EN    EN EN 
 
EN    EN  EUROPEAN COMMISSION  
Brussels, 12.5.2010 
SEC(2010) 518 final 
  
COMMISSION STAFF WORKING DOCUMENT 
Accompanying the 
 
COMMUNICATION FROM THE COMMISSION  
TO THE EUROPEAN PARLIA MENT AND THE COUNCIL 
Taking stock of the European Neighbourhood Policy (ENP) 
  
Implementation of the European  Neighbourhood Policy in 2009: 
Progress Report Georgia  
 
  
{COM(2010) 207 final} 
{SEC(2010) 513 final} {SEC(2010) 514 final} {SEC(2010) 515 final} {SEC(2010) 516 final} {SEC(2010) 517 final} {SEC(2010) 519 final} {SEC(2010) 520 final} {SEC(2010) 521 final} {SEC(2010) 522 final} {SEC(2010) 523 final} {SEC(2010) 524 final} {SEC(2010) 525 final} 
 
EN 2   EN 1. BACKGROUND AND OVERALL ASSESSMENT  
Georgia and the EU first esta blished contractual relations in 1996 through a Partnership and 
Cooperation Agreement which entered into force in 1999. On this basis, the EU-Georgia ENP 
Action Plan was approved in November  2006 for a period of five years.  
EU–Georgia meetings took place at the leve l of the Cooperation Council, the Cooperation 
Committee and subcommittees on trade, economic and related legal issues and on justice, 
liberty and security issues as well as the tw o rounds of the EU-Georgia dialogue on Human 
Rights initiated in 2009.  
This document reports on progress made on th e implementation of the EU – Georgia ENP 
Action Plan between 1 January and 31 Decembe r 2009, although developments outside this 
period are also taken into  consideration when deem ed relevant. It is not  a general review of 
the political and economic situation in Georgia. In addition, for information on regional and multilateral sector processes, please refer to the sectoral report. 
The EU and Georgia agreed to move forwar d with deepening and broadening of the EU-
Georgia relations. In parallel and within the Eastern Partnership fram ework the EU started 
preparations for upgrading contractual relations with Georgia. Negotiati ng directives for an 
Association Agreement were adopted by the EU in May 2010. In the framework of the future 
Association Agreement, negotia tions on a deep and comprehens ive free trade area (DCFTA) 
will start once the necessary conditions have been met. 
Overall, Georgia made progress in the implem entation of the ENP Action Plan priorities 
throughout 2009, especially in the ar eas of rule of law, reform of the justice system, fight 
against petty corruption, trade facilitation a nd improvement of business climate. The 
Government increased its efforts for reforming the justice sector. The new criminal procedure 
code which was pending since 2007 has been adopted by the Gove rnment and will enter into 
force in 2010.Continuous and effective implementa tion of related legisl ation will be the key 
in ensuring the long-term success of the reforms, thus meeting ENP Action Plan 
commitments. Also, Georgia will need to c ontinue its democratic reform efforts and 
consolidation of democratic institutions, espe cially political pluralism and media freedom. 
Other major future challenges include poverty reduction, employment a nd social policies, 
agricultural development includi ng sanitary and phyto-sanitary  issues and civil service 
reform. 
The year 2009 in Georgia was marked by ma ss demonstrations or ganised by the extra-
parliamentary political opposition between April and July. The authorities kept a low profile 
and did not attempt to break these demonstrat ions by force, marking progress from similar 
events in 2007. The implementa tion of the ‘second wa ve of democratic reforms’, announced 
by the President in 2008, continued througho ut 2009. The ‘second wave of democratic 
reforms’ includes a stronger role for Parliament vis-à-vis the executive through constitutional changes, broader involvement of the opposition in decision-making processes, amendment of 
the election code, improved judicial i ndependence and greater media freedom.  
The opposition was granted more power in Par liament. Some representatives of the extra-
parliamentary opposition accepted to  participate in a few enlarg ed sessions of the National 
Security Council, but so me of them subsequently withdrew , describing the ‘second wave’ of 
reforms as mere window-dressing. Polarisation of  political life in Georgia continues to be a 
 
EN 3   EN serious obstacle to genuine political reform and inclusiveness. In this context, the effective 
impact of the ongoing reform process remains to be seen.  
On the economic side, the effects of the A ugust 2008 war combined with the international 
economic downturn increased pressure on the G overnment to address long-standing socio-
economic challenges. In the first half of 2009, domestic demand declined and remittances and 
foreign direct investment levels  fell. Signs of economic recove ry were observed in the third 
quarter of 2009 and inflation remained low in  2009. For the year 2009, a contraction of 3.9% 
of real GDP was forecasted. 
In the second half of 2009 Georgia showed de termination to fulfil key EU's recommendations 
linked to its preparedness for starting DCFTA negotiations. As a result, some progress was 
achieved, notably the preparation of  the first drafts of the necessary strategic reform plans. By 
deploying additional efforts in particular in order to properly complete, adopt and make 
progress in implementing the agreed reform pl ans, Georgia would become ready to start 
DCFTA negotiations.  
The Georgian authorities and civil society re presentatives participated actively and had a 
constructive input to the multilateral framework of the Eastern Partnership , in particular 
through open dialogue and their c ontribution to the working progr ammes for the four thematic 
platforms. Together with the bilateral elements of the Eastern Partnership, this contributed to 
the overall strengthening of EU-Georgia relations and reinforcement of the follow-up on the priorities of the ENP Action Plan.  
2. P
OLITICAL DIALOGUE AND REFORM  
Democracy and rule of law 
Following the OSCE/OIDHR reports in 2008, whic h outlined several irregularities in the 
conduct of elections , the Government embarked on re forming the election code. The 
parliamentary and some extra-parliamentary opposition members joined the Working Group on Election Code, but the parties fa iled to agree on the threshold for the direct election of the 
mayor of Tbilisi. The threshold for victory in  the first round was set at 30%, which was 
considered by most opposition parties as too lo w. The election code was also amended to 
include changes in the procedure for elect ing the Chairman of the Central Election 
Commission, but the amended code does not adequately address potential abuse of 
administrative resources during elections. The co nduct of the May 2010 local electio ns will be 
an important indicator of pr ogress on the election code reform and implementation of 
international recommendations.  
In order to draft a new constitution , as outlined under the ‘second wave of democratic 
reforms’, a State Constitutional Commission was established, I which representatives of non-
governmental organisations and opposition parties, as well as legal experts are also actively 
participating. The aim of the Constitutional Commission is to prepare a new constitution which would ensure further clear separation of  powers, an improved system of checks and 
balances, a more independent co urt system and better protection of human rights. A first draft 
of the constitution is no w expected by autumn 2010.  
Following the period of demonstrations by the opposition parties, the amendments to the Law 
on Assembly and Manifestations and the Law on Police adopted in July 2009 raised concerns 
as they limited the right to assembly and did not specify how the law enforcement agencies 
 
EN 4   EN could use non-lethal force to disperse demonstrators. Furthermore, the Public Defender and 
local non-governmental organisations reported cases of threats and beatings of opposition 
supporters during the demonstrations. These acts of violence against the opposition were not 
thoroughly investigated by the Government and no perpetrators were identified or brought to 
justice. During the demonstrations some po litical opponents were arrested and sentenced on 
alleged politically motivated ch arges. Thorough investigation of all these alleged crimes and 
charges would be a solid indicator of th e improved independence of the judiciary. 
There was progress in 2009 on the reform of the criminal justice  system as the new Criminal 
Procedure Code that had been pending for tw o years was adopted in  October 2009. The Code 
should come into force in Oc tober 2010, introducing a number of  substantial changes to the 
current system of criminal proc eedings in Georgia, notably the  introduction of jury trials in 
criminal cases. The new Code provides for a majo r change in the system of administration of 
justice in criminal matters, which will present a challenge in implementation and will require 
continued and amplified traini ng to judges, court personne l and parties to criminal 
proceedings.  
On strengthening the independence of the  judiciary , lifetime appointment of judges by the 
Higher Council of Justice has not been ensured, as it requires  a constitutional amendment and 
is part of the development of the new consti tution. The judicial vaca ncies in district and 
appeal courts are gradually being filled under a new procedure for the appointment of judges, 
which requires judges to enrol in the 18-mont h training at the High School of Justice.  
Regarding access to justice , the free legal aid service of the ne w Ministry of Corrections and 
Legal Assistance continues to provide legal aid to  citizens throughout the country, including 
to vulnerable groups, on criminal cases and lega l counsel on civil and ad ministrative issues. In 
2009 two new offices were established and as of May 2009 the Service had access to 123 
private lawyers in addition to its core staff of  up to 180. The bi-lingua l website in Georgian 
and English became operational in January  2009 offering the possi bility of on-line 
consultation. The Legal Aid Service also printe d information brochures in Russian, Armenian 
and Azeri and distributed them in all offices of the Service that serve the regions where 
minority communities live.  
Civil service reform was at a standstill in 2009. The Public Se rvice Council, responsible for 
piloting reforms in this area, has not met sin ce 2007 and the Public Se rvice Bureau activities 
has been confined to designi ng and maintaining an on-line system of civil servants’ 
declarations of assets. The Parliament made an  attempt to improve the situation by preparing a 
new Civil Service code. Presented in a public seminar in November 2009, the draft text was 
strongly criticized and was eventually not proposed for parliamentary approval.  
Only few concrete achievements were noted as far as  decentralization  is concerned. The 
related draft strategy is maintained at a techni cal level. Some amendments to the legislation 
applicable to self-government were proposed at the very end of 2009, tackling such issues as 
internal organisation of self- governments and rules applicable  to municipal property. These 
changes are related to the prospect of approva l of the regional devel opment strategy, expected 
in March 2010. The crucial issue of  fiscal decentralization was not  tackled at all, with most 
self-governments still depending on the cent ral Government for about 90% of their 
expenditures. 
In the area of  fight against corruption Georgia made significant efforts to comply with 
Council of Europe’s GRECO recommendations, th rough legislative change s and reforms. The 
 
