Commission staff working document accompanying the Communication from the Commission to the European Parliament and the Council - Implementation of the European Neighbourhood Policy in 2008 - Progress Report Georgia {COM(2009) 188 final} {SEC(2009) 511} {SEC(2009) 512} {SEC(2009) 514} {SEC(2009) 515} {SEC(2009) 516} {SEC(2009) 517} {SEC(2009) 518} {SEC(2009) 519} {SEC(2009) 520} {SEC(2009) 521} {SEC(2009) 522} {SEC(2009) 523}
Date: 2009-04-23
Institutions: European Commission
Subjects: European neighbourhood policy, Georgia, impact study, the EU's international role

EN 

EN 

   EN 

 
 
COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels 23.4.2009 
SEC(2009) 513 

COMMISSION STAFF WORKING DOCUMENT 

Accompanying the 

COMMUNICATION FROM THE COMMISSION  
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Implementation of the European Neighbourhood Policy in 2008 

Progress Report Georgia 

{COM(2009) 188 final} 
{SEC(2009) 511} 
{SEC(2009) 512} 
{SEC(2009) 514} 
{SEC(2009) 515} 
{SEC(2009) 516} 
{SEC(2009) 517} 
{SEC(2009) 518} 
{SEC(2009) 519} 
{SEC(2009) 520} 
{SEC(2009) 521} 
{SEC(2009) 522} 
{SEC(2009) 523} 

EN 

   EN 

 
 
 
  
 
 
 
 
1. 

BACKGROUND AND OVERALL ASSESSMENT 

Georgia  and  the  EU  first  established  contractual  relations  in  1996  under  a  Partnership  and 
Cooperation Agreement which entered into force in 1999. On this basis, the EU-Georgia ENP 
Action  Plan  was  adopted  in  November  2006  for  a  period  of  five  years.  Since  then,  its 
implementation has been guided and monitored on the basis of annual implementation tools, 
which  set  out  comprehensive  yearly  sets  of  priorities  and  timelines,  based  on  the  priorities 
agreed jointly by the EU and Georgia. A first progress report was adopted in April 2008.  

In addition, institutional co-operation through the EU-Georgia Cooperation Council, the EU-
Georgia  Cooperation  Committee, 
the  Parliamentary  Cooperation  Committee  and 
subcommittees on trade, economic and related legal issues and on justice, liberty and security 
issues,  has  enabled  both  sides  to  move  forward  and  follow  the  implementation  of  the  ENP 
Action Plan closely.  

This document reports on the overall progress made on the implementation of the EU-Georgia 
ENP Action Plan between 1 January and 31 December 2008, although developments outside 
this  period  are  also  considered  when  deemed  relevant.  It  is  not  a  general  review  of  the 
political and economic situation in Georgia.  

The  year  2008  was  marked  by  a  number  of  extraordinary  events  and  a  slow-down  in  the 
implementation of the ENP Action Plan. Early presidential and legislative elections, held in a 
very  polarised  political  environment,  resulted  in  a  long  parliamentary  recess  and  several 
Cabinet  reshuffles.  In  the  course  of  2008,  Russia  took  a  number  of  steps  to  strengthen  its 
relations  with  the  separatist  authorities  in  South  Ossetia  and  Abkhazia,  including  the  un-
coordinated  lifting  of  CIS  economic  sanctions.  A  sequence  of  military  incidents  and 
provocations  culminated  in  August  2008  in  the  outbreak  of  an  armed  conflict  with  Russia 
over  the  control  of  South  Ossetia’s  territory.  The  hostilities  resulted  in  several  hundred 
fatalities and the displacement of around 192 000 persons, of which an estimated 30 000 will 
not be able to return to their homes in the foreseeable future, serious environmental damage 
and  left  7000  Russian  troops  stationed  on  Georgian  territory.  A  ceasefire  agreement  and  a 
more detailed implementation agreement were concluded with EU support.  

With  EU  and  international  support,  the  Georgian  government  reacted  promptly  and 
effectively  to  this  emergency,  in  particular  by  providing  accommodation  to  new  Internally 
Displaced  Persons  (IDPs)  before  the  winter  season.  The  ensuing  recognition  of  the  self-
declared independence of Abkhazia and South Ossetia by Russia and the build-up of Russian 
military  presence  in  the  two  separatist  regions  against  the  will  of  the  Georgian  government 
violated Georgia’s sovereignty and complicated a peaceful and sustainable settlement of these 
conflicts. A ceasefire agreement was concluded with EU help, and the extraordinary European 
Council  of  1  September  2008  expressed  firm  support  for  Georgia’s  territorial  integrity  and 
decided to provide substantial political, financial and practical support to Georgia, in order to 
stabilize  the  security  and  humanitarian  situation. This  included  the  dispatching  of  an  EU 
civilian monitoring mission (EUMM), the organisation of an international donors’ conference, 
the  appointment  of  an  EU  special  representative  for  the  crisis  in  Georgia,  the  launch  of  the 
Geneva international discussions, the establishment of an international mission of inquiry into 
the causes of the conflict and the overall strengthening of EU-Georgia bilateral relations. 

Despite  this  difficult  context,  Georgia  managed  to  advance  the  implementation  of  the  ENP 
Action Plan. Major achievements in the reporting period were the pursuit of the fight against 

EN 

2 

   EN 

 
corruption,  reforms  in  the  rule  of  law  area,  especially  in  facilitating  access  to  justice, 
improving  detention  conditions  in  the  penitentiary  system  and  efforts  to  combat  torture  and 
inhumane  and  degrading  treatment.  Increased  political  cooperation  with  the  EU  was 
underpinned by Georgia’s alignment with 117 of the 154 CFSP declarations to which Georgia 
was invited to join. Steps were undertaken to improve the business and investment climate. A 
national reform strategy for the agricultural sector, covering the period 2009-12, was adopted. 
Georgia  continued  its  cooperation  with  the  EU  on  trade-related  issues  and  achieved  some 
progress in this area. Good cooperation was established with Georgia on justice, liberty and 
security  (JLS)  matters,  through  the  establishment  of  a  new  JLS  subcommittee,  and  in  visa 
dialogue,  with  a  view  to  launching  EU-Georgia  negotiations  on  visa  facilitation  and 
readmission  agreements.  Progress  was  also  made  in  the  fields  of  education  and  vocational 
training. 

Georgia made less progress in the implementation of some other key objectives of the ENP 
Action Plan. Media freedom and pluralism remain areas of concern. Injecting new momentum 
into  political  reforms,  economic  recovery,  the  effective  implementation  of  a  comprehensive 
national IDP strategy and more consistent alignment with the EU regulatory system as well as 
advancing  sectoral  reforms,  will  continue  to  be  key  challenges  in  2009.  The  negative 
influence of the August 2008 war on the Georgian economy in combination with the global 
economic  crisis  has  heightened  the  urgency  of  addressing  long-standing  socio-economic 
challenges. 

2. 

POLITICAL DIALOGUE AND REFORM 

Objectives  in  this  area  include:  Strengthening  democratic  institutions  and  respect  for  human  rights 
and  fundamental  freedoms  in  compliance  with  Georgia’s  international  commitments;  strengthening 
the rule of law especially through reform of the judicial system, including the penitentiary system, and 
through rebuilding state institutions; continuing the fight against corruption. 

Democracy and Rule of Law  

Presidential  elections  took  place  in  January  2008  in  a  very  polarised  political  environment, 
following  the  civic  unrest  of  November  2007  and the  subsequent  declaration  of  the  state  of 
emergency. President Saakashvili was reconfirmed for a second term with a narrow margin of 
53.47%.  Although  international  observers  found  that  these  elections  were  “in  essence 
consistent with most international standards for democratic elections”, they noted a number of 
serious shortcomings, including the misuse of state administrative resources for campaigning, 
unbalanced media exposure of candidates, reported acts of voters' intimidation, lack of clarity 
in election-day procedures, and irregularities in counting and tabulation, as described in last 
year’s report. The political opposition rejected the result, judging the electoral process to be 
rigged and containing irregularities and fraud. 

Some of the reported faults were partially addressed before the legislative and administrative 
elections in May 2008, including through EU-financed electoral assistance. The threshold for 
parties  to  enter  Parliament  was  reduced  from  7%  to  5%,  the  electoral  list  was  significantly 
revised, opposition parties achieved a better level of representation in electoral commissions 
and  procedures  for  filing  electoral  complaints  were  clarified  and  simplified.  Negotiations 
between  the  parliamentary  majority  and  the  coalition  of  opposition  parties  on  additional 
amendments  to  the  electoral  code  failed,  contributing  to  an  increasingly  confrontational 
political environment. In spite of the improvements introduced in the electoral system, further 
shortcomings were observed by international monitors in the May 2008 legislative elections, 

EN 

3 

   EN 

 
including intimidation of opposition candidates and state employees, lack of transparency and 
consistency in the tabulation process, and unclear distinctions between State and party with an 
apparent bias in favour of the ruling United National Movement Party. Further problems were 
noted in the treatment and investigation of complaints and reports of irregularities.  

