Press Release

Independent evaluation of IFC Advisory Services in Europe and Central Asia reports success and shortcomings

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Ukraine second largest recipient of IFC- and donor-funded assistance in the region. In Kiev: Sona Panajyan Phone: +1- 38-0-444-906-400 E-mail: Spanajyan@ifc.org Kiev, Ukraine, February 14, 2008 – The Independent Evaluation Group (IEG) of the International Finance Corporation (IFC), the World Bank Group’s private sector lending arm, released today its first review assessing the performance of IFC Advisory Services in countries of Eastern Europe and Central Asia (ECA) – a program that provides technical assistance and expertise to governments and private companies to enhance the growth of a sustainable private sector. For the evaluation, IEG reviewed 44 projects completed in the ECA region through the end of 2005. The study found that about two-thirds of projects showed successful development results as measured by contributions to better corporate governance practices in client companies, promoting business-friendly legislation for small and medium enterprises (SMEs), and supporting better business climate and increased private investments in general. At the same time, the study also found that deficiencies reduced the program’s potential for greater effectiveness. In particular, the evaluation highlights inefficiencies in the funding mechanism, weaknesses in country needs assessment and adaptation of projects to specific country conditions and development context, as well as some shortcomings in how IFC measured its results and impact in the field. In Ukraine, IFC’s advisory operations are financially supported by donors, including the governments of Austria, Canada, the Netherlands, Sweden, Switzerland, and the European Commission. These operations, which to date have cost $51.3 million, aim at helping to develop the private sector by strengthening corporate governance in Ukrainian companies and banks, improving the regulatory environment, and helping develop Ukraine’s leasing, agribusiness and agri-insurance industries. In Ukraine IFC’s advisory operations have generally worked well, however the few performance limitations to greater project success included lack of government commitment to some reforms and weak donor coordination. “This independent evaluation, which presents lessons from the experience of IFC Advisory Services program in the region, should be of interest to donors that support similar programs to foster sustainable private sector growth and their constituents,” said Kelly Andrews Johnson, IEG Task Manager and lead author. The study found that the program’s distinctive features, such as focus on specific business lines, reliance on local expertise, and commitment to developing replicable projects, helped contribute to good results. However, IEG recommends that IFC take a more strategic approach to leveraging advisory and investment products to address long-term country and sector development needs. “This evaluation is the first independent review of a rapidly growing business line for IFC,“ said Marvin Taylor-Dormond, Director of IEG. “Although the program has so far been generally successful in the ECA region, going forward, IEG calls for IFC management to better address some of the shortcomings such as specific country needs assessment. IFC advisory products need to be better customized in countries, taking into account their distinctive gaps and economic features.” As a background it should be noted that from 1996 through 2006, IFC’s annual funding for global advisory services, including in the ECA region, has increased from $25 million to $365 million, with cumulative commitments of $1.7 billion covering operations in 80 countries. Since 2001, IFC advisory services commitments in the region have been over $150 million, of which about 70 percent comes from donors. This first of its kind IEG study has been instrumental in developing an evaluation methodology for assessing the effectiveness of Advisory Services and their contribution to the broader development goals of the IFC.