“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 transport infrastructure, deepening of reforms in social assistance and health coverage for the poor, improvements in the business environment, and 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 program of knowledge services. The financing envelope includes about $130 million through the International Development Association (IDA), the Bank’s highly concessional lending arm, International Bank for Reconstruction and Development (IBRD) lending of about $266 million, 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 Snezana 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 medium business as key drivers of other sectors’ development.”

In Georgia there are 11 ongoing Bank supported projects in health, education, agriculture, roads, municipal development, and internally displaced persons (IDP) support that are aimed at helping Georgia’s poorest to 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 roads 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, will 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 in meeting the immediate needs of the most vulnerable in Georgia while strengthening competitiveness. Bank analytical work and dialogue will include analysis of public expenditure choices, poverty, post-conflict monitoring and reporting, strengthening health and education services, and the welfare and economic integration of those displaced by the conflict. It will also support improving the business and financial sector environment, and supporting greater trade integration and quality standards.

Georgia is seeing substantial progress in its development efforts. Labeled 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, and Georgia is now ranked eleventh in the world for the 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 for small business owners to stimulate growth. Now, an entrepreneur can start a business in just 3 days, with only 3.7 percent of their 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, reaching a total of 13 percent of the population versus 8 percent two years ago. Education is being improved through a new curriculum and standardized testing, which will help Georgian students to compete internationally when they graduate. In health, 55 percent of Georgian doctors and nurses have been given additional medical training, which is making an impact in rural communities in particular.

The IFC also accelerated its support over the past year, working within the World Bank Group to assess the overall state of the financial and real sectors, and provided about $250 million to Georgia. This included significant support to the banking sector, providing critical and timely capital and liquidity cushions. IFC also supported the continuation of trade flows through two trade lines to Georgian banks, and continued to invest in the improvement of business and retail infrastructure. During the CPS period, IFC will focus on investment opportunities in energy, infrastructure, and agribusiness.

Since joining the World Bank in 1992 and IDA in 1993, the commitments to Georgia total approximately US$1.2 billion for 46 projects. Georgia became a shareholder and a member of IFC in 1995. Since then IFC has committed $449 million for 30 projects.