The May 2008 elections gave an overwhelming constitutional majority to the ruling National 
Movement Party. Most of the elected opposition members decided to boycott parliamentary 
participation in protest against the reported electoral irregularities and the new electoral rules 
which  they  claim  gave  an  unfair  advantage  for  the  incumbent  majority.  Following  the 
lowering  of  the  minimal  number  of  seats  required  for  constituting  a  political  group,  the 
opposition Christian Democratic Party eventually entered Parliament. The parliamentary and 
extra-parliamentary  opposition  remains  very  critical  of  several  substantial  aspects  of  the 
present electoral code and asks a new process of revision.  

The  Georgian  President  recognised  in  September  2008  that  the  “rose  revolution”  had  only 
partially  delivered  on  democratic  reforms  and  announced  a  ‘new  wave  of  democratic 
reforms’, including the strengthening of Parliament’s control over the executive, enforcing the 
inviolability  of  private  property, 
the 
independence of the judiciary, and resuming the financing of opposition parties which decided 
to boycott parliamentary work.  

improving  freedom  of 

the  media, 

increasing 

Some of these reforms were initiated and partially enacted by the end of 2008. The role of the 
Parliamentary opposition was strengthened through increased representation in parliamentary 
committees  (including  the  chair  of  the  parliamentary  commission  on  the  August  war), 
inclusion  in  the  constitutional  reform  process,  in  the  High  Council  of  Justice,  and  in  the 
parliamentary  supervision  over  defence  and  security  matters.  Public  funding  of  all  eligible 
political  parties  was  reinstated.  A  new  law  establishing  a  Chamber  of  Control  (Court  of 
Auditors)  on  the  basis  of  EU  and  international  standards  was  adopted  in  December  2008, 
although the implementation of certain important elements is staggered over a longer period. 

In  December  2008  the  President  initiated  amendments  to  the  Constitution  aimed  at  limiting 
President’s  powers  to  dissolve  Parliament  and  simplifying  the  process  by  which  Parliament 
can express a lack of confidence in the government. While the aims of these amendments are 
welcome,  the  proposed  amendments  alone  do  not  ensure  a  more  balanced  share  between 
parliamentary and presidential powers.  

The  controversial  political  developments  of  2008  highlighted  the  need  to  rapidly  advance 
democratic reforms and the consolidation of democratic institutions. A specific commitment 
by the Government to inject new momentum in democratic reforms was included in a package 
of political conditionality linked to increased EU post-conflict assistance which was discussed 
by the European Commission and Georgia in 2008, and eventually agreed in January 2009.  

A series of new measures aimed at advancing the reform of the criminal justice system was 
proposed  in  September  2008.  Independence  of  the  judiciary  should  be  improved  by  the 
proposed lifetime appointment of lower court judges by the Higher Council of Justice - once 
the  relevant  constitutional  amendments  are  adopted  by  the  Parliament  -  and  through  the 
introduction  of  jury  trials.  A  competition  for  judicial  vacancies  in  district  and  appeal  courts 
was  announced  in  September  2008.  Vacancies  in  district  and  appeals  courts  are  being 
gradually  filled  and  expected  to  be  completed  by  2010.  The  Council  of  Europe  provided 
assistance  in  the  elaboration  of  disciplinary  proceedings  against  judges.  Reform  of  judicial 
districts  is  on-going  and  a  specific  department  for  enforcement  of  court  decisions  was 

EN 

4 

   EN 

 
established  in  October  2008.  Training  of  judges,  including  on  judicial  ethics,  has  improved 
through the establishment of the High School of Justice. A systematic ex officio investigation 
and  prosecution  of  politically  motivated  alleged  crimes  still  remains  an  objective.  The  new 
Criminal  Procedure  Code,  identified  as  a  priority  in  the  2007  Implementation  Strategy,  has 
still not been adopted.  

In  December  2008,  the  President  established  a  Criminal  Justice  Reform  Inter-Agency 
Coordinating Council to revise the reform strategy for the Criminal Justice System developed 
with the assistance of EUJUST Themis and adopted in 2005.  

Regarding access to justice, the new free legal aid service established in 2007 continues to 
provide  legal  aid  to  citizens  throughout  the  country,  including  to  vulnerable  groups,  with 
regard  to  criminal  cases  and  legal  counsel  on  civil  and  administrative  issues.  However,  the 
outsourcing  of  legal  aid  services  by  public  tender  may  risk  creating  imbalances  in  terms  of 
uniform service delivery. 

A  coherent  approach  and  a  strategy  on  civil  service  reform  still  remain  to  be  developed. 
There  is  an  urgent  need  to  address  capacity  building  in  the  public  administration.  The 
adoption  of  the  new  civil  service  code,  prepared  in  2007,  remains  stalled  (see  last  year’s 
report).  

Georgia ratified the Council of Europe’s Criminal Law Convention on Corruption in January 
2008, which entered into force in May 2008; and acceded to the United Nations Convention 
on  Corruption  in  November  2008.  In  March  2008,  the  Government  amended  the  Law  on 
Corruption  and  Conflict  of  Interest  in  Public  Sector,  which  includes  a  code  of  conduct  for 
public servants and prosecutors. This was complemented by a training session by the Council 
of Europe. The Anti-Corruption Interagency Coordinating Council was established under the 
responsibility  of  the  Ministry  of  Justice.  The  customs  code  was  simplified  and  clarified  to 
tackle  corruption  in  the  areas  of  valuation,  post-clearance  audit  and  warehouse  approvals. 
However,  there  is  still  a  need  to  simplify  public  procurement  procedures  as  foreseen  in  the 
National Anti-Corruption Strategy Action Plan. The practice of sole source procurement over 
open  tendering  appears  to  contradict  the  Government’s  commitment  to  address  corruption 
within the public sector. Interaction and regular dialogue with civil society organizations and 
with the wider public in monitoring the National Anti-Corruption Strategy remains a priority.  

On local governance, a new Ministry for Regional Development Issues, which is assigned to 
ensure better coordination of governmental activities with regard to implementation of local 
and regional governance reforms, was established in January 2008,.  

Human rights and Fundamental freedoms 

There  is  still  scope  for  strengthening  of  the  Office  of  the  Public  Defender  (Ombudsman). 
The  budgetary  allocations  from  the  Government  remain  insufficient  and  the  office  relies 
mainly  on  international  donors.  Relations  between  the  Public  Defender  and  the  executive 
seriously  soured  as  a  result  of  the  former’s  criticism  of  the  Government  and  President 
Saakashvili.  

Limited progress was reported in the implementation of the legal framework for criminalising 
torture and ill treatment in Georgia. A National Preventive Mechanism (NPM) provided for 
by the Optional Protocol to the UN Convention against Torture (OPCAT), ratified by Georgia 
in  2006,  has  not  yet  been  established.  In  December  2008,  it  was  announced  that  the  Public 

EN 

5 

   EN 

 
Defender would be designated as NPM and amendments to the Law on Public Defender are 
under  preparation.  The  Georgian  Interagency  Coordination  Council  for  Actions  against 
Torture,  Inhuman  and  Degrading  Treatment  presented  a  new  Action  Plan  for  2008-2009, 
which was welcomed by civil society as a good first step and was approved by the President 
in  June  2008.  The  action  plan  takes  into  account  a  number  of  recommendations  from  the 
European  Committee  for  the  Prevention  of  Torture  (CPT)  and  addresses  concerns  on 
excessive  use  of  force.  Inhuman  and  degrading  conditions  in  prisons,  expressed  in  a  2007 
CPT report, remain a concern. The European Commission is supporting progress in this area 
as a priority action under the European Instrument for Democracy and Human Rights.  

Regarding  detention  conditions,  several  prisons  were  demolished,  reconstructed  or 
refurbished in the course of 2008, contributing to the improvement of conditions for inmates. 
However, Georgian prisons still remain overcrowded and limited progress was reported in the 
development of systematic actions to address this problem. The limited use of parole or other 
alternatives  to  imprisonment  is  in  contradiction  with  Council  of  Europe  standards.  Plans  to 
form  a  new  Ministry  of  Penitentiary  and  Probation  were  announced  in  late  2008,  following 
the merger of the General Prosecutor’s Office (GPO) with the Justice Ministry.  

Media freedom and pluralism in Georgia remains an area of concern, notably following the 
disruption  of  the  operations  of  Imedi  TV,  the  only  independent  TV-station  with  a  national 
coverage  in  2007.  The  broadcasting  licence  of  Maestro  cable  TV,  operating  mostly  in  the 
Tbilisi  area,  was  repealed  as  it  aired  opposition-oriented  political  discussions  without 
permission  from  the  authorities.  This  decision  was  later  reversed  by  the  National 
Communication  Commission,  as  the  President  announced  new  measures  to  allow  more  air 
time  to  opposition  groups.  As  a  part  of  these  measures  the  Parliament  adopted  a  new  law 
requiring the public Channel 1 to air twice-weekly broadcasts reflecting diverse viewpoints. 
This started in October 2008.  

Some progress can be reported, as was the case last year, on the improvement of minorities’ 
living  conditions  and  their  civic  integration,  in  particular  through  the  improvement  of 
transport  infrastructures  in  peripheral  regions  where  these  minorities  live,  and  pro-active 
education  policies.  A  draft  National  Concept  for  Tolerance  and  Civic  Integration  has  been 
elaborated. However, isolated incidents of increased religious intolerance have been reported. 
Since last year, there has been no progress on a consistent minorities’ civic integration policy, 
however. The European Charter for Regional and Minority Languages is still not signed. On 
the  repatriation  and  integration  of  the  Meskhetian  population  to  Georgia,  there  was  no 
progress reported by end 2008 and the period for applications to return has been extended by 
six months until July 2009.  

