Georgia: Municipal Services Development Project - Phase 2

Transport - Urban roads and traffic management

Water and other urban infrastructure and services - Urban policy, institutional and capacity development

The proposed Municipal Services Development Project - Phase 2 (MSDP 2) finances investments in municipal infrastructure and utility services. It focuses on urban transport, but could flexibly respond to other municipal infrastructure. It will provide (i) proceeds to MDF for financing to selected municipalities for repairing and rehabilitating municipal infrastructure and local utility services, and (ii) capacity development for MDF and municipalities through incremental administration and technical assistance programs.

The MSDP 2 follows the Municipal Services Development Project (MSDP 1) approved in August 2008. It targets high-priority urban transport projects in Tbilisi and other municipalities, which were proposed for additional Asian Development Bank (ADB) financing under the MSDP 1. As available financing under the MSDP 1 is largely committed to other priority investments, a new facility is proposed.

The double shocks of the August 2008 conflict with the Russian Federation and the global economic crisis undermined growth and stability in Georgia. Investor and consumer confidence deteriorated and liquidity in the banking system contracted, while infrastructure was left damaged. Investment and economic development declined and foreign direct investment slowed. This stressed the balance of payments, shrank public finances from revenue shortfalls, and increased expenditure needs.

Economic growth has plunged from 10.0% in 2007 to 2.1% in 2008. The Georgian authorities responded with macroeconomic policies, but the GEL2.2 billion stimulus has limited municipal funding.

Challenges in the urban transport sector are palpable. Tbilisi suffers from traffic congestion, and air and noise pollution. This is due to increased private car ownership, inadequate roads, and the deteriorating public transport systems including discontinuing tram and trolleybus services. About 80% of air pollution derives from motor transport. Road accidents have increased, with over 4,000 reported in Tbilisi in 2007, and a 62% increase in the number of people injured in 5 years.

Therefore, the Government requested ADB to urgently support a program of investments in Tbilisi's municipal transport systems, including roads, traffic management, and public transport.

The MSDP 2 will finance MDF, an effective agency, for improving municipal transport systems. The Project is technically feasible, institutionally sound, and economically viable. This new facility:

(i) supports government and ADB priorities;

(ii) responds swiftly to the Government's request;

(iii) complies with a mutually defined development framework;

(iv) capitalizes on the proven MDF arrangements; and

(v) reinforces ADB's long-term partnership in urban development with Georgia.

Part A: Investment Projects Financing Facility

Increased quality of service, wider network coverage, reliability of urban transport system, water supply, waste water, and solid waste management

Part B: Project Management and Capacity Development

Improved capacity of municipal governments to prepare and appraise feasibility, engineering design, environmental, social, or other related studies

Improved capacity of municipal governments in project management

Project Completion Report was circulated on 26 June 2013 (IN. 145-13).

Rehabilitation projects (38 total) were completed by September 2012. Urban roads (total length 101.7 km) were improved under 34 subprojects in 27 municipalities. Water supply systems were rehabilitated and expanded with installation of 264 km of distribution pipes in 4 municipalities.

Three subproject appraisal reports (SARs) and 35 subproject summary reports (SSRs) were submitted to and approved by ADB.

Detailed design works for all 38 subprojects were contracted out to local consultants by MDF. Construction supervision was undertaken directly by MDF with participation of the municipal governments. Two consultants were engaged for construction supervision, one for the road project in Mestia and the other for the water supply project for Poti.

MDF staff is gender balanced (46.4% of staff were female in 2013 as opposed to 27.4% in 2008). Two impact performance targets are informed by sex-disaggregated data; 25% of public consultation participants are female.

The main stakeholders will be MDF, participating municipal governments, communities, and civil society organizations. MDF and participating

municipal governments will ensure that for all subprojects, the results of social assessments and stakeholder consultations will be adequately taken into account in identifying investment priorities. Consultation will be carried out through public hearings, surveys, workshops, and

other meetings during project implementation and monitoring.

MDF will be responsible for undertaking and providing adequate resources for project monitoring, including social development outcomes. The assessment of social issues cannot be completed until the start of subproject feasibility. MDF will ensure that a social assessment is carried out in cooperation with the participating municipality to (i) identify possible social issues, including gender, vulnerability, labor, affordability, and other social risks, if applicable; (ii) identify measures to avoid or minimize these risks; and (iii) ensure that the proposed subproject is tailored to the needs and priorities of the participating community as identified through the consultation process. A summary poverty reduction and social strategy is in

MDF and participating municipal governments will furthermore ensure that there is no differential payment between men and women for work of equal value, and no child labor will be employed in the construction or maintenance activities.