Georgia Country Update #1
June 2008
4 June 2008
Recent developments, decisions, and civil society activities related to activities of the International Financial Institutions (IFIs) in Georgia.
The Georgia Country Updates provide information about recent developments, decisions, and civil society activities related to activities of the International Financial Institution’s (IFIs) in Georgia, including that of the World Bank (WB), International Finance Corporation (IFC), International Monetary Fund (IMF), European Bank for Reconstruction and Development (EBRD) and the Asian Development Bank (ADB). If you would like to be included or removed from the distribution list, please email the moderator, George Holliday, at . Correspondence with BIC may be conducted in Russian.
The Bank Information Center (BIC) partners with civil society in developing and transition countries to influence the World Bank and other international financial institutions (IFIs) to promote social and economic justice and ecological sustainability. BIC is an independent, non-profit, non-governmental organization that advocates for the protection of rights, participation, transparency, and public accountability in the governance and operations of the World Bank, regional development banks, and IMF. For more information about BIC, see www.bicusa.org.
Sections:
I. IFI Project Activities
II. Extractive Industry Transparency Issues
III. Civil Society Activities
IV. IFI Consultations and Policy Updates
V. Other Notable Developments
IFC Activities
May 22, 2008: The International Finance Corporation proposed a $7 million subordinated debt and $15 million Senior Loan to the Bank Republic to improve the institution’s capital base and mortgage program.
Bank Republic (IFC website)
May 16, 2008: The IFC disclosed plans to support Rakeen, a real-estate company, in a commercial development near Georgia’s capital. The project will involve a $42 million A Loan, $85 million syndicated B Loan, and $7.6 million equity investment from the IFC.
Rakeen Development (IFC website)
May 14, 2008: The IFC, World Bank, and European Bank for Reconstruction and Development are conducting a survey to gain information on the business climate and private sector development. Results are expected in September 2008.
Business Environment Survey (IFC website)
March 4, 2008: The IFC intends to provide $70 million to TBC Bank, in which the IFC is a shareholder, to support the banking system in Georgia and promote the bank’s stable growth and development.
TBC Bank (IFC website)
World Bank Activities
May 27, 2008: The World Bank sanctioned a $22.7 million loan as part of its Fourth Poverty Reduction Support Operation. The project will support reforms in the areas of government, transparency, utilities, social services, and private sector development in Georgia.
Poverty Reduction Support Operations (WB website)
December 18, 2007: The World Bank approved a $35 million loan for the East-West Highway Improvement Project to increase capacity, travel ease, and transportation safety in Georgia.
Second East-West Highway Improvement Project (WB website)
November 29, 2007: The World Bank disclosed a $10 million proposed investment in municipal infrastructure and services. The project involves strengthening the capacities of local government to provide adequate public services to their constituents through financing rehabilitation and expansion of infrastructure. Regional and Municipal Infrastructure Project (WB website, Acrobat pdf)
International Monetary Fund Activities
March 7, 2008: The IMF reported on its mission to Georgia, noting the country’s strong economic growth, as well as its inflation challenges. The Fund also recommended continued tight fiscal policies and urged full Central Bank independence.
IMF Staff Mission to Georgia (IMF website)
EBRD Activities
May 19, 2008: The European Bank for Reconstruction and Development announced its acquisition plans for a 15% stake in Basis Bank. The project is an effort to improve the bank’s capital base, corporate governance, and operational development.
EBRD Stake in Basis Bank (EBRD website)
January 22, 2008: EBRD approved a $29 million Senior Loan for the construction of a Geosteel mill in Georgia.
Geo Steel Project (EBRD website)
January 16, 2008: EBRD disclosed its plans to endorse a $100.7 million Senior Loan and $10 million Mezzanine Loan for a Hyatt complex in Tbilisi.
Hyatt Tbilisi (EBRD website)
December 11, 2007: EBRD signed a $12 million mortgage credit for TBC Bank to provide long-term financing to residents in Georgia.
TBC Mortgage Credit (EBRD website)
November 30, 2007: EBRD also announced plans to fund TBC Bank with a $10 million loan aimed at supporting energy efficiency projects in Georgia.
Energy Efficiency Investments (EBRD website)
Asian Development Bank Activities
March 5, 2008: Approval of a $40 million Municipal Services Project is expected in July 2008. The project aims to improve public health and urban conditions in Georgia.
Municipal Services (ADB website)
February 8, 2008: ADB announced that it will open a new office in Georgia as part of its expansion in the South Caucuses and Central Asia.
ADB Expansion (ADB website)
January 28, 2008: ADB approved $600,000 in technical assistance for the Ajara Bypass Roads Development, which seeks to open up economic activities by improving area transportation.
Ajara Bypass Roads Development (ADB website)
Overview
The Extractive Industries Transparency Initiative (EITI) was begun in 2002 by UK Prime Minister Tony Blair. It aims to improve openness and transparency in company payments and in government revenues from extractive industries. An independent auditor reconciles payments from companies with revenues received by the government.
