Ukraine | World Bank

World Bank Organizes a Press Tour to Kyiv HPP within the Hydropower Rehabilitation Project

Wed, 01 Jul 2009 09:04:55 GMT

Kyiv, July, 1 2009 – Today the World Bank in Ukraine jointly with UkrHydroEnergo organized a press tour for journalists which included a visit to Kyiv Hydro Power Plant (HPP) and travel across Kyiv reservoir. The objective of the press tour was to highlight the potential of renewable energy in Ukraine and the objectives and achievements to date of the Hydropower Rehabilitation Project implemented with financial support from the World Bank. Mr. Semen Potashnik, the Head of UkrHydroEnergo, Mr. Martin Raiser, World Bank Director for Ukraine, Belarus and Moldova and Mr. Dejan Ostojic, Lead Energy Specialist of the World Bank participated in the press tour.

The main objectives of the Hydropower Rehabilitation Project are to improve the reliability, efficiency and safety of the operation of UHE hydraulic structures and equipment and to improve their environmental performance. The latter will be achieved through the reduction in emissions of greenhouse gases, the installation of nonpolluting turbine runners, and the elimination of oil leaks into Dnipro and Dnister Rivers. The project will help increase the installed capacity of the Dnipro Hydropower Cascade by about 400 MW and its production by about 500 GWh which is equivalent to building a major new hydropower plant. The project also pioneered the concept of Carbon Financing in Ukraine as it was the first Joint Implementation Project under the Kyoto Protocol in the country.

“UkrHydroEnergo is proud to implement one of the first Joint Implementation mechanism projects in Ukraine and to pioneer the use of this new financing mechanism. The revenue from the sale of Emission Reduction Units to the World Bank Netherlands European Carbon Facility provides important added cash-flow to the project”, said Semen Potashnik, UkrHydroEnergo Chairman.

The reservoirs and banks of this large cascade are also potential sites for the development of several hundreds of MW of wind power generation which would further increase and diversify the renewable energy potential of the Dnipro cascade. By using pumped storage technology, such as the existing Kiev pumped storage plant, non-storable wind power can be converted into highly valuable hydroelectric capacity, which can be utilized to deliver for peak demand and thus help stabilize the entire power network. During the press tour, journalists were acquainted with this technological potential for renewables in Ukraine and the strategic importance of the Dnipro cascade in the past and future development of Ukraine’s energy sector.

“The Dnipro cascade was a major feat of engineering in the 20^th century”, - says Martin Raiser, World Bank Director for Ukraine, Belarus and Moldova. “Through careful investments in its modernization and development we hope to preserve its strategic value for future generations, helping Ukraine generate power efficiently and in an environmentally sustainable way.”

Ukraine Is in the Midst of an Unprecedented Demographic Decline Compounded by a Health Crises, Says a New World Bank Study

Thu, 25 Jun 2009 12:09:14 GMT

Kyiv, June 25, 2009. – About half of deaths before the age of 75 in Ukraine could be avoided through adequate prevention and treatment, says new World Bank study “An Avoidable Tragedy: Combating Ukraine’s Health Crisis – Lessons from Europe”, presented in Kyiv today. The study provides a diagnosis of demographic and health challenges in Ukraine and relates these challenges to experience and evidence from other European countries.

“Compared with citizens in other European countries, Ukrainians lead less healthy lives and receive poorer support from health services”, - says Rekha Menon, Senior Economist. “Premature mortality among adult Ukrainian males could be avoided through behavior changes but public awareness of health risks is low. The solution to this challenge is complex, and involves a combination of focus on primary health care and prevention and broader system wide changes in how health services are delivered and financed.”

Ukraine has the highest depopulation rate in Europe, the Report concludes. The probability of reaching old age in Ukraine is lower compared to Central European countries. This is especially true for Ukrainian males, with adult male deaths being at levels comparable to countries with less than one-fifth the GNP per capita of Ukraine. Moreover, Ukrainians spend almost 13 percent of their lives in poor health, compared to Poles where this number is 8 percent, or Slovenians and Czechs with 9 percent of live years spent in poor health. Non-communicable diseases and chronic conditions are responsible for the bulk of mortality in Ukraine, although communicable diseases such as HIV/AIDS and Tuberculosis have reached epidemic proportions and are a growing threat to the health of the Ukrainian nation. The health and demographic crisis is concentrated among the working-age population, especially males, and therefore entails high social and economic costs to be paid by the whole nation.

The report highlights that about half of deaths before the age of 75 in Ukraine could be avoided through behavior change and adequate prevention and treatment. In particular, 94 percent of mortality caused by three major risk factors: tobacco smoking, alcohol consumption and breach of road safety -- could have been avoided with adequate prevention. Furthermore, 25 percent of pre-mature deaths in Ukraine in 2004 could have been avoided with effective health care treatment. Early treatment at the primary care level could have avoided 80 percent of deaths among working age males and about 30 percent among working age females.

”Ukraine has made repeated attempts to launch health sector reforms, but their implementation has been slow and fragmented”- says Martin Raiser, World Bank Director for Ukraine, Belarus and Moldova.“We hope the report will raise awareness of the huge social and economic costs of inaction and encourage policy makers to embrace health sector reform as a key priority for long-term socio-economic development.”

The World Bank supports improvements in health services through its portfolio of analytical and advisory work and through the Development Policy Loan program.