As regards women’s rights, some progress was observed in the end of 2008 in implementing 
the  Action  Plan  2007-2008  on  domestic  violence.  The  National  Referral  Mechanism  on 
implementation  of  the  legislation  on  domestic  violence  was  established  and  an  inter-
institutional Council on elimination of domestic violence was created at the end of December 
2008. Georgia is also working on a draft law on gender equality.  

On  juvenile  justice,  the  amendments  adopted  in  2007  for  lowering  the  minimum  age  of 
criminal  responsibility  from  14  to  12  entered  into  force  in  July  2008.  The  Georgian 
Parliament’s Human Rights and Civil Integration Committee unsuccessfully tried to postpone 
the entry into force of these amendments which contradict UN recommendations. The number 
of  convicted  juveniles  increased  in  2008,  according  to  UNICEF.  Limited  progress  was 

EN 

6 

   EN 

 
reported  on  the  development  of  rehabilitation  and  education  activities  in  places  for  pre-
detention for juvenile offenders.  

Cooperation on Foreign and Security Policy 

Objectives: Strengthen political dialogue and cooperation on foreign and security matters, and efforts 
and cooperation in the fight against terrorism. Further develop co-operation in addressing common 
security threats, including non-proliferation of weapons of mass destruction and illegal arms exports 

Since  June  2007,  Georgia  has  been  invited  to  align  with  CFSP  declarations  on  a  case-by-
case basis. In 2008, Georgia aligned with 117 out of the 154 CFSP declarations to which they 
were  invited  to  join.  There  was  good  political  dialogue  with  the  Georgian  government  in 
2008, including through a Troika meeting organised by the EU Presidency in July 2008.  

Regional Cooperation 

Georgia  participates  in  a  programme  on  integrated  border  management  in  the  Southern 
Caucasus (SCIBM), see section 5.  

Georgia is participating in the South Caucasus Anti-Drugs Programme (SCAD V) with the 
overall  objective  "to  encourage  the  gradual  approximation  of  drug  policy  legislation,  norms 
and standards between Georgia, Azerbaijan and Armenia and between these countries and the 
EU", see section 5.  

The  Regional  Environmental  Centre  for  the  Caucasus  (REC-Caucasus)  became  fully 
operational  under  its  new  charter  with  the  approval  of  national  representatives  of  the  three 
Caucasus  countries  for  the  new  executive  body  in  December  2008.  Georgia  supported  the 
establishment  of  its  new  management  structure.  The  REC  is  an  important  tool  to  promote 
regional cooperation and stability for the future of South Caucasus. 

Cooperation for the settlement of Georgia’s internal conflicts 

Objective:  Promote  sustained  efforts  towards  the  peaceful  resolution  of  the  conflict  in  Tskhinvali 
region / South Ossetia, Georgia and in Abkhazia, Georgia 

In  the  first  half  of  2008,  the  EU  agreed  with  Georgia  to  step  up  the  implementation  of 
confidence-building  measures  between  Georgia  and  the  two  separatist  regions  of  Abkhazia 
and South Ossetia. The new measures were aimed at supporting renewed peace efforts in the 
framework  of  the  UN  Secretary  General's  Group  of  Friends  for  Abkhazia  and  to  create  the 
conditions for reviving peace talks under the Joint Control Commission on South Ossetia, as 
well  encouraging  inter-ethnic  cooperation  and  improving  living  standards  of  concerned 
populations. However, in the light of the August 2008 events they had to be temporarily put 
on hold. 

In the course of 2008, Russia took a number of steps aimed at strengthening its relations with 
the separatist authorities in Abkhazia and South Ossetia, including the unilateral lifting of CIS 
sanctions. Russia’s new policy towards the separatist entities undermined Georgia’s territorial 
integrity. Following a series of military incidents and provocations, armed hostilities between 
the Russian Federation and Georgia over the control of South Ossetia broke out on 7 August 
2008 and were suspended after five days as a result of a ceasefire agreement (Six-Point Plan) 
concluded  under  the  auspices  of  the  EU  French  Presidency  on  12  August.  A  more  detailed 

EN 

7 

   EN 

 
implementation  agreement  was  concluded  on  8  September  2008  following  the  visit  of 
Presidents Barroso and Sarkozy to Tbilisi and Moscow. The hostilities caused several hundred 
victims and the displacement of around 192,000 persons, of which an estimated 30,000 will 
not  be  able  to  return  to  their  place  of  residence  in  the  foreseeable  future,  and  serious 
environmental damage. The six-point agreement has only partially been honoured by Russia, 
as  many  substantial  aspects  remain  unfulfilled.  Russia  strengthened  its  military  presence  in 
Abkhazia  and  South  Ossetia  against  the  will  of  the  Georgian  government,  denied  access  to 
international monitors and humanitarian organisations and not prevented violations of IDPs’ 
human rights in the territories under its control. The separatist authorities in South Ossetia do 
not  allow  yet  free  access  for  humanitarian  agencies  from  the  South.  The  conclusions  of  the 
extraordinary  European  Council  of  1  October  2008  strongly  condemned  Russia's  unilateral 
decision to recognize the self-declared independence of Abkhazia and South Ossetia.  

From the onset of the crisis, the EU provided substantial political, financial and practical post-
conflict  support  to  Georgia.  The  EU  has  firmly  expressed  its  support  for  Georgia’s 
sovereignty  and  territorial  integrity  and  continued  to  condemn  in  the  strongest  terms  the 
decision  of  Russia  to  maintain  a  military  and  diplomatic  presence  in  the  territories.  The 
European  Commission  provided  EUR  8  million  of  immediate  humanitarian  aid  through  the 
DG for Humanitarian Aid (ECHO) for the internally displaced persons (IDPs) and organised 
an international donors' conference with the World Bank in Brussels in October 2008, where 
the EU pledged a package of up to EUR 500 million for the period 2008-10 and mobilized a 
total pledge by international donors of EUR 3.44 billion. Another substantial EU contribution 
for stability was the rapid deployment of an EU civilian monitoring mission (EUMM) with a 
mandate  for  monitoring  the  effective  implementation  of  the  ceasefire  agreement  in  all  the 
territory of Georgia, including the separatist regions. An international commission of inquiry, 
led  by  Ambassador  Tagliavini,  has  been  tasked  by  the  EU  to  investigate  the  circumstances 
that led to the outbreak of the conflict.  

International talks for consolidating the EU-sponsored ceasefire were launched in Geneva in 
October 2008, under the co-chairmanship of the EU, UN and OSCE. The talks are aimed at 
discussing  security  issues  as  well  as  the  dignified  and  safe  return,  or  resettlement,  of  IDPs, 
with all involved parties. The EU co-chair is led by the new EU special representative Pierre 
Morel,  especially  appointed  for  dealing  with  the  consequences  of  the  August  2008  conflict. 
The  European  Commission  and  the  UNHCR  act  as  co-moderators  of  the  Working  Group 
dealing  with  humanitarian  and  IDP  issues.  In  spite  of  the  difficulties  linked  to  status  issues 
and  to  the  opposed  positions  of  the  sides  involved,  the  Geneva  discussions  have  allowed  a 
number  of  concrete  measures  to  advance  that  could  contribute  to  defusing  tensions  and 
creating a better confidence climate.  

In  autumn  2008  the  Government  of  Georgia  adopted  a  new  “Law  on  the  Occupied 
Territories”  regulating  access,  economic  activities  and  assistance  to  South  Ossetia  and 
Abkhazia, Georgia. The European Commission and the international donor community have 
expressed  serious  concerns  about  the  negative  impact  that  the  implementation  arrangements 
drafted by the Government in December 2008 could have on the delivery of humanitarian and 
rehabilitation  assistance  to  the  two  breakaway  regions.  In  the  Joint  Statement  on  political 
conditionality  linked  to  increased  EC  assistance,  the  Georgian  government  took  the 
commitment to further discuss the implementing rules with the European Commission.  

EN 

8 

   EN 

 
3. 

ECONOMIC AND SOCIAL REFORM 

Macroeconomic framework and functioning market economy 

Brisk foreign direct investment and private credit growth supported economic activity in the 
first  half  of  2008  when  real  GDP  growth  reached  9%.  In  the  aftermath  of  the  August  2008 
war,  the  Georgian  economy  contracted  by  3.6%  in  the  third  quarter.  Although  the  financial 
system weathered this first blow on confidence thanks to prompt action of the National Bank 
of  Georgia  (NBG),  the  subsequent  impact  of  the  global  financial  crisis  continues  to  put  the 
financial  stability  and  the  real  economy  under  pressure.  As  a  result  the  real  GDP  growth 
measured over the whole of 2008 was 2.1%. 

In  September  2008,  Georgia  drew  the  first  tranche  of  USD  250  million  (EUR  195  million) 
from the IMF under an 18-month stand-by arrangement to replenish international reserves of 
the NBG. At the end of the year the reserves were still at a relatively low level covering no 
more than about two months of imports. The IMF-supported economic programme includes 
measures to improve the functioning of the newly established Financial Supervisory Agency 
(FSA)  which  needs  to  assess  carefully  the  asset  quality  in  the  banking  system  and  conduct 
contingency  planning  for  bank  resolution.  The  share  of  non-performing  loans  started  to 
increase  rapidly  in  late  2008  (14%  as  of  November).  The  NBG  on  the  other  hand  has 
developed its liquidity management system. 