EN 5   EN amendments to the Criminal Code included the criminal liability of legal persons; the law on 
the Chamber of Control was adopted in January  2009; and the Law on Conflicts of Interest 
and Corruption in Public Service was ame nded. The effective implementation of these 
amended laws will be crucial in consolidating the reform process. 
Human rights and fundamental freedoms 
Georgia is party to the main  international and regional  human rights instruments , and to most 
of their optional protocols. In July 2009, the country  signed the  UN Convention on the Rights 
of Persons with Disabilities as well as its Op tional Protocol. Georgia has been party to the 
Rome Statute of the International Criminal Cour t since 2003. The country is currently late in 
submitting a total of four mandatory periodic reports to UN treaty bodies. No progress was 
made on issuing a standing invitation to UN spec ial procedures. The EU-Georgia dialogue on 
Human Rights, initiated in 2009, focuse d on issues such as detentions.  
A new Public Defender ( Ombudsman ) was appointed in September 2009. The Office of the 
Public Defender is being strengthened in orde r to assume the new function of the National 
Preventive Mechanism (NPM) and in spite of  severe budgetary constraints, financial 
allocations from the Government were slight ly increased in the 2010 budget. The Parliament 
took careful note of the Ombudsman's reports in  2009, but the real impact indicator of the 
Public Defender’s Office will be the act ual implementation of the Ombudsman's 
recommendations by the relevant Government bodies. Development of regional offices is 
ongoing.  
To meet the obligations under the Optiona l Protocol to the UN Convention against Torture  
(OPCAT), the Public Defender’s Office was de signated as the NPM in July 2009 and the 
recruitment of the necessary human resources to the Public Defender’s office is in progress. 
The Georgian Interagency Coordination Counc il against Torture, In human and Degrading 
Treatment presented a new action plan for 2008- 2009 which takes into a ccount a number of 
recommendations of the Committee for Preven tion of Torture (CPT). The report on the 
implementation of the action plan from January  2008 to July 2009 was released in September 
2009, but the mandate of the Inter-Agency C oordination Council expired in December 2009. 
To date, the anti-torture action plan has not  been renewed or th e Coordination Council 
reactivated.  
However, detention conditions  and overcrowding in prisons remain areas of concern, as well 
as inhuman and degrading conditions often cau sed by overcrowding. The use of parole or 
alternatives to imprisonment is  still inadequate, in contradi ction with Council of Europe 
standards. The Code of Administrative Viola tions of July 2009 was amended, prolonging the 
length of administrative imprison ment from 30 to 90 days, whic h is not fully in compliance 
with international human right s standards. The European Court of Human Rights and the 
Public Defender of Georgia unde rlined the systemic problems  in administering adequate 
medical care to prisoners. A new Ministry of Co rrections and Legal Assistance was formed in 
2009, following the merger of the Prosecution Servic e with the Ministry of Justice. This new 
Ministry is in charge of de veloping systematic actions to  address problems in detention 
conditions, which made limited progress so far.  
The ‘second wave of democratic reforms’ outlined measures to encourage media pluralism  
in Georgia. The granting of nati on-wide satellite broadcasting to all TV channels only had a 
limited impact, since the high prices of sate llite licences constitute  a problem for opposition-
minded TV channels which struggle for f unding and revenues from advertisements. The 
 
EN 6   EN Georgian Public Broadcaster’s (GPB) board of trustees has be en enlarged a nd now includes 
independent media experts. However, the broad cast media remain an issue of major concern 
in Georgia, where the television environment is  reported to be highly polarised and biased. 
The GPB’s news coverage and political programme s are criticised for lacking the impartiality 
required of a public broadcaster and being biased  in favour of the ruling party. Transparency 
of ownership is considered crucial in ensuri ng media pluralism, but the availability of 
information and documentation relating to the owners of media outlets and broadcasting 
licences still remains problematic in Georgia. The European Union orga nised a ‘Civil Society 
Human Rights Seminar on Media Freedom’ in November 2009 with the aim of increasing 
awareness on media freedom, identifying proble ms and facilitating the formulation of 
solutions. A number of actions were ta ken by the Government to improve prison 
infrastructure and capacity in 2009, including through the construction of new prisons.  
Integration and the rights of minorities in Georgia remains an area of concern. The 
Government elaborated a “Nati onal Integration Strategy: Nati onal Concept for Tolerance and 
Civic Integration”, which was adopted in May 2009. The concept and the action plan, covering the period of 2009-2014, foresee the impr ovement of infrastructure in remote 
minority regions and development of classes in  Georgian as state la nguage. The Council of 
Europe Framework Convention on  Protection of National Minorities is not fully transposed 
into domestic legislation and the European Ch arter for Regional and Minority Languages is 
still not signed by Georgia. On the repatriati on and integration of the Meskhetian population 
to Georgia the period for appli cations to return was, once again, extended an additional six 
months to cover the period until the end of 2009. The capacity of the Ministry for Refugees and Accommodation to deal efficiently with the applications is a subject of concern and no 
specific action plan to effec tively ensure the repatriation of Meskhetians has yet been 
developed.  
As regards women’s rights , the package of amendments to Georgian legislation, envisaged 
by the action plan 2009-2010 for el imination of domestic violence  and protection of victims 
of domestic violence, was adopted in Dece mber 2009. The inter-institutional Council on the 
elimination of domestic violence is operationa l. During the reporting period, the Ministry of 
Health, Labour and Social Affairs took the deci sion to open shelters for victims of domestic 
violence and identified two premises for this  purpose, which are going through rehabilitation 
to meet the minimum standards already identified. The draft law on gender equality was elaborated with the pa rticipation of local NGOs , international organisa tions and government 
bodies, and is expected to be adopted in spring 2010. Women still suffer from a gender pay gap: the average monthly salary of formally employed women was 43% less than men in the first quarter of 2009.  
The Government  launched the reform of the juvenile justice  system, together with 
international partners. As a result, the strate gy for Juvenile Justice System Reform and its 
action plan were adopted in September 20 09. This strategy foresees to reverse the 
amendments adopted in 2007 for lowering the mi nimum age of criminal  responsibility from 
14 to 12, a reversal recommended by the UN. Progr ess was also reported in the development 
of rehabilitation and educati on activities in detention centr es for juvenile offenders.  
Cooperation on Foreign and Security Policy, conflict prevention and crisis management 
Since June 2007, Georgia has been invited to align with CFSP  declarations  on a case by case 
basis. In 2009, Georgia aligned with 97 out of  137 CFSP declarations to which it was invited 
to join. There was good political dialogue w ith the Georgia in 2009, including through two 
 
