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					Office of the State Minister of Georgia on European and
                Euro-Atlantic Integration




Georgia’s Progress Report on Implementation
       of the ENP Action Plan in 2009




                   February 2010
SUMMARY

The report covers all chapters of ENP Action Plan and is developed against 2009 Action Plan
Implementation Program provisions. Main progress in specific fields is summarized below.

In the second half of 2009 the Government of Georgia undertook several steps to decrease the
political tensions which mounted in the first half of 2009. To enhance the freedom of media, there
were decisions to launch a special political channel, to amend a law on the public broadcasting and
to facilitate the work of independent TV channels such as Maestro. Agreement on the amendments
of Electoral Code and organization of an early local election as well as election of the Mayor of
Tbilisi was reached with the major opposition political parties. A chair of the newly established
Constitutional Commission was appointed by the opposition. Amendments to the Law on
Political Organizations providing for a better financing of opposition political parties were passed.

As regards the Judiciary, major Criminal Justice reform has continued. A new Criminal
Procedure Code was adopted, followed by adoption of Criminal Justice Reform Strategy and
relevant Action Plan of its implementation. The Code provides for a gradual introduction of the
Jury Trial, fully adversarial system and rules of evidence. Strengthening of the courts through
their reorganization and institutional development continued. 14 new regional courts were created.
18 new judges were appointed, salaries of judges increased and comprehensive training carried out.
The system of enforcement of courts decisions was reformed through the entry into force of the
relevant law foreseeing the mixed system of enforcement. The Strategy on Juvenile Justice
providing for the revision of the minimum age of criminal responsibility (setting it at 14 years) and
focusing on prevention was adopted.

In 2009 new prison facilities and a hospital were built and renovated in full conformity with
international standards. A comprehensive reform of the prison healthcare system was undertaken.
Amendments were introduced to the current Law on Imprisonment granting the right to prisoners
to leave penitentiary establishment area for a certain number of days per year. Code on
Imprisonment was adopted enhancing the administration of pre-trial detention and execution of
custodial sentences in line with international standards.

The system of free legal aid was further developed. The Register of the contracted private lawyers
was established under the Legal Aid Service in May 2009. 120 private lawyers are contracted in the
Register.

In November 20, 2009 the Agreement on Privileges and Immunities of the International
Criminal Court was ratified by the Decree of the Parliament of Georgia #2150-II.

The legislative changes related to criminal responsibility of law enforcements officials, increase of
salaries, improvement of working conditions, constant liberalisation of legislation has created good
environment for fight against corruption in all government structures. According to the
Transparency International 2009 Corruption Perception Index, which ranked Georgia 66th out of
180 countries, Georgia progressed the most in the world in this area in 2008-2009.

Regional cooperation has intensified, especially in the areas of energy and transport through
different fora, in particular GUAM and the Eastern Partnership. A coordination mechanism for
the Eastern Partnership has become an integral part of an institutional mechanism to coordinate EU
matters. By the decision of the Government of Georgia the overall coordination of the Eastern
Partnership is undertaken by the Office of the State Minister for European and Euro-Atlantic
Integration. Line ministries are responsible for the relevant Platforms.
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Government of Georgia pursues 3 key priorities with regard to the Russian aggression and
occupation of Georgian territories: (1) diplomatic activities; (2) security arrangements on the
ground; (3) maintenance of people-to-people contacts. In order to maintain peace and stability on
the ground, Georgia has completely fulfilled the 12 August 2008, agreement. Russia remains in
breach of and blatantly violates all the points of the EU brokered August 12 Six-Point Ceasefire
Agreement. Incidents, including kidnappings, lootings etc. take place on the daily basis in the
occupied territories and across the occupation line. In order to make Russia fulfil the 12 August
agreement, Georgia continues intensive consultations with its allies.

Georgia continued active cooperation with the EU member states in order to accomplish EUMM’s
access to the occupied territories. It also attributed great value to the Geneva Discussions
established after the Russia-Georgia war 2008. In order to contribute to peace, stability and security
in the occupied territories of Georgia, incident prevention and response mechanism (IPRM) was
established on the fourth round of Geneva discussions, February 17-18, 2009. The State Strategy
on Occupied Territories was adopted by GoG. The GoG extended its consent to the
implementation of the € 4M program envisaged within the framework of the EC Economic
Rehabilitation Program under the ENPI Annual Action Plan (AAP) 2007.

The year of 2009 was marked with a number of important events in EU-Georgia cooperation in the
field of Justice, Freedom and Security (JLS). On June 3, 2009 the second meeting of the EU-
Georgia Cooperation Sub-committee on Justice, Freedom and Security issues was held in Tbilisi.
The official negotiations on the EU-Georgia visa facilitation and readmission agreements were
launched on April 2, 2009. In November, 2009, upon completion of two subsequent rounds of
negotiations, the texts of the agreements were initialled. Joint Declaration on a Mobility
Partnership between the European Union and Georgia was signed on November 30, 2009.
Government continued the implementation of the reforms in all sectors under the JLS area; in
particular, a draft State Strategy of Migration Management was developed by the inter-
governmental working group. On May 28, 2009 Action Plan for Implementation of State IDP
Strategy for 2009-2012 was adopted.

GoG took further steps for the improvement of the security of travel documents in order to start
issuance of new passports in 2010.

Following the approval of the Integrated Border Management (IBM) Strategy, IBM Strategy
Action Plan has been elaborated by the Interagency Working Group and endorsed by Presidential
Decree of December 25, 2009. Transfer of the Border Crossing Points under the authority of the
Patrol Police and the merger of Navy with the Coast Guard of Ministry of Internal Affairs was yet
another step in the range of successful reforms in the field of border management.

In order to promote judicial cooperation on civil and criminal matters the Ministry of Justice has
developed a draft agreement on mutual legal assistance in civil and criminal matters and conducts
negotiations with other states on conclusion of appropriate bilateral agreements.

In 2009, Public International Law Department of the Ministry of Justice of Georgia conducted
extensive trainings on legal cooperation in civil and criminal matters based on multilateral and
bilateral agreements for the staff of the National Execution Bureau of the Ministry of Justice, judges
and assistants to the judges.

In 2009 GoG initiated a number of activities and programs aimed at creation of more effective and
well targeted social assistance system. Namely, evaluation and assessment of social assistance
performance was produced and new methodology of households‘ survey elaborated. During 2009
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GoG launched the Medical Insurance Program and adopted the rules on Granting Medical
Insurance Vouchers; the Ministry of Labor, Health and Social Affairs approved the State Program
for promotion of social rehabilitation of persons with disabilities, elderly people and homeless
children.

Government of Georgia continued to receive substantial financial assistance from international
financial organizations. During 2009 IMF carried our three tranches; World Bank Group and the
EBRD concentrated efforts on infrastructure development, financial sector stability and the social
needs of the IDPs and other groups of population.

The first Trade Policy Review (TPR) of Georgia was successfully held on 8-10 December 2009, in
WTO.

During the whole year of 2009 Georgian Government has continued its preparatory work for the
eventual negotiations on DCFTA with the EU. In response to the European Commission‘s (EC)
assessment report of Georgia‘s preparedness for a DCFTA with the EU, presented to the Georgian
Government (GoG) on March 26, 2009, on April 14, 2009 the GoG adopted the Resolution creating
the Interagency Working Group for the Preparation of the DCFTA. Coordination of DCFTA related
issues is performed by Prime Minister‘s Office. Governmental Commission on European
Integration established two specialized Task Forces respectively on technical regulation and
food safety issues. The work implied developing of the legal institutional basis. DCFTA
preparatory process focused on a set of administrative measures and legal and institutional reforms
in the area of technical barriers to trade (TBT), food safety, intellectual property rights (IPR),
competition policy, strengthening the administrative capacity of institutions and official to be
involved in the eventual negotiations and different administrative work like translation of Georgian
laws and presenting strategies and plans to the European Commission. Strategies in the area of
food safety, competition and TBTs were drafted and thoroughly discussed domestically and with
the EC. They represent a breakthrough in the regulatory alignment with the EU acquis in these
areas.

From January 2009 changes to the Customs Code came into effect, efforts have been taken to
introduce subsequent secondary legislation. The changes brought significant savings to the
transporting companies, importers, exporters by elimination unnecessary paperwork, launching risk-
based-management system, implementing simplified practices of the customs clearance.

In 2009, Specialised Task Force on technical regulations developed a Strategy in Standardisation,
Accreditation, Conformity Assessment, Technical Regulation and Metrology and Programme on
Legislative Reform and Adoption of Technical Regulations. In April 2009 GEOSTM was provided
with the full database of European Standards. Considerable number of European standards has
been adopted as national standards. Important contribution to the development of the quality
infrasrtucture is provided by the Physical-Chemical Measurement Laboratory renovated with EU
assistance. The progress in the field of accreditation has consisted of a number of actions
strengthening the institutional capacity of the organisation. New technical regulations were adopted
in the area of road transport, civil aviation, maritime transport and construction.

Measures to develop agricultural sector included actions for replacement of hybrid wine plants
and providing of Cheap Credit Program aimed at establishment of cold storage facilities for fruits
and vegetables as well as introduction of slaughter houses meeting high sanitary standards. At the
same time the MoA finalised elaboration of the Strategy for Agricultural Development.

Comprehensive Food Safety Strategy and Operational Programme was elaborated and approved
by the EU Integration Commission. It addressed all aspects outlined in the recommendations
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prepared and submitted to Georgia by the EU Commission as a result of the Fact Finding Mission
of October 2008. Georgia will start gradual implementation of the previously suspended food safety
legislation from 2010 as it was foreseen in the Strategy.

Concrete activities took place in the Food Safety Control system - more than fifteen hundred
samples were subjected to the laboratorial analyses and resulted in more than one hundred fifty
decrees on prohibition of the food products and other administrative measures. The MoA created
Working Group has undertaken intensive legal action by developing pieces of legislation in line
with the EU acquis regulating phyto-sanitary, food hygiene and veterinary fields. The WG has
already finalized the drafting of the Rules on Registration of Food Producing Enterprises; Food
Hygiene; Certification of Enterprise Hygiene; Labelling of Food and Food Products. All along the
year capacity building and training activities in the MoA continued with the support of
international donor organisations.

The Georgian Parliament approved new Organic Law of Georgia on National Bank of Georgia,
September, 2009 expanding and strengthening supervisory functions of the National Bank of
Georgia. Changes and amendments to the Law on Insurance of September 2009 marked alignment
of Georgian insurance legislation with EU acquis. Number of other legal changes considerably
improved the rate of compliance of Georgian legislation with EU acquis in the field of financial
services.

Legislative changes in the taxation area mainly affected three following spheres: tax deduction,
avoidance of double taxation and tax risk management. Other improvements contributed to the
extending the e-fling system and enhancing the voluntary disclosure concept.

The the area of IPR protection negotiations with the European Community on the Agreement on
Protection of Geographical Indications of Agricultural Products and Foodstuffs were completed.
New law on Design and ammendments to the Patent Law of Georgia in line with the international
standards and acquis were drafted.

In the area of Statistics a new ―Law on State Statistics‖ based on EUROSTAT recommendations
was adopted. Accordingly, the Department of Statistics of Georgia was transformed into an
independent National Statistics Service.

The new law on the Chamber of Control adopted in 2009 brings existing regulations in line with
EU standards and strengthens public oversight over budgetary expenses, guarantees increased
transparency of Government activities.

The Entrepreneur Service Centre was created in the Ministry of Economic Development of Georgia
at the beginning of 2009 granting licenses for natural resources, permissions for constructions and
different kinds of certificates and permissions for export that marks steps in the strengthening of the
enterprise policy.

Last year Georgia‘s Government started important reforms in the field of competition policy. Draft
strategy was developed and approved by the Governmental European Integration Commission. It
provides for an independent competition authority.

New Budget Code adopted by the Parliament (December 18, 2009), strengthens relationship
between MTEF and the State Budget and makes whole process transparent. Budget preparation and
reporting format for self-governed units was changed to provide all stakeholders with clear and
understandable information on the consolidated budget. Improvements in the PFM system
reflected an establishment of a single foreign currency account. It is fully functional since July
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2009. A draft law on internal auditing and inspection was prepared and submitted to the
Parliament.

In 2009 Georgia has started the process of country‘s accession to EUROCONTROL to contribute to
integration of Georgian air navigation area into the European air space. Georgia continued to
participate in realization of the Baku-Tbilisi-Kars New Railway Line Construction Project aimed to
develop the rail connection from the Caspian basin through Turkey to EU.

In 2009 Georgia strengthened cooperation with the European Energy Community. Through the
relevant EU projects Georgia has been actively involved in the process of the legal harmonization in
the field of energy. At the same time, under the framework of the INOGATE program, Georgia
enhanced co-operation on Caspian and Black Sea regional energy issues. Steps for development
of the energy transmission capacity which creates the real possibility to supply the electricity to
the European countries through the territory of Turkey in the near future have been made. The first
stage of the study on “Trans-Caspian Black Sea Gas Corridor” has been completed.

As to the environment, Georgia‘s Second National Communication to the UN Framework
Convention on Climate Change has been prepared and progress in preparatory work for ratification
of number of EU Conventions has been achieved. In the framework of EU projects the concept
paper on the new version of Water Law has been developed and the introduction of Water
Resources Basin Management System is under way.

Following the Bologna Process in 2009 Georgia continued to implement higher education reforms
with the aim to reinforce the institutional and professional capacities, provide additional support for
self-certification of National Qualification Framework and for program accreditation, improving the
coordination practice among the main stakeholders in higher education.




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1. Political Dialogue and Reforms
1.1 Democracy and the Rule of Law

1.1.1 Strengthening Democratic Institutions (The new package of democratic reforms)

Encouraging political pluralism

In 2009 the Government of Georgia has managed to decrease political polarization. Based on the
lessons learnt internal difficulties have been handled through peaceful and democratic means.
Amidst the existing challenges the Government of Georgia has managed to start the process of
political dialogue and proposed for discussion the broadest range of reforms with respect to the
judiciary, election, and media among other spheres to advance Georgia towards genuinely
democratic state. Significant progress has been achieved in both groups, the Constitutional
Commission and the Electoral Working Group.

Mass media

For 2009, Georgia has committed to ensuring and further supporting media freedom, one of the
fundamental institutions necessary to develop and consolidate a democratic political system and
considerable progress has been achieved in terms of fostering media pluralism.

A special political television channel modelled after C-SPAN and/or BBC Parliament will be
created by a joint initiative of the Chairman of the Parliament and Georgian Public Broadcaster. The
channel will provide live coverage of all important political events. In addition, political parties and
groups will have direct access to the channel in order to reach out to the public. A parliamentary
working group consisting of representatives of ruling and opposition parties has been established to
finalize operational guidelines. Several public hearings have been held since March 2009 with the
help of NDI of the USA. It is planned to launch the broadcasting in the beginning of 2010 and for
the timely launching of the Channel additional financial resources are envisaged in state budget for
2010.

To support the functioning of the Batumi Television Channel, the Georgian Government has
completed the process of restructuring of the debt of the Channel, following the recommendations
of the Public Defender.

In July 2009, the President proposed to extend the Public Broadcaster‘s Board and compose it based
on the principle of parity: out of 15 members seven would be nominated by opposition including
extra parliamentary oppositional parties, seven by majority and one would be named by civil
society. Simultaneously, mandate and oversight authority of the Board will be strengthened. The
relevant legal amendments already adopted by the parliament and the political consultation with
opposition concerning the composition of the board underway as well.

In order to guarantee sustainable financial development of the Public Broadcaster, amendments to
the Law on Broadcasting will be introduced. According to the amendments it will be defined, that a
certain percent of GDP will be diverted to the PB. This approach will exclude dependence on
Budget Law, which is changed every year.

The commercial TV channel ―Maestro‖ has received a license to air live political talk-shows. This
resolves a long-standing legal dispute between the channel and the Georgian National
Communications Commission. In July 2009 ―Maestro‖ received a license to broadcast via satellite.
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TV channels ―Kavkasia‖ and ―Maestro‖ are in total broadcasting twenty three political talk-shows;
however, their coverage extends to Tbilisi and surrounding regions only.

Three other national broadcasters (Public Broadcaster, ―Imedi‖, ―Rustavi2‖) feature seven political
talk-shows per week. Additionally, four radio channels broadcast forty one political talk-shows per
week.

Improving the Election Code

To increase confidence towards Electoral Code and Electoral environment at large through
inclusive and participatory and transparent process and through sustaining dialogue between
political parties Chairman of the Parliament launched an initiative to establish a cross-party working
group (EWG) with participation of the ruling party, parliamentary and non-parliamentary
opposition, NGOs, as well as International organizations such as COE, OSCE, NDI, IRI, embassies
of US and EU countries. The CEC has been the facilitator of the working of the group and the
Council of Europe, Venice Commission and OSCE Office for Democracy and Human Rights
provided the group with expert assistance.

Consultations within EWG lasted for ten months. In the framework of the Electoral Code Working
Group an agreement has been reached on certain new amendments and on holding local government
and Tbilisi Mayor Elections. Accordingly end of May 2010 has been appointed as the date for these
elections.
The final agreements/document embodied following topics:

   -   Direct Elections of Tbilisi Mayor: Direct elections of mayor shall be held in Tbilisi with
       30% threshold.

   -   Elections of Tbilisi Council: Tbilisi Sakrebulo shall be composed of 25 single-mandate
       majoritarian and 25 proportional system seats. The proportional seats shall be distributed
       among the election subjects that overcome the 4% threshold.

   -   Election Administration: The rule for electing the Chairman of the CEC shall be changed.
       After consulting with non-government organizations (NGOs), the President shall present 3
       candidates for the chairman‘s post to the Central Election Commission. The decision shall
       be made by those members of the CEC designated by the opposition with the majority of the
       votes. If none of the candidates receive enough votes, the Parliament is to select the Chair
       of the CEC from the 3 presented candidates. Secretaries of PECs shall be appointed by the
       opposition.

   -   Special Precincts: Policemen shall be given the right to vote in majoritarian elections, only
       if the polling station where the policeman is voting is located in the place of his/her
       registration.

   -   Timeline of appeals: Timeline for submitting complaints and appeals to every level of
       electoral administration shall be 48 hours instead of 24 hours as it currently stands.

Seven political parties signed all of the issues. Political party Georgian Dasi expressed reservation
to only to election administration topic. Alliance for New Georgia (Alasania‘s alliance) refused to
sign the document due to disagreement on Mayor election threshold.



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The amendments to the new Electoral Code have been submitted to the Parliament, adopted through
the first hearing and the new Electoral Code will presumably be adopted by the end of January
2010, in order to have time for effective implementation of new provisions until 2010 spring local
elections. Political parties agreed to continue the dialogue within the Election Working Group
Format on issues concerning Parliamentary elections.

The President also proposed the reform of local self-governance system, including, but not limited
to the possibility of shift from the current system of council-elected to directly elected mayors
(including mayor of Tbilisi).

New Constitution: A Constitutional Commission was established upon the initiative of the
President of Georgia. The objective of the Commission is to draft a new Constitution with a more
enhanced system of checks and balances, a stronger Parliament, an independent judiciary and
balanced presidential power.
The Chair of the Commission - nominated by the opposition - is an impartial, respected scholar, one
of the authors of the current Constitution of Georgia and a former chairman of the Constitutional
Court. The Commission comprises representatives of all major political parties and state
institutions, as well as academics, NGOs, and civil society. Each political party (including the ruling
party) has one representative. The Commission is composed in a balanced way which excludes any
possibility to control majority of its members by any political party or state institution, while all
decisions are made by 2/3 quorum.
The commission is working in close cooperation with relevant international organizations. Different
EU member-state constitutions are reviewed as possible models.
First draft of the new Constitution in expected to be presented by spring 2010.

Opposition Participation in Work of the National Security Council (NSC): In his address to
Parliament in July 2009, the President called for reform of the National Security Council and
establishment of an extended NSC format. The aim of this new format, which enables the
opposition to participate in NSC work, is to facilitate a wider debate on national security issues and
to encourage opposition to be part of decisions concerning Georgia‘s security and foreign policy.

Offer to Non-Parliamentary Opposition to Take Seats in Parliament: As a part of political
dialogue and reconciliation process, representatives of non-parliamentary opposition who boycotted
Parliament and refused to take their seats after the 2008 parliamentary elections have been offered
to assume their parliamentary seats. The aim of this offer is to shift the center of political gravity
from street rallies to debates within the political institutions and to facilitate political discussion
within Parliament.

As a result, one non-parliamentary opposition representative took seat in parliament – Konstantine
Gamsakhurdia (freedom party). Political consultations with non-parliamentary opposition parties
are underway.

Parliament adopted amendments to the Law on Political Organizations that will improve the
financial sustainability of all qualified political parties. The basic financing of parties has been
increased (including the resumption of financing for those parties that lost funding due to their
refusal to take seats in Parliament). Simultaneously, budgetary funding for the ruling United
National Movement has been decreased. In addition, a special foundation has been set up to finance
research and development activities of political parties and non-governmental organizations. Part of
the allocated funds will be spent on strengthening civil society (NGOs, think-tanks, etc).


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1.1.2 Reforms in Judiciary

In 2009 after consultations with oppositional parties, experts and NGOs the new initiative was
introduced into law on ―Administrative Detention Procedures‖ during the second committee
hearing. The new chapter was included to the Georgian Administrative Violations Code rule to
strengthen appeal procedures on administrative detention, guarantee transparency and fair trial
rights of parties. It envisages fully fledged appeal open process where parties have a right to present
their positions and evidences, invite witnesses. New mechanism guarantees adequate protection for
citizens sentenced to administrative detention by lower level court. Previous version of the law
envisaged mere oversight of detention sentence without hearing in absence of parties.

Reform of the Court System

The reform package envisages more active involvement of parliamentary and non-parliamentary
opposition in the judiciary reform process and offers to the opposition the elaboration of additional
mechanisms to strengthen independence of judiciary as well as strengthen transparency and public
accountability of the law enforcement agencies.

After extensive consultations with judiciary representatives, civil society and experts amendments
to the law on ―Rules of Communication with Common Court Judges‖ and to the criminal code were
initiated in the parliament. According to the amendments the fine for the violation of the rules of
communication by public servant is increasing two fold, for state political officials the fine is
increased three fold. Furthermore, the new amendment of criminal code puts stricter sanction on
state political officials, who interferes the judges of common courts.

The high council of justice of Georgia and the Supreme court of Georgia made a research and
according to the experience of democratic countries, worked out the main principles for the lifetime
appointment of judges to work properly. The up mentioned principles had been discussed and
shared with constitutional committee , which is currently working on the draft of the constitutional
amendments.

Institutional reorganization, reconstruction and equipment of the courts: In April 2009
Adigeni, Aspindza, and Borjomi regional courts were merged to the court of Akhaltsikhe. Since
September 10th, 2009 Ambrolauri regional court, Ozurgeti regional court (in it's composition there
are 2 magistrate judges, who realizes their power in Lanchkhuti and Chokhatauri municipalities),
Khelvachauri regional court (in it's composition there are 3 magistrate judges, who realizes their
power in Qeda, Shuakhevi and Khulo municipalities) and Batumi city court were created.
From October 19th, 2009 Gagra, Gudauta, Gali, Gulrifshi, Ochamchire-Tkvarcheli, Sokhumi city
courts were liquidated and Gali-GulrifSi, Ochamchire-Tkvarcheli and Gagra-GudauTi regional
courts were established. Since December 2nd, 2009 more 3 enlarged courts began functioning -
Telavi, Bolnisi, Zestafoni courts.

Currently, 14 enlarged regional (city) courts are functioning according to the new manner from the
planned 22 enlarged first instance courts, in which's composition there are 24 magistrate courts.

Trainigs: The high school of justice continues trainings of active judges. The planning of the
trainings are held with taking into consideration the fundamental changes of the legislation. In the
frames of retraining program of the highs school of justice, 46 seminars for active judges, justice
listeners, judge‘s assistants and other judicial system employees were held in during the year 2009.
The seminars were dedicated to human rights issues, amendments in the criminal procedure code,
law of Georgia "about arbitrate", formatting homogenous practice in administrative law, fighting
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against torture, compulsory work and human trade, groundless enrichment and issues related to the
executing of court decisions, implementing the foreign court charges, improvement of the civil
service and the judicial system employees professional skills.

With the purpose of getting familiar with the EU member states judicial system, in close
cooperation with several international organizations the study visit of Georgian judges were held in
several EU member states, privately in: Estonia, UK, Poland, Italy.

For the purpose of completing the corporation of judges with high professional judges in the period
under review 3 qualification exam of the judges was held. With this, 3 electing competition for
judges and 2 for justice listeners were conducted. With the result of this events 18 new judges were
appointed (12 of them were graduates of the high school of justice). Two groups consisting of 12
justice listeners were enrolled in the high school of justice.

Except this, in October of the current year according to the competition results, 15 judges were
reappointed, who's 10 years of power had been expired. From January 2009 the salaries of judges
were increased by 200GEL.

For the purpose of informing public about judicial reforms, several TV projects are realized,
newspaper articles, informational clips are made and broadcasted by TV. With this measures people
are informed on ongoing judicial reforms, about jury trial, ongoing court processes and other legal
matters.

Legislation: Since 1 July 2009, as a result of legislative amendments enforcement system of
Georgia has moved on the mixed system of enforcement i.e. Georgian enforcement system consists
of enforcement agents (bailiff) having either public or private status.

Private enforcement officer is a free profession. He/she conducts his/her activities on the basis of
license issued by the Ministry of Justice of Georgia.

