JOINT STAFF WORKING PAPER Implementation of the European Neighbourhood Policy in 2010Country report: Georgia  JOINT STAFF WORKING PAPER Implementation of the European Neighbourhood Policy in 2010Country report: Georgia
Date: 2011-05-25
Institutions: European Commission, High Representative of the Union
Subjects: European neighbourhood policy, Georgia, State aid, association agreement, bilateral agreement, democracy, economic reform, human rights, political cooperation, political reform

EUROPEAN COMMISSION 

HIGH REPRESENTATIVE OF THE
EUROPEAN UNION FOR 
FOREIGN AFFAIRS AND 
SECURITY POLICY

Brussels, 25.5.2011 
SEC(2011) 649 final 

JOINT STAFF WORKING PAPER 

Implementation of the European Neighbourhood Policy in 2010 
Country report: Georgia 

{COM(2011) 303 final} 
{SEC(2011) 637 final} 
{SEC(2011) 638 final} 
{SEC(2011) 639 final} 
{SEC(2011) 640 final} 
{SEC(2011) 641 final} 
{SEC(2011) 642 final} 
{SEC(2011) 643 final} 
{SEC(2011) 644 final} 
{SEC(2011) 645 final} 
{SEC(2011) 646 final} 
{SEC(2011) 647 final} 
{SEC(2011) 648 final} 
{SEC(2011) 650 final} 
{SEC(2011) 651 final} 
{SEC(2011) 652 final} 

EN 

   EN 

 
 
 
 
  
 
JOINT STAFF WORKING PAPER 

Implementation of the European Neighbourhood Policy in 2010 
Country report: Georgia 

1. 

OVERALL ASSESSMENT 

Georgia and the EU first established contractual relations in 1996 through a Partnership and 
Cooperation  Agreement  which  entered  into  force  in  1999.  On  this  basis,  the  EU-Georgia 
European Neighbourhood Policy Action Plan (ENP AP) was approved in November 2006 for 
a period of five years.  

In  2010,  the  EU  and  Georgia  held  meetings  of  the  Cooperation  Council,  the  Cooperation 
Committee,  and  subcommittees  on  trade,  economic  and  related  legal  issues  and  on  justice, 
liberty and security issues, plus one round of the EU-Georgia dialogue on Human Rights.  

This  document  reports  on  progress  made  in  the  implementation  of  the  EU-Georgia  ENP 
Action  Plan  between  1  January  and  31  December  2010  although  developments  outside  this 
period  are  also  taken  into  consideration  where  relevant.  It  is  not  a  general  review  of  the 
political  and  economic  situation  in  Georgia.  For  information  on  regional  and  multilateral 
sector processes, please refer to the sectoral report. 

The  EU  and  Georgia  agreed  to  move  forward  with  deepening  and  broadening  EU-Georgia 
relations  within  the  Eastern  Partnership  (EaP)  framework.  Negotiations  on  an  EU-Georgia 
Association  Agreement  (AA)  were  launched  in  July  2010.  The  negotiations  progressed  at  a 
good pace in the second half of 2010.  

This Agreement is conceived by both Parties as illustrating the most advance and ambitious 
approach  to  the  Eastern  Partnership  vision  of  association,  including  a  Deep  and 
Comprehensive  Free  Trade  Area  (DCFTA)  and  a  comprehensive  programme  of 
approximation  to  EU  acquis.  Negotiations  on  a  DCFTA  will  start,  in  the  same  framework, 
once  the  necessary  conditions  have  been  met.  Georgia  made  progress  in  implementing  key 
recommendations  in  areas  of  technical  barriers  to  trade,  food  safety,  competition  and 
intellectual  property  rights.    Georgia  also  initiated  work  to  build  the  necessary  institutional 
capacity for the trade negotiation process.  

Overall,  Georgia  made  progress  in  the  implementation  of  the  ENP  AP  priorities  throughout 
2010,  especially  in  reforming  the  justice  system,  improving  the  conduct  of  elections, 
increasing women’s rights, carrying out constitutional reform, reforms in trade and business 
related  areas,  and  regional  development,  as  well  as  substantially  curbing  administrative 
corruption.  One  of  the  major  achievements  was  the  entry  into  force  of  the  new  criminal 
procedure code in October 2010. Georgian authorities worked intensively to ensure the new 
code  was  successfully  implemented.  Continuing  these  efforts  and  effectively  implementing 
the legislation will be key to ensuring its long-term success.  

At the same time, Georgia needs to accelerate its efforts to consolidate democracy, especially 
as  regards  political  and  media  pluralism.  The  rights  and  integration  of  minorities  and 
corruption  among  high-ranking  officials  remain  areas  where  more  efforts  are  needed.  Other 

EN 

2 

   EN 

 
major  challenges  include  freedom  of  association,  labour  rights,  employment  and  social 
policies, poverty reduction and agricultural development. In the field of labour rights and core 
labour standards, ILO expressed concerns with the lack of compliance, by Georgia, with core 
labour conventions. If unaddressed, these concerns put at risk Georgia’s continuing inclusion 
in  the  EU’s  General  System  of  Preferences  (GSP+)  which  allows  Georgia  to  benefit  from 
trade preferences from the EU. 

After  the  double  shock  of  military  conflict  with  Russia  in  August  2008  and  the  global 
economic  crisis,  in  2010  the  Georgian  economy  showed  signs  of  recovery.  In  line  with  its 
commitments  in  the  ENP  AP  and  with  the  International  Monetary  Fund  (IMF)  Stand-By 
Arrangement,  the  country  preserved  a  prudent  fiscal  and  monetary  policy  stance  and  made 
progress  in  increasing  exchange  rate  flexibility.  Limited  recovery  in  Foreign  Direct 
Investment  (FDI)  inflows,  however,  meant  Georgia’s  external  position  remained  vulnerable 
given the need to finance the large current account deficit. The country is still dependent on 
external official financing. 

The EU continued to lend full support to Georgia’s territorial integrity and sovereignty and to 
a peaceful resolution of the existing conflicts.  The EU continued to fully implements its post-
war  assistance  pledge  of  up  to  EUR  500  million  as  announced  n  the  October  2008  donors’ 
conference.    The  Geneva  International  Discussion  continued  as  the  single  forum  for 
structured  dialogue  between  the  parties  to  the  conflict.    The  EU  Monitoring  Mission 
(EUMM),  as  the  only  agree  international  presence  on  the  ground,  continued  its  efforts  in 
support  of  a  stabilisation  of  the  security  situation.    However,  it  was  unable  to  carry  out  its 
mandate in the whole territory of Georgia given that it was prevented from getting access to 
the breakaway regions of Abkhazia and South Ossetia.  The start of the implementation of the 
Government  of  Georgia’s  “State  Strategy  on  Occupied  Territories:  Engagement  through 
Cooperation” did not lead to a fundamental change of the situation.  Throughout 2010 the EU 
continued to remind Russia of its commitments under the EU-mediated ceasefire agreement 
with Georgia on 12 August 2008 and the implementation plan of 8 September, which have not 
yet been fulfilled. 

2. 

POLITICAL DIALOGUE AND REFORM  

Democracy and the Rule of Law, Human Rights and Fundamental Freedoms 

Local elections, in which the Tbilisi Mayor was directly elected for the first time, took place 
in May 2010 in a calm atmosphere. The Election Code was amended in advance of the local 
elections,  including  changes  in  the  procedure  for  electing  the  Chairman  of  the  Central 
Election  Commission.  International  observers  reported  that  the  elections  marked  evident 
progress  towards  meeting  international  standards;  however,  shortcomings  continued  to  be 
observed  in  the  pre-election  and  post-election  periods,  mainly  with  regard  to  abuse  of 
administrative  resources  and  the  functioning  of  the  complaints  resolution  mechanism.  The 
Election Code Working Group resumed its work in November 2010, in order to further amend 
the  code  by  autumn  2011,  to  allow  a  full  year  of  implementation before the  next scheduled 
elections. 

Amendments  to  the  Georgian  constitution  were  drafted  by  the  Constitutional  Commission 
and  adopted  by  the  parliament  in  October  2010.  Most  amendments  will  enter  into  force  in 
2013,  after  the  presidential  elections.  The  constitutional  reform  aimed  at  ensuring  a  more 
balanced  separation  of  powers,  reducing  the  powers  of  the  president  so  as  to  strengthen  the 

EN 

3 

   EN 

 
parliament’s  role,  improving  the  system  of  checks  and  balances  and  reinforcing  the 
independence of the judiciary. However, the new amendments do not guarantee parliament’s 
oversight  function  as  they  make  it  very  difficult  for  parliament  to  mount  a  vote  of  no 
confidence  in  the  government.  The  process  and  pace  of  the  constitutional  reform  were  also 
criticised,  as  the  constitution  was  adopted  by  the  parliament  on  the  same  day  that  the  final 
opinion of the Council of Europe (CoE) Venice Commission was published.  

There was continued progress in 2010 on the reform of the criminal justice system. The new 
Criminal  Procedure  Code  entered  into  force  in  October  2010,  introducing  a  number  of 
substantial  changes  to  the  current  system  of  criminal  proceedings  in  Georgia,  notably  the 
introduction  of  jury  trials  in  criminal  cases.  Throughout  2010,  Georgian  authorities  worked 
intensively to ensure the successful implementation of the new code through various training 
programmes for justice sector professionals, public awareness campaign and the introduction 
of the new Integrated Criminal Case Management System.  

