West Pledged $4.5 Billion To Rebuild Georgia

West Pledges $4.5 Billion to Rebuild Georgia

http://www.nytimes.com/2008/10/23/wo.../23donors.html

By ELLEN BARRY
Published: October 22, 2008

MOSCOW — Western donors in Belgium promised on Wednesday to spend about $4.5 billion to rebuild Georgia, whose economy and infrastructure were badly damaged by this summer’s war with Russia.

The sum was more than $1 billion more than the World Bank’s target, and came as a financial crisis rattled the economies of donor nations. The United States pledged the largest amount, $1 billion over three years. An additional $642.8 million will be allocated by the European Commission over the next two years.

José Manuel Barroso, the president of the European Commission, said the pledge should send “a strong signal to the world” that its members stand with Georgia.

“The international community believes in and upholds certain values and norms of conduct, and those include the peaceful resolution of disputes,” Mr. Barroso said.

Russia and Georgia clashed briefly in August when, after a crescendo of low-level violence in the separatist enclave of South Ossetia, the Georgian government ordered an assault on the South Ossetian capital, Tskhinvali. Russia, saying it needed to protect civilians, sent columns of troops into South Ossetia and a second breakaway region, Abkhazia, and then took positions deep in Georgian territory.

As part of a cease-fire brokered by France, Russia has withdrawn from positions outside South Ossetia and Abkhazia. The two regions have declared independence, but have not been recognized by most of the world.

Western countries have harshly condemned Russia’s actions, but have taken no steps to punish Russia or force it to withdraw from the two regions.

Before the war, Georgia, a country of 4.6 million people, had booming economic prospects, boasting more than 10 percent annual growth, a significant tourist industry and foreign investment that tripled last year to nearly $2 billion.

After hostilities broke out on Aug. 7, transportation routes from Georgia’s main Black Sea port were cut off, and dozens of importers defaulted on contracts. The stock market plummeted, and Georgians made a run on banks, wiping out $165 million in deposits at the Bank of Georgia. The country’s scenic Black Sea resorts, once popular with Russians, sit largely empty.

The World Bank had estimated that Georgia would need $3.25 billion “to cover budget support, social sector support and infrastructure development.”

Most of the aid, roughly $3.7 billion, will go to social and construction programs. An additional $850 million will be invested in the private sector, where donors hope it will offset the sharp drop in foreign direct investment.

In remarks before the donors’ conference, Benita Ferrero-Waldner, the European Union’s external relations commissioner, said donors expected Georgia to continue down the path toward democratic reform, and “will urge Georgia to strive for higher standards.” In particular, she called for improvement on judicial and financial reform, and media freedom.