EN 7   EN Political and Security Committee Troika mee tings in February and December 2009, and an 
EU Foreign Ministers' Troika visit to Georgia in July 2009. 
Strengthening regional cooperation  
The Southern Caucasus Integrated Border Management (SCIBM) promoted by the EU among 
Georgia, Armenia and Azerbaijan was to star t in January 2009 but was delayed to address 
issues raised by Azerbaijan. Th e conditions for implementation have now been accepted by 
all three countries and implementation started in March 2010 (see chapter 5 on cooperation 
on justice, freedom and security.)  
The South Caucasus Anti-Drugs Programme (S CAD V) came to an end in 2009. Discussions 
continue on how best to bring forward the results of the action and pursue regional efforts in 
the fights against illegal drugs. 
The new management (a Troika consisting of Armenian, Azerbaijani and Georgian executive 
directors) of the Regional Environmental Cent re for Caucasus (REC) took office in January 
2009. It consolidated the REC both financially  and in terms of internal organisation.  The REC 
carried out regional activities in 2009 notably in the fields of information and public 
participation, environmental policy and local environmental action plans, the protection and 
sustainable development of mount ain regions. It is an importa nt tool to promote regional 
cooperation and stability  for the future of the South Caucasus. 
In the area of higher educat ion, universities from Armeni a, Azerbaijan and Georgia 
cooperated together on a distan ce and e-learning project. This is the first time that such 
regional cooperation emerged under the Tempus programme. 
Cooperation for the settlement of  Georgia’s internal conflicts 
The EU remains committed to respecting Georgia’ s territorial integrity and sovereignty and to 
the peaceful resolution of the conflicts in Ge orgia. Following the August 2008 war, the EU 
provided substantial political, financial and practical post-c onflict support to Georgia, 
including a post-conflict assistance package of  up to EUR 500 million from the EU budget for 
2008-2010. The projects have been aiming at im proving the living c onditions of people 
affected by the conflict, notably the needs of in ternally displaced persons (IDPs), both from 
1992 and 2008, and where possible, the local popul ation living inside the conflict affected 
areas. The confidence building measures which continue to be supported by the EU aim at 
creating conditions for the return of IDPs and facilitating progress in a constructive dialogue 
between opposing social groups (see chapter 8 on financial cooperation ). The EUSR for the 
South Caucasus and the EUSR for the crisis in Georgia have also been actively engaged in the 
conflict resolution efforts. 
In May 2009, an action plan was adopted for implementation of the State Strategy on 
Internally Displaced Persons (IDPs) for 2009- 2012, covering all IDPs, as requested by the 
EU. The action plan allowed the set-up of prope r coordination mechanisms on IDP issues but 
does not outline the link between the actions foreseen with the funds available and the total 
population of IDPs whose situation still need to be addressed. Ther e is also lack of clarity on 
the selection criteria for those IDPs w ho will receive housing during the process of 
privatisation of collectiv e centres. An updated and more concre te version of th e Action Plan is 
to be adopted through a Government decree in  April 2010. An information strategy launched 
by the Government aims at overcoming the l ack of awareness among internally displaced 
persons on their rights and status.  
 
EN 8   EN The EU has also been taking an active role as a co-chair, together with the UN and the OSCE, 
of the “ Geneva talks ”, set up in 2008 as a forum for dial ogue and the only platform allowing 
for an on-going political conflict resolution pr ocess. In the course of 2009, five rounds of 
“Geneva talks” took place and some results were  achieved; notably, the establishment of the 
Incident Prevention and Reporting Mechanism, restoring water and gas supply to the South 
Ossetian region, and discussions on a comprehensiv e set of Agreed Unde rtakings focusing on 
humanitarian issues related to conflicts, which show that the process is beneficial, albeit slow. 
Throughout 2009, the EU continued to remind Russia of its commitments under the EU-mediated ceasefire agreements with Georgi a of August and September 2008, which are not 
yet completely fulfilled. In December 2009, the EU also developed its non-recognition and 
engagement policy towards the breakaway regions of Abkhazia and South Ossetia. 
An EU civilian monitoring mission ( EUMM ) with 340 observers was set up in 2008 to 
monitor and analyse the stabilisation proce ss. In September 2009, the EUMM’s mandate was 
extended for another year, until 2010. However, refusal of access to the breakaway regions for the EUMM results in asymmetrical imp lementation of the Mission’s mandate. 
The independent intern ational fact finding mission on the c onflict in Georgia released its 
report in September 2009 on the events that led to the August 2008 war between Russia and 
Georgia, outlining that the war was avoidabl e. The report made an assessment of the 
responsibilities of both Georgia and Russia in the conflict, as  well as on the role of the 
international community. 
The Law on Occupied Territories  (see last progress report SEC(2009) 513) raises serious 
concerns about the possibility of delivering hum anitarian and rehabilitation assistance to the 
two breakaway regions. In January 2009 the Government and the European Commission 
issued a joint statement on political conditiona lity linked to increased EU budget assistance, 
accompanied by a series of commitments by th e Georgian Government, which included the 
aim of finding mutually acceptable implementing rules for the Law on Occupied Territories. 
The Council of Europe Venice Commission was c onsulted and expressed a number of serious 
concerns.  
After the reporting period, in January 2010, the G overnment adopted the new “State strategy 
on Occupied Territories: Engagement through C ooperation”. This strategy envisages a policy 
of engagement to complement the Government’s efforts towards the peaceful resolution of conflicts. This is generally in line with the EU’s non-recognition and engagement policy and 
Confidence Building approach and was welcomed by the international community as a positive development. In line with the aims of  this strategy and the Venice Commission’s 
opinion, the authorities announced their intention to amend the Law on Occupied Territories 
in the course of 2010.  
3. 
ECONOMIC AND SOCIAL REFORM  
Macroeconomic framework and functioning market economy 
The global financial and economic crisis st rongly affected Georgia and thus further 
exacerbated the economic downturn caused by the August 2008 war. The economic contraction was driven by the decline in dom estic demand caused by a tightening in bank 
credit, a fall in remittances and in foreign dire ct investment inflows which subsequently led to 
a decline in output and consumption. The economi c sectors that were especially hit were 
 
EN 9   EN manufacturing and construction. First signs of  economic recovery appeared in the third 
quarter of 2009. For the year 2009 as a whole a c ontraction of 3.9% of r eal GDP is forecasted. 
As a result of the economic slowdown inflatio n was low, at 1.7% on average for 2009, while 
at the end of 2009 the Consumer Price Index (C PI) was expected to increase somewhat to 
3.5%.  
2009 was characterised by strong adjustments in trade and capital flows. The current account 
deficit decreased from 23% of GDP in 2008 to 12% in 2009. This rebalancing was driven by 
the trade balance adjustment: exports and impor ts of goods and services declined by 16% and 
30% respectively, thus reducing the trade deficit from 30% of GDP to 23%. 2009 was also 
marked by a strong decline of capital inflows: in comparison to 2008, worker remittances 
declined by more than 20%, while FDI inflow s more than halved (from EUR 1.5 billion to 
EUR 0.8 billion). 
Due to the economic contraction the fiscal  position of Georgia deteriorated. The budget 
deficit during the first three quarters reached 6.7 % of GDP. For the year  2009 as a whole, the 
budget deficit reached 9.2% of GDP. The deficit was financed by external assistance from the 
International Financial Institutions (IFIs), bilateral partners and by issuance of domestic Treasury bills. The external public debt incr eased from 21% of GDP in 2008 to 32% of GDP 
in 2009. Higher external borrowing provided funding for public infrastructure projects which 
were intended to support growth  in the post-conflict period.  
An 18-month Stand-By Arrangement (S BA) for EUR 535.7 million approved by the 
International Monetary Fund (IMF) in Sept ember 2008 enabled Georgia to draw EUR 471.4 
million from the Fund, most of it in 2009, to st rengthen its balance of payments and improve 
its macro-economic policy framework. During the third review approved by the IMF Board in 
August 2009, the SBA was extended until June 2011 and the financing package was increased 
by about EUR 302.9 million, bringing the w hole programme to EUR 835.7 million. In 
addition the European Commission provided a grant of EUR 46 million of Macro Financial 
Assistance to Georgia (more on this in chapter 8).  
To limit the depreciation of the lari the National Bank adopted a more interventionist 
exchange policy. However, depreciation pressu res were high and following the autumn 2008 
depreciation against the US dollar by around 17%, since spring 2009 the authorities allowed 
for greater exchange rate flexibility. During 2009 the GEL exchange rate against the "hard" 
currencies remained stable with the lari experiencing only a small depreciation of 2% against 
the USD and 4% against the euro in the cour se of 2009. The National Bank performs regular 
auctions of foreign currency in order to avoid too strong fluctuations of  the exchange rate but 
the practice of almost daily in terventions was abandoned. In term s of monetary policy tools, 
an important phenomenon of the Georgian econo my is its high level of dollarization: in 
September 2009 around 73% of deposits were in USD.  Due to this high level of dollarization 
rather than the National Bank's refinancing rate , it is the domestic interest rate on the USD 
that influenced the economi c activity. Consequently, in 2009, it was the high domestic 
lending rate in USD of ar ound 23% on an annual basis which hampered the economic 
recovery. 
In November 2009 amendments to the Constitution of Georgia and the draft organic "law on 
economic freedom, opportunity and dignity" were  published as a Presid ential initiative. The 
proposed law will legislatively and constitutionally (two thirds’ majority is required in the parliament) determine the macroeconomic indicato rs to be adhered to by the Government. It 
will also restrict increasing of rates of curre nt taxes through the referendum. Furthermore, it 
 