Progress  was  also  noted  on  strengthening  the  independence  of  the  judiciary,  as  the  new 
constitution  provides  for  judges  to  be  appointed  for  life.  However,  the  CoE  Venice 
Commission  and  the  civil  society  expressed  concern  over  the  long  probation  periods  before 
appointment. Judges on probation are more exposed to political influence. The ‘Law on Rules 
of Communication with Judges in Common Courts’ was amended in February 2010. It does 
not prohibit correspondence with a judge, but increases the fine for all illegal correspondence 
and extends the law to officials serving in political positions. Amendments were also made to 
the  ‘Law  on  Disciplinary  Responsibility  and  Disciplinary  Proceedings  of  Judges’,  changing 
the procedure for the election of the chairman of the disciplinary board, in order to minimise 
the possibility of political influence over disciplinary procedures against judges.  

As for access to justice, the free Legal Aid Service of the Ministry of Corrections and Legal 
Assistance continues to provide legal assistance to citizens throughout the country, including 
to vulnerable groups. However, a set-back was reported in 2010.  The Government of Georgia 
decided that the Legal Aid Service will start providing legal representation to citizens in civil 
and administrative cases in January 2013, and not as initially planned for January 2011, due to 
the lack of capacity within the service.  

No progress was noted on civil service reform in 2010. There are no laws or legal provisions 
regulating  salaries  or  training  of  civil  servants  in  Georgia.  A  new  Civil  Service  Code  was 
drafted, but is not in line with the principles and standards outlined by the OECD (SIGMA). 
The  Civil  Service  Bureau  (CSB)  mainly  concentrates  on  fighting  petty  corruption  in  the 
public  service  and  not  on  its  overall  reform.  In  line  with  this,  an  online  system  of  asset 
declaration for civil servants was established by the CSB.  

Limited  progress  was  made  in  2010  regarding  decentralisation  and  development  of  a 
local  self-government  reform.  The  Action  Plan  on  Regional 
national  strategy  for 
Development,  adopted  in  November  2010,  provides  for  a  new  ‘Law  on  Regional 
Development’ to be drafted in 2011, which will include various legislative steps to increase 
local self-governments’ competences. The new Constitution also contains a chapter on local 
self-government, but the provisions remain vague and in need for clarification with regard to 
the definition and organisation of local powers.  

In the field of Regional Policy dialogue the city of Tbilisi organised a seminar together with 
TAIEX to which representatives of the European Commission and of a number of European 
Regions were invited. Following the meeting, the Georgian minister of regional development 

EN 

4 

   EN 

 
and  infrastructure  with  a  group  of  officials  was  invited  to  the  2010  REGIO  Open  Days-
European Week of Cities and Regions in Brussels, during which discussions were held with 
Commissioner for Regional Policy J. Hahn. As a result a joint declaration on Regional Policy 
Dialogue was signed in February 2011 and an agreed work programme is being implemented. 

Since  the  ‘Rose  Revolution’,  Georgia  was  relatively  successful  in  curbing  administrative 
corruption. Progress was noted in criminalising corruption, avoiding conflicts of interest and 
protecting  whistleblowers.  A  new  Anti-Corruption  Strategy  and  Action  Plan  drafted  by  the 
Anti-corruption Interagency Coordinating Council was adopted in 2010. There were a number 
of  corruption-related  investigations  and  charges  brought  against  public  officials.  However, 
concerns  remain  on  corruption  at  political  level,  not  least  because  of  weak  control  over 
political party financing, the lack of transparency in procurement and privatisation processes, 
weak  accountability  of  high-ranking  officials  for  reserve  funds,  insufficient  protection  of 
property rights and a lack of transparency in media financing and ownership.  

Human rights and fundamental freedoms 

Georgia is party to the main international and regional human rights instruments, and to most 
of  their  optional  protocols.  Georgia  has  been  party  to  the  Rome  Statute  of  the  International 
Criminal  Court  since  2003.  A  meeting  of  the  Human  Rights  Dialogue  between  the  EU  and 
Georgia was held in 2010. It provided for a good general exchange of views on human rights 
and fundamental freedoms in Georgia.  

The  Public  Defender  (Ombudsman)  continues  his  independent  monitoring  of  human  rights 
violations  in  Georgia.  The  powers  of  the  Public  Defender  were  increased  in  2010.  The 
government  supported  the  role  of  the  Public  Defender’s  Office  (PDO),  through  increased 
budgetary allocations, inviting it to participate in the EU-Georgia human rights dialogue and 
by  including  the  Office  as  a  beneficiary  of  the  Comprehensive  Institution  Building 
Programme. 

Throughout  2010,  the  PDO  carried  out  its  first  year  of  monitoring  as  National  Preventive 
Mechanism under the Optional Protocol of the UN Convention against Torture (OPCAT). In 
September  2010,  the  Council  of  Europe  Committee  for  the  Prevention  of  Torture  (CPT) 
issued  its  report  on  a  visit  to  Georgia  in  February  2010.  It  reported  several  prisoners’ 
complaints  of  ill-treatment  and  abuse  of  authority  by  prison  staff,  which  have  not  been 
thoroughly investigated by the Georgian authorities. 

Inhuman  and  degrading  detention  conditions,  often  caused  by  overcrowding  in  prisons, 
remain  a  major  area  of  concern, together with inadequate healthcare in prisons, as was also 
reported  by  the  CPT.  The  treatment  and  situation  of  psychiatric  patients  is  also  of  concern. 
Limited progress was noted in the improvement of material conditions in prisons and in police 
detention  establishments,  and  in  the  provision  of  legal  aid  to  persons  in  police  custody. 
Amendments made to the Criminal Code of Georgia in February and July 2010 represented a 
positive step towards the liberalisation of criminal policies in Georgia. The implementation of 
these amendments and a more substantial revision of the criminal legislation and sentencing 
policies are important to address the problems caused by increasing prison population.  

The  lack  of  transparency  of  media  ownership  and  the  difficulty  of  access  to  public 
information  continues  to  pose  serious  problems  for  the  independent  media  in  Georgia.  The 
Parliament is scheduled to discuss a package of measures to guarantee transparency of media 
ownership,  by  amending  all  related  legislation,  including  the  Law  on  Broadcasting.  The 

EN 

5 

   EN 

 
Georgian Public Broadcaster’s coverage of the period before and during the local elections of 
May 2010 was reported to be more balanced compared to previous election periods, albeit still 
polarised.  

There has been no progress reported on the integration and the rights of ethnic, religious and 
sexual  minorities  in  Georgia.  The  ‘National  Integration  Strategy:  National  Concept  for 
Tolerance and Civic Integration’ was adopted in May 2009 but there is no follow-up report on 
the state of the implementation of the action plan for 2010. The CoE Framework Convention 
for  the  Protection  of  National  Minorities  has  not  been  fully  transposed  into  domestic 
legislation and the European Charter for Regional and Minority Languages has still not been 
signed  by  Georgia.  On  the  repatriation  and  integration  of  the  Meskhetian  population  to 
Georgia, the period for applications to return ended at the end of 2009 with more than 6000 
people seeking repatriation. The Georgian government set up a database for these applications 
and  started  assessing  them,  but  the  process  has  been  very  slow.  A  specific  action  plan  to 
effectively  ensure  the  repatriation,  resettlement  and  integration  of  Meskhetians  has  still  not 
been  developed  and  the  government’s  capacity  to  deal  efficiently  with  the  applications 
remains a subject of concern. 

In March 2010, parliament adopted the Law on Gender Equality drafted in consultation with 
local  NGOs,  international  organisations  and  government  bodies.  The  Advisory  Council  on 
Gender  Equality  Issues  in  the  parliamentary  Speaker’s  office  is  active  on  women’s  rights, 
gender  equality  and  domestic  violence  and  contributed  to  the  adoption  of  the  new  law.  The 
law provides for the  strengthening of women’s political participation and gender-responsive 
planning and budgeting by the government. Women continue to suffer from a gender pay gap: 
the  average  monthly  salary  of  formally  employed  women  remained,  on  average,  43 %  less 
than men in the third quarter of 2010. 

Progress was noted in the reform of the juvenile justice system where the amendments to the 
Criminal  Code  lifting  the  age  of  criminal  responsibility  from  12  to  14  years  of  age  entered 
into force in February 2010. The amendments also granted the prosecutor discretionary power 
to  divert  juveniles  from  criminal  prosecution  in  order  to  encourage  alternatives  to  criminal 
prosecution. Progress was also made on the specialisation of staff within the criminal justice 
system  and  in  setting  up  a  separate  juvenile  parole  board  to  consider  applications  for  early 
conditional release. 

Cooperation on Foreign and Security Policy 

Since June 2007, Georgia has been invited to align with CFSP declarations on a case by case 
basis. In 2010, Georgia aligned with 28 out of 44 CFSP declarations which they were invited 
to support. There was intense political dialogue with the Georgia in 2010, including through 
two  Political  and  Security  Committee  Political  Dialogues  in  June  and  September  2010,  and 
visits  by  the  Commissioner  for  Enlargement  and  Neighbourhood  Policy  and  the  High 
Representative of the European Union for Foreign Affairs and Security Policy to Georgia in 
April and July 2010 respectively. 