World Bank Debars Four for Engaging in Fraud in Bank-Financed Projects

Tue, 02 Jun 2009 16:33:01 GMT

Contacts:

Michelle Porvaznik (202) 458-7716

mporvaznik@worldbank.org

WASHINGTON, June 2, 2009—The World Bank today announced that it has debarred a Ukrainian non-governmental organization, a Turkish firm and two individuals for having engaged in fraud in relation to World Bank-financed projects. The debarments, which resulted from investigations by the World Bank’s Integrity Vice Presidency (INT), are part of the Bank’s broader anti-corruption agenda.

Leonard McCarthy, Vice President for Integrity for the World Bank Group, said, “The outcomes of these cases demonstrate that the Bank is making significant strides in addressing fraud and corruption, which is especially important given the current economic crisis.”

Two Ukrainian entities debarred

The Ukrainian Centre for International Integration (UCII) is ineligible to be awarded a contract under a Bank Group-financed operation for a period of two years, and its former Executive Director, Natalia Yasko, is debarred for a period of three years.

"UCII had received a trust fund grant to assist the Ukrainian government in the preparation of a program of institutional and structural reforms under the Bank-financed Second Programmatic Adjustment Loan, but evidence indicated that UCII had submitted a falsified CV as part of its proposal." The government terminated the contract before any payments were made, and Yasko has since stepped down. No evidence connects UCII’s current management with the misconduct.

The alleged fraud was first reported to the government-run Project Implementation Unit (PIU), which researched the allegation and shared its findings with the Bank. The World Bank’s Integrity Vice Presidency (INT) then conducted an investigation and found evidence that confirmed the suspicion of the PIU.

After one year, UCII’s debarment may be reduced by one year if the organization has put in place an effective corporate compliance program acceptable to the World Bank, and has implemented this program in a manner satisfactory to the World Bank. In the case of Yasko, after two years, the period of debarment applicable to any organization she directly or indirectly controls may be reduced by one year if such organization has likewise put in place and implemented an effective compliance program.

Turkish firm and individual also sanctioned

In addition, Enerji Sistem Insaat ve Is Makinalari Sanayi Ticaret Limited Sirketi—ISTANBUL (Enerji Sistem) and its proprietor, Alamdar Esetoglu Galandarov, have been debarred for two years.

In the case of Enerji Sistem, an INT investigation found evidence that Galandarov—acting on behalf of the company—submitted a false bank reference letter in an attempt to win a multi-million dollar contract providing construction equipment for the Greater Baku Water Rehabilitation Project in Azerbaijan. Neither Enerji Sistem nor Galandarov can have their debarments reduced.

The debarments represent a substantial increase in the number of sanctions imposed by the Bank since last year. So far this fiscal year, the Bank has debarred thirteen firms and individuals.

Since 1999 the World Bank Group has debarred 355 firms and individuals for their involvement in fraud and corruption in Bank Group-financed projects.

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Europe and Central Asia Facing Significant Climate Change Threats, But Is In ‘Adaptation Deficit’

Tue, 02 Jun 2009 14:25:40 GMT

Contacts:
In Brussels: Alexander Rowland +32-478-319939
Arowland@worldbank.org

In Washington: Kristyn Schrader +1-202-458-2736
Kschrader@worldbank.org

BONN, June 2, 2009—The World Bank today warned that the impact of climate change in the Europe and Central Asia Region* will be more significant than expected due to a lingering post-Soviet legacy of environmental mismanagement and the poor state of much of the Region’s infrastructure, leaving the countries poorly prepared to adapt.

“Europe and Central Asia suffers from an ‘adaptation deficit’ that is already challenged by recent climate variability,” said Marianne Fay, Director of the World Bank’s World Development Report 2010, and author of the new report ‘Adapting to Climate Change in Europe and Central Asia’, “which will only worsen with the consequences of projected trends in climate in the coming decades.”

Fay added that “While almost two decades have passed since the breakup of the Soviet Union and its partner countries in Central and Eastern Europe, the legacy of environmental mismanagement and oversized infrastructure in countries outside the European Union still remains a dangerous holdover from the past. It greatly worsens the countries’ vulnerability to even modest changes in the climate.”

Launched today during the UNFCCC Bonn Climate Change Talks and on the eve of ‘World Environment Day’ (June 5^th), the report says that, contrary to popular perception, the Region is significantly threatened by climate change and is already experiencing the consequences: increasing variability, warmer temperatures, changing hydrology, and more extremes – droughts, floods, heat waves, as well as windstorms and forest fires.

Average temperatures across ECA have already increased by 0.5ºC in the south to 1.6ºC in the north (Siberia) since the early 1900s and overall increases of 1.6 to 2.6ºC above are expected by the middle of the century, with the greater changes occurring in the more northern latitudes. The north is projected to see greater temperature changes in winter, with the number of frost days declining by 14 to 30 days over the next 20 to 40 years. Southern parts of the region are expected to see the greatest changes in the summer, with the number of hot days increasing by 22 to 37 days over the same period. This warming trend is significant: by mid-century, countries such as Poland or Hungary are expected to experience the same number of hot days (>30^oC) as today’s Spain or Sicily.

According to Fay, “Increases in temperature are affecting hydrology, with a rapid melting of the region’s glaciers and a decrease in winter snows. Many countries are already suffering from winter floods and summer droughts – with both Southeastern Europe and Central Asia at risk for severe water shortages. Summer heat waves are expected to claim more lives than will be saved by warmer winters.”

