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Implementation Completion Report (ICR) Review - Poland Rural Development Project


  
1. Project Data:   
ICR Review Date Posted:
03/28/2006   
PROJ ID:
P058202
Appraisal
Actual
Project Name:
Poland Rural Development Project
Project Costs(US $M)
 300.4  285.5
Country:
Poland
Loan/Credit (US $M)
 120.0  124.1
Sector, Major Sect.:
Sub-national government administration, Micro- and SME finance, Other social services, Roads and highways, Water supply,
Law and justice and public administration; Finance; Health and other social services; Transportation; Water sanitation and flood protection
Cofinancing (US $M)
   
L/C Number:
L7013      
   
Board Approval (FY)
 
Partners involved
 
Closing Date
         
Evaluator: Panel Reviewer: Division Manager: Division:  
Christopher D. Gerrard
George T. K. Pitman Alain A. Barbu IEGSG

2. Project Objectives and Components:

a. Objectives
The overall objective was to provide medium-term support for the development of the rural sector in Poland.

The three specific objectives were:
(1) To increase the level of off-farm employment in rural areas
(2) To contribute to the on-going decentralization of self-government and regional development
(3) To assist Poland in building institutional capacity to absorb EU pre-accession and structural funds.
The objectives were not revised during implementation.

b. Components (or Key Conditions in the case of Adjustment Loans):
The project had four components:

A. Micro-credit (EUR 18.9 million at appraisal, EUR 16.5 million actual) -- to reduce unemployment in rural areas by promoting off-farm self-employment through financing: (a) small, one time only grants to cover cost of small investments; (b) micro-loans up to US$5,000 to new and existing rural micro-enterprises; (c) advisory services for newly established micro-enterprises created under the component; and (d) operational costs and technical assistance for micro-lending to non-governmental organizations which were selected to assist in the implementation of the component as service providers.
B. Human Capital Development

    B1. Labor Redeployment (EUR 44.4 million at appraisal, EUR 31.1 million actual) -- To assist the economically disadvantaged in rural communities to expand and use their human capital in response to economic and labor market opportunities by financing (a) economic and labor market surveys and (b) labor redeployment services, such as specialized employment services, on-the-job and institutional training, support to temporary community employment, small business assistance services, small business incubators, promotion activities and local economic development planning grants.
    B2. Education (EUR 24.4 million at appraisal, EUR 79.0 million actual) -- to improve the utilization of educational resources by financing (a) teacher training (b) instructional materials, (c) computers for instructional purposes, (d) improved school facilities, and (e) public awareness, implementation, and monitoring of project activities.
    B3. Institution Building in Local and Regional Administrations (EUR 12.5 million at appraisal, EUR 9.7 million actual) -- to increase the level of efficiency and effectiveness in local and regional administration (gminas, powiats and voivodships) by financing (a) institutional development programs, (b) training, and (c) capacity building.
C. Rural Infrastructure (EUR 192.9 million at appraisal, EUR 118.9 million actual) -- to improve public infrastructure in rural areas by financing water supply systems, sewage collection and treatment facilities, solid waste management systems and rural roads.
D. Project Management (EUR 3.7 million at appraisal, EUR 4.9 million actual)

c. Comments on Project Cost, Financing, Borrower Contribution, and Dates
The key components and objectives did not change during implementation, but project resources were formally reallocated to the education component from other components in response to the high demand for school reconstruction activities by participating local governments. The labor redeployment component was also able to access resources from the European Social Fund and the rural infrastructure component from the EU, SAPARD (Special Accession Program for Agriculture and Rural Development), and IROP (Integrated Regional Operational Program). ICR does not provide detailed information on how much became available through these other sources.


The project closed in June 2005, eleven months after the original closing date due to initial issues at the beginning of project implementation and the additional time required to complete all project activities. Factors which affected the initial slow pace of implementation were (a) the complex procedures by which project funds flowed to beneficiaries took time to understand and master caused major delays during the first year of implementation, (b) local governments’ initial lack of willingness to participate in RDP, (c) weak initial mobilization of co-financing, and (d) limited presence and capacities of construction companies in the rural areas in the early project implementation.


