Helping Georgia Achieve Long-Term Growth

After last month’s conflict between the Republic of Georgia and Russia, Under Secretary of State Reuben Jeffery led an interagency delegation to Tbilisi, Georgia, from August 25 to 27, to assess that country’s economic and reconstruction needs. MCC signed a $295 million compact with Georgia in September 2005 to help the government there reduce poverty, and I was glad to be a part of the U.S. assessment team.

The delegation arrived in Tbilisi aboard a U.S. Air Force C-17 bringing relief supplies such as tents and humanitarian daily rations. From the moment we landed, the delegation spent three days in intense discussions with officials from the U.S. Embassy, the Government of Georgia, businessmen, civil society, and ordinary citizens.

Georgia is a small country, smaller than South   Carolina, with about 4.6 million citizens. The Prime Minister, Lado Gurgenidze, heads a team that is energetically confronting the challenges of the conflict: a new influx of internally displaced persons, disruption of transportation networks, and general uncertainty about the future. Before August, the Georgian economy had been growing at about 10 percent a year.

What we saw was sobering. Areas of Georgia that were already in need of assistance to replace aging or inadequate infrastructure are now more in need than ever. I met with Georgians who made it clear that, given the proper roads and other resources, they could resume their plans for economic growth.

MCCs existing projects [see map] were not directly affected by the conflict. The MCC model—in which the partner country selects and implements projects—is one that the Georgian government would like to replicate more broadly, both with other donors and for other sectors of the economy. The Georgian government has proposed a Phoenix Fund for a broad array of possible infrastructure projects, from roads to railroad rolling stock to natural gas projects to water and sanitation.

MCC, as part of the package of assistance announced by the Administration after the assessment team returned to the U.S., is considering a $100 million compact amendment for Georgia. The new funds would enable Millennium Challenge Georgia to finish some projects for which preliminary design and feasibility studies had already been completed, but could not fit within the compact’s original $295 million total. Such an amendment would first need to be approved by MCC’s Board of Directors. Many of the projects under consideration were previously included in the original compact but were later scaled back as a result of external pressures such as dollar depreciation and increased international construction costs.

MCCs indicator assessment of Georgia for fiscal year 2008 was markedly positive in that Georgia passed 15 of the 17 indicators, including every indicator in Ruling Justly and Economic Freedom. Our new set of indicators for Georgia, and other candidate countries, will be released by early November.

Click here for more details regarding ongoing MCC projects in Georgia and information about how additional resources will help Georgia reduce poverty and achieve long-term economic growth.