Apart from the above mentioned other legislative amendments were also made to the law of
Georgia ―On Enforcement Proceedings‖ in June 2009. The mentioned amendments dealt with
simplification of the procedure of auction. The procedure of conduction of an auction has been
improved; the principle of the determination of the initial price of the property has been changed.

The draft Law on Courts of General Jurisdiction was elaborated by the High Council of Justice and
the Supreme Court of Georgia. The Law will unify the existing laws on Courts of General
Jurisdiction and on Supreme Court of Georgia in single legal act and lay down the common status
of judges and their social guarantees.

On the 30th of November of the current year the parliament of Georgia took the draft of the organic
law on "courts of general jurisdiction". The parliament of Georgia took a new legislation packet,
which provides setting in motion the new rule of selecting judges. Specifically in order to become
a judge, it is mandatory for the candidate to take the full course in the high school of justice, after
which his place in the justice listeners qualification list will be defined.

Criminal Justice Reform

In 2009, one of the main priorities for the Georgian Government was successful continuation of the
judiciary reform. Throughout the year, the reforming process of the Judiciary system continued in
the fields of capacity building, improvement of the public perception and informing the public
about the reforms.
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The central philosophy of the criminal justice reform is to set up a democratic system of criminal
justice based on the tenets of independence of judiciary, adversariality, equality of arms and strong
emphasis on human rights. The main and new component of Georgian CPC is an Introduction of
trials by jurors.

Criminal Procedural Code: Adoption of the Criminal Procedural Code has been the key
achievement in the reforming process of Judiciary.

On 9 October 2009 the new Criminal Procedure Code of Georgia, which was discussed once again
on 28-29 January 2009 in Paris under the auspices of the Council of Europe (CoE), was adopted
with the third hearing by the Parliament of Georgia. The main part of the mentioned legal
instrument will come into force since 1 October 2010. In this respect, it should be noted that Jury
Trial will gradually enter into force from 1 October 2010 to 1 October 2014.

The principal novelty of the Code is introduction of fully adversarial system, rules of evidence and
the jury trial. To ensure smooth and successful implementation of the new Code, Criminal Justice
Reform Strategy and relevant Action Plan was adopted (On 27th of July 2009), under the auspices of
the Criminal Justice Reform Inter-agency Coordinating Council. Both the Strategy and the Action
Plans for 2009-2013 deal with practical challenges related to organizational, structural and
institutional matters that the new legislation brings into the criminal justice system. In the process
of elaboration and adoption of the abovementioned documents civil society and donor/international
community were intensively involved.

In order to respond to these challenges, the Action Plan defines responsible institutions, clear
deadlines for implementation, budgetary estimations required, and specific indicators of
implementation and specific avenues of following action.

The mentioned legal instruments mainly refers the following areas: Criminal Procedure Code;
Legislation on Administrative Offence; Juvenile Justice; Penal System Reform; Probation; Legal
Aid Service; Prosecution; Police; Judiciary; Legal Education; Office of the Public Defender.

In addition on 27th of July 2009 the Inter-Agency Coordination Council empowered its Secretariat
with the monitoring function over fulfillment/implementation of the Action Plans. Each institution
engaged in the process (governmental agency and international/donor organization) has designated
a contact point that will be responsible for providing details of activity reports in line with the
implementation of the Action Plan to the Secretariat once in three months.

Standing Commission: On the basis of the legislative initiative, a reform of the Standing
Commission on Early Conditional Release was successfully accomplished. In addition to the
MCLA staff, representatives of the parliamentary majority and minority, as well as of non-
governmental organizations are included in the composition of the Commission.
The new Commission started functioning on 1 September 2009. It is obliged to motivate every
decision concerning each case of early release. The Commission is authorized to apply to the Court
to grant early release to a prisoner or to change the non-served part of the sentence with a lighter
sentence. Refusal of the Commission can be appealed before the Court by a prisoner or his/her
lawyer.

The Strategy on Juvenile Justice: the strategy provides for the revision of the minimum age of
criminal responsibility and sets it at 14 years. Particular attention is paid to the prevention as the
primary building block of a juvenile justice system and the priorities of future prevention programs
are laid down. Deprivation of liberty, including arrest, detention and imprisonment is considered to

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be the measure of last resort which can be used for the shortest appropriate period of time. The
referral to alternative schemes is strongly encouraged. Reintegration mechanisms, public awareness
campaigns and building the special skills of administrative personnel dealing with juveniles are
adequately addressed.

Rehabilitation/ development of the infrastructure of penitentiary institutions: In 2009 new
prison facilities and a hospital were built and renovated in full conformity with international
standards: Penitentiary Establishment #8 of Strict Regime in Geguti, Western Georgia (February
2009); part of the Penitentiary Establishment of Prison and Strict Regime #1 in Rustavi (March
2009); Penitentiary Establishment of Prison and Strict Regime #2 in Kutaisi (October 2009).

In 2009, monthly food expenditure for prisoners was increased and quality of nutrition was
improved in the whole system. Service of private company that provides food for prisoners allows
the Department of Prisons to provide adequate nutrition to those prisoners who need special diet
due to the health conditions and/or religious beliefs. Throughout 2009, shops were opened in all
penitentiary establishments that provide a possibility for prisoners to buy additional food and
hygienic items through their credit cards.

Along with above-mentioned activities, in 2009 the MCLA (Ministry of Corrections and Legal
Assistance of Georgia) undertook a comprehensive reform of the prison healthcare system. As a
part of this reform, a new Medical Department was created in August 2009. In 2010, it will be fully
in charge of administering and monitoring healthcare system in penitentiary establishments,
investing human and physical resources, providing healthcare services and managing finances.

The reform of the whole penitentiary system will be completed by 2013. As a midterm vision, the
MCLA will be focused on development of infrastructure, including building of new prisons,
strengthening of penitentiary staff, increasing public protection and introduction of new security
systems, implementation of the pilot programs for providing higher education in penitentiary
system as well as other areas.

Legislation: In July 2009, significant amendments were introduced to the current Law on
Imprisonment. In particular, the prisoners were granted the right to leave penitentiary establishment
area for a certain number of days per year if they have already served a certain part of their
sentences. For adult convicts this is five days twice a year, for juveniles and women convicts who
are pregnant or have children up to three years, this period is maximum five days three times a year.
The main goal of introducing home leaves in the Georgian legal system and practice is to increase
the opportunities for prisoners for their post-sentence re-socialization and to ensure their
communication with the outside world. This mechanism also serves as an additional motivation for
good behavior for prisoners. They are allowed to spend certain number of days with their families
and relatives while serving sentences. This is in line with the recommendations of the Committee of
Ministers of the Council of Europe (#R (82)16).

In 2009, a new Draft Code on Imprisonment (Draft Code) was finalized which was a process of
long discussions and deliberations. In the working process international and national organizations
as well as experts were actively involved. At the same time the draft was submitted to the Council
of Europe for its recommendations. The Draft Code was adopted in its first hearing by the
Parliament of Georgia in July 2009.

The main aim of the Draft Code is to improve conditions in the penitentiary institutions and provide
relevant standards for prisoners in conformity with international and European standards. One of the
main goals is to enhance the administration of pre-trial detention and execution of custodial
                                                                                                  13
sentences, regulating and guaranteeing protection of rights of defendants and convicts, giving strong
legal and social guarantees, supporting re-socialization and re-integration of prisoners into the
society. For this purpose, together with the short leaves, adult convicted prisoners are entitled with
the right to short-term meetings while juvenile convicts are additionally entitled with the right to
long-term visits.

Use of non-custodial measures: Alongside with ongoing penitentiary reform, in 2009 the MCLA
started to implement a fundamental and comprehensive reform of the probation system. The aim of
this reform is to strengthen the probation system through ensuring effective and intensive use of
non-custodial sentences and supporting re-socialization and re-integration process of the
probationers.

In order to increase efficiency of the National Service of Execution of Non-custodial Sentences and
Probation (National Probation Service) throughout Georgia and ensure proper working
environment, at the first stage the Tbilisi Bureau together with its 10 regional bureaus and an office
in Poti were refurbished and provided with proper technical facilities (including IT equipment) by
the August 2009.

At the present time considerable efforts are being undertaking in order to develop an electronic
centralized database within the system. It is already put into operation within all 11 regional offices.
Additionally, it is already a part of the Georgian Governmental Network (GGN) that, in its turn,
will support to the co-ordination of activities of the probation service with the law-enforcement
agencies. Furthermore, within the framework of the probation reform, a dactyloscopy system was
introduced from August 2009.

At the same time, various employment opportunities were created for the probationers. They were
also provided with regular classes in foreign languages and computer programmes. Within the
context of promoting the re-socialization activities and use of community service, the probationers
participated in the building of the churches and monasteries on the territory of Georgia.

The draft Criminal Procedure Code, being currently under the second committee readings in the
Parliament of Georgia, further extends the scope of application of non-custodial measures both by
extending the list of such measures (electronic surveillance, surrender of ID, requirement to reside
or not to leave the place, etc.) and requiring the courts to formally review the evidentiary standard
of proof against the defendant before deciding on specific coercive measure.

In November 20, 2009 the agreement on Privileges and Immunities of the International
Criminal Court was ratified by the Decree of the Parliament of Georgia #2150-II.

Legal Aid: From 1 February 2009, the Legal Aid Service continues its activities under the Ministry
of Corrections and Legal Aid as a legal entity of public law. Currently, the Legal Aid Service
provides legal assistance in cases prescribed by law throughout the whole territory of Georgia via
the lawyers employed at ten legal aid bureaus.

The legal aid covers lawyer‘s representation in criminal cases, as well as representation in the cases
of sentencing to compulsory psychiatric treatment to all detained, accused and convicted persons at
pre-trial investigation stage and at the court hearing. Furthermore, any citizen, irrespective of their
social status is entitled to apply to consultation centers1 and receive professional legal consultation.
If necessary, the legal aid consultants also assist with drafting of legal documents.

1
 Consultation Centers are operating under each legal aid bureau; in addition two consultation centers carry out their functions in
Ozurgeti and Ambrolauri independently.
                                                                                                                                     14
The Register of the Contracted private lawyers was established under the Legal Aid Service in May
2009. Nowadays, 120 private lawyers are contracted in the Register. In the future, taking into the
consideration the workload related with the conflict of the interests, while providing free advocacy
in the criminal cases, this number might increase.

61 social workers, 189 regime staff, 69 prison staff using firearms, 15 registration unit staff received
specialized training in accordance with the training curricula of the Penitentiary and Probation
Training Center. In addition, extensive course was provided to 52 prison staff on international and
national legal aspects on prevention of torture. Staff of the Juveniles Correctional Establishment
received special training on reform directions within individual reintegration schemes. Together
with the courses for the prison staff and probation officers mentioned above, 38 contracted lawyers
under the Legal Aid Service were trained on orientation course and 37 contracted lawyers – on
Ethics Code. Training of special defense skills was provided for 26 legal aid lawyers.

Trainings of prosecutors: Professional development of the prosecutors through training
component remains a priority for the Training Center of the Analytical Department of the Ministry
of Justice.

Since the beginning of 2009 the prosecutors have participated in the following trainings: on
domestic violence; on investigation and prosecution of the crime of trafficking; on the prohibition
of discrimination on various types of crimes, including prohibition of torture, prohibition of racial
and ethnical discrimination, prohibition of religious discrimination and etc          (In total – 75
prosecutors and investigators participated in the seminars); on professional ethics according to the
Criminal Procedure Code of Georgia by legal advisor of the Embassy of United States of America
in Georgia and federal level judges of the United States; on the inter-agency cooperation among
law-enforcement structures on human trafficking issues; on investigation of crime of torture,
inhuman and degrading treatment; on European Human Rights standards in criminal law matters;
on juvenile justice, juvenile pedagogy and psychological issues; on judiciary skills for prosecutors;
on the cross examination matters before the Jury Trial in line with the standards incorporated in new
Criminal Procedure Code of Georgia; on international cooperation on criminal cases; on fight
against money laundering.

National Bureau of Enforcement: Under the Financial support of ABA IT program of case
management has been developed and installed at the National Bureau of Enforcement in autumn
2009.

In 2009 135 personal computers and other equipments were purchased by NBE. In addition since 22
May 2009 NBE has been functioning unified governmental network involving all 11 territorial
bureaus. NBE has developed IT program for the debtor‘s registry. Draft of legislative framework
regarding the abovementioned issue is elaborated.
Salaries were increased for the heads of the enforcement bureaus and enforcement agents, since 1
April monthly salary of the head of the territorial enforcement bureau has been increased up to 1300
GEL (it was 870 GEL) and salary of enforcement agent is 960 GEL (it was 710 GEL).

In Tbilisi of the National Bureau of Enforcement, salaries of the heads of specialized groups have
been increased for 40% and salaries of enforcement agents have been increased for 42,25%.


1.1.3 Human Rights and Fundamental Freedoms

Strengthening the Public Defender’s Office: The Government of Georgia has considered that the
implementation of the obligations incumbent upon Georgia under the United National Optional
                                                                                           15
Protocol on Convention against Torture (OPCAT), namely development of the framework for the
designation of the National Preventive Mechanism shall take place in a transparent and
participatory process.
In July 2009, the Parliament of Georgia adopted amendments to the Law on Public Defender
designating the Public Defender of Georgia as a National Preventive Mechanism in accordance with
OPCAT at the Council session. The amendment has been drafted in accordance with the
requirements of OPCAT and good practices existing in Europe. Apart from general provision
designating the Office of the Public Defender of Georgia as an NMP, this proposal describes in
detail the privileges (such as an access to any prison at any time) and duties of the members of the
National Preventive Group.

The Criminal Justice Reform Council has publicly supported the Office of the Public Defender of
Georgia in acquiring financial resources required for the implementation of the NPM in 2010.

In October 2009, PDO has announced officially regarding the NPM recruitment procedure (TORs
for the NPM experts are available at the PDO website at http://www.ombudsman.ge ).

The Inter-Agency Coordinating Council on Fight against Torture (the Council) served as a forum
for the discussions. Membership of the Council is open to international/donor organizations and
local NGOs/individual experts.

With coordination of Ministry of Justice several meetings were organized of the Inter-agency
Coordination Council against torture, inhuman, degrading treatment or punishment. I addition
Ministry of Justice prepared report of the implementation of the 2008-2009 Action plan against
torture inhuman, degrading treatment or punishment, which was published in December and is
available at the official website of the Ministry of Justice at www.justice.gov.ge.

For the effective implementation of the Hague Convention of October 25, 1980 on the Civil Aspects
of International Child Abduction, Public International Law Department of the Ministry of Justice of
Georgia took the following steps:

   - The list of attorneys specialized in family law is under elaboration, which will be offered to
     foreign claimants for the representation of their interests in the Georgian courts during the
     hearings of the child abduction cases.

   - In order to raise awareness of legal professionals as well as wider public on the Convention
     an article on the Operation of the Child Abduction Convention was elaborated and will be
     published in Journal of International Law of Tbilisi State University.

   - During the reporting period, the Public International Law Department of the Ministry of
     Justice of Georgia cooperated on child abduction cases with the central authorities of
     France, Belgium, Germany, Netherlands and Austria. During the reporting period, three
     cases under the Child Abduction Convention are pending before the Tbilisi City Court.

1.1.4. Anti-Corruption Measures

In 2009 the Government of Georgia carried out important anticorruption activities. The legislative
changes related to criminal responsibility of law enforcements officials, the increase of salaries,
improvement of working conditions, constant liberalisation of legislation has created good
environment for fight against corruption in all government structures. This is particularly visible
and important in the law enforcement organs (police, prosecutor‘s office).

                                                                                                 16
Transparency International‘s 2009 Corruption Perception Index ranked Georgia 66th out of 180
countries and gave a score of 4.1, as opposed to 3.9 last year. There is no other country, which made
such a substantial progress as Georgia during 2008-2009.

In May, 2009 GRECO at its 42nd plenary meeting concluded, that out of 14 recommendations of
GRECO Georgia fulfilled eight of them fully and six of them have been implemented partially.
GRECO noted tangible progress made by Georgia.

Survey on corruption perception and the quality of public service was conducted with support of
Council of Europe Project GEPAC. Further anti-corruption activities of Georgia will be based on
results of survey.

In the framework of the Inter-Agency Coordinating Council draft Strategy and Action Plan will be
adopted in 2010, which will put major focus on prevention of corruption in six thematic areas and
represent the top priority for current anticorruption efforts of the Government: Efficient and
corruption-free public sector; State and administrative service; Improvement and control of public
procurement; Competitive and corruption-free private sector; Advancing reform of judiciary and
law enforcement; Improving anti-corruption related legislation.

1.2 Regional Cooperation

In the first half of 2009 Georgia participated in the high level conferences on energy issues
(Nabucco Summit in January 2009 in Budapest; Energy Summit on April 24-25, 2009 in Sofia;
Southern Corridor Summit on May 8, 2009 in Prague, organised by the Czech EU Presidency).

With the aim of developing several segments of the Black Sea Region Transport corridor, a number
of concrete projects are discussed in the framework of GUAM: Baku-Poti, Odessa-Chisinau,
Odessa-Kyiv, providing shortest ways to connect the region with the European states. Special
attention is paid to the development of multimodal (road-railway-ferry) line taking less time than
the Batumi-Poti-Ilichovsk ferry communication (26 hours against 40 hours).

Eastern Partnership

On May 7, 2009 at the Prague Summit the Eastern Partnership Initiative was launched where
Georgia alongside with Ukraine, Moldova, Azerbaijan, Armenia and Belarus is participating.
Georgia has actively involved in the work of this new partnership. The relations with the EU under
Eastern Partnership umbrella are developing both bilateral and multilateral level. Bilateral
cooperation envisages the deepening of the relation through the signing the Association Agreement
with DCFTA incorporated in it, as well as gradual visa liberalization and social-economic reforms
supporting approximation of our country to the EU economic space, is developing actively. We are
also fruitfully developing multilateral dimension of partnership through participation in all four
thematic platforms and flagship initiatives. Georgia is actively involved in the process of
elaboration of Work Programs of the platforms. Some of our proposals were considered by the
parties.

The Government of Georgia formed a coordination mechanism for the Eastern Partnership which
becomes an integral part of our EU Integration institutional mechanism. By the decision of the
Government of Georgia the overall coordination of the EU Eastern Partnership will be implemented
by the Office of the State Minister for European and Euro-Atlantic Integration. The relevant
Ministries are responsible for the relevant Platforms.

                                                                                                  17
Civil Society Forum, which is one of the important components of the Eastern Partnership held its
first meeting on November 17, 2009 in Brussels, where four thematic groups were formed
elaborating significant recommendations for EaP development. 22 NGOs from Georgia taka part in
EaP Civil Society Forum. Georgian Foundation for Strategic and International Studies is the
Coordinator of thematic group dealing with economics issues.

On December 8, 2009, EaP Foreign Ministers‘ Summit was held where the progress of EaP
development was discussed and the perspectives of future enhancement of the cooperation were
shaped.


1.3 Alignment with the EU statements

Since 1 June 2007 Georgia is invited to join EU CFSP statements, except where the statement
concerns Georgia directly or settlement of Russia Georgia conflict. From January 1 to December
31, 2009 Georgia was invited by the EU to align with 347 Statement /Declaration /Resolution
/Common Position /explanation on position, out of which Georgia aligned with 146 statements, 80
declarations, 2 draft resolutions, 4 common positions.

Based on the Extraordinary European Council conclusions of September 1, 2008 and the following
EU Council decision of September 15, 2008 EU Monitoring Mission (EUMM) was sent to Georgia
within the framework of European Security and Defence Policy (ESDP) on October 1, 2008. Based
on EU Council decision of July 29, 2009 the mandate of the EUMM was extended till September
14, 2010.


2. Conflict Resolution

At this stage the Government of Georgia pursues 3 key priorities with regard to the Russian
aggression and occupation of Georgian territories: (1) Diplomatic activities; (2) Security
arrangements on the ground; (3) Maintenance of people-to-people contacts;

2.1 Cooperation with the EU and other International Organizations

Despite the tireless efforts of Georgian side and the OSCE Greek Chairmanship to reach a decision
on the extension of OSCE mission mandate in Georgia, the decision was eventually blocked by
Russia at a PrepCom on May 13, 2009.

Georgia vigorously tried to retain the UNOMIG and actively cooperated with the partner countries
in order to elaborate the draft resolution recognizing territorial integrity and sovereignty of Georgia;
extending the UN monitoring based on the fulfilment of the August 12 cease-fire agreement and
introducing the peacekeeping and police components to the UN mission. However, not only this
draft resolution, but even a technical roll-over resolution, with the reference to the UNSC
Resolution 1808, envisaging the respect of the sovereignty and territorial integrity of Georgia in its
internationally recognized borders, became unacceptable for Russia. Russia vetoed the technical
roll-over draft resolution submitted at the UN Security Council for a vote and as a consequence,
terminated the UN Observer Mission in Georgia (UNOMIG). By doing so, the Russian Federation
not only got rid of international observation of its illegal military buildup on the ground conducted
in blatant violation of the ceasefire agreement, and witnesses of violation of human rights, but also
interrupted those communication channels, which were facilitating humanitarian, rehabilitation or
confidence building programs in Tskhinvali Region, Georgia and Abkhazia, Georgia.
                                                                                                     18
Under such circumstances, the presence of the EU Monitoring Mission gains more significance.
Georgia welcomed the extension of the mandate on July 27, 2009.

Georgia continued active cooperation with the EU member states in order to accomplish EUMM‘s
access to the occupied territories.

On January 26, 2009 a Memorandum of Understanding was signed between the EUMM and the
Ministry of Defence, which defines mechanisms for information exchange and interaction between
the EUMM and the Ministry aimed at strengthening confidence and security. By virtue of the
Memorandum, the Georgian side unilaterally assumed the responsibility to limit its heavy armour
along the administrative line of the regions occupied by the Russian Federation and to provide the
EUMM in advance with the information on movements of Georgian armed forces.

On May 22, 2009 additional Protocol to the Memorandum of Understanding between the EUMM
and the Ministry of Internal Affairs of Georgia (of October 10, 2008) was signed. The Protocol
specifies certain aspects of the Memorandum (e.g. neighbouring districts of Abkhazia, Georgia and
Tskhinvali region, Georgia) and allows EUMM to undertake inspections of the Georgian Police
checkpoints along the occupation line with Abkhazia, Georgia and Tskhinvali region, Georgia
without prior notice.

Georgia held numerous consultations with international organizations and various states on the
issue of transforming EUMM into a full-fledged ESDP operation, which will have policing and
peacekeeping capabilities and more instruments to promote peace and stability on the ground.

Georgia declared publicly and through diplomatic channels that the involvement of the third
countries in the EUMM will contribute to the effectiveness of the mission and farther enhance
stability on the territories adjacent to the occupied territories of Georgia.

Georgia is actively involved in consultations with EUMM to improve its capabilities by receiving
satellite data from the EU Satellite Centre (located in Madrid). This data has to be up-to-date and be
followed with an adequate analysis. EUMM can and should monitor the situation inside the
occupied territories without actually entering the regions if sufficient technical resources are used.

In order to make EUMM more effective Georgia holds consultations with EU member states to
make EUMM report available more widely and implement the delivery of the daily and weekly
reports to the Georgian side.

Georgia attributes great value to the Geneva Discussions established after the Russia-Georgia war
2008, a format of the conflict peaceful resolution.

Eight rounds of Geneva talks have already been held:

   -   1st round of Geneva talks was held on October 15, 2008
   -   2nd round – 18-19 November, 2008
   -   3rd round – 18 December, 2008
   -   4th round – 17-18 February, 2009
   -   5th round - 18-19 May, 2009
   -   6th round – 1 July, 2009.
   -   7th round – 17 September, 2009
   -   8th round - 11 November, 2009

                                                                                                   19
Georgia is actively involved in the process of Geneva discussions. One of the main goals stated by
Georgia is to deploy international peacekeeping and police missions in the occupied territories to
ensure peace and stability.

In order to contribute to peace, stability and security in the occupied territories of Georgia, incident
prevention and response mechanism (IPRM) was established on the fourth round of Geneva
discussions February 17-18, 2009. The aim of the mechanism is to ensure a timely and adequate
response to the security situation on the ground.

The mechanism involves the representatives of structures with responsibility for security and public
order in the relevant areas and representatives of the international organizations (UN, OSCE and
EU) in accordance with the area of their responsibility and mandate.

The Independent International Fact-Finding Mission on the Conflict in Georgia (IIFFMCG) headed
by Ms. Heidi Tagliavini published the final report on 30 September 2009.

General view of the Government of Georgia on the report is that practically all facts are properly
reflected in the report, though the Georgian side disagrees with some of the assessments based on
incorrect interpretation of these facts.

The report makes clear that the Russia-Georgia war was just an episode of a longer cycle of
provocations, from Russian side. The report also unveils Russia‘s illegal activities in the period
leading to the war as well as confirms that regular armed Russian forces, mercenaries and so called
volunteers illegally crossed into Georgia before August 8, 2008.

It is regrettable that while the report has proven that more than 100 tanks and thousands of armed
people were illegally stationed in Georgia, it fails to call this fact an invasion. It is hard to imagine
that any free European State will not take it as an invasion. In fact it was this invasion that
persuaded Georgia for active actions to protect its citizens and defend sovereignty of the country.
The Government of Georgia acted as a democratic state responsible under the Constitution for its
civilian population and security of the country.
The report also rightly wipes out all legal pretexts that Russia tried to use invading Georgia
including fabricated claims of Genocide, protection of Russian Citizens illegally manufactured by
Russia itself and false claims about attack on Russian peacekeepers.

In order to maintain peace and stability on the ground, Georgia has completely fulfilled the 12
August 2008, agreement.

