5. In formal restructuring programs, most of the financial<sup>costsofthesocialaspectsof</sup> restructuring are incurred early on in the process. Severance payments<sup>tend to be thesingle most</sup> costly item as they are made to all workers separated from the<sup>industry,althoughthemagnitude</sup> of these payments varies depending on the conditions of<sup>downsizingpackageandspecific</sup> attributes of the workforce. Some level of counseling and retraining<sup>isalsousuallyprovided.</sup> Governments also usually provide funds for temporary public<sup>worksprogramsinorderto</sup> mitigate the short-term negative employment impact of coal sector<sup>restructuring,providingsome</sup> income to the workers and necessary services to the community.

6. Consistent with the front-end bias of the costs to the budget of coal<sup>sector restructuring,most</sup> of the monitoring and evaluation carried out to assess the impact<sup>ofrestructuringandthe</sup> effectiveness of the mitigation efforts tends to focus on the short term,<sup>when workersare being</sup> laid-off, and when the risk of social disruption and related political<sup>actionis perceivedto be at its</sup> highest. The research described in this report was undertaken in an<sup>attempttolookbeyondthe</sup> short-term effects of coal sector restructuring and the relatively narrow<sup>confinesof the sectorand</sup> its workers to the broader affected communities several years after mine<sup>closureinthree</sup> countries in Eastern Europe and the Former Soviet Union (EE/FSU).

# **Coal Sector Restructuring in Eastern Europe and the Former Soviet**<sup>**Union**</sup>

7. The countries of EE/FSU that have significant coal industries<sup>arenoexceptiontothe</sup> generalized description above of the impetus behind governments'<sup>decisionstoengagein sector</sup> restructuring. In addition, these countries possess some unique features,<sup>ormoreextreme</sup> manifestations of similar attributes, that distinguish their experience<sup>withcoalsector</sup> restructuring from that of other coal-producing countries And while the formerly socialist economies know many other examples of "one-company towns",<sup>thecoalindustry andthe</sup> communities dependent on it, nonetheless, possess a number of characteristics<sup>thatdistinguish</sup> them from other small and medium-sized towns dominated by a single<sup>industry.3</sup> 8. First, the coal sector has been in something of the avant-garde of industrial<sup>restructuringin</sup> transition economies, and governments in the region have borrowed<sup>fromthe WorldBankand</sup> other international lenders to finance the restructuring of the<sup>coalindustry.4</sup> While this may appear at first to be a formal rather than substantive indication of<sup>significance,infact it reflects</sup> the priority that governments have accorded to coal sector restructuring<sup>in the generalcontextof</sup> economic transition, and suggests that the lessons of coal sector restructuring<sup>that can be derived</sup> today may be of broader relevance to restructuring programs yet to<sup>be undertaken.Asecond</sup> (related) factor distinguishing the coal sector and communities dependent<sup>on itfrom other</sup> industries is that in all countries the coal sector was (in some<sup>cases,continuestobe) unique</sup> among industrial sectors of the economy in the levels of subsidization<sup>receivedfrom the national</sup> budget (indeed, it is ultimately this factor that drives the decision to<sup>embarkuponrestructuring).</sup> Third, the industry was generally a major employer even<sup>inthenational contextpriorto</sup> restructuring. In Ukraine, for example, the entire coal industry employment<sup>wasestimatedat</sup> 4.3% of the country's labor force in 1994. Fourth, certain attributes of the labor and<sup>thelabor</sup> force (underground work in brigades often carried out by men<sup>whohaveworkedonlyinthe coal</sup>

> **3** Expert Institute (2000) provides a thorough review and analysis of "one-company towns" in Russia.

> 4 Annex 2 lists World Bank loans to Poland, Romania, Russia and Ukraine in support of coal sector restructuring.

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