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August 17, 2005

Georgia: U.S. Government Agency Approves $300 Million Aid Deal For Tbilisi

by Robert McMahon

A U.S. government agency has approved a development aid package for Georgia worth nearly $300 million. The board of the Millennium Challenge Corporation approved a five-year compact aimed at rehabilitating roads and an energy pipeline and boosting private-sector development. The corporation expects to sign the compact with Georgia in September.
Washington, 17 August 2005 (RFE/RL) -- The Millennium Challenge grant seeks to make infrastructure improvement the catalyst for development in some of Georgia's poorest areas.

The U.S. government's Millennium Challenge Corporation (MCC) says more than one-third of the funds would go toward building and rehabilitating about 245 kilometers of road traversing the southern Samtskhe-Javakheti region.

Another project uses MCC funds to rehabilitate the north-south gas pipeline from Russia.

The corporation's vice president, Charles Sethness, told RFE/RL yesterday that U.S. officials expect the program to benefit hundreds of thousands of Georgians, particularly in the impoverished south.

"The road project itself is going to be connecting a remote area with Armenia and Turkey and Tbilisi and supporting agricultural development in what used to be the breadbasket of Georgia, reducing travel time by almost 50 percent and on the pipeline front, we're going to making dramatically more secure and reliable the supply of gas for some 35 percent of the energy in the country," Sethness said.

Sethness said preparatory work for the road and pipeline projects has already begun and work could get under way some time next year.


At a ceremony expected next month, Georgia would become the fifth country to sign a compact with Washington under the Millennium Challenge program. The administration of U.S. President George W. Bush set up the program to give money only to poor countries with proper governance. Local officials decide how to use the grants but must show some impact on economic growth.

Sethness told RFE/RL that corporation officials were impressed with the way Georgian officials solicited public input to come up with poverty-reduction plans. "There was a very extensive consultative process throughout the whole country, including going out to all the regions outside Tbilisi, from whence they got 500 proposals from individuals and organizations on what were the most important things for them to do," he said.

In addition to the road and pipeline projects, about $32 million would be channeled to an independently managed investment fund for enterprises outside Tbilisi. Another fund of $15 million would supply grants to farmers and agribusinesses.

Previous poverty-reduction aid in Georgia has been undermined by corruption. Post-Soviet Georgia has been known as one of the most corrupt states in the region. Recent government crackdowns on money laundering and reform of police patrols have improved its image somewhat.

Sethness said the Millennium Challenge grant process has safeguards for limiting corruption. "We have a fiscal agent and procurement agent arrangement that we believe provides reasonable protections against corruption, and we're going to be following good international procurement practices and good international fiscal management practices with periodic audits," he said.

The approved package of $295.3 million is nearly $100 million more than Georgian officials estimated when they met with U.S. officials in Washington this spring.
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