Annual  consumer  price  inflation  decelerated  to  5.5%  in  December  2008,  in  line  with  the 
slowdown  in  economic  activity  and  a  decline  in  commodity  prices  (11%  at  end-2007).  To 
ensure a low and stable inflation rate, the NBG plans to adopt an inflation-targeting regime, 
possibly  already  in  2009.  The  NBG  is  adhering  to  exchange  rate  flexibility  following  a 
temporary de facto peg of the national currency to the US dollar to provide stability after the 
outbreak of the armed conflict. In November 2008, a one-off devaluation became necessary to 
counter the market nervousness stemming from the deteriorating global economic outlook. 

The  recovery  of  private  inflows  is  subject  to  high  uncertainty  but  some  foreign  direct 
investment  is  underway,  notably  to  the  transport  and  energy  sectors  where  Georgia  has 
potential for transit and exports. Remittances continued to grow in 2008, including those from 
Russia  which  accounts  for  some  60%  of  all  remittances  to  Georgia.  The  current  account 
deficit started to narrow in the second half of the year given slower growth in imports which 
to a large extent is related to the pace of foreign direct investment. The current account deficit 
is estimated at around 17% of GDP. 

The public finances were characterised by continued growth in expenditure thanks to larger-
than-projected  revenues  (tax  revenues  about  25%  of  GDP).  Privatisation  was  also  pursued 
successfully in the first half of2008. The fiscal space was used primarily to increase defence 
spending  which  accounted  for  24%  of  total  expenditure  in  2008.  The  government  deficit 
increased from 2007 to about 6% of GDP. The Government accessed the international capital 
market in April 2008 tapping USD 500 million (EUR 390 million) from Georgia's first-ever 
sovereign Eurobond when the market conditions were still relatively favourable. 

The grants and concessional loans pledged at the international donors' conference in October 
2008 are being used to finance the Government's economic recovery plans, and refinancing to 
the banking sector is also forthcoming from IFIs. These public transfers to Georgia  provide 
significant  help  in  financing  the  current  account  deficit  in  the  short-term  as  private  capital 
flows are particularly low. This does not, however, obliterate the need to broaden the exports 

EN 

9 

   EN 

 
potential for Georgia to achieve a sustainable external position and maintain robust economic 
growth.  

Employment and social policy 

In  January  2008,  Georgia  adopted  a  programme  “Georgia  without  poverty”  for  the  years 
2008-2012, aimed at reducing poverty by developing more efficient social safety nets through 
a  reformed  pension  system  and  improving  access  to  health  care.  In  2008,  23.6%  of  the 
Georgian population was living under the poverty line. Georgia estimated in October 2008 the 
need to create 250 000 jobs to alleviate poverty.  

As  regards employment,  the  Government  launched  a  “Vocational  Training  and  Retraining” 
programme  to  enhance  professional  skills  and  help  the  unemployed  to  meet  the  changing 
requirements  of  the  labour  market.  About  113 800  job-seekers  and  more  than  1  400 
enterprises reportedly participated, 65% of whom were women. A programme for stimulating 
job  creation  in  rural  areas  was  initiated  in  February  2008.  Launched  during  the  election 
campaign period for Presidential and Parliamentary elections, the effectiveness and efficiency 
of these programmes are under question as they were not included in an overall medium-term 
comprehensive  job  creation  strategy.  The  unemployment  rate,  officially  at  13,3%  but 
probably underestimated as the rural population is considered self-employed, remains high.  

As regards labour law, rights at work and social dialogue, Georgia declared its willingness 
to  intensify  dialogue  with  social  partners,  but  it  has  not  yet  taken  any  concrete  measures  to 
this  end.  While  no  change  to  the  Labour  Code  took  place  in  the  reporting  period,  the 
agreement on a joint statement in October 2008 between representatives of the Government, 
the Trade Unions and the International Labour Organisation (ILO), allowed Georgia to extend 
until  2011  its  status  of  beneficiary  under  the  special  EU  unilateral  trade  preferential  regime 
aimed at partner countries engaged in sustainable development and good governance (GSP+). 
The joint statement focuses on the promotion of tripartite consultations and decent work under 
the ILO auspices. A work plan was established in December 2008 in order to implement the 
joint statement as a matter of priority. Georgia submitted an updated report on the application 
of  the  revised  European  Social  Charter  to  the  Council  of  Europe  in  July  2008,  on  issues 
dealing with employment, training and equal opportunities. 

One  third  of  the  2008  State  budget  was  allocated  to  social  programmes  which  cover  a 
substantial  part  of  the  unemployed  population.  Old-age  minimum  pensions  were  doubled 
during the reporting period. The Government also provided a number of one-off cash and in-
kind benefits, including winter fuel subsidies for certain categories, 50 kilograms of flour per 
rural  household  and  the  ‘good  start  programme’,  which  provides  1000  GEL  (approximately 
EUR  380)  to  newborns  in  families  which  are  eligible  for  targeted  social  assistance.  Such 
assistance aims at identifying families below the poverty line, evaluating the socio-economic 
situation  and  creating  a  relevant  data  base.  The  number  of  people  eligible  to  benefit  of  free 
public health insurance vouchers increased from  650  000  to  750  000.  However  the  services 
covered by this scheme are limited (e.g. provisions of pharmaceuticals are not included).  

In  March  2008,  the  Ministry  of  Labour,  Health  and  Social  Affairs  approved  “The  Social 
Rehabilitation  State  Programme  of  disabled,  elderly  people  and  homeless  children”.  The 
programme  foresees  several  kinds  of  social  services,  including  rehabilitation  of  disabled 
children. 

EN 

10 

   EN 

 
The Child Action Plan 2008-2011 adopted in December 2008 is a strategic document which 
reflects  a  change  of  policy  from  “de-institutionalisation’,  (i.e.  decreasing  the  number  of 
deprived  children  in  orphanages  and  other  child-care  institutes)  to  the  development  of  a 
sustainable and modern community-based child welfare system. 

The dedicated sustainable development strategy as required by the decisions contained in the 
Economic Development and Poverty Reduction Strategy was still not developed. The work on 
it  was  on  put  on  halt  due  to  the  difficult  political  situation  in  the  country  in  2008.  Progress 
was  achieved  on  implementing  commitments  on  agriculture  contained  in  the  ENP  Action 
Plan.  A  Strategy  for  the  Agricultural  Development  of  Georgia  covering  the  period  2009-12 
was  elaborated  and  backed  by  comprehensive  programmes  for  implementations.  Several 
workshops aimed at exchanging experience on best practices and use of international and EU 
standards  in  the  area  of  agriculture  were  organised  with  EU  support.  A  state  programme 
“Cheap Credit” was launched in 2008 with the aim of fostering job creation in rural areas, and 
notably  in  agricultural  farms,  agricultural  processing  enterprises,  handicraft  and  export 
oriented  enterprises.  Georgia  also  launched  a  national  programme  to  allow  entrepreneurs  to 
purchase  state  owned  agricultural  land  at  concessional  price.  In  July  2008,  the  Ministry  of 
Agriculture  approved  an  order  listing  the  materials  allowed  for  the  production  of  organic 
agricultural  products  and  cooperation  is  on-going  with  a  non-governmental  body  to  certify 
organic agricultural production.  

4. 

TRADE-RELATED ISSUES, MARKET AND REGULATORY REFORM 

The EU is Georgia’s main trading partner (31.14 % share in Georgia's overall external trade in 
2007).  Total  trade  growth  was  steady  in  2007  and  significantly  increased  in  2008,  in 
particular  as  regards  Georgia's  exports  (+  62.7%).  However,  the  bilateral  trade  and  notably 
Georgia's  exports  remain  low.  Furthermore,  as  in  previous  years,  in  2008  Georgian  exports 
were  concentrated  in  a  few  commodities  with  low  value  added  and  would  need  further 
diversification.  Under  the  EU  GSP  Regulation  for  2006-2008  Georgia  benefited  from  the 
special  incentive  arrangement  for  sustainable  development  and  good  governance,  the  so-
called GSP+, and qualified for these enhanced preferences also under the new Regulation for 
2009-2011. 

On  the  possibility  of  a  future  establishment  of  a  deep  and  comprehensive  free  trade 
agreement  (DCFTA)  between  the  EU  and  Georgia,  the  European  Commission  tendered  an 
independent feasibility study in 2007, which was finalised in May 2008. The study concluded 
that Georgia would benefit from such an agreement, but that the country was not yet ready for 
such  a  far-reaching  liberalisation.  Following  the  results  of  the  study  a  preparatory  process 
aiming at creating the necessary conditions for a DCFTA in Georgia was launched and it was 
further accelerated following the extraordinary European Council of 1 September 2008, which 
concluded  that  "the  EU  should  step  up  relations  with  Georgia,  including  the  possible 
establishment of a full and comprehensive free trade area as soon as the conditions are met". 
In  particular,  the  European  Commission  carried  out  a  fact-finding  mission  to  Georgia  in 
October  2008  in  order  to  assess  Georgia’s  current  state  of  preparedness  for  a  DCFTA  and 
established  recommendations  on  further  reforms  to  be  taken,  notably  key  priority  steps  to 
achieve  the  necessary  level  of  preparedness  for  the  DCFTA  negotiating  process.  In  the 
reporting  period  Georgia  overall  achieved  some  progress  in  its  preparations  for  a  possible 
future DCFTA, but it still needs to make additional progress in several areas. 

