GEO

Developing a second MCC compact in Georgia: next steps

14 March, 2011

On January 5 the Board of Directors of the Millennium Challenge Corporation (MCC) approved Georgia’s eligibility for a second five-year compact. The first compact, worth USD 395.3 million, is expected to come to a close in April 2011. Georgia is one of only two countries ever approved for a second compact (the other is Ghana). This decision was based on the country’s successful completion of the first compact (2006-2011) and continued progress in generating economic growth and reducing poverty, according to the MCC board. On January 25, President Saakashvili announced specific plans for the new compact on national television, including paving the road between Khulo and Akhaltsikhe. In addition, Georgian Prime Minister’s spokesman, Nikoloz Mchedlishvili stated that one of the priorities of the new compact will also include the development of a University in Batumi. These projects were discussed again during a meeting of the Business Association of Georgia and the Prime Minister. Yet there are many steps between MCC’s approval to proceed in the development of a second compact and actually concluding the second compact. Over the next six months, the government of Georgia must elaborate a constraints analysis to diagnose problems in key sectors, identify possible solutions to those, and based on this, develop a relevant project proposal to MCC. The Prime Minister’s office is leading the process and recently took steps to initiate a consultation process, on the basis of MCC requirements and a joint letter from the Transparent Foreign Aid to Georgia (TFAG) coalition. The first step of this consultation took place on February 28, when the Prime Minister’s Office hosted an information-sharing meeting with 11 relevant civil society actors to share basic information about the compact development process. The new compact just entered the initial phase of start-up and preliminary analysis. The first step is to conduct a Constraints Analysis to understand why households don’t invest in ways that would increase their income. In addition, the country team will conduct an analysis of key sectors and beneficiaries to identify sectors where investments would have high rates of return. The Prime Minister’s Office is expected to share the first draft of the constraints analysis in a couple of months. Another key component of the early phase of compact development is initiating the Consultative Process. The February meeting was itself one step in that process, and Tamar Kovziridze, Chief Advisor to the Prime Minister, noted that the next round of “peer-review” discussions with civil society organizations will take place at the end of March. The consultative process should include other measures as well. For example, the country team is expected to meet with relevant experts such as economists within and outside of government during the first phase of compact development. According to MCC guidelines, “The information gathered in these consultations should contribute directly to the country core team’s prioritization of obstacles and/or sectors for intervention.“ The next phase includes the formulation of concrete project ideas and shortlisting priorities for different segments of society, followed by detailed feasibility and design studies. MCC representatives note that this process is expected to take up to a year. In December 2011, the MCC board will make another decision on Georgia's eligibility based on the progress made in the planning and development of the second compact. TI Georgia welcomes the government’s initiative to begin a consultative process with interested civil society actors as a first important step to ensuring transparency and accountability in the development of MCC’s second compact. There is a great deal to learn from the first compact, including the specifics of transparency provisions in the compact itself.

Author: Lasha Gogidze