Russia remains in breach and blatantly violates all the points of the EU brokered August 12 Six-
Point Ceasefire Agreement. Incidents, including kidnappings, lootings etc., take place on the daily
basis in the occupied territories and across the occupation line. In order to make Russia fulfil the 12
August agreement, Georgia continues intensive consultations with its allies.

The Georgian side continuously raises the issue of de-occupation of Georgian territory and full
implementation of the six-point cease-fire agreement by the Russian side at the meetings with the
high level EU representatives and at different international fora. During meetings with the EU
representatives, the Georgia side also stresses the necessity of permanently keeping issues related
with Georgia, particularly security situation in the country, on the agenda of the EU-Russia political
dialogue.

Georgian side officially requested European Commission to open consultations aimed at revision of
the EU-Georgia ENP Action Plan for the proper reflection of the existing situation since Russian
                                                                                              20
aggression against Georgia, the EU‘s role and its involvement in the peaceful settlement process.
Georgian position on possible changes to the relevant section of the ENP Action Plan was
elaborated by the Office of the State Minister of Georgia for Reintegration (SMR), the Office of the
State Minister for European and Euro-Atlantic Integration and the Ministry of Foreign Affairs of
Georgia. It is regrettable that as it was stated in the letter of June 16, 2009 of the Commissioner
Mrs. Benita Ferrero-Waldner, the Commission has difficulties to accommodate our request.

2.2 Maintenance of people-to-people contacts:

The Russian Federation‘s invasion in August 2008 and the occupation of Georgian territories have
created huge obstacles and led to the suspension of all the EC and other internationally sponsored
rehabilitation and confidence building programs on the ground.

Georgia is firmly committed to promote and facilitate creation of favourable mechanisms that will
support implementation of the EC Rehabilitation programs in Abkhazia, Georgia and Tskhinvali
Region/South Ossetia, Georgia, despite the fact that Russia as an occupying power pursues an
obstructive policy of hindering this process.

Georgia continues discussions with the Delegation of the European Commission in Georgia to bring
the EC funded economic rehabilitation program in Abkhazia, Georgia in compliance with the
Georgian legislation in force and to make Joint Steering Committee mechanism operational on a
politically free venue to conduct discussions and exert oversight on implementation of joint
projects.

Georgia has prepared the Draft State Strategy on Occupied Territories and is planning to develop
the Action Plan to address the needs of populations residing in and expelled from the occupied
territories, as well as to address the problems related to free movement, restoration of destroyed
infrastructure, vocational trainings, etc.

The Goal of the State Strategy is to promote interaction between population of Georgia regardless
of their ethnic belongings, divided by occupation lines, and to counter the isolation and division
resulting from occupation by creating frameworks and mechanisms for engagement and promoting
incentives for cooperation in different areas such as: economic relations, infrastructure and
transportation, education, healthcare, people-to-people interactions, preservation of cultural heritage
and identity, free flow of information, legal and administrative measures, human rights.

In the light of the mentioned strategy, the SMR is committed to maintain links and communication
channels with our citizens, irrespective to ethnicity, living under occupation and to guarantee their
human rights, inter alia, the education rights of the ethnic Georgians, including education in the
mother tongue, ensure that discriminatory treatment of the people living in the occupied territories
of Georgia is prohibited; the population is not forced to give up the Georgian citizenship and
acquire the Russian or the separatists‘ passports; the freedom of movement and the rights to
property are secured. At this point, this could be managed only through intensive involvement of
international community.

Achievement of the above listed goals will make it possible to substantially improve the quality of
life of the population residing in the occupied territories and also in the areas adjacent to the
Occupation Lines, and establish mutually favorable trade or social relationships that will facilitate
reintegration of the population residing in the occupied territories within the Georgian State.




                                                                                                    21
With a view to implement the goals set out in the State Strategy, the Government of Georgia deems
it reasonable to create appropriate governmental institutions in Georgia and develop liaison
mechanisms in the Occupied Territories.

The practical implementation and monitoring of the areas of interests set out in the State Strategy
will be reflected in the Action Plan. The Government of Georgia, through consultations with local
and international experts, think-tanks and stakeholders, is determined to develop the Action Plan of
the State Strategy on Occupied Territories by the end of the second quarter of 2010. It will establish
the detailed and concrete measures, mechanisms and procedures as well as initiate and introduce
amendments to Georgian legislation required to fulfil the aims of the State Strategy and the Action
Plan.

The GoG extended its consent to the implementation of the € 4M program envisaged within the
framework of the EC Economic Rehabilitation Program under the ENPI Annual Action Plan (AAP)
2007. However, the operation format of the Steering Committee is still under discussion. As it has
been reiterated by the SMR, on the one hand, the presence of Joint and not separate Steering
Committee shall contribute to restoring the confidence between the Abkhaz and Georgian
communities. On the other hand, the Joint Steering Committee mechanism under the auspice of
ENP Economic rehabilitation program is indispensible, as it provides the effective leverage for the
interested parties to be fully engaged in the process of development, management, implementation,
monitoring and evaluation of different projects. The offer included bringing the Steering Committee
meetings to a neutral place such as Brussels, where politically free environment shall be provided.

The SMR, in cooperation with NGO sector, has cultivated an integrated concept aimed at
confidence building between the Georgian and Abkhaz/Ossetian communities living in the both side
of occupation lines and adjacent areas implying the creation of special economic zones (integrated
socio-economic zones) there, supporting of joint cultural, social and economic activities/projects
between the relevant communities. At this stage there is agreement with the EC Delegation in
Georgia about the funding of the integrated socio-economic zones in the immediate vicinity of the
occupation lines.

Within the given concept, in September 2009, the SMR supported the UNHCR funded project on
creation of an Integrated Socio-Economic Zone (ISEZ) in Shida Kartli region, namely near the
village of Shindisi located in the immediate vicinity of the occupation line of the occupied
territories of Georgia. The Project is designed to restore and enhance agricultural and agro-business
productivity, promote and encourage social and community related activities and engagement in
one of the region‘s most seriously affected by the Russian military aggression. It will provide
employment and income generating opportunities for IDPs and local community members in the
area.

In the light of the joint cultural, social, economic and confidence-building activities, the SMR
supports various joint projects intended to facilitate reintegration and rapprochement of forcefully
split communities; preservation of historical and cultural heritage in the Occupied Territories of
Georgia.

The main objective of the given project is to build up soft power chain of capabilities along the
occupation lines of the occupied territory of Georgia, create and effectively run one-stop shop
projects on medical assistance, educational, vocational trainings, etc. within that chain, which will
in the long run result in producing spill over effects on the other side of the occupation lines.

The GoG is also ready to provide its support to joint projects on preservation of historical and
cultural heritage on occupied territories of Georgia.
                                                                                                   22
As far as the modalities on ―the Rules of Engagement of the International
Governmental/Supranational, Nongovernmental and Humanitarian Organizations in the Territories
occupied by the Russian Federation‖ are concerned, the Office of State Minister has developed the
initial draft version of the modalities, which were communicated to the international organizations
for their comments and recommendations. To this effect, the SMR continues the consultations with
the EC Delegation in Georgia. However, the entry into force of these modalities, which is sub-
legislative normative act of the law of Georgia ―On occupied Territories‖, is temporarily suspended
as the recommendations of the Venice Commission are under discussion in the Parliament of
Georgia.

The SMR has prepared the Report of the Government of Georgia ―on Political and military
aggression by the Russian Federation against Georgia‖. The mentioned Report was made public on
August 6 2009.

This document represents the Government of Georgia‘s report to the public on the background and
details of the August 2008 armed conflict. The purpose of this document is to provide the public
with information on the political situation in Georgia, the changing nature of Georgia‘s relationship
with Russia, and Georgia‘s efforts to secure a peaceful resolution of the ongoing conflict. It covers
the current political situation in Georgia, presents the history behind the conflict and describes the
actions taken by the Georgian Government in response to Russia‘s relentless provocations. This
document aims to provide comprehensive and transparent information on these issues.

This document focuses on the three main actors involved in the process:
   a) The Russian Federation and its puppet regimes in South Ossetia/Tskhinvali region, Georgia
       and in Abkhazia, Georgia;
   b) The Georgian authorities and its various political structures; and,
   c) The international community, including the main international organisations;
   d) The document covers the policies pursued by these three actors, the actions they have
       undertaken and the crucial decisions throughout the process.

Legal, political, and military documents are also attached as appendices to this report.


3. Justice, Freedom and Security
On June 3, 2009 the second meeting of the EU-Georgia Cooperation Sub-committee on Justice,
Freedom and Security issues was held in Tbilisi. The Sub-committee focused on the progress
achieved for the past one year in the areas such as the rule of law and the fight against organised
crime; fight against terrorism; cooperation in legal and judicial matters; legal and illegal migration
and border management, exchange of information on visa-related issues.

3.1 Migration Issues (Legal, Illegal, Readmission, Visa and Asylum)

3.1.1 Migration

In close cooperation with the EU financed project ―For the Creation of Strong Mechanisms of
Reintegration in Georgia‖ and Danish Refugee Council the Ministry of Refugees and
Accommodation of Georgia prepared the draft State Strategy of Migration Management. The draft
was developed through the inter-governmental working group. Based on feedback from focal public
agencies and international organizations the Ministry finalized its work on the new version of the

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draft document. As soon as the Strategy is adopted, the Ministry of Refugees and Accommodation
will embark on elaboration of relevant Action Plan.

The activities of the inter-governmental working group that aimed at the development of a state
strategy supported the communication among focal public agencies and evolved into a new type of
cooperation. The contacts have been farther enhanced through the activities of a working group,
established by a Presidential Decree, involved in readmission and visa facilitation negotiations

Joint declaration on the ―Partnership for Migration Development‖ was signed during the Prague
Ministerial held on 27 – 28 April 2009 that was attended by the State Minister on European and
Euro-Atlantic Integration and the Minister of Refugees and Accommodation. The Declaration aims
at increasing cooperation among the countries of European Union and Eastern European neighbours
on the issues of preventing illegal migration and fostering legal migration.

Since April 2009 the Ministry of Refugees and Accommodation and the Ministry of Foreign Affairs
are actively engaged in ―Enhancing Returns to Georgia Operationally‖ a new EU financed project
implemented by the Danish refugee Council. The project aims at: a) establishing the network of
practitioners from Georgia and EU Member States, b) developing the practical manual on return,
and c) ensuring the protection of returnee rights by providing 50 assistance packages.

On 21 June 2009 the Ministry of Refugees and Accommodation, The Ministry of Education and
Science set an agreement #01/08 with the International Organization for Migration (IOM). The
agreement stipulates the principles of cooperation in ―counselling and managing the employment‖
for both returned migrants and internally displaced people.

The Ministry of Refugees and Accommodation completed negotiations with the IOM on the
transfer of migrant advisory centers. The Centers will aim at raising public awareness on migration-
related issues and facilitate the process of reintegration of returned migrants on which in 30.12.09
the memorandum of cooperation in the area of the migrants information and consultation centres in
Georgia has been agreed.

With the financial support of the EU and USAID the Ministry of Refugees and Accommodation of
Georgia and the UNHCR are implementing the reconstruction activity for the reception center for
asylum seekers. The Ministry has acquired the relevant building in Martkopi village.

The new law on People with Refugee and Humanitarian Status is nearly completed. The last stage
communications are being taking place with the UNHCR.

During the reporting period the staff of the Ministry of Refugees and Accommodation and other
relevant Ministries participated in several capacity building events: seminar on the issues on labour
migration financed by TAIEX; study visits to Czech Republic, Portugal, Finland, Holland, Poland,
Estonia aimed at familiarization with migration management models of those countries organized
within the framework of AENEAS programme; On 30-31 March international conference on
Migration and Georgia - Human Dimension and Policy Directions organized jointly by the Ministry
of Refugees and Accommodation and Danish Refugee Council.

On 6-7 October 2009 the invited representatives of the German Federal Office of Migration and
Refugees held a seminar at the Ministry on the reintegration of returned migrants.

3.1.2 IDP Protection


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About 305 compactly accommodated units are being rehabilitated. Around 6000 displaced families
were granted with ownership rights on dwelling spaces.

On May 28, 2009 Action Plan for Implementation of State IDP Strategy for 2009-2012 was
adopted. The main objective of the State IDP Strategy and its implementation plan is to foster
social-economic integration of displaced persons and to improve their housing conditions. The
action plan will be carried out in three stages:
    - the first stage, which is already underway (2009-2010) envisages the rehabilitation of
        collective centers and their transfer to the ownership of displaced families;
    - the second stage (2010-2012) provides for finding durable solution for the accommodation
        of the displaced persons, who refuse to take the space into the ownership; accommodation of
        the displaced persons who live in the so called private sector; identification and
        rehabilitation of unused premises in the state ownership and construction of new dwelling
        houses in different regions of Georgia;
    - On the third stage (2011-2012) the assistance in a form of one-time money allowance will
        be provided to displaced persons with no need of accommodation.

In parallel with the programs of accommodation other activities aimed at IDPs integration will be
carried out. Social-economic integration of displaced persons also include but are not limited to the
rehabilitation of the infrastructure, access to the health care system, targeted social assistance and
education.

In the framework of the implementation of the Action Plan (AP) for the IDP State Strategy, the
Steering Committee of donor agencies and State institutions working on the implementation, had
been created with the facilitation of the Minister of Refugees and Accommodation of Georgia. This
Steering Committee is formed as a decision making/advisory board to coordinate joint efforts of
Government of Georgia and international organizations in sphere of implementation of the State
Strategy for IDPs and serving as supporting mechanism to the State Commission for the
improvement of the living conditions of IDPs from Abkhazia, Georgia and Tskhinvali Region,
Georgia 1989-1992.

For increasing of effectiveness and efficacy of work implemented in the framework of the AP, and
for the better addressing of needs of IDPs in Georgia, Temporary Expert Groups were created under
the Steering Committee dealing with the standards for housing/resettlement, issues of IDP
protection, livelihood, capacity building.

During 2009, the Ministry of Refugees and Accommodation signed a new project with the Council
of Europe – Increasing of opportunities of IDPs through their education and increase access to
employment – the training was conducted to the top management staff of the Ministry for Refugees
and Accommodation and other relevant Ministries.

3.1.3 Visa Facilitation and Readmission Agreements with the EU

The official negotiations on the EU-Georgia visa facilitation and readmission agreements were
launched on April 2, 2009, based on the EU Council decision of November 27, 2008. Two
subsequent rounds were held on June 4-5, 2009 in Tbilisi and August 24-25, 2009 in Brussels. The
texts of the agreements were initialled on November 25, 2009.

The Ministry of Refugees and Accommodation is in the process of active development of relevant
software to accommodate technical requirements for the creation of a database on migrants returned
within the framework of readmission agreements and other potential returnees.

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3.1.4 Security of Travel Documents

Work on introduction of the biometric passport started in 2008. The software set up envisaged
through the international tender on biometric data enrolment infrastructure, face recognition system
and PKI infrastructure supported by EU has been successfully completed with the financial support
of the EU and is ready to be integrated into passport personalization infrastructure. The face
recognition system preventing and excluding document falsification is ready to be put into
operations as soon as biometric passport printing infrastructure is on place. The mentioned system
will ensure the personal identification through checking of the citizens‘ picture within the database
of Civil Registry Agency (CRA) and automatic detection of the falsified document if any. The
system will go through the final check before initiating issuance of the biometric passports.

At the same time the tender for public purchase of: Implementation of passport personalization
infrastructure; 923 900 passport booklets; ICAO compliant photo-capturing photo-booths for
CRA‗s all territorial offices has been completed as well.

By November 2009 the implementation of passport personalization infrastructure is ongoing and is
expected to be finalized at the onset of the next year.
The purchase of the passport booklets has been finished. The design of the booklets is agreed and
supply of first 100 000 pieces took place at the end of this year. As soon as personalization process
of the biometric passport specimen is completed, they would be shared with other state for their
feedback; following this phase, the issuance of new biometric passports shall take place within the
first quarter of 2010.

ICAO compliant photo-capturing photo-booths for CRA‗s territorial offices has been purchased. To
this date equipping and installation process is ongoing; the first photo booth has been installed in
Didube-Chughureti territorial office within the premises of the CRA‘s Head Office.

The development of a Backup Datacenter for the CRA in line with the governmental agreement
signed between the governments of Georgia and the Federal Republic of Germany on 30th of
March would be completed by December 2009. All the necessary equipment has been purchased
and delivered on place. The Backup datacenter would function in parallel with the main datacenter
in online regime.

CRA will start the issuance of new passports already in 2010.

The new sophisticated human recourse management system is planned to be introduced by the end
of January 2010. Currently, the legal unit of the Civil Registry Agency is drafting the contract
necessary for purchase of relevant software. CRA Human Recourses Unit runs trainings for the
personnel of all territorial units of the Agency in service.

During the reporting period CRA‘s 8 territorial offices have been refurbished. Through the financial
support of UNHCR, Tskhinvali territorial office of the CRA located in Gori and Akhmeta territorial
office have been refurbished. Within the framework of UNDP‘s ―Civil Registration Reform II‖
project and with the contribution of the USAID/Caucasus, Kutaisi, Sagarejo, Gurjaani, Poti and
Akhalkalaki territorial offices have been renovated, while the Zugdidi territorial office has been
refurbished through CRA‘s own recourses.

3.2 Border Reform

The process of reforms in the border management system continued in 2009. Following the
approval of the Integrated Border Management Strategy, elaboration of the IBM Strategy Action
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Plan has been finalized by the Interagency Working Group operating under the National Security
Council with the assistance of EUSR BST. IBM AP has undergone all relevant internal state
procedures, and was approved by special Presidential Decree on December 25, 2009.

Transfer of the Border Crossing Points under the authority of the Patrol police, and the merger of
NAVY with the Coast Guard of MoIA was yet another step in the range of successful reforms in the
field of border management. The latter actions have been taken in full compliance with the
Integrated Border Management Strategy (IBM) and were guided by the principle of effective
management of state borders as well as improved intra-agency, inter-agency and international
cooperation. The first results of the reform became evident after immediate detection of several
cases of bribery, illegal border crossing and organized group attempting to enter Georgia.

The Border Police remains responsible for the security of the green border as well as for enforcing
border regime in the maritime space of Georgia. As it was mentioned another important structural
change was the merger of the Georgian Navy with the Border Police Coast Guard. This change
supported the ongoing process of forming the Unified Naval Force of Georgia which shall be
capable of performing effective self-defence activities whenever needed, whereas everyday
activities shall be limited to law enforcement functions. The strategic decision of merging Navy
with the MoIA Coast Guard was taken soon after the August war, based on risks and opportunities
analyses by both GAF Joint Staff and the MoIA. While framework legislation is already in place as
well as tactical & operational level merger has been completed, the next task is to insure building
reliable coordination system with the Joint Staff of MoD.

Elaboration of the ―Rules on cooperation Border Crossing Points‖ of the Ministry of Internal
Affairs and Ministry of Finance Revenue Service of Georgia is ongoing with active support of the
EUSR BST. In its first phase specially established Interagency Working Group comprised of the
representatives from MoIA Patrol Police, MoF Revenue Service and experts of the EUSR BST has
completed study visits to the border crossing points in order to assess the specific needs on spot.

For bringing work of Patrol Police and the Customs closer to the principles of IBM, the Joint
Ministerial Order of the MoIA and the MoF has been issued. The Joint Order authorized the
customs officers to inspect documents of travellers (drivers of motor trasport) as well as to put entry
and exit markings whenever applicable.

Based on the progress already achieved by the Border Police, the work has continued on further
improvement of infrastructure and equipment of the Border Crossing Points. The personal
identification and Registration System (PIRS), created by the assistance of the USA and IOM is
implemented at every Border Check Point, giving opportunity to register and collect the border
crossing data and increasing the capacity of Patrol Police to detect false documents. The system also
collects the information on means of transport. Currently, software allowing bridging of Border
crossing database with other databases of the MoIA, verification of persons entering or leaving
Georgian territory in ―live‖ (online) regime is tested at every border crossing point. The program is
provided with new passport readers which substantially increased speed of document checks. In a
parallel regime the photos of the travellers are taken by digital cameras which enhance
identification and control of the crime. The video-control cameras at the border entry points are
connected to the central database which enables permanent control. The information is recorded and
saved in the database. Furthermore, the infrastructure of the border check points has been
substantially improved. The border entry points which were without solid buildings have been
equipped with temporary modular offices and provided with appropriate equipment. The MoIA is
planning to initiate relevant constructions as soon as possible.


                                                                                                    27
The delegation of certain border control responsibilities on the Patrol Police significantly increased
human resources of one of the largest departments of MoIA and required additional attention to
training and human resource development. Large part of the personnel, who have been employed on
the similar position in border police, possessed relevant qualification and experience and expressed
respective will, have been transferred to Patrol Police. Relevant changes have also applied to police
training curriculums. Another measure directed at approximation was the establishment of Border
and Customs Faculty at the Academy of MoIA, where the officers of the two structures receive joint
training: The training course is conducted in accordance with their future specializations and
envisages deeper training in border control aspects. Conducted trainings are based on the
recommendations and direct support of European Union and US experts.

Ministry of Internal Affairs pays particular attention to radiation security issue, especially
prevention of smuggling of radioactive substances through Georgian borders. In the framework of
the Second Line of Defense Programme of the US State Department of Energy, US experts
provided trainings in Radiation Security and Maintaining Radiation Detectors. Radiation detection
pagers, hand-held equipment, survey meters and identifiers have been handed over to Batumi and
Tbilisi Airports as well as to ―Tsodna‖ and ―Sadakhlo‖ BCPs. Four vans with radiation detection
monitors have been provided to MoIA and over 100 Patrol Police officers have been trained in
operation and maintenance of portal points. The Georgian police officers have been instructed on
new radiation detectors installed at the ports of entry of Georgia. All major road, sea, railroad and
air BCPs are fully equipped with radiation detection equipment. Equipment handover is planned to
be continued.

Ministry of Internal Affairs drafted a presidential decree ―On the Approval of the Rule of Joint
Action to the Alarm when Detecting Nuclear and Radio-active Substances at the Airports &
Harbours and Related Procedures‖. This draft decree was agreed with the Revenue Service and
legal procedures for its issuance will be finalized by MIA in the near future. MoF Revenue Service
established a special unit for organizing the process of x-raying of goods.


In the framework of the South Caucasus Border Management project several preparatory trainings
have been organized by the ICMPD for the project counterparts. Representatives from Georgia,
Armenia and Azerbaijan took part in the study visits held in Georgia and Austria. The project is
intended to be implemented jointly by UNDP & ICMPD as well as partner states such as Czech
Republic, Latvia and France.


3.3 Fight against Organized Crime, Trafficking in Human Beings, Drugs and Money
Laundering

3.3.1 Fight against Criminality

Throughout 2009, the MoIA continued implementation of effective measures aimed at prevention
as well as effective fight against criminality. General trend of decrease in the statistics of grave and
especially grave crimes can still be monitored – in year 2009, as compared to the year 2008, 14,9%
decrease in crime statistics has been documented by the Information and Analytical Department of
MoIA. No terrorist organizations or organized criminal groups operate on the territory of Georgia.
The Ministry continues to strengthen its capacities in the fight against criminality by establishing
effective institutional structure, in particular developing the institute of district police, introduction
of detective-investigators and continuous training and equipment of the forensics.


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In the beginning of 2009, the Ministry started the process of selection and training of ―Speaker-
Policemen‖ – police officers, who will develop communication and presentation skills oriented at
children and will subsequently conduct interactive seminars on criminality in general, with the
special emphasis on drugs.

In order to support the implementation of Council of Europe Convention on Cybercrime the
European Commission and Council of Europe have launched Project of Cybercrime in Georgia,
direct counterparts of which are the MoIA and the Ministry of Justice. The duration of the project is
12 months starting from 1 June 2009 until 31 May 2010.

For the given stage, the following progress has been achieved in the framework of the project: On
16 July 2009, a workshop on cybercrime legislation was held in Tbilisi with the objective to analyze
existing legislation on cybercrime in Georgia and identify the provisions that need further reform in
order to comply with the requirements of the Convention on Cybercrime. The participants also
discussed the need to strengthen institutions for the investigation of cybercrime, international
cooperation and public-private cooperation, in particular cooperation between law enforcement and
internet service providers.

Subsequently, two documents were elaborated by experts: an analysis assessing the Georgian
legislation that includes proposals to bring Georgian cybercrime legislation fully in line with the
Convention on Cybercrime and a report assessing data protection legislation in view of complying
with relevant European standards were drafted in order to facilitate the process of drafting
legislative amendments.

Further steps were defined at the second meeting held on 28-29 September 2009:
   - Necessity of Creation of a 24/7 international cooperation contact point and the specialized
       unit as envisioned by the Convention;
   - Drafting legislative amendments with emphasis on Georgian data protection legislation.

By the decision of the Minister of Internal Affairs a special anti cyber-crime working group will be
established within the Ministry which will ensure effective implementation of the EC/CoE
cybercrime project.

3.3.2 Fight against Drug Abuse through Rehabilitation and Prevention

In 2009 methadone substitute therapeutic program was launched in Tbilisi, Telavi, Kutaisi, Ozurgeti
and Poti. In 2010 within this program additional units will be opened in Tbilisi and Zugdidi.
Currently, 10 medical team functions and 800 patients take part in it.

In 2009 within this program 600 000 GEL was allocated, among which 350 000 GEL for
purchasing drugs. In 2010 1 250 000 GEL will be addressed, among which 350 000 GEL for
purchasing drugs. 2011 is planned to be issued 2 000 000 GEL, among 800 000 GEL for purchasing
drugs.