EN 

11 

   EN 

 
Progress was achieved in the customs area in line with the Business Strategy of the Georgian 
Customs aiming at further approximating customs legislation and practices with the EU and 
international  standards.  Georgian  customs  continued  upgrading  its  risk  management  system 
and  risk  analysis  based  on  profiles  integrated  into  the  ASYCUDA  World  Customs 
Declaration processing IT system, thus reducing the number of physical controls. The transfer 
of  clearance  of  goods  to  inland  clearance  customs  offices  and  the  rolling  out  of  the 
ASYCUDA system significantly reduced customs clearance times. Although a post clearance 
control system does not exist in practice, a special group was set up and training is on-going 
with external assistance. Concerning legislation there were several major amendments to the 
code  this  year  covering  issues  such  as  valuation,  post  clearance  audit,  simplified  customs 
procedures  for  authorised  operators,  binding  tariff  and  origin  information  and  warehouses. 
However,  as  a  consequence  of  the  amendments  to  the  customs  valuation  provisions  of  the 
Customs  Code,  the  legislation  concerning  customs  valuation  is  no  longer  in  line  with  the 
WTO and EC principles. Moreover the secondary legislation in the area of customs, necessary 
for the correct implementation of the Customs Code, is still not finalized. Georgia is preparing 
its  accession  to  the  Harmonized  Commodity  Description  and  Coding  Systems  (HS) 
Convention and already applies the HS 2002. Following last year’s establishment of the State 
Revenue Service (SRS), its new structure of the SRS was completed by merging the existing 
tax and customs territorial units in eight regional centres. 

On free movement of goods and technical regulations, Georgia made some progress in the 
implementation of the reform of technical regulation system. Two  independent agencies are 
now  in  operation,  namely  the  National  Agency  of  Standards,  Technical  Regulations  and 
Metrology (GEOSTM) and a Unified National Centre for Accreditation. A legislative reform 
is underway to review the functions of the State Inspection for Technical Supervision in order 
to clearly separate registration of products, surveillance, and investigation of accidents from 
inspection  by  accredited  bodies.  GEOSTM  is  a  member  of  ISO  and  an  affiliate  member  of 
CEN.  Concerning  imports,  Georgia  acknowledges  the  standards  of  some  40  countries, 
including  the  OECD  countries,  which  means  that  their  products  may  enter  the  Georgian 
market without any further conformity assessment and acceptance or legalisation procedures. 
More progress in approximation to the EU legislation will be needed in selected sectors, such 
as construction standards, to consider opening of negotiations of an Agreement on Conformity 
Assessment and Acceptance of Industrial Products (ACAA) in a long-term perspective. 

As regards sanitary and phytosanitary matters Georgia confirmed the postponement of the 
key elements of the recent reform, including controls, until the end of 2009. There is limited 
administrative  capacity  and  serious  difficulties  for  establishments  to  comply  with  the  rules. 
Georgia continued the preparation of implementing legislation with a view to bringing food 
safety practice closer to the EU standards. The preparation of a new veterinary law has been 
abandoned. Georgia took steps towards its integration with the EU’s Rapid Alert System for 
Food  and  Feed  including  by  establishing,  in  April  2008,  a  working  group  advancing  this 
integration.  Georgia  finalised  an  action  plan  for  risk  analysis  for  food  and  feed.  In  order  to 
fulfil the objectives of the Action Plan and to be able to increase exports to the EU, Georgia 
will  have  to  make  considerable  progress  in  the  sector.  Georgia  participated  in  workshops 
under the European Commission’s “Better training for safer food” programme. 

Despite  the  initial  loss  of  investor  confidence  after  the  August  2008  armed  conflict,  the 
business  climate  is  generally  considered  to  be  conducive  to  foreign  investments,  however 
concerns remain related to the enforcement of the protection of property rights. 

EN 

12 

   EN 

 
In the area of establishment and company law, the Georgian National Investment Agency is 
a  ‘one-stop  shop’  for  foreign  direct  investment  (FDI)  and  local  investors.  The  law  on 
entrepreneurs was amended in March 2008 with a view to further simplifying the registration 
procedures.  It  now  takes  only  about  three  days  and  three  procedures  to  start  business.  State 
and  tax  registration  of  companies  is  now  carried  out  by  tax  inspectorates  under  one  single 
procedure.  The  revised  law  also  provides  for  more  transparency  and  public  accessibility  to 
companies' information. However, the legislation  is not  yet in line with EC requirements as 
regards transparency issues, disclosure requirements, grounds for nullity and certain rules on 
publicity of registers. Moreover the amended Law is not fully in compliance with other EU 
standards  in  respect  of  the  formation  of  public  limited  liability  companies  and  the 
maintenance  and  alteration  of  their  capital.  No  Corporate  Governance  Code  has  yet  been 
adopted.  

Georgia  made  some  good  progress  in  the  field  of  financial  services.  The  regulatory 
framework now includes the National Bank of Georgia and the Financial Supervision Agency 
(FSA), created since May 2008, which merges all supervisory bodies for banking, insurance 
and  securities  markets.  Its  creation  was  stipulated  in  the  Global  Competitiveness  of  the 
Financial  Services  Sector  Act,  adopted  in  March  2008.  The  FSA  is  an  independent  body 
which is in charge of regular monitoring and reporting, and on-site inspections. Elaboration of 
a new Financial Code is underway. The Code would further liberalise and unify the approach 
to financial markets by giving equal access to local and foreign investors. Banks still follow 
Basel  I  core  principles  for  effective  banking  supervision.  More  efforts  are  required  in 
improving consumer protection in the financial sector.  

As  regards  capital  movement,  there  are  no  restrictions  on  foreign  currencies,  and  the 
Georgian Lari is the only national currency adopted for internal transactions. 

Other key areas 

Georgia  continued  efforts  to  improve  legislation  and  operations  in  the  area  of  taxation  by 
implementing  the  Corporate  Strategy  for  2007-2011  of  the  Ministry  of  Finance  and  the 
“Revenue Service Strategy 2008”, with a political will to combat corruption and to reform the 
tax administration. The Georgian Tax Code was amended in 2008: the amendments included 
among  others  the  reduction  of  the  applicable  rate  for  income  tax  on  dividends,  measures  to 
simplify and accelerate VAT refunds as well as measures related to the improvement of tax 
collection  and  the  right  of  appeal.  The  main  differences  between  the  EU  and  Georgian  tax 
legislation still concern tax exemptions, energy taxation, differences in application of excised 
duty and arrangements for monitoring the movement of excisable products. An agreement on 
avoidance  of  double  taxation  with  Finland  entered  into  force  in  June  2008.  The  agreement 
with Luxembourg was ratified by the Parliament in February and the agreement with Ireland 
was signed in December. Negotiations are on-going with Slovenia and Hungary.  

With  regard  to  competition  policy,  progress  remains  limited.  The  2005  Competition  Law 
concerns  state  aid  more  than  anti-trust.  However,  there  are  some  sector-specific  anti-
monopoly  regulations  which  are  enforced 
independent  national  regulatory 
commissions  and  agencies  in  the  key  sectors  (e.g.  energy,  water  supply,  communication, 
transport and financial sectors). The Free Trade and Competition Agency is still a structural 
unit  of  the  Ministry  of  Economic  Development  with  only  an  advisory  role  and  there  are  no 
legal mechanisms assuring the enforcement of the agency’s decisions. A high-level dialogue 
with the European Commission services on the competition policy is on-going. 

through 

EN 

13 

   EN 

 
In  the  area  of  intellectual  property  rights  (IPR),  Georgia  continued  to  further  align  its 
legislative framework with international standards. The new patent law as well as the new law 
on industrial designs, prepared in cooperation with World Intellectual Property Organization 
(WIPO), remain to be adopted. Georgia is well advanced in the conclusion of an agreement on 
geographical indications with the EU. Finally, Georgia is a member of the UPOV Convention 
for the protection of new varieties of plants since November 2008. Georgia’s legislation is not 
in line with EC requirements on non reliance on data protection of pharmaceuticals and agro-
chemicals  and  on  supplementary  protection  certificate.  Further  efforts  are  needed  to 
effectively  enforce  IP  rights  at  court  level.  There  is  no  dedicated  IPR  unit  in  the  police. 
Georgia has not yet conducted the anti-piracy and counterfeiting study foreseen in the Action 
Plan. In connection of IPR-infringements, the scope of ex officio powers should be extended 
to the police and Customs. 

As  regards  public  procurement,  there  were  minor  amendments  to  the  Law  on  state 
procurement  in  2008.  Foreign  and  local  companies  have  equal  access  to  the  Georgian 
procurement  market.  Guidelines  and  manuals  are  only  available  in  Georgian.  Georgia  is 
working on the introduction of electronic procurement with the assistance of the World Bank 
and the law on electronic signature entered into force in March 2008. The State Procurement 
Agency  (SPA)  is  no  longer  under  the  auspices  of  the  Ministry  of  Economy  but  is  now 
accountable to the Prime Minister. 