The report says that changes in sea level, another impact of climate change, will affect the Region’s four basins – the Baltic Sea, the East Adriatic and Mediterranean coast of Turkey, the Black Sea, and the Caspian – and the Russian Arctic Ocean. On the Baltic, Poland, with its heavily populated low-lying coast, is the most vulnerable. Along the Adriatic and the Mediterranean, storm surge and saltwater intrusion into aquifers threaten parts of the Croatian, Albanian, and Turkish coasts. Sea level rise in the Black Sea is already threatening numerous ports and towns along the Russian, Ukrainian, and Georgian coasts. In the Caspian Sea, increased surface evaporation is projected to decrease water levels by as much as 6 meters by the end of the 21st century, imperiling

fish stocks and affecting coastal infrastructure.

However, according to the report, legacy issues make the Region even more vulnerable. Under the Soviet system, economic growth was pursued in blatant disregard to natural conditions. When water was needed for irrigation, the rivers feeding the Aral Sea were diverted to the desert to produce rice, fruit, and cotton. Uzbekistan became one of the world’s largest exporters of cotton, but at the cost of destroying the Aral Sea in the process.

The historic poor environmental management across the Region has its consequences. Even countries and sectors that stand to benefit from climate change are currently poorly positioned to do so. According to Fay, “Much has been made of the fact that warmer climate and abundant precipitation in the northeastern part of Europe and Central Asia – Kazakhstan, Russia, and Ukraine – will open up a new agricultural frontier. However, any local potential benefit pales in comparison to the costs of the region’s relative inefficiency and low productivity. While world grain yields have been growing on average by about 1.5 percent per year, they have been falling or stagnant in these three countries.”

But over the next ten to twenty years, Europe and Central Asia’s resilience to climate shocks can be strengthened with improved infrastructure and environmental management systems, all of which will have positive consequences for sustainable development. Regardless of climate change, Europe and Central Asia will gain from improving its water resource management, tackling its environmental pollution problems, upgrading neglected infrastructure and housing, and strengthening disaster management. These steps will also greatly strengthen the Region’s ability to cope with the current climate.

Adapting to the changing climate will also require specific climate-related actions: investments in weather and water monitoring; the capacity to interpret and disseminate climate information; institutions to support adaptation efforts, whether by large firms or small farmers; and policies to foster incentives for informed, proactive responses to the challenges of climate change.

The Europe and Central Asian countries will need to develop strategies to reduce vulnerability to future changes. Jane Ebinger, World Bank Senior Energy Specialist, emphasized the need for stakeholder involvement in adaption. “Adaptation strategies will require steps to bring together policy makers, planners, asset owners, academics, and civil society to discuss and assess the risks a country may face from current weather and projected climate change, and identify possible adaptation measures, their costs and benefits. In addition, the experience of countries, regions, or cities currently developing and implementing adaptation plans offers valuable lessons and methodologies.”

*Europe and Central Asia Region economies: Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Kazakhstan, Kosovo, Kyrgyzstan, Latvia, Lithuania FYR Macedonia, Moldova, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia, Tajikistan, Turkey, Turkmenistan, Ukraine, Uzbekistan,

For more information, please visit: www.worldbank.org/eca

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Strengthening the Ukrainian Banking Sector: The Principles for Government Involvement

Mon, 01 Jun 2009 11:00:00 GMT

The International Monetary Fund (IMF) and the World Bank (WB) have been working very closely since October 2008 with the National Bank of Ukraine (NBU), the government and other authorities to implement a comprehensive bank resolution strategy. One important recent outcome of this was the government’s announcement of its intention to recapitalize several systemically important banks. This article explains the reasoning behind the proposed solution and why state involvement in individual commercial banks is necessary.

In the wake of the global financial and economic crisis, Ukraine experienced significant stresses in its banking sector. These have become evident in two major ways. On the asset side, the quality of loan portfolios has worsened. As a result of the deteriorating economic environment and the sharp depreciation of the exchange rate, an increasing number of individual and corporate borrowers have encountered difficulties in servicing their loans. On the liability side, deposits plunged by 20 percent system wide between October and March, although since then the situation has stabilized and deposits have started to flow back into the system.

Signs of stress have varied significantly across banks in Ukraine, but the risk remains that difficulties in some banks turn into a systemic banking crisis. This occurs when confidence deteriorates to the point where concerned despositors deem no bank sufficiently safe and, rather than changing banks, leave the banking system altogether. The extent of such contagion typically depends on the size of the banks that face acute liquidity or solvency problems.

If a systemic crisis is likely, the state must step in. While the central bank provides liquidity to the financial system, the government uses budgetary resources to provide new capital, loans, and/or guarantees for systemic banks, whose shareholders are unable to raise additional capital. In this situation, the authorities pursue these three important objectives: (i) restore society’s confidence in the country’s banking system, (ii) protect the system at a minumum cost to taxpayers, and (iii) strengthen the system to make it more resilient to future crises.

