ICRR 10026
                                                                                               Report Number : ICRR10026
                    ICR Review
                    Operations Evaluation Department




1. Project Data :
             OEDID :
             OEDID:     L3346
         Project ID :   P009036
      Project Name :    Turkey: Private Investment Credit
            Country :   Turkey
             Sector :   Other Finance
       L/C Number :     L3346
  Partners involved :
       Prepared by :    Anwar Shah, OEDCR
      Reviewed by : Patrick G. Grasso
    Group Manager : Rene Vandendries
       Date Posted : 03/30/1998

2. Project Objectives, Financing, Costs and Components :
The project objectives were: (i) supporting Turkey's export expansion and diversification efforts by
providing long term funds for private investment; (ii) to assist Industrial Development Bank of Turkey
(TSKB) and Industrial Investment and Credit Bank (SYKB) in their efforts to diversify their business and
resources; and (iii) to support development of participating commercial banks (PCBs) into intermediaries
capable of mobilizing and allocating long term resources more efficiently .
Project Cost: US$200 million
Project components: Sub-project investments US$400 million (of which IBRD, $200 million), Technical
assistance $1million

3. Achievement of Relevant Objectives :
The project achieved most of the stated objectives . It helped achieve plant modernization and expansion of export
industries. It further assisted the TSKB and SYKB in their diversification drive . The exposure of PCBs to the project
preparation, appraisal and audit procedures under the loan agreement contributed to improvement in instuttional
capacity at the PCBs.

4. Significant Achievements :
The loan stimulated infusion of local private counterpart funds such that the loan financed investment
amounted to only 20% of total investment.

5. Significant Shortcomings :
During the first three and a half years of its operation, the project experienced lack of borrower interest due
to the generous availability of subsidized credit from Government sources . A major increase in interest
rates and amendments in loan agreements done in 1994 to allow financing of permanent working capital,
pre-shipment export finance and leasing and single currency lending, led to an acceleration of loan
utilization. Nevertheless, technical assistance available to PCBs for process improvements remained
unutilized.


6. Ratings :             ICR                       OED Review                Reason for Disagreement /Comments
               Outcome : Satisfactory              Satisfactory
     Institutional Dev .: Substantial              Modest                    The ICR does not make a convincing
                                                                             case as to the role of this loan in inducing
                                                                             financial sector reforms undertaken by
                                                                             Turkey to meet EU standards. Further
                                                                             much of the institutional development
                                                                             objectives were to be achieved through
                                                                             the technical assistance component which
                                                                             was not utilized.
       Sustainability : Likely                     Likely
   Bank Performance : Satisfactory                 Satisfactory
      Borrower Perf .: Satisfactory                Satisfactory
       Quality of ICR :                            Satisfactory

7. Lessons of Broad Applicability :
The project design must take into existing economic climate and policy environment and be flexible for
adaptation if this environment is radically altered . This credit experienced lack of interest by the borrower in
the initial years of implementaion as the project design overlooked macroeconomic climate and policy
environment in Turkey that favored easy availability of credit and at more attractive terms than available
under this loan agreement.

8. Audit Recommended?         Yes      No

9. Comments on Quality of ICR :
The ICR is of good quality. It could have provided more details on institutional development associated with
this project and performance of export industries financed under this project .