The FINANCIAL — “I am hopeful that America is a natural market for many Georgian products and that the Georgian brand will become better known for its quality and consistency,” Jim McNicholas, Deputy Resident Director, Millennium Challenge Corporation (MCC).
Q. At their quarterly meeting, the Millennium Challenge Corporation’s (MCC) Board of Directors discussed the possibility of providing up to an additional USD 100 million to MCC’s existing USD 295 million compact with Georgia. What directions will the additional financing go to?
A. The proposal to amend the existing Georgia Compact in order to make up to USD 100 million available for Compact-related activities is intended to have two purposes – first, to extend the impact of the original Compact’s focus on core infrastructure improvements which underlie economic development, and second, to demonstrate to investors a commitment to Georgia’s economic future. Both are critical to poverty alleviation, and to securing Georgia’s progress in economic policy and practice to date.
I would also like to see Georgia become a tourist destination, particularly for outdoor enthusiasts. While it is not the MCC mission to directly become involved in trade initiatives, Georgia has allocated MCC grant funds to strengthen small and medium enterprises and agribusinesses to improve and expand production and ultimately Georgian export potential.
Q. Are you in any way involved in consultations with the Georgian Government on how and where this money should go to? What’s your outlook on the subject, which sectors in Georgia need emergency rehabilitation at this moment in time?
A. MCC has been a partner with Georgia actively for the past two and half years. In August and September we had very productive discussions with the government and MCG’s stakeholder committee regarding priorities. There are clearly priorities for emergency response, assistance to internally displaced citizens and to address many other social impacts that the government has addressed with other partners. The government and MCC agreed that MCC funding should continue to be allocated to achieving the full impact of the Compact projects including road rehabilitation in Samtskhe-Javakheti and priority investments in energy and municipal infrastructure, primarily water and wastewater.
Q. The European Union also plans an international donors conference for Georgia. And the International Monetary Fund announced Wednesday it had tentatively agreed to provide Georgia with a USD 750 million financial package aimed at shoring up investor confidence in the war-battered country. Do you think such direct support from international donors will incite FDI flow to Georgia?
A. I believe that the business community in Georgia is resilient, and certainly the continued international commitment to Georgia will support the return of confidence and return to high levels of investment in Tbilisi and increasingly to the regions.
Q. Why should Americans invest in Georgia and which sectors do you see the most attractive for U.S. investors and why?
A. Our message is that the partnership and commitment between Georgia and MCC remains strong, but strong private sector partners are required to implement Georgia’s economic development plans. I encourage investors to pursue opportunities and reach out to members of the business community here in Tbilisi – through Amcham for example – to understand the market opportunities and risks.
Q. On September 23 the Millennium Challenge Georgia signed a GEL 8,7 million worth agreement with joint venture “New -Energy-Tbilisi-Sakhydro”. What are the new upcoming projects by MCG for the near future?
A. At this stage, all of the major component projects are fully underway. Road construction has begun in Samtskhe-Javakheti; the natural gas pipeline rehabilitation is in its second round of repairs, water supply of Poti is being rehabilitated and several other major city repairs are upcoming under the management of the Municipal Development Fund; and investments and grants are rolling out under the Enterprise Development initiatives.
Q. MCG’s energy infrastructure budget is USD 49.5 million which aims at restoring the damaged sites of the North-South Gas main pipeline requiring emergency rehabilitation. Georgian Oil and Gas Corporation Construction manage the works on the North-South gas pipeline. Were there any problems raised during the war concerning the pipeline?
A. The launch of the second round of pipeline repairs is a major milestone illustrating MCG’s progress in implementing the Compact. In the case of the energy project, I highlight the leadership of the Georgian Oil and Gas Corporation, which has managed and supervised the repairs according to international standard and are working to improve their corporate operating standards in the process. This is a significant result of dedicated personnel and management at GOGC.
Q. What’s the overall volume of the financing already spent out of the USD 295 million grant?
A. At the end of the last quarter, September 2008, Georgia has spent USD 70 million, representing the highest expenditures for any MCC Compact country. I want to highlight that the majority of the Georgia grant is allocated to major infrastructure investments (road, pipeline rehabilitation, water infrastructure) – all of these projects follow standard project cycles beginning with project design, environmental and social impact analysis conducted to both Georgian and international standard, transparent international procurement processes, and finally construction. The bulk of expenditures are to be expected in the latter years of the Compact, and this trend is also true for Georgia where expenditures are expected to be higher in 2009 and 2010.
Interviewed by Kate Tabatadze