Besides, for patients treatment with traditional methods 100 000 GEL was allocated in 2009.
260 000 GEL will be allocated in 2010.


3.3.3 Fight against Trafficking

MoIA continues to implement National Anti-Trafficking Action Plan. Trainees at the MoIA Police
Academy are provided with basic course on Trafficking in Persons which touches upon specifics of

                                                                                                  29
the crime, updated national legislation and international instruments as well as instructions on
victim identification and assistance.

MoIA cooperates with local NGOs, International Organizations and relevant agencies of partner
countries in anti-trafficking matters. This cooperation covers wide area of activities such as:

   - Joint implementation of awareness-raising campaigns at BCPs (People‘s Harmonious
     Development Society);
   - Targeted training and re-training of the police officers (IOM, ILO, BSEC, UNODC,
     Swedish Institute);
   - Improvement of the mechanisms to fight child trafficking (World Vision International).

With the aim of increasing MoIA public accountability and transparency, the MoIA official new
web-site has been already launched. Updated information on Fight against Trafficking in Persons as
well as all relevant national and International legislation including the mandate of Interagency
Coordination Council and hotline numbers is available on the new web site www.police.ge.

In order to raise public awareness on trafficking the documentary film was made in collaboration
with State fund for Protection and Assistance of (Statutory) Victims of Human Trafficking by the
Ministry of Labour, Health and Social Affairs. The film is targeted for the seminar and conference
format.

In March-May 2009 two awareness rising seminars were undertaken in Dusheti. Ministry of Justice
with the assistance of the EU organised seminars for prosecutors. The trainings are regularly
delivered to the shelter‘s staff.

State fund for Protection and Assistance of (Statutory) Victims of Human Trafficking in
cooperation with International Organization of Migration prepared the TV clip which was intended
to adolescent. In TV program ―life is good‖, which was on TV several times in Spring of 2009 - all
aspects related to trafficking was mentioned. With initiative of Coordination Council and State
Fund representatives, the program of the Legal Faculty of I. Javakhishvili Tbilisi State University
includes materials about human trafficking. During the course students gain theoretical and
practical knowledge.


The Ministry of Justice carried out anti-trafficking activities in line with the Anti-trafficking Action
of Georgia adopted by the Anti-Trafficking Inter-Agency Council. In particular:

   - The Ministry of Justice of Georgia continues to disseminate information leaflets aimed at
     the prevention of trafficking in human beings through Civil Registry of Georgia
     countrywide. The special banner devoted to the trafficking in human beings at the web-page
     of the Ministry of Justice is being regularly updated.

   - With the aim of further improving methods of investigation and prosecution of the
     trafficking in persons the trainings of law enforcement officials are carried out on a regular
     basis.

   - Ministry of Justice of Georgia is currently working on improving the legal mechanism of
     civil registration of victims of trafficking having no official identification documents.

   - Ministry of Justice of Georgia continues to cooperate with the law enforcement agencies of
     Turkey and Kazakhstan in the field of fight against trafficking in human beings.
                                                                                                     30
In order to implement reintegration and rehabilitation strategy previously approved by the
Coordination Council, the meetings with international and nongovernmental organizations were
carried out regularly in order to perfect services and integration strategies.

The co-operation by National Referral Mechanism is actively ongoing. Two 2 victims of human
trafficking were given the status by the permanent group of Coordination Council. According to the
information came in the fund, on the basis of the National Referral Mechanisms‘ co-operation, there
were prepared interviews with 3 persons. Besides, with support of international organizations,
integrative and rehabilitation plans foreseen by the National Referral Mechanism were carried out
towards 4 victims. At the present time the plan is going to be carried out towards 3 victims.

Periodically, monitoring of shelters is carried out. Currently, 14 trafficking victims are at the
shelters. One shelter is in Tbilisi, another is in Kutaisi.

The Prosecution Service of Georgia has directed its particular attention towards investigation of
allegations of the trafficking in persons and the prosecution of the offenders. In 2009 (January-
October), 30 investigations have been initiated on allegations of trafficking in persons, 35 offenders
have been prosecuted and the judgments were rendered against 35 persons.

Special trainings were held during 2009 with collaboration with European Union and Ministry of
Justice for prosecutors. Also, the training is regularly conducted for the Shelter Staff in order to
improve the relationship with trafficking victims and develop professional skills of staff.

Georgia retained status of the ―Tier-1‖ country in the US State Department ranking, already for the
third consecutive year.

3.3.4 Strengthening Cooperation against Money Laundering

With a view of enhancing the inter-agency cooperation, Financial Monitoring Service of Georgia
(FMS) signed the Memorandums of Understanding with the Ministry of Justice (including the
Office of Chief Prosecutor) and with the Ministry of Finance (including tax and customs
authorities) in January, 2009. The MOJ facilitate the inter-agency cooperation and exchange of
information, established feedback system and envisage access to the databases of the respective
bodies.

For the promotion of the international cooperation and exchange of information, Georgian Financial
Intelligence Unit (FIU) has continued its practice and also signed Memorandum of Understanding
with three countries: Cyprus, Latvia and Aruba. Up to date FMS has signed Memoranda of
Understanding with relevant authorities of 25 countries (Lichtenstein, Serbia, Ukraine, Estonia,
Czech Republic, Israel, Slovenia, Romania, Thailand, Panama, Belgium, Bulgaria, China, Croatia,
Moldova, Lebanon, Armenia, Indonesia, Turkey, Sweden, Macedonia, Poland, Cyprus, Latvia and
Aruba).

For further strengthening of cooperation with Moneyval, FATF type institutions – Egmont group
and Eurasian Group – as well as with other international institutions, Georgia has actively
participated in all the events organized by the above-mentioned institutions as well as coordinated
it‘s efforts in timely and qualitative manner.

In order to strengthen the AML/CFT system of Georgia, following trainings have been organised
for the respective staff of the Office of Chief Prosecutor of Georgia, Financial Monitoring Service
of Georgia and Ministry of Internal Affairs of Georgia:
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   - September 21-25, 2009 - the seminar on Combating Money Laundering with the support of
     the Embassy of the Republic of France;

   - MONEYVAL Training Seminar for Evaluators, organized by Committee of Experts on the
     Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism on 6-10
     July 2009, San Marino;

   - Seminar on Anti-Money Laundering and Combating the Financing of Terrorism for
     Criminal Justice Officials, organized by International Monetary Fund (IMF) in collaboration
     with the Joint Vienna Institute (JVI) on 22-26 June, 2009, Vienna, Austria;

   - Workshop on Typologies of ML/FT, organized by International Monetary Fund (IMF) in
     association with International Institute of Higher Studies in Criminal Sciences (ISISC) on
     June 8-12 2009, Syracuse, Italy.

In 2009, several meetings have been organized with the representatives of the United States
Department of Treasury and Basel Institute of Governance. During the above-mentioned meetings,
future activities regarding the organisation of trainings in certain areas of Georgian AML/CFT
system has been agreed.

For the enhancement of the inter-agency cooperation, Financial Monitoring Service of Georgia has
signed the Memorandums of Understanding with the Ministry of Justice of Georgia (including the
Office of Chief Prosecutor) and Financial Monitoring Service of Georgia in January 2009.

3.4 Police and Judicial Cooperation

3.4.1 Judicial Cooperation on Civil Matters

During the reporting period, the Public International Law Department of the Ministry of Justice of
Georgia has prepared the draft agreement on mutual legal assistance in civil and criminal matters
which will be used as a standard agreement for the conclusion of bilateral treaties with other states.
Based on this draft agreement, a proposal has been made to conclude bilateral agreement with the
United States of America and Canada. Georgia also offered legal cooperation in civil matters to
Czech Republic and introduced the abovementioned draft agreement to the other party. The
negotiation is still ongoing.

Georgia also expresses its readiness (and made such proposal during the JLS Sub-Committee
meeting held in Tbilisi on June 3, 2009) to conclude the similar agreement with the European
Union.

In 2009, Public International Law Department of the Ministry of Justice of Georgia conducted
extensive trainings on legal cooperation in civil and criminal matters based on multilateral and
bilateral agreements for the staff of the National Execution Bureau of the Ministry of Justice, judges
and assistants to the judges.

3.4.2 International Cooperation on Criminal Matters

Georgia is a party to major UN and Council of Europe treaties providing the framework for
extradition and mutual legal assistance (hereinafter – MLA) in criminal matters. As the biggest part


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of the co-operation falls on the European countries, the Council of Europe Conventions2 provides
the basic legal framework. Georgia is also bound by bilateral MLA treaties with several countries
and it should be noted that the number of bilateral instruments is increasing. Recently, Georgia
decided to negotiate MLA treaties with Canada, China and some other countries.

For the time being, Criminal Procedure Code of Georgia (CPCG) is the only legal instrument
regulating international legal co-operation in criminal matters on national level. The relevant
Georgian authorities are currently elaborating the new law on International Legal Co-operation in
Criminal Matters that would be rather comprehensive in comparison to CPCG.

Raising awareness of the judicial officials in the field of international legal co-operation is a key
factor for the effective co-operation. For that purpose, the Prosecution Service of Georgia which is a
principal authority for this kind of co-operation organizes large-scale trainings for prosecuting
officials on annual basis. The trainings showed significant progresses in practice. As a result the
legal errors relating to the international legal co-operation become rare.

The Office of Chief Prosecutor as a central authority in international judicial co-operation issued the
special guidelines on MLA and extradition related matters. The guidelines suggest answers to many
questions that can be raised in practice.

Georgia also participates in the Council of Europe institutions working on the MLA issues (CoE
CDPC, PCOC) which are the suitable forums to exchange expertise and discuss existing challenges.

3.5 Cooperation in the Framework of the Mobility Partnership Initiative

Government of Georgia was effectively cooperating with the relevant EC structures in the
Framework of Mobility Partnership aiming enhancement of the freedom of movement between the
EU and Georgia by promoting legal migration possibilities and addressing illegal migration threats;

Non paper Priority Directions for EU - Georgia Cooperation in the Framework of the Mobility
Partnership Initiative was prepared and submitted to the EU side during the first round of
consultations on the initiative held on April 2-3 in Brussels. The main purpose of the document was
identification of priority directions for cooperation in the following areas: migration management,
labor migration, readmission, reintegration, diasporas, document protection, united data base on
migration and sharing information with EU, labor market and recognition of the professional
qualification. The Government of Georgia welcomed relevant support in the listed areas by creating
possibilities for legal labor migration, as well as for further strengthening of related government
institutions and human resource development and implementation of appropriate government
programs.

The two rounds of consultations were held in Brussels and Tbilisi. The Joint Declaration and the list
of concrete projects offered by the 16 EU Member States based on the Georgian non-paper were
discussed and agreed during the meeting.

‖Partnership for Mobility‖ joint declaration was signed on November 30, in Brussels. Signatory
from the Georgian side is the Vice Prime Minister Giorgi Baramidze, from the European side –
Minister for Migration and Asylum Policy of Sweden, the State that currently chairs the EU, as well
as the Vice President of the European Commission and Ministers of the 16 EU MS (Kingdom of
Belgium, Republic of Bulgaria, Czech Republic, Kingdom of Denmark, Republic of Estonia,
Republic of France, Republic of Greece, Federal Republic of Germany, Republic of Italy, Republic

2
    1957 Convention on Extradition; 1959 Convention on Mutual Assistance in Criminal Matters;
                                                                                                    33
of Lithuania, Republic of Latvia, Kingdom of Netherlands, Republic of Poland, Romania, Kingdom
of Sweden, Kingdom of Great Britain) that have engaged in the ‖Partnership for Mobility‖ initiative
with Georgia. Respectively, the joint declaration reflects the priority directions and specific
objectives offered by the above listed countries.

Georgia‘s main priority is facilitation of legal labour movement including agreement on labour
quotas. Accordingly we consider as a priority projects related to exchange of information
concerning the labour market, employment possibilities for foreign citizens and related legislation,
although majority of offers are related to the return and reintegration of Georgian citizens.

The above declaration is the starting point for the work to be done and some serious steps need to
be made in order to render the above initiative fully operational in the future.

4. Economic and Social Reform, Poverty Reduction and Sustainable
Development

4.1 General Developments

Under the influence of the global financial crisis Georgia‘s economic and financial conditions in
2009 have become more challenging. The fall in FDI, remittances, and export has continued
through the first half of 2009, leading to a significant reduction of employment and incomes. The
steady rise in deposits since May, higher VAT Tax receipts, the recovery of remittances, and a
stabilisation in real estate prises suggest that turnaround is taking place. However, the recovery
remains tentative: trade data are still weak and private credit has continued to contract.
Consequently, the Government revised its growth projections for 2009 downward to -4%, which
coincides with IMF estimation.

Fiscal performance has been adversely affected by the economic decline. Tax collection in the first
three quarters 0f 2009 reduced by 9.6% in nominal terms compared with the same period of last
year. Expenditures in the same period were diminished by 6.1%. Spending priorities continued to be
social spending and labour-intensive infrastructure projects largely financed from donor resources
thereby allowing the Government to limit contracting debt on commercial terms. The fiscal deficit
for 2009 is expected to be increased over the earlier projections and will reach 6.7% of GDP.

Against the background of declining economic activity and falling global commodity prices,
inflationary pressures have reduced. End-period inflation was 5.5 % for 2008 and twelve-month
inflation is only 2.3% percent as of end-June 2009. Taking into account the recent increase of global
commodity prices and signs of improvement in economic activity, the authorities expect inflation to
reach 3.5% by the end of 2009.

Foreign trade has declined significantly in the first three quarter of 2009. Exports dropped by 33
percent relative to the same period last year, while imports of goods declined by almost 35 percent.
The reduction of exports was mostly due to smaller exports of metals as commodity prices fell
substantially and the drop in value of imports was due largely to price effects stemming from the
lower oil and other commodity prices and reduced domestic demand for imported goods.

In line with the plan to increase the exchange rate flexibility, the National Bank of Georgia (NBG)
introduced a foreign exchange auction mechanism in early March 2009. Further, as of end-May
2009, the NBG stopped participating in the TICEX and has minimized its market-maker role.



                                                                                                  34
The financial sector continues to resist well despite a difficult environment. Thanks to the assistance
of international financial institutions, commercial banks have refinanced most of the foreign
liabilities due to mature in the first half of this year avoiding major contractions of their loan
portfolios. The share of non-performing loans has been slowly decreasing since July 2009.
Commercial banks net profit in September turned out positive for the first time since July 2008.
Average capital adequacy—at 20.2 % —has risen since end-2008 despite the need for additional
provisioning.


4.2 Social Security

GoG conducted number of important activities to reform the Social security System, namely:
evaluation of the social assistance performance and targeting; assessment of the changes of the
families economic conditions‘ and social assistance system‘s monitoring results; analysis of the
united database of socially unprotected families; elaboration of the households survey new
methodology and its results.

The above-mentioned activities enables the step by step creation of the more effective social
assistance system, which will more precisely and transparently merge ultimately poor groups of the
society and according to it the maximum efficiency of the targeting and assistance addressing of the
government‘s current resources will be insured.

Government of Georgia approved Decree No 32 on ―Setting Conditions for Granting Medical
Insurance Vouchers under Medical Insurance Programme for the Population below the Poverty Line
for the year of 2009‖ (February 19, 2009). The following categories of population benefit from the
programme: persons whose rating point by the December 31, 2008 equals or is less than 70 000;
families registered in the united database of socially unprotected families in the period of march 31,
2008-December 31, 2008 and whose rating point equals or is less than 70 000; persons forced to
leave their homes during the military aggression of Russia and children leaving in special
educational institutions.

By the Order No 86/n (February 20, 2009) of The Minister of Labour, Health and Social Affairs of
Georgia ―The Social Rehabilitation promoting state Program of disabled, elderly people and
homeless children‖ was approved, which envisages providing of several kinds of social services to
persons with disabilities, elderly people and homeless children, including special twenty-four-hour
care institutions, services of community organizations, institutional patronage of persons with
mental disabilities, health resort rehabilitation of persons from specialized day centres, psycho-
somatic rehabilitation of the disabled children, the prosthetic-orthopaedic devices delivery to
program beneficiaries, services for improving communication of deaf-and-dumb persons and of
social integration of blind, support of early development of children.

By the Order No 118/n (March 23, 2009) of the Minister of Labour, Health and Social Affairs of
Georgia ―Child Care‖ program was approved. This program aims to support homeless, socially
unprotected, disabled children, children with special educational needs and behavioural problems
and children who became the victims of violence.

State Medical Insurance Programme for the population below the poverty line was approved by the
Order No 119/n (March 25, 2009) of the Minister of Labour, Health and Social Affairs of Georgia.
The budget of this programme is 129 511,7 thousand GEL. It provides for the medical insurance
(ambulatory and in-patient care) for the population under the poverty line.


                                                                                                    35
According to the governmental decree No 145 (July 28, 2006) ―About Social Aid‖ families
registered in the united database of socially unprotected families and whose rating point is under
57001 receive social allowance. This allowance is 30 GEL for 1 capita families and from January
2009 - 24 Gel - for each additional member of the family.

According to this decree the families who were forced to abandon their homes after military
aggression of Russia, and who are registered in Civil Registry, can not return to their homes
because of occupation and whose family members are not public servants, also receive the
allowance from January 2009.

Final survey on health systems performance assessment (HSPA) - the first unified assessment on
health systems functioning in Georgia - was completed in November, 2009, which describes the
structure of national instrument of health system functioning assessment and system dimensions as
well as existing correlations between strategies and health systems functioning. Abovementioned
survey will be distributed to all stakeholders, after which implementation of the institutionalization
of the function itself and its integration in the cycle of evidence based policy is planned.

National Health Accounts of the year 2008 is on the start. In the beginning of the year National
Health Accounts of the year 2007 and its methodology was completed (both Georgian and English
versions) and it was placed on the website of the Ministry of Labour, Health and Social Affairs of
Georgia.

4.3 Social Dialogue

In December 2008, a memorandum was signed between the Ministry of Labour, Health and Social
Affairs (MoHLSA), Georgian Trade Union Confederation (GTUC) and the Georgian Employers
Association (GEA) that established provisions to start institutionalisation of a social dialogue in
Georgia. This process was facilitated by ILO expert consultant who participated in most of the
meetings held by the parties and streamlined the process in general.

The social partners have been holding sessions regularly since December 2008, at least once a
month (in some cases several times a month) to discuss issues concerning the labour relations.

During October 21-22, 2009 a tripartite roundtable was held in Tbilisi, Georgia. The roundtable was
held between the ILO delegation, representatives of the Government of Georgia (GoG), the
Georgian Trade Unions Confederation (GTUC) and the Georgian Employers Association (GEA).

The roundtable generated an interesting and useful discussion and it clarified some of the issues
raised by the constituents.

During the discussion, Minister of Labour, Health and Social Affairs of Georgia indicated, that the
GoG pays vital attention to the process of strengthening of the social dialogue formats and would
like to further develop and institutionalize tripartite cooperation. The GoG decided to engage more
actively in social dialogue with all the interested parties and cooperate with them on the relevant
issues.

The parties of the roundtable agreed on the following issues:

   -   To continue the enhancement of cooperation between the ILO and GoG.

   -   To strengthen social dialogue within Georgia by continuing social dialogue on labour
       legislation issues to exchange viewpoints between government, employers and employees.
                                                                                             36
   -   To establish secretariat for support to effective and productive cooperation between social
       partners. This issue was also touched upon in during the discussion between the Prime
       Minister of Georgia and Executive Director of the ILO.

In the frames of the roundtable, the Executive Director of the ILO, Mr. Kari Tapiola met the Prime
Minister of Georgia Mr. Nika Gilauri. During the meeting of the Prime Minister of Georgia and
Executive Director of the ILO, the Prime Minister underlined commitment of the GoG to the social
dialogue, further develop and institutionalize tripartite cooperation.

Following the roundtable several practical steps were made by the GoG:

   -   Prime Minister of Georgia issued a decree that formalized the establishment of
       institutionalized a Tripartite Social Partnership Commission (Decree #335, November 12,
       2009).

   -   A Working Group (WG) consisting 2 representatives of each social partner was created to
       work on the status of the newly established council and review and analyze the Georgian
       labour legislation.

For implementation of Prime Ministers‘ Decree on institutionalization of a Tripartite Social
Partnership Commission, ILO provided technical and advisory services. ILO consultant worked
with WG representatives of each social partner on elaboration of statute of a Tripartite Social
Partnership Commission for enhancing institutionalization of social dialogue in Georgia.

From 8 December to 16 December 2010, WG meetings was held for drafting statute of a Tripartite
Social Partnership Commission. The Minister Labour, Health and Social Affairs opened the first
meeting by asking the WG members to concentrate on drafting the proposed Statute of the
Tripartite Social Partnership Commission.

The constituent‘s representative had to opportunity to express their concerns and views regarding
the Commission status, mandate, relationship to media, working priorities and areas. Statute of
Commission is drafted and WG meetings are on-going for clarification of a few issues.

It should be emphasised, that all 8 fundamental conventions are ratified by Georgia.

The Government of Georgia carefully studies all ILO requests and observations and sends annual
reports without any delay. Accordingly, GoG prepared responses to ILO observations and direct
requests have been already sent on 1st September 2009.


4.4 Progress in Cooperation with International Financial Institutions

After August, 2008 Russia‘s invasion all major International Financial Institutions strongly
committed to the post-war rehabilitation of the Georgian economy. Their contributions expanded
under the deepening of the global financial crisis.

On September 15, 2008 the Executive Board of the International Monetary Fund (IMF) approved an
18-month 477.1 million SDR (759,3 million USD) Stand-By Arrangement to support the Georgian
authorities‘ macroeconomic policies, aiming at rebuilding gross international reserves and bolster
investment confidence after the August war. Country immediately received the first disbursement -
250 million USD. Completion of the second positive review of Georgia‘s performance under this
program (March 23, 2009) allowed for the disbursement of the next tranche - 186.6 million USD.
                                                                                               37
Completion of the third (August 6, 2009) and fourth (December 11, 2009) reviews allowed for
disbursement following tranches -148.4 and 75.3 million USD.

World Bank Group and the EBRD combined their facilities to minimize the impact of the August
shock and global financial turmoil on the Georgian economy. On the basis of the Joint Needs
Assessment (October, 2008) they concentrated efforts on infrastructure development, financial
sector stability and the social needs of the IDPs and other groups of population. World Bank
committed to extend in 2008-2011 530 million, IFC separately – 350 million and EBRD – 927
million USD.

World Bank Group already extended a number of loans including 40 million USD for the municipal
infrastructure and improving housing conditions of conflict-affected population, 40 million USD for
Poverty Reduction Support Operation, 20 USD million for the Second East-West Highway
Improvement Project and 70 million for Secondary and Local Roads Project.

EBRD and IFC provided financial package for the support of two leading Georgian banks: Bank of
Georgia received 200 million and TBC bank – 161 million USD (including also the contribution of
the Netherlands Development Finance Company). EBRD extended loans to the private companies
in the industrial and trade sectors.


5. Trade-related Issues, Market and Regulatory Reform

5.1 Preparatory Work for the Deep and Comprehensive Free Trade Agreement (DCFTA)

Organisational pattern
Georgian Government is strongly committed to have a Deep and Comprehensive Free Trade
Agreement with the EU. Preparatory work for DCFTA with the EU has started. European
Commission‘s (EC) assessment of Georgia‘s preparedness for a DCFTA with the EU was presented
to the Georgian Government (GoG) on March 26, 2009. In response to that the GoG adopted the
Resolution No 78 dated 14 April 2009 ―On Approval of Creation of the Interagency Working
Group for Preparation of the DCFTA in the framework of the Georgian Commission of European
Integration‖. The group is headed by Ms. Tamar Kovziridze, Chief Advisor to the Prime Minister
and comprises representatives of different ministries at the level of deputy ministers and heads of
relevant agencies. Coordination of DCFTA related issues is performed by Prime Minister‘s office.
In order to better coordinate this process two advisory groups in Prime Minister‘s office where
recently reorganized and staff was assigned to support the work of DCFTA Task Force. 15 staff
members, including 2 chief advisors to the PM, are involved in the overall coordination process. 9
out of this 15 are directly responsible for the concrete chapters of future DCFTA. Respective
Ministries and State Agencies designated experts responsible for concrete chapters of future
DCFTA .

In order to facilitate the reforms in certain priority areas set as a precondition by the Commission to
start negotiations on DCFTA, in May 2009 the Governmental Commission on European Integration
established two specialized working groups on technical regulation and food safety issues.

Strengthening the administrative capacity

With due regard to the importance of strengthening administrative capacity of the institutions to be
involved in DCFTA negotiations EU funded project GEPLAC designed the capacity building
programme for the Task Force and its supportive staff. The programme addressed all the key issues

                                                                                                    38
outlined in the Commission‘s assessment. The core activity foreseen was trainings on key priorities,
like General introductory seminar on DCFTA, EU Trade Policy and Tariffs, EU Technical
Regulation, EU Food Safety Regulation, IPR Enforcement, EU Competition Policy, etc.
DCFTA task force in coordination with the NGO ―Eurasia Partnership Foundation‖ (Head of NGO
Coalition) organised round tables on the relevant DCFTA issues with the participation of all
interested stakeholders starting from fall 2009.
EU-Georgia Business Council (EUGBC) has issued three publications on Georgian language and
organized three seminars in different regions of Georgia, aimed at raising Georgian business
community‘s (mainly, small and medium entrepreneurs) awareness on the complex EU trade
legislation, regulations, procedures, rules and standards.
Apart from the above-mentioned, GoG plans to organise further events on DCFTA issues in
coordination with GEPLAC and other donors.