Strengthening regional cooperation  

Southern  Caucasus  Integrated  Border  Management  (SCIBM),  promoted  by  the  EU  between 
Georgia,  Armenia  and  Azerbaijan,  started  in  March  2010  (see  chapter  on  cooperation  on 
justice,  freedom  and  security).  The  Regional Environmental  Centre  (REC)  for  the  Caucasus 

EN 

6 

   EN 

 
worked  on 
environmental action plans (see chapter 6, part on environment). 

information  and  public  participation,  environmental  policy  and 

local 

Cooperation on settling conflicts within Georgia’s internationally recognised borders  

Georgia continued to implement the internally displaced persons  (IDPs) Action Plan,  which 
was  reviewed  in  May  2010.  In  tandem  with  the  review,  a  new  ‘IDP  Housing  Strategy  and 
Working  Plan’  was  drafted.  The  latter  outlines  the  remaining  needs  and  challenges  in 
providing durable housing solutions for all remaining IDP families due to limited availability 
of  funding.  From  June  to  August  2010  and  in  January  2011,  thousands  of  IDPs  illegally 
occupying  idle  buildings  in  Tbilisi  were  forcefully  evicted.  Although,  according  to  the 
Georgian  government,  most  of  the  evicted  people  had  already  received  durable  housing  or 
were not in need of them, many were offered relocation to far-away rural areas, with limited 
prospects of earning a living. Many international human rights associations, the international 
donor community in Georgia and local NGOs criticised the process and the manner in which 
these  evictions  were  carried  out.  With  the  support  of  UNHCR  and  other  donors,  the 
Government  developed  Standard  Operating  Procedures 
for  evictions.  However, 
implementation of these procedures is inconsistent, which often creates unmet expectations in 
IDPs.  Also,  more  efforts  are  needed  to  help  with  socio-economic  reintegration  and  to  give 
IDPs a means of earning a living. A number of projects exist, including some financed by the 
EU, but a comprehensive socio-economic State strategy for IDPs is not in place.  

The EU remains committed to respect for Georgia’s territorial integrity and sovereignty and 
peaceful  conflict  resolution.  The  EU  continues  to  fully  implement  its  post-war  assistance 
pledge  of  up  to  EUR 500  million  as  announced  in  the  October  2008  donors’  conference. 
Through  this  support,  tens  of  thousands  of  IDPs  have  received  durable  housing  and  some 
limited  efforts  were  made  to  integrate  them  socially  and  economically  in  the  host 
communities. Other conflict-affected people have also received assistance, and a constructive 
dialogue  between  communities  living  across  the  conflict  divide  has  been  fostered  through 
civil society. (See chapter on financial cooperation.) 

The EU has been taking an active role as a co-chair, together with the UN and the OSCE, of 
the ‘Geneva International Discussions’, set up in 2008 as a forum for dialogue and the only 
platform allowing an ongoing political conflict resolution process. In the course of 2010, six 
rounds of ‘Geneva Discussions’ took place.  

Throughout  2010,  the  EU  continued  to  remind  Russia  of  its  commitments  under  the  EU-
mediated  ceasefire  agreement  with  Georgia  of  12  August  2008,  which  have  not  yet  been 
fulfilled. In October 2010, Russia pulled out of Perevi village adjacent to the administrative 
boundary line with the Georgian region of South Ossetia.  

An EU civilian monitoring mission (EUMM) with 340 observers was set up in October 2008 
to  monitor  and  analyse  the  stabilisation  process.  In  September  2010,  the  EUMM’s  mandate 
was extended for another year. However, continued refusal of access to the breakaway regions 
for the EUMM results in asymmetrical implementation of the Mission’s mandate. 

In  July  2010,  the  Government  of  Georgia  approved  an  Action  Plan  to  implement  the 
‘Strategy on Occupied Territories: Engagement through Cooperation’. The Action Plan 
is to provide a ‘human-centred approach’ designed to ‘reduce isolation and improve welfare’ 
for people living in Abkhazia and the South Ossetia regions of Georgia. The ‘Modalities for 
Engagement of Organisations Conducting Activities in the Occupied Territories of Georgia’, 

EN 

7 

   EN 

 
which  are  the  implementing  modalities  for  the  Action  Plan  and  the  Law  on  Occupied 
Territories,  were  adopted  in  October  2010.  These  regulate  the  actions  of  donors  and  their 
implementing  partners  in  carrying  out  international  assistance  projects  in  the  breakaway 
regions. The international community has expressed concerns about these regulations and the 
restrictions  imposed,  recommending  changes;  however,  only  a  few  of  these  changes  were 
accepted  by  the  Georgian  government.  Successful  implementation  of  the  Georgian  Strategy 
and Action Plan, and the continuation of international assistance projects for peaceful conflict 
resolution, will depend on the implementation of the ‘modalities’ in a practical and enabling 
manner.  

On 23 November 2010, President Saakashvili made a unilateral ‘non-use of force’ pledge at 
the  European  Parliament,  stating  that  Georgia  would  only  use  peaceful  means  to  restore 
control over Abkhazia and South Ossetia. 

Georgia  continued  to  implement  the  IDP  (internally  displaced  persons)  Action  Plan,  which 
was  reviewed  in  May  2010.    In  tandem  with  the  review,  a  new  ‘IDP  Jousing  Strategy  and 
Working  Plan’  was  drafted.    The  latter  plan  outlines  the  remaining  needs  and  challenges  in 
providing durable jousing solutions for all remaining IDP families due to limited availability 
of  funding.    From  June  to  August  2010  and  in  January  2011,  thousands  of  IDPs  illegally 
occupying  idle  buildings  in  Tbilisi  were  forcefully  evicted.    Although,  according  to  the 
Georgian  government,  most  of  the  evicted  people  had  already  received  durable  housing  or 
were not in need of them, many were offered relocation to far-away rural areas, with limited 
prospects of earning a living.  Many international human rights associations, the international 
donor community in Georgia and local NGOs criticised the process and the manner in which 
these  evictions  were  carried  out.    With  the  support  of  UNHCR  and  other  donors,  the 
government  developed  Standard  Operating  Procedures  (SOPs)  for  evictions.  However, 
implementation of these procedures is inconsistent, which often creates unmet expectation in 
IDPs.    Also,  more  efforts  are  needed  to  help  with  socio-economic  reintegration  and  to  give 
IDPs a means of earning a living.  A number of projects exist, including some financed by the 
EU, but a comprehensive socio-economic state strategy for IDPs is not in place. 

3. 

ECONOMIC AND SOCIAL REFORM 

Macroeconomic framework and functioning market economy  

In the aftermath of the double shock of the military conflict with Russia of August 2008 and 
the global crisis, the Georgian economy is showing signs of recovery. Following two years of 
low  or  negative  growth,  2010  saw  a  revival  of  economic  activity.  After  a  contraction  of 
activity by 3.8 % in 2009, in 2010 real GDP grew by 6.3 %.  

On the back of the economic recovery, the government decided to tighten its budgetary and 
monetary  policies.  In  line  with  its  commitment  under  the  IMF  Stand-By  Arrangement,  the 
fiscal  deficit  was  reduced  from  9.2 %  of  GDP  in  2009  to  6.6 %  in  2010.  Expenditure 
containment  was  the  main  strategy  behind  this  fiscal  consolidation,  although  recovering  tax 
revenues were also an important factor. Tax revenue increased by almost 10 % in comparison 
to 2009 and thus more than compensated the falls from the previous year caused by the global 
crisis.  The  tightening  of  monetary  policy  began in  the  summer,  with  the  key  policy  interest 
rate being moderately increased, to keep inflation under control. However, while CPI inflation 
in  2010  was  7.1 %  on  average,  it  picked  up  at  the  end  of  the  year,  reaching  10.2 %.  In  late 
2010,  to  bring  down  inflation  pressures,  the  monetary  authorities  further  increased  the  base 

EN 

8 

   EN 

 
interest rate and introduced higher reserve requirements acting in line with their commitment 
to  macro-economic  stability  under  the  ENP  AP  and  the  IMF  Stand-By  Arrangement.  The 
authorities  also  reviewed  agricultural  policy,  announcing  greater  political  commitment  to 
promoting growth and jobs in the agricultural sector. 

While  the  economic  recovery  seems  to  be  taking  hold,  the  external  economic  situation 
remains vulnerable as the financing of the large current account deficit remains uncertain. By 
weakening domestic demand, the crisis contributed to a halving of the current account deficit 
in 2009. However, the deficit remains very large, at 9.9 % of GDP in 2010, and it is expected 
to increase further in 2011. The trade deficit, which reached 22.2 % of GDP in 2010, has been 
the main driver of the large current account deficit. Georgia’s exports continue to suffer from 
the trade embargo imposed by Russia in 2006 and extended in 2008. Georgia’s exports to the 
EU  countries  have  remained  low  and  the  opportunities  offered  by  the  GSP+  remain  under-
exploited. While a certain shift in trade and changes in its export profile have recently taken 
place,  Georgia’s  exports  continue  to  need  diversification.  Overall,  the  Georgian  export 
performance remains far below its potential.  

FDI inflows were adversely affected by the crisis and declined to USD 550 million (ar. EUR 
415 million) in 2010 in thus remaining significantly below their 2009 level when they reached 
USD  750  million  (EUR  566  million).  This  disappointing  performance  puts  at  risk  the 
financing of the current account and the build up of international currency reserves and shows 
that foreign investor confidence, which was hard hit by the conflict with Russia in 2008, has 
still not returned. It also reflects the loss of steam of the privatisation process, as many of the 
most attractive state companies and assets have already been sold.  