The draft law on statistics, aiming to strengthen the independence of the State Department for 
Statistics (SDS), which is currently under the Ministry of Economic Development, remains to 
be  adopted.  The  weak  administrative  capacity  of  the  SDS,  as  well  as  the  staff  shortage  and 
turnover,  is  an  issue  of  concern.  A  task  force  was  therefore  created  in  December  2008  to 
develop  a  concept  for  the  reform  of  the  Georgian  statistics  system.  Modern  IT  equipment, 
funded and delivered by the European Commission, has started to be installed. 

Further efforts are needed in the field of auditing and accounting to meet, as agreed in the 
Action  Plan,  EU  standards  on  statutory  audit  and  control  mechanisms.  The  new  law  on 
auditing and accounting is to be adopted.  

With  regard  to  the  management  of  public  finances,  the  Ministry  of  Finance  conducted 
training and information seminars in regions and municipalities in preparation for adoption of 
GFSM -2001 methodology while an E-Treasury pilot project was proposed for six regions to 
better manage information collation. A new law on external audit was adopted in December 
2008. Some developments were noted with regard to the adoption of a strategy or legislative 
framework  for  public  internal  financial  control.  A  working  group  to  this  effect  was 
established  in  the  last  quarter  of  2008.  The  effectiveness  of  existing  general  inspectorates 
within line Ministries are limited by the absence of common standards and procedures as well 
as frequent staff turnover. 

On enterprise policy, the Government launched the “Cheap Credit” programme, as reported 
in section 3. The ‘Invest in Georgia’ business forum event took place in June 2008. It gave an 
opportunity  to  exchange  views  about  the  enterprise  and  industrial  policies  and  to  stimulate 
competitiveness.  

EN 

14 

   EN 

 
5. 

COOPERATION ON JUSTICE, FREEDOM AND SECURITY 

In  the  area  of  border  management,  the  National  Strategy  2008-2012  was  endorsed  by  the 
President  in  February  2008  and  its  corresponding  action  plan  was  due  for  adoption  in  June 
2008 At the end of 2008, Patrol Police was tasked to carry out operation and control of the 
border entry points, including the delegated authority from the Ministry of Foreign Affairs to 
issue visas at border crossing points. Georgia participates in the Southern Caucasus Integrated 
Border  Management  (SCIBM)  regional  programme,  agreed  between  Georgia,  Armenia  and 
Azerbaijan  already  in  October  2007.  The  programme  aims  to  enhance  inter-agency 
cooperation  while  strengthening  the  capacity  of  customs  and  border  guard  services  in  line 
with agreed regional standards and EU norms. The implementing consortium, led by United 
Nations Development Programme (UNDP) was selected by year end to start implementation 
in  early  2009.  However,  lack  of  progress  on  delimitation  and  demarcation  of  borders  with 
neighbours other than with Turkey remains a cause of concern. In addition, Georgia does not 
have  a  bilateral  border  agreement  with  Armenia.  Further  efforts  to  improve  institutional 
capacity in this area are still needed. Regional cooperation in this area through SCIBM needs 
on-going policy attention and resource investment.  

The early completion and reform of a functioning civil register was a noteworthy indication 
of  progress.  The  Civil  Registry  Agency  is  currently  implementing  preparatory  actions  for 
working  on  introduction  of  biometric  passports.  There  was  no  progress  with  regard  to 
elaboration of data protection legislation. 

In June, the Council invited the European Commission to open a dialogue with Georgia with a 
view  to  launching  a  Mobility  Partnership. In  November  2008,  the  European  Commission 
obtained negotiating directives from the Council to negotiate visa facilitation and readmission 
agreements with Georgia.  

In the area of migration, a second draft of the Migration Policy document was elaborated and 
awaits  approval.  To  this  end  an  inter-ministerial  working  group  was  created  to  work  on 
migration  policy.  The  Civil  Registry  Agency  of  the  Ministry  of  Justice  was  tasked  with 
developing  a  general  migration  management  system.  No  database  for  the  management  of 
migration  flows  has  been  created  yet.  To  date  Georgia  has  not  approved  policies  or  passed 
legislation  regulating  labour  migration.  There  is  no  law  on  data  protection  adopted  so  far. 
Georgia is however a signatory to Council of Europe conventions regulating aspects of data 
protection,  such  as  the  Convention  on  the  Protection  of  the  Individual  with  Regard  to  the 
Processing of Data.  

With  regard  to  the  fight  against  organised  crime,  Georgia  did  not  sign  or  ratify  the  Third 
Protocol  to  the  United  Nations  Convention  against  Transnational  Organized  Crime,  on  the 
illicit manufacturing of and trafficking in firearms.  

With regard to the fight against trafficking in human beings, the National Action Plan for 
2007-8  was  fully  implemented.  Successful  cooperation  among  state  agencies  in  the  fight 
against human trafficking led to better protection of victims and very active investigation and 
prosecution.  The  implementation  of  the  National  Plan  and  Strategy  on  the  Fight  against 
Trafficking  in  Persons  continues  with  specific  measures  focussing  on  rehabilitation  and 
reintegration of victims of trafficking.  

The National Drugs Strategy focusing on prevention, criminalisation of drug trafficking and 
the protection of youth, awaits adoption. The Code of Criminal Procedure includes provisions 

EN 

15 

   EN 

 
for  the  confiscation  of  the  assets  of  drug  traffickers  while  the  Code  of  Civil  Procedure 
foresees  graduated,  dissuasive  sanctions  for  first-time  drugs  offences  e.g.  confiscation  of 
driver’s  licence.  Georgia  participates  in  the  SCAD  V  regional  programme  through  which 
operational  bilateral  contacts  with  its  neighbours  are  emerging.  The  capacity  of  law 
enforcement agencies to deal with the drugs issue requires on-going attention. However, it has 
not yet designated a national focal point for the programme. 

With regard to money laundering, Georgia introduced amendments to the Criminal Code in 
July  2007  in  line  with  the  Council  of  Europe  Moneyval  Group  and  Financial  Action  Task 
Force  (FATF)  recommendations,  to  include  the  confiscation  and  freezing  of  assets  and 
property  derived  from  money  laundering  with  distinctions  drawn  between  ‘illegal’  and 
‘undocumented’ transactions. The scope of the Law on Money Laundering was extended in 
March  2008  to  include  legal  reporting  obligations  on  tax  advisors,  charities/non-profit 
organizations, estate agents and cash couriers in line with FATF recommendations.  

Georgia is reviewing its legislation with a view to the signature and ratification of the Council 
of Europe Convention on the Laundering, Search, Seizure and Confiscation of the Proceeds 
from Crime and on the Financing of Terrorism (CETS 198). Further efforts are also needed to 
improve inter-agency cooperation and coordination. 

Georgia is a member of Moneyval and has an observer status within the Eurasia FATF group. 
Further efforts are also needed to improve inter-agency cooperation and coordination.  

With regard to international and regional judicial cooperation, the Council of Europe’s 1959 
Convention  on  Mutual  Legal  Assistance  and  its  1978  Additional  Protocol  and  the  1957 
European  Convention  on  Extradition  along  with  the  1993  Minsk  Convention  on  Legal 
Assistance  and  Legal  Relations  in  Civil,  Family  and  Criminal  matters  constitute  Georgia’s 
cooperation framework. No short-term extradition procedure is provided under the Criminal 
Procedure  Code.  Further  attention  is  needed  in  relation  to  recognition  of  financial  penalties 
and confiscation orders to enhance future cooperation. 

Georgia  participates  in  the  Hague  Conference  on  Private  International  Law,  intending  to 
proceed  with  the  ratification  of  all  attendant  Conventions.  It  also  cooperates  with  CIS 
countries within the framework of the 1993 Minsk Convention on Legal Assistance and Legal 
Relations in Civil, Family and Criminal matters. No developments took place on the exchange 
of best practice information on judicial cooperation with EU Member States or with regard to 
the  establishment  of  a  network  of  judicial  and  law  enforcement  agencies.  An  independent 
national data protection supervisory authority was not established as required for the signature 
and ratification of the 2001 Additional Protocol to the Council of Europe Convention for the 
Protection  of  Individual  with  regard  to  the  Automatic  Processing  of  Personal  Data.  Further 
improvements  are  also  required  to  secure  the  automatic  processing  of  personal  data  of 
individuals  in  line  with  the  relevant  Council  of  Europe  Convention,  ratified  by  Georgia  in 
April 2006.  

6. 

TRANSPORT, ENERGY, THE ENVIRONMENT, THE INFORMATION SOCIETY, RESEARCH 
AND DEVELOPMENT 

Following  the  restructuring  of  the  administration  and  regulatory  bodies  in  the  transport 
sector (into the Unified Transport Administration functioning  as sub-departmental bodies of 

EN 

16 

   EN 

 
the Ministry of Economy), there is still a need to strengthen the administrative capacity of the 
various regulatory transport bodies in particular to ensure efficient safety oversight.  

In  the  road  sector,  the  upgrading  of  the  central  part  of  Georgia’s  East-West  corridor  is  on-
going.  At  the  same  time  the  capacity  of  the  Road  Department  of  the  Ministry  of  Economic 
Development is being strengthened to develop and implement a traffic safety programme.  

In  the  rail  sector  the  upgrading  of  the  railway  infrastructure  is  being  pursued.  The 
rehabilitation  of  the  Yerevan-Tbilisi  railway  line  was  launched  in  Tbilisi  and  in  Yerevan  in 
mid-October  2008.  No  decisions  were  taken  during  the  reporting  period  on  the  announced 
privatisation of the railway. 