EITI Progress
Georgia possesses oil, gas, and other mineral deposits, as well as major energy transport lines. In 2004, Georgia expressed an intention to join EITI in a memorandum with the International Monetary Fund. However, although it cosponsored the EITI United Nations resolution, Georgia has yet to take concrete action to move forward. The private sector, particularly British Petroleum, and civil society organizations, including the Coalition for Transparency of Public Finance, are supportive of its implementation, forming a strong foundation for future EITI involvement.
For more information, see the links below:
Extractive Industries and Energy Transit in Georgia: Background Report, Open Society Georgia Foundation, May 5, 2006 (Publish What You Pay website, Acrobat pdf)
Coalition for Transparency of Public Finance website
Open Society Georgia Foundation website
EITI website
IFI Involvement
- World Bank support of EITI includes administration of the EITI Multi-Donor Trust Fund and assistance to civil society groups and the EITI Secretariat.
- On April 12, 2008, the World Bank announced an Extractive Industries Transparency Initiative Plus Plus (EITI++) project, which offers governments additional options and technical aid for improving revenue management. Civil society groups, such as Publish What You Pay, have endorsed the project. EITI Plus Plus (WB website)
- As of January 2007, all investors supported by the International Finance Corporation must publish their payments to the government. The IFC will evaluate investor compliance in the first half of 2008. Implementation of the Management Response to the Extractive Industries Review, World Bank, February 2008 (WB website, Acrobat pdf)
- The European Bank for Reconstruction and Development (EBRD) has pledged support for EITI through active involvement in EITI consultation, promotion of transparency in revenue reporting and within the financial sector, and capacity-building aid for countries implementing EITI principles. EBRD EITI Policy (EBRD website)
- In February of 2008, the Asian Development Bank officially endorsed EITI. ADB Endorses EITI (ADB website)
Resources
Extractive Industries and Energy Transit in Georgia: Background Report, Open Society Georgia Foundation, May 5, 2006 (Publish What You Pay website, Acrobat pdf)
Drilling Down: The Civil Society Guide to Extractive Industry Revenues and the EITI, Revenue Watch Institute, May 2008 (RWI website)
Implementation of the Management Response to the Extractive Industries Review, World Bank, February 2008 (WB website, Acrobat pdf)
Eye on EITI: Civil Society Perspectives and Recommendations on the Extractive Industries Transparency Initiative, Publish What You Pay and Revenue Watch Institute, 2006 (EITI website, Acrobat pdf)
Transit Revenue Transparency Meeting in Georgia
Open Society Georgia hosted a working meeting with civil society and expert representatives from Georgia, Kazakhstan, and Ukraine on April 12-13, 2008. The meeting was intended to formulate a policy paper on energy transport revenue transparency. The paper will be promoted at the next international EITI conference in the fall to urge the extension of the Extractive Industries Transparency Initiative to transit revenue.
Georgia Revenue Watch (OSI Georgia website)
Energy Sector Awareness Project
In October 2007, Transparency International Georgia launched Understanding of the Energy Sector project with BP funding. The project will span through September 2008 and seeks to raise awareness of energy issues in the country, train journalist to cover energy related topics, and produce a number of in-depth and monthly reports.
Understanding of the Energy Sector (TI Georgia website)
EIB Civil Society Workshop
On June 30, 2008, the European Investment Bank will hold a workshop for civil society organizations in Brussels, Belgium. The workshop will be in English and French and will include observers from other international finance organizations. For more information and to request an invitation, visit the link below.
EIB Civil Society Workshop (EIB website)
ADB Interim Operational Strategy
On March 19, 2008, the Asian Bank for Development’s Board of Directors approved the Interim Operational Strategy 2008-2009 for Georgia. Summary of the board’s notes on the Interim Strategy is available on ADB website.
Interim Operational Strategy 2008-09 (ADB website, Acrobat pdf)
Extended Consultation on EIB’s Environmental and Social Statement
The European Investment Bank has extended the public consultation period for its Environmental and Social Statement until June 20, 2008. A consultation meeting will be held in Warsaw on June 12. With sufficient stakeholder interest, the Bank intends to hold the second round of consultation between September 1 and 28 to seek input on the second draft revised Statement on Environmental and Social Principles and Standards. Submission details and the statement draft can be found at the links below.
Comment Submission Details (EIB website)
EIB Environmental and Social Statement (EIB website, Acrobat pdf)
Public Consultation on EIB's Environmental and Social Statement (EIB website)
EBRD Environmental and Social Policy
On May 12, 2008, the Board of Directors of the European Bank for Reconstruction and Development (EBRD) approved the Bank's new Environmental and Social Policy as well as a new Public Information Policy, one week before the EBRD's Annual Meetings in Kiev, Ukraine.