3. Relevance of Objectives & Design:

The objectives of the project were highly relevant. The RDP was the first broad and comprehensive program during Poland's transition period supporting the development of rural areas -- preceding programs having had a narrow sectoral nature, oriented only towards agriculture. It was consistent with the country's "Medium-Term Strategy for Agriculture and Rural Areas Development" (April 1998) and with the Bank's country assistance and rural sector strategies. The project was also prepared in the late 1990s during a difficult macroeconomic environment in Poland characterized by a fall in economic growth, an increase in unemployment, and a deterioration of the economic situation in agriculture.

4. Achievement of Objectives (Efficacy) :

Objective (1) -- Increasing the level of off-farm employment in rural areas was achieved.

The project contributed to the creation of about 22,500 jobs outside of agriculture directly, and 64,000 jobs indirectly, according to the project's ex post economic analysis. The micro-credit component (A) contributed roughly 3,000 direct jobs, the Labor Redeployment component (B1) contributed 14,500 direct jobs, and the rural infrastructure component (C) contributed 4,991 direct jobs and 64,000 indirect jobs. The impact of improved teacher qualifications, educational materials, and better physical education infrastructure on the quality of labor force and its employability can only be evaluated in the longer-term perspective.

Objective (2) -- Contributing to the on-going decentralization of self-government and regional development was achieved.
The project strengthened regional and local government administration through training activities and learning-by-doing. Training was provided to 4,195 participants from 595 administrative units in the areas of (a) strategic and financial management (b) management of public services (c) stimulation of economic development, social participation and social development, (d) project management, (e) human resource management, (f) ethics and prevention of corruption, and (g) cooperation between local government units. In addition, detailed institutional analysis, development plans, and project analyses were implemented in 33 self-government units in an intensive mentoring program. Regional and local governments responded positively to the challenge of implementing the labor redeployment, education, and rural infrastructure components in a decentralized and participatory way, based on the expressed preferences of their inhabitants. The knowledge and experience gained from the RDP has also enabled local governments to secure additional financing from their own activities and investments.

Objective (3) -- Assisting Poland in building institutional capacity to absorb EU pre-accession and structural funds was achieved.
The project introduced modern institutional practices, compatible with European standards, including basic mechanisms for applying for funds and implementing investments supporting regional and local development. These practices paved the way for those now being used under EU-financed programs. The experience of decentralized RDP implementation using transparent and consistently applied principles was instrumental in making regional and local self governments ready to participate in EU funded programs. At the end of the project, local governments who had participated in the Institutional Development Program under component B.2 were more successful than other local governments in applying for EU-supported regional development programs


5. Efficiency:

The ICR assessed the economic and fiscal impact of the project using largely the same methodology as in the PAD. Overall, the project managed to promote the movement of unemployed and new labor market entrants into an estimated 87,000 jobs, with an average cost in public funds spent of roughly EUR 3,000 each, which is substantially lower than US$5,000 per job level of expenditure which was defined by the PAD (Annex 1) as a benchmark for creating jobs in a cost-effective manner. In addition, the unit costs of the various project components compare favorably with the cost-effectiveness benchmarks set by the PAD and with other rural development programs in Poland. Building on these findings, the ICR then goes beyond the PAD methodology to estimate an overall ERR of 23 percent.


The fiscal impact of the project has also been positive, based on the foregone expenditures for unemployment benefits, increased tax income, and additional social security premiums paid by those newly employed. Depending on the wages received by the newly employed person, the value of annual fiscal benefit of creating one new job, for the 2003 data, was in the range of PLN 4,582 to 11,852, compared to the average cost to the project of US$ 3,000 (roughly 12,000 PLN) per job created. The fiscal impact will be positive if the new jobs created last for at least two to three years.