EN 10   EN will impose restrictions on the establishment of new regulatory bodies or new types of 
licences. The intention of the pr oposed law is to re-build i nvestor confidence which was 
damaged after the August 2008 wa r. This initiative is a con tinuation of the Government's 
policy which limits state intervention  in social and economic life.  
Employment and social policy  
Poverty remains high in the country, affecting an estimated 27.8% of the population in 2009, 
and it is aggravated by the impact of the cr isis on employment and incomes. Measures to 
address poverty included a doubling of old-age pe nsions, one-off cash assistance and in-kind 
benefits (including fuel and basic food produc ts). The implementation of the 2008 programme 
“Georgia without Poverty” was hampered by the global crisis and its focus was shifted from addressing poverty to facilitating job cr eation and improving social assistance.  
As regards employment,  Georgia has no specific employ ment strategy in place and no 
employment implementing agency (therefore, no  employment promotion policy exists in the 
country). There is a need to thoroughly addr ess the mismatch between skills and labour 
market needs.  
Further to the October 2008 joint statement by the International Labou r Organisation (ILO) 
and Georgia, a number of consultations were  held during the repor ting period between 
representatives of the Government, the trade unions and th e Association of Employers, to 
review the provisions of the Labour Code whic h were not in line with the ILO Conventions 
on core  labour standards.   
The social dialogue  of October 2009 led to  the issuing in Nove mber 2009 of a Decree 
institutionalising the tripar tite National social dialogue commission. A working group was 
created to review and an alyze the legislation’s conformity with ILO core conventions and to 
draft the charter of the newl y established social dialogue commission. The commission’s 
charter defines its role, functioning and obj ectives, remains to be finalised. Georgia’s 
commitment to promote social dialogue and implement ILO Conventions will be assessed by 
the ILO. Georgia submitted in November 2009 its report on the implementation of the 
European Social Charter.  
As regards  social assistance, the Government elaborated in February 2009 the Medical 
insurance programme for those in the populatio n below the poverty line. It targets families 
that are registered in the united database of  socially unprotected families and displaced 
persons.  
The State Programme of disabl ed, elderly people and homele ss children rehabilitation was 
approved in February 2009. It provides several ki nds of social servi ces to persons with 
disabilities, elderly people and homeless ch ildren (GEL 13.7 million, approximately EUR 5.8 
million, in 2010). There are no allowances or a ny kind of social assistance for unemployed 
persons. 
Since January 2009, child care is under the respons ibility of the Ministry  of Labour, Health 
and Social Affairs. The Child Care program me was approved in March 2009. It aims at 
supporting homeless, socially unprotected, disabled childr en, and children who became 
victims of violence. It also aims to support deinstitutionalization and prevent abandonment of 
children. The decrease of the number of child ren in residential care continued over the 
 
EN 11   EN reporting period. The Children Action Plan was re vised in July 2009 to include the specific 
targets and activities to be implemented in the period 2009-2011. 
The agriculture  sector remained neglected and perf ormed poorly during 2009. The Strategy 
for the Agricultural Development of Geor gia 2009-2012, prepared by the Ministry of 
Agriculture in 2008, was not endorsed In the m eantime the main programming tool for the 
MoA is the Midterm Action Plan, which was ap proved in 2009 and will run until 2013. Public 
investment to the agriculture sector was low, only 1.5% of  the budget allo cation in 2009. 
Supply of tractors to farmers, providing financial assistance to  wine producers and one-time 
assistance continued to be the main form of  support to the farmers by the Government. The 
Ministry of Agriculture established nation-wi de product-oriented associations which will 
represent the common interest of their member s and develop common marketing strategies.  
In the reporting period th ere was no progress regarding sustainable development . The 
Ministry of Environment and Ma nagement of Natural Resources has still not started drafting 
the relevant strategy. 
4. TRADE -RELATED ISSUES , MARKET AND REGULATORY REFORM  
As regards bilateral trade , in 2009, as a result of the gl obal slow-down of the economic 
activity due to the financ ial crisis, EU exports to Georgia declined by 27.9% compared to the 
previous year, while exports of Georgian pr oducts to the EU decreased by 34.8%. Georgia’s 
exports to the EU remain very low, with a low value added and non-diversified – in 2009, 
almost three quarters (71.6%) of them consisted of mineral products and almost one tenth of 
respectively agricultural and food products (9.4%) and chemicals (9.0%). 
Under the new EU Regulation providing for the Generalized System of Preferences (GSP) for 
the years 2009-2011, Georgia contin ued to benefit from the special incentive arrangement for 
sustainable development and good governance - GSP+. These enhanced preferences should 
contribute to diversifyi ng of Georgia's export structure a nd improving its export performance. 
In March 2009 Georgia endorsed the assessment of  the European Commission (in the form of 
key recommendations) on its preparedness for the start of negotiations on a deep and 
comprehensive free trade area (D CFTA). Following this endorsement, in the second half of 
2009 the Georgian authorities prepared the firs t drafts of the strategic plans aiming at 
implementing the necessary reforms recommen ded by the EU. Intensive dialogue took place 
between both sides on these issues. By deploying a dditional efforts in part icular in order to 
properly complete, adopt and make progress in  implementing these agreed legislative and 
administrative capacity-building plans, Geor gia would become ready to start DCFTA 
negotiations. 
The negotiations between the EU and Georgi a regarding the agreement on protection of 
geographical indications of agricultural produ cts and other foodstuffs continued positively 
during the reporting period. Georgia is expected to improve the in stitutional control system to 
ensure the effective protecti on of geographical indications. 
In the area of customs , some progress was achieved, in partic ular in the area of simplification 
and trade facilitation. There were improvements in the post clearance control system and “on 
the spot audits” started in September 2009. A ne w regulation on risk management came into 
effect in January 2009 to implement the risk ma nagement changes to the Customs Code and a 
 
EN 12   EN special Risk Analysis Department and a Risk  Management Committee were set up within the 
Revenue Service. Since the first quarter of 2009 risk-based cargo se lectivity is applied also to 
exports and customs warehouses and the Revenue  Service is working on the introduction of 
a “green corridor” and a “blue corridor”, whic h are currently available only to authorized 
operators within the Golden List programme.  From January 2009, new provisions on dispute 
resolution and on customs penalties entered into force. A first step to involve customs in this process of issuance and verification of prefer ential certificates of origin was initiated by 
means of an amendment to the Customs Code wh ich specifies that the criteria and rules to 
determine origin and to issue certificates of or igin. Continued efforts are needed in particular 
with regard to security, safe ty controls and combating cust oms fraud. Georgia should bring 
customs valuation practice in line with the WT O standards, as well as abolish customs 
administrative fees. The implementing provisions to  the Customs code remain to be adopted.  
On free movement of goods a nd technical regulations , some progress was made. In May 
2009, the Working Group on Standardisation, A ccreditation, Technical Regulations and 
Metrology was created in the context of th e DCFTA preparations. In September 2009, 
Georgia presented a draft strategy in standard isation, accreditation, co nformity assessment, 
technical regulation and metrol ogy and a draft programme on legi slative reform and adoption 
of technical regulations. These documents provi ded the basis for a further technical dialogue. 
Georgia adopts European standard s directly as its own legisla tion in particular since the 
country became a member of CEN in 2008. The upgrading of the quality infrastructure and capacity building efforts are also on-going. Th e Georgian National Centre of Accreditation
 