EBRD 2008 Environmental and Social Policy, May 12, 2008 (EBRD website, Acrobat pdf)
BIC comments on the draft EBRD Environmental and Social Policy, April 8, 2008 (BIC website)
EBRD Public Information Policy
The new Public Information Policy was approved on May 12, 2008, bringing some positive improvements to the previous policy. Civil Society comments on the initial discussion paper called for more transparent and amenable public consultation and disclosure provisions, an independent appeal system, and more timely and automatic disclosure of project impact information. Concerns were also expressed at the disclosure exceptions.
EBRD 2008 Public Information Policy, May 12, 2009 (EBRD website, Acrobat pdf)
Global Transparency Initiative and CEE Bankwatch Network comments on EBRD PIP, December 26, 2007 (GTI website, Acrobat pdf)
Independent Recourse Mechanism Review
EBRD is currently reviewing its complaint review system, the Independent Recourse Mechanism (IRM). It is also expected that a revised version of the IRM policy will be made public late 2008 for an additional round of public comment period that will last through January 2009.
EB Independent Recourse Mechanism (EBRD website, Acrobat pdf)
Study: Weak EBRD complaints mechanism (CEE Bankwatch study)
World Bank Consultations
The World Bank Group is seeking comments on its strategic priorities for civil society engagement. The process will take place from March until July of 2008. Additionally, the bank is drafting an issues paper on Climate Change, which is currently available for comment and will be discussed at the 2008 Annual Meetings. Details can be found here:
Strategic Priorities Framework for Bank – Civil Society Relations (WB website)
Climate Change Global Consultation page (WB website)
World Bank and IMF Spring 2008 Meetings Summary
The World Bank and IMF Spring Meetings addressed climate change, rising food and commodity prices, and the global credit crisis. Civil society meetings examined revenue transparency in extractive industries, anti-corruption measures, IMF conditionalities, and a variety of other issues. For summaries of official WB/IMF meetings as well as civil society strategy meetings, see the links below:
Bretton Woods Project (BWP website)
IMF and World Bank - Spring Meetings 2008 (IMF website)
WB and IMF: Revenue and Contract Transparency Assessment
Global Witness and Bank Information Center are conducting an assessment of revenue and contract/licensing transparency implementation in extractive industry operations by the World Bank, IFC and IMF. Preliminary findings of the assessment across 15 resource rich countries revealed that revenue transparency is inconsistent across countries and programs of these institutions. Both civil society involvement and contract transparency were rarely mentioned in institutions’ project/country documents and were only once used as progress indicator upon which further funding was tied. GW and BIC plan to release the final assessment during summer 2008.
New World Bank Website Publishes Company Payments
The World Bank launched a webpage, where IFC clients publish their payment to their host governments starting with operations in 2007. The webpage provides figures for companies that already disclosed payment figures and those planning to do so during June 2008, as well as projects that do not involve payments to the government.
IFC Extractive Industry Clients Government Payment Disclosure (WB website)
Independent Evaluation Office (IEO) Report
The International Monetary Fund leadership has commented on the IEO report of 2008. The report examines IMF governance structures, accountability, and stakeholder involvement. The comments and report can be found at the link below:
IEO Report and the IMF (IMF website)
EBRD 2008 Annual Meetings and Business Forum
Over 2,000 government, civil society, and business actors met in Kiev, Ukraine on May 18-19, 2008, for the EBRD’s Annual Meeting. Civil society groups were critical of the bank’s support of problem projects and of new policies drafted without adequate commentary from civil society. These policies, energy efficiency, and banking systems formed some of the topics of discussion. More information on the meetings and civil society responses can be found at the following links:
2008 Annual Meetings (EBRD website)
Blogs and 2008 Annual Meetings News (IFIwatchnet website)
Comments on New EBRD Policies (BIC website)
EBRD's Annual Meeting (BIC website)
Asian Development Bank 2008 Annual Meetings
At the 2008 Annual Meeting in Madrid, Spain, on May 6-7, 2008, rising food costs were a major area of concern. The ADB committed $500 million to address the problem immediately and $2 billion for agricultural support in the coming year. The ADB also launched its Strategy 2020, which will help shape ADB activity in the future. Some civil society actors have objected to the strategy. Further news articles, summaries, and useful documents can be found at these sites:
Annual Meeting News and 2008 News (ADB website)
2008 ADB Annual Meeting and Civil Society Criticisms (BIC website)
NGOs Boycott ADB Consultations, ADB Agrees to Second Draft
Several members of the NGO Forum Network did not attend the Asian Development Bank’s April roundtable consultations, citing the draft Safeguard Policy Statement’s failure to comply with basic objectives. After U.S. and NGO pressure, the ADB agreed in May to release another draft and consultation.
ADB Consultations Boycotted (BIC website)
ADB Agrees to Second Draft (BIC website)