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VIEWS: 3 PAGES: 93

									     The Government of Georgia


Basic Data and Directions for 2008-2011




              Tbilisi 2007
Table of Contents:

The Medium-Term Strategy of the Government of Georgia (2008-2011)....................... 4
  Expected Outcomes ...................................................................................................... 4
  The Principles Governing the Activities of the Government of Georgia ..................... 4
  Action Priorities of the Government of Georgia for the Years 2008-2011 .................. 5
Macroeconomic Policy ..................................................................................................... 8
  Objectives of the Macroeconomic Policy..................................................................... 8
  Macroeconomic Review and Projections ..................................................................... 8
  Fiscal policy................................................................................................................ 12
Budget Revenues ............................................................................................................ 15
  Revenue Analysis ....................................................................................................... 15
  Projection of 2007 Year Revenues ............................................................................. 17
  Projection of 2008-2011 Year Revenues.................................................................... 17
Brief Overview of the Year 2006 ................................................................................... 18
Expenditures according to Core Economic Criteria ....................................................... 20
Public Debt Strategy ....................................................................................................... 21
  Sustainability and Strategy of Foreign Debt............................................................... 21
  Sustainability and Strategy of Domestic Debt............................................................ 22
Functional Classification of the Budget Expenditures ................................................... 23
Priorities to implement the Basic Data and Directions of the Government for the years
2008-2011 defined by the Ministries.............................................................................. 25
  Ministry of Finance..................................................................................................... 25
  Ministry of Economic Development .......................................................................... 26
  Ministry of Justice ...................................................................................................... 27
  Ministry of Foreign Affairs ........................................................................................ 28
  Ministry of Defence.................................................................................................... 29
  Ministry of Internal Affairs ........................................................................................ 30
  Ministry of Education and Science............................................................................. 31
  Ministry of Culture, Protection of Cultural Heritage and Sport ................................. 32
  Ministry of IDPs and Resettlement............................................................................. 33
  Ministry of Labour, Health Protection and Social Security ....................................... 34
  Ministry of Energy...................................................................................................... 35
  Ministry of Agriculture............................................................................................... 36
  Ministry of Environment Protection and Natural Resources...................................... 37
Annex 1 Main Macroeconomic Indicators ..................................................................... 39
Annex 2 Medium-Term Action Plans of the Ministries ................................................. 50




                                                                2
This strategy represents an addendum to the Government’s programme for a ‘United Georgia’.
It assesses the progress achieved with regard of the goals of the United Georgia programme and
unveils further challenges.

The government’s strategy is represented in the following documents:

National security concept paper;
NATO accession within the intensive dialogue (IDP)
NATO accession plan (IPAP)
Anti-corruption strategy action plan of Georgia
World Bank - Poverty Reduction Strategy Operations (PRSO)
EU- Georgia cooperation plan, in terms of the European Neighbourhood Policy (ENP AP).




                                              3
THE MEDIUM-TERM STRATEGY OF THE GOVERNMENT OF
GEORGIA (2008-2011)
Georgia has a historical chance to build itself in a free, united, democratic just and prosperous
country. The new Georgian State will be a part of the modern developed world. This will be a
state for an individual, his/her development and freedom.

The new Georgian State is:

- Free Georgia - with adequate defence mechanisms
- United Georgia – for every citizen
- Democratic Georgia –with transparent institutions, developed civil society and freedom of
    speech
- Equitable Georgia – with a just and unbiased legal system
- Prosperous Georgia – with protected property rights and economic freedom

To achieve these goals, the Government will address the following issues in 2008-2011:

-   Achieve the territorial integrity of Georgia through peaceful efforts
-   Ensure sustainable economic growth and support the creation of jobs
-   Create flexible, responsible and active governance structures
-   Rehabilitate and develop infrastructure
-   Comply with NATO accession requirements

The modernization objectives of the State will be achieved through dynamic reforms on the
background of public stability.


Expected Outcomes

-   Increased job creation in private sector
-   Transparent and effective public sector and self-governance
-   Effective court system
-   Adequate defence ability
-   Effective law enforcement system
-   Energy independence
-   Equal development of regions
-   Sustainable and effective use of natural resources
-   High quality and competitive education
-   Open and tolerant cultural environment
-   Economic and cultural integration with neighbouring and developed countries.


The Principles Governing the Activities of the Government of Georgia

All Government activities must be centred on an individual and ensure increase of freedom of
his/her rights, dignity and professional development. The Government activities shall be
directed to enhancing the country’s industrial capabilities, territorial integrity and public
inclusion. All Government agencies are required to coordinate each of their actions with the
following governing principles:



                                                 4
- “Small government”: if there is a possibility to choose the right of holding, priority shall be
  given to private ownership. The activities of the State shall strictly be concentrated on those
  issues that the private sector is not able to fulfil; administrative involvement of the
  Government in business activities must be minimal. Protection or privileges will not be
  granted to anybody.

- “Good Governance”: activities of the management bodies shall be goal-oriented and
  measurable. Activities shall be transparent, State control shall be efficient, state agencies shall
  be accountable and management shall be decentralized by delegating rights and
  responsibilities to lower management levels.

- “Targeted Assistance”: state assistance shall be linked to each beneficiary person, not to state
  institutions. The principle “assistance to all, including to the rich” shall be replaced by
  “assistance to those who need it”.

- “Targeted Spending”: resource management according to the priorities. Financial resources
  shall be directed to the established purposes. It is prohibited to fragment the financial
  resources. The Budget shall be a universal (all inclusive) document.

- “Good Practice”: to be based on the substance of the international practice, not by just
  mechanical copying. International financial resources shall be used only if domestic resources
  are insufficient.


Action Priorities of the Government of Georgia for the Years 2008-2011

Based on the planned outcome of the reforms and their governing principles, the action
priorities of the Government of Georgia for the years 2008-2011 are the following:

Public Policy

National Security and Foreign Policy

   Consistent implementation of National Security Concept;
   Following successful implementation of the Intensive Dialogue, transfer to the Membership
   Action Plan (MAP);
   Optimization of army management and improvement of resistance; reformation of the army
   in consistence with NATO standards; and improvement of civil control over the army;
   Successful implementation of the ENP Action Plan and enhancement of economic, political
   and cultural cooperation with the EU;
   Implementation of Georgia – EU Partnership and Cooperation Agreement (PCA), including
   harmonization of Georgian legislation with European legislation, and initiating negotiations
   on the new agreement before the end of this agreement ( in 2009)
   Increase of regional cooperation in the neighbourhood area – the Black Sea and South
   Caucasus, and creation of preconditions for implementing Georgia’s strategic interests.




                                                  5
Institutional Building of a State

   Directed implementation of peace-making action plans for peaceful resolution of conflicts
   and restoration of territorial integrity;
   Establishment of an independent, reliable, impartial and optimized judicial system;
   Establishment of capable self-government; distinction of powers and property;
   Formation of a well equipped public safety system through functional and technical
   improvements; improvement of emergency situation management systems;
   Reform of the sphere of criminal, civil and administrative law;
   Establishment of a modern and reliable border protection system;
   Expansion of diplomatic and consulate networks.

Public Administration and Regulation

Legal Regulation

   Successful implementation of the criminal code legislation reform strategy and the action
   plan;
   Reform of execution system with the purpose of timely and effective execution of court
   decisions;
   Formation of infrastructure and database for the Common Civil Register; increase of
   reliability and quality of service of the Public Register;
   Rehabilitation and development of the infrastructure of penitentiary system in order to
   improve the conditions of prisoners, through the introduction of new management model;
   development of effective mechanisms for protection of prisoners’ rights and their re-
   socialization;
   Formation of an affordable and qualified institute of treasury attorney.

Public Administration

   Effective execution of the action plan for implementation of Georgia’s national anti-
   corruption strategy;
   Reorganization of the public administration and civil service; introduction of a staff selection
   system; creation of environment for due motivation of employees, by establishing the “small
   government” and “good management” principle;
   Improvement of mechanisms for regular public reporting, accountability and civil control for
   public administration bodies;
   Improvement of the medium-term, results-oriented expenditure policy and mechanisms for
   the state budget;
   Development of the centralized treasury system; ensuring sustainability of revenue collection
   and creation of the integrated information system of public finance management.

Economic Freedom and Development of Infrastructure

Institutional De-regulation of the Economy

   Organization and improvement of licensing and permissions regulation;
   Consummation of divestiture of state-owned economic units and property; privatization of
   agricultural land; increase of transparency and commercialization of state property
   management;
   Minimization of state regulation of entrepreneurship;
   Ensure effective functioning of the Revenues Service;
   Improvement and further liberalization of the tax system;

                                                6
   Introduction of a competitive system of utilizing natural resources and facilitation of
   formation of a secondary market; diversification of forms of ownership and utilization of
   natural resources (including development and implementation of the water and forestry
   management concept);
   Support in seeking alternative markets for Georgian agricultural products.

Infrastructural Arrangement of the Economy

   Ensure a uninterrupted and safe operation of the power supply system by increasing the
   number of alternative sources and higher level of integration into international power supply
   systems;
   Regional development by intensive rehabilitation and development of engineering (roads,
   water supply, power supply, etc.) and social infrastructure;
   Use of public-private partnership for infrastructure development;
   Optimization of management for all kinds of transport and pursue of an ‘open policy’ to
   ensure integration, mobility and transit attractiveness;
   Development of a unified food security system and its gradual implementation; increase
   epizootic reliability of the country.

Public Sector

Social Protection

   Formation of a residual system of social assistance; move to a monetized, targeted and
   household assistance system;
   Formation of a targeted protection from poverty in old age; introduction of a pension system
   based upon age and social status, and stimulation of private pension savings initiatives;
   Institutional reform of the health system to become more customer-oriented, economic-
   sound and based on insurance principles;
   Implementation of the hospital sector development master plan;
   Improvement of the conditions for development of basic healthcare;
   Improvement of bio-safety system.

Education and culture

   Public – private partnership in professional training in order to satisfy labour market
   requirements; formation of professional education oriented towards new requirements of the
   economy;
   Completion of institutional and programme reform of the education system, support to high-
   quality education consistent with international practices;
   Integration of education and science; improvement of grant-and-competition-based
   mechanisms of financing;
   Improving the institutional management of culture, cultural heritage and sports spheres, and
   increasing the role of private sector;
   Restoration of cultural monuments and its preventive conservation;
   Rehabilitation of sport and cultural infrastructure.




                                               7
       MACROECONOMIC POLICY

       Objectives of the Macroeconomic Policy

       In the medium-term the country’s macroeconomic policy will be directed towards ensuring
       macroeconomic stability. Its objectives are:
       - Sustainable and rapid economic growth
       - Low inflation
       - Creation of investment friendly environment.


       Macroeconomic Review and Projections

       In 2004-2006 the average annual growth of the real GDP was 8.3 percent, and the annual
       inflation rate was 7.7 percent (see table 1).


Table 1. Core Macroeconomic Indicators

                               2004       2005       2006        2007       2008        2009       2010       2011
                              actual     actual     actual       prog.      prog.       prog.      prog.      prog.
 Real GDP growth rate (%)        5.9        9.6        9.4        10.0        7.5         7.0        7.0        7.0

 Nominal GDP (GEL mln.)      9,824.3   11,621.0   13,783.9   16,527.2    18,878.0   21,218.9    23,851.7   26,813.8

 GDP per capita (GEL)        2,275.5    2,679.8    3,124.5     3,746.3    4,279.2     4,809.8    5,406.6    6,078.0

 GDP per capita (USD)        1,187.2    1,478.4    1,758.7     2,243.3    2,593.4     2,915.0    3,276.7    3,686.6

 CPI (medium-term)               5.7        8.3        9.2         8.5        5-7         5.0        5.0        5.0

 Current account (% GDP)        -6.6      -10.8      -15.2       -23.1      -20.7       -20.4      -19.8      -19.1



       A. Economic Growth

       Overview
       In 2006, as compared with the previous year, real GDP growth amounted to 9.4 percent and
       equalled to GEL 13.8 billion in nominal expression. Industry, trade and transport sectors
       contributed significantly to the growth of GDP: 6.2 percent of to the GDP growth (which is 66
       percent of the overall GDP growth can be attributed to these sectors) can be attributed to these
       sectors.

       Industry

       In 2006 the value added created in the industry sector increased by 20.3 percent. All three sub-
       sectors showed growth: processing industry increased with 22.4 percent; electricity, gas and
       water supply with 14.2 percent; and mining industry with 18.9 percent. As compared to 2005,
       the share of industry in GDP increased by 0.2 percent and reached 12.4 percent.

                                                       8
Agriculture

2006 was not a successful year for the agriculture sector. In real terms, the value added created
by the sector decreased with 9.3 percent and the share of agriculture in GDP decreased with 3.5
percent, to 11.3 percent. The disappointing development in the agriculture sector reduced the
overall GDP growth rate with 1.4 percent: disregarding the agricultural sector, GDP growth
would have grown with 10.9 percent.

Infrastructure, trade and financial intermediary

In 2006 trade, transport and financial intermediary sectors were rapidly developing. As
compared to 2005, value added created by trade increased with 19.7 percent; transport with 15.1
percent and financial intermediary with 40.4 percent.

Projections

GDP
It is forecasted that in 2007 GDP in real terms will grow with 10.0 percent and that GDP in
nominal terms will be higher than GEL 16.5 billion (See Chart 1). In the medium-term future
(2008-2011), the average annual GDP growth will presumably be around 7.0 – 7.5 percent.

Investments and Consumer Expenditures
In 2007, as compared to 2006, the nominal volume of private investments is expected to
increase with 21.3 percent and reach 28.3 percent of GDP. Also in the subsequent 3 years the
volume of private investments is foreseen to increase and presumably will exceed 29.0 percent
of GDP in 2011.

The share of consumer expenditures in GDP is also expected to increase in 2007 but although
the volume of consumer expenditures (in real terms) is foreseen to grow further in 2008-2011,
its share in GDP will decrease gradually.

Chart 1. Trend of Nominal GDP (in GEL million)

     30000

     25000

     20000

     15000

     10000

      5000

          0
               2004      2005     2006      2007      2008      2009      2010     2011




                                                9
Chart 2. GDP per capita (in USD dollars)

    4000.0
    3500.0

    3000.0

    2500.0
    2000.0

    1500.0
    1000.0
      500.0

         0.0
               2004      2005      2006      2007      2008      2009      2010      2011




B. Foreign Sector

Overview

Current Account Deficit
In 2006 the current account deficit increased and amounted to USD -1,176.3 million. The ratio
of the current account deficit to GDP also increased and it reached 15.2 percent of GDP,
compared with 10.8 percent in 2005. This development was mainly to higher FDI, which
increased the demand on import products.

Trade Turnover
Foreign trade turnover reached USD 5,362.2 million in 2006, which is 28.9 percent higher than
in 2005. The share of exports in the total turnover is USD 1,666.5 million (increased with 13.2
percent), and imports amounted to USD 3,695.7 million (increased with 37.6 percent). In 2006,
Georgia’s negative trade balance increased by 67.1 percent and amounted to USD -2,029.2
million.

In 2006 Turkey was the major trade partner of Georgia. Its share in the total trade turnover is
13.9 percent, which is 1.8 percent higher than in 2005. Russia holds the second place with 13.6
percent (in 2005 its share amounted by 16.0 percent), followed by Azerbaijan (8.8 percent),
Germany (8.5 percent) and Ukraine (8.1 percent).

The major export partner is Turkey, which receives about 12.6 percent of the total exports.
Azerbaijan holds the second place with 9.3 percent, Russia the third place with 7.6 percent. In
2005, Russia’s share in the total export still was 17.8 percent. In fact, in 2006 exports to Russia
more than halved. The total exports, disregarding exports to Russia, increased with 28.9 percent.

With a share of 15.3 percent in total imports, Russia is still the main source of imports. In 2006
the share decreased only marginally (15.4 percent in 2005). Turkey is on the second place with
14.2 percent.



                                                10
Projections

The Trade Turnover and Current Account Deficit
It is forecasted that in the forthcoming period the foreign trade turnover will further increase.
The share of the current account deficit in GDP is projected to increase in 2007. It is also
forecasted that in 2008-2011 the growth of export will be higher than the growth of imports.

In turn, this will decrease the share of the current account deficit in GDP, even though the
current account deficit in absolute terms will continue to grow: in 2007 the share of the current
account deficit in GDP is projected to be -23.1 percent, and in 2008 -20.7 percent. Provided no
external shocks will affect the economy, this trend will remain unchanged during next years and
the current account deficit as percentage of GDP is estimated at around -19.0 percent in 2011.

C. Monetary Policy

Overview

Consumer Prices
In December 2006, compared to the same period of the previous year, the Consumer Price
Index (CPI) changed with 8.8 percent, and the average annual CPI increased with 9.2 percent.

In 2006, the prices in the consumer basket were mainly affected by changes in prices of two
products groups: food products and non-alcoholic beverages (contributed 5.3 percent to the
increase of consumer prices); and housing, water, electricity, gas and heating (contributed 2.0
percent).

GEL/USD exchange rate
In 2006 the exchange rate of the GEL to the USD increased. Compared with December 2005,
the average monthly exchange rate of the GEL increased by 3.5 percent and reached 1.72 GEL
per USD. During the previous year, the average monthly value of GEL appreciated by 2 percent
and was 1.78 GEL per USD.

Money in circulation
According to the National Bank of Georgia, at the end of 2006 reserve money was increased
with 19.1 percent and equalled to GEL 1,193.2 million.