These objectives are at the core of the Ukrainian authorities’ strategy to strengthen the banking sector, which they developed with the support of the International Financial Insitututions and the donor community. It is precisely with the purpose of restoring trust in the system that the Government of Ukraine announced its intention to provide new capital to a number of banks, which together hold a large share of deposits from Ukrainian citizens and businesses. The intention is to restore free and full access for the depositors in the problem banks, in the shortest timeframe possible, and have depositors safely return their money to the banks. In turn, this confidence of depositors will allow credit flows to resume, reduce pressure on interest and exchange rates, and thus facilitate economic recovery.

The government's bank recapitalization program, the legislative aspects of which were passed by Parliament in November, is designed to help the banking system survive the current depressed state of the economy, while still holding bank owners liable for the banks’ losses. This involves no bailout of private bank owners with public funds. The scheme is considered necessary at this point, given the scarcity of new capital from existing owners or new investors in Ukraine and abroad under present market conditions. The IMF and the World Bank support this scheme as the least costly solution to strengthen the Ukrainian banking system. Let us look at the specific elements.

Diagnostic: The recapitalization scheme started with targeted valuations of the loan portfolios of the largest banks to identify possible losses and capital shortfalls. Where needed, existing bank shareholders have been asked to put in additional capital to meet the minimum required by NBU regulations. For those banks defined as systemic by the NBU (banks with assets accounting for at least 2% of system assets or 1% of total deposits of individuals) and owners are unable to inject capital, the state has agreed to step in.

Recapitalization and liability management: Good crisis management calls for the state to be an investor of last resort, and to choose very diligently how to spend limited public funds. Troubled financial institutions, like any other private corporation, face a hierarchy of claims on their resources. First and foremost are depositors, then come secured creditors, then non-secured creditors, and last come existing shareholders. Prudent crisis management must ensure that public funds are used first and foremost to satisfy the claims of depositors and secured creditors. Existing owners and unsecured creditors of problem banks will loose some or indeed all of their investments. Once liabilities have been restructured, the banks benefiting from recapitalization should have access to liquidity from the central bank to ensure that all their liabilities can be duly serviced.

Corporate governance and control: Once the state, represented by the Government, injects capital into a bank, it will need to take full control of the bank, install new managers who are experienced bankers and do not have conflicts of interest in relation to the assets or liabilities of the bank, and are tasked first of all with the fast restoration of depositors’ access to their funds. De facto nationalization of troubled banks has been a point of debate in other countries. However, in Ukraine, the capital needs of the several systemically important problem banks are such that the state inevitably will become the major shareholder. Moreover, in Ukraine’s specific circumstances the interests of the state as a shareholder are best secured if it has full corporate control. Other countries, including developed countries, are now moving in the same direction.

Asset restructuring and sale: When access to deposits has been restored and the financial condition of the bank has been stabilized, management should seek to maximize asset values and prepare the banks for future sale back to the private sector. The banks may be resold as a going concern, but in some cases, asset values will be maximized, or the need for additional state capital minimized, by merging the bank with another bank, selling assets in lots or transferring assets and liabilities to other financial institutions. Whatever the route chosen, the resulting revenues will at least partially compensate taxpayers for the initial capital outlays for crisis resolution. Indeed, the state’s involvement should be viewed as temporary, covering the period of macroeconomic uncertainty when private sector sources of funding are scarce or non-existent. Needless to say, the newly recapitalized banks should be managed without political interference; they should be subject to the normal regulatory and supervisory framework maintained by the NBU, and should not distort the playing field.

Bank resolution: There are other elements of the banking sector rehabilitation strategy developed with the authorities. For the many commercial banks in Ukraine that may not be considered systemic but face acute liquidity and capital shortfalls beyond what their owners can deal with, the NBU must have a full range of resolution tools to act quickly and minimize risks. These include not only the option of liquidation but also the ability to merge weaker banks with stronger institutions and to transfer their assets and liabilities to other banks. As with the systemically important banks, the least costly solution to tax payers means that equity holders and unsecured creditors will need to pay the price for the risks they have taken and cannot expect to have their investments protected. For effective bank resolution, legislative amendments are critically needed and have been elaborated jointly by the Ministry of Finance and the NBU – the success of the strategy will need the support of Parliament for these amendments. Voters should take note.

These are the main elements of Ukraine’s banking sector rehabilitation strategy. They have been extensively discussed within the Government and with the NBU. Now is the time to move forward decisively with the implementation of the strategy. Delays would lead to further losses of assets and increase the costs of the state. The stabilization of deposits during May 2009 so far provides welcome tail-wind and increases the chances of success. Consistency and persistence will also be critical. Counter-productive moves such as the recent ban on foreclosures should be avoided.

In Ukraine as elsewhere, the unprecedented economic and financial crisis is casting the state in a leading role. To rise to this challenge requires leadership and consistency in implementation, often in the face of strong private sector resistance. The IFIs will continue to support the authorities in making sure scarce public funds are well spent. Private investors interested in rapid crisis resolution and the emergence of a healthy and efficient financial sector following the current turmoil will want to ensure the same.

USD 400 MILLION ROAD AND SAFETY IMPROVEMENT PROJECT LAUNCHED IN KYIV TODAY

Tue, 19 May 2009 10:00:00 GMT

KYIV, May 19, 2009 – The Government of Ukraine and the World Bank today officially launched the implementation of the Ukraine Roads and Safety Improvement Project. The Loan Agreement for the USD $400 million project was signed on April 21. The objective of this first World Bank financed transport project in Ukraine is to improve the condition and quality of sections of the M-03 road and increase traffic safety along Ukraine’s main road network. It will be implemented by the State Road Administration of Ukraine, Ukravtodor.

