41198-013: Municipal Services Development Project

Project Data Sheet (PDS): Details


The objective of the Project is assist project municipal governments to improve delivery of basic urban services. The Project comprises two components: investment projects and capacity development. The outputs of the investment component are loans and grants to municipalities and local utility companies to improve basic urban services and infrastructure. The outputs of the capacity development component are (i) feasibility, engineering design, environmental and social, and other related studies for project preparation and appraisal; (ii) decentralized process for identification, planning, preparation and implementation of subprojects; (iii) institutionalized corporate and business planning process within MDF; and (iv) studies and training to develop MDF capacity.

Project Rationale and Linkage to Country/Regional Strategy

Municipal services including water supply and sanitation, solidwaste management, road repair, and urban transport in Georgia have deteriorated due to economic collapse, political instability, and a vitiated policy and institutional environment since the dissolution of the former Soviet Union. Capital investments in infrastructure and operation and maintenance (O&M) have been neglected nationwide. As a result, the quality of municipal services is low. Ownership and delivery of these services belongs to municipal government. Although municipalities have a mandate to deliver these services, in many instances they do not have the financial and technical resources to do the job. Key service targets such as coverage, quality, and continuity have been falling or are already at unreasonably low levels. This situation affects the quality of life of people but also constrains investment, business development, and ultimately the creation of jobs. Most principal and secondary towns are equally affected by this problem. The Government understands the issue and has started to put together a strategic framework and support actions to address it. The most effective of the measures taken is the establishment of the MDF. This fund provides finance and technical advice to municipal governments. Its work so far has been effective but coverage needs to be expanded further. To date, more than 10 municipalities have benefited from MDF operations. Decentralization was seen as central to achieving the objectives. Since 1997, the Government has carried out local government reforms in two stages, and in that time MDF has managed to extend finance to local governments while generating enough revenues to convert it into effectively a revolving fund. The Project will focus on improving basic municipal services and the rehabilitation, repair, and extension of dilapidated urban infrastructure. It will also provide technical assistance to assist the participating municipalities in improving local revenues, financial management, and reporting systems. Moreover, an integral part of the Project is to provide institutional strengthening and capacity development to municipalities to ensure the sustainability of project benefits. The Asian Development Bank (ADB) is not the only international financing institution working with the Government and MDF. The World Bank has already financed two municipal development projects. The European Bank for Reconstruction and Development has also participated in several large water supply projects, some of them cofinanced with the Millennium Challenge Corporation on a parallel basis. The Millennium Challenge Corporation is the largest bilateral source of grant aid for Georgia, and is mainly involved in the rehabilitation of water supply, sewerage, and irrigation systems. The other bilateral aid agencies are involved in the municipal sectors, mostly through technical cooperation by cofinancing with multilateral financial agencies. The Project is the first ADB intervention in the country. It will build on the experience of other multilateral and bilateral financial institutions projects. Cooperation with other financial institutions is critical and the Ministry of Finance has taken an impressive lead in ensuring such cooperation. This is particularly important for the institutional strengthening activities under the Project, which will be designed in consultation with other international aid agencies. This will maximize benefits, avoid unnecessary and costly overlap, and prevent confusion in policy matters.


Improved urban environment and public health within urban areas.

Project Outcome

Description of Outcome

Improved service delivery and better living conditions within urban areas.

Progress Towards Outcome

As of date, 105,000 households benefit from improved municipal services.

Implementation Progress

Description of Project Outputs

Part A - Investment Projects Financing Facility Part B - Project Management and Capacity Development

Status of Operation/Construction or Implementation Progress

Project Completion Review Mission fielded on 4-9 September 2012. Draft Project Completion Report to be circulated in October 2012.

Safeguard Categories

Environment: FI
Involuntary Resettlement: C
Indigenous Peoples: C

Stakeholder Communication, Participation and Consultation

During Project Design

The main stakeholders will be MDF, participating municipal governments, communities, and civil society organizations. MDF and participating municipal governments (MG) will ensure that for all subprojects the results of social assessments and stakeholder consultations will be adequately taken into account in identifying investment priorities. Consultation will be carried out through public hearings, surveys, workshops, and other meetings during project implementation and monitoring.

During Project Implementation

i) Municipal Government to prepare and submit a project proposal to MDF; ii) Municipal Government to provide necessary information, statistics, and project data during various studies including feasibility of the subproject; iii) MDF to carry-out preparation of investment projects; iv) MDF responsible for the coordination and overall management of its activities; v) MDF to carry-out all financial management activities in accordance with Georgian law and regulations, and donors requirements; vi) MDF to overseas day-to-day operations of project management office and manage project implementation; vii) MDF to provide technical and logistical support required for efficient operation; viii) Municipal Government to provide necessary inputs such as logistics during project implementation; ix) Municipal Government to join commissioning of the project facilities after completion of the project facilities; x) Municipal Government to operate and maintain the project facilities in accordance with the operations manual of the project facilities prepared; xi) MDF to carry-out procurement for investment projects.

Status of Covenants

Category Rating
Loan 2441
Social Satisfactory
Financial Satisfactory
Others Satisfactory
Safeguards Satisfactory
Project Financial Statements


Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

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