By the end of December 2006 the volume of M3 broad money was GEL 2,689.9 million, which
4.7 percent than a year earlier. During the same period, M2 money supply increased with 30.2
percent. In 2006, deposits in foreign currency increased with 54.2 percent, and deposits in
national currency with 69.5 percent.

The money multiplier also changed: compared with the previous year, the M3 money multiplier
increased with 0.34 points (to 2.25), and M2 multiplier increased with 0.1 point (to 1.17). In
2006, compared with the previous year, the dollarization ratio reduced by 2 percent and
equalled to 69.6 percent.

The money circulation velocity, according to the M3 aggregate, reduced with 0.96 points (to
5.12). For M2, this indicator was 1.0 point less than in 2005 (and reached 9.9).

Interest rates
In 2006, interest rates on loans in national currency reduced with 0.9 percent and equalled to
19.8 percent. Interest rates on loans in foreign currency amounted to 17.4 percent, being 0.9
percent more than in 2005.

                                                11
The interest rate on deposits in national currency increased with 2.1 percent (to 10.1 percent),
and in foreign currency reduced with 0.5 percent (to 7.6 percent).

Projections

It is projected that in 2007 the CPI will increase with 8.5 percent. In 2008-2011 the projected
average annual CPI change is around 5-7 percent. For the forecasted period, money circulation
velocity is likely to reduce, both for M3 and M2 while the money multiplier is expected to
increase. It is also forecasted that the interest rates will reduce.


D. Employment and Unemployment

Overview

According to statistical data, in 2006 1,747,000 people were employed in the economy, of
which 34.6 percent is hired, and 65.4 percent self-employed. In 2006 unemployment decreased
with 1.7 percent, and amounted to 13.8 percent.

Projections

As a result of economic growth, unemployment level is likely to reduce in the forecasted time
period 2007-2011. It is forecasted that by 2011 the unemployment level will presumably be
reduced by 2.0-2.5 percent.


Fiscal policy

In 2006 the share of tax revenues to GDP increased with 2.1 percent and the volume of state
investments increased 1.6 times. In 2006, as compared with the previous year, the share of
government debt in GDP decreased with 8.0 percent, and came to 32.1 percent.

For the long-term, it is the Government’s core fiscal strategy to further improve fiscal stance to:

   Retain high economic growth
   Ensure macroeconomic stability
   Increase priority spending
   Strengthening of financial order




                                                12
Chart 3. Budget Deficit in 2004-2011 (as percentage to GDP)


      0
   -0.3
   -0.6
   -0.9
   -1.2
   -1.5
   -1.8
   -2.1
   -2.4
   -2.7
            2004       2005      2006       2007         2008     2009    2010      2011

                                         Overall balance (cash)



Chart 4. Government debt in 2004-2011 (as percentage to GDP)


   50.0
   48.0
   46.0
   44.0
   42.0
   40.0
   38.0
   36.0
   34.0
   32.0
   30.0
   28.0
   26.0
   24.0
   22.0
   20.0
   18.0
            2004       2005       2006       2007        2008     2009     2010       2011




For 2008-2011 the objectives of the fiscal policy are:

   Increase of spending on priority directions such as investments for infrastructure
   development, social sector, defence and legal order.
   By 2011 reduction of government debt to not more than 20 percent of GDP.
   Budget expenditures of not more than 30 percent of GDP.
   Budget subsidies to the real sector to be based on clearly defined programmes, which shall
   not cause generation of additional expenditures during the coming budget cycle.
   LEPLs of the public sector shall be considered as part of standard budget reporting.
   A capital budget shall be established as part of the annual budget.
   While initiating new programmes and projects (legislative and other) indirect expenditures
   shall be analyzed along with the direct expenditures.

                                               13
            The budget deficit shall not exceed 2 percent of GDP.
            One-time revenues will be directed to cover one-time expenditures, which do not cause
            generation of costs during the forthcoming budget cycle.

        The following actions will be implemented to reach the above objectives;

            Further liberalization of tax legislation.
            Merging of income and social tax in 2008: the unified tax rate will be 25 percent.
            Reduction of the profit tax till 15 percent in 2008.
            The arrears in payment of land tax accumulated till 1 January 2005 by physical persons will
            be written-off.

Table 2. Core Fiscal Indicators in 2004-2011 (in percentage to GDP)

                                             2004     2005     2006     2007    2008      2009    2010     2011
                                            actual   actual   actual   likely   prog.     prog.   prog.    prog.
Total revenues and grants                     22.0     23.4     26.7    28.6     28.0      28.5    29.0     29.4
  Tax revenues                                18.4     19.7     21.8    25.4     25.9      26.6    27.3     27.9
  Non-tax revenues                             2.3      2.8      3.5      1.7     1.3       1.2     1.1      1.0
  Grants                                       1.3      0.9      1.4      1.5     0.8       0.7     0.6      0.5


Expenditures and net lending                  19.7    25.0     28.7     30.2     29.5     30.0      30.0   30.0
  Current expenditures                        15.6    19.1     20.7     22.4     22.4     23.0      23.0   23.0
  - Payment of interest                        1.4     1.0      0.8      0.8      0.5      0.5       0.4    0.4
  - Other remaining current expenditures      14.2    18.1     19.9     21.6     21.9     22.5      22.6   22.6
  Capital expenditures and lending             4.1     5.9      8.0      7.8      7.1      7.0       7.0    7.0
  Excluding repayments


Overall balance (liabilities)                  2.3     -1.6     -1.9    -1.6       -1.5    -1.5     -1.0    -0.6

Net change in arrears by expenditures         -2.6     -0.8     -0.3    -0.1       0.0      0.0      0.0     0.0
(-reduction)


Overall balance (cash)                        -0.3     -2.5     -2.2    -1.7       -1.5    -1.5     -1.0    -0.6


Financing                                      0.3      2.5      2.2     1.7        1.5     1.5      1.0     0.6
Privatization                                  0.7      3.6      4.1     3.5        0.5     0.3      0.2     0.2
   Domestic (net)                             -0.7     -0.9     -1.4    -1.7       -0.1     0.2     -0.8    -0.5
   External                                    0.3     -0.2     -0.5    -0.1        1.1     1.0      1.6     0.9




                                                       14
BUDGET REVENUES

Revenue Analysis

Revenues and grants of the consolidated budget of Georgia amounted to GEL 3,686.8 million
in 2006, exceeding the previous year’s indicator by 33.6 percent (Table 3). Total volume of
revenues and grants amounted to 26.7 percent of GDP.


Table 3. Revenues of the Consolidated Budget (GEL million)

                                                                                                           Consolidated Budget
                                                                                       2006                                                         %
                   Title
                                                                                                                                                    Share of taxes
                                                             Projection    Actual             +/-            %          GDP          2005/2006      in tax revenues

   Revenues and Grants                                          3,566.5       3,686.8           120.2         103.4           26.7         133.6
   Total revenues (excluding capital revenues)
                                                                3,376.1       3,492.5           116.4         103.4           25.3         131.2


   Tax revenues (excluding social tax from public sector)
                                                                2,880.6       3,004.1           123.5         104.3           21.8         131.2                      100.0


   Income tax                                                     356.0         385.9               29.9      108.4            2.8         132.8                       12.8
   Profit tax                                                     334.3         341.1                6.8      102.0            2.5         162.2                       11.4
   VAT                                                          1,280.8       1,332.7               51.9      104.0            9.7         135.0                       44.4
   Excise                                                         338.4         335.6               -2.8         99.2          2.4         117.2                       11.2
   Customs tax                                                    127.5         132.4                4.9      103.8            1.0         107.3                        4.4

   Property tax                                                     81.4            85.8             4.4      105.4            0.6         142.2                        2.9

   Tax from profitable games                                         9.9            10.9             1.0      110.0            0.1           99.9                       0.4

   Other taxes                                                      15.1            22.2             7.1      147.2            0.2         168.6                        0.7


                                                                  337.2         357.5               20.3      106.0            2.6         116.7                       11.9
   Social tax (excluding social tax from public sector)

   Non-tax revenues (excluding repayment of issued credits        495.5         488.4               -7.1         98.6          3.5         155.6

   Grants                                                         190.5         194.3                3.8      102.0            1.4         185.8




In 2006, the consolidated budget mobilized as total revenues GEL 3,492.5 million, which is
31.2 percent more than in 2005. Its share in GDP increased to 25.3 percent.

In 2006, GEL 3,004.1 million was mobilized as tax revenues, which is 4.3 percent more than
projected. Compared with 2005, the tax revenues increased with 31.2 percent, and its share in
GDP increased to 21.8 percent.

In 2006, GEL 385.9 million was mobilized as income tax of individuals in all levels of budget,
being 8 percent more than projected. Compared with the previous year the collected income tax
increased with 32.8 percent, and its share in GDP was 2.8 percent. The share of income tax in
total tax revenues amounted to 12.8 percent.




                                                                   15
Table 4. Consolidated Budget Revenues in 2003-2006 (GEL million)



 Item                                                                   2004            2005        2006

    Revenues and grants                                                    2,160.8        2,715.4   3,686.8
    Total revenues (excluding capital revenues)                            2,036.1        2,610.9   3,492.5

    Tax revenues (excluding social contributions                           1,811.2        2,289.1   3,004.1
    from public sector)
    Income tax                                                               268.6          290.7     385.9
    Profit tax                                                               161.6          210.3     341.1
    VAT                                                                      628.2          987.4   1,332.7
    Excise                                                                   204.6          286.4     335.6
    Customs tax                                                              100.1          123.4     132.4
    Other taxes                                                              167.2           84.5     118.9
    Socal tax                                                                280.9          306.3     357.5
    Non-tax revenues (excluding repayments of                                224.9          321.8    488.4
    issued credits)
    Grants                                                                   124.7          104.6    194.3



In 2006, the volume of profit tax collected in the consolidated budget increased with 62.2
percent, and amounted to GEL 341.1 million. This was 2 percent higher than projected. The
share of the profit tax to GDP was 2.5 percent, and its share in total tax revenues equalled to
11.4 percent.

The consolidated budget collected GEL 1,332.7 million as VAT, which is 44.4 percent of the
total tax revenues, and 9.7 percent of GDP. VAT collection was 4 percent higher than projected.
In 2006, VAT collection was 35 percent higher than in the previous year.

Excise duties collection was GEL 335.6 million. This is 17.2 percent more than in the previous
year and 99.2 percent of the projected amount. Excise duties had a share in total tax revenues of
11.2 percent and a share in GDP of 2.4 percent.

Customs tax amounted to GEL 132.4 million, which is which is about 7.3 percent more than in
2005. The share of customs tax in total tax revenues is 4.4 percent and its share in GDP is 1.0
percent.

Non-tax revenues amounted to GEL 488.4 million, being 13.2 percent of total revenues and
grants. This is 55.6 percent more than in 2005. Its share in GDP is 3.5 percent.




                                                16
Projection of 2007 Year Revenues

In medium-term budget revenue projections, consideration was given to changes in fiscal sphere
and likely outcomes.

In 2007, consolidated budget revenues and grants (excluding social tax payments by the public
sector; repayments to issued credits from non-tax sector; and capital expenditures) are expected
to increase with 28.1 percent. Its share in GDP is likely to be 28.6 percent. Total revenues are
likely to increase with 28.3 percent, and to reach 27.1 percent as share in GDP.

Tax revenues of consolidated budget (excluding social contributions from the budget sector)
will likely increase with 40.0 percent, with its share in GDP equalling to 25.4 percent, including:

- Income tax is likely to increase with 41.7 percent and as share in GDP with around 3.3
  percent.
- Profit tax is likely to increase with 56.2 percent, and as share in GDP with around 3.2 percent.
- VAT is likely to increase with 49.6 percent, and as share to GDP with around 12.1 percent.
- Excise is likely to increase with 17 percent, and as share to GDP with around 2.4 percent.
- Property tax is likely to increase with 40.7 percent, and as share to GDP with around 0.7
  percent.
- Social tax from non-public sector is likely to increase with 73.3 percent, and as share to GDP
  with around 3.8 percent.

In 2007 non-tax revenues of consolidated budget will likely decrease with around 56.3 percent
because of lower one-time transfers to the consolidated budget. Their share in GDP is expected
to be about 1.7 percent.


Projection of 2008-2011 Year Revenues

The revenues in the consolidated budget are projected to have a growing trend in the years
2008-2011. During this period the revenues and grants will increase with 12-15 per year and
will exceed 29 percent of GDP in 2011. As for tax revenues, its nominal annual growth will be
around 15-16 percent, reaching 28 percent of GDP in 2011.

The structure of tax revenues is anticipated to change in the medium-term. During the past years
the indirect taxes was significantly higher than the direct taxes, but in 2008-2011 the growth of
direct taxes is expected to exceed the growth rate of indirect taxes. In 2011 the indirect tax
revenues are projected to be 15 percent of GDP, and the direct taxes revenues 13 percent of
GDP.

The share of non-tax revenues as well as grants in GDP will decrease during the projection
period.




                                                17
BRIEF OVERVIEW OF THE YEAR 2006

The planned expenditures of the 2006 State Budget were 40 percent higher than in 2005 and
100% higher than in 2004. The Government fully executed the commitments under the 2006
Budget Law.

The 2006 State Budget expenditures focussed on financing of the country’s strategic priorities,
including:

   Progress of the Action Plan for cooperation with NATO was assessed positively, and
   Georgia moved to a new stage of cooperation – “NATO IPAP – Intensive Dialogue”.
   Reform of the defence system continued. GEL 684.1 million was spent for improving
   defence, including financing of measures under the NATO Partnership Programme. In 2006
   a large-scale unified training was held, and its planning and implementation showed
   significant improvement.
   The ENP Action Plan was approved.
   The Law on Budget of Local Self-governing Unit was prepared and approved, which
   strengthens local self-government, decentralizes the system, organizes budgetary relations
   and spreads social-economic development equally over the whole country; following the
   elections of local self-government representation bodies, the organic Law on Local Self-
   government was enacted.
   The MTEF-based budgetary process was further developed and all ministries were included
   in MTEF process. In accordance with the requirements of the Budget System Law, this was
   reflected in the Government’s “Main Directions and Data for 2007-2010”.
   The new functional budget classification was prepared, in order to ensure the consistence of
   public finance accounting system with international standards (GFSM – 2001). This was
   reflected in the 2007 State Budget.
   Significant measures were taken to resolve the energy crisis; the increased tariff for natural
   gas was financed from the budget; rehabilitation of the energy system continued, including
   the rehabilitation of hydro- and fuel-electric stations and energy transmission lines. This
   assured the energy security for the country.
   The new Customs Code and the Law on Customs Tariffs were adopted, in order to
   profoundly revise customs policies, to prevent corruption, to liberalize trade and to
   harmonize with EU legislation.
   Significant work was undertaken to bring the main road infrastructure to international
   standards and GEL 181.2 million was spend for this purpose. In 2006 the construction of the
   highway Tbilisi-Senaki-Leselidze was initiated with the reconstruction and modernization of
   the Natakhtari-Agayani section. Periodic and rehabilitation works were completed for
   approximately 322 km main roads, 45 bridges were restored, preventive measures to
   strengthen river beds and dams were taken in 27 settlements of 14 districts.
   Within the framework of the strategy to divestiture state-owned enterprises and unused
   property, the Ministry of Economic Development privatized 141 units, including 19 large
   ones.
   With the aim to maker it easier for Georgian products to enter international markets and to
   eliminate technical barriers in international trade, legislative framework was improved to
   harmonize with international standards.
   The funds allocated for public order protection increased to GEL 369.0 million.
   Food, as well medical conditions and facilities, in some penitentiary institutions improved
   significantly. E.g. the daily food norm per prisoner increased from GEL 0.77 to GEL 1.52
   (or to GEL 45 per month).
   The minimum pension increased to GEL 38 per month; pensions in Tbilisi will now be
   calculated in accordance with the years of service, with a minimum of GEL 48 month.

                                               18
Significant measures were taken to provide pensions for the Ossetian-speaking population in
the out-of-control area. This plays a major role in increasing the confidence of the Ossetian
population in the Georgian authorities.
Within the framework of presidential programme “My House”, which aims at registering
real estate in Abkhazia and Tskhinvali regions, 43,000 applications were received.
Arrears from the previous years continued to be cleared and in 2006 GEL 40.8 million was
spend for this purpose.
Targeted measures continued to assist the socially insecure population. The cost of energy
consumed by those entitled to this privilege (including war veterans and others under the
same category) was compensated. In 2006, 97,719 were entitled to this privilege and these
received in total GEL 14.8 million.
The Georgian Government purchased a significant quantity of mineral fertilizers, which was
given to the rural population for spring works (GEL 7.1 million was allocated for the
purchase of mineral fertilizers and transportation to regions).
The social assistance programme was implemented, aimed at providing monthly assistance
to socially insecure families. The expenditure incurred for this purpose amounted to GEL
26.8 million. In addition, the state programme for on-site vocational training spent GEL 18.8
million within this framework.
GEL 42.7 million was spent on the construction, rehabilitation and modern equipment of
healthcare institutions.
In total GEL 828.8 million was spent on healthcare, social insurance and social protection,
which is GEL 134.4 million higher than in 2005.
Reform of education continued, and included capital repairs of educational institutions and
purchase of modern equipment (20,000 people were hired for constriction and
rehabilitation). The expenditures incurred for this purpose amounted to GEL 88.1 million.
Besides, from 2006 the voucher programme for general educational institutions was fully
launched (the expenditures incurred for this purpose amounted to GEL 187.4 million).