6. M&E Design, Implementation, & Utilization:

The PAD (pp. 15-16) states that each ministry participating in the project would designate responsibility for monitoring its own project activities to a department or external service provider, which would cooperate with the Project Coordination Unit (PCU) to provide information on project implementation in line with the project indicators. Progress reports would be submitted by all lower-level implementing units to the Voivodship Project Implementing Units or, in the case of institution building activities, service providers reports would be submitted through project teams in appropriate ministries to the PCU. Then the PCU would prepare periodic consolidated financial management reports for the National Steering Committee, the Ministry of Finance, and the Bank, which would be part of the project MIS. A periodic RDP evaluation process (initially every six months), at both the regional and central levels, was also built into the project implementation schedule for continuous process improvements.


The ICR does not provide an overall assessment of the quality of M&E under the project, except to say that:

  • The comprehensive monitoring procedures and transparent processes contributed to better governance at all levels, which is clearly documented in the Final Evaluation Study of the RDP (p. 8).
  • The monitoring and evaluation system was adequately designed to capture results from various relevant sectors and institutions (p. 10).
  • A web-based MIS which integrates local activities to the regional level and regional summaries to the national level is a prerequisite for a fully representative monitoring and evaluation system. Without this, the regional and an national coordinating bodies will not have sufficient knowledge of decentralized implementation to be able to have confidence in it and demonstrate its results convincingly (p. 13).

The ICR extensively cites (on pp. 6, 7, 8, and 12) evidence from the Final Evaluation Study of the RDP that was completed in June 2005 by the Consortium of Doradca Consultants, Instytut Spraw Publicznych and Proeko Ltd. But the ICR does not provide any information about how this study was conducted -- to what extent there was a baseline, or control groups, etc.
7. Other (Safeguards, Fiduciary, Unintended Impacts--Positive & Negative):

The project was classified as environmental category Fl, because it involved the flow of funds to local levels, where sub-projects would be identified, prepared, and implemented. The major environmental issues were primarily associated with the rural infrastructure component, and primarily with the construction phase. The environmental regulatory framework in Poland was generally regarded as adequate and effective, but specific local institutional capability and mechanisms had to be carefully delineated and assessed for effectiveness (PAD, pp. 29-30).


The ICR does not provide any explicit information about whether any environmental issues arose during the implementation of the project.


8. Ratings:
ICR
ICR Review
Reason for Disagreement/Comments
Outcome: 
SatisfactorySatisfactory
Institutional Dev.: 
SubstantialSubstantial
Sustainability: 
LikelyLikely
Bank Perf.: 
SatisfactorySatisfactory
Borrower Perf.: 
SatisfactorySatisfactory
Quality of ICR: 
Satisfactory

NOTES:
- When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006.
- ICR rating values flagged with ' * ' don't comply with OP/BP 13.55, but are listed for completeness.

9. Lessons:

The ICR has extracted a number of useful lessons from the experience with this project.
  1. Projects like RDP should be implemented as much as possible in a decentralized way, especially where political decentralization to elected regional and local governments is already in place. While line ministries should play a substantial role in project design, they should allow regional and local governments substantial leeway in adjusting the mix of project activities during implementation.
  2. Centralized management of decentralized and autonomous implementation is counter-productive to local capacity-building. Giving regional and local governments the responsibility for implementation -- including reponsibility for examining their communities’ specific problems, for focusing project components on addressing these problems, and for executing the related activities -- helped achieve the project objective of strengthening their capacity.
  3. Project design needs to specify clear ranking and qualification criteria for local governments to access project funds, based on socio-economic information at the local level, in order to mitigate the potential trade-off between decentralized implementation and a focus on poverty alleviation. Otherwise, regional governments are naturally under pressure to allocate access to project benefits widely across many local governments of varying need.

10. Assessment Recommended?  Yes

          Why?  This was largely a decentralization project that was intended to strengthen the capacity of regional and local governments to provide public services to rural areas. It would be good for a PPAR to confirm the findings and lessons, since decentralization is a principal strategic thrust in the Bank's current rural development strategy.

11. Comments on Quality of ICR:

The ICR is well written and covers most of the bases. However, section 1 did not provide the closing date of the project, and one of the usual tables in Annex 2 on Projects Costs and Financing was missing.

(ES-Rev4B-Dec/05)
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