“I am pleased that implementation of this important project is moving ahead swiftly.” says Martin Raiser, World Bank Country Director for Ukraine, Moldova and Belarus, “The investments in upgrading Ukraine’s road infrastructure will help lay the foundations for future growth and competitiveness. At the same time, they will create demand for local jobs and civil works, thus helping reduce the negative impact of the current crisis on people’s livelihoods.”

The Road and Safety Improvement Project is an integral part of The State Road Sector Reform Program for the next 3 years. This Program in particular focuses on improving the efficiency of road sector management and financing, including: (i) upgrade of the current road management system, (ii) expand the role of the private sector, and (iii) introduce international best practice contracting procedures and rules. In addition, the Project will make an important contribution to reducing fatal accidents at key black spots across Ukraine.

“The level of fatal road accidents in Ukraine exceeds the European average by three times.”, emphasizes Andreas Schliesser, Task Team Leader of the Road and Safety Improvement Project, “Through physical investments and an emphasis on public education, we hope to bring this number down and make road travel not only more comfortable and efficient but also a lot safer.”

During the Project launch workshop, implementation details will be reviewed and Ukrainian and World Bank experts will review the physical conditions of the M3 road on location. The aim is to start physical implementation before the end of 2009.

World Bank Supports Ukraine`s Economy Though a New Infrastructure Project

Tue, 21 Apr 2009 12:24:34 GMT

KYIV, April 21 – A Loan Agreement between the government of Ukraine and the World Bank for the USD $400 million Roads and Safety Improvement Project was signed today by Pablo Saavedra, World Bank Acting Director for Ukraine, Belarus and Moldova and Vadym Gurzhos, Head of the State Road Administration of Ukraine, following the project’s approval by the World Bank’s Board of Executive Directors on April 7, 2009. The project is aimed at improving the condition and quality of a 120 kilometer section of the M-03 road and increasing traffic safety throughout the national road network.

“This project is also part of the World Bank’s response to the economic crisis affecting Ukraine, and would help creating jobs and domestic demand for the real sector whilst investing in needed infrastructure to enable medium-term economic growth”, says Pablo Saavedra, World Bank Acting Director for Ukraine, Belarus and Moldova.

In the framework of Ukraine’s strategy of trade integration, strengthening priority transport corridors from neighboring countries and from the country’s network to the European Union is a key element. This project is part of that strategic vision. Moreover, the aim of the Government is to improve significantly road safety by reducing road traffic accidents. Currently, the fatal traffic accident rate in Ukraine is among the region’s highest – above three times that of the EU. The Roads and Safety Improvement Project is also an integral part of The State Road Sector Reform Program for the next 3 years, which focuses in improving the efficiency of the road sector management and financing.

This project will finance various activities under the following 3 main components:

1. Road Rehabilitation of a 120 kilometer section (Boryspil-Lubny) of the Kyiv-Kharkiv-Dovzhansky road (M-03). This component comprises civil works for the rehabilitation/strengthening of the existing 2x2 lanes of the M-03 road, including safety measures such as signaling, lighting in critical sections, and crash barriers as well as pedestrian crossings, parking, and special facilities.

2. Road safety improvement. The project will carry out a program of safety measures for vehicles and local inhabitants at traffic accident black spots in public roads; about 110 black spots identified will be targeted. This component will fund the supply and installation of road safety improvements such as vertical and horizontal signaling, reflectors (cats’ eyes), rumble strips, and modern crash barriers on the most critical points in the roads network.

3. Capacity Building through the provision of advisory services and training and equipment to enhance road management in line with best international practices.

Ukraine: Roads and Safety Improvement Project

Tue, 07 Apr 2009 22:33:20 GMT

WASHINGTON, April 7, 2009 - The World Bank’s Board of Executive Directors today approved the following project:

IBRD Loan: $400 Millon

Terms: Maturity = 30 years; Grace = 5 years

Project Description: The Roads and Safety Improvement Project for Ukraine aims to improve the condition and quality of sections of the M-03 road and increase traffic safety along Ukraine’s main road network. It will be implemented by the State Road Administration of Ukraine, Ukravtodor. The project forms part of the World Bank’s response to the social and economic crisis affecting Ukraine. It will lay the foundations for future growth and competitiveness, while at the same time creating jobs and fiscal stimulus to mitigate the effects of the economic downturn. Ukraine is an important transit country given its location between Russia and other members of the Commonwealth of Independent States, and the European market. The project will help integrate Ukraine’s transport network with that of the EU, promote Ukraine’s transit potential, and maximize the use of Ukraine’s existing transport assets. It will also contribute to making travel by road safer, thus helping to reduce the high rate of accident related deaths and injuries in Ukraine (7,690 died in road accidents in 2008).

Media Contact

Michael Andrew Jones

(202) 473-2588

mjones2@worldbank.org

For more project information, please visit:

http://web.worldbank.org/external/projects/main?pagePK=64312881&piPK=64302848&theSitePK=40941&Projectid=P100580

Ukraine economic update (April 7, 2009)

Tue, 07 Apr 2009 04:00:00 GMT

This Ukraine economic update includes the following headings: the global economic environment has deteriorated further, dragging Ukraine into a sharper downturn; the economy is undergoing a painful though needed rebalancing; and a comprehensive, inter-linked, and consistent'anti-crisis'program of measures and reforms is urgently needed to face the economic downturn and lay the foundations for the economic recovery. Efforts in this direction would do much to stabilize market expectations.