signed a cooperation agreement with the Eur opean Accreditation (EA) in November 2009.  
Regarding sanitary and phytosanitary  (SPS) issues, progress wa s limited. Georgia drafted a 
first version of a food safety strategy, which was discussed in a tec hnical dialogue. Georgia 
also prepared draft laws on hygi ene, registration of food estab lishments and labelling of food 
products. Implementing legislation was adopted (for example on phytosanita ry certificates) or 
prepared. The aim is approximation to EU rule s. It continued the upg rading of laboratories 
and training of experts. In June 2009, Georgi a and the European Union signed a memorandum 
on participation in the EU’s Ra pid Alert System for Food and Feed. In 2009, Georgia decided 
to start implementation of the Law on food safety in several stages from 2010 until 2018. 
Georgia will start with the progressive regist ration of food establishments, but it suspended 
again the implementation of key provisions on controls and traceability, until 2011. During 
2009, some (voluntary) controls took place and some establis hments applied strengthened 
hygiene rules.  
In order to implement the Action Plan and prepare for a deep and comprehensive free trade 
area with the EU, Georgia would n eed to progress considerably in the sector. Issues such as 
the enactment and implementation of legislation, the functioning of institutions and increased 
animal disease surveillance need specific atte ntion. For example, despite some progress, 
enhanced coordination is necessary between th e National Service on F ood Safety, Veterinary, 
and Plant Protection (under the Ministry of Agriculture) and the Revenue Service (under the 
Ministry of Finance) which is responsible for certain SPS controls  at the border. Georgia took 
initial steps towards authorisation for export to the EU of  fishery products.  
Some progress can be reported on  business climate, establishment and company law . The 
Law on Entrepreneurs, which was amended in November 2009, reintroduced the requirement 
of submission of the company’s charter for regi stration purposes. It also defined the minimum 
mandatory content of the charter. However, additional efforts are needed to meet the Union’s requirements on transparency issues, disclosure  requirements, grounds for nullity and certain 
 
EN 13   EN rules on publicity of registers. Online assist ance (legal consultation) for registration of 
companies became available, while the registrati on itself is still not available. A Corporate 
Governance Code with a special focus on banks is being drafted within the frameworks of a 
non-governmental initiative, but w ith support of the Government. However, further efforts are 
needed to align with Union standards in respect of the formation of public limited liability companies, the maintenance and alteration of cap ital, grounds for nullity and certain rules on 
publicity of registers. 
Georgia continued to make so me progress in the field of financial services . A new law on the 
National Bank of Georgia was adopted in September 2009, and entered into force in 
December 2009. The Law aims at expanding and st rengthening the functions of the National 
Bank of Georgia, which should contribute to th e stability and transparency of the financial 
system, and perform other functions. The most significant risk for Ge orgian banks remains 
their indirect foreign currency exposure.
 The Financial Supervision Agency (FSA), the unified 
supervision body for banking, insurance and secu rities markets, continued its regulatory 
activities.  
Other key areas  
The process of upgrading the structures and th e operational capacities of the State Revenue 
Service (SRS) following the merger of the tax and customs administrations was continued, 
with major reductions of employment and stru ctural modifications. Despite the entry into 
force of the measures to facilitate VAT de duction, the VAT invoices system needs to be 
further improved. The Financial Po lice (Investigative Service of the Finance Minister) was re-
established in 2009 with the aim to improve th e compliance with the tax and customs law. 
However, no effective appeal mechanism was set up. It is important to ensure that the new 
institution does not create unjustified pressure  on legitimate trade/business. Agreements on 
avoidance of double taxation with France, Irela nd, Luxembourg and Malta await ratification. 
The agreement with Spain is st ill to be signed, while nego tiations are ongoing with Cyprus, 
Hungary, Slovakia, Slovenia, and Sweden. 
With regard to competition policy , limited progress was made. Georgia prepared a draft 
Comprehensive Strategy in Competition Policy  (CSCP) in September 2009. It provided the 
basis for a technical dialogue with the Eur opean Commission services on competition policy. 
The Strategy should foresee drafting of a co mprehensive Law on Competition and setting up 
of a reinforced Agency for Competition in the near future. This includes provisions for state 
aid. The 2005 Competition Law, cu rrently in force, does not regulate anti-trust and the Free 
Trade and Competition Agency lacks indepe ndence and has only an advisory role. 
In the area of Intellectual Propert y Rights (IPR) , Georgia adopted in October 2009 the 
amended Law on Drugs and Pharmaceutical activiti es dealing with data  exclusivity and non-
reliance whereby IP right holders enjoy the right to control, on their own initiative, parallel import and to regulate this issue by distribution agreements or according to the exhaustion of 
rights clause. However, the draft laws on i ndustrial designs and the revised Patent law 
including new provisions on supplementary protect ion certificate remain to be adopted. Both 
legal drafts are in the proce ss of governmental approval procedure, before submission to the 
Parliament. Georgia also worked on the text of the draft agreem ent of mutual legal protection 
of geographical indications with CIS countries.  
In autumn 2009, Georgia launched a study on pir acy and counterfeiting aiming at identifying 
measures for improvement of IPR enforcement.  The study is expected to be completed in 
 
EN 14   EN Spring 2010. However, additional substantial effo rts are needed to improve IPR enforcement 
in line with EU standards, in particular to adopt measures aiming at strengthening powers and 
capacities of the institutions in charge (e.g. give ex officio  power to the police and 
prosecutors). Very few court cases or raids were carried out in the reporting period. No 
progress can be reported as regards the establishment of IPR units in courts or an IPR unit in the police. 
The new law on  statistics , which is in line with Union requirements, was adopted by the 
Parliament in December 2009. It provides in particular for the creation, organisation and 
functioning of the new Statistical Agency (Sakstat) which entered into force after the reporting period, in February 2010. The staff of the statistics depart ment needs to be trained to 
ensure effective implementation of the new legi slation and the reliability of the statistics 
produced. 
On enterprise policy , the Entrepreneur Service Centre was established in the Ministry of 
Economic Development of Georgia in 2009 in or der to promote a ‘one-stop shop principle’. 
Furthermore, a Department on Export Promotion in the same ministry was established. With 
the aim of enhancing cooperation between Geor gian and foreign businesses, the Georgian 
National Investment Agency organised severa l business forums in different European 
countries. There were also many projects whic h support Small and Medium Sized Enterprises 
(SMEs) and business development. A public di scussion on SME development in Georgia was 
held in July 2009 and a ‘Wider Small Business Forum’ in September 2009. Also, a draft law on supporting SME development in Georgia was forwarded to the Parliament. Also, in 
October 2009, an Inter-organisational Small Business Committee was established.
  
With regard to public finance  management, as a response to the Public Expenditure and 
Financial Accountability (PEFA) findings, the Ministry of Finan ce revised the Public Finance 
Management Reform Strategy and issued a new Policy Vision paper, which replaced the 2007 
PFM Strategy reform. The current Policy Visi on focuses only on the areas which are under 
the mandate of the Ministry of Finance: Budge t preparation, resource management, internal 
control and accounting & reporting. While th ere may be some discussion as the 
appropriateness of the level of de tails of the vision, Ministry c onsiders it a realistic reflection 
of what can be done with the existing capacity.  
The PFM Vision also includes a plan of actions, implementati on of which is spread across 
2009 to 2013, and a more detailed list of ac tivities for 2009. The Minister of Finance 
presented the most recent status of the refo rm implementation during a meeting in October 
2009, underscoring the achievements in various PFM areas, e.g. drafting of the new Budget 
Code, implementation of programme and capit al budgeting, enhanced tr ansparency of budget 
execution, extensive development of sub-legisl ation, establishment of  simplified Customs 
procedures for selected entrusted traders, estab lishment of risk based se lection procedures for 
tax auditing and introduction of e-services, including filing of returns and enquiries, now available for taxpayers. 
In terms of public internal financial control, the Ministry presented a policy paper and action 
plan in March which led to the submission of a draft law on Internal Audit in October 2009 to 
the Parliament. Enactment of the law will enab le the progressive development of additional 
control functions. However, secondary legislat ion remains to be enacted alongside further 
development of auditing tools and administrative capacity. The effectiveness of this reform 
will in part hinge upon the success of measures to implement common standards and procedures and to limit staff turnover. 
 
