Greetings from Tbilisi, Georgia, where I’m working to bring you the tenth installment in the MCA Monitor’s Report from the Field series. As many readers know, these reports provide a snapshot-in-time, on-the-ground analysis of individual country experiences with the Millennium Challenge Corporation’s (MCC) policies and operations. The first nine reports covered countries in sub-Saharan Africa and Latin America and focused on the early stages of the MCC compact process: compact development and initial implementation. This report on Georgia’s MCC experience will be the first to focus on the end of a five-year MCC compact.I’ll be travelling around Georgia to interview key stakeholders—members of the Millennium Challenge Georgia Fund (MCG) which is the accountable entity established to manage the compact, civil society, government representatives, private sector partners, and more—to better understand the five projects in the country’s $395 million MCC compact, interim and anticipated long-term results, and importantly, what happens when the compact comes to a close in April 2011. The recently launched Quality of Official Development Assistance assessment, or QuODA, says the MCC leads the way among U.S. development agencies in “fostering country institutions and ensuring country ownership of programs,” and I’ll be looking at how these elements are being put into practice in Tbilisi and the surrounding regions.First snap-shot: The Georgia Regional Development Fund
The Georgia Regional Development Fund (GRDF) is one of the initial MCC compact projects I’ve delved into. It is a part of the MCC compact’s Enterprise Development Activity and is the first investment fund of its kind in Georgia. The Millennium Challenge Georgia Fund (MCG) and the MCC created the fund and finalized its objectives together; MCG disburses funds while resident MCC staff have final approval on all investment decisions. With an allotment of $30 million to invest, the GRDF aims not only to encourage the flow of capital into rural small-to-medium enterprises (SMEs) and earn positive revenues, but also to maximize development impact and poverty reduction. Developmental returns are being measured in four ways: 1) increased wages of investee employees; 2) increased payment of taxes by investee; 3) increased contracting of local suppliers for raw materials and equipment, and; 4) increased revenue of investee.Through the MCC compact, GRDF has invested $21 million in 10 enterprises primarily focused on agribusiness and tourism. Investments range from hazelnut processing and export to concrete production and supply. One of the investments is in the Black Sea Anchovy Fishing Fleet, the first Georgian company to utilize a Georgian fishing license rather than leasing out to Turkish ships. To ensure all investments are merit-based, GRDF is entirely managed by an independent fund manager and a board of directors comprising five Georgian and international bankers.Four more proposals are due to be approved by the end of the calendar year, effectively disbursing almost all $30 million in funds. But what happens at the compact’s end in six months? That’s where this investment fund model gets really interesting. All new investments will cease and for the next five years (until April 2016) the $30 million in prinicipal plus additional revenues (forecasted to be around $8 million) will go into a trust to be used for higher education scholarships in under-funded disciplines like engineering and agriculture. In this way, the next cadre of Georgian experts will be educated to maintain and improve the sectors on which the compact focuses. MCC and MCG staff are currently working on a detailed plan of how this will work and the clock is ticking, but in theory this model looks to be an innovative way to fund SMEs and provide a sustainable developmental impact well into the future.
The GRDF is just one of five projects in Georgia’s compact. I’ll be looking into the other four, each of which will reveal its own successes and challenges within the MCC model. The Georgia Report from the Field will highlight these experiences and what happens next--remembering that Georgia’s compact has only six short months to go before it’s officially closed. In the meantime, I encourage you to take a look at MCG’s impressive website and the MCC’s own web-based tools for tracking Georgia’s compact results. Stay tuned!
