EurasiaNet Business & Economics - Road Construction Proving Tricky for Georgia's Millennium Challenge

BUSINESS & ECONOMICS

ROAD CONSTRUCTION PROVING TRICKY FOR GEORGIA’S MILLENNIUM CHALLENGE
Molly Corso 5/02/08

Two years into the US government-funded Millennium Challenge Georgia program, observers are concerned that major delays and cost adjustments could prevent the development program from achieving one of its most ambitious goals.

A $102.2 million road repair project that will upgrade 300 kilometers of highway running between Tbilisi and Georgia’s borders with Turkey and Armenia is the crown jewel of the Millennium Challenge Georgia (MCG) campaign. Construction on the project, which represents 35 percent of the MCG’s overall $295.3 million budget, was slated to begin a year ago. But under the latest construction timetable, work won’t get underway until later this spring at the earliest.

The first tender for a road repair company to do the work was cancelled last April. Ashtrom International, an Israeli construction company, won a second tender held last October. It intends to begin work either later in May or in June, and has set a new project completion date for the fall of 2011.

In an April interview with EurasiaNet, Lia Mamniashvili, MCG’s then acting chief executive officer, cited the cancelled tender as the main reason for the delay. The time needed to work out complex engineering designs for roadwork in the affected Samtskhe-Javakheti region � one of Georgia’s most remote areas � also played a role, she noted.

A local non-governmental organization monitoring the MCG fund, however, claims that the road project delay indicates that other problems exist as well. In a September 2007 report, the Economic Policy Research Center identified inconsistent project budgeting and analysis as an additional source of concern. "[When] international projects are delayed � [their] value decreases," commented Nino Evgenidze, a project coordinator for the Center. Inflation and a falling dollar rate mean that the Millennium Challenge Georgia’s funds no longer stretch as far as planned, she elaborated.

"Prices go up all the time," Evgenidze said. "They [beneficiaries] did not receive [the funds] today and in the future these benefits decrease."

Georgia posted a 12.3 percent inflation rate for March 2008. Meanwhile, the dollar has lost 18 percent of its value against the lari since 2006, the year the Millennium Challenge Georgia program began.

MCG’s Mamniashvili conceded that there are grounds for the criticism, but that the Economic Policy Research Center’s calculations do not pertain to the road project, which, she argued, cannot be quantified by a formula. "It [the Samtskhe-Javakheti project] is different," she said.

"MCC programs are facing delays in every country. Spending is slow � things just don’t work out in reality according to the schedule that was based on theoretical assumptions," Mamniashvili said.

That view is supported by research performed by a US organization that monitors the Millennium Challenge Account. Indeed, the difficulties facing the Millennium Challenge Georgia program seem to be par for the course for all program participants. "There was an overestimation of the capacity of the countries to really manage the project. MCC [Millennium Challenge Corporation] could have given more guidance," said Sheila Herrling, a senior policy analyst at the Center for Global Development in Washington, DC. "Not just Georgia is running behind schedule."

Rising oil prices and the declining dollar are hurting infrastructure projects in all the MCC countries, Herrling added. These factors, however, do not mean that MCG’s road rehabilitation project "will not be a good investment," she said.

MCG managers say their focus will be on the results. But this has helped fuel a separate controversy. To assess their programs’ performance, the MCG is required to monitor and evaluate Georgia’s economic situation. On April 4, the program signed an agreement with the Georgian State Department of Statistics to receive data over the next three years from a national survey and report on rural populations. The information is intended to help MCG to determine what infrastructure needs exist in rural Georgia and how villages are developing.

In 2007, however, the anti-corruption watchdog Transparency International, along with the United Kingdom’s government-run Department for International Development, issued reports stating that Georgia’s Department of Statistics is not an independent body and that its data suffers from government influence

Access to polling data dating back to 2002 and the program’s "important" mandate to enhance "institution building" dictated the choice, according to the MCG’s Mamniashvili. Neither the MCG nor local monitoring groups like the Economic Policy Research Center expressed concerns about the quality of data the Millennium Challenge Georgia will receive.

[Editor’s Note: The Open Society Georgia Foundation helps funds the Economic Policy Research Center. EurasiaNet.org and the Open Society Georgia Foundation are both part of the Soros Foundations Network, though both operate as distinct entities].

Editor�s Note: Molly Corso is a freelance reporter based in Tbilisi.

The Central Eurasia Project aims, through its website, meetings, papers, and grants, to foster a more informed debate about the social, political and economic developments of the Caucasus and Central Asia. It is a program of the Open Society Institute-New York. The Open Society Institute-New York is a private operating and grantmaking foundation that promotes the development of open societies around the world by supporting educational, social, and legal reform, and by encouraging alternative approaches to complex and controversial issues.

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