                                           19
EXPENDITURES ACCORDING TO CORE ECONOMIC CRITERIA

Consolidated Budget

The calculation of the budget expenditures was based on macroeconomic forecasts consistent
with IAS. According to macroeconomic calculations, the share of consolidated budget
expenditures to GDP will be 29.5 percent in 2008, and 30 percent in 2009-2011.

Expenditures from consolidated budget on goods and services are forecasted to be 13 percent of
GDP in 2008. This includes expenditures to pay salaries as well as all expenditures that are not
included in other items of the economic classification. In 2009, this will increase to 13.9 percent
of GDP, in 2010 to 14.1 percent, and in 2011 to 14.7 percent.

The expenditures on subsidies and transfers are projected to be 8.8 percent of GDP in 2008, 8.7
percent in 2009, 8.4 percent in 2010, and 7.9 percent in 2011. This item includes financing of
both social and educational measures.

The share of capital expenditures to GDP will be 7.1 percent in 2008, and about 7.0 percent in
2009-2011.

Expenditures to pay interest will be 0.5 percent of GDP in 2008 and 2009, and are foreseen to
reduce to 0.4 percent in 2010-2011. This includes interest on domestic and foreign debt.

State Budget

State Budget Expenditures for 2008 are projected at 26.4 percent of GDP; 26.8 percent in
2009; 26.7 percent in 2010; and 26.6 percent in 2011. According to the economic classification,
expenditures and expenses are distributed in the following way in the years 2008-2011:
   The expenditures on salaries will be about 3.2 percent of GDP in 2008 and 2009; 3.1 percent
   in 2010; and 3.0 percent in 2011.
   Expenditures on subsidies and transfers will be 10.7 percent of GDP in 2008, 10.9 percent
   in 2009; 10.5 percent in 2010 and 10.0 percent in 2011.
   Capital expenditures will be 5.2 percent of GDP in 2008, and around 5.0 percent in 2009-
   2011.

Local Budget

   Local budget expenditures hare project to increase in 2008-2011. In 2008 local budget’s
   total expenditures will be 5.7 percent of GDP, increasing to 5.9-6 percent in 2009-2011.
   Expenditures on salaries in the local budget will be 0.5 percent of GDP in 2008-2011.
   Expenditures on other goods and services in the local budget will be 2.6 percent of GDP in
   2008, 3.1 percent in 2009 and 2.9 and 3.1 percent in 2010-2011.
   Expenditures on subsidies and transfers will be 0.6 percent of GDP in 2008-2010,
   decreasing to 0.5 percent in 2011.
   Capital expenditures from the local budgets will be 1.9 percent of GDP in 2008-2011.




                                                20
     PUBLIC DEBT STRATEGY

     Sustainability and Strategy of Foreign Debt

     The servicing of public debt (see the table below) is based on the following assumptions:

        The terms of the Paris Club agreements for foreign debt restructuring in 2001 and 2004 are
        taken into consideration.
        The terms of loan agreements only as of beginning of 2007 are used.
        Forecasts for the commitments to be assumed in the future are not reflected.
        It is assumed that Georgia’s debt to Turkmenistan will be fully redeemed by the end of 2007.


     Table 5. Anticipated budget expenditures regarding foreign debts, 2008-2011 (GEL million)
                                      2005        2006       2007      2008      2009      2010          2011
                                     Actual      Actual

Servicing foreign debt                 200.4      270.4     236.8     123.1      124.5    125.1         134.7
Servicing foreign debt as              1.7%       2.0%       1.4%      0.7%      0.6%      0.5%         0.5%
percentage of GDP,
of which
   Principal                           161.9      234.4     154.4      73.3       82.3     85.5          98.0
  Interest                              38.5       36.0      82.4      49.8       42.2     39.6          36.7
Commitments resulting from               0.0        0.0        7.6       7.9       7.8       7.8          6.0
Georgia’s participation in
international organizations
As percentage of GDP                  0.00%      0.00%      0.05%     0.04%     0.04%     0.03%         0.02%

     * Calculations use the exchange rate of the GEL against the US dollar – 1.75.

     Expenditures for servicing of foreign debt do not include:
     1. Turkmenistan debt payments, as it is assumed that this debt will be repaid with goods in
        2007.
     2. Grant-replacement payments to be presumably received from EU in 2008.

     The Ministry of Finance will continue cooperation with economic agents so that the bilateral
     debts are repaid similar to the servicing of the debt to Turkmenistan – with goods and services.
     The negotiations will start with bilateral creditors on repayment of non-concessionary loans
     with discount (with necessary observation of so-called ‘comparison principle’ of Paris Club).

     Non-concessionary loans to be taken by Georgia in the future will not exceed relevant limits.

     As a result of Georgia’s membership of a number of international financial institutions (Asian
     Development Bank, Development Bank of the Council of Europe, European Investment Bank,
     etc.), credit resources, including those with concession, will be enhanced.

     The public debt sustainability analysis has shown that in 2008-2011 the sustainability of
     Georgia’s foreign debt will be maintained.




                                                    21
Sustainability and Strategy of Domestic Debt

  In accordance with the Agreement on Amending the 20 March 2006 Agreement between the
  Government of Georgia and the National Bank of Georgia on Repayment of Arrears of the
  Government of Georgia to the National Bank, to repay the portion of the National Bank debt
  on annual basis;
  Full inventory of so-called ‘historic debts’, and based on the analysis of its outcomes, to
  develop a reimbursement mechanism:


                                                                               In GEL million
                               2005      2006      2007      2008     2009      2010      2011
                              Actual    Actual

Repayment of domestic debt     113.6      84.9      77.0     85.0      89.0      87.0     86.0
Repayment of domestic debt     1.0%      0.6%      0.5%     0.5%      0.4%     0.4%      0.3%
as percentage of GDP,
of which:
   Principal                    32.0      20.4      20.0     30.0      35.0      35.0     35.0

   Interest                     81.6      64.5      57.0     55.0      54.0      52.0     51.0



  All the debt of the Ministry of Finance to the National Bank of Georgia will be covered by
  16 March 2030.
  All state debt acknowledged by the Law on State Debt of Georgia will be covered in the
  following 20-25 years.




                                             22
FUNCTIONAL CLASSIFICATION OF THE BUDGET
EXPENDITURES

General Purpose State Service

  Enhancing the role of Georgia in the international community, and improving the
  cooperation.
  Following the neighbourhood policy with the EU; facilitation of integration into NATO.
  Participation in the international peace operations. Improving the cooperation.
  Increasing the number of diplomatic relations.
  Managing internal and external debt; ensuring debt sustainability.
  Increasing the effectiveness of state resource management.
  Integrating Georgia in international statistics network.
  Implementing a united policy towards migration.
  Making education accessible for all levels of society.
  Developing science.
  Ensuring that the refugees return to their homes.


Defence

  Increasing Georgia’s defence capacities.
  Enhancing the quality of military equipment available to the armed forces.
  Perfecting logistics of the armed forces.
  Introducing fully contract-based employment in the armed forces.


Public Order and Security

  Public-oriented and effective police.
  Enhancing the quality of protection of public security and public order.
  Creating the system of free legal assistance.
  Ensuring compatibility of Georgian prisons with the international standards.


Economic Activity

  Economic liberalization.
  Improving the business climate.
  Development of the country’s infrastructure.
  Enhancing the attractiveness of the country to foreign investors.
  Developing eco-tourism and making the country more attractive to the tourists.
  Developing agricultural infrastructure.
  Reforming the irrigation systems.
  Developing of the wine sector.
  Establishing the Public-Private-Partnership scheme in managing forests.
  Ensuring food security and combating falsification.
  Ensuring supply of energy and natural gas to hydro stations, electricity stations.




                                              23
Environment Protection

   Establishing the system of protected territories.
   Reforming the waste management system.
   Transferring to the basin system of the water resource management.


Utilities

   Rehabilitation - construction of water supply and sewage systems.
   Creation-reconstruction of gas supply system.
   Organizing the payment system for the population of the utilities consumed.


Healthcare

   Enhancing the accessibility to the financial resources to finance the healthcare services.
   Enhancing the quality of the healthcare services; and diversifying the location of quality
   hospitals.


Leisure, Culture and Religion

   Reform of the museums.
   Rehabilitation, systematization, documentation and popularization of the memorials of
   cultural heritage.
   Rehabilitation of sports and culture infrastructure.


Education

   Ensuring access to quality education to all citizens.
   Inclusion in the united European and Euro Atlantic educational network
   Orient the education system to the needs of current work environment.
   Utilizing IT in the education process.
   Reform of arts education.


Social Protection

   Facilitation to employment.
   Decreasing the level of poverty and vulnerability of the population.
   Perfection of the pension system of the country
   Social protection of the military servants and members of their families.




                                               24
PRIORITIES TO IMPLEMENT THE BASIC DATA AND
DIRECTIONS OF THE GOVERNMENT FOR THE YEARS 2008-
2011 DEFINED BY THE MINISTRIES

Ministry of Finance


Priorities for 2008-2011

   Further improvement of the budget process
   Treasury development
   Financial policy
   Revenue collection
   Institutional development

Expected outcomes:

   The budget process will be based on MTEF principles. The state budget will be prepared
   pursuant to GFSM-2001 standards. MoF will create relevant conditions to simplify
   management of the unified budget system and the budget process.
   Retain foreign debt sustainability.
   Strengthening of macroeconomic and fiscal projections.
   Management of the state expenditures and minimize the time required for treasury
   operations.
   Initialisation electronic treasury system.
   Improvement of the government’s record-keeping system.
   Improvement of the business environment by simplifying the tax system.
   Development of action mechanisms and Georgian legislation in accordance with the Euro-
   Atlantic integration requirements.
   Improvement of the efficiency of management and recording of funds from donor
   organizations for investment projects.
   Improvement of the quality of revenue administration; increase the level of voluntary
   payment of taxes by tax-payers, reduction of tax violations.
   Improvement of tax-payer registration.
   Improvement of the efficiency of the state management of financial - budgetary, tax and
   customs sectors.

Selected criteria for evaluation of outcomes:

   Relevance of the national standards and instructions with the Global Financial Statistics
   Manual 2001 (GFSM 2001) and International Public Sector Accounting Standards (IPSAS);
   Inclusion of the NBG in the unified system.
   Development of the corruption risk evaluation system.
   Reduction of the number of complaints from tax-payers.
   Reduction of out-dated debts.
   Increased number of service-centres of the Revenue Service.
   Development of telephone – consulting network on taxes.




                                                25
                                                                                  in GEL million
                                        2005       2006        2007      2008        2009     2010    2011
                                       Actual     Actual

 Ministry of Finance                      68.3         80.5    90.2      69.7        68.8     72.0    75.4
 As percentage of GDP,                   0.6%         0.6%    0.5%       0.4%        0.3%    0.3%    0.3%
 of which:
    Investments                            0.2          6.2    28.5       8.0         4.0      4.0     4.0

   Investments as percentage of GDP     0.00%         0.05%   0.17%    0.04%      0.02%     0.02%    0.01%



Ministry of Economic Development


Priorities for 2008-2011

   Analysis of the economic policy, further liberalization of transport and construction sectors.
   Development of road infrastructure.
   Introduction of preferential trade regimes, development of technical regulations and support
   to attract investments and tourists.
   Development of private entrepreneurship and support to the creation of new jobs.
   Improvement of management of state-owned property and their privatization.

Expected outcomes:
  Stable macroeconomic environment in medium- and long-term.
  Ensure high economic growth.
  Increase of foreign and local investments.
  Creation of new work opportunities.
  Development of the road infrastructure and improvement of its quality.
  Increase the country’s potential as a transit country.
  Increase of tourists in all regions of Georgia.
  Attraction of investments in former state-owned enterprises and introduction of modern
  methods of management and modern IT technologies.

Selected criteria for evaluation of outcomes:

   Macroeconomic parameters and trends.
   Ratings given to Georgia by international organizations and analytical centres.
   Volume of investments in road construction.
   The length of rehabilitated and new roads.
   Data on turnover and quantity of passengers.
   FDI trend.
   Trend of the quantity of tourists visiting Georgia.
   Dynamics of export and its diversification.
   Amount of privatized enterprises and privatization proceeds




                                                 26
                                                                                  in GEL million
                                           2005       2006      2007      2008      2009        2010     2011
                                          Actual     Actual

 Ministry of Economic Development           162.3     195.1    279.9     377.4     427.0        480.1   529.2
 As percentage of GDP,                      1.4%      1.4%      1.7%      2.0%      2.0%        2.0%    2.0%
 of which:
    Investments                             125.9     179.1    238.9     336.5     385.0        437.0   485.0

   Investments as percentage of GDP        1.08%     1.30%     1.45%     1.78%     1.81%    1.83%       1.81%



Ministry of Justice


Priorities for 2008-2011

   Development of a free legal assistance system.
   Ensure representation of Georgia in European courts of protection of human rights and
   international arbitrage.
   Effective functioning of the enforcement jurisdiction and its improvement to modern
   standards.
   Ensure improvement of the enforcement and probation systems up to international standards.
   Development of forensic examination and its improvement up to international standards.
   Ensure effective functioning of the National Archive of Georgia.
   Development of a functional Civil Registry.

Expected outcomes:

   Free-of-charge legal assistance system on the whole territory of Georgia.
   Effective inter-governmental system of law-enforcement.
   Technically well-equipped system.
   Probation system of international standards and functioning effectively; re-socialization,
   rehabilitation and improvement of convicts.
   Civil Registry system based on electronic management principles.
   Customer-oriented service with well-qualified staff.
   Improved information database, simplified working processes.

Selected criteria for evaluation of outcomes:

   Ratio of the quantity of claims submitted to the European Court of Human Rights and the
   quantity of decisions confirming violation of human rights by Georgia.
   Quantity of arbitration cases in favour of Georgia.
   Quantity of unsolved crimes.
   Quantity of solved crimes.
   Amount of food to prisoners and their living conditions.




                                                27
                                                                                  in GEL million
                                            2005       2006     2007      2008      2009      2010     2011
                                           Actual     Actual

 Ministry of Justice                         34.5       72.0    116.6      99.9       94.2     87.9    88.1
 As percentage of GDP,                      0.3%       0.5%     0.7%      0.5%      0.4%      0.4%    0.3%
 of which:
    Investments                                 6.0     25.9     50.0      33.3       24.3     14.5    11.0

   Investments as percentage of GDP        0.05%      0.19%    0.30%     0.18%     0.11%     0.06%    0.04%




Ministry of Foreign Affairs


Priorities for 2008-2011

   Within the framework of the Ministry’s activities, support to creation of an independent, safe
   and protected country, support to the process of joining NATO and inclusion of international
   community in re-establishing Georgia’s territorial integrity.
   Within the framework of the Ministry’s activities, support to the process of the country’s
   economic growth and welfare.
   Diplomatic and organizational effectiveness.
   Enhancement of diplomatic activities and relations in order to ensure that Georgia is
   acknowledgement as a respected country.
   Protection of Georgian citizens abroad.

Expected outcomes:

   Successful and more effective foreign policy and implementation of consistent, sustainable
   and predictable diplomatic policy.
   Strengthening of bilateral and multilateral foreign relations, active cooperation with
   international organizations.
   Increase of attracted investments, identification of potential markets for Georgian products,
   achievement of acceptable trade regimes with partners.
   Strengthening of energy independence, support to tourism development, within the scopes of
   the Ministry’s competence.

Selected criteria for evaluation of outcomes:

   Inclusion of Georgia in MAP, as one of prerequisites for joining NATO.
   Increased international competitiveness of Georgian products.
   Export/import ratio and diversification data.
   Increased investments.
   Tourism growth rate.
   Quantity of abuses of the rights of Georgian citizens abroad.
   Quantity of assistance rendered to Georgian citizens abroad for emergency cases.
   Quantity of new diplomatic representations




                                                28
                                                                                   in GEL million
                                            2005       2006       2007      2008      2009      2010     2011
                                           Actual     Actual

 Ministry of Foreign Affairs                  32.5      43.6      49.6      52.1      54.7      57.5     60.3
 As percentage of GDP,                       0.3%      0.3%      0.3%      0.3%      0.3%       0.2%    0.2%
 of which:
    Investments                                0.0       1.2       1.1       1.2       1.2        1.2     1.2

   Investments as percentage of GDP         0.00%     0.01%     0.01%     0.01%     0.01%     0.01%     0.00%




Ministry of Defence


Priorities for 2008-2011

   Improvement of social conditions of military and civil servants.
   Improvement of defence potential of military forces.
   Improvement of technical and logistics systems.
   Support to the process of integration to NATO.
   Improvement of defence management system.

Expected outcomes:

   Military service will become prestigious, military servants will be motivated, and their
   families will be socially protected during the military service as well as after its completion.
   Solving housing problems will decrease funding of rents.
   The military forces will be able to ensure due defence of the country. Budget resources
   allocated for defence will be spent more effectively. Sub-forces consistent with NATO
   requirements will be created and will be able to serve as part of NATO coalition forces.
   Utilization of un-used facilities will reduce the cost of their keeping, their impact on the
   environment and decrease the danger of accidents. Improvement of logistics system will
   guarantee uninterrupted defence ability.
   By implementing liabilities towards NATO, Georgia will become a real candidate for joining
   NATO.
   A modern and effective management system will be created.