Georgia  needs  to  significantly  strengthen  its  aviation  authorities  after  the  many  transport 
restructurings.  Urgent  efforts  should  be  made  to  improve  safety  oversight  and  to  gradually 
harmonise Georgia's legislation with European safety standards. To this effect, a twinning or 
similar  project  should  be  envisaged.  Georgia  should  speed  up  ratification  of  the  Montreal 
Convention  for  the  unification  of  certain  rules  for  international  carriage  by  air.  Georgia 
continues its policy of liberalisation of air traffic in order to promote competition. From 2007 
to 2008, the number of flight frequencies from and to Georgia increased from 112 to 148, and 
the  number  of  foreign  airlines  from  13  to  19.  As  relations  with  the  Russian  Federation 
deteriorated, there was a clear shift in aviation connections from Russia to Turkey, Ukraine 
and  EU  countries.  Passenger  and  cargo  traffic  between  the  EU  and  Georgia  has  been 
increasing  significantly  since  2004  growing  at  around  14  percent  per  year.  Outside  the 
reporting  period,  in  February  2009,  the  European  Commission  received  a  mandate  to 
negotiate  a  bilateral  air  agreement  leading  to  a  Common  Aviation  Area  between  EU  and 
Georgia. 

Maritime  safety  remains  an  issue  of  great  concern.  Again,  the  consistent  failure  by  the 
authorities to address the lack of port state control and flag state implementation has resulted 
in the Georgian fleet being classified on the ‘High Risk’ category of the black list of the Paris 
Memorandum of Understanding on port state control. The construction of the Kulevi sea port 
was completed and the port started functioning. The Poti Sea Port was privatised.  

Georgia continued to implement its energy policy, inter alia by rehabilitating and expanding 
electricity production capacity including the large Enghuri hydro power plant. It confirmed its 
role  as  a  key  transit  country  for  the  transport  of  Caspian  energy  resources  including  to  EU 
markets.  The  Baku-Tbilisi-Ceyhan  (Turkey)  oil  pipeline  and  the  Baku-Tbilisi-Erzurum 
(Turkey)  gas  pipeline  are  key  infrastructure  in  this  regard.  Furthermore,  the  Baku-Supsa 
(Georgia)  export  oil  pipeline  was rehabilitated  and  the  Kulevi  oil  terminal  at  the  Black  Sea 
was made operational. Georgia continued to participate in the “Baku Initiative” for EU-Black 
Sea/Caspian  energy  cooperation.  It  actively  participated  in  the  completed  European 
Commission  study  regarding  the  feasibility  of  a  Trans-Caspian/Black  Sea  energy  corridor. 
Georgia launched, together with companies from Azerbaijan, Lithuania, Poland and Ukraine a 
new  study  on  the  extension  of  the  Odessa-Brody  oil  pipeline  to  Gdansk  in  Poland.  Georgia 
pursued the upgrading of gas infrastructure and the assessment of the use of underground gas 
storage  facilities.  A  Georgian-Azerbaijani  agreement  on  natural  gas  was  signed  in  2008. 
Azerbaijan  has  thus  become  the  key  provider  of  natural  gas  to  Georgia.  Georgia  initiated 
reflections to build up strategic oil reserves.  

The energy regulator started to develop a new electricity tariff methodology and measures to 
promote the use renewable energy sources. Azerbaijan, Georgia and Turkey worked on their 

EN 

17 

   EN 

 
plan  to  strengthen  electricity  inter-connections.  In  order  to  facilitate  regional  electricity 
integration,  Georgia  benefited  from  an  allocation  under  the  Neighbourhood  Investment 
Facility (under the European Neighbourhood and Partnership Instrument). Preparatory works 
were carried out on the project of the Black Sea Energy Transmission System which is part of 
the Turkey-Georgia-Azerbaijan high voltage transmission line. Georgia and Turkey launched 
a  feasibility  study  for  an  electricity  link.  The  construction  of  a  Georgia-Armenia  electricity 
interconnection  progressed.  Georgia  participated  as  observer  in  meetings  of  the  Energy 
Community.  Georgia  further  upgraded  electricity  networks  and  pursued  the  installation  of 
electricity  meters  in  cities.  In  April  2008  the  Government  adopted  the  state  programme  for 
renewable  energy-2008.  Preparations  started  towards  a  law  on  energy  efficiency  and 
renewable  energy.  Much  more  efforts  are  needed,  according  to  the  objectives  of  the  Action 
Plan, to make progress on energy efficiency and the use of renewable energy sources. Georgia 
initiated the development of a plan on the detection of nuclear and radioactive materials.  

In  the  field  of  climate  change,  Georgia  continued  preparing  its  climate  strategy,  adaptation 
policies and a second national communication on climate change, including vulnerability and 
adaptation studies. An inventory of greenhouse gas emissions of 2000 – 2006 was completed, 
and  a  first  report  published  in  September  2008.  Georgia  took  steps  to  prepare  and  approve 
further  Clean  Development  Mechanism  (CDM)  projects.  Only  one  of  the  more  than  30 
Georgian  CDM  projects  has  been  registered  at  the  UN  level.  The  European  Commission 
continued to support Georgia to implement the Kyoto Protocol. Georgia has not yet adopted a 
formal position regarding the post-2012 regime. 

As regards the environment, Georgia’s water and waste infrastructure as well as biodiversity 
were seriously affected by the August 2008 armed conflict. Updating and finalisation of the 
draft  second  national  programme  of  environment  protection  for  2009-2012  is  planned.  The 
legislative  framework  continues  to  require  further  development,  in  particular  as  regards 
implementing  legislation.  However,  no  new  environment  legislation  was  adopted  in  2008. 
Nevertheless,  new  legislation  on  water,  waste  and  nature  protection  as  well  as  on  rules  to 
conduct  State  ecological  examination  is  under  preparation.  No  new  strategies  or  plans  were 
adopted  in  2008  either.  Efforts  are  still  on-going  to  develop  a  policy  document  on  forestry. 
Water  governance  reform  is  on  hold.  Some  steps  were  taken  to  address  obsolete  pesticides. 
Georgia  took  steps  to  enhance  its  environmental  monitoring  system  and  environmental 
inspectorates. Continued attention is required to implement existing strategies and plans and 
to further enhance monitoring and enforcement.  

The  former  Environmental  and  Prognostic  Centre  was  transformed  into  a  National 
Environmental Agency. An Agency of Protected Areas was created from a former department 
under the Ministry of Environment and Natural Resources. However, further strengthening of 
administrative  capacity  at  all  levels  of  the  country  is  still  a  major  challenge.  Coordination 
between  authorities  requires  attention.  No  significant  progress  can  be  recorded  in  the 
integration  of  environmental  considerations  into  other  policy  sectors.  Georgia  took  steps  to 
prepare  a  state-of-the-environment  report  for  2006.  Access  to  information  and  public 
participation  require  particular  attention,  even  if  the  Aarhus  Centre  continues  to  be 
operational. There were no developments concerning environmental impact assessment (EIA), 
as  public  projects  continue  to  be  exempted  from  such  assessments.  Some  steps  were 
undertaken  to  promote  implementation  of  strategic  environmental  assessment.  For  the 
Regional Environmental Centre for the Caucasus, please see section on regional cooperation. 

Georgia  did  not  make  significant  progress  in  the  ratification  of  the  Protocol  on  Strategic 
Environmental  Assessment  Protocol  to  the  UNECE  Convention  on  Environmental  Impact 

EN 

18 

   EN 

 
Assessment  in  a  Transboundary  Context,  nor  in  signing  the  UNECE  Convention  on  the 
Protection  and  Use  of  Trans-boundary  Watercourses  and  International  Lakes,  or  becoming 
party to the UNECE Convention on the Transboundary Effects of Industrial Accidents and to 
the UNECE Convention on Environmental Impact Assessment in a Trans-boundary Context . 
Furthermore,  the  implementation  of  several  already  ratified  agreements  requires  particular 
attention. Georgia participated in the Danube - Black Sea Task Force (DABLAS), in the EU 
Water  Initiative,  where  a  national  policy  dialogue  was  formally  launched,  and  the 
International Commission on the Protection of the Black Sea against Pollution. Cooperation 
and  information  exchange  took  place  between  the  European  Commission  and  Georgia, 
including  on  water,  forestry,  waste  management,  environmental  data,  biodiversity,  land 
management and strengthening the capacity of environmental NGOs. Other topics, such as air 
quality and civil protection were identified for possible closer cooperation.  

The Community Civil Protection Mechanism was mobilised in the aftermath of August 2008 
conflict and facilitated the  arrival  and use  of  the civil protection assistance provided by the 
EU  Member  States.  Georgia  and  the  European  Commission  discussed  the  possibility  to 
negotiate  a  bilateral  administrative  arrangement  on  closer  co-operation  in  the  field  of  civil 
protection. 

the  fixed  network  operator.  The  regulatory  authority, 

In the field of the Information Society, the markets for electronic communications have been 
completely opened to competition, but the local and long-distance services are still dominated 
by 
the  Georgian  National 
Communications  Commission  (GNCC)  is  preparing  regulations  for  the  tariffs  of  fixed  and 
mobile  services  as  well  as  for  interconnection  changes.  Additional  licenses  for  GSM 
frequencies and for WIMAX services have been auctioned and attributed. As Internet services 
are  not  yet  well  developed,  the  regulatory  authority  intends  to  increase  broadband 
deployment.  

