||The Investment Program will improve water supply and sanitation (WSS) services in 6 secondary towns of Georgia. The Investment Program includes (i) infrastructure improvement to rehabilitate, improve, and expand WSS services; (ii) institutional effectiveness to improve the service utility's technical and management capabilities of the key WSS service provider, United Water Supply Company of Georgia LLC (UWSCG) to provide efficient WSS services, and develop the capacity of sector regulators to regulate tariffs, services standards, environmental protection, and drinking water quality in the long-term; and (iii) Investment Program implementation support.
|Project Rationale and Linkage to Country/Regional Strategy
Georgia has a population of 4.43 million and serves as an important nodal point for inter-regional trade flows connecting the South Caucasus and landlocked Central Asia with the Black Sea and Mediterranean basins. The country's gross domestic product (GDP) is $10.5 billion with an annual growth of 5.9% (2004-09). With the global recovery taking hold, Georgia's GDP grew by at least 6.6% in the first half of 2010 on account of high growth in manufacturing, trade, and transportation.
Foreign direct investment (FDI) in Georgia has been the principal driver of economic growth over the last five years and is a major balancing factor for a sizeable trade deficit. Decline in FDI due to the recession was counterbalanced by growing remittances and current account surpluses in 2010. The service sector accounted consistently for a predominant share of total FDI (averaging nearly 60%) and continues to create employment opportunities in urban centers and secondary towns. Based on Q3-2010 figures, the government expects the FDI to reach 2009 levels and improve over time. By creating employment opportunities in secondary towns the government will reduce poverty and complement its targeted social assistance program to improve living standards of the poor.
New employment opportunities will condition further rural-to-urban migration, and weigh down city/secondary town infrastructure and municipal service provision, such as water supply and sanitation (WSS) with growing impacts on the habitats and concomitant public health implications. Improved municipal services, and specifically WSS, are therefore a key government priority. This is highlighted in the context of major urban centers, such as Tbilisi, Rustavi, Kutaisi, Poti, and Zugdidi where larger populations are associated with increased demand for municipal services and greater pressures on service delivery. Urban centers in traditional tourist destinations such as Kobuleti, Batumi and most recently Mestia serve as important magnets for tourist attraction and are expected to witness similar pressures on municipal service delivery in the medium term.
Improved urban WSS service is a key priority for the government, essential to improving quality of life, attracting investments, and increasing productivity and competitiveness. Recognizing the need to overcome the current problems and constraints the government's urban WSS sector development plan (SDP) for 2011-20, approved on 31 January 2011, aims to ensure continuous and reliable water supply and safe sanitation services to all of Georgia's urban population by 2020. The SDP's objectives include technical sustainability of WSS services, environmental protection of natural resources, institutional effectiveness of service utilities and sector regulators, financial sustainability of service utilities, and provision of an enabling legislative and regulatory framework for WSS services.
The SDP objectives are fully consistent with the approach agreed between Georgia and ADB for the purposes of the ADB assistance program in the country and in line with principal elements of ADB's water policy. The SDP fits with ADB's approach to the WSS sector development in Georgia and supports the use of the proposed multitranche financing facility (MFF) as a funding modality for this ADB intervention.