Consistent with the monetary authorities’ commitment within the IMF Stand-By Arrangement 
to increasing exchange rate flexibility, the National Bank of Georgia (NBG) continued its less 
interventionist exchange rate policy. The depreciation against the USD during the first half of 
the  year  reversed  in  June  2010,  with  the  appreciation  allowing  a  slight  recovery  in  foreign 
reserves.  However,  although  gross  international  reserves  have  recovered  from  a  trough  of 
USD 1.5 billion (EUR 1.13 billion) reached during the crisis to USD 2.3 billion (EUR 1.73 
billion) at the end of 2010, net international reserves remained low, at USD 825 million (EUR 
622 Million). A further vulnerability in the balance of payments relates to the fast increasing 
external  public  debt,  up  from  16.8 %  of  GDP  in  2007  to  34.1 %  of  GDP  in  2010,  and  a 
significant need for a debt roll-over in the next few years.  

In  September  2008,  the  IMF  approved  an  18-month  Stand-By  Arrangement  for  Georgia, 
worth USD 750 million (EUR 566 million). During the third programme review, approved by 
the IMF Executive Board in August 2009, the Stand-By Arrangement was extended until 14 
June 2011 and the financing package increased, bringing total access to IMF resources under 
the arrangement to USD 1.17 billion (EUR 883 million). On 12 January 2011, the IMF Board 
completed the 7th and the 8th reviews, concluding that performance under the programme has 
been broadly satisfactory. However, the authorities indicated that they did not intend to draw 
on the instalment of around USD 153 million (EUR 115 million) that became available. 

Employment and social policy 

The  labour  market  has  benefited  only  marginally  from  the  economic  recovery,  with  the 
unemployment rate decreasing only moderately from its 2009 height of almost 17 % to around 
15 %. There is a need to thoroughly address the mismatch between skills and labour market 
needs,  but  Georgia  has  no  specific  employment  strategy  in  place  and  no  employment 

EN 

9 

   EN 

 
implementing  agency.  More  generally,  there  is  no  overall  social  sector  strategy,  although 
there are several medium-term action plans to address particular policy areas, covering social 
exclusion  and  protection  issues  for  children  at  risk,  the  disabled,  those  with  learning 
difficulties, IDP families, and trafficking.  

In the field of labour rights and core labour standards, the March 2010 report of the ILO 
Committee  on  Freedom  of  Association  repeats  the  ILO's  concern  on  the  implementation  of 
two key conventions, on Freedom of Association and Protection of the Right to Organise, and 
on  Right  to  Organise  and  Collective  Bargaining.  The  Labour  Code  and  the  Law  on  Trade 
Unions need to be amended in order to comply with core labour standards, notably regarding 
the criteria for establishing trade unions, protection against anti-union discrimination, the right 
to  strike.  In  addition,  the  Committee  re-stated  ILO  continued  concerns  as  regards  the 
implementation  of  the  Conventions  on  Equal  Remuneration,  on  Discrimination,  and  on 
Holidays with Pay.  

In the area of social dialogue, the tripartite constituents reached an agreement, in May 2010, 
on the minimum changes to be introduced to the labour code, particularly with regard to anti-
union  discrimination.  However,  these  changes  have  not  yet  been  introduced.  Moreover,  the 
Georgian  Trade  Union  Conference  has  made  allegations  of  anti-union  discrimination  and 
government  interference  in  the  check-off  system,  which  suggests  persisting  interference  by 
the government in social dialogue.As regards social assistance, the government continued to 
implement the 2009 Children Action Plan and in November 2010 approved an action plan for 
the Major Areas of Child Care System Reform for 2011-12. The child welfare reform process 
continued  in  the  reporting  period.  The  government  supports  the  development  of  children’s 
homes for small groups and plans to close down all the 31 big institutions by the end of 2013.  

In June 2010, the system of means testing for targeted social assistance was revised and new 
criteria adopted to define households whose socio-economic conditions are below the poverty 
line.  The  government  also  adopted  rules  on  setting  up  a  unified  database  of  socially 
vulnerable families, evaluation of their social-economic conditions and their registration.  

In 2010, agricultural production continued to decline. All the major constraints (e.g. lack of 
consistent sector strategy, weak public services, fragmented supply chains, limited access to 
credit,  outdated  production  techniques,  etc.)  remain  so  far  unaddressed.  In  particular,  the 
government  has  not  taken  any  significant  measure  to  improve  access  to  credit  facilities  for 
farmers yet. However, some positive signals came in 2010 from the ministry of agriculture, 
which has drafted a comprehensive national strategy for the sector, for approval beyond the 
reference period. Limited availability of funding reduced the ministry’s ability to implement 
traditional support measures such as funding for mechanisation programmes, free distribution 
of fertilisers and subsidies for grape production.  

In  February  2010  the  government  created  the  Georgian  Agriculture  Corporation,  a  state-
owned  company  aiming  to  become  the  operational  arm  of  the  ministry  of  agriculture.  The 
process of privatisation of state-owned land continued steadily during the year. 

Overall,  most  of  the  public  efforts  in  the  sector  follow  top-down  approaches,  with  limited 
engagement  of  civil  society  and  with  a  focus  on  attracting  big  investors,  rather  than  on 
promoting rural initiatives that could benefit farmers more directly.  

In  the  reporting  period  there  was  no  progress  regarding  sustainable  development.  The 
ministry of environment and management of natural resources has not yet started to draft the 

EN 

10 

   EN 

 
relevant strategy. 

4. 

TRADE-RELATED ISSUES, MARKET AND REGULATORY REFORM 

After  a  decline  in  2009,  bilateral  trade  grew  during  the  reporting  period;  EU  exports  to 
Georgia  increased  by  31.6 %  compared  to  the  previous  year,  while  exports  of  Georgian 
products to the EU increased by 7.1 %. However, there is a need for further diversification of 
Georgian  exports,  which  remain  concentrated  in  a  few  commodities  of  low  value  added  (in 
particular, mineral products formed 71.8% of Georgia's exports to the EU in 2010.  

Georgia  continued  to  benefit  from  the  special  incentive  arrangement  for  sustainable 
development  and  good  governance  —  the  GSP+  —  within  the  EU  Generalised  System  of 
Preferences  (GSP).  These  enhanced  preferences  should  help  to  diversify  Georgia’s  export 
structure and improve its export performance. However, the above-mentioned, if unaddressed, 
put  at  risk  Georgia’s  inclusion  in  the  GSP+  given  that  it  is  conditional  on  the  country’s 
compliance with the core ILO and UN conventions. 

At the beginning of 2010, Georgia increased above the rates bound in its WTO schedules the 
customs duties applied to imports of some industrial and agricultural products. In March 2010 
Georgia  ended  this  breach  of  WTO  rules.  In  the  course  of  2010,  Georgia  rectified  other 
breaches  in  WTO  rules:  it  lowered  the  tariff  rates  applied  to  imports  of  spirits  to  the  levels 
bound  in  its  WTO  schedules  and  it  equalised  excise  taxes  on  imported  and  domestically 
produced tobacco products.  

Intensive dialogue was held on preparations for the start of negotiations on a DCFTA with the 
EU based on the EU key recommendations. Good progress was made in drafting and adopting 
strategies and preparing the necessary legislation in the key regulatory areas as reported below 
in the sections on sanitary and phytosanitary measures, free movement of goods and technical 
regulations, intellectual property rights and competition. However, in order to become ready 
for  DCFTA  negotiations,  Georgia  will  need  to  accomplish  additional  work,  in  particular  as 
regards practical implementation of reforms in the key regulatory areas and building adequate 
institutional structures and administrative capacity for the negotiating process.  

In  January  2010,  the  Georgian  National  Investment  Agency  (GNIA)  established  an  Export 
Promotion  Department.  The  GNIA  launched  in  September  2010  a  new  export  web  portal 
focussing  on  the  needs  and  interests  of  Georgian  exporters,  including  facilitating  partner 
searches for foreign companies. In 2010, the GNIA also held events to promote export and to 
ensure the trade community was regularly consulted on and informed of export procedures.  

In  July  2010,  the  EU  and  Georgia  concluded  negotiations  on  a  bilateral  agreement  for  the 
protection of their respective ‘geographical indications’. The agreement, which is the first of 
this  kind  with  an  ENP  partner,  will  foster  trade  in  agricultural  products  and  foodstuffs 
originating in the territories of both Georgia and the EU.  