Ukraine - Hydropower Rehabilitation Project : additional financing

Thu, 02 Apr 2009 04:00:00 GMT

Ukraine - Programmatic Financial Rehabilitation Loan Project

Mon, 16 Mar 2009 04:00:00 GMT

Ukraine - Roads and Safety Improvement Project

Thu, 12 Mar 2009 04:00:00 GMT

The objective of the Roads and Safety Improvement Project in Ukraine is to improve the condition and quality of sections along the M-03 road, and increase traffic safety on roads. There are three components to the project. The first component of the project is road rehabilitation of about 120 kilometer section of the Kyiv-Kharkiv-Dovzhansky road (M-03). This component comprises civil works for the rehabilitation/strengthening of the existing 2x2 lanes of the M-03 road, including safety measures for the vehicles and for local inhabitants. The M-03 road is strategic for Ukraine's integration with the European Union (EU) road network and as a potential domestic and international transit corridor. The second component of the project is road safety improvement. The project will carry out a program of safety measures for vehicles and local inhabitants at traffic accident black spots on public roads. The component will fund the supply and installation of road safety improvements such as vertical and horizontal signaling, reflectors, rumble strips, and modern crash barriers on the most critical points on public roads. The third and the final component of the project is capacity building. Provision of advisory services, training and equipment to enhance road management according to international practice, including: (a) improvement of Ukrainian norms, rules and standards in the design, construction, repair and maintenance of roads; (b) modernization of road management and operations, including implementing performance based contracts and introducing systems for planning and programming road works, and (c) introduction of international'best practice'contracting in the road sector.

Ukraine - Public Finance Modernization Project : procurement plan

Thu, 05 Mar 2009 05:00:00 GMT

World Bank Continues Energy Sector Support

Tue, 03 Mar 2009 08:21:32 GMT

Kyiv, March 3, 2009. - The Government of Ukraine and the World Bank today officially launched the implementation of the UkrainePower Transmission Project. The World Bank’s Board of Executive Directors approved a US$ 200 million loan for this project in August 2007. The Loan Agreement was signed in November 2007 and ratified by the Ukrainian parliament on 29 October 2008.

The main objective of the Power Transmission Project is to improve the security, reliability, efficiency and stability of electricity supply through the rehabilitation of transmission substations and the strengthening of the power transmission network. The project will also aim to improve the institutional capacity and technical capabilities of the transmission system operator, UkrEnergo (UE), so that it can assure secure and reliable operation of the high voltage power grid, and, therefore, facilitate unimpeded operation and opening up of the electricity market. This is the second project financed by the World Bank as part of a sector-wide long-term energy program, which also includes extensive technical assistance to the National Energy Regulatory Commission and the Ministry of Fuel and Energy.

“The modernization of Ukraine’s energy system is a priority for the World Bank”, - says Martin Raiser, World Bank Director for Ukraine, Belarus and Moldova.– “We are happy to be launching this important project at this time to help Ukraine improve its energy efficiency, thereby mitigating the effects of the economic crisis but also alleviating constraints on long-term growth.”

The Power Transmission Project comprises five key components: rehabilitation of transmission substations, strengthening of the transmission network, stabilization of the Crimea Regional Power Grid, institutional development of UE, and implementation of the Wholesale Electricity Market concept. It is expected that investments under the project will (a) reduce the amount of electricity not delivered to consumers due to network failures by 35 GWh per year; (b) reduce transmission losses and peak capacity requirements by 14MW; and (c) improve voltage quality in dozens of transmission substations across the country.

“The Power Transmission Project will help improve performance of the electricity grid and create conditions for increasing electricity trade in the domestic and international markets.” says Dejan Ostojic, Project Team Leader. “As such, it will help Ukraine utilize its existing energy resources more efficiently, contributing to savings of US$ 38 million per year, and help lay the foundation for Ukraine’s integration into the European Energy Community.”

Reforming food safety regulation in Ukraine : proposals for policymakers - a background policy paper

Sun, 01 Mar 2009 05:00:00 GMT

This report provides an overview of the main legal, regulatory, and institutional bottlenecks adversely affecting the food safety system in Ukraine, as a way to raise awareness among policymakers and all relevant stakeholders about the need to harmonize the current system with international best practices. The structure of the report is the following: section two analyzes the performance, key sectoral issues, and economic potential of agribusiness in Ukraine; section three provides a legal review of the legislative and regulatory framework in Ukraine, while also assessing the institutional structure of the food safety control system; section four focuses on three critical areas in need of reform, namely: outdated product standards, mandatory certification of food products, and inspections; and section five finally provides a detailed set of recommendations and proposed actions for reform.

EBRD, EIB and World Bank Group join forces to support Eastern Europe

Fri, 27 Feb 2009 09:00:00 GMT

For EBRD:

Anthony Williams

Tel: +44 20 7338 6997

Email: WilliamA@ebrd.com

For EIB:

Gill Tudor

Tel: +352 43 79 8 31 53

Email: g.tudor@eib.org

For World Bank Group:

Lotte Pang

Tel: +12027584290

Email: LPang@ifc.org

Washington, 27 February 2009 - The largest multilateral investors and lenders in Eastern Europe - the EBRD, the EIB Group, and the World Bank Group - have pledged to provide up to €24.5 billion to support the banking sectors in the region and to fund lending to businesses hit by the global economic crisis.