EN 15   EN The Chamber of Control has de veloped its own strategy to implement the new law which was 
approved in January 2009. The activities envisage d for upcoming years are: the establishment 
of a sustainable training syst em for auditors; development of  a methodology for all kinds of 
audits according to INTOSAI standards; impr ovement of the relations/communication with 
the Parliament, Ministry of Finance and the broader public. 
The amended Law on State Procurement  was adopted by the Parliament in November 2009 
and entered into force in December. It provides  for the introduction of electronic tenders in 
March 2010 leading to the abo lition of paper-based procedur es in September 2010. It also 
foresees the establishment of a complaint re view mechanism comprising the representatives 
of State Procurement Agency and non-governmental organisations  in March 2010.  Further 
efforts are needed to ensure full transp arency throughout the procurement process.  
Progress in many areas of Public Finance Mana gement continued; however, further reform is 
required and envisaged, notably  in MTEF/budgeting, due to, inter alia,  limited administrative 
capacity and lack of institutionalised s ector consultation and procedure manuals. 
5. COOPERATION ON JUSTICE , FREEDOM AND SECURITY  
In the area of border management , the action plan for the implementation of integrated 
border management, foreseen under the Nati onal Strategy, was adopted in December 2009. 
The EUSR for the South Caucasus Border S upport Team helped fina lise the action plan, 
supported inter-agency coordina tion and provided further techni cal assistance to the Border 
Police. 
Georgia continued participating in the Southern Caucasus In tegrated Border Management 
(SCIBM) regional programme, formally agreed be tween Georgia, Armenia and Azerbaijan, in 
October 2007. The programme aimed at enhanci ng inter-agency cooperation, training and 
capacity of customs and border gu ard services in line with agr eed regional standards and EU 
norms. Despite the regional ch aracter of this programme, Azerbaijan chose to pursue 
cooperation only through its bi-lat eral component with Georgia,  which delayed the start of 
implementation until March 2010. Nevertheless, in the framework of SCIBM, Georgia’s 
customs and border guard services participated in preparatory training  sessions in Austria, 
Croatia, Italy and Slovenia al ongside representatives from Armenia and Azerbaijan. 
Further training was provided for border and pa trol police including cr oss-border seminars 
with border officials from bot h Armenia and Azerbaijan in cooperation with OSCE. Similar 
training cooperation continued with Turkey as  well as Germany, Poland and Romania in areas 
such as border surveillance, vessel security, an d operative investigation. As was the case in 
2008, progress on delimitation and demarcation of  borders with neighbour s other than with 
Turkey stills remains a cause for concern. De veloping comprehensive education and training 
strategies for this sector as well as improve ments to institutional capacity to effectively 
manage border crossing checkpoints requi res ongoing attention and investment. 
The issuance of biometric passpor ts to the citizens of Georgia di d not start in 2009 as planned, 
although the Civil Registry took a number of preparatory steps to this end. Travel documents 
for refugees were issued in 2009 in line with the 2008 Law on Refugees.  
In November 2009, the EU and Georgia adopted a Mobility Partnership. Sixteen EU 
Member States participate in the Partnership, o ffering various initiatives in three main areas 
 
EN 16   EN of cooperation: promotion of legal migration, fi ght against illegal migration and migration’s 
contribution to development.  
The negotiations on visa facilitation and readmission agreements  were technically 
concluded in November 2009 and si gnature is expected in 2010.  
Georgia has not yet developed a database for the management of migration  nor approved 
policies or passed legislation regulating labour migration. On asylum , Georgia has acquired 
buildings and is reconstructing a temporary reception centre for as ylum seekers, with financial 
support, notably from the EU. The issuan ce of refugee travel documents begun and 
naturalization of refugees was made easier, with  the period of required uninterrupted stay in 
Georgia reduced from 10 to 5 years.   
With regard to the fight against organised crime , Georgia began preparatory measures 
leading to signature and ratifi cation of the Third Protocol to  the United Nations Convention 
on Transnational Organised Crime on the Illi cit Manufacturing of and Trafficking in 
Firearms, Their Parts and Components and A mmunition. In order to support implementation 
of the European Convention on  Cybercrime signed by Georgia in 2008, the Ministries of 
Internal Affairs and Justice launched a one year  project in June 2009 with the support of the 
EU and the Council of Europe. 
On the  fight against  trafficking in human beings, the Ministry of Internal Affairs continued 
implementation of the National Anti-Trafficking Action Plan including training for police officers and enhanced cooperati on with civil society on rehabi litation and reintegration of 
victims and measures to combat child traffi cking. Awareness-raising was given particular 
attention by the launch of a specific police webs ite. Moreover, Georgia continued cooperation 
with law enforcement agencies in Turkey  and Kazakhstan, resulting in successful 
investigations and prosecutions. 
With regard to the fight against drugs , Georgia pursued its part icipation in the SCAD V 
regional programme, but failed to designate a national focal point for the programme.  
With regard to money laundering , Georgia actively pursued cooperation in the context of the 
Egmont and Eurasian FATF groups and Moneyva l. The staff of the Financial Monitoring 
Service (FMS), the Chief Prosecutor’s Office (CPO) and the Ministry of Internal Affairs 
participated in international training semina rs covering both money laundering and measures 
to combat the financing of terrorism. More over, inter-agency cooperation was enhanced 
through the signature of a Memo randum of Understanding between the FMS, the CPO and the 
Ministry of Justice. To enhance exchange of  information, additional Memoranda were signed 
with the Financial Intelligence Units of Cyprus and Latvia. However, restrictions on the freedom of association of non-pr ofit and civil society organisations must be avoided while 
implementing national policies and international commitment s. The Council of Europe 
Convention on Laundering, Search, Seizure and C onfiscation of the Proceeds from Crime and 
on the Financing of Terrorism remains to be signed and ratified. 
With regard to international and regional  judicial cooperation, Georgia submitted draft 
agreements on legal mutual assistance in civi l matters to third countries in May 2009, but 
there was no progress since. 
No developments took place on the exchange of best practice information on judicial 
cooperation with EU Member States or with re gard to the establishm ent of a network of 
 
EN 17   EN judicial and law enforcement agencies. A draft law on Personal Data Protection  awaits 
adoption pending a review of its provisions by international expe rts. A solid system for the 
protection of personal data in te rms of legislation and administra tive capacity is essential to 
advance cooperation with the EU Member Stat es as well as with Europol and EUROJUST. 
The 2005 Council of Europe Conve ntion on the Launderi ng, Search, Seizur e and Confiscation 
of the Proceeds of Crime and the Financing of Terrorism remains unsigned. An independent data exchange agency was established under th e authority of the Ministry of Justice in 
January 2010, as part of preparations for the signature and ratification of the Additional Protocol to the 1981 Council of Europe Conven tion for the Protection of Individuals with 
regard to the Automatic Pr ocessing of Personal Data.  
6. 
TRANSPORT , ENERGY , ENVIRONMENT , THE INFORMATION SOCIETY , RESEARCH AND 
DEVELOPMENT  
Although the recently established Unified Transport  Administration took in the various 
transport modes and took significant steps to ensure safety oversight, there is still a need to strengthen administrative capacity. 
In the road sector, Georgia continued to fo cus on improving road safety, among others by 
aligning its road worthiness rules with internati onal standards. With a view to strengthening 
multi-modal transport connections, Georgia paid pa rticular attention to the development of a 
multimodal (road-railway-ferry) line taking less time than the Batumi-Poti-Ilichovsk ferry communication. 
With regard to aviation safety, Georgia made s ubstantial progress in 2009  since the release of 
the International Civil Aviati on Organisation (ICAO) safety audit report. A follow-up visit 
performed by ICAO in April 2009 showed that i ssues of immediate seri ous safety concerns 
had been effectively addressed by the authori ties. The Civil aviation authorities deserve 
stronger political and administrativ e support to increase st aff in some specific areas and to be 
in a position to recruit hi ghly qualified personnel. Negotia tions on a Common Aviation Area 
Agreement between the EU and Georgia starte d in October 2009 and significant progress was 
made in a second round of these negotiations in December. Through the agreement, Georgia 
will gradually take over EU standards in the field of aviation. A working arrangement with the European Aviation Safety Agency (EASA) , signed in 2009, provides for a mechanism to 
strengthen cooperation. Furthe r efforts are needed to stre ngthen the Georgian aviation 
authorities after the frequent restructurings in recent years, including with regard to safety 
oversight. Georgia is yet to ratify the Montreal  Convention for the unification of certain rules 
for international carriage by air.  
In the maritime sector, Georgia started to stre ngthen flag state implementation and align with 
international standards by adopting a number of  technical rules among ot hers on “Recognition 
of the Classification Society”, “Minimal acce ptable personnel of the crew necessary to 
provide safety on the ship flyi ng the flag of Georgia” and “Offi cial Investigation of Maritime 
Incidents”. However, maritime safety remains an  issue of great concern. The Georgian flag 
still figures in the ‘High Risk’ category of the black lists both of the Paris and Tokyo 
Memoranda of Understanding on port state control.  
Georgia re-confirmed its wish to play a role in enhancing the EU’s energy  security as a transit 
country for the Caspian energy resources. Both the EU and Georgia have an interest to 
develop a regulatory framework, in line with the EU energy acquis , to ensure a transparent 
 