Georgia  made  progress  on  revenue  management.  The  Revenue  Service,  the  agency 
responsible  for  customs  and  taxation  issues  under  the  ministry  of  finance,  was  transformed 
into a legal entity under public law from April 2010 with a view to making it more business 
oriented. In September 2010, Parliament approved a new Tax Code which entered into force 
in January 2011. The existing Customs Code provisions were reduced from 250 articles to 36 
articles  and  included  in  the  new  Tax  Code.  The  impact  of  these  changes  will  have  to  be 

EN 

11 

   EN 

 
evaluated  in  the  light  of  the  implementing  regulations,  which  have  yet  to  be  adopted.  The 
Georgian  customs  continued  upgrading  its  risk-analysis  system.  It  set  up  an  Operational 
Management  Division  in  the  Customs  Control  Department,  which  operates  as  a  central  unit 
with  specially  trained  officials.  Mobile  x-ray  screening  systems  are  used  to  control  vehicles 
and  a  database  is  now  in  place.  A  tracking  system  for  vehicles  in  transit  is  also  operational 
and  scanned  images  are  attached  to  the  transit  documents  via  the  Automated  System  of 
Customs Data (ASYCUDA). The Georgian customs drafted standard procedural manuals for 
customs  officials  on  customs  infringement,  definition  of  sanctions  and  border  customs 
procedures in Tbilisi International Airport, Poti Sea Port and the Kutaisi Free Industrial Zone. 
Concerning  ethics  and  human  resources,  the  ministry  of  finance  adopted  two  orders  which 
regulate  recruitment  and  training  of  probationers  in  the  Customs  Service.  A  comprehensive 
human  resources  strategy  is  being  drafted.  Georgia  now  applies  the  updated  version  of  the 
Harmonised Commodity Description and Coding System (HS 2007). The ministry of finance 
prepared  a  draft  amendment  to  the  Law  on  Customs  Fees  aiming  to  abolish  customs 
administrative fees. Georgia amended the Valuation chapter of the Customs Code and enacted 
the  relevant  implementing  provisions  with  a  view  to  clearly  defining  procedures  for 
determining  the  customs  value  according  to  WTO  principles.  Georgia  should  continue  to 
ensure that measures are taken to align the policy on customs administrative fees, to simplify 
and  coordinate  post  clearance  controls,  to  improve  the  uniformity  of  customs  controls  and 
decisions across the administration and to upgrade customs capacity for checking cross-border 
movement  of  counterfeit  and  pirated  products.  Additional  acts,  for  example  on  integrated 
tariff and advance customs rulings (BTI and BOI), need to be adopted. 

Georgia  made  some  progress  on  the  free  movement  of  goods  and  technical  regulations. 
Government  adopted  a  Strategy  on  Standardisation,  Accreditation,  Conformity  Assessment, 
Technical Regulation and Metrology together with a Programme on Legislative Reform and 
Adoption  of  Technical  Regulations  in  respectively  July  and  August  2010.  The  drafting  of  a 
Code on Safety and Free Movement of Products started and is to be finalised and adopted in 
2011.  A  new  single  agency  in  charge  of  market  surveillance  -  Technical  and  Construction 
Inspection Agency -  was set up through merging of the two existing agencies in this field and 
development of a market surveillance strategy is planned for 2011. 

In the area of sanitary and phytosanitary (SPS) issues, in December 2010 Georgia adopted a 
food  safety  strategy  aiming  at  aligning  this  sector  with  EU  and  international  standards. 
Georgia  plans  the  approximation  with  key  EU  ‘horizontal’  legislation  by  2014.  In  2010, 
Georgia drafted and adopted several implementing acts such as the hygiene rules for food and 
feed business operators, including simplified rules for smaller operators. It also adopted rules 
on  inspections  and  traceability.  Georgia  prepared  draft  laws  on  food  safety,  hygiene, 
registration  of  food  establishments  and  labelling  of  food  products.  In  2010,  Georgia  started 
implementing  food  safety  provisions  that  had  been  suspended  since  2006.  As  a  result, 
registration  of  food  business  operators  started  in  February  2010.  Georgia  also  initiated 
compulsory  inspections  of  traceability  requirements,  however  only  for  food  business 
operators  exporting  to  the  EU,  in  July  2010.  The  Food  Safety  Law  was  amended  to  extend 
inspections and traceability to all food and feed operators starting January 2011. In September 
2010, Georgia adopted the Annual State Control Programme of Food Business Operators. In 
December  2010,  the  Government  adopted  the  General  Plan  for  Food  and  Feed  Crisis 
Management.  Georgia  further  upgraded  laboratories  and  opened  new  slaughterhouses. 
Georgia  developed  an  SPS  training  programme  and  worked  on  training  of  experts.  The 
National Service for food safety, veterinary and plant protection prepared an institutional gap 
assessment. In October 2010, the European Commission’s Food and Veterinary Office carried 

EN 

12 

   EN 

 
out a mission to Georgia on the control of fishery products and a follow-up process is ongoing 
to  help  Georgia  to  meet  the  requirements  for  exporting  these  goods  to  the  EU.  Georgia 
continued to monitor animal diseases such as African swine fever and foot and mouth disease. 
Overall, nevertheless, Georgia will need to make further significant progress in the SPS sector 
in order to align it with the EU and international standards. In particular, legislation including 
its 
institutional  development  and  animal  disease 
surveillance need continued attention. 

implementation  and  enforcement, 

In  the  area  of  business  climate,  establishment  and  company  law,  Georgia  implemented  a 
very  efficient  registration  system  for  new  enterprises  through  one-stop  offices,  whereby  a 
company can be registered and necessary permits be given in half a day. It rose to 12th place 
overall in the 2011 World Bank ‘Doing Business’ study, in particular thanks to improvements 
in  access  to  credit  and  investor  protection.  Changes  made  to  the  Law  on  Entrepreneurs  in 
April  2010  reaffirmed  the  requirement  to  register  a  company  charter  in  the  Registry, 
specifying the minimum content of the charter. This minimum content includes information 
on  the  shareholders,  the  director(s),  the  managing  bodies  of  the  company  and  the  decision 
making rules, restrictions on the representation power of director(s), and information on any 
insolvency,  bankruptcy  or  rehabilitation  of  the  company.  The  further  amendments  made  in 
October 2010 set a time limit of four months for the liquidation of a company.  

2010 was also the first full year when the new provisions on audit applied to the following 
entities:  (a)  accountable  companies  (as  defined  by  the  Law  on  Securities  Market),  the 
securities which are admitted to the stock exchange, (b) companies licensed by the National 
Bank  of  Georgia  (such  as  banks,  insurance  companies,  brokerage  companies,  etc.);  and  (c) 
companies with more than 100 shareholders. Audits are to be conducted by an auditor who is 
legally and economically independent from the company, its directors and shareholders. 

On  financial  services,  since  December  2009  the  NBG  has  acted  as  the  single  regulator  of 
financial  services,  including  supervision  of  commercial  banks,  insurance  companies  and  the 
securities market. In 2010, it focused on a gradual transition towards a risk based supervision 
system.  The  banking  sector’s  high  levels  of  capital  and  provisioning  provided  adequate 
buffers against adverse shocks, but continued close supervision of banks remains critical. In 
2010,  the  NBG  introduced  new  measures  and  policy  instruments  designed  to  increase  the 
effectiveness of monetary policy.  

Other key areas 

In September 2010, Parliament approved a new Tax Code which entered into force in January 
2011. The new code introduced the concept of ‘micro’ and ‘small’ businesses. A different tax 
regime will be applied to individuals and companies involved in small businesses. Under the 
new code, companies will submit tax declarations on a quarterly basis. The new tax code also 
reduces the duration of legal proceedings for tax appeals from a maximum of 125 days to 65 
days.  The  Revenue  Service  introduced  e-filing  of  tax-returns,  that  enables  taxpayers  to  file 
declarations  electronically,  directly  or  through  their  representatives.  Negotiations  on 
avoidance  of  double  taxation  are  still  ongoing  with  Spain,  Cyprus,  Slovenia,  Hungary, 
Slovakia and Sweden. Georgia continues to apply an excise tax on the export of scrap metals. 

With  regard  to  competition  policy,  progress  was  made.  The  Comprehensive  Strategy  in 
Competition Policy was adopted in December 2010. In line with the Strategy, the Georgian 
Government  is  currently  drafting  a  general  framework  competition  law  (covering  antitrust, 
including  abuse  of  dominant  position,  merger  control  and  state  aid  rules).  The  Presidential 

EN 

13 

   EN 

 
Resolution issued in February 2010 set up an Agency for Free Trade and Competition, which 
is  an  independent  entity  under  public  law,  no  longer  under  the  ministry  of  economic  and 
sustainable development. The Agency is in the process of recruiting new staff. It still needs to 
be given adequate powers and resources.  

Georgia continued in 2010 to align its legislative framework on intellectual property rights 
with EU standards, which is of particular importance in the DCFTA process. In this context, 3 
TAIEX-funded study missions to MS IP Offices took place.  

A new Law on Design (separate from the Patent Law) was drafted and subsequently adopted 
in June 2010. The amended Patent Law introducing the supplementary protection certificate 
entered into force in June 2010. A Government decree was adopted in July 2010 to bring the 
system of fees into compliance with international requirements (the Trade-Related Aspects of 
Intellectual Property Rights — TRIPS — agreement). Under this Decree, IPR registration fees 
are  now  equal  for  local  and  foreign  persons,  and  so  comply  with  the  WTO  requirement  on 
non-discrimination. The Trademark Law was amended, introducing an accelerated procedure 
for trademark registration (at the applicant’s request, subject to an additional charge). 

The  criminal  procedural  code  that  entered  into  force  in  October  2010  authorises  the 
prosecutor  to  act  ex  officio  in  cases  involving  IPR.  According  to  an  independent  expert 
organisation,  Georgia  has  the  highest  prevalence  of  pirated  software  (95 %)  of  any  country. 
Overall, IPR protection and enforcement will require additional efforts. 

The new law on statistics entered into force in February 2010. The new set up increased the 
independence  of  the  National  Statistical  Office,  formerly  a  department  of  the  ministry  of 
economic and sustainable development, and now a legal entity under public law (‘Geostat’). 
However, the Geostat budget is still set by the ministry and is not sufficient to improve the 
quality of statistics.  

