ADB to Extend $500 Million to Georgia for Seven-Year Road Upgrade Program

MANILA, PHILIPPINES - The Asian Development Bank (ADB) is extending up to $500 million to Georgia to support a major overhaul of vital link-roads between Central Asia and the Caucasus.

The ADB Board of Directors today approved the funds, which will be released periodically through a multitranche financing facility to support the Government of Georgia’s seven-year Road Corridor Investment Program. In the first tranche, ADB will provide a $119 million loan from its concessional Asian Development Fund (ADF). The program, which will cost an estimated $3 billion, is also being financed by other development agencies including Japan International Cooperation Agency, World Bank and the Millennium Development Challenge Corporation.

Georgia is the shortest land link connecting Central Asia to Europe and its main highways play an essential role in transporting oil and other exports from Central Asian countries for shipment out of the Georgian ports of Poti and Batumi on the Black Sea. The potential for improved cross–border travel between the Caucasus and Central Asia is now well recognized by countries in the region, and a number of major road investments, supported by ADB, are planned or underway, including the Georgia program, a north-south corridor upgrade for Armenia, and ongoing upgrades for Azerbaijan’s road system.

Georgia’s road network was built during the Soviet Union but inadequate maintenance and a sharp increase in passenger and freight traffic has left many routes in poor condition, causing long travel times, high transport costs and a high rate of traffic accidents. The program targets both infrastructure upgrades and improvements in the planning and management capabilities of oversight agencies. It puts a major focus on improving road safety and increasing private sector involvement in design, construction and maintenance work.

"Successful implementation of the program will improve the efficiency of subregional road traffic through Georgia, increase trade flows and competitiveness, lower transport costs, increase mobility and access to markets, jobs and social services, and improve governance," said Dong-Soo Pyo, Principal Financial Analysis Specialist in ADB’s Central West Asia Department.

Under the first tranche, ADB will finance a 34 kilometer two-lane bypass road, strengthen the capabilities of the Roads Department, carry out road safety training and provide project management support. The requested loan, which will finance 80% of the first tranche investment cost of almost $149 million, has a 32-year term with an 8-year grace period carrying an interest charge of 1%, rising to 1.5% for the balance of the period. The Government will fund the remaining cost of $30.1 million.

In the second phase, another bypass road will be funded, along with improvements in border facilities designed to simplify and speed up cross border traffic movements.

The multitranche financing facility has major advantages as it is more flexible than other funding models, gives the government greater financing certainty, and creates a long term partnership with ADB. The program supports increased regional cooperation, and is aligned with a joint development needs assessment for the country released by development agencies, including ADB, in 2008.