                                                                                   in GEL million
                                            2005       2006       2007      2008      2009      2010     2011
                                           Actual     Actual

 Ministry of Defence                         366.8     684.0     513.3     736.0     809.6     780.0    796.2
 As percentage of GDP,                       3.2%      5.0%      3.1%      3.9%      3.8%       3.3%    3.0%
 of which:
    Investments                              153.9     265.1     160.8     242.0     248.6     195.3    187.2

   Investments as percentage of GDP          1.3%      1.9%      1.0%      1.3%      1.2%       0.8%    0.7%




                                               29
Ministry of Internal Affairs

Priorities for 2008-2011

   Ensure social order and state security.
   Protection of Georgia’s borders.
   Professional and qualified personnel.
   Ensure protection of national heritage and diplomatic representations.
   Social protection of staff.
   Ensure delivery of top secret materials, secret materials and documents of special
   importance, and ensure implementation of all safety measures.

Expected outcomes:

   Decrease of number of law violations, ensure protection of citizen’s rights and freedom.
   Improvement of road transportation safety.
   Ensure border protection; reduction of violations at the sea borders.
   Fight against import/export of narcotics, weapons, explosives and weapons of mass
   destruction.
   Improvement of protection of diplomatic missions, residences, sites of significant
   importance and national heritage.
   Delivery of top secret materials, secret materials and documents of special importance, and
   implementation of all safety measures.

Selected criteria for evaluation of outcomes:

   The level of social order and defence (reduction on number of violations of the social order,
   safety indicators etc.).
   Quantity of violation of country’s borders, the rate of reduction and preventive measures.
   The growth rate of the number of professional and qualified personnel.
   The level of protection of diplomatic missions, residences, the sites of special importance
   and the national heritage.
   Expenses on social guarantees of the personnel.

                                                                                  in GEL million
                                            2005      2006      2007      2008      2009      2010       2011
                                           Actual    Actual

 Ministry of Internal Affairs               182.2     275.1     297.8     373.5     311.8     326.4     341.8
 As percentage of GDP,                      1.6%      2.0%      1.8%      2.0%      1.5%      1.4%      1.3%
 of which:
    Investments                              17.5      36.5      18.5      94.2      18.5        18.5    18.5

   Investments as percentage of GDP        0.15%     0.26%     0.11%     0.50%     0.09%     0.08%      0.07%




                                                30
Ministry of Education and Science


Mid-term Priorities for 2008-2011

   Completion of institutional constructions in the education sector, improvement of education
   management system and development of the material and technical basis.
   Ensure equal access to high quality education, integration into the European and Euro-
   Atlantic education system, support to the society’s integration process.
   Use of information and IT technologies in education, development of science and support to
   the creation of knowledge-based environment.

Expected outcomes:

   A unified education environment, with clear inter-relation between different phases of
   education; democratic and decentralized management system with separated rights and
   responsibilities of the state and education institutions; a unified legislation framework
   defining transparency and reporting requirements to society.
   Modern material basis of education and implementation of a targeted education programme.
   Increase of education quality; development of the European-type classification system,
   professional and education standards, continuous system of professional development of
   teachers; teaching of Georgian language and programmes targeted for ethnic minorities in
   order to support their integration into society.
   Information and IT technologies will be used at all phases of education; relevant conditions
   will be created for whole life-time education, which will ensure development of competitive
   human resources; integration of education and science will continue; priorities of science
   spheres will be defined and developed.

Selected criteria for evaluation of outcomes:

   State expenditures per student/pupil in total and at all levels of education.
   Quantity of newly built and renovated education institutions, sport fields, laboratories and
   libraries.
   Quantity of education institutions with elected management boards. Percent of education
   institutions with repeated election processes.
   Education quality rate on OECD indicator scale.
   Results of pupils in international evaluation systems: PISA, TIMSS, PIRLS.
   Indicator of financing of education and science and material and technical basis, considering
   international standards.
   The rate of employment after completion of professional and high education programmes.
   Absolute and comparative indicator of participation of families in annual costs for education.
   Indicator of effective use of resources – pupil-teacher.




                                                31
                                                                                  in GEL million
                                            2005      2006     2007      2008      2009      2010     2011
                                           Actual    Actual

 Ministry of Education and Science           80.9     342.5     382.2     452.9     498.2     589.9   630.0
 As percentage of GDP,                       0.7%      2.5%      2.3%      2.4%      2.3%      2.5%    2.3%
 of which:
    Investments                               15.5     88.8      90.8     108.3     118.8     124.1    78.0

   Investments as percentage of GDP         0.13%     0.64%    0.55%     0.57%     0.56%     0.52%    0.29%



Ministry of Culture, Protection of Cultural Heritage and Sport


Mid-term Priorities for 2008-2011

   Reform of museums.
   Rehabilitation, systematization, documentation, popularization of Georgia’s cultural heritage
   and monuments and integration into the West
   Rehabilitation of sports and culture infrastructure.
   Reform of arts and sports education.
   Institutional reform.

Expected outcomes:

   Assessment of the condition of Georgia’s main collections.
   Inventory of museum items.
   Restoration of education, scientific and visual functions of museums.
   Definition of diagnostic and rehabilitation priorities necessary for restoration of cultural
   heritage.
   Physical saving of the cultural heritage of national importance, rehabilitation of the sector’s
   prestige and implementation of international standards in protection, rehabilitation and use of
   cultural heritage, including using cultural heritage to economic growth of the country.
   Restoration of cultural objects located in regions and providing them with modern
   equipment.
   Restoration and construction of multifunctional sport facilities, mini-football fields with
   artificial surface and other priority directions of sport.
   Reform of art and sport education – based on legislation on secondary, professional and high
   education and taken into account international experience, requirements and standards.
   Definition of legal forms to organize the culture system and to base it on modern
   management principles.

Selected criteria for evaluation of outcomes:

   Physical condition of collections of national museums and important regional museums.
   Quantity of modern expositions.
   Quantity of visitors in museums.
   Quantity of conservation and restoration projects implemented in cultural heritage.
   Quantity of physically restored items of cultural heritage.
   Quantity of people involved in sport and art clubs.

                                                32
                                                                                   in Million GEL
                                            2005       2006      2007       2008      2009         2010    2011
                                           Actual     Actual

 Ministry of Culture, Protection of           34.4      53.8      65.4      60.3      62.8         62.8    65.4
 Cultural Heritage and Sport
 As percentage of GDP,                       0.3%      0.4%      0.4%      0.3%      0.3%      0.3%       0.2%
 of which:
    Investments                                 0.2      6.4      16.8      11.8      11.8          9.2     9.2

   Investments as percentage of GDP         0.00%     0.05%     0.10%     0.06%     0.06%     0.04%       0.03%



Ministry of IDPs and Resettlement


Priorities for 2008-2011

   Creation of conditions for safe return of IDPs.
   Integration of IDPs.
   Development of unified state policy on migration processes.
   Intensive cooperation and development of relations with Georgians living abroad.
   Implementation of commitments, as taken up with the Council of Europe in 1999, related to
   repatriation of Muslim Meskhs.


Expected outcomes:

   Relevant conditions created for safe return of IDP’s.
   Restoring of primary function of collective centres of social importance.
   Commercial collective centres for private investments.
   Complete migration system.

Selected criteria for evaluation of outcomes:

   Quantity of spontaneously returned IDP’s, their living conditions and availability of social
   assistance.
   Number of IDP’s who left over-polulated housing sites.
   Number of IDP’s who were able to find jobs or started agricultural activities.
   Intensiveness of illegal migration, quantity of families receiving state assistance and back-
   migration.
   Quantity of repatriates.




                                                33
                                                                                  in GEL million
                                           2005        2006     2007      2008      2009     2010     2011
                                          Actual      Actual

 Ministry of IDPs and Resettlement           61.7       59.2     44.1     21.3       22.3     23.3    24.4
 As percentage of GDP,                      0.5%       0.4%     0.3%      0.1%      0.1%     0.1%    0.1%
 of which:
    Investments                                 1.8      4.0      2.0       1.7       1.7      1.7     1.7

   Investments as percentage of GDP        0.02%      0.03%    0.01%     0.01%     0.01%    0.01%    0.01%



Ministry of Labour, Health Protection and Social Security


Priorities for 2008-2011

   Increase affordability of public health care and medical services.
   Improve the quality of medical service and its geographic affordability/convenience.
   Reduction of poverty and vulnerability of the population.

Expected outcomes:

   Improved health of the Georgian population.
   Increased affordability of basic medical services.
   Improved medical infrastructure and developed human resources.
   Increased quality of medicines on the Georgian market.
   Improved environment for social integration of socially unprotected layers of society.

Selected criteria for evaluation of outcomes:

   Absolute and comparative expenses on health care by poor population; share of government
   health care financing allocated to low income families.
   Share of renovated health care institutions in the overall health care sector.
   Quantity of re-trained human resources as compared to the amount of the required medical
   personnel.




                                                34
                                                                                   in GEL million
                                            2005       2006
                                                                2007      2008      2009         2010      2011
                                           Actual     Actual
 Ministry of Labour, Health Protection       631.8     744.1     892.6     926.9     995.1       1,062.6   1,116.5
 and Social Security
 As percentage of GDP,                       5.4%       5.4%     5.4%      4.9%      4.7%          4.5%      4.2%
 of which:
    Administrative costs                        0.0     25.1      22.6      22.6      23.7         24.9      26.2
   Administrative costs as perc. of GDP     0.00%     0.18%     0.14%     0.12%     0.11%        0.10%     0.10%
    Pensions                                 407.2     457.4     499.2     524.1     550.4        577.9     606.8
    Pensions as perc. of GDP                3.50%     3.32%     3.02%     2.78%     2.59%        2.42%     2.26%
    Social Assistance                          0.0      53.9     121.4     127.5     133.8        140.5     147.6
    Social Assistance as perc. of GDP       0.00%     0.39%     0.73%     0.68%     0.63%        0.59%     0.55%
    Treatment programmes                      87.0     123.2     164.0     182.2     220.1        255.6     280.7
    Treatment programmes as perc. GDP       0.75%     0.89%     0.99%     0.96%     1.04%        1.07%     1.05%
    Other healthcare and social programs      28.9      41.4      29.1      30.5      32.0         33.6      35.3
     Other, as percent of GDP               0.25%     0.30%     0.18%     0.16%     0.15%        0.14%     0.13%
    Investments                               26.1      43.2      56.3      40.0      35.0         30.0      20.0
     Investments as perc. of GDP            0.22%     0.31%     0.34%     0.21%     0.16%        0.13%     0.07%



Ministry of Energy

Priorities for 2008-2011

   Construction and rehabilitation of hydro and thermo electricity stations.
   Construction and rehabilitation of electricity transmission lines.
   Ensure gas supply, rehabilitation and construction of the network.

Expected outcomes:

   Maximum use of hydro resources, increase of capacities and reliability of power generation
   stations.
   Increase sustainability and reliability of electric power supply system, its synchronization
   with the systems of neighbouring countries.
   Reconstruction, rehabilitation and construction of main gas pipelines and gas distribution
   network in regions.

Selected criteria for evaluation of outcomes:

   Data on use of local resources to cover the country’s total demand on electricity; data on
   effectiveness on electricity supply and amount of leakages.
   Increase supply and reliability of transportation of gas supply, data on reliability of gas
   mains and distribution network operation




                                                35
                                                                                   in GEL million
                                            2005      2006          2007    2008     2009     2010     2011
                                           Actual    Actual

 Ministry of Energy                         208.7     216.6        188.2    29.5       0.0      0.0     0.0
 As percentage of GDP,                       1.8%      1.6%        1.1%    0.2%      0.0%     0.0%    0.0%
 of which:
    Investments                               68.2    204.7        184.5    27.0       0.0      0.0     0.0

   Investments as percentage of GDP         0.59%     1.48%        1.12%   0.14%    0.00%    0.00%    0.00%



Ministry of Agriculture

Priorities for 2008-2011

   Development of agriculture infrastructure, reform of management of irrigation systems.
   Development of wine industry and anti-forgery measures.
   Ensure food security and relevant quality of products.

Expected outcomes:

   Increase of primary production of agricultural products.
   Increase of drained and irrigated land plots.
   Effective management of irrigation systems.
   Provision of modern agriculture technologies.
   Reduction of forgery and ensure protection of Georgian wine brands on local and foreign
   markets.
   Creation of Georgian wine quality system based on the requirements of the distribution
   network.
   Full-scale use of the potential of Georgian wine on local and export markets.
   Maximum protection of consumer’s health, life and economic interests with regard of food
   products.
   Retain epizootic and phyto-sanitary reliability.
   Reduction of falsification of food products.
   Development of highly productive cattle breeding.
   Restoration of Georgia’s name as of a trade reliable partner.

Selected criteria for evaluation of outcomes:

   Data on drained/ irrigated land plots.
   Timely performed high quality agricultural activities.
   Data on quantity of agricultural techniques.
   Data on the amount of falsified products.
   Quantity and increased revenues of export products.
   Data on diseases/poisoning spread by food products.
   Data on quantity of distribution zones of epizootic diseases.




                                                36
                                                                                     in Gel million
                                             2005      2006        2007      2008     2009      2010        2011
                                            Actual    Actual

 Ministry of Agriculture                       23.5      31.5      33.6       22.7     23.3      24.1       25.0
 As percentage of GDP,                        0.2%      0.2%       0.2%      0.1%     0.1%      0.1%       0.1%
 of which:
    Investments                                 2.9       7.8      18.7        7.2      7.1          7.1     7.1

   Investments as percentage of GDP          0.02%     0.06%     0.11%      0.04%    0.03%     0.03%       0.03%



Ministry of Environment Protection and Natural Resources

Priorities for 2008-2011

   Initiation of the Public-Private Partnership model in forestry management.
   Transfer to the basin management system of water resources.
   Development of the system of protected territories and eco-tourism.
   Reform of the waste management system.

Expected outcomes:

   Increase of the private sector share in forestry.
   Rational use of forestry.
   Simple and effective system of monitoring the forestry utilisation.
   Transfer to rivers’ basin management regime.
   Increase of the role of the private sector in water management.
   Initiation of adequate economic mechanisms in use of water resources.
   Increase of number of tourists visiting Georgia.
   Decrease of poaching.
   Maximum protection of biodiversity.
   Minimization of uncontrolled waste storages in cities of regions.
   Increased motivation of the private sector in participation in waste collection, transportation
   and treatment.

Selected criteria for evaluation of outcomes:

   The volume of illegal cutting of trees.
   Leased forestry (minimum 35 percent of Georgia’s forestry).
   Scope of legal employment.
   Quantity of new protected territories.
   Territories of low category of protection, transferred to the private sector.
   Quantity of tourists visiting Georgia.
   Scope of negative impact from waste.
   Quality of water.




                                                37
                                                                       in GEL million
                                      2005     2006     2007    2008     2009     2010     2011
                                     Actual   Actual

Ministry of Environment                14.8     17.9    20.7    18.6      19.5     20.4    21.4
As percentage of GDP,                 0.1%     0.1%    0.1%    0.1%      0.1%     0.1%    0.1%
of which:
   Investments                          0.0      1.7     3.3     1.2       1.2      1.2     1.2

  Investments as percentage of GDP   0.00%    0.01%    0.02%   0.01%    0.01%    0.01%    0.00%




                                        38
          ANNEX 1

Main Macroeconomic Indicators




             39
                                                                                                                    Appendix
                                                                                                                          #1
Selected economic and financial indicators

                                              2004      2005      2006         2007   2008       2009       2010        2011
                                             Actual    Actual    Actual   Forecast Forecast   Forecast   Forecast    Forecast

(Percentage change from the
previous year, unless otherwise indicated)

National income and prices
Nominal GDP                                  14.7%     18.3%     18.6%     19.9%     14.2%     12.4%      12.4%       12.4%
Real GDP                                      5.9%      9.6%      9.4%     10.0%      7.5%      7.0%       7.0%        7.0%
Nominal GDP ( million GEL)                   9824.3   11621.0   13783.9   16527.2   18878.0   21218.9    23851.7     26813.8
GDP Per Capita
 Lari                                        2275.5    2679.8    3124.5    3746.3    4279.2    4809.8     5406.6      6078.0
 USD                                         1187.2    1478.4    1758.7    2243.3    2593.4    2915.0     3276.7      3683.6
Investment ( million GEL)                    3121.7    3982.1    4922.6    5956.9    6701.2    7541.6     8591.4      9762.9
Consumer price index, period average          5.7%      8.3%      9.2%      8.5%      5.0%      5.0%       5.0%        5.0%
Consumer price index, end of period           7.5%      6.2%      8.8%      8.5%      5.0%      5.0%       5.0%        5.0%
GDP deflator                                  8.4%      7.9%      8.5%      9.0%      6.3%      5.0%       5.1%        5.1%

Consolidated General Government
Tax revenue                                  50.0%     26.4%     31.2%     40.0%     16.2%     15.8%      15.3%        14.7%
Expenditure and net lending                  23.3%     50.2%     36.1%     26.3%     11.4%     14.4%      12.4%        12.4%
 Current expenditure                          8.3%     44.8%     28.6%     29.9%     13.8%     15.6%      12.4%        12.4%

Foreign sector
Exports                                      27.3%     33.8%     18.0%     31.7%     23.9%     22.3%      22.3%        22.3%
Imports                                      33.3%     33.9%     33.5%     47.3%     14.8%     17.3%      17.3%        17.3%