Translation of Georgian Laws
The translation of the existing/draft Georgian legislation in DCFTA relevant areas is underway with
the support of UNDP. The thirteen pieces of legislation requested by EU commission are translated
and provided to DG Trade on September 8, 2009, among them Law on Licenses and Permits, Law
on State Promotion of Investments, Law on Promotion and Guarantees of Investment Activities,
Law on Georgian National Investment agency, Law on Food Safety, Law on Certification of
Products and Services, others.


DCFTA preparatory process implies a set of administrative measures and legal and institutional
reforms in the concrete fields like TBT, Food Safety, IPR, Competition policy, etc. GoG has
undertaken necessary actions in the mentioned areas. The results are exposed below in the relevant
chapters.

5.2. WTO Trade Policy Review on Georgia

The first Trade Policy Review (TPR) of Georgia was held on 8-10 December 2009, in WTO‘s
office in Genève, Switzerland. The respective report says that the country‘s recent economic
policies have met with considerable success guided by reliance on the private sector for growth in a
liberalized trade, investment and business environment, in what has been one of the world‘s fastest
reforming economies. The report says that continuing structural reforms will be the key to
strengthening Georgia‘s resistance to shocks, sustaining growth, attracting investment into export
activities and improving productivity.

5.2 Customs

From January 2009 changes to the Customs Code came into effect. In order to support the
implementation of these changes considerable effort has been taken to introduce subsequent
secondary legislation.

The system of risk-based-management (‗‘ASYCUDA‖) was implemented and became operational.
Different forms of customs control will be applied by the system. There are 4 channels: green,
yellow, red and blue. The risk assessment is performed on the basis of ASYCUDA and its
supplementary software, using importers/exporters risks analysis. The risk-based checking system
significantly reduces not only the time of customs clearance procedures, but also the use of

                                                                                                 39
administrative resources. This ensures random, non-human-dependent selection of inspections and,
in most cases, minimizes the time and cost of compliance.

The practice of specific simplified procedures has been implemented for a certain group of tax
payers in the framework of customs-trade cooperation. These payers are eligible to place their
goods in their own warehouse instead of the Customs warehouse and to defer payments of import
duties up to 30 days. If the declaration is selected ―green‖ it is considered as accepted and the
system automatically assigns a serial number. After the declaration is assessed, and if import duties
will not be paid by declarant, the customs officer will print out the declaration and release goods
with the stamp ―permissible released against security‖. The importer should pay import duties
within 30 days. The criteria for selection of the participants eligible for this preferential treatment
are also defined in the same order. These specific criteria, which were defined for inclusion in this
cooperation, namely are: experience of foreign economic activity (no less than one year); certain
threshold of declared customs value, specific threshold of paid import duties, or quantity of
declarations (no less than 100), financial solvency (absence of customs and tax liabilities), no
history of serious infringement, registration as VAT payer.

Georgia acceded to the Harmonized Commodity Description and Coding System (Harmonized
System version 2007). By the Decree of the Minister of Finance of Georgia, the new national
commodity nomenclature for foreign economic activity was adopted. The adoption of the
Harmonized System will further Georgia‘s compliance with international standards and as well as
facilitate the preparatory process for future negotiations on a Deep and Comprehensive Free Trade
Agreement (DCFTA) between the EU and Georgia.

Procedures were defined in order to enable changes in the declaration without further
complications. This includes the rules of filing as well as the determination of responsibilities and
rights of the declaring and the Tax official. The system of risk-based-management ‗‘ASYCUDA‖
enables the presentation of altered or amended declarations.

The legislative changes also touched upon the dispute resolution issues. According to the changes,
trader is authorized to appeal against violation act even if he signed it. Another innovation of
changes (of December 2008) is a possibility to receive binding information about classification and
country of origin of goods.

From January 1, 2009 new provisions on customs penalties entered into force. According to the
changes majority of provisions became clearer and penalties became more proportionate to
violations.

In 2009 procedures for post-clearance audit inspection came into force. With the assistance of
USAID, several employees were selected for receiving training in customs price valuation and post-
clearance inspection. As part of the controlling mechanism, the customs audit is performed based on
risk evaluation criteria.

According to these changes customs valuation chapter of Customs code was redrafted and new
piece of secondary legislation was adopted. Valuation rules now are fully harmonized with the
WTO valuation regulation;

There was introduced advance ruling on binding tariff information and binding origin information.

Permissions for activity of customs warehouse and temporary warehouse were merged into one
permission. The terms of customs procedures for inward processing or outward processing were
extended.
                                                                                                    40
The integrate tariff concept was introduced in Customs Code.

The Two border crossing point at the border with the Republic of Armenia were modernized.


5.3 Standardization, Technical Regulations and Conformity Assessment

5.3.1 Legal and Institutional Reforms
Comprehensive developments that are worth to be mentioned in the field of TBT, are being
elaborated by the relevant Working Group as the GoG‗s respond to the to the recommendations of
fact-finding mission of EC:
    - Strategy in Standardisation, Accreditation, Conformity Assessment, Technical Regulation
        and Metrology and
    - Programme on Legislative Reform and Adoption of Technical Regulations; and legislative
        support for implementation thereof
    - The Code on safety and Free Movement of Products (related to industrial products).

The principles and guidelines of the Strategy are based on the best international practice and
approaches existing as per field concerned. It considers further alignment of the existing legislation
to international and EU one in order to promote development of equivalent national quality
infrastructure and integration thereof in international infrastructure, thus facilitation of trade and
removing of TBT‘s.

The process of elaboration of mentioned documents started in May 2009, first draft thereof was
submitted to the EC in September 2009. As a part of the process technical meeting was held in
November 2009 in Brussels. During the meeting both parties provided comments and clarifications
regarding the issues of draft Strategy and Programme. As the result of the meeting, operational
conclusions were prepared and agreed in January 2010. The final draft of Strategy and Programme
will be provided to the EC by the end of February 2010.

For the implementation of the principles and goals given in the strategy legislative amendments are
to be introduced. Due to the fact that strategy is multifarious document that covers many different
fields respectively relevant legislation need to be amended is as well as diversified, therefore it was
considered justified to introduce the new ―Code on Safety and Free Movement of Products‖3 where
all necessary innovations and amendments will be reflected.

The process of elaboration of the ―Code on Safety and Free Movement of Products‖ has been
started since October 2009. From that period following relevant laws are being analysed. The
working structure of the draft Code contains the following chapters:

      -    General product safety
      -    Liability for defective products
      -    Technical regulations
      -    Standardization
      -    Uniformity of measurements;
      -    Conformity assessment
      -    Control of technical hazard


3
    Working title
                                                                                                    41
In-depth analysis of Georgian legislation specifically against the two horizontal directives GPSD
and LDP has also been carried out as part of the process of elaboration of the Strategy on TBT
issues, has shown that requirements of LDP are mostly fully reflected in the Civil Code of Georgia,
and as for GSPD main parts and requirements thereof are also reflected in Georgian legislation.
Furthermore the requirements of mentioned directives will be completely incorporated in the ―Code
on Safety and Free Movement of Products‖.


5.3.2 Standardization

In April 2009 European Committee for Standardization provided Georgian National Agency for
Standards, Technical Regulations and Metrology (GEOSTM) with the full database of European
Standards (including those adopted before Georgia‘s affiliation). The database is being updated on
the regular basis.

 In April 2009 24 European standards under the EU Directive 95/16/EC on lifts were adopted as
national standards. GEOSTM has registered approximately 2000 international and European
standards up to date. CEN standards are adopted as Georgian National standards while adoption of
IEC (International Electrotechnical Commission) and CENELEC standards depends on membership
in those organizations. New and global approach directives are registered in the registry of
standards and technical regulations. International standards are used in the field of construction
(mainly cement production); ISO and ISTM standards are widely used in oil and gas sector, as well
as ISO environmental standards (mainly on safety signs) are also applied.

In March 2009 the Strategic Consultative Committee with GEOSTM has approved the internal
programme of gradual adoption of standards related to quality infrastructure needs (mainly related
to quality management systems, environmental management systems and conformity assessment).
With the assistance of the EU TACIS project ―Support to Implementation of Art. 51 of PCA‖
translation of standards is almost finalized and revision of translation will be carried out by the
standardization technical committee on ―quality management and conformity assessment‖.

In April 2009, with the aim of wider public participation in the policy dialogue on the needs and
priorities of quality infrastructure development the Ministry for Economic Development (MoED)
created the working group which should prepare the basis for the establishment of Quality
Coordinating Council. The Council will be composed of the representatives of line ministries and
other relevant public bodies as well as key stakeholders (NGOs, business representatives,
conformity assessment bodies). The working group will soon come up with the suggestions
regarding the structure of the Council, its legal status, and functions.

With the assistance of the German National Metrology Institute (PTB) Mass Reference Laboratory
has been established in conformity with the existing international requirements and its international
recognition will be ensured. With the EU assistance the Physical-Chemical Measurement
Laboratory is being renovated and equipped.

In 2009 GEOSTM established communication with IEC and submitted membership application.
Representatives of GEOSTM participated in 73rd IEC general meeting, where the issues of
membership had been discussed. Membership to CENELEC would become possible only after
becoming a member of IEC. Negotiations and consultation regarding membership of GEOSTM
in ETSI is underway.



                                                                                                  42
During the reporting year GEOSTM participated in the comparisons carried out in the framework of
COOMET as well as in the work of Quality Forum of COOMET. Regional seminar was held in
Georgia under the auspices of Quality Forum of COOMET on the ISO/IEC 17025.

In order to raise efficiency of the information centre (enquiry point) established under the WTO
TBT Agreement Governmental Decree N170 of 18.09.09 has been endorsed. Decree lays down the
rules of notification on standards, technical regulations, conformity assessment procedures and
drafts thereof. Trainings of WTO TBT enquiry point staff as well as study visit to EU countries
enquiry points (Lithuania, Austria) has been carried with the support of EU TACIS project.
Upgrading of the equipment of inquiry point will be carried out Lithuanian technical assistance
project.

EU TACIS project ―Support to Implementation of Art. 51 of PCA‖ provided assistance in further
strengthening of the capacity of GEOESTM. Within the framework of this project GEOSTM was
delivered with PERINORM database and relevant IT network was established (further upgrading is
planned in the framework of Lithuanian technical assistance project); GEOSTM was provided with
consultancy on Quality Management. Development and implementation of integrated quality
management system according to ISO 9001 and ISO/IEC 17025 in GEOSTM are foreseen under the
Twining program.

Representatives of GEOSTM participated in ISO trainings, regional seminars and CASCO
meetings. GEOSTM staff participated in numerous trainings organized by EU TACIS project,
bilateral German-Georgian project and Lithuanian technical assistance projects, on the issues of:
    - Adaptation of National Metrology Institute to achieve international recognition;
    - Expression of uncertainty of measurements;
    - Metrological traceability;
    - Metrology in Chemistry – uncertainty and traceability of measurements;
    - Requirements of standards ISO IEC 17025, ISO IEC 19011;
    - Preparation for transposition of priority international and CEN/CENELEC Standards as
        Georgian national standard.

GEOSTM representatives participated in NMIs directors meeting and CIPM MRA 10 year event.
GEOSTM carried out preparatory work for ensuring participation of national measurement
standards in the comparisons under the COOMET in the fields of temperature, electricity,
conductometry and ionizing radiation.

New version of GEOSTM web page was developed and it is updated on the regular basis. Related
consultancy and on job trainings are provided by the EC TACIS projects.


5.3.3 Accreditation

The Georgian Accreditation Centre (GAC) continues to offer services in new areas of accreditation.
During the reporting period the pharmaceutical enterprise‘s quality insurance laboratory was
accredited in accordance with international standard ISO/IEC 17025. Several ISO standards in the
field of accreditation were translated with the assistance of EU TACIS project ―Support to
Implementation of Art. 51 of PCA‖. More than 20 procedural and technical manuals and related
documents were translated and are being implemented in the accreditation management system.

In June 2009 in the view of promoting cooperation of GAC with EA (European Cooperation for
Accreditation) General Director of GAC participated in the General Assembly of EA. The

                                                                                               43
presentation on the activities of GAC was delivered. GAC Director proposed to sign Agreement on
Cooperation with EA and discussed the possible associated membership of GAC to EA.

In September 2009 GAC concluded an agreement with LATAK (Latvia), which provides for the
transfer of the appropriate standard samples for inspection of laboratories

With the assistance of EU TACIS project ―Support to Implementation of Art. 51 of PCA‖ and
German PTB project trainings/workshops for the assessors of the accreditation centre as well as on-
job-training of the GAC staff in Czech Republic took place.

5.3.4 Technical Regulations

In May 2009 the Governmental Commission on European Integration established specialized Task
Forces on technical regulation. The task force headed by the Chief Advisor to the Prime Minister
and comprised of representatives of different ministries and governmental agencies was charged
with a task of elaboration of Governmental Program on adoption of technical regulations in priority
industrial areas in line with EU New and Global Approach directives. The task force conducted
comparative analysis of Georgian and EC normative framework in the field of technical regulation
and identified the priority industrial areas in which EU compatible technical regulations should be
gradually introduced. The Governmental Strategy on technical regulation was drafted and currently
undergoes the final revision.

Up to date Georgia adopted national technical regulations (TRs) in the fields of gas supply,
automatic-compressor enterprises using natural gas, explosion works, transport using liquid gas,
construction rules for liquid gas service stations, fare safety, railway safety, roads transport,
agrochemicals and pesticides, and wine. Several new technical regulations are under development.
The alignment of national TRs of transport sector with that of EU and other international standards
is ongoing. In 2009 a number of new TRs were adopted in the field of road transport, among them
the rules on carriage of goods and passengers; working and rest hours of drivers of international
carriers; carriage of dangerous goods (the latter is aligned with the requirements of EU Directive
94/55/EC4); rules on issue and using of the certificates for trucks‘ and trailers‘ on compliance with
the ECMT technical and safety requirements and roadworthiness test are worth mentioning. In
order to raise road safety, geometrical standards of roads in line with international standards have
been adopted.

TRs in civil aviation sector are based on relevant ICAO rules. During the reporting period two new
rules, namely, on Certification of the Enterprise Realizing Technical Service of the Civil Aviation
Technique and on Certification of the Civil Aviation Technique were adopted.

During the reporting period the United Transport Administration signed the Working Arrangements
with the European Aviation Safety Agency (EASA), whereby the country agreed to cooperate at the
technical level in order to gradually implement EU standards in filed of aviation safety.

The Government took steps for the accession of Georgia to EUROCONTROL. In particular, the
documents necessary for the accession were prepared and Georgia officially addressed the
EUROCONTROL with the request of membership.

In the area of maritime transport the following new regulations were endorsed: Port Rules; Rules
on Producing, Issuing and Using of the Sailor‘s Book; Rules on Minimal acceptable personnel of
the crew necessary to provide safety on the ship flying the flag of Georgia; Rule on Official

4
    Directive 94/55/EC on the approximation of the laws of the Member State with regard to the transport of dangerous goods by road (ADR directive)
                                                                                                                                                 44
Investigation of Maritime Incidents and Rule on Recognition of the Classification Society. The
letter regulation sets the state control over the ship flag and is aimed on regulation of ships‘
classification organizations.

Progress has been made in the field of construction regulation. In March 2009 the Governmental
Resolution N57 on the Rules of Issuance of Construction Permits and Permit Conditions was
adopted. The regulation deals only with administrative-procedural issues related to permit issuance.
By the request of the Government of Georgia and in close cooperation with MoED and Prime
Minister‘s office IFC Georgia Business Enabling Environment Project is developing the concept of
Technical Safety System reform. The draft concept was endorsed by the Government session of
April 14, 2009. The concept presumes the adoption of three framework laws on Technical Threat
Control and Construction-Technical Control; on Conformity Assessment and Certification of
Products and Services and on Technical Regulations and implementation of subsequent institutional
reform of inspection system in short run.

5.4 Agriculture, Sanitary and Phyto-sanitary (SPS) Issues

Reform of wine sector

Steps have been taken in order to improve institutional control over the use of appellations of origin
of wines. According to the new procedures, appellations of origin are assigned to wines and
certificate of compliance is issued based on the results of the test conducted by Permanent
Degustation Committee and laboratory testing of wines and database available at the Vine and Wine
Department (Samtrest). In case of positive evaluation of wines special hologram ―approved‖ is
fixed on the label of the product. The recent changes to the Law on Vine and Wine (Chapter XII,
Article 33) introduced mandatory certification of wines with appellation of origin.

The Ministry of Agriculture (MoA) has finalized the replacement of 93.7 hectares of hybrid plants
under the program Measures for Replacing Hybrid Plants. According to the program farmers got
compensation in amount of 1000GEL per hectare.

Rising export potential of agricultural sector

The Government of Georgia launched a new cheap credit program (1 year interest free; 7 years
period for its coverage with annual interest rate of 7%). The main objective of the program is to
establish in Georgia cold storage facilities for fruits and vegetables as well as introduce slaughter
houses meeting the high sanitary standards.

Agricultural Strategy

MoA finalised the drafting of the Strategy for Agricultural Development and submitted it to the
International experts for the review. The Basic Data and Directions Document (BDD) for 2010-
2013 recently approved by the GoG contains specific measures contained in the Strategy for
Agricultural Development. In relation to SPS sector BDD includes following strategic areas:
renewal of agricultural machinery; promotion of formation of fruit and vegetable storage facilities;
promotion of cooperation between farmers and small scale land owners; wine laboratory study;
Georgian wine promotion activities; vineyard renovation; vintage support; world wine congress;
intensification of agricultural production; artificial insemination services; livestock identification;
arrangement of sanitary slaughter houses; epizooty activities; plant protection and phyto-sanitary
reliability; food laboratory research.

Enforcement of the Law on Food Safety and Quality
                                                                                                    45
The special Inter-agency Working Group was created at the decision of the GoG Euro-Integration
Commission on 19 May 2009 with a mandate to develop a strategy for progressive implementation
of the Law. The Working Group is led by the Ministry of Agriculture (MoA).

Comprehensive Food Safety Strategy and Operational Programme was elaborated and approved by
the EU Integration Commission. The aim of Government of Georgia (GoG) as demonstrated in the
draft Comprehensive Strategy in Food Safety is to further develop legal and institutional framework
in the food safety sector and implement suspended food safety legislation in line with the EU and
international standards.

The draft strategy and operational programme aim at: a) thoroughly analysing the existing
legislative framework and identifying possible shortcomings; b) describing the steps, Government
of Georgia plans to take in order to introduce a solid food safety system in Georgia; c) outlining
principles and priorities by which the establishment of such a system should be guided; d)
identifying the needs, goals and challenges, associated with implementation of each component of
the food safety system; e) introducing timelines and stages of implementation.

The Strategy and Operational Program address all aspects outlined in the recommendations
prepared and submitted to Georgia by the EU Commission as a result of the Fact Finding Mission
of October 2008. Priorities, principles and implementation timelines of the Strategy have been
identified based on the analysis of Georgia‘s agricultural sector and its specific characteristics. In
addition, a special survey with a tailor made questionnaire was conducted, in order to receive feed-
back from food processing enterprises. Results of the survey were taken into account.

Draft Comprehensive Safety Strategy and Operational Program in Food Safety has been approved
at the EU Integration Commission on September 8, 2009 and provided to DG Trade on September
10, 2009. Commission Services (hereafter COM services) sent comments on Comprehensive
Strategy to Georgian authorities on November 5, 2009. Expert Meeting between Commission
Services and Georgian Authorities on Food Safety Issues was held in Brussels, on November 12,
2009. During the meeting, Comprehensive Strategy was discussed by the sides in a detailed manner.
Operational Conclusions of the above-mentioned Expert Meeting was agreed between COM
services and Georgian authorities on January 29, 2010.

As it was preliminary agreed between COM services and Georgian authorities, the implementation
of suspended provisions of food legislation (registration, traceability and HACCP, inspections) will
be carried out gradually.
Georgia decided to start implementation of suspended food legislation in 2010 as it was indicated in
the Strategy, namely:
    - The first stage of implementation of food safety legislation will focus on the registration of
        food business operators starting from 2010.
    - As for the inspections and traceability related provisions , the implementation will be started
        in the following sequence:

   1. The first phase (from 2011) – inspection, traceability and HACCP will be introduced on
      products designated for the export to the EU. The inspection will cover any kind of products
      designated for the export to the EU, including high risk food production, other food
      production industries and feed products.
   2. The second phase (from 2013) – inspection, traceability and HACCP will cover high risk
      food production.
   3. The third phase (from 2015) – inspection, traceability and HACCP will start for other food
      production industries.

                                                                                                   46
   4. The fourth phase (from 2017) – inspection, traceability and HACCP will start for feed
      production industries, which is last group.

For starting the implementation of suspended food legislation as it was described in the draft
Strategy, the Parliament of Georgia initiated technical changes for reflecting implementation terms
into food safety legislation according to the Strategy and start gradual implementation.
It should be mentioned, that according to the Strategy, legislative streamlining needs to be done.
Accordingly, Georgia would like to use the opportunity to revisit and revise its legislation in the
concerned areas and build the unified and efficient base for ensuring adequate level of food safety
and quality. For these purposes, gradual implementation of inspection and traceability related
provisions will start from 2011 after ensuring:

   -   legislative streamlining,
   -   intensive awareness raising campaign for private sector,
   -   elaborations of database of food business operators through starting registration.

Specific steps to start implementation have already been undertaken, namely: registration of food
business operators started from February 1, 2010. Accordingly, implementation of suspended food
safety legislation started in 2010, as currently envisaged by the Law on Food Safety and Quality.
Already existing authority responsible for company registration (National Agency of Public
Registry) will register food business operators, as it has adequate institutional capacity and
experience in handing databases. The registration authority will be obliged to ensure transparency
and accessibility to the database.

While the registration procedures will be undertaken by the registration authority, the National
Service of Food Safety, Veterinary and Plant Protection (hereafter NS) will have full access to the
database of registered food business operators. The registration authority (National Agency of
Public Registry) has branches in all regions of the country. Accordingly, the food business operators
will have possibility to make registration at local branches and at the same time avoid transport,
time related and other additional costs.

The Working Group is working actively to revise the draft Strategy. GoG has used GEPLAC
assistance, in particular on SPS and the revision of the Strategy will be completed and send to COM
services in February, 2010.

This strategy will serve as a guiding document and framework for further streamlining the food
safety legislative framework and ensuring introduction of a solid food safety system in Georgia.

Food Safety Control

According to Article 361 of the Law of Georgia on Food Safety and Quality, the National Service
for Food Safety, Veterinary and Plant Protection undertook the state control of 6 food enterprises
upon their own request. As a result, some violations were detected and the companies were
provided with recommendations on preventive actions.

Laboratorial research on safety and quality of food samples (water among them) and quality
(falsification among them) parameters was carried out in 58 cities and districts of Georgia under the
State targeted Program of Laboratorial Research of Food Production for 2009. 1564 samples
(mainly on meat and meat products, milk and dairy products, eggs, fish and fish products, sugar,
confectionary, fruits and vegetables, flower, bread, tea, coffee, oils, butter, drinking water etc.) were
taken and passed to the laboratory. On the basis of violations revealed by the laboratory checks 96
cases were submitted to the Revenue Service of the Ministry of Finance for their further reaction;
                                                                                                       47
154 decrees were adopted on prohibition of food (and drink) unsuitable for human consumption; on
the cases of incompliance of the quality of drinking water with the Technical Regulation on
Drinking Water the recommendations were submitted to relevant entities.

National Service for Food Safety, Veterinary and Plant Protection carried out the monitoring on
quality of pesticide and agrochemicals. Consequently, the places of realisation of pesticide and
agrochemical have been registered and the correspondent list has been drawn up. In cases of
violations the sellers were given the prescriptions on labelling, small packing, realisation and
storage of the products.

In this regard it should be noted as well that 150 methods of identification of pesticide quality and
115 methods of identification of pesticide residues in agrarian products, fodder, water, soil and air
were elaborated. These methods will be submitted to the National Agency of Standardisation and
Metrology for their official registration.

Veterinary Control and Plant Protection

Georgia closely cooperates with OIE and is an active partner of WAHIS. Upon the special request
of MoA, OIE experts have elaborated report on veterinary situation in the country. Currently, the
MOA is in the process of its finalization.

In accordance with the Law on Veterinary Medicine the GoG, based on internationally published
information, systematically issues the list of countries, where the dangerous animal infect diseases
are spread. Such countries are announced as non-reliable countries and according to the Codex for
Upland Animal Sanitary live animal, animal products and raw materials from such countries are
subjected to restrictions on import and transit. The latest list was published in January 2009.

During the year several cases of infect disease exposure were reported, in particular: 11 938 cases
of anthrax in cattle and 782 cases in sheep and goats and 42 cases in sheep; 26 004 cases of rabies
in agricultural and domestic animals; and 23 100 cases of brucellosis in cattle, sheep and goats. The
special measures were undertaken on infected areas and the further spread of the diseases was
avoided.

Furthermore, the locust prevention measures were undertaken on 11 827 hectares, thus preserving
the agricultural land areas and the green landscape from the dangerous migration of the locust.

The veterinary control of 317 entities was carried out during the reporting year. As a result,
violations in 35 entities were revealed and acts of administrative violations were drawn up.

In June 2009 implementation of the first phase of the Foot and Mouth Disease Prevention Project
was accomplished.

Development of the legislative and regulatory base

The Working Group (WG) created within the MoA in November 2008 (Order of the Minister of
Agriculture N2-169 (28.11.08)) is in the process of drafting the primary and secondary legislation
on phyto-sanitary, food hygiene and veterinary. The Working Group is tasked with development of
more than 15 pieces of legislation in line with the EU acquis.