Georgian  audiovisual  legislation  is  still  not  aligned  with  European  standards  on  media 
regulation. The current legislation and practice of the National Communication Commission 
does  not  allow  for  an  adequate  protection  of  minors  and  other  consumers.  Films  and 
programmes not suitable for children are still broadcasted outside adequate times. Georgia has 
not ratified the Council of Europe Convention on Transfrontier Television.  

Research and innovation  activities  remain  modest.  The  participation of Georgia in the 7th 
Research  Framework  Programme  (FP7)  did  not  significantly  increase  in  comparison  to  the 
FP6.  However,  the  slightly  higher  success  rate  suggests  that  there  are  improvements  in  the 
quality  of  submitted  proposals,  in  particular  in  the  fields  of  research  infrastructures, 
international cooperation and health. As a result of the first INCO-NET call, IncoNet EECA 
(The  S&T  International  Cooperation  Network  for  Eastern  European  and  Central  Asian 
countries)  was  launched  on  1  January  2008  for  the  duration  of  four  years.  To  ensure  the 
international  character  of  this  project  a  large  consortium  of  23  institutes  from  21  EU  and 
EECA countries, including Georgia, was formed. 

7. 

PEOPLE-TO PEOPLE CONTACTS, EDUCATION AND HEALTH 

Reform  of  higher  education  progressed  with  a  focus  on  alignment  and  approximation  to 
European  standards  in  line  with  the  principles  of  the  Bologna  Process.  In  this  respect,  the 
establishment  of  an  institute  for  European  Studies  with  support  from  the  earlier  TACIS 
instrument  provides  a  model  for  the  application  of  Bologna  standards.  In  addition,  Georgia 

EN 

19 

   EN 

 
hosted  a  Council  of  Europe  Bologna  regional  conference  on  self  certification  of  national 
qualification  frameworks  in  November  2008  and  became  a  governmental  member  of 
European  Quality  Assurance  Register  (EQAR)  While  all  higher  education  actors  and 
universities  are  familiar  with  Bologna  Process  requirements,  systemic  reform  will  require 
structured  national  coordination  and  additional  consensus-building  support  actions.  The 
University programmes are still not responding the labour market demands. 

Georgian  universities  and  higher  education  institutions  participated  actively  in  Tempus, 
benefiting from three projects under the first Call for Proposals of Tempus IV. A total of ten 
students and one scholar received scholarship under Erasmus Mundus for the academic year 
2008-9.  A  further  nine  Georgian  students  received  scholarships  in  European  integration 
studies at masters level for students from the ENP region under a special pilot project for the 
academic  year  2008-9.  Student  and  academic  mobility  received  further  impetus  through 
participation  in  Erasmus  Mundus  External  Cooperation  Window.  Improved  mechanisms  for 
awareness-raising  of  what  EC  programmes  offer  is  urgently  required  in  order  to  offset  the 
tendency to monopolize information about international cooperation opportunities. 

In the area of vocational education and training (VET), the National Professional Agency 
(NPA) started operations in January 2008 in support of sector reform, developing activities in 
relation  to  competence-based  standards  and  qualifications,  teacher  training,  career  guidance 
and adapting training to labour market needs. The Ministry of Education and Science held an 
international conference on financing of VET in December 2008 to contribute to the further 
elaboration of the VET reform strategy of the Ministry. The sector policy support programme 
for  the  VET  in  2009  was  agreed  with  the  Government.  Improved  coordination  mechanisms 
were  established  with  the  assistance  of  the  ETF  as  a  basis  for  stakeholder  dialogue,  and 
reform-related research. Georgia elaborated its first National Report on Adult Education in the 
framework  of  life-long  learning  with  view  to  its  presentation  at  the  2009  UNESCO  world 
conference on Adult Education. Achieving equity and greater access to vocational education 
and  training  particularly  for  women  and  the  economically  vulnerable  remain  key  policy 
priorities alongside agreed mechanisms to accredit skills and prior learning (APL) to combat 
structural  unemployment.  Reform  of  vocational  training  and  education  requires  on-going 
investment, optimum transparency and the involvement of all concerned parties. 

Georgia  continues  to  benefit  from  its  participation  in  the  Youth  in  Action  programme 
providing support to various youth projects, including youth exchanges, voluntary service as 
well  as  other  non-formal  education  activities.  The  establishment  of  a  Youth  Information 
Centre and forum for structured dialogue between youth organizations and national Ministries 
would facilitate future developments in this area. 

In the field of culture, Georgia ratified the 2005 UNESCO Convention on the Protection and 
Promotion of the Diversity of Cultural Expressions in July 2008.  

Georgia  continued  health  sector  reform  by  focusing  inter  alia  on  financing,  primary 
healthcare, the privatisation of secondary health care (hospitals) and better access to services 
for  the  poor.  These  efforts  are  supported  by  state  healthcare  programmes,  adopted  in  May 
2008. An overall health strategy is lacking. The country also adopted an infectious diseases 
care  programmes  that  will  help  to  address  communicable  diseases  including  tuberculosis. 
Georgia  pursued  participation  in  the  EU  Network  of  competent  authorities  in  health 
information and knowledge. Georgia took measures to tackle the health impact of the August 
2008  armed  conflict.  Among  other  things,  the  country  developed  a  rehabilitation  plan  for 
damaged infrastructure, strengthened disease surveillance in the affected areas, cared for the 

EN 

20 

   EN 

 
psychosocial  traumas  of  the  affected  persons  and  provided  health  facilities  to  the  internally 
displaced persons.  

8. 

FINANCIAL COOPERATION – 2008 KEY FACTS AND FIGURES 

The  ENPI  financial  envelope  for  Georgia  under  the  National  Indicative  Programme  2007-
2010 is EUR 120.4 million. The programme is geared towards supporting the achievement of 
key  policy  objectives  as  outlined  in  the  ENP  Action  Plan  and  pursues  four  priorities: 
strengthening  good  governance  and  democratic  development,  supporting  regulatory  reforms 
in  areas  of  the  ENP  Action  Plan,  supporting  economic  development  and  poverty  reduction, 
and peaceful settlement of the conflicts.  

The  implementation  of  the  measures  covered  by  the  2007  Annual  Action  Programme  is 
underway.  The  sector  budget  support  programme  for  the  reform  of  Public  Finance 
Management  is  proceeding  as  planned.  Twinning,  TAIEX  and  SIGMA  have  provided  for 
more  flexible  interventions  specifically  geared  towards  administrative  and  institutional 
capacity building with a view to support the implementation of the ENP Action Plan. 

In  2008,  the  European  Commission  continued  to  support  national  reform  efforts  in  Georgia 
and programmed assistance for a total amount of EUR 28.8 million. The 2008 Annual Action 
programme,  adopted  in  September  2008  focussed  on  support  for  the  justice  reform  and  on 
twinning operations in support of the implementation of the ENP Action Plan.  

As  a  result  of  the  emergency  situation  due  to  the  conflict  with  Russia  of  August  2008, 
Georgia’s assistance needs have dramatically increased. In the international donor conference 
in October 2008 the EC pledged to contribute up to EUR 500 million towards the country’s 
reconstruction  needs  for  the  period  2008-20101.  A  number  of  projects  are  already  under 
implementation  such  as  humanitarian  assistance  (ECHO  -  EUR  8  million),  support  to 
internally displaced persons (ENPI – EUR 61.5 million and Instrument for Stability – EUR 15 
million) and the ESDP mission of EU observers.  

Assistance  previously  provided  under  the  ENPI  for  the  rehabilitation  programme  in  the 
conflict zones of Abkhazia and South Ossetia, with the overall aim of confidence building and 
peaceful settlement of conflicts, was stalled after the armed conflict in August. However, the 
Commission  is  focused  on  its  principle  of  peaceful  resolution  of  the  conflicts  and  hence  is 
looking  forward  to  finding  workable  solutions  in  order  to  continue  this  type  of  assistance 
under the ENPI. 

Georgia can also benefit from  cooperation activities  financed  under  the  ENPI  multi-country 
(including  the  Neighbourhood  Investment  Facility)  and  regional  programmes  and  is  eligible 
under the ENPI Cross Border Cooperation component. Under the Neighbourhood Investment 
Facility (NIF) a contribution for a project in Georgia was approved in 20082, committing EUR 
8 million in technical assistance, expected to leverage EUR 200 million in loans of European 
Finance  Institutions  in  the  energy  sector.  Georgia  participates  in  the  Black  Sea  CBC  Sea 
Basin  programme  (EUR  17,306  million  for  the  whole  programme  in  the  period  2007-13) 
which has been adopted in 2008. Through this programmes the populations of the maritime 

1 
2 

EN 

Including both "regular" programmes and "post-crisis" programmes 
‘Black 
for 
http://ec.europa.eu/europeaid/where/neighbourhood/regional-cooperation/irc/investment_en.htm  

Transmission 

information 

System’, 

Energy 

more 

Sea 

21 

see: 

   EN 

 
                                                 
regions bordering the Black Sea will receive funding for joint co-operation projects aimed at 
fostering sustainable development and enhancing human contacts.  

Additionally, EUR 2.65 million was programmed for Georgia in the period 2007-2008 under 
the thematic programme “Non State Actors and Local Authorities in Development”.  

EN 

22 

   EN