EN 18   EN hydrocarbons transport to the EU. Hydrocarbo ns transit through the Baku-Tbilisi-Ceyhan 
(Turkey) oil pipeline and the Baku-Tbilisi-E rzurum (Turkey) gas pipeline remain of key 
importance. Georgia continued to support the development of the Southern gas corridor 
including Nabucco and the trans-Caspian transpor tation project. In May 2009 it participated in 
the Prague Summit on the Southern Corridor.  
Georgia supported the ongoing EU  study for a Caspian Development Corporation, the central 
purpose of which is to aggregate gas demand in  support of the said Corridor’s development. 
In October 2009, Georgia and Ro mania agreed to cooperate, inter alia , on the development of 
liquefied natural gas (LNG) facilities in view of the transport of Caspian resources to the EU. 
In July 2009, energy companies from Georgia, Azerbaijan, Lithuania, Poland and Ukraine completed a study on the Euro-Asian Oil Transp ortation Corridor Proj ect (EAOTC). After the 
rehabilitation of the Baku-Supsa oil pipeline (in 2008), Georgia started reflections on building 
a refinery in Supsa.  
The country further implemented its energy policy, inter alia,  by investing in the 
rehabilitation of hydro power plants, preparin g the construction of new hydro plants and the 
strengthening of electr icity networks. Rehabilitation incl uded the large E nguri hydro power 
plant. Georgia continued to work towards the preparation of an Azerbaijan-Georgia-Turkey 
electricity interconnection. It rehabilitated intern al gas pipelines and connected, in the context 
of the ‘Gas to every village’ programme, new customers to the grid. Georgia completed a pre-
feasibility study regarding the use of underground gas storage facilities. Georgia adopted 
legislation aiming at further, progressive, convergence with EU’s internal energy market 
rules. Georgia pursued the preparation of a new electricity tari ff methodology. The country 
continued to install el ectricity and gas meters in households, which contributed to improving 
bill collection rates.  
On the basis of the 2008 state programme fo r renewable energy, Georgia developed small 
hydro power plants. There was no progress achiev ed with regard to the draft law on energy 
efficiency and renewable energy. A draft build ing code remained at preparatory level. 
Enhanced efforts are needed to advance, in li ne with the Action Plan, on energy efficiency 
and the use of renewable energy sources.  
In the field of climate change, Georgia submitted its Second National communication to the 
UN Framework Convention on Climate Change w ith information on national circumstances 
and steps planned to implement the Convention. A Climate Week took place in October 2009, providing several large public fora gathering relevant stakeholders.  
Georgia identified its strategic priorities with regard to cl imate change policy for 2010-2012. 
It plans to prepare an overall climate change  strategy, taking into account the findings of the 
second national communication. Steps were also taken to prepare adapta tion action in climate 
change sensitive regions. 
Georgia took steps to prepare and approve further Clean Development Mechanism (CDM) 
projects. One new such project was registered at UN level, br inging the overall number of 
registered projects to two.  Georgia associated itself with the Copenhagen Accord and 
provided information on actions that it will im plement. The European Commission continued 
to support Georgia to implement the Kyoto Protocol. 
With regard to the environment,  Georgia  started to pay more attention to development of 
environment policy and legislation than it did a few years ago. The Ministry of Environment 
 
EN 19   EN and Natural Resources Protection continued preparing the second Na tional Environmental 
Action Plan and drafted a stra tegy setting out the Ministry’s basic pr iorities for 2009-2013. 
The legislative framework continues to require fu rther development, in particular as regards 
implementing legislation. A new environmen t protection code is under preparation, 
comprising a set of new framework laws on key environmental sectors. A draft convergence 
plan on water was elaborated. 
An integrated coastal zone management strate gy was prepared but not yet adopted. A strategy 
on the management of protected areas was prep ared. Efforts are still on-going to develop a 
policy document on forestry. Some steps were  taken to address in ventory, collection, 
packaging and disposal of  obsolete pesticides. Continued atte ntion is required to implement 
existing strategies and plans and to furt her enhance monitoring and enforcement. 
Further strengthening of administ rative capacity at all levels of  the country remained a major 
challenge. Coordination between authorities continues to require  attention, even  if certain 
measures were taken to promote cooperation be tween the Ministry of  Environment and the 
Ministry of Health on licensi ng of medical installa tions emitting radiation. Some steps were 
taken to promote the integration of environmen tal considerations into other policy sectors 
such as regional development . 
A state-of-the-environment repor t covering the year 2006 was prepared but not formally 
adopted nor published. However, certain steps were taken to strengt hen reporting guidelines 
with a view to preparing a report covering the years 2006 - 2009. Georgia also continued to 
carry out some other activities to provide information to the public. ( For the Regional 
Environmental Centre for the Caucasus, pl ease see section on regional cooperation.) 
There were no developments on environmental imp act assessment. Public projects can still be 
exempted from such assessments. Neverthele ss, some steps were taken to promote the 
implementation of strategic environmental asse ssments. Procedures and consultation with the 
public in the context of environmental a ssessments require particular attention. 
Some preparatory steps were taken towards becoming party to the UNECE Convention on the 
Transboundary Effects of Industrial Accident  and ratifying the UNECE Convention on the 
Protection and Use of Transboundary Watercourse s and International Lakes. There were no 
significant developments with regard to the accession or ratification of remaining UNECE 
Conventions and Protocols1. Furthermore, the implementati on of several already ratified 
agreements requires particular attention. Georgi a participated in the Danube - Black Sea Task 
Force (DABLAS), in the EU  Water Initiative, including a na tional policy dialogue, and the 
International Commission on the Protection of the Black Sea ag ainst Pollution.  
Cooperation and information exchange took place between the Commission and Georgia, 
including on water, forestry, waste management, environmental data, nature protection and air 
quality.   
In the field of civil protection , the Government adopted its annual risk assessment and 
launched the state programme for establishment of regional emergency management services 
and search and rescue teams under the Ministry  of Regional Management. Training of staff 
                                                 
1 The UNECE Convention on Environmental Impact Assessment in a Transboundary Context and its Protocol on Strategic Impact 
Assessment (the latter signed but not ye t ratified), and the Protocols to the UNE CE Convention on Long-Range Transboundary 
Air Pollution.  
 
EN 20   EN and supply of equipment started. Thematic emergency response plans on natural and man-
made emergencies are in the process of develo pment. Georgia participated in the December 
2009 launch event of the Eastern Partnershi p flagship initiativ e on prevention on, 
preparedness of and response to man-made-made and natural hazards. 
As regards Information Society , the Georgian National Communications Commission 
(GNCC) regulated tariff bands or caps acco rding to market conditions. However, the 
Government still exerted prevailing influe nce over the fixed line incumbent operator 
responsible for international te lephony. Another operato r dealt with local and inter-city phone 
services and continued to dominate the fixe d voice market. For Internet service, the 
alternative operator had approximately 80%  of the market. In May 2009 GNCC extended a 
mobile operator’s 1800 MHz GSM licence by 10 years. 
The Russian Federation and the de facto  authorities of Abkhazia signed in September 2009 a 
memorandum on cooperation in the field of co mmunications. According to information, the 
Russian Federation assigned to the de facto  authorities the right to use Russian calling codes 
for both fixed (wire-line) and ce llular (wireless) operators. Th is contradicts the standards 
developed by the Internati onal Telecommunication Union. 
Georgian audiovisual  legislation still needs to converge with European standards on media 
regulation and decisive actions in  this field should be taken. Ge orgia still has to ratify the 
Council of Europe Convention on Transfrontier Television.  
In the area of research , Georgia increased its level of pa rticipation in the 7th Framework 
Programme (FP7), with 23 research groups bei ng successful in their applications, as of 
November 2009, receiving some EU R 1.6 million of EU funding.  
The Georgian National Science Foundation succe ssfully organised an Information Day event 
in Tbilisi in June 2009, within the framework of the S&T Internati onal Cooperation Network 
for Eastern European and Central Asian countri es (FP7 IncoNet EECA project). This event 
raised awareness of the scientific communities in Georgia and more broadly the Caucasus region on the scientific partne rship opportunities and research cooperation within FP7 in the 
'Environment' theme and the 'People' specific programme.  
7. 
PEOPLE -TO PEOPLE CONTACTS , EDUCATION AND HEALTH  
Reform of higher education  continued, as in 2008, with  a focus on alignment and 
approximation to European standa rds in line with the principles  of the Bologna Process. In 
this respect, a two year tw inning project on capacity building for implementing Bologna 
actions started in June 2009. Moreover, the Law on Higher Education was amended in August 2009 introducing a differentiation between higher education inst itutions in te rms of their 
research and teaching functions. Two Councils of  Rectors, one for state and one for private 
universities, were established (in June and October 2009) thereby strengthening universities’ 
autonomy and capacity to dialogue with the st ate. While all higher education actors and 
universities are familiar with Bologna Process requirements, systemic reform will require 
structured national coordination and additional c onsensus-building support actions in order to 
secure implementation. 
In the area of vocational education and training , the national Medium Term Strategy on 
vocational education and trai ning 2009-2011 was approved in December after extensive 
 