The WG has already finalized the drafting of the Rules on Registration of Food Producing
Enterprises; Food Hygiene; Certification of Enterprise Hygiene; Labelling of Food and Food
Products. It is also planned to introduce changes to several existing rules as well.
                                                                                        48
On the basis of amendments to the Law of Georgia on Agricultural Quarantine (26.06.2009) the
Rules on Phyto-sanitary Protection of Georgian Territory from Invasion and Spreading of Harmful
Organisms has been drafted and is pending approval. In order to deepen the trade relations with the
EU Members States the requirements of international standard N15 Guiding Principles for
Regulating of the Wooden Packing Materials in International Trade are fully reflected in the Rule.

In order to improve the procedures related to issuance of phyto-sanitary certificates the Rule of
Issuing Phyto-sanitary Certificates and Re-export Phyto-sanitary Certificates entered into force in
September, 2009. The above mentioned rules are in line with the principles of International
Convention on Plant Protection; applicable international standards and European Directives
92/90/EEC, 93/50/EEC and 94/3/EC.

Additionally, the Rules on Issuance of the Hygiene Certificate for Food and Food Jar were adopted.
192 hygiene certificates were issued based on the new rules.

Capacity Building of the MoA Staff

Under the FAO project Strengthening of Prevention Measures of Foot and Mouth Disease and
Assistance in Implementation of Urgent Actions in South Caucasus Countries the special trainings
were delivered to veterinarians in May, 2009.

In June 2009 FAO (project TCP/GEO/3102) organised the study visit of representatives of the
Marketing Research and Strategic Development Unit of MoA to Italy. The main objective of the
study visit was to share Italian experience of promoting agricultural export by the government and
learn organizational and managerial structures of the private and state organizations, also find out
how they are financed and supported by the government. During the study tour the marketing and
export organizations were visited.

In December, 2009 the UNDP organised a number of seminars aimed at raising the knowledge of
the MoA staff on different instruments of rising the agricultural potential of the country and
attracting investments.

The representatives of the National Service of Food safety, Veterinary and Plant Protection
participated in trainings, seminars and conferences meetings organised by various international and
non-governmental organizations (FAO, WB, OIE, EPPO, IPPC, UNDP).

It should be emphasized, that GEPLAC organized training for public officials including MoA staff
on EU Food Safety Regulation and workshop on Organization of Food Control under in the Food
Safety Legislation of the EU and particularly in relation to SME‘s" .

Further training will be organised on relaxed schemes for small food/feed business operators on
February 4, 2010.

Study visit to UK is being organised by the GEPLAC. The theme of the visit is Food Safety.

SPS border control

Based on primary legislation of Georgia (Georgia Laws ―On veterinary‖, ―On agricultural
quarantine‖, Customs Code) Revenue Service (RS) on the Ministry of Finance implements State
Phyto-sanitary and Veterinary Border-Quarantine Controls based on rules defined by the Ministry
of Agriculture. This division of competence clearly defines the sphere of activity of RS as the
                                                                                                 49
operational authority, and Ministry of Agriculture as the policy decision maker authority. According
to N987-N2-184 joint order, 31.12.2008 of the Minister of Agriculture and Minister of Finance,
veterinary, or phyto-sanitary inspector of RS has obligation to undertake documentary check,
identity check, and physical check and laboratory samples taking. This joint order was elaborated
with the assistance of EU funded project TA to the secondary customs legislation and SPS import
control.

From July 1, of 2009 year there was started to undertake full identity check (a check by visual
inspection to ensure that the veterinary or phyto-sanitary certificate(s) or other document(s)
provided for by the Georgian legislation tally with the product itself, as well as for the presence and
conformity of the marks which must appear on the animals themselves or on the packaging of
products, including to open transport means) and also physical check and laboratory samples
taking.
    - Documentary and identity check should be undertaken in any case (excluding consignment
        which fall into monitoring plan) regarding any goods subject to controls. However, if the
        officer will find out any non-compliance, suspicious in the process of documentary and
        identity check officer should implement physical check and laboratory samples taking
        additionally. Goods may be released into import only if results of physical check and
        laboratory samples taking will not reveal any threat for society.

   -   Only Documentary check should be implemented if consignment will be chosen according
       to the reduced frequency of physical checks monitoring plan for laboratory test. In this case
       the identity check will be implemented in the inland customs office and if the officer will:

   a) Find out any non-compliance, or suspicious in the process of identity check officer should
      implement physical check and laboratory samples taking. Goods may be released into
      import only if results of physical check and laboratory samples taking will not reveal any
      threat.

   b) Not find out any non-compliance, or suspicious in the process of identity check officer
      should implement physical check and laboratory samples taking (the same will apply
      regarding physical check). Goods may be released after laboratory samples taking, without
      waiting of results of laboratory samples.

These monitoring plans were made out based on statistical data for 2008 year with the assistance of
EU funded project TA to the secondary customs legislation and SPS import control, there was taken
into account quantity of goods subject to control which were moving via each BIP (Border
Inspection Post). Current monitoring plans were agreed with the National Service of Food Safety,
Veterinary and Plant Protection (NSFSVPP), Ministry of Agriculture.

Approximetly 120 veterinary and phyto-sanitary officers are working at RS. They were trained at
the Academy of MIA.

Integration within the EU Rapid Alert System for Food and Feed

Georgia is becoming progressively integrated within the EU Rapid Alert System for Food and Feed
(RASFF). Rules and procedures for communication and information sharing have been developed,
and responsible units created within the structures of the MoA and the State Revenues Service of
the Ministry of Finance (MoF). Rules for communication and notification have been developed and
communication is exercised.

                                                                                                    50
International Cooperation

Since 2006 Georgia is a member of IPPC. Georgia has recently uploaded all corresponding
legislation covering phyto-sanitary measures and established relevant inquiry point.

MoA has been intensively involved in communication with WTO through filing the information
requested by the WTO questionnaires.

Georgia has made progress in cooperation with BSEC countries on SPS issues. The cooperation
aims at streamlining of border sanitary quarantine procedures and alignment of the list of harmful
organisms with that of World Health Organization. Ministry has developed the drafts of
international agreements on plant protection with Azerbaijan, Armenia and Ukraine. The draft
agreements have been submitted to the above mentioned states and currently Georgia is waiting for
their final response.


5.5 Financial Services

The Georgian Parliament approved new Organic Law of Georgia on National Bank of Georgia on
24th September, 2009, effective from 1st December, 2009. The Law aims at expanding and
strengthening the functions of the National Bank of Georgia, which implies supervision of the
financial sector. Without prejudice to the main objective, the National Bank of Georgia should
contribute to the stability and transparency of the financial system, and perform other functions.

During 2009 several changes were introduced to both primary and secondary legislation on
financial services. Changes and amendments to the Law on Insurance of September 2009 should be
considered as significant step forward in terms of alignment of Georgian insurance legislation with
EU acquis. The licensing and supervisory regime of insurance undertakings, as well as rules on
winding up has been further approximated with the requirements of respective EU Directives. New
Regulation on Investment of Technical Provisions January 2009 has considerably improved the
investment possibilities and diversification of assts covering technical provisions of insurance
companies and has been further approximated to the requirements of the EU acquis with regard to
both categories of authorized assists as well as investment diversification.

The legislative changes introduced to the Law on Activities of Commercial Banks in September,
2009 improved the corporate governance rules of the banks and further clarified the issue of
division of competences between the executive and supervisory boards.

In September 2009 by the initiative of Association of Banks of Georgia 12 out of 18 banks of
Georgia signed the Corporate Governance Code. Code was developed within the framework of IFC
Georgian Corporate Governance project. The code represents voluntary rules; however, by adhering
to this document the bank abides itself to follow those high standards of corporate governance.

5.6 Taxation

Changes effective from January 1, 2009 made to the Tax Code facilitated the improvement of the procedure
for providing tax deduction (credit). The new rules allow taxpayer to be more flexible in issuing an invoice
and getting a credit are in compliance with VAT Directive.




                                                                                                         51
According to ENP AP general objectives and actions (4.5.5 other key areas)5 Georgia has to ―Complete the
network of bilateral agreements between Georgia and EU Member States on avoidance of double taxation in
line with the OECD Model Tax Convention‖. Georgia continued cooperation with different countries to deal
with double taxation issue. For the moment, Georgia has double taxation treaties (DTA) in force with 26
countries; DTAs with 3 countries are signed and to be ratified; negotiations with 8 states are underway.

In order to ensure proper implementation of DTAs new regulation on double taxation was adopted on
November 18, 2009. According to the new regulation DTA benefits can be granted upon payment of income.
Double taxation relief information forms should be submitted once a year together with annual income tax
return. It is important to establish an effective procedure which will enable Georgia to provide the anticipated
DTA benefits by relief at source rather than requiring foreigners to rely on obtaining refund of tax. And in
fact, new regulation offers this option.

The new regulation abolishes residence certificate and introduces self-certification for certain cases. The
self-certification of residency and beneficial ownership is introduced for double taxation relief on any
income up to 50 000GEL and any amount of income received in the form of dividend and interest. Ideally,
self-certification shall be introduced for all cases without any threshold. The self-certification replaces
mandatory requirement of residency certificate from foreign authorities. The process of obtaining residency
certificate is time consuming and expensive. During self-certification foreign income recipients file a request
with the withholding agent self-certifying as to their entitlement to DTA benefits. The non-resident is also
required to certify that if any of the situations certified to change the withholding agent will be notified.

The regulation abolishes the legalization\apostile requirement. Legalization or even simplified legalization
through apostile is an expensive and time consuming process. Elimination of this requirement will facilitate
to faster and more effective procedure for granting DTA benefits.

The progress has been made in the area of tax risk management. From April, 2009 tax authorities in Georgia
began selecting taxpayers for audit based, in part, on an automated risk-based selection system. The new
system automatically generated 100 high-risk companies based on 13 tax risk profiles programmed into risk
management software.

The Revenue Service managers then have been reviewing the list and selecting companies from that pool for
audit. The taxpayers to be audited are sorted from the classified list based on: highest scores and resources
available at Audit Department. Application of new method shall allow Revenue Service to inspect companies
through the territory of Georgia and over time carry out audit of every company and not only the same ones.
Based on ongoing experience, the risk profiles will be modified in order to respond the newly exposed risks.

Ministry of Finance (MoF) has been gradually extending the e-fling system. E-filing is one of the key MoF
electronic services reducing tax compliance costs and facilitating voluntary payment of taxes. E-filing
system was gradually implemented for all taxes starting with VAT in November, 2007. Introduction of
electronic filing aims at increasing accuracy and efficiency, decreasing taxpayer burden, enhancing voluntary
compliance and reducing Revenue Service administrative costs. Paper VAT invoices are no longer required
if taxpayer submits VAT return electronically. In 2009 number of e-filers increased significantly. By the end
of 2009 approximately 17 000 taxpayers were submitting tax returns electronically as compared to 1500
taxpayers last year.

One of the last year changes to the Tax Code enhanced voluntary disclosure concept and allowed taxpayer to
change the declaration without being penalized (Articles 97, 124 (2.1) of Georgian Tax Code). This concept
increases compliance of companies with tax legislation. According to EU practice companies have
possibility to amend tax declarations and correct any procedural mistakes without getting penalized, before
these mistakes are revealed by tax audit or before tax authorities make decision about auditing the company.

5.7 Intellectual Property Rights Enforcement


5
    ENP EU-Georgia Action Plan
                                                                                                             52
Georgia has made progress in conclusion of international agreements aimed at protection of
intellectual property rights (IPR). Negotiations with the European Community on the Agreement on
Protection of Geographical Indications of Agricultural Products and Foodstuffs were finalised. At
present, provisional measures for concluding the agreement are carried out. In particular, Georgian
Government has adopted Decree on ―establishment of commission examining complaints related to
granting protection to Community Geographical Indications of agricultural products and foodstuffs
in Georgia‖. Besides, list of Community Geographical Indications are prepared for publication in
Georgia.

In May 2009 Georgia signed bilateral agreement with the Republic of Azerbaijan on cooperation in
the field of protection of IPR. Negotiations on the Agreement of mutual legal protection of
geographical indications with other regional neighbours are underway.

In the framework of DCFTA preparation GoG has drafted the new Law on Design and draft
amendments on Patent Law of Georgia regarding the introduction of supplementary protection
certificate for the purposes to bring the IPR legislation in line with EU and international standards.
The draft Law on Design and the draft amendments on Patent Law are translated in English and
sent to EC services for comments. Currently the intra-governmental procedures are underway for
the approval of the draft Law and the draft amendments. The draft Law on Design and the draft
amendments on Patent Law will be submitted to the Parliament of Georgia in February.

GoG has launched the study on piracy and counterfeiting in the framework of the DCFTA
preparations. The study serves to achieve tangible progress in the implementation of the relevant
PCA and ENP Action Plans provisions aiming at significantly improving the implementation and
enforcement of the existing IPR legislation. The study is carried out with the support of UNDP and
it is believed to be finalized in the beginning of 2010.

During the reporting period National Centre for Intellectual Property (Sakpatenti) carried out
substantial public information campaign aimed at raising the knowledge of the population on IPR
issues. In 2009 Sakaptenti published an album Georgian Folk Craftsmanship, as well as brochures
related to copyright, inventions, trademarks, GIs, designs, new plant varieties and animal breeds.
Sakpantenti has translated WIPO comic books on copyright, trademarks and patents and
disseminated it at the secondary schools of Georgia. Sakpatenti has translated and published WIPO
summaries annotations of conventions and agreements administered by WIPO; as well as translated
and published the texts of several international IPR conventions.6

The amount of registered objects of Intellectual Property at the register of Revenue Service of the
ministry of Finance (Customs Administration of Georgia) was significantly risen in comparison to
the last year. Several decisions on seizing the goods by Customs authorities were made, two case
was brought to the court and in one case the seized goods was destroyed. There was created special
risk profiles for registered objects of Intellectual Property. These risk profiles are active in
Automated System of Customs Data System, through which customs control regarding IPR
protection is concentrated.

5.8 Statistics

According to the decision of Government a task force on statistics reform was formed in December
2008. The key government agencies, experts of local NGOs and international organizations were
presented in the group. The concept for reform of Georgian system of statistics has been developed

6
    Berne Convention, Rome Convention, Paris Convention, Madrid Protocol, Lisbon Agreement, PCT, Hague Agreement.


                                                                                                                    53
and submitted to the Prime Minister. On the basis of this concept the draft law on ―State Statistics‖
has been prepared which was sent to the Eurostat for recommendations.

The Government of Georgia received (July, 2009) Eurostat‘s comments on the draft Law. GoG has
carefully analyzed all these recommendations and proposals. In addition, national laws on statistics
and experience of deferent countries, for example, the statistical laws of Lithuania, Poland and
Armenia, Latvia, etc. were analyzed. Based on the above-mentioned, GoG redrafted the Law and
submitted it to the Georgian Parliament (September, 2009).
At present the Law on Official Statistics is adopted by the Georgian Parliament and entered into
force (December 21, 2009). The new Law includes all the basic recommendations of Eurostat.

According to the new Law on Official Statistics, from february 1, 2010 Department of Statistics of
Georgia is no more under the Ministry of Economic Development of Georgia. It has been
established as the Legal Entity of Public Law - National Statistics Service (Saqstat), which carries
out its activities independently.
According to the EU/Georgia ENP Plan for 2009 and towards graduate harmonization of particular
areas of official statistics with the international (European) standards the number of activities have
been carried out..
In Particular, It was planned to widen the scope of Consumer Price Indices in order to improve
estimates. Existing method of CPI estimates covered five cities (Tbilisi, Batumi, Gori, Kutaisi and
Telavi). From January 2009 three more cities (Poti, Marneuli, Akhaltsikhe) were added to the CPI
estimations. Nowadays pilot observations in those cities are carried out and their results do not
participate in the compilation of National Consumer Price Indices.
In 2009 Pilot observations on the Producer‘s prices of agricultural production have finished. The
implementation of Producer‘s price index (PPI) for agricultural production will substantially
improve the quality of calculation of the GDP real growth. Nowadays quarterly observations on the
producer‘s prices are carried out.

In 2009 the statistical survey of small and medium-sized enterprises has been finished. The survey
has been focused on the trends in small and medium business development. It was basically aimed
at collecting thorough data on the trends typical to economic activities of small and medium-sized
enterprises in the sector of non-financial corporations, in order to make proper analyses of business
environment. As well as the PPI of agricultural production survey, it was carried out under the EU
experts‘ supervision, according to modern European standards.

5.9 New Law on Chamber of Control

In January 2009 the new law on the Chamber of Control has been adopted to increase its
independence, strengthen public oversight over budgetary expenses, bring existing regulations in
line with EU standards, increase transparency of Government activities, and establish new
institutional mechanisms that enable the opposition to exercise greater control over the work of the
Chamber, including appointment of the opposition MP to the special ―council of disputes‖ which
makes decisions on all disputable issues.

5.10 Enterprise Policy

The ―Cheap Credit‖ programme continued in 2009. The programme foresees delivery cheap credits
to enterprises operating in agriculture, tourism and handicraft. The government determined the
conditions for participation in relation to the volume, terms, interest rates and payment system.
Selection of companies and credits will be provided via the commercial banks and the Ministry of
Economic development of Georgia will provide temporary monitoring of the Program.

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To apply the ―One Stop Shop‖ principle as much as possible the Entrepreneur Service Center was
created in the Ministry of Economic Development of Georgia in the beginning of 2009. It is
engaged in granting of licenses for natural resources, permissions for constructions and different
kinds of certificates and permissions for export. The Service Center also provides consultations on
state property management, privatization, legal and other issues. During 2009 more than 16
thousand people took the opportunity to use services of the Center.

With the aim to enhance cooperation between Georgian and foreign businessmen Georgian
National Investment Agency organized 15 business forums in different European countries. In
2009 Georgian Government continued extension of institutional arrangements with the foreign
partners aimed to create solid basis for the attraction of investments. In this context the bilateral
agreements on protection and encouragement of investments were signed with Czech Republic and
Estonia.


5.11 Competition Policy

Competition policy is one of key areas of importance for the future DCFTA between EU and
Georgia. GoG has taken appropriate measures to comply with EU recommendations during the
reporting period. As recommended by the European Commission‘s assessment of Georgia‘s
preparedness for a deep and comprehensive free trade agreement (DCFTA), GoG has drafted a
Comprehensive Strategy in Competition Policy. Inter-Agency Task Force for Coordination of
Preparatory Works for the Deep and Comprehensive Free Trade Agreement with the EU has
worked on the strategy in coordination with relevant ministries, agencies and interested parties.

According to the Strategy, in order to bring the competition legislation in line with international
standards, Competition Framework Law should be elaborated, which would include the following
definitions, regulations and implementation provisions: abuse of dominant position, concentration
regulations, restrictive agreements, concerted practices and decisions by undertakings, state aid,
terms of relevant market and block exemptions, institutional provisions aimed at strengthening the
competition authority.

The Strategy outlines enforcement issues related to both investigative and preventive/punitive
powers and provides views on further institutional development of the Competition Authority, by
suggesting a higher level of institutional independence.

The draft Strategy was approved at the EU Integration Commission on September 8, 2009, and
submitted to DG Trade on September 10, 2009. COM Services sent comments on Comprehensive
Strategy to Georgian authorities on November 5, 2009. Expert meeting between Commission
services and Georgian authorities on Competition issues was held in Brussels, on November 26,
2009. During the meeting, Comprehensive Strategy was discussed by the sides in a detailed manner.
Operational conclusions of the Expert Meeting was agreed between COM services and Georgian
Authorities.

Specific steps to start implementation are already in planning, namely GoG decided to start the
institutional reform in competition area, in order to create the basis for the independence of the
Competition Agency and equip it with adequate powers and competences. The foreseen institutional
reform reflects the genuine political commitment of the GoG to undertake the fundamental reform
in the competition area as it was declared in the Strategy and discussed on subsequent technical
meetings. The reform includes the creation of Legal Entity of Public Law (LEPL) – Competition
Agency. The Agency will not be the structural unit of any governmental institution and will

                                                                                                  55
subsequently replace the currently existing Agency for Free Trade and Competition under the
Ministry of Economic Development of Georgia.

Note and timeline on foreseen institutional reform was sent to Commission Services. This timeline
will become part of the competition strategy. GoG aims at starting the institutional reform process
in February 2010 by undertaking the necessary legal steps in order to set up a new independent
competition authority.

It should be emphasized, that the Task Force is working actively to revise the draft Strategy. GoG
has used GEPLAC assistance, in particular on competition and the revision of the Strategy will be
completed and send to COM services in February, 2010.


GEPLAC has supported the GoG with the specific seminar on "EU Best Practice of Competition
Institutional Setup" in December, 2009. Task Force is working actively and completion of the
revision of the Strategy is expected very early next year. . Seminar was conducted by Swedish
expert from Department for Communication and International Affairs of Swedish Competition In
the framework of DCFTA preparations the office of the Prime Minister has started analyzing the
existing legislation in the competition policy and international best practice.

5.12 Public Finance

5.12.1 New Budget Code

New Budget Code was developed and adopted by the Parliament (December 18, 2009), which
replaced the existing set of laws. New Budget Code strengthens relationship between MTEF and
the State Budget by focusing on improving the budget calendar and reinforcing MTEF and Annual
Budget law linkage on a legislative basis.

According to the new Budget Code the terms for the BDD preparation have changed. This
document is submitted to the Parliament along with the Draft Law of State Budget. The BDD
defines spending agencies‘ expenditure ceilings for the next 4 years. If a spending agency‘s budget
request is not in conformity with the priorities stated in BDD, the agency is obliged to give
reasonable explanations, and only after that GoG will make a decision about financing the particular
priority of the spending agency. After approving the budgets at all levels (including local), the MoF
is obliged to revise the BDD and present the final version to the Parliament. Budget reporting will
become more transparent. Particularly, if there will be a significant difference between a spending
agency‘s allocations and actual expenditures for its priorities, the agency will be obliged to give
justifications.

The Full Program Budgeting process will be launched from 2012 (medium-term financing of each
priority, possible outcome and performance indicators), which will complete the implementation of
MTEF principles. On top of that preparation of Capital Budgeting at all budget levels has
introduced. A new equalizing transfer formula has been developed. According to this formula, the
volume of transfers has been directly linked to country‘s economic development and fairly reflected
the social welfare.

5.12.2. Review of the BDD and MTEF framework

The BDD framework was reviewed in order to improve the linkage between the national and
regional strategies and the priorities of spending agencies. The spending agencies are obliged to

                                                                                                  56
develop and approve their own costs strategies whereupon they will be incorporated within the
BDD.

The format of the BDD is modified and updated. Spending agencies‘ Medium-Term Action Plans
are categorized by their programs and measures thus better reflecting purposes of budget
expenditures. Information is grouped according to priorities and measures to be taken. 5 self-
governing cities, involved in BDD preparation process, present information on i) main priorities for
the next four years and ii) financing needs for those priorities. Priorities of all municipalities will
also be included BDD.

The existing macro-fiscal framework was audited by an international company with highly
satisfactory results.

Two working groups were established for to gradually implementation of the Capital and Program
budgeting. The groups include representatives of the MoF, line ministries and foreign experts. The
working groups hold intensive consultations with other line ministries and self-governing cities on
issues concerning MTEF process. Presented information is analyzed on a permanent basis. The
groups also revised budgeting request forms that were submitted to the MoF by spending agencies.
Compared to previous years, these forms were simplified and became more informative.

5.12.3. Farther adoption of the GFSM 2001 classification

In 2009, the GFSM 2001 classification was adopted by the autonomous republics and all self-
governing units. In the same period, the budget preparation and reporting format for self-governed
units was changed making the information concerning the Consolidated Budget more clear and
understandable for all stakeholders.

5.12.4. Integration of the LEPL’s budgets

One of the major components of public finance management is integrating the budgets of the
LEPL‘s since a large number of their activities are related to the realization of programs defined as
priorities of the GoG. Thus, a cohesive database, containing information about all the LEPL‘s, was
created within the MoF. More than 140 LEPL‘s are reflected in the State Budget and information
concerning their budget expenditures is submitted to the Parliament quarterly, along with the State
Budget execution report. However, in addition to budget resources, some of these LEPL‘s have
their own revenues. Official information about these revenues was not previously available;
Governmental decree (April 6, 2009) determined large LEPL‘s (having high revenues) with the aim
to provide MoF quarterly reports on their budget execution for 2009.

5.12.5. Public Finance Management System

The basic structure of the PFMS was agreed with the stakeholders and the functional and technical
design of the system was prepared in 2009. PFMS modules will be developed and implemented in
2010. With a view to broadening knowledge on international best practice in the field of PFMS
MoF and Treasury personnel visited Ukraine and Slovakia in August and September 2009
respectively.

Treasury single foreign currency account is established and fully functional since July 2009. All FX
transactions are executed through the single multi-currency account. The new FX information
system ran by Treasury Service provides precise accounting and more versatile and timely
reporting.

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5.12.6. Public Internal Financial Control

March 2009 GoG approved the strategy document (policy paper) on ―Public Internal Financial
Control‖ (PIFC). It is based on the European Union‘s PIFC concept and the International Centre of
Internal Auditors‘ (IIA) Guidelines for Internal Control Standards for the Public Sector. PIFC
Policy Paper reflects more modern international interpretation of internal control. The view of
internal control has been expanded to encompass all internal processes that will help an organization
to achieve its goals comprising of human resources, information and communication including
written procedures, risk analysis and the ‗control environment‘. The main goal of this strategy is to
settle unified internal financial and internal auditing control mechanisms. The strategy includes an
action plan for 2009, which describes in detail the number and type of activities necessary for the
successful fulfilment of the main objectives.