This initiative complements national crisis responses and will deploy rapid, large-scale and coordinated financial assistance from the International Financial Institutions to support lending to the real economy through private banking groups, in particular to small and medium-sized enterprises. The financial support will include equity and debt finance, credit lines, and political risk insurance.

The response takes into account the different macroeconomic circumstances in and financial pressures on countries in Eastern Europe, acknowledging the diversity of challenges stemming from the global financial retrenchment.

EBRD President Thomas Mirow said: "The institutions are working together to find practical, efficient and timely solutions to the crisis in eastern Europe. We are acting because we have a special responsibility for the region and because it makes economic sense. For many years the growing integration of Europe has been a source of prosperity and mutual benefit and we must not allow this process to be reversed.”

“This joint action plan will help speed up the delivery of vital finance through the banks to support the real economy of hard-hit countries in Central, Eastern and Southern Europe, and particularly to help small businesses survive in these turbulent times,” said EIB President Philippe Maystadt.

“This is a time for Europe to come together to ensure that the achievements of the last 20 years are not lost because of an economic crisis that is rapidly turning into a human crisis,” said World Bank Group President Robert B. Zoellick. “I welcome the close cooperation among the EBRD, the EIB and the World Bank Group, and am committed to making this partnership work as we move forward to address the risk of a crisis of the banking sector in Eastern Europe.”

Under the two-year plan:

The EBRD will provide up to €6 billion for the financial sector in 2009-10 in the form of equity and debt finance, to banks and directly to SMEs, and trade finance.
The EIB will provide some €11 billion in SME lending facilities in Central, Eastern, and Southern Europe, of which €5.7 billion is already available for rapid disbursement, with a further €2.8 billion set for approval by end-April and further tranches expected to follow. The EIF, the EIB Group's venture capital and SME guarantee arm, is also aiming to increase its activity in the region over the next two years.
The World Bank Group will provide support of about €7.5 billion:
- IFC, through its crisis response initiatives in sectors including banking, infrastructure, and trade as well as through its traditional investment and advisory services, is expected to contribute up to €2 billion;
- IBRD intends to increased lending in Europe and Central Asia up to €16 billion in 2009-10 out of which up to €3.5 billion is envisaged for addressing banking sector issues in emerging Europe;
- MIGA will provide political risk insurance capacity of up to €2 billion for bank lending, subject to Board approval.

The response to Europe’s integrated financial markets requires fast and coordinated action; from parent banks, which own a large part of the region’s financial sectors; from systemically important local banks; from home and host country authorities of cross-border banking groups and from the European institutions and the IFIs.

By jointly addressing urgent financing needs, the three institutions in this initiative are drawing on their own mandates and specific capabilities to provide financial support.

The initiative goes beyond the pure provision of finance by engaging all parties concerned to seek appropriate solutions to the problems caused by the global economic crisis.

The IFI initiative has been developed in the broader context of the support that is being provided by parent banks to their subsidiaries in Eastern Europe, to provide capital where needed and maintaining adequate funding levels.

The IFIs welcome the support that that has already been provided to some countries by IMF programmes that have had a clear stabilizing impact and have helped to raise confidence.

The IFIs believe firmly that coordinated action among the IFIs, the bank groups, governments across Europe and the European institutions will help the financial sector in the region emerge robustly from the current crisis.

For the communique by The European Bank For Reconstruction And Development, The European Investment Bank Group, and The World Bank Group please click here

Supporting Better Access to Municipal Services in Ukraine

Wed, 04 Feb 2009 06:38:57 GMT

Kyiv, February 4, 2009. - The Government of Ukraine and the World Bank today officially launched the implementation of the Urban Infrastructure Project for Ukraine. The World Bank’s Board of Executive Directors approved a US$140 million loan for this project on August 28, 2007. It was ratified by the Ukrainian parliament in October, 2008. The Swedish International Development Cooperation Agency (SIDA) is assisting with a grant of about US$ 5.6 million to support energy efficiency, technical assistance and investments.

The project will fund the replacement of pumps and related infrastructure in municipal water utilities in selected cities with more efficient and energy saving equipment to reduce costs and improve energy efficiency. The project will also fund rehabilitation of water supply and wastewater systems, and help municipal utilities improve their operational efficiency. Specific investments have been indentified in Chernihiv, Ivano-Frankivsk and Odessa, while investments in other cities throughout the country are being selected under a competitive process.

Water supply and sewerage systems are in serious need of rehabilitation, exacerbated by the low level of energy efficiency of existing pumps, with resulting additional energy requirements estimated at around 50 percent. The potential energy savings by replacement of the energy intensive pumps for the country as a whole are in the range of 1.0 billion to 1.75 billion kWh per year (equivalent to cost savings of USD 50 million per year). Energy intensity in Ukraine is the highest in Europe: for example, it consumes 3.6 times more energy per unit of GDP than Germany if calculated at Purchasing Power Parity exchange rates.

