Georgia: Boosting the Kakheti Economy with Improved and Safer Road Connections

Challenge

In a 2006 study of the impact of road quality on intraregional trade in Europe and Central Asia, Georgia was ranked as having the poorest infrastructure in the region. The often challenging topography, relatively low design standards, and inadequate maintenance and investments have led to the failure of many of the country’s secondary and local roads. In the Kakheti region, with a population of about 405,000, the principal activities are agriculture, especially wine growing, and tourism. The regional economy declined after the collapse of the Russian market for Georgian wine and the general impact of the financial crisis, turning Kakheti into one of the poorest regions, with a 46 percent poverty level. The road between Tbilisi and Kakheti has been in poor condition for several years, resulting in lengthy and time-consuming detours. A reliable transport network was needed to stimulate both the wine industry and tourism and to reduce poverty in this area.

Approach

To promote agricultural and rural development, Georgia’s economic development program for 2008–12, “Georgia without Poverty,” emphasized targeted infrastructure development, which is linked to economic growth. Better infrastructure improves the competitiveness of goods, lowers prices for consumers, improves regional integration, and enhances access to markets and social services. The government has implemented significant measures in the transport sector in recent years to upgrade its infrastructure to international standards. The project was designed primarily to rehabilitate the road link between Tbilisi and the Kakheti region, and also to improve traffic safety measures throughout the region. As road quality is improved, vehicle speeds tend to increase, potentially leading to an increased risk of crashes unless safety is also addressed. Because of this and other growing traffic safety concerns in Georgia, road safety improvements were also included in the project.

Results

The Kakheti Regional Roads Improvement Project (KRRIP) has resulted in significant improvements for about 60% of the total population of Kakheti Region (about 240,000 people), including the following:

• Sixty-five km of the Vaziani-Telavi road were rehabilitated between October 2009 and March 2011, which led to a reduction in travel time from two hours to one.
• Traffic on the Vaziani-Telavi road increased from 496 vehicles per day in October 2009 to 1,812 vehicles per day in November 2010.
• Between October 2009 and November 2010, vehicle operating costs decreased two-fold, from US$0.36 to $0.17 per vehicle-kilometer for cars, and from US$1.05 to $0.65 for trucks. Up to June 30, 2010, the project supported the creation of 2,968 person-months of temporary employment, mostly for the local communities, helping employment generation during the economic crisis.
• The “Final Report on Assessment of Road Safety on Main Roads in Kakheti” is currently under review and should be finalized by April 2012. Detailed proposals on the implementation of further improvement measures at the region’s most urgent locations are currently being reviewed by the Roads Department of the Georgian Ministry of Regional Development and the Bank. The implementation is planned for later in 2012.

Bank Contribution

In 2009, the IBRD approved US$30 million under the KRRIP to improve the 65-km Vaziani-Gombori-Telavi road and identify road safety measures that could be implemented to improve road safety in the region. The loan covers 80 percent of project costs, with 20 percent (US$7.5 million) provided by the Government of Georgia in counterpart funding.

Partners

While no other development partners are directly involved in the implementation of this project, several are supporting activities in Georgia’s transport sector, where assistance for the completion of the East-West Highway (E60) is a major activity. There is close cooperation with all the development partners—Asian Development Bank, Japan International Cooperation Agency (JICA), the European Investment Bank, and others—and a donor coordination meeting, co-chaired by the Bank and the Ministry of Regional Development and Infrastructure, takes place annually in Tbilisi.

Moving Forward

The KRRIP is on target to achieve most of its development goals. Savings generated during the initial bidding process will enable the project to rehabilitate more kilometers of road than originally planned. The support to the Kakheti region continues through the Bank’s Kakheti Regional Development Project and the Secondary and Local Roads Project, Phase II (SLRP II), both approved by the World Bank Board in March 2012. The Bank also completed a study on the sustainability of road financing, whose recommendations for more efficient and durable road management will be incorporated into a pilot Output and Performance-Based Road Contract for a road network of about 200 km, to be financed under the SLRP II.

Beneficiaries

Direct beneficiaries of the Project are the 405,000 residents of the Kakheti region.

Ghia Zatiashvili, a farmer from Napareuli village :
We cultivate the land, and sell the most of the harvest. We grow cucumber, tomato, onion, garlic, pepper, eggplant. Everybody has a small kitchen garden in our village. Taking these vegetables to market and selling them is the only source of income for us. We also have a small vineyard, only for the home use, for ourselves. But many farmers in the region grow grapes mostly and take them to market. With the new road this has become easier and much faster.

Gocha Lashkarashvili, a small restaurant owner in Sasadilo village:
My restaurant opened long time ago, but was not functioning properly. Because of the lack of the visitors due to the poor road quality, it was closed. But now, when the new road has been built, I decided to expand and redesign it, to meet the visitors’ needs, the number of which is growing. Everybody is welcome here for a brief stop-over and a good meal.