In June 2009, a draft law on internal auditing and inspection was prepared and submitted to the
Parliament. The law regulates the scope, requirements, principles, general methodology, standards
and other issues of the financial management and control and the internal auditing process within
the public sector. The draft Law was submitted to the Parliament. Under this law, ―public sector
entities‖ refers to the users of the Budget of Georgia, budgets of municipalities, state funds,
independent regulatory bodies and other legal entities in which the government or municipalities
have a controlling stake. Financial Management and Control relates to both financial and non-
financial activities in the operation of the entity. Financial Management and Control is carried out in
all organizational units at all levels of the entity, and covers all resources. The main purpose of this
law is to promote internal audit principles and practice according to the best international standards.

In close collaboration with the Internal Audit Harmonization Unit and in line with the best
international standards (IFC, IIA), the Risk Assessment and Internal Audit Unit of MoF developed
internal audit standards, a code of ethics and audit manuals to assist the auditors in preparing the
relevant reports (addressing international requirements). Within the scope of this collaboration,
training on internal audit issues was conducted for Inspectors General.


6. Cooperation in Specific Sectors

6. 1. Transport and Communications

Ministry of Economic Development of Georgia has started the process of Georgia‘s accession to
EUROCONTROL to contribute the integration of Georgian air navigation area into the European
air space. During 2009 the government of Georgia realized appropriate activities, namely: accession
documents were discussed and agreed with the relevant governmental agencies of Georgia; Georgia
officially applied the EUROCONTROL for accession. In accordance with the rules of
EUROCONTROL, closed draw is necessary for the accession of the new member. To become a
member of the organization, the parliament of Georgia has to ratify the number of conventions.

Realization of the Baku-Tbilisi-Kars New Railway Line Construction Project is underway to
develop the rail connection form the Caspian basin through Turkey. In this context the first meeting
of the Trilateral Steering Group of the Baku-Tbilisi-Kars New Railway Line Construction Project
with the participation of the ministers of the Republic of Azerbaijan, the Republic of Turkey and
Georgia was held on 23-24 May 2009 in Bodrum (Republic of Turkey). Parties considered and
agreed on technical, as well as economic and financial details of the project realization.



                                                                                                     58
―Azerinshaatservice‖ company is undertaking construction works on Akhalkalaki-Kartsakhi
(Border with the Republic of Turkey) railway section to realize Baku-Tbilisi-Kars New Railway
Line project. Construction started in 2008 and currently the work is underway.

Procedures in order to enter ground necessary for railway line construction in authorized capital
stock of ―Marabda-Kartsakhi Railway‖ are underway. The process of buying back the land started
in May 2009 and will approximately be completed in 2010.
International tender to design the Akhalkalaki station, railcar crossing and handling point was
completed and the contract with the winner company was signed in Novembe 26, 2009.

Tender on Marabda-Tetritskaro railway section construction works was completed as well and the
contract with the winner company was signed in December 9, 2009.

Preparing documentation for Tetritskaro-Tsalka-Akhalkalaki railway section is underway and will
be completed in January 2010. After technical examination the documentation will be approved by
the Coordination Council.
New Numbering System and the Plan for Electronic Communications Networks of Georgia is to be
presented for the GoG. This will increase the efficiency of the electronic communications networks,
further development of entrepreneurship and improvement of service quality for customers;

The Georgian Governmental Network (GGN) project started in 2006 and will be the basis for e-
Government system of Georgia. On November 2008 ―Magticom‖ L.T.D. 3 months ahead finished
first stage of building process of Georgian Government Network and now it connetcts more then
500 points of different ministries and entities. On 2009 started the second stage of bilding process
of Georgian Governmental Network.

The Agreement between the Government of Georgia and the Government of the Republic of Latvia
on co-operation in the field of Information Technologies was signed on 8th of December 2009
according to this Latvian side will be able to offer technical assistance to elaborate the E-
government system project in Georgia.

6.2 Energy

Two INOGATE projects active in Georgia ―Harmonization of gas and oil technical standards and
practices in Eastern Europe and the Caucasus‖ and ―Safety and Security of main gas transit
infrastructure in Eastern Europe and the Caucasus‖ assisted the GoG to enhance co-operation on
Caspian and Black Sea regional energy issues. During April and May 2009 a list of standards for
the assessment of the country‘s needs and specifications was identified. This will be used for further
harmonization with the EU requirements. Within the framework of “Harmonization of gas and oil
technical standards and practices in Eastern Europe and the Caucasus” project translation of main
20 EU standards is underway.

INOGATE project ―Support to energy market integration and sustainable energy in the NIS‖
(SEMISE) held a meeting of experts in the Ministry of Energy of Georgia on June17, 2009.
Caucasus regional workshops were held on 25-26 June in the Ministry of Energy of Georgia aimed
to develop a concrete concept for two possible projects ―Strengthening institutional capacity for
sustainable energy governance in NIS‖ and ―Support to energy security in the NIS through
statistical cooperation‖.

Ministry of Energy of Georgia hosted high level INOGATE Information Event on December 2,
2009. High level representatives from different national energy organizations, European
Commission, international financial institutions, other governmental and nongovernmental
                                                                                     59
organizations received background information on INOGATE ongoing and forthcoming projects in
Georgia.

Under the framework of the INOGATE program, several new projects are underway: 1.Energy
Saving Initiative in the Building Sector in Eastern Europe and Central Asia; 2.Harmonization of
Electricity Standards; and 3. ―Covenant on Mayors in Georgia‖;

On May 7, 2009, under the Eastern Partnership Georgia entered into intensified relations with the
EU in the field of energy that gives Georgia additional opportunity to develop country‘s energy
infrastructure and to attain economical and political stability. In the framework of ―Eastern
Partnership‖ Georgia actively participated in multilateral thematic platform ―Energy Security‖
meetings held on 17 June and 5 November, 2009 in Brussels.

With a view to regional cooperation and progressive integration with the EU energy market,
Georgia took active part in the energy summits held in Sofia and Prague in April and May, 2009.
Implementation mechanisms for international energy projects were discussed during the Prague
summit, where Georgia strongly supported the NABUCCO and White Stream options.

Georgia as an observer country participated in Permanent High Level Group meetings in over the
whole year. From 2009 Georgia strengthened cooperation with the European Energy Community in
order to determine the possibility of gaining full membership in this organization. This will support
implementation of regional projects successfully, as far as countries involved in many of this
regional projects (Turkey, Ukraine and Moldova) are already members of European Energy
Community and thus are very active participants in the Energy Community Treaty‘s activities.

On November 12-13 of 2009 Georgia signed an agreement making Georgia a member to the
organization IRENA. Main aims of IRENA are to systemize, analyze, monitor and discuss with
NGOs the existing experience towards the development of renewable energies and future
opportunities to benefit from the membership in IRENA.

Georgia supports energy security in the region through the development of the hydro potential of
the country. The Ministry of Energy of Georgia is working on the effective utilization of the
country‘s major energy potential - hydropower resources and on the construction of small, medium
and large hydro power stations. Georgian energy sector has already attracted investments from
South Korea, Estonia, Czech Republic and Turkey with the amount of 500 mln USDs in 2009. This
means that Georgian existing investment climate quite corresponds with international requirements.
Despite the financial crisis and the August events of last year in Georgia, some potential investors
from Japan, India, and Turkey continue to express their interests in the construction of small and
medium size HPPs. Also, large financial institutions such as KFW, EBRD, EIB, and WB are
involved in the process of implementing existing and future projects relevant for the sector
development.

In the context of developing the energy transmission capacity, implementation of Turkey – Georgia
400 kw interconnection line - ―Black Sea Energy Transmission Line‖ project is under way. The
Social and Environmental Impact Assessment (ESIA) of the line has already been finished.
Implementation of this project creates the real possibility to supply the electricity to the European
countries through the territory of Turkey in the near future. The construction process of the line
started in September, 2009. The selection of main companies will be finalized in the Spring of
2010. The project will be completed in 2012.



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In 2009 the feasibility study and detailed mapping of the project of new HPPs: Kirnati HPP,
Khelvachauri HPP, Chorokhi HPPs - I-II is under preparation. After the completion of feasibility
study construction activities of the HPPs are expected to start in 2012.

The feasibility study of Paravani HPP is underway. Also the draft ESIA of the project was prepared.
Public discussion of the project was held in Apindza region in November, 2009. The process of
obtaining construction permits and licenses is underway. The construction is planned to start in the
first half of 2010.

The pre-feasibility study on the rehabilitation and construction of small HPPs and power
transmission lines in Tusheti region has been prepared this year. Next year future activities will be
determined.

The feasibility study for the Namakhvani HPPs cascade is already prepared. In August of 2009 the
expression of interest (Joneti HPP 100 MW, Namakhvani HPP 250MW and Tvishi HPP 100MW
with the design electricity production of 1,6 bil.kw/h) was announced on the construction of
250MW cascade on the river Rioni. In September the winner was revealed - consortium of Korean
and Turkish firms. On December 8 a memorandum on the construction was signed between the
government and the consortium.

The pre-feasibility study on the construction of Oni HPPs cascade was finalised in November,
2009. In the first half of 2010 the international tender on the construction of the cascade is planned
to be announced.

The rehabilitation works on Enguri HPP financed by ERDB is performed. Consequently it is the
first time since 1992 when all the five units are in full operation.

The planned activities under the SCADA project have already finished and in the first half of 2010
the project will be completed. A control board with modern technologies was installed on August
25, 2009 in Georgian Electricity System which is unique in Caucasus. Benefits of the program
include reliable communication between S/Ss and central Dispatch; Information on the system will
be received in on-line mode. Efficient control of emergency break downs will be available.

Rehabilitation in the gas sector has advanced. The Georgian Oil and Gas Corporation conducted
project design activities of the ―Saguramo-Tsiteli Khidi‖ project. The construction activities on the
section of main pipeline ―Navtlughi-Saguramo‖ have already started. The substantial part of the
rehabilitation of the North-South main gas pipeline was completed. Construction activities are
carried out under the ―Millennium Challenge Georgian‖ Fund (MCG).

The underground natural gas storages construction has been considered. A pre-feasibility study was
completed. It identified the location for the construction of 400 mln cubic meter underground gas
storage (oil deposit in Ninotsminda - eastern part of Georgia). Pre-construction design study will be
completed in 2010 with the support of MCG.

The first stage of the study on ―Trans-Caspian Black Sea Gas Corridor‖ has been completed this
year. At present the development of the project is under consideration by the European commission
for further financing.

On April 25, 2009 the members of LTD Sarmatia adopted feasibility study of EAOTC (―Euro-
Asian Oil Transporting Corridor project‖) and relevant proposals were sent to Kazmunai Gaz which
expressed readiness to familiarize them with the Kazakstan‘s extraction association comprising of
40-50 local and foreign companies. Kazakstan‘s possible involvement in the project will have
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substantial positive effect on its implementation and outlines Georgia‘s increasing transit potential.
Also, Sarmatia conducted several meetings with the representatives of European Commission to
advance the project as the priority one. The preparation of the feasibility study of the EAOTC
project is also completed. Next year the final conclusion on the technical and commercial viability
of the EAOTC project will be made.


Through the several EU-projects Georgia has actively been involved in the process of the
harmonization of legislation, e.g.: “Harmonization of gas and oil        technical standards and
practices in Eastern Europe and the Caucasus‖ and ―Harmonization of electricity standards‖;

The Ministry of Energy of Georgia have had consultations with relevant Georgian energy
companies and discussed several approaches for gradual convergence towards the principles of the
EU internal electricity and gas markets. During 2009 Georgia studied existed and new EU energy
directives, their advantages and responsibilities in the frame of Energy community. With the
support of USAID programme, the Ministry of Energy of Georgia in April-May prepared special
presentation describing commitments of the EU gas and electricity directives and Georgia‘s status
related to this. These activities will give Georgia the possibility to be a part of the united European
energy system.

The draft methodology for setting electricity tariffs has already been prepared and is currently under
consideration.

In 2009 90000 new customers were supplied with gas in Georgia. These actions were taken in the
framework of the state program ―Gas to every village‖. Within this program the distribution
companies are intensively working towards the gasification of different regions of Georgia. In 2010
gasification of approximately 135000 new customers is planned.

In 2009 individual metering of 57 767 customers in Shida qartli, Racha-Lechkhumi and Qvemo
SvaneTi, Imereti, Samegrelo-Zemo svaneti, Adjaria and Kakheti has been completed.

78 530 new customers were provided with gas in Imereti, Qvemo Qartli, Shida Qartli, Samtskhe-
javakheti, Kakheti, Qvemo Qartli, Shida Qartli, Mtskheta-Mtianeti, guria, Samegrelo-zemo Svaneti
amd Adjaria. The process of intensive metering has significantly improved the collection rate from
15-20% up to 95%. Today electricity is uninterruptedly supplied to domestic consumers. All these
activities significantly increased the energy security of the country.

Rehabilitation works are being carried out on 220 KV power transmission line ―Alaverdi‖ and at
Gardabani, Lisi, Marneuli and Didube Substations. The 76 % of works has been completed and
remained works are likely to finish in March of 2010.

6.3 Environment

Creation of enabling environment for Water Resources Basin Management System is under way. 2
new EC projects were identified to assist in the transition to the River Basin Management System:
1. EU TACIS international Project ―Water Governance in the Western EECCA‖ (Belarus,
   Moldova, Ukraine and the countries of the Caucasus). The project has started in 2008 and will
   end in 2010.
2. Transbaundary River Management Phase II for Kura River – Armenia Georgia and Azerbaijan.
   The project has commenced in 2008 and will terminate in 2010.



                                                                                                    62
The work on elaboration of new standards (norms) on surface water quality has been started. Water
quality monitoring will be carried out during the year of 2009 on selected water bodies: river
Alazani (Georgia-Azerbaijan), river Debeda (Georgia- Armenia) and river Khrami(Georgia-
Azerbaijan). Number of seminars was conducted on water standards and on establishment of system
on emission limit values in water bodies. The work on database, related to water resources
management has started and pilot river basins were identified.

Under the TACIS funded project - ―Environmental Collaboration for the Black Sea‖ the work on
development of the new version of ―Water Law‖ is under way. The concept paper on the draft law
has been developed by September 2009 and the final draft of the law will be ready by the quarter of
2010

In 2009 the implementation of the project on ―inventory, collection, packaging and temporary safe
disposal of obsolete and non-usable pesticides in Georgia‖ has been started. The tender for specific
activities envisaged by the project has been announced in July. Currently, all activities planned
under the project are finalized.

Georgia‘s Second National Communication to the UN Framework Convention on Climate Change,
within the frame of the UNDP project ―Preparation of the Second National Communication of
Georgia to the UNFCCC― has been prepared.
Text necessary for accession to 1984 Protocol on Long-term Financing of the Cooperative
Programme for Monitoring and Evaluation of the Long-range Transmission of Air Pollutants in
Europe (EMEP) of United Nations Economic Commission for Europe (UNECE) Convention on
Long-range Transboundary Air Pollution (CLRTAP) has been translated and submitted to the
Ministry of foreign affairs for the confirmation of authenticity.

UNECE-Convention on Environmental Impact Assessment in Transboundary Context. The project
proposal ―Improvement of Environmental Impact Assessment System‖ has been developed. For the
time being it is submitted to the Government of      Netherlands and is under the process of
consideration. The project is considered to be a preparatory instrument for the ratification of
UNECE-Convention on ―Environmental Impact Assessment in Transboundary Context.‖

UNECE Convention on the Protection and Use of Transboundary Watercourses and International
Lakes. South Caucasus Regional Cooperation Project initiated by UNEECE has been approved and
will be implemented in the Framework of Environment and Security Initiative. The project will be
carried out in Georgia and Azerbaijan. The project objective is the identification of specific
measures and timeframe for considering the date of accession by Georgia and fulfilling the received
commitments under the convention.

UNECE Convention on the Transboundary Effects of Industrial Accidents. Authentic text of the
convention in Georgian has been prepared. Within the frame of the convention the project proposal
on ―Improvement of legislative basis for the prevention of industrial accidents ― has been
elaborated and submitted to the bureau of the convention in July, 2009 for its further
consideration.

South Caucasus Regional Cooperation Project initiated by UNEEC will be implemented through
Cooperation with OSCE in the Framework of Environment and Security Initiative. During the first
half of 2009 the      Terms of Reference of the project has been developed and national and
international experts were hired. The first meeting of the working group took place on 26 June of
2009.


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Currently, the development of ―Environment Protection Code ‖ is underway, where the ―Forestry
code‖ drafted in 2008 will be incorporated as a separate chapter. The draft version of the code will
be ready by the first quarter of 2010.

Presently the Ministry of Environment Protection and Natural Resources is in the process of
development of following        documents : Environmental Performance Review, National
Environmental Action Plan; State of Environment Report. These documents can serve as a solid
ground during the process of elaboration of the Strategy of Sustainable Development initiated by
the Government. Negotiations with the Ministry of Science and Education of Georgia regarding
establishment of National Coordination Council is underway. The draft National Strategy of
Education for Sustainable Development will be submitted to the abovementioned Council for
further consideration

6.4 Education and Science

Higher Education

In 2009 Georgia continued to implement higher education reforms to further integrate with the
European Higher Education Area through the Bologna Process. To this end the 2 year Twining
project - ―Capacity Enhancement for Implementing the Bologna Action Lines in Georgia‖
(CEIBAL) was launched in June 2009. The project aims to reinforce the institutional and
professional capacities, provide additional support for self-certification of National Qualification
Framework and for program accreditation, improve the coordination practice among the main
stakeholders in higher education i.e. the Ministry of Education and Science of Georgia, National
Education Accreditation Centre and Higher Education Institutions. In July, 2009 under the
TWINNING ―CEIBAL‖ project assessment of NEAC was held with the purpose to access the
European Quality Assurance Register (EQAR). In order to help the main beneficiaries operate
according to the European Standards and Guidelines (mandatory requirement for European Quality
Assurance Register membership) specific actions had been proposed including trainings for the
main beneficiaries. The training seminars had been held in December 2009.

National Tempus Office organized information seminars on Bologna Process – presentations given
by the Higher Education Reform Experts (HERE). Six HERE participated in different seminars,
conferences and workshops in Europe – dissemination seminars are being organized afterword with
participation of HEIs and MoES representatives. Reports and presentations were published on
website: www.tempus.ge . Four regional seminars for students ―Making sense of the EU‖ were
organized in collaboration with Internews Media Group.

The Project ―Tuning‖ was finalized in August 2009. The project envisaged elaboration of curricula
in 10 subject areas in cooperation with Socrates-Erasmus steering committee. The Process of
disseminating the outcomes at HEIs is underway. Final report of the project is posted on the web-
site of the Ministry of Education and Science.

In February 2009 Tuning Conference ―Application of the Tuning Approach in the Higher Education
System‖ was held. Partners of the project, foreign and local experts, rectors of accredited higher
education institutions, representatives of quality assurance services, as well as EC delegation,
ministry and other institutions participated in the conference. Coordinators of ten subject groups
presented their outcomes on research of specific competences and profiles of education programs.
In March foreign subject experts conducted seminars for subject groups at 3 partner universities:
Tbilisi State Medical university (Chemistry, Mathematics, Business Administration, Nursery); Ilia
Chavchavadze State University (Physics, European Studies, Pedagogy, History); Georgian
Technical University (Earth Sciences, Civic Engineering).
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Draft of higher education qualifications framework, in compliance with overarching Framework of
Qualifications in the European Higher Education Area was prepared, revised and discussed with
accredited higher education institutions. Various stakeholders: representatives of National
Education Accreditation Centre, Ministry, TEMPUS project and NGOs were involved in the
process. Meetings of the working group are held regularly and the document is actively discussed.
In July national seminar on National Qualifications Framework was held with participation of
academic and administrative staff of higher education institutions, students, representatives of the
Ministry of Education and Science, National Education Accreditation Center and Teachers‘
Professional Development Center. Document agreed at the seminar was translated into English and
sent to European experts. Revision of the document according to the comments received has started.
The Project on implementation of National Qualification Framework has been elaborated.


Within the ―University curriculum development program‖ a manual on internal quality assurance
was elaborated (soft version of the document will be posted on the web-site of the Ministry). The
manual focuses on following issues: quality assurance services, principles for their operation,
evaluation tools etc.

Within the Erasmus Mundus External Cooperation Window Program the project „Participation of
Georgian Universities in Erasmus Mundus External Cooperation Window Program― with
participation of Georgian Universities – Tbilisi, Batumi and Telavi State Universities was launched
since 2008. The consortium coordinated by the University of Thessaloniki (Greece) obtained two
year extension of the project.

National Education Accreditation Centre participated in TEMPUS/Tacis project ―Establishing of
curriculum of applied Biology and Biotechnology in Tbilisi State University‖ for strengthening
cooperation between Georgian and European Universities7 in elaborating new curricula

Four Georgian projects were funded through theTempus IV 2nd call for proposals:

       1. 158627-Tempus-UK-Tempus-JPCR "Development of the e-learning and distance learning
          courses and assessment in Biomewdical Sciences in the Southern Caucasus" (Tbilisi State
          University; Kutaisi state University);
       2. 158739-Tempus-DE-Tempus-JPHES "E-learning-Weiterbildungsnetzwerk im Tourismus"
          (Tbilisi State University of Economic Relations; Kutaisi University of Law and Economics;
          Tsnori College; Batumi Maritime Academy);
       3. 159338-Tempus-LV-Tempus-SMHES "Higher education system development for social
          partnership improvement and humanity sciences competitiveness" (Sokhumi State
          University, Batumi State University);
       4. 159340-Tempus-ES-Tempus-JPCR "MAPB" - Master in Applied Bio-Sciences (Tbilisi
          State University; Kutaisi State University; State Agricultural University).

Tempus Info Days in Tbilisi, Telavi, Batumi, as well as private consultations and dissemination
seminars and Info seminar on Erasmus Mundus Programmes were provided for Georgian HEIs in
order to enhance collaboration with EU universities.

Under University Infrastructure Development Program 17 public higher education institutions had
been reconstructed.



7
    Bristol University/Great Britain and Thessaloniki Aristotle University/Greece
                                                                                                 65
Science

The Georgia National Science Foundation promotes participation of the Georgian Scientists in the
European research and development 7th framework program (FP7). Announcement of calls for
peer-review based scientific grants continued. In March 2009 fourth State Science Grants
Competition was announced in the following fields: Information Technologies and
telecommunication; Life Science; Mathematics, Mechanics; Nature Science; Earth Science and
Environment; Medical Science; Engineering, High technology Materials; Agricultural Science.
Within the program that aims at promotion of science in public schools lectures and seminars were
delivered in a number of Georgian cities.

Training Workshop for FP7 NCPs of South Caucasus Countries (Armenia, Azerbaijan and Georgia)
was conducted in November 6-8, 2009. The training workshop was organized in the frame of the
Inconet EECA Work Package (WP4) with overall objective to support the National Information
Points (NCPs/NIPs) in EECA countries assuring an optimum participation of the EECA on the 7th
FP. Since in most of EECA countries there is a need of well-trained and efficient NIPs/RIPs the
IncoNet EECA project endeavours further development of the existing structures in EECA
(established mainly in the frame of INTAS ININ network) by providing best practices of the well-
functioning Trans-European NCP network and encouraging regional networking of NCPs/NIPs.
More specifically, the tailor made training workshop in Tbilisi was held in accordance with the task
4.4. ―Capacity Building of NIPs in Armenia, Georgia, Azerbaijan‖.

Information Day on development of the international S&T cooperation with the EU in the EU 7th
Framework Programme thematic area ―Environment‖ and the ―People‖ programme was organized
by the Georgia National Science Foundation in Tbilisi in June 19, 2009 to develop the international
S&T cooperation within the EU 7th Framework Programme (FP7) in the thematic priority
Environment as well as in FP7 People programme. The representatives of EC Delegation to Georgia
and the EU key speakers from Poland and Estonia involved in international cooperation within
FP7took part in the event.(www.inco-eeca.net).

Program ―Popularization of Science for public school students‖ was launched in 2008. The program
aims at countrywide delivery of popular lectures by Georgian prominent scientists in various
scientific fields to the students of public schools in order to make science popular in young
generation, acquaint it with scientific achievements and state-of-art capability of national and
international science, generate interest towards research. In 2009 13 scientists conducted lectures
every month during 6 months in 9 cities of Georgia.

On April 3, 2009 on the basis of the Agreement of the Scientific Collaboration, The Georgia
National Science Foundation (GNSF) and the French Centre Nayional Dela Recherche Scientifique
(CNRS) launched a call for proposals for Collaborative Bilateral Research Projects.
The call covered the following 3 fields of exact and nature science:
    - mathematics
    - earth and environment sciences
    - life sciences
Projects have been selected on the basis of their quality and novelty, the perspective they offer for
developing the CNRS-GNSF collaboration, young researcher‘s potential, and the perspective for the
future joint application to the EU Framework Programme. The project realization started on
October 1, 2009 and will last up to 24 months. Only one project has been funded in each scientific
field.

Professional education

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3 professional education and training centres for vocational education and training were established
and licensed. Professional education programs in penitentiary institutions (prisons) for 40 women
and juvenile delinquents were elaborated and funded.

Ministry has selected experts that are working on the guidebook on quality assurance in vocational
education and are elaborating standards for vocational education centres and norms for vocational
education.

