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OO RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHSI #0448 0651437
ZNR UUUUU ZZH
O 061437Z MAR 09
FM AMEMBASSY TBILISI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1120
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY

UNCLAS TBILISI 000448 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PHUM PREL GG
SUBJECT: GEORGIA: FINANCE MINISTER LAYS OUT AID PRIORITIES 
 
REF: A. TBILISI 356 
     ¶B. TBILISI 292 
 
¶1.  (SBU)  Summary:  Finance Minister Kakha Baindurashvili 
met the Ambassador February 27 to discuss options for the 
remaining tranche of pledged USG post-conflict assistance. 
Baindurashvili repeated that the GOG would prefer direct 
budget assistance; however, in lieu of budget assistance, 
Baindurashvili also outlined a number of specific projects 
that are GOG priorities that he thought the USG might 
possibly support.  Baindurashvili, who was previously Deputy 
Finance Minister before taking over the job in February after 
then Finance Minister Gilauri was named Prime Minister, 
indicated that he would visit Washington March 5-12 to meet 
with USG officials to discuss assistance.  End Summary. 
 
Specific Project Assistance 
 
¶2.  (SBU)  After asking for the USG to consider fulfilling 
the remainder of the $1 billion assistance pledge in the form 
of direct budget support, which he acknowledged would likely 
be a non-starter for the USG, Baindurashivili proceeded to 
outline a number of projects in the GOG budget that might be 
financed through projectized assistance.  He cited primary 
and secondary road construction projects ($100M); 
rehabilitation of irrigation systems including those in the 
Shida Kartli region ($20M); IDP housing ($30M); and banking 
sector support (no specific dollar amount).  With respect to 
the previously identified Batumi - Akhaltsikhe road project 
and the Senaki high voltage transmission line, the Finance 
Minister agreed that these projects were important from the 
standpoint of providing increased energy and transit security 
and important to Georgia.  (Embassy Note:  In a March 3rd 
meeting with the Ambassador, Justice Minister Adeishvili said 
that the Batumi - Akhaltsike road project would be too 
expensive and was still unplanned.  Instead, the Government 
would support USG assistance to develop the road from Tbilisi 
to Telavi to promote economic development in eastern Georgia. 
 End Note.)  Baindurashvili stressed that te GOG is flexible 
regarding project funding and looks forward to working with 
the USG to target additional or alternative projects. 
 
OPIC Assistance 
 
¶3.  (SBU)  Baindurashvili, looking for ways to attract more 
Foreign Direct Investment (FDI) to Georgia, requested 
information on a possible association with OPIC on political 
risk insurance (reftels).  The Finance Minister wanted to 
explore the possibility of developing a mechanism to provide 
political risk insurance in Georgia, and was interested in 
both OPIC's expertise and possible support for a large 
insurance pool.  While it was unclear exactly what he was 
requesting, he hoped that some sort of agreement could be 
formalized through a MOU.  In addition, Baindurashvili asked 
for the name of a point of contact at OPIC to direct 
potential investors to learn more about OPIC's programs. 
Baindurashvili viewed OPIC support as a key means to attract 
investors, and wanted to ensure that the Georgian Government 
was doing all it could to use OPIC's benefits. 
Baindurashvili listed lagging investor confidence as a major 
hurdle Georgia would have to overcome to resume positive 
growth, and he believed USG-supported risk insurance would be 
a significant step towards achieving that goal. 
 
Tough Economic Outlook 
 
¶4.  (SBU)  Baindurashvili was candid about the current 
economic situation in Georgia.  He hoped 2009 FDI would be at 
roughly 2006 levels (1bn USG) although admitted his hopes 
might be too optimistic considering the current global 
economic climate.  (Embassy Note:  FDI for Georgia in 2007 
Qeconomic climate.  (Embassy Note:  FDI for Georgia in 2007 
was roughly 2bn USG, it dropped to roughly 1.2bn in 2008 
almost all of which entered the Georgian economy in the first 
half of 2008.  End Note.).  Baindurashvili said as a result 
of the global economic crisis, remittances had also decreased 
sharply.  This lack of revenue for many has increased 
pressure on the GOG to provide more extensive social 
payments.  Accordingly to Baindurashvili, the GOG had spent 
down its foreign reserves to defend the currency (the lari), 
but downward pressure on the lari had largely stabilized in 
the last week.  Baindurashvili cautioned that inflation was 
not a concern for policy makers, but that deflationary 
pressures could exacerbate a further slowdown in an already 
lagging economy. 
TEFFT