On  enterprise  policy,  some  progress  was  made.  The  Bank  of  Georgia  promoted  access  to 
finance  through  a  ‘Small  and  Medium  Enterprise  (SME)  Lending’  credit  line,  approved  in 
July 2010. It allows the Bank to develop its lending programmes countrywide in the relevant 
business segments, providing essential support for longer-term financing of micro, small and 
medium sized enterprises.  

With  regard  to  the  management  of  public  finances,  the  ministry  of  finance  continued  to 
implement its reform plan 2009-2011 including measures improving oversight and regulation 
of public procurement. Reform of public finance management, consistent with the objectives 
of the Action Plan, is one of the conditions of EU macro-financial assistance. 

Based  on  the  October  2010  amendments  to  the  Law  on  State  Procurement,  in  December 
2010  Georgia  introduced  a  new,  electronic  procurement  system  for  all  types  of  contract, 
irrespective  of  size  and  nature.  There  is  no  other  public  procurement  system  in  Europe  that 
would allow such extensive use of e-auctions. For the first time, all procurement records and 
data  will  be  stored  electronically,  and,  according  to  the  State  Procurement  Agency  (SPA), 
much  of  this  information  will  be  accessible  to  the  public.  Price  will  be  used  as  the  main 
criterion  to  determine  the  winner  of  a  contract  and  a  technical  evaluation  and  qualification 
compliance check is done with the winning tenderer only. Georgia has applied the Common 
Procurement  Vocabulary  since  2010.  To  prepare  for  the  implementation  of  the  new 
legislation, the SPA has adopted an E-procurement Implementation Action Plan that provides 
for training in the new procedures for procuring entities and bidders, as well as the purchase 

EN 

14 

   EN 

 
of IT equipment and software for the E-platform. The SPA also intends to conduct awareness 
raising campaigns for the wider public. 

A  newly  established  council  that  includes  representatives  of  the  State  Procurement  Agency 
and  several  representatives  of  NGOs  will  address  complaints  of  irregularities  and 
shortcomings in the procurement process. 

In terms of public internal financial control, in March 2010 parliament approved the law on 
State Internal Financial Control and Audit, which will gradually establish internal audit units 
within  all  ministries.  The  law  is  not  in  line  with  international  standards  on  managerial 
accountability  and  separation  of  audit  from  inspection.  The  ministry  of  finance  decision  to 
abolish  its  Central  Harmonisation  Unit  for  financial  management  and  control  in  September 
2010 and to dismiss its staff raises questions about the overall commitment to reform in terms 
of investment of staff resources and internal enforcement.  

In  the  area  of  external  audit,  the  Chamber  of  Control  adopted  its  2010–2011  Capacity 
Development Plan and in November 2010 updated the ‘Strategic Development Plan for 2010-
2012’. The documents provide for the approval of compliance audit manuals, the introduction 
of a quality control system, staff recruitment and targeted training. 

5. 

COOPERATION ON JUSTICE, FREEDOM AND SECURITY 

The  third  meeting  of  the  EU-Georgia  Subcommittee  on  Justice,  Freedom  and  Security  took 
place in Tbilisi in July 2010. 

In  the  area  of  border  management,  Georgia  continued  to  implement  the  Action  Plan  on 
integrated  border  management  adopted  in  2009  while  participating  actively  in  the  Southern 
Caucasus Integrated Border Management (SCIBM) regional programme, which was launched 
in March 2010. Border crossing points with Azerbaijan were fully equipped and refurbished 
with state funds. 

In  addition,  in  October  2010  the  ministry  of  internal  affairs  signed  a  two-year  Operational 
Agreement  with  FRONTEX  on  cooperation  to  counter  irregular  migration  and  cross-border 
crime and on strengthening working relations with EU member states. In August, the ministry 
also drafted Joint Standard Operational Procedures with the Revenue Service of the ministry 
of finance, with the support of the Border Support Team of the EU Special Representative. 

In  the  field  of  migration,  the  EU  and  Georgia  signed  visa  facilitation  and  readmission 
agreements,  which entered into  force in March  2011.  The  EU-Georgia  Mobility  Partnership 
entered the implementation phase, with the start of a three-year project on the reintegration of 
returning  migrants  and  a  number  of  bilateral  activities  with  EU  member  states.  Georgia 
started issuing only biometric passports as of April 2010. 

On the fight against organised crime, the ministry of internal affairs continued to prepare for 
accession to the Third Protocol to the UN Convention on Transnational Organised Crime on 
the  Illicit  Manufacturing  of  and  Trafficking  in  Firearms,  Their  Parts  and  Components  and 
Ammunition.  Georgia  ratified  the  European  Convention  on  Cybercrime  in  October  2010.  It 
did  not  ratify  the  2007  CoE  Convention  on  the  Protection  of  Children  against  Sexual 
Exploitation and Sexual Abuse, which it signed in 2009.  

EN 

15 

   EN 

 
With regard to the fight against trafficking in human beings, the ministry of internal affairs 
continued to implement the National Anti-Trafficking Action Plan 2009–10 while drafting the 
successor  plan  in  October  2010  for  the  period  2011–12  in  consultation  with  civil  society 
organisations. Moreover, Georgia hosted regional cooperation meetings with law enforcement 
agencies (police, border guards, and judiciary) from the Republic of Moldova and Turkey in 
July  and  September  2010  respectively,  with  a  focus  on  experience-sharing  and  improving 
cooperation.  

Regarding  the  fight  against  drugs,  Georgia  has  not  yet  adopted  a  National  Drugs  Strategy 
incorporating  both  demand  and  supply  reduction  actions.  However,  the  substance  of 
international  legal  instruments  on  prevention  and  enforcement  is  incorporated  into  national 
legislation. The ministry of health hosts the National Focal Point since 2009 but, as yet, the 
latter  has  no  drugs  monitoring  system.  There  are  various  reports  on  the  drug  situation  and 
drug  treatment  projects  are  implemented  in  cooperation  with  civil  society.  However,  the 
negative social attitude towards drug addicts does act as an obstacle.  

In the field of money laundering, Georgia actively continued cooperation in the context of 
the  Egmont  and  Eurasian  FATF  groups  and  Moneyval.  The  2005  CoE  Convention  on  the 
Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and the Financing 
of  Terrorism  remains  unsigned.  The  2003  Additional  Protocol  to  the  CoE  Criminal  Law  on 
Corruption aiming to protect arbitrators and jurors from bribery also remains unsigned.  

A  draft  law  on  data  protection  was  presented  to  Parliament  in  September  with  a  view  to 
signature  of  the  Additional  Protocol  to  the  1981  CoE  Convention  for  the  Protection  of 
Individual  with  regard  to  the  Automatic  Processing  of  Personal  Data  regarding  supervisory 
authorities  and  trans-border  data  flows.  To  give  the  former  practical  effect,  an  independent 
national data protection supervisory authority needs to be set up.  

In  the  area  of  international  and  regional  judicial  cooperation,  in  November  2010,  CEPOL 
(External  Working  Group)  approved  a  proposal  for  conclusion  of  a  cooperation  agreement 
with the Georgian Police Academy and the ministry of internal affairs. Georgia did not sign 
the  Second  Additional  Protocol  to  the  CoE  Convention  on  Mutual  Assistance  in  Criminal 
Matters to protect individual rights in the processing of personal data. As pointed out in 2009, 
a solid system for the protection of personal data is essential to advance cooperation with the 
EU  member  states,  with  Europol  and  with  EUROJUST.  Georgia  also  did  not  sign  the 
European  Convention  on  the  Transfer  of  Proceedings  in  Criminal  Matters.  With  regard  to 
judicial cooperation in civil matters, Georgia has not yet acceded to important conventions in 
the framework of  the Hague Conference on Private International Law, e. g. conventions on 
judicial  assistance  (1965  Convention  on  the  Service  Abroad  of  Judicial  and  Extrajudicial 
Documents in Civil or Commercial Matters and 1970 Convention on the Taking of Evidence 
Abroad  in  Civil  or  Commercial  Matters)  and  on  child  protection  (1996  Convention  on 
Jurisdiction,  Applicable  Law,  Recognition,  Enforcement  and  Co-operation  in  respect  of 
Parental Responsibility and Measures for the Protection of Children). The implementation in 
Georgia of the 1980 Hague Convention on International Child Abduction is also a matter of 
interest for the EU 

EN 

16 

   EN 

 
6. 

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

In  July  2010  the  United  Transport  Administration,  established  in  2009,  came  under  the 
umbrella of the ministry of economy and sustainable development. In the road sector, Georgia 
adopted a detailed action plan in 2010 to implement the 2009 Road Safety Strategy. Georgia 
intends to introduce road worthiness testing for all vehicles only in 2013. During the reporting 
period,  Georgia  pursued  investment  in  the  railway  sector,  which  included  preparing  for  the 
Tbilisi railway bypass.  

In December 2010 the EU and Georgia signed a comprehensive air services agreement. The 
agreement will allow Georgia to become a full partner of the EU in aviation and will open the 
respective markets and integrate Georgia into a wider European Common Aviation Area. As a 
result  of  the  agreement,  Georgia  will  harmonise  its  legislation  with  European  standards  and 
implement  EU  aviation  rules  in  areas  such  as  aviation  safety,  security,  the  environment, 
consumer  protection,  air  traffic  management,  economic  regulation,  competition  issues  and 
social matters.  