In order to elaborate professional qualification framework on vocational education the program
―Establishment of qualification system‖ (decree of the minister #323 2009.22.05) is implemented.
Under the program 13 sector councils were established. Each council consists of the experts of the
respective professional field – employers, representatives of professional unions, state authorities,
higher education and scientific-research institutions and professional education center. Functions of
the councils are: elaboration of the drafts professional qualification frameworks for each field;
defining list of qualifications for the vocational education database. Council will also define the list
of the countries according professional standards of which accredited professional associations and
higher education institutions will elaborate professional standards to be approved by the
government. Council will be in charge of assessment of the standards and compliance with
international requirements and local needs, ensuring peer review of different manuals and etc. List
of vocational education fields was elaborated according to the qualification levels. On the meeting
of the councils draft of the professional qualification framework was considered and revised.

Sector councils have considered draft of the informal education recognition project. In December
piloting of certification of informal education took place for six different qualifications in the field
of engineering and hotel/restaurant management. Experts have already been selected.

Within the framework of the program (―Institutional Development of Vocational Education
Centres‖ trainings are held for governance bodies of vocational education centres in strategic
planning and program management aimed at developing skills for elaborating business plans and
teaching project management principles and methods. About 70 representatives from 38 public
vocational education centres from the country took part in the trainings (upper and middle level
managers). Training curriculum was elaborated based on the educational needs. Trainings were
positively evaluated by participants. Workshop on education-industry partnership in vocational
education for vocational education centres proposed by USAID and training of trainers were held in
the fourth quarter. It was followed by two-day training on education institutions/business sector
partnership in framework of the ―Institutional Development of Vocational Education Centres
Program‖.

Since 2008 (the State Program for Vocational Education Infrastructure Development ―Vocational
Education for Employment‖ is being implemented. The program aims to increase the role of private
sector in the field of vocational education to ensure professional training responding to the demands
of labour market. Private companies have a possibility to purchase vocational education centres
under condition that they will use it for organizing vocational education courses. With a view to the
effective implementation of the program department elaborated database of vocational education
and secondary education institutions operating in the fading mode. Under the program four private
companies (―Profunit‖, ―Miller and Company‖, ―Shavnabada Academy Vocational Center‖,
―Demetre-96‖) received licensing for conducting vocational education programs.

Vocational retraining programs for adults are implemented by international organizations at
vocational education centers.



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In 2009 Tbilisi vocational education center – ―Spectri‖ implemented 6 month vocational education
program for 40 convicts of penitentiary institution #5.

In 2009 within the program ―vocational education for persons with special needs‖ project for
arranging appropriate environment for students with disabilities of 14 vocational education centers
was elaborated. In addition 4 month vocational education retraining project was elaborated and
conducted at three vocational education centers for 46 children from childcare institutions and their
parents. At 15 vocational education centers 2 day training in inclusive education was conducted for
teachers, parents and students.

Strategy ―Adult education in the context of LLL‖ was developed and published.


7. Overview of the EU Assistance Programmes for 2009

Activities related to the EU assistance coordination have been conducted in two directions:
assistance covered by the National Indicative Programme and financial assistance up to EUR 500
million pledged by EC at the donor conference in October, 2008 following the Russian aggression.
The EUR 224,3 million out of the whole pledge have already been allocated and the rest of the
assistance amounting EUR 247,7 million plan to be transferred in 2010.

For the efficient coordination of EU assistance to Georgia pledged at donor conference, the GoG
established Joint Task Force headed by the Prime Minister and involving all relevant Line
Ministries, EU Delegation and EU MS representatives.

At the end of 2009 new initiative was launched regarding the set up of sectoral working groups in
order to promote better cooperation between EU donors and Government of Georgia. First
coordination meeting was held on December 7, 2009 with active participation of the representatives
from the EC, EU Member States and the line ministries.

In the framework of National Indicative Programme (NIP), Georgian government`s efforts are
mainly focused on the utilization of new Instruments, from which the Budgetary support is of an
utmost importance. All priorities of the NIP 2007-2010 has been agreed with the EC and the most
of the programmes are under implementation. Consultations with the EC on NIP 2011 – 2013 is at
final stage.

European Neighborhood and Partnership Instrument (ENPI) 2008 and 2009 Action Plans
(59,2 mln. euro):


All Financial Agreements for the ENPI AP 2008 have been signed between the EC and the
Government of Georgia. As for ENPI AP 2009, the only financing agreement for Support to the
Internally Displaced Persons (3 mln. Euro) is absent, which is at the programming phase.

ENPI Action Plan 2008 (28,8 mln. euro):

   -   Budgetary support to the Strengthening Rule of Law – 16 mln. Euro;
   -   Twinning and TA Facility Instrument – 6,8 mln. Euro;
   -   Support of the peaceful settlement of the Georgian internal conflicts – 6 mln. Euro.


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ENPI Action Plan 2009 (30,4 mln. euro):


   -   Sector Policy Support related to Vocational Education– 19 mln. Euro;
   -   Twinning and TA Facility Instrument – 8,4 mln. Euro;
           o   Twinning 6,4 mln. euro.
           o   TA – 2 mln. euro
   -   Support to the Internally Displaced Persons (IDP) – 3 mln. Euro (pending due to
       programming issues).

Budgetary Support 2007 (16 mln. euro):

Budgetary support programme of the AP 2007 supports the Ministry of Finance to improve the
Public Finance Management. First tranche (€5mln), second tranche (€4mln out of €5mln) and third
trance (€4.5 mln out of €5 mln) were transferred in February 2008, December 2008 and December
2009 respectively.

Budgetary Support 2008 (16 ml. euro):

Budgetary Support programme of the AP 2008 (16 ml. euro) covers Support to the Criminal Justice
Reforms of Georgia. First tranche (€5mln) and second instalments (4,5 mln. euro) have already
been transferred to the state budget. The third, final instalment is to be transferred in 2010.

Budgetary Support 2009 (19 mln. euro):

AP 2009 envisages the Sector Policy Support related to Vocational Education and Training. First
tranche (6 mln) planned for transfer in the beginning of 2010.

National Indicative Programme (NIP) 2011 – 2013:

Draft NIP 2011 – 2013 which will consider about 180 mln. euro assistance to Georgia has been
presented to all line ministries for comments, which have been timely communicated to Brussels. It
is expected that the EC will take into account all comments of Georgian Ministries and
subsequently finalize necessary inter-service consultation.

Twinning, TAIEX, SIGMA:

Georgian Government has successfully started utilization of new instruments: Twinning, TAIEX
and SIGMA. As of September 2009, one Twinning project is ongoing, another 4 projects are under
the preparation phase and there have been received 8 requests for Twinning operations from various
Ministries.

Since availability of the TAIEX instrument, State Ministers Office has received around 62
applications covering following areas: border and migration issues, visa facilitation, trade issues,
agriculture, education, and environment. Out of which, 51 requests has already received a positive
response from TAIEX Team. Additionally, Georgian public servants participate in 34 seminars and
workshops organized by EC.

As regards to the dialogue on DCFTA, it should be mentioned that inter-ministerial working group
on DCFTA has identified priorities for TAIEX support in this direction: Customs, Procurement,
Rules of Origin, Intellectual Property Rights, Competition, Food Safety and Capacity Building. All
those requests have been approved except the one workshop on Capacity Building.
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Three Georgian institutions (Chamber of Control, Ministry of Finance, and Parliament of Georgia)
have expressed interest in seeking assistance under this facility. The following issues have been
raised for addressing:
    - Promoting effective and transparent legal drafting process in the Parliament and increasing
        its role vis-à-vis the Executive Government;
    - Improving operations of legal drafting at the Ministry of Finance of Georgia;
    - Improving coordination of External and Internal Auditors of the Chamber of Control of
        Georgia;
    - Supporting Chamber of Control in raising awareness about the benefits of its new role in
        auditing the Government operations;
    - Supporting the Parliament in initiating Dialogue on Civil Service Reform and review of
        Civil Service legislation.

Conflict Resolution:


The SMR extends its consent to the implementation of the € 4M program envisaged within the
framework of the EC Economic Rehabilitation Program under the ENPI Annual Action Plan (AAP)
2007;

To this effect, it is necessary to provide the updated description of the needs on the ground and the
detailed information on the genuine situation in respect of all three directions foreseen by the ENP
2007 program ―Economic Rehabilitation and Confidence Building in Abkhazia, Georgia and
Adjacent Area in Western Georgia‖ to be implemented in the occupied territories of Gali District,
Georgia. The complete picture will enable us to make appropriate modifications to the school and
health infrastructure rehabilitation scheme.

The SMR suggests convening Joint Steering Committee meeting, instead of the proposed two
separate Steering Committees, in politically unbiased venue (e.g. Brussels) that will be appropriate
and acceptable for all parties concerned.

Additionally, the SMR has suggested creating special economic zones (Integrated Socio-Economic
Zones, Free Industrial Zones) aiming at boosting the motivation among the population to interact
and communicate more intensively. The territories where these zones will be located should be
carefully selected with regard to security, accessibility and logistics. The territorial location of the
zones shall be decisive factor for assuring the guaranteed physical interaction between the
communities residing in the occupied territories and the rest of Georgia. The given zones will serve
as the effective mechanism to support local economies. At the initial stage, the feasibility study on
the integrated Socio-Economic Zones as well as their implementation shall be advisable to be
conducted in parallel with the implementation of the ENP 2007 Economic Rehabilitation program.

Black Sea Cross Border Cooperation:

Government of Georgia has signed Black Sea CBC Financing Agreement on 31-th of July, 2009
and thereby confirmed its readiness to play an active part in the programme. For the time being,
Georgian potential beneficiaries have submitted project applications together with other partners
from the Black Sea region. On the other hand we are actively cooperate with Romanian side (Joint
Managing Authority of the Programme) to timely finalize all remaining procedures and timely set
up selection committee which should identify most successful projects. Georgian stakeholders from
governmental and non-governmental sector have actively participated in the first call for proposals

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under the CBC programme and applied project proposals almost in all sectors envisaged by the
programme (Truism development, Environment - waste management, educational and cultural
cooperation). For the moment Georgian side is looking forward to finalization of administrative and
eligibility checks being carried out by the Selection Committee which should select most
appropriate and eligible projects to be finally approved by the Black Sea CBC Joint Monitoring
committee.

REGIONAL PROGRAMMES

Georgia has a strong intention to be actively involved in planning and implementation of regional
programmes, but the complexity of current management system of the Regional Programmes
creates additional barriers for the transparency and adequate level of cooperation.

INOGATE:

INOGATE Programme represents an important instrument for the energy cooperation in the region.
For the time being, three projects which are in line with policies and strategies of the European
Neighbourhood Policy are implemented in the framework of INOGATE programme.

   -   Harmonization of gas and oil technical standards and practices in Eastern Europe and the
       Caucasus.
   -   Support to Market Integration and Sustainable Energy in the NIS (SEMISE).
   -   Safety and Security of main gas transit infrastructure in Eastern Europe and the Caucasus.

Within the frames of ―Harmonization of gas and oil technical standards and practices in Eastern
Europe and the Caucasus‖ translation of 20 EU standards of priority significance is coming to the
end.

The cooperation between the GOGC and Inogate project - ―Safety and Security of main gas transit
infrastructure in Eastern Europe and the Caucasus‖ - was developing at scheduled workshop events,
targeted study tours and thematic seminars during 2009.

Regarding the SEMISE project, Georgia hosted an expert team visit on June 17, 2009. During the
meeting main priority needs of the country were identified within the scope of the project.

Within the Co-operation on Caspian and Black Sea regional energy issues, under the framework of
the INOGATE program, several new projects are underway:

   -   Energy Saving Initiative in the Building Sector in Eastern Europe and Central
       Asia;
   -   Harmonization of electricity standards;
   -   ―Covenant on Mayors in Georgia‖;

Ministry of Energy of Georgia hosted high level INOGATE Information Event on December 2,
2009. High level representatives from different national energy organizations, European
Commission, international financial institutions, other governmental and nongovernmental
organizations received background information on ongoing and forthcoming INOGATE projects in
Georgia.

TRACECA


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In accordance with new challenges and international requirements TRACECA has renewed its role.
On the one hand, it has been decided to join Trans European Network (TEN) and on the other hand
to use Public Private Partnership (PPP) for the implementation of infrastructure projects. Currently
six projects are being implemented under the TRACECA programme:

   -   Strengthening of Transport Training Capacity in NIS Countries.
   -   Motorways of the Sea for the Black Sea and the Caspian Sea.
   -   International Logistical Centers for Western NIS and the Caucasus in Armenia, Azerbaijan,
       Georgia, Moldova, Ukraine.
   -   TRACECA Civil Aviation Safety and Security.
   -   TRACECA Land Transport Safety and Security.
   -   Transport dialogue and interoperability between the EU and its neighbouring countries and
       Central Asian countries.

ENVIRONMENT

In the end of September, Georgia is going to sign Statement of Endorsement of the project - Waste
Governance ENPI East, which involves six Eastern European countries (Azerbaijan, Armenia,
Georgia, Belarus, Ukraine, Moldova, Russian Federation) and considers 650.000 euro assistance for
the reduction of risks arising from inappropriate management of wastes in the ENPI East and is in
line with ENP AP priorities.

Georgia is actively involved in the EU ongoing project - Environmental Collaboration for the Black
Sea - ECBSea (Georgia, Moldova, Russia and Ukraine). Project is focused on the assistance to
national governments in achieving the objectives of the Bucharest Convention at regional and
national level, and to support some specific activities outlined in the working plan of the
Commission for the Protection of the Black Sea against Pollution. On 15 September 2009, a public
event was held in Tbilisi to present the legal outcomes of the ECBSea Project activities in Georgia.

Apart from that, Regional Environmental Center for Caucasus (REC) is coordinating 4 EC funded
projects in the fields of protection of forests and mountainous regions of the Caucasus, Land
management, and integrated management of trans-boundary Rivers Basin.

TEMPUS programme:

TEMPUS programme is focused on Modernization of the HE system in Georgia according to the
Lisbon agenda and the Bologna process. Since 1995 up to 11 Mio Euro has been allocated to
Georgia. 12 Georgian HEIs have established partnerships in the framework of 26 projects
(JEP/SM).

Following TEMPUS projects are in the pipeline:

   -   Developing new applied biosciences and biotechnology curricula (2007-2009)
   -   Curricula Reformation and harmonisation in the field of Biomedical Engineering (2009 –
       2012)
   -   New Masters Programme on Library and Information Science (2009-2012)
   -   Developing an Internal Quality Assurance System at Telavi State University (2007- 2009)
   -   Advancing the three cycle system in social work education in six European countries (2009-
       2012)

As of 2007, TEMPUS programme is implemented under the regional format involving 6 Eastern
Partnership countries plus Russia. Taking into account that all participating countries have to use
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TEMPUS Programme recourses from one basket with very limited financial resources, there is high
risk that these resources might be absorbed by Russia which has more experience in TEMPUS and
represented by higher number of education institution. The recommendation of the GOG is to limit
participation by the Eastern Partnership countries within the allocated TEMPUS budget.

Erasmus Mundus External Co-operation Window:

Programme is aimed at achieving better understanding and mutual enrichment between the
European Union and third countries co-operation in the field of higher education through promoting
the exchange of persons, knowledge and skills at higher education level.

Starting from 2009, the new phase of the Erasmus Mundus Programme (2009-2013) will provide
support to
    - higher education institutions that wish to implement joint programmes at postgraduate level
        (Action 1) or to set-up inter-institutional cooperation partnerships between universities from
        Europe and targeted Third-Countries (Action 2);
    - individual students, researchers and university staff who wish to spend a study / research /
        teaching period in the context of one of the above mentioned joint programmes or
        cooperation partnerships;
    - any organization active in the field of higher education that wishes to develop projects
        aiming at enhancing the attractiveness, profile, visibility and image of European higher
        education worldwide (Action 3).
For the time being, only one project has been funded for the whole Caucasus region, involving three
Georgian HEIs (State Universities of Tbilisi, Telavi and Batumi) and ensuring mobility of 58
persons (students and academic staff). For the time being, Georgian institutions are applying for the
current call for Proposals with the overall budget of 2.1 Mio Euro which was announced in
December 2009.

South Caucasus Anti-Drug Programme - SCAD

5-th phase of the South Caucasus Anti-Drug Programme (SCAD 5) which was implemented by
UNDP and financed by EU has been accomplished on 31-th of August 2009. The project aimed at
gradual adoption of the EU practices in the field of drug policies by the beneficiary authorities. As a
result, State Drug Policy Council functioning within the Ministry of Labour, Health and Social
Affairs elaborated the State Anti-Drug Strategy document accompanied by the corresponding action
plan. The main strategic directions of the plan were adopted by the resolution of the Parliament of
Georgia. The resolution outlined the following priorities for national anti drug strategy: 1) Drug
Demand Reduction, including prevention (i.e. information campaign), treatment and rehabilitation
(2), Drug Supply Reduction (3), Drug-Related Harm Reduction (4) and Education of Relevant
Professionals.

South Caucasus Integrated Border Management (SCIBM)

The project aims to facilitate the movement of persons and goods in the South Caucasus, while at
the same time maintaining secure borders, through enhancing inter-agency, bilateral and regional
border management cooperation both within and among the countries of the South Caucasus region
as well as between the countries, EU Member States and other international actors. Project overall
budget is 6 mln. euro and is implemented by UNDP in cooperation with the Lithuanian, Polish,
Latvian, Estonian, Czech, border agencies, ICMPD, and the French government. Project started in
December 2009 and will continue 30 moths.


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Participation in the EU agencies and Community Programmes.

Border Police of the Ministry of Interior and FRONTEX (European Agency for the Management of
Operational Cooperation at the External Borders of the Member States of the European Union) have
already signed Working Arrangement for Establishment of the Operational Cooperation and
currently parties are having consultations on elaboration of the 2 year Cooperation Action Plan.
Also there is active cooperation between The Police Academy of Georgia and AEPC (Association
of European Police Colleges).

Ministry of Environment Protection and Natural Resources expressed its interest to start
cooperation with the following EU Agencies: CFCA (Community Fisheries Control Agency), EEA
(European Environment Agency), EMSA (European Maritime Safety Agency).

Ministry of Education and Science has expressed its interest start cooperation with the following
EU Agencies: European Centre for Development of Vocational Training (CEDEFOP); European
Union Satellite Centre (EUSC), European Institute for Security Studies (ISS), European Training
Foundation (ETF), European GNSS Supervisory Authority (GNSS).

Migration and Asylum

In the frame of the newly launched EU Thematic Cooperation Programme with the third Countries
in the Development Aspects of Migration and Asylum, new project - ―Enhancing Returns to
Georgia Operationally‖ was started on January 1, 2009 with the duration of 18 months. The overall
objective of the project is to increase the capacities of competent authorities and civil society in
Georgia to actively support dignified sustainable return and reintegration, whether spontaneously or
on the basis of readmission agreements, through enhanced co-operation and networking. The
specific objectives of the project are to:
    - Contribute to the negotiation and practical implementation of readmission policies and
        procedures by establishing sustainable working relations between each participating EU
        Member State and the Georgian government;
    - Translate sound return and readmission policies and procedures into a viable support system
        for returnees at the local level.

Humanitarian assistance - ECHO Programme

In addition to the €10M aid for internally displaced people (IDPs) from South Ossetia and
Abkhazia, as well as in Gali district and other vulnerable population affected by the August 2008
Russian aggression European Commission has recently allocated additional €2mln for IDPs,
returnees and other affected residents, that is being channelled through World Food Programme.

EU post conflict response under the Instrument for Stability after the August 2008 Russian
aggression:

Phase I - Response to UN Flash Appeal (€15 million, 18 months, start - January 2009)

The EC has allocated 15M Euros from its Instrument for Stability to respond to the needs of IDPs
under the UN Flash Appeal. Under this EC programme for post-conflict and emergency response
has the following projects has been funded:
    - Winterization/housing support to people affected by conflict (Flash Appeal): € 9.7 million,
        UNHCR;
    - Early recovery of IDP livelihoods (Flash appeal): € 4.4 million, UNDP;
    - Civil society support on IDP issues: € 0.6 million, Danish Refugee Council;
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   -   Monitoring, auditing and evaluation of Stability Instrument projects: € 0.4 million,
       Integration;

Phase II – Support to people affected by conflict (€14 million, 18 months, start - July 2009)

The EC is allocating and additional 10M Euros from the Instrument for Stability to further respond
to the needs of people affected by conflict, e.g. old and new IDPs as well as vulnerable people in
Abkhazia. This second phase EC programme for post-conflict and emergency response, which is
currently under way, has the following priorities:
    - Support to confidence building, people-to-people contacts in Georgia, including in South
        Ossetia and Abkhazia (€2.4 million);
    - Support to democratization in Georgia (€ 3.15 million);
    - Support to socio-economic integration of IDPs (€ 5.5 million);
    - Civil society capacity building and socio-housing support in Abkhazia (incl. returnees in
        Gali district)(€2.45 million)

Macro-Financial Assistance – MFA (2009 - 46 mln; 2010 – 46 mln.):

First disbursement amounting 15,3 mln. Euro out of 2009 MFA programmes (46 mln. Pledge) was
transferred in December 2009. The rest of the sum (30,7) will be transferred in 2010.

Food Security Programme:

Georgia has signed the new Food Security Program considering 2 million budgetary assistance and
looking forward to receive the assistance in the beginning of 2010.

Support to the IDPs (Phase I – 10 mln. euro):

10 mln euro assistance under the Phase I have already been transferred and utilized via the
Municipal Development Fund to improve the living conditions of IDPs by providing durable
housing solutions. Assistance covered the urgent housing needs for newly displaced persons
following the conflict in August 2008 as well as for the construction of houses for the old IDP
resulting from the 1992 conflict. More specifically, this support contributed to the construction of
built new houses in nine villages located in the regions of Kaspi, Gori and Kareli.

Support to the IDPs (Phase II – 51,5 mln. euro):

Georgian side has received first (12,1 mln. euro) and second (26,9 mln. euro) instalments out of the
whole sum. The final, third allocation (9,5 mln. euro) is to be transferred in the first half of 2010.
Assistance will be implemented via the Municipal Development Fund (MDF) and is expected to
reinforce the Government‘s capacity to deliver an adequate response for the integration,
resettlement, social and economic integration of all IDP groups since the early 1990s, including
IDPs resulting from the open Russian Aggression of August 2008.

Assistance will be implemented through the following Priorities:
   - The resettlement measures for the IDPs resulting from the open conflict between Russia and
       Georgia since August 2008.
   - The implementation of the 2009 and 2010 State Budget allocation aimed at facilitating
       durable housing and resettlement solutions (including rehabilitation and privatization of
       collective centers) to IDPs from the conflicts of early 1990s and August 2008.


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   -   The implementation of a transparent distribution and transfer process of IDP collective
       centers, for all categories of 1990s IDPs in accordance with minimum international housing
       standards.

Support to the IDPs (Phase III – 53 mln. euro):

Financing memoranda between the Government of Georgia and the EC have been signed.
Assistance will be implemented through the Municipal Development Fund (MDF) and will follow
up the priorities envisaged by the Phase II of the IDPs support programme.


Covenant of Mayors initiative and Cooperation with EU on a City Level:

Georgia actively cooperates with the EU in the framework of newly launched Covenant of Mayors
initiative of the European Commission that will bring together the mayors of Europe's most
pioneering cities in a permanent network to exchange and apply good practices across these cities
and beyond to improve energy efficiency significantly in the urban environment. The Covenant of
Mayors is the response of the most active cities to global warming: a formal commitment by the
cities to reduce their CO2 emissions even beyond the EU 20% objectives. Almost 100 cities
throughout Europe, including 15 capitals, have expressed their willingness to join.

Currently, Department of the Tbilisi City Municipality responsible for the EU Programmes &
cooperation with International Organizations is examining the possibility of joining to the Covenant
of Mayors. To this end, EC together with the Municipality is implementing project aiming at
assessment of present CO2 emission level in Tbilisi city and elaboration of Action Plan for the
further steps to decrease CO2 emission in the Capital.

Apart from that, Tbilisi City Municipality is actively participates in initiatives like EUROCITY
being a member of the working group and Global City Forum as well as submitted project
application for the EU Black Sea CBC Porgramme, TAIEX and CIUDAD in the sectors of
Sustainable Solid Waste Management, City marketing, Black Sea Truism Development, SME
development, Capacity Building for local Authorities.

Neighbourhood Investment Facility (NIF)

Georgia is a recipient of the following projects within the framework of NIF:
   - Black Sea Energy Transmission System: Total cost: €220 mln of which €8 mln is financed
       by NIF. €3 mln out of the €8 mln will be relocated to cover extra investment costs originated
       by the selection of an alternative route for the transmission line in order to mitigate the
       project`s environmental impact on the Borjomi-Kharagauli National Park.
   - Framework for Capacity Building to support Financial Intermediaries – Total cost: €36 250
       000 of which €2 800 000 is financed through NIF.
Planned projects:
   - Tbilisi Railway Bypass Environmental Clean-up: NIF contribution is €8, 5 Euro.
   - Establishment of European Neighbourhood Fund (ENBF): NIF contribution is €8,5 Euro.

Comprehensive Institutional Building Programme under the EaP:

Georgian government is ready to be actively involved in Institution building programme and use
this instrument for the implementation of further successful reforms in Georgia. Following to the
EC request, Georgian Government has already nominated the National Coordinator (Mr. Giorgi
Baramidze, Vice Prime-Minister, State Minister for European and Euro-Atlantic Integration of
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Georgia) and the structure responsible for the implementation of the CIB programme in Georgia. In
addition the GoG has also requested EC support in organizing a launching seminar for the Georgian
line Ministries aiming at introduction of CIBP programme objectives, priorities and implementation
procedures.




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