More World Bank support for Georgia

On September 10 The World Bank Group Board of Directors discussed a new Country Partnership Strategy (CPS) with Georgia, which provides the framework which will guide the World Bank Group's assistance to Georgia for 2009-2012.

“This Strategy has been prepared against the backdrop of twin crises – the August 2008 conflict, followed by the global economic downturn,” said Asad Alam, World Bank Regional Director for the South Caucasus. “As a result, the joint World Bank/International Finance Corporation strategy focuses on pressing post-conflict and vulnerability issues, and strengthening the foundations for competitiveness and growth in the future.”

Under the new strategy new initiatives will support investments in the transport infrastructure, the deepening of reforms in social assistance and health coverage for the poor, improvements in the business environment and the strengthening of expenditure efficiency. It is in this context that the CPS envisages World Bank Group financing of about $740-900 million over four years, underpinned by a strong programme of knowledge services. The financing envelope includes about $130 million made available through the International Development Association (IDA), the Bank’s highly concessional lending arm. The International Bank for Reconstruction and Development (IBRD) will also lend about $266 million, which will be added to disbursements under ongoing IDA/IBRD projects of about $135 million and International Finance Corporation (IFC) investments and lending of about $210-360 million.

“We strongly believe that the private sector has a significant role to play in the country’s economic development. IFC’s strategic approach in Georgia is to combine investments and advisory services to support private sector participation in economic restoration and growth,” said Snezhana Stoiljkovic, IFC Director for Central and Eastern Europe. “Our main focus will continue to be on the banking sector, infrastructure (especially renewable energy), and small and mediu-sized business as key drivers of other sectors’ development.”

In Georgia 11 ongoing Bank supported projects in health, education, agriculture, roads, municipal development, and internally displaced persons (IDP) support are aimed at helping Georgia’s poorest weather the financial crisis and increase the country’s competitiveness in the future. In addition, new infrastructure investments will focus mostly on road improvements to help reduce transport costs, improve internal connectivity and strengthen Georgia’s role as a transport corridor within the South Caucasus. These projects will build on the success of other road initiatives, which have seen travel times reduced by as much as 30 percent on some highways. Roads investments will also help create much needed temporary jobs and, over time, boost competitiveness, growth and job creation prospects.

Preparing research and analysis will be another critical aspect of the Bank’s work in Georgia, to aid the Government in making policy choices and meet the immediate needs of the most vulnerable in Georgia while strengthening competitiveness. Georgia is seeing substantial progress in its development efforts. Labelled a fragile state just a few years ago, it now boasts a dramatic increase in foreign investment in Georgian business, from 8.3 percent of GDP in 2004 to 16.4 percent in 2007, before the 2008 conflict. In fact, the business environment has improved so much that a recent survey showed a stunning drop in bribe frequency from 38 percent in 2002 to 4 percent in 2008. Starting a business in Georgia is easier as well, as Georgia is now ranked eleventh in the world for ease of doing business. In 2005 it took 21 days and cost 46.8 percent of the average Georgian’s annual income to start a business, making it time consuming and costly. Now an entrepreneur can start a business in just 3 days, using only 3.7 percent of the average income. The time it takes to export products has been reduced by 44 days to just 10 days, and the time it takes to import has been reduced by 39 days to 13 days.

Beyond the business environment, there have been many other significant development achievements in Georgia. Social assistance, for example, is better targeted to the poorest in the country, and funding for it has nearly doubled. Education is being improved through a new curriculum and standardised testing, which will help Georgian students compete internationally when they graduate. 55 percent of Georgian doctors and nurses have also been given additional medical training, which is making an impact in rural communities in particular.

The IFC has also accelerated its support over the past year and provided about $250 million to Georgia. This has included significant support for the banking sector. IFC has also supported the continuation of trade flows through two trade lines to Georgian banks and continued to invest in the improvement of the business and retail infrastructure. During the CPS timespan IFC will focus on investment opportunities in energy, infrastructure, and agribusiness.

The World Bank Board of Executive Directors also approved a US$147 million IBRD loan for the Third East-West Highway Project (TEWHIP) for Georgia on September 10. This is the third in a series of investments aimed at improving the E60 Highway, Georgia’s key transport corridor. The project will upgrade the E60 highway between Svaneti and Ruisi to a four lane highway. It will also assist the Government in implementing reforms in the transport sector, including strengthening the Highways Department and improving private sector participation in road maintenance and operations, road safety and engineering education. The project will see road transport costs reduced and access, ease of transit and road safety along the central part of Georgia’s East-West corridor improved. The capacity of the Highways Department and relevant Government entities to plan and manage the road network and to improve traffic safety will also be strengthened.

“This operation is a major element of the new Country Partnership Strategy for Georgia,” said Asad Alam. “It will not only strengthen Georgia’s competitiveness, economic growth and job creation prospects over the medium-term but also help stimulate economic recovery and create new employment in the immediate future.” “The E60 highway carries over 60 percent of the foreign trade that uses Georgia’s roads,” added Christopher Bennett, Task Team Leader of the project. “The Government’s programme to upgrade the E60 will help cement Georgia’s position as a key transport corridor. The Government’s support for addressing road safety issues on the E60 as an integral part of upgrades to the corridor is particularly encouraging.”

The Third East West Highway Programme builds upon the US$19 million First East-West Highway Improvement Project, the US$35 million Second East-West Highway Improvement Project (SEWHIP), and the US$20 million SEWHIP Additional Financing. These efforts are part of a larger programme that also includes financing for ongoing investments in local and secondary roads.

Since the inception of its programme in Georgia in 1995 the World Bank has financed 46 projects with total commitments up to $1.2 billion. The current portfolio consists of 11 active projects with commitments of $295.3 million.