Money and credits (end of period)
Reserve money                                44.2%     19.7%     19.1%     28.7%     20.3%     18.3%      18.3%        18.3%
Broad money M3                               42.6%     26.4%     40.7%     34.5%     25.4%     22.8%      22.8%        22.8%
Velocity of money M3, level                    6.50      6.08      5.12      4.57      4.16      3.81       3.49         3.19
Money multiplier M3, level                     1.81      1.91      2.25      2.36      2.46      2.55       2.65         2.75

Gross international reserves
 in months of imports of goods and
services                                        1.9       1.7       2.5       2.7       3.3       3.4        3.4         3.4
 million US dollar                            383.7     475.1     930.8    1483.4    2075.4    2461.5     2893.3      3378.9

Interest rates on domestic currency, %
 Loans                                       24.6%     20.7%     19.8%     19.4%     18.5%     17.9%      17.6%        17.6%
 Deposits                                     7.2%      8.0%     10.1%      9.3%      8.9%      8.7%       8.5%         8.5%
(Percent of GDP, unless otherwise
indicated)

Real Sector
Investment                                 31.8%      34.3%     35.7%      36.0%      35.5%      35.5%   36.0%    36.4%

Consolidated general government
Total revenue and grants                   22.0%      23.4%     26.7%      28.6%      28.0%      28.5%   29.0%    29.4%
 Tax revenue                               18.4%      19.7%     21.8%      25.4%      25.9%      26.6%   27.3%    27.9%
Total expenditure and net lending          19.7%      25.0%     28.7%      30.2%      29.5%      30.0%   30.0%    30.0%
 Current expenditure                       15.6%      19.1%     20.7%      22.4%      22.4%      23.0%   23.0%    23.0%
Fiscal balance, commitment basis            2.3%      -1.6%     -1.9%      -1.6%      -1.5%      -1.5%   -1.0%    -0.6%
Fiscal balance, cash basis                 -0.3%      -2.5%     -2.2%      -1.7%      -1.5%      -1.5%   -1.0%    -0.6%

Foreign sector
Trade balance                             -16.6%     -17.8%     -24.0%    -31.7%     -28.9%     -28.5%   -28.0%   -27.3%
Current account balance
 Excluding transfers                      -14.7%     -16.4%     -21.8%    -29.8%     -26.7%     -26.3%   -25.6%   -24.8%
 Including transfers                       -6.6%     -10.8%     -15.2%    -23.1%     -20.7%     -20.4%   -19.8%   -19.1%

General Government Debts
 Foreign debt, as percent of GDP           32.9%      26.8%     21.1%      16.9%      15.8%      15.0%   14.9%    14.2%
 Foreign debt, as percent of export       109.4%      80.2%     66.5%      50.3%      43.4%      38.0%   34.6%    30.3%
 Foreign debt service, as percent of
export                                      6.4%       5.1%        6.0%     4.9%       1.7%       1.5%    1.3%     1.2%
 Foreign debt, as percent of budget
revenue and grants                        156.9%    115.8%      81.8%      59.8%      56.5%      52.6%   51.3%    48.3%
 Government debt, as percent of budget
revenue and grants                        229.4%    172.3%     122.8%      91.4%      84.2%      76.2%   71.4%    65.5%
 Foreign debt service, as percent of
budget revenue and grants                   9.2%       7.4%        7.3%     5.8%       2.2%       2.0%    1.9%     1.9%

Note: the calculations are made by macroeconomic model and for the consistency the data are corrected




                                                              41
                                                                                                              Appendix
                                                                                                              #2
National accounts

                                 2004      2005          2006        2007       2008       2009       2010        2011
                                Actual    Actual        Actual    Forecast   Forecast   Forecast   Forecast    Forecast

(Million GEL, Nominal)

 Consumption                    8336.1    9709.6    12169.5       15817.5    17631.7    19729.2    21936.3     24366.3
  Government                     641.2    1018.7     1240.2        1931.2     2462.9     2942.7     3374.8      3948.3
  Private                       7694.9    8690.9    10929.3       13886.3    15168.8    16786.5    18561.5     20417.9
 Investments                    3121.7    3982.1     4922.6        5956.9     6701.2     7541.6     8591.4      9762.9
  Government                     346.0     660.2     1069.7        1284.2     1340.3     1485.3     1669.6      1877.0
  Private                       2775.7    3321.9     3853.0        4672.7     5360.8     6056.2     6921.8      7886.0
 Exports                        3100.1    3921.9     4534.4        5614.3     6870.1     8399.9    10270.2     12557.1
 Imports                        4733.6    5992.7     7842.7       10861.5    12325.0    14451.8    16946.3     19872.5
Gross Domestic Product          9824.3   11621.0    13783.9       16527.2    18878.0    21218.9    23851.7     26813.8
 Net factor income               187.5     165.6      304.8         329.6      417.1      476.1      567.5       666.6
  Government                     -48.5     -38.5      -36.0         -78.7      -47.7      -44.8      -47.8       -53.3
  Private                        236.0     204.1      340.8         408.2      464.8      520.9      615.4       719.9
Gross National Product         10011.7   11786.6    14088.7       16856.8    19295.1    21695.0    24419.2     27480.5
 Transfers from abroad           793.3     651.1      913.7        1105.5     1136.3     1255.9     1387.9      1533.5
  Government                     124.7     104.6      194.3         242.9      151.0      148.5      143.1       134.1
  Private                        668.6     546.5      719.3         862.6      985.2     1107.4     1244.8      1399.4
Total national disposable
income                         10805.0   12437.6    15002.3       17962.2    20431.4    22950.9    25807.2     29013.9
 Private disposable income      9535.5   10922.5    12928.5       15015.4    16908.4    18827.5    20991.0     23347.7
 Total savings                  3121.6    3982.1     4922.7        5956.9     6701.2     7541.6     8591.4      9762.9
  National savings              2468.9    2728.0     2832.8        2144.7     2799.7     3221.7     3870.8      4647.7
  Government                     628.3     496.4      833.6        1015.6     1060.1     1180.7     1441.3      1717.9
  Private                       1840.6    2231.6     1999.2        1129.1     1739.6     2041.0     2429.6      2929.8
  Foreign savings (current
account deficit)                 652.6    1254.1        2089.8     3812.2     3901.5     4319.8     4720.6      5115.3


Memorandum items
GDP growth, %                    5.9%      9.6%           9.4%     10.0%        7.5%       7.0%       7.0%        7.0%
 GDP Per Capita
 Lari                           2275.5    2679.8         3124.5    3746.3     4279.2     4809.8     5406.6       6078.0
 USD                            1187.2    1478.4         1758.7    2243.3     2593.4     2915.0     3276.7       3683.6
GDP deflator (2001=100)        118.6%    128.0%         138.9%    151.4%     160.9%     169.0%     177.5%       186.5%
 Percentage change, %            8.4%      7.9%           8.5%      9.0%       6.3%       5.0%       5.1%         5.1%
Consumer price index
(2001=100)                     118.1%    127.9%         139.6%    151.5%     159.1%     167.0%     175.4%       184.2%
 Percentage change, %            5.7%      8.3%           9.2%      8.5%       5.0%       5.0%       5.0%         5.0%
Consumer price index, end of
the period                     123.6%    131.3%         142.9%    155.0%     162.8%     171.0%     179.6%       188.6%
 Percentage change, %            7.5%      6.2%           8.8%      8.5%       5.0%       5.0%       5.0%         5.0%
Interest rate on loans, %       24.6%     20.7%          19.8%     19.4%      18.5%      17.9%      17.6%        17.6%
Interest rate on deposits, %     7.2%      8.0%          10.1%      9.3%       8.9%       8.7%       8.5%         8.5%



                                                   42
(Million GEL, real0

 Consumption                 7057.8   7592.8     8714.6      10439.6   11082.8   11810.7   12506.6   13230.5
  Government                  542.9    796.6      888.1       1274.6    1548.1    1761.6    1924.1    2143.9
  Private                    6514.9   6796.2     7826.5       9165.0    9534.7   10049.1   10582.5   11086.6
 Investments                 2643.0   3113.9     3525.1       3931.6    4212.2    4514.7    4898.3    5301.1
  Government                  292.9    516.3      766.0        847.6     842.5     889.2     951.9    1019.2
  Private                    2350.0   2597.7     2759.1       3084.0    3369.7    3625.5    3946.4    4282.0
 Export                      2613.4   3063.3     3265.2       3708.2    4270.5    4970.6    5785.0    6732.2
 Import                      4032.3   4693.1     5579.2       7163.3    7830.8    8739.8    9754.8   10888.3
Gross Domestic Product       8281.8   9076.9     9925.8      10916.0   11734.7   12556.1   13435.0   14375.5
 Net factor income            158.0    129.4      219.5        217.7     259.3     281.8     319.7     357.4
  Government                  -40.9    -30.1      -25.9        -52.0     -29.7     -26.5     -26.9     -28.6
  Private                     198.9    159.4      245.4        269.6     288.9     308.2     346.6     386.0
Gross National Product       8439.8   9206.2    10145.2      11133.7   11994.0   12837.9   13754.7   14732.9
 Transfers from abroad        668.7    508.5      657.9        730.1     706.3     743.2     781.8     822.1
  Government                  105.1     81.7      139.9        160.4      93.9      87.9      80.6      71.9
  Private                     563.6    426.9      518.0        569.7     612.4     655.3     701.2     750.3
Total national disposable
income                       9108.5   9714.8    10803.2      11863.8   12700.3   13581.1   14536.5   15555.0
 Private disposable income   8038.4   8531.3     9309.8       9917.5   10510.4   11141.0   11823.7   12517.2
 Total savings               2631.5   3110.4     3544.8       3934.5    4165.5    4462.7    4839.3    5234.1
  National savings           2081.3   2130.8     2039.9       1416.5    1740.3    1906.4    2180.3    2491.7
  Government                  529.7    387.7      600.3        670.8     658.9     698.7     811.8     921.0
  Private                    1551.6   1743.0     1439.6        745.7    1081.4    1207.8    1368.5    1570.7
  Foreign savings (current
account deficit)              550.2    979.6        1504.9    2517.9    2425.2    2556.2    2659.0    2742.4

(In percent of GDP)

 Consumption                  84.9%    83.6%         88.3%    95.7%     93.4%     93.0%     92.0%     90.9%
  Government                   6.5%     8.8%          9.0%    11.7%     13.0%     13.9%     14.1%     14.7%
  Private                     78.3%    74.8%         79.3%    84.0%     80.4%     79.1%     77.8%     76.1%
 Investments                  31.8%    34.3%         35.7%    36.0%     35.5%     35.5%     36.0%     36.4%
  Government                   3.5%     5.7%          7.8%     7.8%      7.1%      7.0%      7.0%      7.0%
  Private                     28.3%    28.6%         28.0%    28.3%     28.4%     28.5%     29.0%     29.4%
 Export                       31.6%    33.7%         32.9%    34.0%     36.4%     39.6%     43.1%     46.8%
 Import                       48.2%    51.6%         56.9%    65.7%     65.3%     68.1%     71.0%     74.1%
Gross Domestic Product       100.0%   100.0%        100.0%   100.0%    100.0%    100.0%    100.0%    100.0%
 Net factor income             1.9%     1.4%          2.2%     2.0%      2.2%      2.2%      2.4%      2.5%
  Government                  -0.5%    -0.3%         -0.3%    -0.5%     -0.3%     -0.2%     -0.2%     -0.2%
  Private                      2.4%     1.8%          2.5%     2.5%      2.5%      2.5%      2.6%      2.7%
Gross National Product       101.9%   101.4%        102.2%   102.0%    102.2%    102.2%    102.4%    102.5%
 Transfers from abroad         8.1%     5.6%          6.6%     6.7%      6.0%      5.9%      5.8%      5.7%
  Government                   1.3%     0.9%          1.4%     1.5%      0.8%      0.7%      0.6%      0.5%
  Private                      6.8%     4.7%          5.2%     5.2%      5.2%      5.2%      5.2%      5.2%
Total national disposable
income                       110.0%   107.0%        108.8%   108.7%    108.2%    108.2%    108.2%    108.2%
 Private disposable income    97.1%    94.0%         93.8%    90.9%     89.6%     88.7%     88.0%     87.1%
 Total savings                31.8%    34.3%         35.7%    36.0%     35.5%     35.5%     36.0%     36.4%
  National savings            25.1%    23.5%         20.6%    13.0%     14.8%     15.2%     16.2%     17.3%
  Government                   6.4%     4.3%          6.0%     6.1%      5.6%      5.6%      6.0%      6.4%
  Private                     18.7%    19.2%         14.5%     6.8%      9.2%      9.6%     10.2%     10.9%
  Foreign savings (current
account deficit)              6.6%    10.8%         15.2%     23.1%     20.7%     20.4%     19.8%     19.1%

                                               43
                                                                                                              Appendix
                                                                                                                    #3
Consolidated General Government*

                                        2004     2005     2006       2007       2008       2009       2010        2011
                                       Actual   Actual   Actual   Forecast   Forecast   Forecast   Forecast    Forecast

(Million GEL, in current prices)

Total revenue and grants               2160.8   2715.5   3686.8    4722.6     5280.4     6057.9     6923.6      7881.2
Total revenue                          2036.1   2610.9   3492.5    4479.7     5129.4     5909.3     6780.5      7747.1
 Tax revenue                           1811.2   2289.1   3004.1    4204.7     4884.0     5654.7     6518.1      7479.0
 Indirect taxes                         909.7   1397.2   1800.8    2429.8     2761.5     3156.3     3576.5      4017.2
 Direct taxes                           620.6    585.5    845.8    1205.0     2122.5     2498.4     2941.6      3461.8
 Taxes on wage                          280.9    306.4    357.5     569.9        0.0        0.0        0.0         0.0
 Non-tax revenue**                      224.9    321.8    488.4     275.0      245.4      254.6      262.4       268.1
Grants**                                124.7    104.6    194.3     242.9      151.0      148.5      143.1       134.1

Expenditure and net lending            1933.2   2904.0   3952.7    4993.8     5563.6     6365.7     7155.5      8044.1
Total expenditure                      1878.5   2879.3   3922.8    4991.2     5560.7     6362.5     7151.9      8040.2
 Current expenditure                   1532.5   2219.1   2853.1    3707.0     4220.4     4877.1     5482.3      6163.3
 Expenditure on goods and services      641.2   1018.7   1240.2    1931.2     2462.9     2942.7     3374.8      3948.3
 Transfers and subsidies                750.4   1080.3   1509.4    1638.6     1654.6     1837.1     2009.7      2112.9
  Subsidies                             313.0    436.3    568.0     600.0      609.4      639.9      671.7       705.2
  Transfers                             437.4    644.0    941.4    1038.6     1045.2     1197.2     1338.0      1407.7
  Interest payment                      140.9    120.1    103.6     137.2      102.9       97.4       97.7       102.0
  Domestic                               92.4     81.6     67.6      58.5       55.2       52.6       49.9        48.7
  External                               48.5     38.5     36.0      78.7       47.7       44.8       47.8        53.3
 Capital expenditure                    346.0    660.2   1069.7    1284.2     1340.3     1485.3     1669.6      1877.0
Net Lending**                            54.7     24.8     29.9       2.6        2.9        3.2        3.6         3.9

Overall balance (commitment)            227.6   -188.5   -265.9    -271.2     -283.2     -307.8     -231.9       -162.9

Net change in expenditure arrears (-
reduction)                             -255.3    -97.1    -43.2      -10.0        0.0        0.0        0.0         0.0

Overall balance (cash)                  -27.7   -285.6   -309.1    -281.2     -283.2     -307.8     -231.9       -162.9

Total financing                          27.7    285.6    309.1     281.2      283.2      307.8      231.9        162.9
Privatization                            72.7    419.4    564.5     572.0      100.0       70.0       50.0         50.0
Domestic                                -73.6    -99.3   -193.7    -280.0      -10.7       32.5     -183.0       -138.4
 NBG credit                              24.9      0.0      0.0     -20.0      -30.0      -35.0      -35.0        -35.0
 Change of Deposits at NBG              -86.1    -67.3   -173.3    -260.0       19.3       67.5     -148.0       -103.4
 Other                                  -12.4    -32.0    -20.4       0.0        0.0        0.0        0.0          0.0
External                                 28.6    -34.5    -61.7     -10.8      193.9      205.3      364.9        251.4
 Disbursements                          179.0    127.4    172.7     183.9      264.0      284.7      447.9        347.0
 Amortization**                        -150.4   -161.9   -234.4    -194.7      -70.1      -79.4      -82.9        -95.6

Financing gap                             0.0      0.0      0.0        0.0        0.0        0.0        0.0         0.0



                                                 44
Memorandum items
Government foreign debt, mln US         1768.7   1734.9     1697.5     1691.0     1808.6    1933.0    2154.1       2306.5
Government foreign debt service,
million USD                              103.8     110.6      152.2     163.7       71.4      75.2       79.3         90.3
Principal, million USD                    78.5      89.3      131.9     116.6       42.5      48.1       50.3         57.9
Interest, million USD                     25.3      21.2       20.3      47.1       28.9      27.1       29.0         32.3
Govern. domestic debt, mln GEL          1567.3   1535.4     1510.9     1490.9     1460.9    1425.9    1390.9       1355.8
Government foreign debt, as
percent of GDP                          32.9%     26.8%      21.1%     16.9%      15.8%     15.0%      14.9%        14.2%
Government foreign debt, as
percent of exports                     109.4%     80.2%      66.5%     50.3%      43.4%     38.0%      34.6%        30.3%
*The table is made in consistency with IMF standards
** Non-tax revenue, Grants, Net Lending, and Amortization items are corrected by Turkmenistan and Austrian debt noncash operation