In  the  field  of  maritime  transport,  Georgia  is  committed  to  regaining  the  EU  recognition  of 
certificates from Georgian sea farers that was revoked in late 2010. Georgia started work on a 
new  Flag  State  Annual  Inspection  Policy,  underlining  its  will  to  remove  its  flag  from  the 
‘High  Risk’  category  on  the  black  list  of  the  Paris  Memorandum  of  Understanding  on  port 
state control. 

Georgia  and  the  EU  stepped  up  energy  dialogue,  inter  alia,  through  the  first  ever  energy 
subcommittee,  held  in  Tbilisi  in  October  2010.  In  November  2010,  the  Georgian  Prime 
Minister and the Energy Commissioner co-chaired a Georgia energy investment conference in 
Brussels. In 2010, Georgia ensured oil and gas transit through the Baku-Tbilisi-Ceyhan and 
the Baku-Tbilisi-Erzurum pipelines. Georgia puts great emphasis on the development of the 
Southern Gas Corridor including Nabucco and White Stream (gas pipeline crossing the Black 
Sea).  In  September  2010,  the  Heads  of  State  of  Georgia,  Azerbaijan  and  Romania  and  the 
Hungarian 
(Azerbaijan-Georgia-Romania 
Interconnection) project. This aims to export liquefied natural gas from Azerbaijan, through a 
Georgian Black Sea terminal, to Romania and beyond. Azerbaijani, Bulgarian and Georgian 
companies  further  studied  possibilities  to  develop  compressed  natural  gas  supply  to  the  EU 
across  the  Black  Sea  from  the  Georgian  coast.  Georgia,  Azerbaijan,  Lithuania,  Poland  and 
Ukraine continued work towards a Euro-Asian Oil Transportation Corridor. 

Prime  Minister 

the  AGRI 

endorsed 

An  observer  to  the  Energy  Community,  Georgia  initiated  studies  on  possible  membership. 
Georgia amended the law on electricity and natural gas, with regard to third party access to 
the grid and reserve capacity rules among other issues. Georgia continued to develop a new 
electricity  tariff  methodology;  it  increased  electricity  tariffs  in  July  2010.  Georgia 
implemented  its  large-scale  investment  programme  for  constructing  and  rehabilitating  small 
and  large  hydro  power  plants  and  gas  and  electricity  networks.  It  further  worked  on  the 
construction  of  the  Black  Sea  Electricity  Transmission  Line  (Azerbaijan-Georgia-Turkey). 
Georgia  and  Armenia  started  constructing  an  electricity  interconnection.  In  October  2010, 
Tbilisi  hosted  a  major  conference  of  the  EU-supported  Covenant  of  Mayors,  aiming  at 
promoting energy efficiency and the use of renewables at local level.  

In  the  field  of  climate  change,  the  second  National  Environmental  Action  Plan  for  2011–
2014,  currently  under  preparation,  identifies  climate  change  as  a  priority  issue.  A  second 

EN 

17 

   EN 

 
Climate  Week  took  place,  during  which  more  than  100  climate-related  awareness  raising 
events were carried out. Georgia plans to draft an overall climate change strategy, taking into 
account  the  findings  of  the  Second  National  Communication  to  the  UN  Framework 
Convention  on  Climate  Change,  submitted  in  2009.  Two  adaptation  programmes  developed 
under the Second National Communication are under implementation and preparations for a 
Nationally Appropriate Mitigation Action strategy have started. Georgia took steps to prepare 
and approve further Clean Development Mechanism (CDM) projects even if no new projects 
were registered at the UN level, leaving the overall number of registered projects at two. The 
EU  continued  to  support  Georgia  in  implementing  the  Kyoto  Protocol.  Georgia  is  also 
encouraged to fully implement the Cancun agreement and in particular devise a low carbon 
development strategy including update information on target or actions that it will implement.  

With regard to the environment, the ministry of environment and natural resources protection 
continued  to  draft  the  second  National  Environmental  Action  Plan  for  2011–2014,  which 
identifies as priority the following environment sectors: waste management, water resources, 
air  quality,  land  resources,  nuclear  and  radiation  safety,  biodiversity,  disaster  management, 
mineral resources, forestry and the Black Sea. Limited progress was made in developing the 
legislative  framework  including  an  environmental  code  and  the  related  implementing 
legislation.  The  legislative  framework  continues  to  require  further  development.  Continued 
attention  is  required  to  implement  existing  strategies  and  plans  and  to  further  enhance 
monitoring  and  enforcement.  Georgia  took  some  steps  to  promote  the  integration  of 
environmental  considerations  into  other  policy  sectors,  such  as  energy  and  regional 
development. A state-of-the-environment report was drafted but has not yet been published.  

Georgia  has  not  yet  ratified  the  Protocols  under  the  UN  Economic  Commission  for  Europe 
(UNECE) Convention on Long-Range Trans-boundary Air Pollution, nor signed the UNECE 
Convention  on  the  Protection  and  Use  of  Trans-boundary  Watercourses  and  International 
Lakes. It has not become a party to the UNECE Convention on the Trans-boundary Effects of 
Industrial  Accidents  or  the  UNECE  Convention  on  Environmental  Impact  Assessment  in  a 
Trans-boundary  Context.  Furthermore,  the  implementation  of  several  agreements  already 
ratified requires particular attention. Georgia participated in the EU Water Initiative, including 
a national policy dialogue, and in the Commission on the Protection of the Black Sea against 
Pollution.  

The  REC  for  the  Caucasus  carried  out  regional  activities  in  2010  mainly  in  the  fields  of 
information  and  public  participation,  environmental  policy  and  local  environmental  action 
plans. REC also further improved its internal management, fund-raising and visibility in 2010. 
Nevertheless, it carries over a deficit from previous years which impedes its activities.   

Concerning developments in the field of civil protection, there are  activities under the  EaP 
framework (please see the sectoral report). 

In  the  information  society  sector  the  Georgian  telecoms  regulator,  the  Georgian  National 
Communications  Commission  (GNCC),  is  working  towards  approximation  with  the  EU 
regulatory framework for electronic communications and ensured greater market opening. In 
2010,  the  GNCC  completed  the  review  of  both  mobile  and  fixed  call  termination  markets, 
reducing  termination  rates  by  approximately  50 %  via  the  imposition  of  cost  accounting 
methods.  

EN 

18 

   EN 

 
In March 2010 Georgia decided to introduce fixed and mobile number portability from 2011. 
Georgia also drafted a new numbering plan to be introduced in 2011, which will rationalise 
the national numbering space and provide for more efficient management.  

In  the  area  of  research  Georgia  increased  its  level  of  participation  in  the  7th  Framework 
Programme  (FP7).  As  of  November  2010,  24  research  groups  had  successfully  applied, 
receiving some EUR 1.7 million of EU funding. The highest level of successful participation 
was  in  the  research  infrastructure,  international  cooperation  and  health  parts  of  the 
programme.  Georgia  continued  to  participate  actively  in  the  International  Science  and 
Technology Cooperation Network for Eastern European and Central Asian (EECA) countries 
(FP7 IncoNet EECA project), which aims to support bi-regional EU-EECA dialogue and to 
increase  EECA  participation  in  FP7.  A  workshop  on  EU-EECA  collaboration  in  energy 
research was held in Tbilisi in October 2010, scientific areas of mutual for the EU and EECA 
interest  were  identified  for  potential  inclusion  in  future  FP7  calls  for  research  proposals. 
Georgia is a target country under the new FP7 International Cooperation Network for Central 
Asia and South Caucasus countries (FP7 IncoNet CA/SC) which was launched in April 2010 
and  aims  to  strengthen  and  deepen  the  EU  S&T  cooperation  with  the  CA/SC  countries,  as 
well as with the Republic of Moldova. 

Georgia  is  also  taking  an  active  part  on  the  Black  Sea  ERA-NET  project,  which  aims  to 
contribute  to  the  coordination  of  EU  Member  States’  and  partner  countries’  research 
programmes targeting the extended Black Sea region.  

7. 

PEOPLE-TO-PEOPLE CONTACTS, EDUCATION AND HEALTH 

In January 2010 the ministry of education and science announced further education reforms 
for 2010–15 including higher and secondary vocational education with a focus on structures, 
quality  assurance  and  the  role  of  executive  institutions.  A  new  law  on  the  Development  of 
Quality  Assurance  of  Education  was  adopted  in  September  2010  transferring  regulation  of 
accreditation  to  the  National  Centre  for  Quality  Enhancement.  New  rules  on  admission  to 
higher education institutions based on unified national exams were adopted in July 2010 with 
amendments  to  the  charter  of  the  Teachers’  Professional  Development  Centre  from  June 
2010.  Greater  clarity  is  required  on  retraining  incentives  and  efficient  use  of  resources  if 
promised school reforms are to be realised. Georgia pursued its approximation and alignment 
with  European  standards,  benefiting  from  an  ongoing  twinning  project  in  support  of  the 
Bologna Process.  