EN 21   EN discussions with stakeholders. The Nati onal Vocational and Education Council was 
established in December opening the prospect of  improved coordination between stakeholders 
and strengthened links with social  partners. It is particularly important that the training system 
produce skills that respond more closely to employer requirements ( see chapter 3 on 
employment and social policy ). Further efforts were develo ped under the leadership of the 
Ministry of Education and Science in the areas of teacher training, professional standards and 
the preparation of a quality assurance policy. 
Georgia continued to benefit from its active participation in the Tempus, Erasmus Mundus 
and Youth in Action programmes.  A Tempus Information Day was held in December, but 
information on Erasmus Mundus grants should be spread to a larger number of potential 
applicants. Work began on the establishment of a national Youth Information Centre in Tbilisi 
which should open branches in different re gions of Georgia in 2010. One university 
participated in the Jean Monnet programme. Geor gian universities are en couraged to continue 
submitting high-level applications for Jean Monnet projects. Nine Georgian students and two scholars were awarded scholarships for Erasmu s Mundus Masters Courses for the academic 
year 2009-10 under Erasmus Mundus Action 1 while academic and student mobility was further facilitated under Erasmus Mundus Action 2 through the award of 58 mobility 
grants.Four projects were sel ected under the second Call for Proposals of Tempus IV and a 
Tempus Information Day was held in Decembe r. Work began on the establishment of a 
national Youth Information Centre in Tbilisi whic h should open branches in different regions 
of Georgia in 2010. One university participated  in the Jean Monnet programme. Georgian 
universities are encouraged to continue subm itting high-level applicat ions for Jean Monnet 
projects.  
In the field of culture , the Georgian National Museum a nd Georgian cultural associations 
took part in several EU-funded cooperation proj ects with EU and ENP partners. To advance 
its regional cooperation in the framework of the Eastern Partne rship and the Ky iv Initiative, 
Georgia is encouraged to sign and ratify th e 2000 European Landscape Convention and the 
2005 Council of Europe Framework Conventi on on the Value of Cultural Heritage for 
Society. Georgian cultural or ganisations participated in th e Call for Proposals of the 2009 
ENP Special Action under the Culture Programme. 
Georgia continued health sector reform, which aims, inter alia,  at increasing efficiency and 
ensuring adequate health services to the most vulnerable groups. The reform included further 
work towards privatisation of primary and sec ondary health care facili ties. In 2009 Georgia 
launched state programmes on free emergency h ealth care and on medical insurance. The 
insurance programme should contribute to reduc ing the considerable out of pocket payments. 
In November 2009, stakeholders presented a me dical reform concept. In November 2009, 
Georgia conducted a first ever  survey on health systems pe rformance assessment. In May 
2009, Georgia established an experts group whic h started working on a national monitoring 
and evaluation framework for HIV/AIDS. In  September 2009, the law on HIV/AIDS was 
adopted. Georgia took measures to comb at influenza A (H1N1) including by the 
establishment of guidelines and a vaccination strategy. In October 2009, Georgia participated 
in the newly established EU enlarged health information committee. 
8. 
FINANCIAL COOPERATION – 2009  KEY FACTS AND FIGURES  
The European Neighbourhood and Partnership Instrument (ENP I) envelope for Georgia under 
the National Indicative Programme 2007-2010 is EUR 120.4 million. The programme is 
 
EN 22   EN geared towards supporting the achievement of ke y policy objectives as outlined in the EU-
Georgia Action Plan and pursues four prioritie s: (1) Support for Democratic Development, 
Rule of Law and Governance; (2) Suppor t for Economic Development and ENP AP 
implementation; (3) Poverty reduction and so cial reforms and (4) Support for peaceful 
settlement of Georgia's internal conflicts. 
The implementation of the measures covered by the 2007 and 2008 Annual Action 
Programmes (AAP) is underway. Under the 2007 AAP a Public Finan ce Management (PFM) 
Sector Budget Support programme was financed a nd the last tranche was released before the 
end of 2009. Under AAP 2008, a Sector Budget S upport on Justice started and its second 
tranche was released in December 2009, follo wing the major reforms carried out by the 
Government in many justice-related areas, such as: probation, juvenile justice, protection of 
human rights.  
In 2009, the European Commission programmed assistance for a total amount of EUR 27.4 
million under the ENPI 2009 Annual Action Progra mme. It focuses on Sector Budget Support 
in Vocational Education and Training (EUR  19 million) and on TA/Twinning component 
(EUR 8.4 million).  
An indicative financial envelope of EUR 180. 3 million will be available to support co-
operation activities in Georgi a in the period 20 11-2013, based on a European Commission 
decision of March 2010. 
In addition to the AAP, a Special Measure in  support of IDPs was approved in November 
2009 by a Commission Decision, th erefore another EUR 43.5 million will be used for socio-
economic integration of IDPs within the Geor gian society and their hosting communities, 
representing the 3rd Special Measure adopted in favour of  Georgia in the aftermath of the 
August 2008 conflict with Russia. Previously funding was granted to Georgia in the form of 
two Special Measures in suppor t of Internally Displaced Pe rsons (IDPs). In 2009, EUR 61.5 
million was committed and nearly EUR 50 million already disbursed, principally aimed at ensuring decent living conditions and livelihood to all Georgian IDPs. In addition to the ENPI 
Special Measure, the Instrument for Stability (IfS) has also been  mobilised in 2009 and a total 
amount of EUR 14 million have be en allocated to (i) support confidence building measures 
between the conflict pa rties, (ii) support th e socio-economic integration of IDPs, (iii) 
contribute to further democratic reforms and (i v) support to civil society capacity building in 
the Gali district. 
Also in the context of the additional post co nflict assistance to Georgia, the European 
Commission provided a grant of EUR 46 million of  macro-financial assistance, out of which 
50% was already disbursed in 2009. This meas ure aims at supporting Georgia’s domestic 
efforts towards a sustainable economic recover y, and in this way, alleviating the financial 
constraints on the implementation of the Government's economic programme. 
In addition to the bilateral allocations, Geor gia also benefited from cooperation activities 
financed under the ENPI multi-country and re gional programmes, as well as horizontal 
thematic programmes, such as  the European Instrument fo r Democracy and Human Rights 
(EIDHR) and the DCI programmes: Non-State Ac tors and Local Authorities in Development 
(NSA/LA) and the Food Security. Georgia also  participates in the ENPI Cross Border 
Cooperation (CBC) programme "Black Sea" (ar.  EUR 18 million for the whole programme in 
the period 2007-13). The prioriti es of this CBC programme are to provide cross border 
support to partnership for economic development and networking resources and to strengthen 
 
EN 23   EN competencies for environmental protection and c onservation as well as for establishment of a 
common cultural environment in the region.  In 2009, eight proposals from Georgia were 
submitted, but the financial decisions have not yet been taken.  
Under the Neighbourhood Investment Facility (NIF ) contributions, one project in Georgia was 
approved in 20091, committing EUR 8.5 million in grants and technical assistance, expected 
to leverage EUR 250 million in lo ans of European Finance Institutions in the transport sector. 
The twinning instrument that was introduced in  Georgia in 2007 slowly gained momentum in 
2009. However, the Georgian authorities seemed to show a certain relu ctance to use twinning 
and the pace of identification and preparation of new twinning projects remained very slow.  
The Government’s efforts in donor coordination remained wea k. Donor coordination rather 
focused on financial tracking and sector coor dination took place only in very few areas. 
Furthermore, the Government played no signifi cant role in the programming, monitoring and 
evaluation of external assistance proj ects. Unlike other donors’ funding, European 
Commission funding was coordinated by the Mi nistry for European and Euro-Atlantic 
Integration. However, this Ministry suffere d from significant staffing shortfalls, which 
weakened its supervisory and coordination role. 
The EU Delegation to Georgi a supported the coordination of  assistance activities. The 
Delegation started collecting information on EU donor activities, setti ng up specific sectoral 
working groups to promote be tter donor coordination at sect or level and encouraging the 
Government to take a stronger role in donor coordi nation and to adhere to the principles of the 
Paris Declaration on Aid Effectivene ss and the EU Code of Conduct.