MCC-Georgia Partnership

Straddling both European and Asian borders, Georgia is one of the most culturally diverse economies in the Caucasus region. Economic growth is driven mainly by tourism, agriculture, mining and exports. Although now considered one of the stronger economies in the region, Georgia was in 2008 and 2009 affected severely by both the global financial downturn and territorial disputes with Russia, which led to a disastrous five-day war. Tourism, foreign and private investment, and domestic spending plummeted as a result of the subsequent crises. From 2005 to 2006, Georgia’s gross domestic product grew 9 percent on average; growth peaked in 2007, when GDP increased 12.3 percent. But following the twin crises, GDP growth slid to 2.3 percent in 2008 and dropped further to -3.8 percent in 2009. Following the recession, then-President Mikheil Saakashvili initiated a series of macroeconomic and fiscal reforms to stimulate domestic consumption. As a result, the economy bounced back in 2010, with GDP improving 6.3 percent that year and 7 percent in 2011. It was also during the period that the Millennium Challenge Corp. implemented its first compact with Georgia. The $395.3 million agreement, which ended in April 2011, focused on addressing the two main barriers to the country’s economic growth back then: unreliable infrastructure and lackluster business development, especially in agriculture. For its second compact with Georgia, MCC will be focusing on “equipping [its] citizens with the education and skills they need to succeed in a modernizing economy.” Approved in June 2013, the second compact was signed a month after. While Georgia’s health and education indicators are steadily improving, poverty and inequality levels remain high, with nearly 25 percent of the population still living below the national poverty baseline, according to 2009 indicators. Providing adequate and sustainable housing and employment for thousands of internally displaced people continue to be a social challenge for Georgia as well. Funding levels For Georgia’s second compact, MCC has earmarked $136.65 million to fund three main projects. Georgia’s government will serve as MCC’s main conduit of compact funds while the Millennium Challenge Account-Georgia II fulfills all oversight, monitoring and implementation activities related to the overall program. Click on the image to view a larger version of the table. In addition to the compact funding, $3.35 million will be allocated to fund the necessary program administration costs for monitoring and evaluation, preliminary studies and procurement, among other overhead expenses. Pending the disbursement of the compact implementation funding, however, is the adequate submission of all necessary documents by MCA-Georgia II to MCC. Funding priorities MCC’s second compact will fund projects that aim to improve Georgia’s human capital through strategic investments in education and skills development. 1. The Improving General Education Quality Project will upgrade Georgia’s general education system by rehabilitating rundown school facilities, conducting faculty and curriculum development activities, and implementing nationwide assessments of math and science in secondary schools. 2. The STEM Higher Education Project seeks to modernize and upgrade science, technology, engineering and math in Georgia’s education systems by improving the quality of bachelor’s degree programs. Through the tertiary-level programs, productivity and employment opportunities are expected to increase. 3. The Industry-led Skills and Workforce Development Project aims to effectively match the skills demanded by the labor market with the supply of Georgians who have the necessary technical skills. Two component activities — namely, employment development and industry engagement — will be conducted in line with this project. Devex analysis For the next five years, MCC’s work in Georgia will prioritize stimulating inclusive economic growth through investments in human capital and education, fostering greater productivity within Georgia’s labor force. Drawing from previous success from the first compact, MCC is optimistic that the second compact would yield significant development gains for Georgia’s growth in the long run. In the short term, and to leverage existing donor activities, MCC and the Georgian government will seek to deepen their collaboration with the World Bank, U.S. Agency for International Development, U.N. Development Program and European Union, among other donors actively investing in Georgia’s education sector. Quarterly targets and 20-year projections and estimations have yet to be set as Georgia is currently at the initial stages of its compact. Contact: MCA-Georgia II Tel: (995-32) 281-179 Email: info@mcageorgia.ge Join the Devex community and gain access to more in-depth analysis, breaking news and business advice — and a host of other services — on international development, humanitarian aid and global health.