ICRR 10204
                                                                                               Report Number : ICRR10204
                    ICR Review
                    Operations Evaluation Department




1. Project Data :
             OEDID:
             OEDID :    L3851
         Project ID :   P038641
      Project Name :    Pre-Export Guarantee Facility
            Country :   Moldova
             Sector :   Financial Sector Development
       L/C Number :     L3851
  Partners involved :   None
       Prepared by :    Edgard Rodriguez, OEDCR
      Reviewed by : Robert Buckley, OEDCR
    Group Manager : Rene Vandendries, Acting Manager, OEDCR
       Date Posted : 08/14/1998

2. Project Objectives, Financing, Costs and Components :
The US$30 million contingent loan aimed to attract foreign private funds to finance exporters' working capital in the
Moldovan private sector. A government-owned Guarantee Administration Unit (GAU) would sell guarantees to
foreign suppliers, trading companies and financial institutions . These clients would bear full commercial risks, but the
guarantees would protect them from changes in government performance and other political risks . The loan would
support claims against outstanding guarantees up to $ 30 million at any time. The project was approved in FY 96 and
it closed in FY98 with 100 percent of the original loan cancelled .

3. Achievement of Relevant Objectives :
The project did not meet its main objective . No guarantees were sold. The Government requested to cancel the loan
to avoid further commitment fees seven years before the original closing date .

4. Significant Achievements :
In retrospect, this innovative project failed but it also served as an experiment for a new kind of guarantee to cover
political risks in transition economies with little or no financing of working capital for private firms . Based on the
experience, the Bank has now two similar and successful facilities in Eastern Europe .

5. Significant Shortcomings :
The project failed to assess the demand for guarantees from the Moldovan private sector . Also, the project failed to
obtain full cooperation from key ministries within the public sector .


6. Ratings :               ICR                     OED Review                 Reason for Disagreement /Comments
              Outcome :    Unsatisfactory          Unsatisfactory
    Institutional Dev .:   Negligible              Negligible
        Sustainability :   Unlikely                Unlikely
   Bank Performance :      Satisfactory            Satisfactory
      Borrower Perf .:     Deficient               Unsatisfactory
       Quality of ICR :                            Satisfactory

7. Lessons of Broad Applicability :
The project illustrates two basic lessons . First, projects should assess systematically the demand for a new financial
instrument among its potential clients . This assessment should also be done early and it should consider alternative
pricing scenarios. Second, the project shows the importance of government's ownership . Only a government
committed to not interfere with the market can credibly support an agency that sells insurance against government
interference in private business .
8. Audit Recommended?         Yes      No

9. Comments on Quality of ICR :
The ICR is satisfactory. It candidly acknowledges the failure of the project .