The project consists of the following main components:

Institutional Strengthening: This component will help utilities to adopt commercially oriented business-type practices and work towards achieving financial viability through the preparation of annual Business Plans.
Rehabilitation Investments: This component will fund rehabilitation investments in the water, wastewater and solid waste sectors in the cities of Chernihiv, Ivano-Frankivsk and Odessa to help improve the quality and reliability of municipal services.
Energy Efficiency: This component will replace old electromechanical equipment in municipal utilities by energy-efficient equipment thereby reducing operating costs and environmental pollution. The component will provide financing to selected municipal utilities based on a competitive selection process. Municipal utilities that are able to provide economic and technical analysis confirming potential energy savings of a minimum of 15% through the proposed investments and confirmed by the Ministry of Finance of Ukraine are allowed to access these funds.

”Improving the quality of municipal services and their energy efficiency is a key objective of our partnership with Ukraine”, – says Martin Raiser, World Bank Director for Ukraine, Belarus and Moldova. – The rehabilitation of municipal infrastructure will lead to the reduction of high operating costs and further improve the financial viability of the utilities. In addition, at this time of economic crisis, the capital spending financed by the project will also contribute to reviving local economies and job markets.”

What drives firm productivity growth ?

Sun, 01 Feb 2009 05:00:00 GMT

This paper presents new evidence on the causal links between changes in the business environment and firm productivity growth. It contributes to the literature in three important aspects. First, it constructs a unique database merging information from two large firm-level databases. The samples of both databases are merged on four criteria-country, sub-national location, firm size, and year-producing a panel of 22,004 firms in eight economies of Eastern Europe and the former Soviet Union: Bulgaria, Croatia, Czech Republic, Estonia,, Poland, Romania, Serbia, and Ukraine. Second, the paper addresses shortcomings of earlier studies, namely reverse causation, multicollinearity, and unreliable productivity estimates. Firm productivity growth is estimated drawing on corporate financial data from manufacturing firms included in the AMADEUS database. Changes in the business environment are estimated from the World Bank Enterprise Surveys conducted in 2002 and 2005. Multicollinearity problems in the full model regression are mitigated by constructing a set of six aggregate indicators of the business environment (using principal component analysis). The paper finds that, over the period 2001 to 2004, an increase of one standard deviation in infrastructure quality, financial development, governance, labor market flexibility, labor quality, and market competition raises the total factor productivity of the average firm by 9.8, 7.8, 3.2, 3.4, 5.8, and 3 percent, respectively. Lastly, the paper decomposes firm productivity growth and ranks the relative impact of changes in these six aspects of the business environment by country, by firm size, and by industry.

Ukraine: Development Policy Lending 3 (DPL 3)

Mon, 22 Dec 2008 21:18:22 GMT

WASHINGTON, December 22, 2008 - The following project was approved today by the World Bank’s Board of Executive Directors:

IBRD Loan: US$500 million

TERMS: Maturity = 30 years; Grace= 5 years

Project Description: The programmatic Development Policy Lending series supports reforms under three policy areas: (i) improving the investment climate to sustain growth, (ii) creating fiscal space for growth through strengthened public finances and public sector reforms; and (iii) improving service delivery and social inclusion.

Media Contact

Kristyn Schrader

458-2736

kschrader@worldbank.org

For project documents, please visit:

http://web.worldbank.org/external/projects/main?Projectid=P107365&Type=Overview&theSitePK=40941&pagePK=64283627&menuPK=64282134&piPK=64290415

World Bank Supports Ukraine’s Structural Reforms to Mitigate the Financial Crisis

Mon, 22 Dec 2008 20:54:22 GMT

Contacts: In Kyiv –Dmytro Derkach (+38 044) 490-6671

Dderkatch@worldbank.org

In Washington –Kristyn Schrader +1-202-458-2736

Kschrader@worldbank.org

WASHINGTON, December 22, 2008 - The World Bank’s Board of Executive Directors today approved the Third Development Policy Loan (DPL-III) for Ukraine in the amount of US$500 million.

The programmatic DPL series has supported reforms related to improving the investment climate, public finance, and service delivery. Some key reforms under the DPL III include the enactment of the Joint Stock Companies Law, initial steps in building a framework to rehabilitate the financial system, executive actions to reduce the high costs of regulation and inspections, executive regulation to improve the public procurement framework, and the implementation of measures to improve transparency in access to higher education.

“The measures taken by the government under the DPL series are important signals of Ukraine’s commitment to economic reform at a time of severe economic difficulties,” says Martin Raiser, World Bank Country Director for Ukraine, Belarus and Moldova. “But clearly more efforts are required going forward to implement commitments already made, improve policy coordination, and deepen structural and financial sector reforms.”

The DPL III is part of a comprehensive package of support to Ukraine to mitigate the economic downturn and lay the foundations for a sustained recovery. Key elements of this package include:

· budget support,

· targeting more efficient spending and further deepening of structural reforms,

· loans to support critical infrastructure investments,

· technical and financial assistance to rehabilitate the financial sector, and

· a comprehensive program of analytical and advisory work.

The World Bank Group is working with other development partners in this endeavor.

“The challenges faced by Ukraine’s economy underscore the need to accelerate structural reforms in areas such as the business climate, the financial sector, trade diversification, land reform, competition policy, and energy security,” explains Pablo Saavedra, World Bank Senior Economist for Ukraine. Moreover, he adds that “in the short-run particular attention needs to be placed on designing a prudent 2009 budget − one that targets social assistance to those in particular need and also safeguards critical capital investments.”

For more information about the World Bank in Ukraine, please visit http://www.worldbank.org.ua/