Government foreign debt service,
as percent of exports                  6.4%       5.1%       6.0%       4.9%      1.7%       1.5%       1.3%        1.2%
Government foreign debt interest
payment, as percent of exports         1.6%       1.0%       0.8%       1.4%      0.7%       0.5%       0.5%        0.4%
Government debt, as percent of
budget revenue and grant             229.4%     172.3%     122.8%     91.4%      84.2%      76.2%      71.4%       65.5%
Government debt service as
percent of budget revenue and
grant                                  9.2%       7.4%       7.3%       5.8%      2.2%       2.0%       1.9%        1.9%
Government debt service as
percent of budget expenditure and
net lending                           10.3%       6.9%       6.8%       5.5%      2.1%       2.0%       1.8%        1.9%
Government debt service as
percent of budget expenditure and
net lending                            2.5%       1.3%       0.9%       1.6%      0.9%       0.7%       0.7%        0.7%

(As percent of GDP)
Total revenue and grants              22.0%      23.4%      26.7%     28.6%      28.0%      28.5%      29.0%       29.4%
 Total revenue                        20.7%      22.5%      25.3%     27.1%      27.2%      27.8%      28.4%       28.9%
 Tax revenue                          18.4%      19.7%      21.8%     25.4%      25.9%      26.6%      27.3%       27.9%
  Indirect taxes                       9.3%      12.0%      13.1%     14.7%      14.6%      14.9%      15.0%       15.0%
  Direct taxes                         6.3%       5.0%       6.1%      7.3%      11.2%      11.8%      12.3%       12.9%
  Taxes on wage                        2.9%       2.6%       2.6%      3.4%       0.0%       0.0%       0.0%        0.0%
 Non-tax revenue                       2.3%       2.8%       3.5%      1.7%       1.3%       1.2%       1.1%        1.0%
 Grants                                1.3%       0.9%       1.4%      1.5%       0.8%       0.7%       0.6%        0.5%

Expenditure and net lending           19.7%      25.0%      28.7%     30.2%      29.5%      30.0%      30.0%       30.0%
 Total expenditure                    19.1%      24.8%      28.5%     30.2%      29.5%      30.0%      30.0%       30.0%
 Current expenditure                  15.6%      19.1%      20.7%     22.4%      22.4%      23.0%      23.0%       23.0%
  Expenditure on goods and
services                               6.5%       8.8%       9.0%     11.7%      13.0%      13.9%      14.1%       14.7%
  Transfers and subsidies              7.6%       9.3%      11.0%      9.9%       8.8%       8.7%       8.4%        7.9%
  Subsidies                            3.2%       3.8%       4.1%      3.6%       3.2%       3.0%       2.8%        2.6%
  Transfers                            4.5%       5.5%       6.8%      6.3%       5.5%       5.6%       5.6%        5.2%
  Interest payment                     1.4%       1.0%       0.8%      0.8%       0.5%       0.5%       0.4%        0.4%
  Domestic                             0.9%       0.7%       0.5%      0.4%       0.3%       0.2%       0.2%        0.2%
  External                             0.5%       0.3%       0.3%      0.5%       0.3%       0.2%       0.2%        0.2%
 Capital expenditure                   3.5%       5.7%       7.8%      7.8%       7.1%       7.0%       7.0%        7.0%
 Net Lending                           0.6%       0.2%       0.2%      0.0%       0.0%       0.0%       0.0%        0.0%

Overall balance (commitment)           2.3%      -1.6%      -1.9%      -1.6%      -1.5%     -1.5%      -1.0%        -0.6%

                                                  45
Net change in expenditure arrears
(- reduction)                       -2.6%   -0.8%   -0.3%   -0.1%   0.0%    0.0%    0.0%    0.0%

Overall balance (cash)              -0.3%   -2.5%   -2.2%   -1.7%   -1.5%   -1.5%   -1.0%   -0.6%

Total financing                      0.3%    2.5%    2.2%    1.7%    1.5%    1.5%    1.0%    0.6%
Privatization                        0.7%    3.6%    4.1%    3.5%    0.5%    0.3%    0.2%    0.2%
Domestic                            -0.7%   -0.9%   -1.4%   -1.7%   -0.1%    0.2%   -0.8%   -0.5%
 Net NBG credit                      0.3%    0.0%    0.0%   -0.1%   -0.2%   -0.2%   -0.1%   -0.1%
 Change of Deposits at NBG          -0.9%   -0.6%   -1.3%   -1.6%    0.1%    0.3%   -0.6%   -0.4%
 Other                              -0.1%   -0.3%   -0.1%    0.0%    0.0%    0.0%    0.0%    0.0%
External                             0.3%   -0.3%   -0.4%   -0.1%    1.0%    1.0%    1.5%    0.9%
 Disbursements                       1.8%    1.1%    1.3%    1.1%    1.4%    1.3%    1.9%    1.3%
 Amortization                       -1.5%   -1.4%   -1.7%   -1.2%   -0.4%   -0.4%   -0.3%   -0.4%

Financing gap                       0.0%    0.0%    0.0%    0.0%    0.0%    0.0%    0.0%    0.0%




                                            46
                                                                                                          Appendix
                                                                                                                #4
Balance of Payment

                                 2004     2005       2006        2007       2008       2009       2010        2011
                                Actual   Actual     Actual    Forecast   Forecast   Forecast   Forecast    Forecast
(Million USD)

Current account                 -340.5    -691.9    -1176.3   -2282.8    -2364.5    -2618.1    -2861.0     -3100.2
 Trade balance                  -852.2   -1142.5    -1862.1   -3142.1    -3306.0    -3667.8    -4046.1     -4433.6
 Export                         1617.4    2163.6     2552.3    3361.9     4163.7     5090.8     6224.4      7610.4
 Import                         2469.6    3306.1     4414.4    6503.9     7469.7     8758.6    10270.5     12043.9
 Net factor Income                97.8      91.4      171.5     197.3      252.8      288.6      343.9       404.0
 Employees compensation          221.3     229.1      287.7     367.0      424.2      476.8      536.0       602.6
 Net interest payment            123.5     137.7      116.2     169.6      171.4      188.3      192.1       198.6
  Government                      25.3      21.2       20.3      47.1       28.9       27.1       29.0        32.3
  Private                         98.2     116.5       95.9     122.5      142.5      161.1      163.1       166.2
 Net current transfers           413.9     359.2      514.3     661.9      688.6      761.2      841.2       929.4
  Government                      65.1      57.7      109.4     145.4       91.5       90.0       86.7        81.3
  Private                        348.8     301.5      404.9     516.5      597.1      671.2      754.4       848.1
Capital and financial account    532.7     783.3     1632.0    2835.4     2956.5     3004.2     3292.8      3585.7
 Government                       14.9     -19.0      -34.7      -6.5      117.5      124.4      221.2       152.3
 Private                         544.1     683.7     1485.5    2813.0     2825.2     2845.7     3036.1      3396.8
 Banking sector                  -26.3     118.6      181.2      28.8       13.7       34.1       35.5        36.6
Change of international
reserves (- increase)           -192.2     -91.4     -455.7    -552.6     -592.0     -386.1     -431.8       -485.6
Balance                            0.0       0.0        0.0       0.0        0.0        0.0        0.0          0.0


(In percent of GDP)

Current account                  -6.6%   -10.8%     -15.2%     -23.1%     -20.7%     -20.4%     -19.8%      -19.1%
 Trade balance                  -16.6%   -17.8%     -24.0%     -31.7%     -28.9%     -28.5%     -28.0%      -27.3%
 Export                          31.6%    33.7%      32.9%      34.0%      36.4%      39.6%      43.1%       46.8%
 Import                          48.2%    51.6%      56.9%      65.7%      65.3%      68.1%      71.0%       74.1%
 Net factor Income                1.9%     1.4%       2.2%       2.0%       2.2%       2.2%       2.4%        2.5%
 Employees compensation           4.3%     3.6%       3.7%       3.7%       3.7%       3.7%       3.7%        3.7%
 Net interest payment             2.4%     2.1%       1.5%       1.7%       1.5%       1.5%       1.3%        1.2%
  Government                      0.5%     0.3%       0.3%       0.5%       0.3%       0.2%       0.2%        0.2%
  Private                         1.9%     1.8%       1.2%       1.2%       1.2%       1.3%       1.1%        1.0%
 Net current transfers            8.1%     5.6%       6.6%       6.7%       6.0%       5.9%       5.8%        5.7%
  Government                      1.3%     0.9%       1.4%       1.5%       0.8%       0.7%       0.6%        0.5%
  Private                         6.8%     4.7%       5.2%       5.2%       5.2%       5.2%       5.2%        5.2%
Capital and financial account    10.4%    12.2%      21.0%      28.7%      25.8%      23.4%      22.8%       22.1%
 Government                       0.3%    -0.3%      -0.4%      -0.1%       1.0%       1.0%       1.5%        0.9%
 Private                         10.6%    10.7%      19.1%      28.4%      24.7%      22.1%      21.0%       20.9%
 Banking sector                  -0.5%     1.8%       2.3%       0.3%       0.1%       0.3%       0.2%        0.2%
Change of international
reserves (- increase)            -3.7%    -1.4%      -5.9%      -5.6%      -5.2%      -3.0%      -3.0%       -3.0%
Balance                           0.0%     0.0%       0.0%       0.0%       0.0%       0.0%       0.0%        0.0%




                                               47
                                                                                                          Appendix
                                                                                                                #5
Monetary Survey

                                   2004    2005           2006      2007      2008      2009      2010        2011
(Million GEL)

Net foreign assets                162.3    110.5         576.1    1419.0    2373.1    2953.9     3607.7     4348.5
 Foreign assets                   962.2   1161.0        1959.7    2919.1    4011.5    4731.2     5533.6     6433.3
 Foreign liabilities              799.9   1050.5        1383.6    1500.1    1638.5    1777.3     1925.8     2084.8
Domestic assets                  1349.6   1800.7        2113.8    2199.7    2165.5    2617.5     3236.1     4053.9
 Net claims on the general
government                        739.2    633.1         437.5     157.5     146.8     179.3       -3.7      -142.1
 Net claims on the rest of the
economy                          1056.0   1829.3         2852.5    3237.1    3253.6    3713.1    4549.7      5535.9
 Other items (net)               -445.6   -661.7        -1176.3   -1194.9   -1234.9   -1274.9   -1309.9     -1339.9
Broad money M3                   1511.9   1911.2         2689.9    3618.7    4538.6    5571.3    6843.8      8402.4
 Broad money M2                   846.1   1069.9         1392.8    1844.0    2251.7    2685.9    3205.6      3824.2
 Currency outside of banks        616.0    736.3          827.4     907.6     946.4     944.3     872.3       685.3
 Domestic currency deposits       230.1    333.6          565.5     936.4    1305.3    1741.5    2333.4      3138.9
 Foreign currency deposits        665.8    841.3         1297.0    1774.7    2286.9    2885.5    3638.2      4578.2

Memorandum items
Velocity of money M3               6.50     6.08           5.12      4.57      4.16      3.81      3.49        3.19
Velocity of money M2               11.6     10.9            9.9       9.0       8.4       7.9      7.44        7.01
Coefficient of dolarization      74.3%    71.6%          69.6%     65.5%     63.7%     62.4%     60.9%       59.3%
Money multiplier M3                1.81     1.91           2.25      2.36      2.46      2.55      2.65        2.75
Money multiplier M2                1.01     1.07           1.17      1.20      1.22      1.23      1.24        1.25
Credit to the private sector
as a percent of GDP              10.7%    15.7%          20.7%     19.6%     17.2%     17.5%     19.1%       20.6%

(Percentage change relative
to previous year)

Net foreign assets               160.4%   -31.9%        421.4%    146.3%     67.2%     24.5%     22.1%       20.5%
 Foreign assets                   50.4%    20.7%         68.8%     49.0%     37.4%     17.9%     17.0%       16.3%
 Foreign liabilities             -12.0%    31.3%         31.7%      8.4%      9.2%      8.5%      8.4%        8.3%
Domestic assets                    1.5%    33.4%         17.4%      4.1%     -1.6%     20.9%     23.6%       25.3%
 Net claims on the general
government                        -3.5%   -14.4%        -30.9%    -64.0%     -6.8%     22.1%    -102.1%    3735.4%
 Net claims on the rest of the
economy                           20.6%   73.2%          55.9%     13.5%      0.5%     14.1%     22.5%       21.7%
 Other items (net)                42.4%   48.5%          77.8%      1.6%      3.3%      3.2%      2.7%        2.3%
Broad money M3                    42.6%   26.4%          40.7%     34.5%     25.4%     22.8%     22.8%       22.8%
 Broad money M2                   60.4%   26.5%          30.2%     32.4%     22.1%     19.3%     19.4%       19.3%
 Currency outside of banks        39.5%   19.5%          12.4%      9.7%      4.3%     -0.2%     -7.6%      -21.4%
 Domestic currency deposits      167.9%   45.0%          69.5%     65.6%     39.4%     33.4%     34.0%       34.5%
 Foreign currency deposits        24.9%   26.4%          54.2%     36.8%     28.9%     26.2%     26.1%       25.8%




                                                   48
                                                                                                               Appendix
                                                                                                                     #6
Accounts of National Bank
                                     2004      2005      2006         2007       2008       2009       2010        2011
                                    Actual    Actual    Actual     Forecast   Forecast   Forecast   Forecast    Forecast
(Million GEL)

Net foreign assets                   107.7     342.0    1092.7      1964.0     2940.7     3577.8     4290.3       5091.5
 Foreign assets                      700.2     851.6    1595.0      2447.7     3424.4     4061.5     4774.0       5575.1
 Foreign liabilities                 592.5     509.6     502.3       483.7      483.7      483.7      483.7        483.7
Domestic assets                      728.8     659.5     100.6      -427.8    -1092.6    -1391.9    -1703.7      -2032.1
 Net claims on the general
government                           721.7     645.8      426.9      146.8      136.1      168.6       -14.4      -152.8
 Claims on the general
government                           841.4     832.8     787.1       767.1      737.1      702.1      667.1        632.1
 Government deposits                 119.7     187.0     360.3       620.3      601.0      533.5      681.5        784.9
 Net claims on commercial banks      -41.0       0.0    -254.6      -513.4    -1137.5    -1439.3    -1543.0      -1708.0
 Other items net                      48.1      13.7     -71.7       -61.2      -91.2     -121.2     -146.2       -171.2
Reserve money                        836.5    1001.5    1193.2      1536.2     1848.1     2185.9     2586.6       3059.4
 Currency in circulation             676.2     811.4     929.5      1181.9     1406.4     1645.8     1926.9       2255.1
 Required reserves                    92.3     129.8     224.6       270.8      325.3      384.4      454.5        537.1
 Balances on corresponding
accounts                              68.0      60.3       39.1       83.5      116.5      155.7      205.2       267.2

Memorandum items
International reserves in months
of imports                            1.86      1.72       2.53       2.74       3.33       3.37       3.38         3.37
International reserves, million
USD                                  383.7     475.1      930.8     1483.4     2075.4     2461.5     2893.3      3378.9

(Percentage change relative to
previous year)

Net foreign assets                 134.6%    217.5%    219.5%        79.7%     49.7%      21.7%      19.9%        18.7%
 Foreign assets                     76.2%     21.6%     87.3%        53.5%     39.9%      18.6%      17.5%        16.8%
 Foreign liabilities               -16.4%    -14.0%     -1.4%        -3.7%      0.0%       0.0%       0.0%         0.0%
Domestic assets                    -18.2%     -9.5%    -84.8%      -525.3%    155.4%      27.4%      22.4%        19.3%
 Net claims on the general
government                           -7.8%    -10.5%       -0.3        -0.7     -7.3%     23.9%     -108.5%      961.5%
 Claims on the general
government                            3.0%     -1.0%     -5.5%      -2.5%      -3.9%       -4.8%     -5.0%        -5.2%
 Government deposits                256.3%     56.2%     92.7%      72.2%      -3.1%      -11.2%     27.7%        15.2%
 Net claims on commercial banks    -750.8%   -100.0%         '-'   101.7%     121.6%       26.5%      7.2%        10.7%
 Other items net                    -52.9%    -71.4%   -622.2%     -14.6%      49.0%       32.9%     20.6%        17.1%
Reserve money                        44.2%     19.7%     19.1%      28.7%      20.3%       18.3%     18.3%        18.3%
 Currency in circulation             42.9%     20.0%     14.6%      27.2%      19.0%       17.0%     17.1%        17.0%
 Required reserves                   13.4%     40.6%     73.0%      20.6%      20.1%       18.2%     18.2%        18.2%
 Balances on corresponding
accounts                           168.8%     -11.3%    -35.1%     113.5%      39.4%      33.7%      31.8%        30.2%




                                                49
               ANNEX 2

Medium-Term Action Plans of the Ministries




                   50
                                              Ministry of Finance: Medium-Term Action Plan 2008-2011

Spending Agency       Ministry of Finance
Priority Directions   1. Improvement of Budget     2.Treasury Development        3.Financial Policy             4.Revenue Mobilization          5. Institutional
                      Process                                                                                                                   Development

Justification of      In the last years Medium     More effective system of      New Tax Code (2005) and        Tax compliance has              In 2005-2006, Ministry of
Priority Directions   Term Strategic Planning      targeted spending of state    new Customs Code (2006)        increased. Despite              Finance implemented the
based on the          Process of the budget has    resources by introduction     were important steps           reduction of tax rates and      monitoring and analysis of
Current Situation     started, which lead to the   of treasury management        towards improvement of         number of taxes, improved       staff and improved the
Analysis              improvement of the budget    systems.                      business climate and           mobilization of taxes lead      database of current
                      process (Basic Data and                                    liberalization of trade.       to their increase.              employees. In order to
                      Directions Document,         Current budget                Further reforms and                                            increase the efficiency of
                      Budget Circular and          classification was based on   simplification is necessary.   Important reform has been       the ministry (including the
                      Annual Budget Law have       1986 methodology. In the                                     implemented: In the             Revenue Service) human
                      been improved, the link      meantime, new                 During 2005-2006,              beginning of 2007 tax           resource management has
                      between these document       classification based on       negotiations aimed at          department, customs             to be further developed.
                      has been created).           GFSM 2001 has been            double taxation avoidance      department and financial
                                                   elaborated and it needs to    have started and               police were merged and          Material-technical base
                                                   be introduced. Public         agreements with several        Revenue Service was             will be improved (also –
                                                   sector accounting system is   countries have been            created.                        information technologies)
                                                   old and needs to be           signed. In the coming                                          in Central Apparatus and
                                                   reformed according to         years this process has to      In order to maintain the        subordinated agencies.
                                                   IPSAS.                        continue.                      sustainability of the results   Some problems still
                                                                                                                Revenue Service needs           remain – especially, in
                                                                                                                further strengthening and       relation with tax and
                                                                                                                reform.                         customs infrastructure.

