Economic rehabilitation credit
Report No: ; Type: Report/Evaluation Memorandum ; Country: Mongolia; Region: East Asia And Pacific; Sector: Macro/Non-Trade; Major
                                           Sector: Economic Policy; ProjectID: P004340




June 30, 1995

Mongolia: Economic Rehabilitation Credit (Credit 2320- MOG)

The Implementation Completion Report (ICR) for the Mongolia Economic Rehabilitation credit (Credit 2320-
MOG, approved in FY92) was prepared by the East Asia and Pacific Regional Office, with an excellent Part II
contributed by the Borrower.

The main objective of this SDR 22.2 million project was to finance critical imports in order to increase
production levels in three priority sectors (agriculture, energy, and transport) at a time when Mongolia was
facing grave supply shocks following the collapse of the Soviet aid programs. A secondary objective was to
familiarize Mongolian institutions with procedures on international finance and procurement, thus facilitating
the country's access to new export markets.

The project achieved its resource transfer and institutional strengthening objectives. The full amount was
disbursed, although procurement delays required a one-year extension of the closing date. Funds and inputs
were provided for the various purposes intended. The country's capacity to handle international procurement
procedures and to implement projects financed by foreign credits was greatly improved. However, with
respect to the objective of increasing production in the key priority sectors, actual results fell considerably
short of expectations.

The ICR rates the project outcome as satisfactory, institutional development as partial, and sustainability as
likely. The Operations Evaluation Department (OED) agrees with these ratings. OED also agrees with the
other ratings in the ICR, with the exception of the Bank's performance in identification, which the ICR rates as
highly satisfactory but OED rates as satisfactory, reflecting the relatively simple design and limited objectives
of the operation.

The ICR describes the emergence of severe problems of intercompany pricing and arrears. It will be necessary
to address and correct these problems in order to ensure the sustainability of the project's benefits. The ICR
also fails to explain the reasons for the shortfalls in production, and to assess the effectiveness of donor
coordination. Because the ICR recognizes the importance of developing institutional capacity, it would have
benefited from a discussion of the objectives and preliminary achievements of a parallel technical assistance
credit.

The Region notes that it is providing advice to Mongolia regarding agriculture productivity issues and that it
will incorporate the lessons gained through ERC, including the above concerns, in the implementation of the
IDA's country assistance strategy.

No audit is planned.