March 30, 2011
MCC Nears Completion of Successful $395.3 Million Compact with Georgia
Georgian Prime Minister Nikoloz Gilauri Participates in Closeout of MCC’s Third Compact Since its Creation in 2004
Washington, D.C. — The U.S. Government’s Millennium Challenge Corporation (MCC) Board Member Alan Patricof and Vice President of Compact Operations Patrick Fine today joined Georgian Prime Minister Nikoloz Gilauri and U.S. Ambassador John Bass at an event marking the upcoming completion of MCC’s $395.3 million Compact with Georgia, which will conclude on April 7, 2011.
“The success of this MCC compact is a sign of Georgia’s continued development and builds a strong foundation for many more years of growth,” stated Mr. Fine at the event. “All of this progress has been made thanks to the hard work of the people of Georgia.”
In September 2005, MCC signed a five-year, $295.3 million Compact with the Government of Georgia to address the two main barriers to economic growth: a lack of reliable infrastructure and the slow development of businesses, particularly agribusinesses. The MCC compact in Georgia entered into force (EIF) in April 2006, formally initiating the 5-year term for project implementation. In November 2008, MCC and the Government of Georgia signed a Compact amendment making $100 million of additional funds available to perform work in the Roads, Regional Infrastructure Development, and Energy Rehabilitation Activities that had been identified in the original Compact.
During the five-year compact, the Government of Georgia adopted far-reaching economic and institutional policy reforms and met very ambitious project timelines.
“Development assistance works best in countries that are committed to good governance and are willing to enact policy reforms that will promote economic growth and enhance sustainability,” stated Mr. Patricof. “We are seeing this commitment in Georgia, and the partnership between MCC and the Government of Georgia has produced tangible results that are already having a significant impact on the lives of the Georgian people.”
One Compact project, the rehabilitation of the Samtskhe-Javakheti Road, has repaired 220 km of road, improving access to markets in Tbilisi and providing a key transport corridor between and border crossings with Turkey and Armenia. The project has reduced travel time along the repaired road from over eight hours to less than three, and has facilitated both regional and international trade. In 2011 alone, the improved road is expected to save $13 million in vehicle operating costs due to reduced wear and tear.
Through the MCC-funded agribusiness grant program, more than 280 businesses in Georgia have been assisted, resulting in over 2,800 jobs, nearly $3.2 million in increased wages and more than $2.7 million in additional business income.
Another Compact project, which involved rehabilitation work at 22 sites on Georgia’s main natural gas pipeline, has helped increase safety, security and reliability in country’s energy sector.
“I want to thank the U.S. President, MCC, the MCC Board and the American people for this grant,” stated Prime Minister Gilauri. “It has been five tough years and no one expected it to be this successful. We are very happy with the success of this first compact and ready to move forward and fulfill even more difficult projects.”
Key results from MCC’s compact with Georgia:
• The Samtskhe-Javakheti Road rehabilitation project repaired 220 km of road, improving access to markets in Tbilisi, providing a key regional transport corridor and border crossings with Turkey and Armenia, and reducing travel time from over eight hours to under three. Under the compact, the Government of Georgia committed to annual increases in the state’s road maintenance appropriations. Georgia has fulfilled this commitment increasing appropriations from $33.6 million in 2006 to $56 million in 2010.
• Agribusiness development project provided grants to improve the economic performance of 280 agribusiness and farm production projects, resulting in 2,867 jobs as of January 2011, and benefitting over 10,000 people. Businesses have already reported an increase in wages of almost $3.2 million.
• The rehabilitation of 22 sites of the main gas pipeline has improved regional and municipal service delivery, providing increased energy reliability and security throughout the country.
Under the compact, the Government committed to focus on the financial performance of the
Georgian Oil and Gas Corporation (GOGC), a state-owned entity and ensure that the company
would collect payment from natural gas consumers and achieve a collections rate of 95%. This
allowed the Government to stop subsidizing regions and improve billing and collection
procedures. Additional revenues allowed GOGC to operate more efficiently and maintain the
MCC elected to work with GOGC as the implementing entity for the Energy Rehabilitation Project,
responsible for designing and managing all pipeline repairs under the Compact. GOGC is now
the party responsible for the operation and long-term sustainability of the MCC investment. MCC
supported operational and financial improvements at GOGC before and during construction.
Encouraged by MCC’s results, USAID recently signed a contract with GOGC to manage a $70
million investment to further rehabilitate the national natural gas distribution network.
• The Georgia Regional Development Project (GRDF), a ten-year investment fund in its fifth year, has invested $27.8 million in 12 small and medium enterprises primarily in the agribusiness and tourism sectors, realizing revenues of $ 7.1 million.
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Millennium Challenge Corporation, a U.S. Government agency designed to work with developing countries, is based on the principle that aid is most effective when it reinforces sound political, economic, and social policies that promote poverty reduction through economic growth. For more information, please visit www.mcc.gov.
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