Possible time-        2008-2011 (started in        2008-2011                     2008-2011                      2008-2011                       2008-2011
frames for            2005)
execution (if
current when it
started)
Expected Results       Budget process will          Public expenditure            Business climate will be       Quality of Revenue              Efficiency of the Public
                       become effective and         management will be            improved by                    Service will be improved,       Service in budget, tax and
                       transparent                  improved, time needed         simplification of tax          tax compliance will             customs spheres will
                       Macroeconomic and            for the treasury              system.                        improve, violations in the      increase.
                       fiscal forecasting           operations will be            International cooperation      tax system will decrease.       Effectiveness of Mof




                                                                                 51
                capacity and model will       reduced to minimum.          in the fiscal sphere will   Revenue Service will         internal control and
                be improved.                  Every stage of budget        increase.                   develop functionally.        judicial activities will
                Internal debt                 process will be integrated                               Public awareness on the      increase.
                management will be            in the common system by                                  tax issues will increase.    MoF system
                improved.                     development of public                                                                 infrastructure will be
                Donor coordination will       finance management                                                                    improved.
                be improved for               common information
                attraction of additional      system.
                investments.                  Government accounting
                Budget process will be        system will be improved
                based on MTEF                 and integrated with
                principles.                   budget international
                State budget will be          finance statistics.
                prepared according to
                GFSM 2001 standards.
                Ministry of Finance,
                Treasury, line ministries
                and territorial units will
                be included in the
                common budget system.
                Foreign debt
                sustainability will be
                maintained
                Inventory of state internal
                debt will be held
                Improvement of
                statistical data validation
                and reporting procedures
                in connection with
                foreign debt will take
                place.
Criteria for    Consistency of budget         Solving the legislative      Clear definition of         Introduction of audit        Elaboration of job
evaluation of   process with MTEF             and technical issues and     service fee and due and     based on risk evaluation     description for each
results         principles.                   gradual implementation       optimization of rates.      criteria.                    position.
                Preparation of state          of the activities related    Elaboration of Due Code.    Implementation of tax        Development of modern
                budget according to           with electronic treasury     Elaboration of relevant     audit evaluation system.     system of motivation and
                GFSM 2001 standards.          development.                 secondary customs           Creation of taxpayer         career management of
                Evaluation of budget          Inclusion of National        legislation aimed at        service desks at local tax   staff.
                format according to           Bank in the common           simplification of           inspections.                  Improvement of PEMSY




                                                                           52
PEFA criteria.               system.                      administrative procedures    Creation of electronic       software.
Simplification level of      Implementation of public     and reduction of time        means of taxpayer service    Improvement of links
budget process               finance management           needed for registration of   which will enable us to      between structural
Consistency of BDD           integrated system.           cargo.                       exchange the declarations    subdivisions.
document and budget          Purchase and/or              Abolishing of customs        and other information in
law.                         elaboration public           tax.                         the electronic form.         Elaboration of internal
Inventory of internal debt   finance management                                        Creation of information      audit criteria.
finalized.                   system software.                                          base for the decisions       Development of internal
Mechanism of ‘historic       Provision of central and     Signing agreements for       taken in the disputable      control mechanisms in
debts’ compensation          regional units of Treasury   avoiding double taxation     situations, periodic         parallel with internal
elaborated.                  with communications and      with EU countries and        publishing of information    audit.
National Bank loans will     systems.                     main trade/investment        in order to inform           Creation of passport for
be covered according to      Training of staff in         partners of Georgia.         taxpayers.                   the normative acts
the schedule                 applying new systems..       The responsibilities will    Simplification of            prepared in the system of
Service of foreign           Gradual implementation       be fulfilled within the      administrative procedures    Ministry of Finance.
financial liabilities        of GFSM-2001. On the         competence of the            in the normative acts.
according to the             first stage Treasury         Ministry of Finance          Definition of cargo          Rehabilitation of
agreements.                  General Ledger will be       according to                 evaluation criteria.         material-technical base
Relation of foreign debt     introduced based on          protocol/documents of        Creation and                 for taxpayer service units
sustainability indicators    economic classification.     Intergovernmental            implementation of risk       of tax inspections.
with sustainability          Later, implementation of     Economic Cooperation         analysis system.             Creation of
marginal indicator.          cash and accrual             Commission                   Definition of functions      call/consultation network.
Provision of international   methods.                                                  for staff of the Customs     Elaboration of primary
organizations and            Elaboration of                                            system.                      registration mechanisms
interested agencies with     Government accounting                                     Preparation of               for VAT operations in
relevant information on      policy in accordance with                                 methodology for the staff    electronic form among
foreign debt, upon their     international standards,                                  of the Revenue Service       VAT payers.
request.                     considering national                                      for introduction of new      Opening of new Customs
                             legislation and specifics.                                Criminal Code from           Centers in Tbilisi, Poti,
                             Gradual implementation                                    2008.                        Kutaisi and Akhaltsikhe.
                             of IPSAS                                                  Systematic analysis of       Provision of Customs
                                                                                       2005-2006 criminal cases     service centers with
                                                                                       recorded in police.          computers and software.
                                                                                       Definition of evaluation
                                                                                       criteria for investigators
                                                                                       and operative staff –
                                                                                       elaboration of internal
                                                                                       procedures and control
                                                                                       rules.




                                                          53
                                                                           Integration of
                                                                           investigations in the
                                                                           fiscal sphere and
                                                                           cooperation with
                                                                           investigative organs, staff
                                                                           of Customs and Tax
                                                                           organs.
                                                                           Cooperation with
                                                                           financial police of the
                                                                           partner states.
                                                                           Strengthening of revenue
                                                                           mobilization by means of
                                                                           raising the level of
                                                                           culture and consciousness
                                                                           of taxpayers.
Possible preventive   Outflow of highly   Implementation process of                                      Low remuneration.
factors               qualified staff.    GFSM 2001 and IPSAS is
                                          difficult and takes time.




                                                                      54
                             Ministry of Economic Development of Georgia: Medium Term Action Plan 2008-2011
Spending Agency       Ministry of Economic Development of Georgia
Priority Directions   1. Analysis of the economic       2. Development of roads                    3. Creation of privileged foreign      4. Support to development of
                      processes in the country, further infrastructure                             trade regimes, development of          private sector and creation of job
                      liberalization of transport and                                              technical regulation sphere,           places, improvement of state
                      construction spheres.                                                        support to economic investments        property management and
                                                                                                   and attraction of tourists.            privatization.
Justification of      Necessary precondition for            In order to speed up the economic      For diversification of foreign trade   Majority of assets under state
Priority Directions   speeding up the economic              development of the country basic       markets privileged foreign trade       ownership are not fully involved
based on the          development of state is further       infrastructure development is          regimes are important with partner     in the economic activities In
Current Situation     liberalization and deregulation of    necessary. Accordingly, the state      trade countries.                       addition, the abovementioned
Analysis              economy, which is the basis for       needs development of roads                                                    assets are in the difficult financial
                      attraction of investments.            infrastructure, its consistency with   In addition, for overcoming the        and economic conditions.
                      Improvement of investment             international level, absorption of     non-tariff barriers at foreign
                      climate is very important from the    transit potential and liberalization   markets, increase of                   These are preventive factors for
                      point of optimization of regulation   of transport sector.                   competitiveness of the goods and       economic development of state
                      organs and mechanisms in basic                                               services produced in the country is    and attraction of investments.
                      infrastructure sectors.                                                      important. For that purpose,           Accordingly, their restructuring
                                                                                                   technical regulation sphere should     and privatization is important. .
                      Proper analysis of economic                                                  develop, and become consistent
                      processes, relevant statistical                                              with international norms.              As a result of improvement of
                      research is necessary.                                                                                              business climate, private
                                                                                                   Attractiveness of the country from     entrepreneurship is developing
                                                                                                   the viewpoint of investments and       more and more in Georgia,
                                                                                                   tourism is important pre-condition     number of newly registered
                                                                                                   for growth of foreign                  companies is increasing and
                                                                                                   investments. It is important to        existing businesses are
                                                                                                   implement the activities within the    developing. For their further
                                                                                                   country and international level,       development, implementation of
                                                                                                   which on the one hand, will            flexible programs is necessary,
                                                                                                   demonstrate investment and             which will lead to their
                                                                                                   tourist capacity within the country,   sustainability and further
                                                                                                   and on the other hand, will create     development and create new job
                                                                                                   new similar opportunities and          places.
                                                                                                   support inflow of investments in
                                                                                                   different sectors of economy.




                                                                                   55
Possible time-         2008-2011                          2008-2011                           2008-2011                          2008-2011
frames for execution
(if current when it
started)
Expected Results        Maintaining stable                 Development of roads                Growth of investment attraction    Acceleration of economic
                        macroeconomic environment in       infrastructure, improvement of      capacity of the country.           growth
                        the medium and long term           its quality;                        Attraction of foreign              Growth of number of stable
                        perspective.                       Improvement of attractiveness       investments in the economy of      private companies.
                        Provision of high moderate rate    of the sector from the point of     Georgia;                           Creation of new job places.
                        of economic growth.                investments.                        Growth of the number of             Attraction of investments in the
                        Growth of foreign and local        Growth and absorption of            tourists in every region of the    objects formerly under state
                        investments.                       transit potential of the country    country.                           ownership, implementation of
                        Creation of new job places in                                          Raising the competitiveness of     modern methods and
                        the country;                                                           produced goods and services.       technologies of management.
                        Dynamics of investments in                                             Growth of amount and
                        infrastructure.                                                        diversification of export.


Criteria for            Indicators of macroeconomic        Amount of investments in roads      Dynamics of foreign                Indicators of economic growth;
Evaluation of           parameters and their dynamics.     construction. (including amount     investments                        Dynamics of employment and
Results                 Ratings given to Georgia by        of budget resources).               Diversification of foreign         unemployment;
                        different international            Indicator of length of              investment sources.                Dynamics of newly registered
                        organizations and analytical       rehabilitated and new roads.        Dynamics of the number of          and liquidated companies.
                        centers.                           Indicators of cargo turnover and    foreign tourists.                  Dynamics of amount of
                                                           transportation of passengers.       Indicators of export dynamics      investments.
                                                           Growth of investments in the        and its diversification.           Number of privatized objects.
                                                           sector.                                                                Amount of revenues from
                                                           Growth of the number of                                                privatization.
                                                           enterprises in the transport
                                                           sphere.




                                                                                56
                                                Ministry of Justice: Medium Term Action Plan 2008-2011
Spending Agency        Ministry of Justice

Priority Directions    1. Provision of free legal              2. Ensure representation of the       3. Effective functioning of             4 Ensuring compliance of
                       assistance system.                      state at the European Court of        executive system and its                probation and penitentiary systems
                                                               Human Rights and International        consistency with modern                 with requirements of international
                                                               Court of Arbitration                  standards.                              standards.

Justification of       Until today, free legal assistance is   Number of law suits brought            Mechanism that will be helpful         Penitentiary and probation systems
Priority Directions    limited to criminal cases The           against Georgia for consideration     for timely and effective execution      of Georgia are not in accordance
based on the Current   effective system which provides         of the European Court of Human        of the cases is currently ineffective   with modern standards.
Situation Analysis     free legal aid to every person does     Rights is persistently increasing.    and needs improvement.
                       not exist.                              As a result it is necessary:

                                                                a) In relation with representation
                                                               at European Court of Human
                                                               Rights.:

                                                               1. Efficient representation and
                                                               defending of the position of the
                                                               state at European Court of Human
                                                               Rights.
                                                               2. Strengthening internal
                                                               legislative means of legislative
                                                               defence.

                                                               b) In relation with representation
                                                               at International Court of
                                                               Arbitration.

                                                               Efficient representation and
                                                               defending of the position of the
                                                               state in the arbitration disputes
                                                               against Georgian State.




                                                                                     57
Possible time-frames   On the whole territory of Georgia,     2006-2011                                 2007-2011                      2006-2011
for execution (if      free legal assistance on criminal
current when it        cases started in 2007, for civil and
started)               administrative cases, the process
                       will start from 2009.

Expected Results       Creation of system of free legal       a) In relation with representation     All the court decision swill be   In penitentiary agencies European
                       assistance on the whole territory of   at European Court of Human             executed within the time-frames   prison standards will be
                       Georgia.                               Rights:                                defined by law.                   introduced.
                                                                                                                                       As a result of re-socialization
                                                              1. Proportionally, with the number                                       program prisoners and
                                                              of proposals, the cases of political                                     probationers will be rehabilitated
                                                              and material responsibility of                                           in the society.
                                                              Georgia will be reduced
                                                              2. Efficient state internal system
                                                              for Legal Protection will be
                                                              formed.

                                                              b) In relation with representation
                                                              at International Court of
                                                              Arbitration
                                                              Prevention of arbitration disputes
                                                              against Georgia, provision of
                                                              maximally suitable results for
                                                              Georgia in the existing disputes.




                                                                                    58
Criteria for            Based on the statistical data          a) In relation with representation   Non of the unexecuted cases will       In Tbilisi, Gldani-Nadzaladevi-
Evaluation of Results   analysis, effective and high quality   at European Court of Human           remain in the country. Statistics of   prison for imprisonment before
                        free legal assistance for each         Rights                               finalized cases and amount of the      trial for 4000 prisoners.
                        person will be provided.                                                    sums raised in the state budget        In 2007-2008 in Samegrelo and
                                                               Proportionally with the number of    will have a growing tendency.          Adjara construction of new
                                                               suits at the European Court of                                              penitentiary institutions will start
                                                               Human Rights, reduced number of                                             and end.
                                                               violations of European Convention                                            In 2008-2009 penitentiary
                                                               of Human Rights from the side of                                            institution will be built in Kakheti.
                                                               Georgia                                                                     In 2009-2010- two prisons of open
                                                                                                                                           type in East and West Georgia. In
                                                                                                                                           2007-2008 all prisons will be
                                                               b) In relation with representation                                          refurbished. Until 2011, number of
                                                               at International Court of                                                   the prisoners in the prisons will be
                                                               Arbitration                                                                 in accordance with the norms.
                                                               Increase of the number of cases
                                                               decided in favour of Georgia.




                                                                                     59
Possible preventive   Population lacks information on         a) In relation with representation    Arrear of the state towards           Dynamic growth of prisoners and
factors               their rights and availability of free   at European Court of Human            physical and legal entities is much   probationers, which is inadequate
                      legal assistance.                       Rights                                higher than the sums allocated for    with the number of places in
                                                              1. Inefficient cooperation of         their coverage from the budget,       penitentiary institutions, (the
                                                              different state agencies.             which makes coverage of the           needs of constructions and
                                                                                                    arrears impossible.                   refurbishment will not be fulfilled
                                                              2. Ignoring human rights by the                                             if the growing tendency is
                                                              representatives of different public                                         maintained), also - number of
                                                              organizations.                                                              personnel (in the penitentiary and
                                                                                                                                          probation systems).
                                                              3. Inconsistency of Georgian
                                                              legislation with standards of
                                                              European Convention.

                                                              b) In relation with representation
                                                              at International Court of
                                                              Arbitration

                                                              1. Origin of current arbitration
                                                              disputes from old corrupt
                                                              relationships.

                                                              2. As Georgian firms can not offer
                                                              the needed quality of service, we
                                                              need to purchase consulting
                                                              service of expansive highly
                                                              qualified legal firms.




