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U.S./Georgia: Washington Signs $300 Million Aid Pact With Tbilisi

Presidents Bush, Saakashvili in Tbilisi in May Top U.S. and Georgian officials have signed an agreement aimed at bringing nearly $300 million worth of development aid to some of Georgia’s poorest areas. U.S. Secretary of State Condoleezza Rice lauded Georgia’s commitment to reforms, which she said will enable the Millennium Challenge grant to affect hundreds of thousands of Georgians. Georgian President Mikhail Saakashvili said the five-year compact would be a key part of the country’s reconstruction effort.

New York, 13 September 2005 (RFE/RL) – U.S. and Georgian officials have hailed what they called an intensified partnership following the signing of the Millennium Challenge Compact (MCC) yesterday (12 September).

The $295.3 million aid grant seeks to make infrastructure improvement the catalyst for development in some of Georgia's poorest areas.

At a signing ceremony in New York, Secretary of State Condoleezza Rice said the grant signals Washington’s long-term commitment to Georgia. “Our partnership will only to grow stronger as Georgia continues to establish the rule of law, a vibrant civil society, an independent media, a free economy and accountable, effective institutions of government at all levels,” Rice said.

Two-thirds of the funds will go to infrastructure improvements, including the rehabilitation of about 245 kilometers of road traversing the southern Samtskhe-Djavakheti region. Another plan is to use MCC funds to rehabilitate the north-south gas pipeline from Russia. It also includes municipal infrastructure development for water, sanitation, irrigation, and roads in regions outside the capital.

They were among the recommendations Georgian civilians and community groups made in a nearly countrywide consultative process.
“It’s another example of how free, democratic government can provide basic needs to its citizens because it’s accountable to the people, because it’s under daily scrutiny from our media, from our political organizations, from civil society, from population in general." - Saakashvili

Rice said U.S. officials expect the program to benefit hundreds of thousands of Georgians, particularly in the impoverished south. She explained how the program was intended to work in the region: “The country will rebuild a regional thoroughfare that will cut the average travel time from rural areas to Tbilisi by 43 percent. This will make it easier for farmers and small-business owners to transport their goods to market and will enable more citizens to gain access to social services.”

Some preparatory work for the road and pipeline projects has already begun and major work is expected to begin next spring.

Georgia became the fifth country to sign a compact with Washington under the Millennium Challenge program. The plan has drawn some criticism in the U.S. Congress for the time it has taken to disburse aid.

The administration of U.S. President George W. Bush set up the program to give money to poor countries with proper governance. Local officials decide how to use the grants but must show some impact on economic growth. The timing of this latest compact comes just days ahead of the UN summit, in which member states are having difficulty agreeing on aid commitments to reduce poverty.

Washington has traditionally opposed setting aid targets pegged to gross domestic product, as favored by European states. The new Millennium Challenge grant process of rewarding reformist states is its preferred initiative.

Georgian President Mikheil Saakashvili said at the signing ceremony that his government was worthy because its moves to clamp down on corruption and limit bureaucracy. “It’s another example of how free, democratic government can provide basic needs to its citizens because it’s accountable to the people, because it’s under daily scrutiny from our media, from our political organizations, from civil society, from population in general,” Saakashvili said.

Saakashvili called the Millennium Challenge process the most efficient, targeted approach he has seen to aid and predicted positive results. He said the aid comes at a time of essential reconstruction for Georgia.

“The whole country is under reconstruction. I mean we are building roads all over the place, we are fixing the energy system. We are building hospitals, schools, water sewage systems, and all the infrastructure that was so desperately needed,” Saakashvili said.

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

Georgia has been recipient in the past of hundreds of millions in poverty-reduction aid but corruption was a major impediment. Post-Soviet Georgia has been known as one of the most corrupt states in the region. U.S. officials say the Millennium Challenge grant process has safeguards for limiting corruption.

The U.S. Congress has funded the Millennium Challenge program with almost $2.5 billion. The administration has requested an additional $3 billion for the next fiscal year beginning next month.

See also:

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