Georgia: Supporting the Government’s Post-Crisis Priorities 99785 Supporting the Government’s Post-Crisis Priorities Overview Georgia has continued to make strong progress on the structural reform agenda in the face of post conflict vulnerability needs and economic downturn. Growth is now estimated at 6.3 percent for 2010. Georgia maintained its high overall rank of 12 (out of 183) on the Doing Business 2011 indicators. The interface between the citizens and the state is widely believed to be largely free of corruption (Transparency International’s Global Corruption Barometer 2010). Swift reconstruction from the conflict, strong recovery from the economic downturn and support for the favorable business environment remain central to Georgia’s development prospects and are being supported through the Bank’s ongoing Country Partnership Strategy (CPS). Challenge MULTIMEDIA Georgia is a low middle-income country with a fragile economic recovery, significant social vulnerabilities, and substantial medium term challenges for competitiveness and growth. Economic activity is picking up, however, significant uncertainty remains regarding the pace of recovery and growth given the global economic situation. One in four Georgians remains poor. The overall poverty rate increased from an estimated 22.7 percent in 2008 to 24.7 percent in 2009. The gap between urban and rural areas has widened. Unemployment rates are at around 17 percent. Large numbers of internally displaced persons (IDPs) continue to face More Results economic and social deprivation. The first phase of the Government response following the August 2008 conflict focused on essential housing and basic social services for 30,000 new IDPs. But there is still an unmet need to address housing for many of the IDPs from 600 km of roads were rehabilitated the 1990s. There is also the bigger challenge in terms of between 2009 and 2011, creating improving employment opportunities and livelihoods for all about 20,000 person-months of employment. IDPs. Rising food and energy prices are putting additional pressures on household incomes, particularly for the poor 75% and vulnerable. The Government also achieved significant strides in improving infrastructure (especially roads and power), though Georgia does not yet fully benefit from its location as a transit country and its potential in generating expansion of e-filing system for all tax payments from 10% in and exporting power across the region. While the banking mid-2009 to 75% in 2011 helped sector has withstood the financial crisis well, challenges improve the business environment. remain. Approach MORE INFORMATION Current CPS for the fiscal years 2010-2013 coincided with Georgia Program Snapshot the post-crisis period. The CPS program remains relevant to support the Government’s priorities such as: i) addressing Country Partnership Strategy unemployment, developing infrastructure, ensuring high (2010-2013) quality education, and developing a more market-friendly Government of Georgia business environment; ii) increasing competitiveness through Ministry of Finance of Georgia maintaining a free market environment, with openness to international trade, and establishing a deep and Ministry of Regional comprehensive free trade agreement with the EU; iii) Development and Infrastructure maintaining social assistance and health insurance as two of Georgia pillars underpinning social integration, and access to medical EU Delegation to Georgia services and public health; iv) supporting IDPs through USAID provision of housing as well as social and economic integration opportunities; and v) developing agriculture. Dutch Embassy in Georgia SIDA Results The following progress has been achieved through several Bank-supported programs during the period starting from the CPS launch (September 2009) until to date: Over 600 km of roads were rehabilitated, creating about 20,000 person-months of employment and providing improved public access to markets and social services. Seven new schools were constructed, serving 4150 students (about half of whom are girls) and employing more than 300 teachers. Over 1800 health specialists were trained in family medicine, of which 95 percent are women. A 25-bed hospital was constructed in a mountainous area (Ambrolauri) and a primary health care center was opened in the administrative center Gori serving about 69,000 beneficiaries (of which 10,000 are IDPs). The targeted social assistance (TSA) scheme was scaled up to cover 408,367 beneficiaries, of which about 56 percent are women. Expansion of e-filing system for all tax payments to 75 percent of all declarations from 10 percent in mid-2009 contributed to the improvements in the business environment. A joint EU - World Bank project totaling around € 4,9 million has supported improvements of the IDP housing and infrastructure for people affected by the conflict of August 2008. A total number of 3,964 IDPs in the four districts have benefited from different kinds of improvements. Bank Contribution The World Bank provides support to Georgia through the Country Partnership Strategy for 2010-2013 totaling US$ 630 million of the IDA and IBRD funds, of which US$ 385 million have already been committed and disbursed to support anti-crisis needs. The Bank’s current lending portfolio comprises 10 investment projects to address economic and social vulnerabilities while also supporting recovery and medium-term growth. Analytical and advisory services further contributed to program implementation. The policy note on capital budgeting as well as analysis of expenditure efficiency under the programmatic public expenditure work is helping to form the policy dialogue on public financial management and fiscal consolidation. The ongoing programmatic poverty work provides useful analysis of poverty impacts of changing patterns of growth as well as of key social programs. The ongoing Rural Investment Climate Assessment (RICA) will contribute to understanding the constraints faced by the rural sector at the household, farm and non-farm levels. The RICA is expected to stimulate policy dialogue with the Government and inform design of proposed Bank interventions in the Kakheti region. Partners Donor coordination continues through a broad range of Bank activities such as on roads, health, public financial management, IDPs, agriculture, and poverty analysis, as well as in the context of the Progress Reports on the Joint Needs Assessment undertaken in the wake of the August 2008 crisis. Several donors including the EU, Dutch Government and SIDA actively co- finance Bank-financed projects while many other projects have parallel donor financing. The Bank team is actively contributing to mobilizing additional donor funds. The Bank also continues providing fee-based services to the Millennium Challenge Corporation in supervising the regional infrastructure development project. Toward the Future As economic recovery takes hold, the Bank will continue its interventions by providing both financing and analytical work. The Bank will continue with an annual Development Policy Operations (DPOs) series that would support further improvements in social safety nets, fiscal efficiency, and competitiveness. Investments in secondary and local roads will be deepened to support domestic connectivity and access to markets and public services, especially in rural areas. These would also help to create short-term jobs and support the economic recovery. The regional development program -- which will be piloted in the Kakheti region - will build upon the delivery of public services, transport links with Tbilisi and trade logistics, and the potential for targeted interventions to foster growth in selected sectors. The program of analytical and advisory services focuses on such key areas, as sources of growth, expenditure efficiency, poverty and inequality analysis, skills, as well as IFC advisory services on banking and business climate issues. These cut across the CPS strategic pillars. In particular, the Bank will invest more in sources of growth analysis with respect to regional competitiveness, agriculture, trade, power, and environment. Beneficiaries Ketevan Bestaeva is an IDP and a mother of 7 children from Varta village,which had to be evacuated during the 2008 armed conflict. She and her family received one of the newly constructed houses for IDPs. “ The house is now totally refurbished, walls repainted, and floors changed. Each family received from the Government a full set of furniture, TV , refrigerator, a kitchen yard and a nearby 0.3-0.7 hectare of land to cultivate in order to support our economic livelhood.” Kakheti Regional Roads ProjectGhia Zatiashvili,” marshrutka” driver (Vaziani-Telavi- Gombori road, note: “marshrutka” is a privately owned bus or minivan serving as a means of public transportation): “ The road is of a very good quality. It has reduced the travel time a lot! People take this road often when they drive in and out of Kakheti on business matters, especially when taking grapes and other products to the market. We are so grateful that this road has been reconstructed and repaired. It’s fast and safe now to drive. If there is a possibility to rehabilitate other roads as well, we would be happy, of course .”