Concerning  vocational  education  and  training,  in  September  2010  parliament  adopted 
substantial  amendments  to  the  law  on  vocational  education  ensuring  a  clear  link  between 
vocational  and  higher  education,  increasing  flexibility  and  aligning  provision  with  lifelong 
learning  principles.  However,  there  was  limited  consultation  by  the  government  on  the 
amendments  in  the  law  and  over  14  VET  centres  were  closed..  The  government  adopted  a 
National  Qualifications  Framework  in  December  2010  broadly  in  line  with  the  European 
Qualifications  Framework,  covering  the  whole  education  and  training  continuum.  The  new 
Centre for Education Quality Enhancement coordinated intensive cooperation with employers 
on occupational standards and adopted over 100 new standards by the end of 2010. The Adult 
Education  Association  developed  a  National  Lifelong  Learning  Strategy.  Through  a  large 
programme  of  voucher-financing,  the  National  Teacher  Professional  Development  Centre 
oversaw  the  professional  development  of  some  20 000  primary  and  secondary  education 
teachers  through  subject  and  professional  in-service  training,  an  essential  premise  for 

EN 

19 

   EN 

 
implementation of the new teacher certification process which started in 2010 and which will 
become  mandatory  as  from  2014..  An  assessment  of  vocational  training  and  education-
business cooperation was carried out by the European Training Foundation under the Torino 
Process.  

Higher education reform in Georgia continued to benefit from participation in Tempus, with 
five projects selected under the third Call for Proposals for Tempus IV including one led by a 
Georgian university. Georgia also continued its active participation in Erasmus Mundus in 
the  academic  year  2010-11  with  the  expected  award  of  seven  scholarships  for  Erasmus 
Mundus  Master’s  Courses  under  Action  1  and  a  further  56  mobility  grants  for  students  and 
academics  under  Action  2.  Tbilisi  State  University  received  continuing  support  for  its  Jean 
Monnet chair in European law.  

Georgian  young  people  and  youth  organisations  continued  to  benefit  from  the  Youth  in 
Action Programme through exchanges, voluntary service and youth cooperation activities in 
non-formal  education.  A  national  Youth  Information  Centre  in  Tbilisi,  with  branches  in 
several regions, opened in 2010.  

In the field of culture Georgian cultural organisations participated in four projects under the 
2010 Special Action for ENP countries under the Culture Programme. A first twinning project 
on  cultural  heritage  conservation  started  in  June  2010  between  the  Georgian  National 
Museum  and 
the  Foundation  of  Prussian  Cultural  Heritage  (Stiftung  Preussischer 
Kulturbesitz).  To  advance  regional  cooperation  as  part  of  the  EaP  and  the  Kyiv  Initiative, 
Georgia  is  urged  to  ratify  the  2005  CoE  Framework  Convention  on  the  Value  of  Cultural 
Heritage for Society.  

Georgia pursued reform of its health sector. Household health expenditure remains high and 
coverage  by  health  insurance  low.  In  February  2010,  in  the  context  of  last  year’s  influenza 
A(H1N1) epidemic, the EU and Georgia established communication channels for exchanging 
epidemiological  information  in  the  event  of  a  public  health  emergency  of  international 
concern.  In  2010,  Georgia  adopted  a  national  HIV/AIDS  strategic  plan  for  2011–2016.  In 
October  2010,  Georgia  published  a  draft  national  HIV/AIDS  monitoring  and  evaluation 
framework.  

8.  

FINANCIAL COOPERATION — 2010 KEY FACTS AND FIGURES 

Cooperation framework 

The  Mid-Term  Review  of  the  programming  document  confirmed  that  the  Country  Strategy 
Paper  adopted  in  2007  remains  a  valid  framework  for  cooperation  with  Georgia.  The  new 
National Indicative Programme (NIP) 2011–13 for Georgia was adopted in May 2010 and has 
a  budget  of  EUR  180.3  million.  The programme is geared  to supporting the achievement of 
key policy objectives as outlined in the EU-Georgia ENP AP and pursues four priorities: (1) 
support  for  democratic  development,  the  rule  of  law  and  governance;  (2)  support  for 
economic  development  and  ENP  AP  implementation;  (3)  poverty  reduction  and  social 
reforms and (4) support for peaceful settlement of Georgia’s internal conflicts. 

The  NIP  2011–13  includes  a  specific  appropriation  to  finance  new  actions  under  the  EaP, 
notably a Comprehensive Institution Building Programme (CIB) (with a minimum allocation 
of  EUR  30.9  million)  and  Cohesion  Policy  (a  minimum  of  EUR  7.4  million).  The  CIB 

EN 

20 

   EN 

 
Framework Document was signed in October 2010 and identified three areas of key priorities 
including:  support  for  government  structures  for  coordination  of  enhanced  agreement 
negotiations;  support  for  trade  policy  reform;  and  consolidation  of  democratic  reforms 
through the strengthening of oversight institutions.  

Implementation 

Implementation of measures covered by the Annual Action Programmes (AAPs) 2007, 2008 
and 2009 is under way. The first Sector Budget Support (SBS) Programme in Public Finance 
Management (PFM), financed under AAP 2007, has been completed.  

Under the AAP 2008, an SBS on Justice has been implemented with major results achieved by 
the government in areas such as probation, legal aid, juvenile justice and support for Georgia’s 
Public Defender. The AAP  2009  for  Georgia  focused on Vocational Education and Training 
and on the implementation of Technical Assistance and Twinning Programmes. 

In 2010 a total of EUR 37.2 million was committed to Georgia under the bilateral envelope of 
the  European  Neighbourhood  and  Partnership  Instrument  (ENPI).  The  AAP  2010  was 
approved  in  June  2010  and  includes  an  SBS  for  PFM  reforms  aiming  at:  improving 
government  capacity  to  manage,  coordinate  and  monitor  the  reform  of  the  PFM  system; 
further  improving  budget  preparation,  execution  and  monitoring;  enhancing  the  capacity  of 
the Chamber of Control; and harmonising procurement systems in line with EU best practice. 
The  same  AAP  earmarked  EUR  7.2  million  for  a  Technical  Assistance  Facility  for  EU-
Georgia  ENP  AP  implementation  and  a  further  EUR 19 million  for  a  Sector  Policy  Support 
Programme  for  Regional  Development.  The  latter  will  contribute  to:  (a)  enhancing  the 
capacity  of  central  and  local  authorities;  (b)  streamlining  institutional,  legislative  and 
territorial  arrangements;  (c)  improving  legislation  and  regulations  to  reduce  local  self-
government  dependency  on  the  central  level;  (d)  improving  statistical  instruments;  and  (e) 
improving civil society participation at local level. 

In the aftermath of the August 2008 conflict and after some EUR 8 million were provided in 
direct humanitarian assistance, the EU has granted some additional funding to Georgia, largely 
through three Special Measures (adding up to EUR 105 million) in support of IDPs. The first 
two programmes have already been completed providing decent living conditions (by means of 
durable  housing)  and  livelihoods  to  IDPs  who  lost  their  homes  as  a  result  of  the  conflict.  In 
2010, the third programme (EUR 43.5 million) was launched and will provide accommodation 
and socio-economic integration for all Georgian IDPs (including those from the conflict in the 
early 1990s) and to their host communities.  

in 

In  addition  to  the  bilateral  allocation,  Georgia  also  benefited  from  cooperation  activities 
financed under the ENPI cross-border, inter-regional and regional programmes. Georgia takes 
the  ENPI  Cross-Border  Cooperation  (CBC)  programme  Black  Sea  Basin 
part 
(EUR 21.3 million  for  the  programme  in  the  period  2007–13;  the  overall  allocation  was 
planned to be increased). The main priorities of this programme are to support cross-border 
partnerships  for  economic  and  social  development  based  on  combined  resources,  to  share 
resources  and  competencies  for  environmental  protection  and  conservation,  and  to  support 
cultural and educational initiatives for the establishment of a common cultural environment in 
the Basin.  

EN 

21 

   EN 

 
Under  the  ENPI-financed  Neighbourhood  Investment  Facility  (NIF),  three  projects  were 
approved  in  the  water  sector  in  2010,  committing  EUR 15 million  in  grants,  expected  to 
leverage EUR 167 million in loans from European Finance Institutions. 

Other  EU  instruments  supplement  the  ENPI  assistance  package.  Georgia  benefited  from 
cooperation activities financed under horizontal instruments such as the European Instrument 
for  Democracy  and  Human  Rights  (EIDHR)  and  the  Development  Cooperation  Instrument 
(DCI) thematic programmes Non-State Actors and Local Authorities in Development (NSA-
LA) and Food Security. 

Georgia  also  continued  to  benefit  from  the  Instrument  for  Stability  to:  (1)  support  a  more 
balanced  coverage  of  political  parties;  (2)  contribute  to  the  repatriation/integration  of  the 
Meskhetians;  (3) support confidence building  measures  along and across  the  Administrative 
Boundary Line between Georgia and South Ossetia and Abkhazia, (4) advise Georgia on its 
policy towards the breakaway regions and (5) introduce the concept of transitional justice. 

Moreover,  as  part  of  the  October  2008  European  Union  pledge  to  Georgia,  a  second 
instalment  of  Macro-Financial  Assistance  has  been  prepared.  It  amounts  to  a  maximum  of 
EUR  46  million,  half  to  be  made  available  in  the  form  of  grants,  the  remainder  in  loans.  A 
first tranche shall be disbursed in 2011.  

Donor coordination 

The EU Delegation has continued to actively promote coordination of assistance activities in 
the  country,  especially  among  EU  donors.  The  government  should  play  a  stronger  role  in 
donor coordination in the future.  

EN 

22 

   EN