                                                                                    60
                                                  Ministry of Justice: Medium Term Action Plan 2008-2011
Spending Agency       Ministry of Justice

Priority Directions   5. Organizing expert activities and conducting them      6. Smooth functioning of National Archive of     7.Creation of functional Civil Register.
                      in accordance with international standards of            Georgia.
                      expertise.
Justification of      Legal expertise is the part of administration of         Material-technical base of National Archive is   Reforms in the sphere of Civil Register need to
Priority Directions   Justice. According to statistics, 90% of court           in poor state. National Archive Fund is almost   be finalized.
based on the          decisions are based on the results of expertise. It is   destroyed. Institute of compulsory copies does
Current Situation     the bases of sentence. Modern expertise agency           not exist. If relevant measures are not taken,
Analysis              does not exist in Georgia. Qualification upgrade of      the country will be devoid of documentary
                      staff is sensible.                                       memory.

Possible time-        2007-2011                                                2007-2011                                        2006-2011
frames for
execution (if
current when it
started)
Expected Results      Improvement of time frames of legal conduct              Rehabilitated and refurbished building of        Costumer oriented service. Civil register
                      functioning of highly qualified and highly               National Archive of Georgia and improved         system based on electronic management
                      technological Expertise Bureau, which will lead to       material-technical base, necessary copies of     principles. Giving out bio-metric passports and
                      the reduction of the number of un-investigated           specially important documents of National        plastic cards. Service provided according to
                      cases and avoidance of provoked crime. Rights of         Archive Fund, enriched Archive Fund, modern      “one window” principle, availability of
                      the citizens will be protected, expertise quality will   methods of affair-conducting, service of the     database for other organizations. Unified
                      be improved.                                             citizens and researchers with modern methods.    database of civil acts, identification cards and
                                                                                                                                passports, transparent service centers, unified
                                                                                                                                database, satisfied customer.

Criteria for          Timely exchange of information will reduce the           Fulfilling the normative of keeping and          Minimal mistakes in the election lists.
Evaluation of         time needed for expertise. Number of un-                 protecting documents of National Archive
Results               investigated cases will be reduced.                      Fund. Protection of physical-chemical
                                                                               conditions of the documents. Provision of
                                                                               society with information.




                                                                                      61
Possible preventive   Overlaps in the sphere, which must be corrected   Large number of material to be given to the        Lack of common government network. Lack
factors               and regulated by legislative base.                Archive Fund, unclear status of (former            of equipment necessary for the network in the
                                                                        Communist) President Archive, lack of free         regions.
                                                                        space in archives, lack of sufficient resources.




                                                                               62
                                           Ministry of Foreign Affairs: Medium Term Action Plan 2008-2011
Spending Agency       Ministry of Foreign Affairs
Priority Directions   1. Directions targeted          2. Promotion of economic      3. Conducting of active       4. Protection of citizens of    5. Diplomatic and
                      towards promotion of            development and welfare of    diplomatic activities         Georgia residing abroad         organizational efficiency
                      establishment of                the country within the        targeted towards promotion
                      independent, safe and           limits of its competence,     of establishment of Georgia
                      protected country within        (effective economic           as reliable partner on
                      the limits of competence of     diplomacy)                    international arena
                      the Ministry

                      1.1 Promotion of                2.1 Usage of diplomatic       3.1 Establishment of closer   4.1 Protection of rights and
                      restoration of territorial      links in the process of       links for the purpose of      interests of citizens of        5.1 Improvement of
                      integrity of the country        promotion of economic         strengthening of image of     Georgia residing abroad ;       organizational efficiency
                      1.2 Promotion of accession      development and security.     Georgia;                      4.2 Promotion of Georgian       5.2 Planning and resources:
                      to NATO - joining MAP           2.2 Strengthening of          3.2 Promotion of increase     Business activities abroad.     - Elaboration of short and
                      and its implementation.         international economic        of the role of Georgia        4.3. Travel, education and      medium term planning
                      1..3 Promotion of               relations                     within international          work in foreign countries       system
                      implementation of priority      2.3. Strengthening of         network                       4..4 Opening of new             - Optimization of resource
                      directions, identified within   cooperation with              3.3 Exposure of the role of   diplomatic representations      management.
                      the framework of ENP            international economic        Georgia in the sphere of      and consulates
                      action plan of EU               institutions, support to      ensuring of international     4.5 Liberalization and
                      1.4 Regional cooperation        implementation of             security                      improvement of the
                      with the purpose of             undertaken commitments        3.4 Establishment of          procedures of giving
                      ensuring stability on           and monitoring over           relations with Georgian       foreign visas to the citizens
                      regional level (SUAM,           implementation;               diasporas existing abroad     of Georgia.
                      BISEK, SDC etc.)                2.4 Attraction of
                                                      investments, identifying
                                                      potential markets,
                                                      achievement of favourable
                                                      trade regimes with partners
                                                      for Georgian production. ;
                                                      2.5 Implementation of
                                                      activities in the energy
                                                      sector within the limits of
                                                      competence of the Ministry




                                                                                    63
Justification of      Presently sovereignty of       Today economic potential     Due to being in isolation       Protection of interests and     Along with reformation of
Priority Directions    Georgia does not extent       of Georgia is not fully      for a long period of time,      rights of citizens of           public structures existing
based on the           to the whole territory of     realized which was           regarding Georgia was           Georgia abroad is one of        in the country we have to
Current Situation      the country, which            mainly provided by the       spread insufficient or          the objectives of foreign       improve management and
Analysis               represents a major            fact that in the country     incorrect information, as a     policy.                         organization of the
                       obstacle undermining and      was widespread               result of which economic,       Support to the student          Ministry of Foreign
                       limiting prospects of         corruption and political     cultural, political or other    exchange programs for           Affairs (the central
                       sustainable development.      destabilization Along        potential of the country was    provision of the country        apparatus and foreign
                       Consequently, restoration     with transformation to       underutilized.                  with qualified human            diplomatic
                       of territorial integrity is   new policy it is extremely   Very Important:                 resources.                      representations) and bring
                       our major priority.           important to participate       Underlining role of           Broadening the network          the process of
                      Accession to NATO is           in modern international        Georgia in strengthening      of diplomatic                   management into
                       one of the main priorities    economic developments          international security        representations for             compliance with modern
                       of foreign and security       and establish diplomatic       Demonstrating capacity        presentation of state           needs.
                       policy , as it leads to       links with relevant            of Georgia from the           interests on the broader        Elaboration of more
                       national security of          countries;                     viewpoint of European         scale and their protection.     effective system of
                       Georgia.                      For the purpose of             and NATO energy                                               management needs
                      Intensification of             promotion of economic          security.                                                     implementation of policy
                       cooperation with EU and       development and ensure         Presentation of rich                                          planning process, based
                       perspective of making         security of the country it     cultural heritage of                                          on which resources will
                       Georgia EU member is          is necessary to establish      Georgia on the                                                be allocated and
                       important priority of         environment conducive          international arena and its                                   managed.
                       foreign policy. In this       for export, attraction of      popularization.                                               Fulfilment of the
                       respect fulfilment of         investments, activation of                                                                   objectives of the ministry
                       European Neighbourhood        existing or development                                                                      needs preparation of
                       Policy Action Plan (ENP       of future transport and                                                                      highly qualified and
                       AP) is extremely              energy corridors and                                                                         active staff;
                       important.                    strengthening of regional                                                                  For timely and secure
                      By Black Sea Region,           and inter-regional                                                                         working process
                       Georgia is identified as      cooperation.                                                                               implementation of modern
                       European country.             The events of last years                                                                   technologies and
                       Events in Caucasus/Black      indicated the importance                                                                   infrastructure at the
                       Sea are directly reflected    of energy security and the                                                                 ministry is necessary.
                       on our state.                 necessity of
                       Development of regional       diversification of energy
                       cooperation is priority       supply.
                       direction of foreign
                       policy.




                                                                                  64
Possible time-                2004-2010                current (from 2004)         2007- 2010                     2007- 2010                     2007- 2010
frames for execution
Expected Results       Restoration of territorial    Development of strong          Promotion of                   Better informing of            Institutionalization of
                        integrity of the country     economy based on the           establishment of positive      citizens of Georgia living     organizational culture of
                        through peaceful and         principles of market           image of Georgia               abroad and ensure              management and
                        democratic process           economy;                       throughout the world;          protection of their rights;    planning.
                       Preparation of relevant       Diversification of energy      Growth of importance of        Protection of Georgian         Improvement of quality of
                        conditions for joining       supply.                        Georgia in the world in        businesses abroad.             work of diplomatic
                        NATO from the                Growth of investments;         relation with international    Promotion of integration       representations and
                        diplomatic angle.            Utilization of transport       security, European and         of Georgia into the            consulates; Establishment
                        (Joining MAP);               potential of the country       NATO energy security.          system of higher               of modern model of
                       Support to fulfilment of      Implementation of              Exposure of tourist            education of Europe            management;
                        priorities considered by     regional economic              potential of the country        Expansion of the network      improvement of
                        ENP Action Plan,             projects.                      on international arena         of consulates and              organizational structure
                        intensification of           Export of national             Better awareness of            diplomatic                     and processes of staffing
                        cooperation with EU,         production to the foreign      international                  representations.               and professional
                        which will positively be     markets and finding the        commonwealth of                                               development;
                        reflected on our political   niches on such markets..       cultural heritage of
                        and economic aims.                                          Georgia.
                       Improvement of good-
                        neighbourly relations and
                        economic cooperation in
                        the region, political
                        support of countries of
                        the region.
Criteria for                                         Indicators of                  Improved image of               Reduction of number of        Growth of the number of
Evaluation of          Major steps undertaken in     improvement of the well        Georgia;                        cases of infringement of      highly qualified staff.
Results                the direction of              being and prosperity of        Number of positive              rights of citizens of         Effective and rational
                       restoration of territorial    population;                    articles and other              Georgia living abroad;        management;
                       integrity of the country;     International                  materials published in         Increase of trust of            Expansion of the network
                       Joining MAP                   competitiveness of             foreign press;                 citizens of Georgia            of diplomatic
                       Implementation of the         national production;           Results of international       residing abroad towards        representations
                       ENP action plan and           Increased share of export      surveys;                       Georgian diplomatic
                       strengthened links with       and import and                 Indicators of increase of      representations;
                       member countries              diversification indicators;    tourism potential of the        Increased rates of
                       Active cooperation in         Indicators of growth of        country.                       provision of assistance to
                       regional format.              investments.                                                  citizens of Georgia who
                                                     Increase of economic                                          found themselves in




                                                                                   65
                                                   welfare and energy                                        critical situations;
                                                   security of Georgia as a                                  Introduction of simplified
                                                   result of participation in                                procedures fro exit of
                                                   energy projects                                           citizens of Georgia
                                                                                                             abroad;
                                                                                                              Increase of the number of
                                                                                                             diplomatic representations
Possible preventive   Destructive policy of         Unpredictable activities     Attempts of spreading of    Lack of trust of citizens of   Deficit of professional
factors               Russia and systematic        of trade and economic         incorrect information and   Georgia, who reside            staff
                      canceling of peaceful        partners;                     negative propaganda         abroad illegally towards
                      initiatives by self-         Weakness and lack of          regarding Georgia           consulates and diplomatic
                      announced regimes.           experience of democratic                                  representations;
                      Postponing of discussion     institutions and NGOs                                      Insufficient number of
                      of broadening the alliance   Dependence on one                                         consulates
                      and issue of accession of    source of energy supply
                      Georgia in NATO by           .
                      NATO member states.
                      Regional conflicts




                                                                                66
                                                   Ministry of Defence: Medium Term Action Plan 2008-2011
Spending Agency       Ministry of Defence
                      1. Improvement of social        2. Improvement of the            3. Improvement of material     4. Support to the NATO          5.Improvement of defence
Priority Directions   conditions of military and      capacity of armed forces         – technical base and           integration process.            management system.
                      civil servants.                                                  logistics system.
                      Despite unemployment in         Despite the fact that during     Despite positive processes     State of Georgia, based on      As a result of the reforms
                      Georgia, qualified staff at     the last three years the         at the ministry of Defence     its development priorities is   taking place in Georgia,
                      the ministry of Defence is      capacity of the Georgian         the material technical base    determined to become the        financing and efficiency of
                      still a problem. Also,          armed forces has                 of the armed forces is         member of western               armed forces has increased.
                      outflow of staff is taking      importantly increased            behind NATO standards.         democratic unions and           Though considering budget
                      place at the ministry. Based    compared with the previous       For optimization of            achieve consistency with        and other existing
                      on the specifics of the         years, improvement of the        existing material technical    their standards. In this        resources further raising
                      ministry, solution of the       structure of the armed           base it should be consistent   process NATO integration        the level of efficiency is
                      problem would be                forces, optimal staffing of      with definite standards,       is crucial. Despite great       very important. In this
                      improvement of social           armed divisions, systematic      modernization of service       will and eagerness, armed       respect raising the
                      conditions of military and      and planned changes,             system, improvement of         forces of Georgia are not       qualification of staff and
Justification of      civil servants, improvement     selection and recruitment        maintenance of property        ready for it. In order to       improvement of defence
Priority Directions   of health and life insurance    of new staff, qualification      and real estate, growth of     support NATO integration        system is important (the
based on the          systems of military             upgrade of professional          warehouse power                process, it is necessary to     problem concerns medium
Current Situation     servants and consistency        staff, intensification of        according to the demands,      finalize SDR, fulfill the       and lower circles
Analysis              with international              training activities, military-   planned activities of re-      IDP objectives, also,           especially). In order to
                      standards, improvement of       training programs and field      arming and modernization       elaboration of modern           improve defence
                      living conditions, gradual      trainings are necessary for      of material-technical base.    system of short, medium         management system it is
                      increase of remuneration        the purpose of consistency                                      and long-term planning and      necessary: implementation
                      and improvement of              with NATO standards and                                         financial management is         of planning programming
                      pensions for the retired        improvement of fighting                                         crucial. Adapting trainings,    and budgeting system
                      from military service.          capacity.                                                       operation management,           (DPBS) which considers
                                                                                                                      doctrines with NATO             planning mechanisms at the
                                                                                                                      standards. Holding              ministry of defence on the
                                                                                                                      trainings planned within        horizontal level.
                                                                                                                      PFP. Continuation of            Elaboration of
                                                                                                                      participation in                recommendation of the
                                                                                                                      Blackseafors and Active         management group (which
                                                                                                                      Endeavor, holding unified       consists of heads of the
                                                                                                                      Headquarter operations and      Departments and
                                                                                                                      trainings, participation in     saxeobebi) on short
                                                                                                                      international studies           medium and long-term
                                                                                                                      together with partner states,   development programs,




                                                                                        67
                                                                                                                contribution to                their financing and
                                                                                                                international peace-keeping    consideration in the budget.
                                                                                                                missions.
                       Military service will         As a result, divisions of     Utilization of depreciated     By fulfilment of the          Modern and effective
                       become prestigious,           armed forces will be in       material assets shall          commitments towards           system of management
                       military servant –            accordance with the           reduce expenses related        NATO, Georgia will be         will be elaborated, which
Expected Results       motivated, his/her family     security demands of the       to their maintenance, also     viewed as real candidate      will enable Ministry of
                       will be socially protected    country, spending of the      probability of                 of NATO membership.           Defence to implement
                       during the military           budget resources              environment pollution                                        realistic planning process
                       service and afterwards.       allocated for defense will    and accidents will                                           and use existing resources
                       Improvement of                become rational.              decrease.                                                    in the maximal effective
                       apartment fund will           Divisions compatible          Current and capital                                          way.
                       reduce the amount of          with NATO combined            expenditures shall be
                       compensation resources        forces will be created        optimized.
                       needed for renting.           which will be able to         Improvement of the
                                                     perform the tasks together    system of logistics will
                                                     with NATO coalition           guarantee uninterrupted
                                                     forces.                       provision of supplies for
                                                                                   military units.
Possible time-                2004- 2011                    2004-2011                     2004-2011                   Starting in 2004                 2005-2009
frames for
execution. (if
current, when it
started)
Possible preventive   Possible preventive factor    In the conditions of          In the conditions of          In the conditions of           In the conditions of
factors               might be change in the        relevant financing and        relevant financing and        relevant financing, the        relevant financing, this
                      economic and social           existing political will,      existing political will,      possible preventive factor     problem is eliminated.
                      conditions in the country,    possible preventive factor    possible preventive factor    could be political situation
                      also, other force-majeure     could be unforeseen force-    could be unforeseen force-    within and outside the
                      and emergency situations.     majeure and other             majeure and other             country.
                                                    emergency situations.         emergency situations.




                                                                                   68
                                          Ministry of Internal Affairs: Medium Term Action Plan 2008-2011
Spending Agency
                     Ministry of Internal Affairs

Priority             1. Protection of public   2. Protection of state     3. Preparation of         4. Provision of         5. Social protection of       6. Operative and
Directions           order and state           border security.           professional and          security of national    staff.                       timely delivery of
                     security.                                            qualified staff.          treasure and                                        specially important,
                                                                                                    diplomatic                                         completely secret and
                                                                                                    representations.                                  secret correspondence
                                                                                                                                                           and ensuring its
                                                                                                                                                              security.
Justification of     Geopolitical location,    Attempts to hinder         Lack of highly            Attempts to export      Injuring,-wounding of     Danger of revealing
Priority             drug industry, danger     sovereignty and            professional and          national treasure and   staff/servants in the     State secrets as a
Directions based     of terrorist and          territorial integrity.     highly qualified staff.   danger of attacking     process of performing     result of spying of ill-
on the Current       diversionary acts.                                                             diplomatic              their duties.             disposed neighbour
Situation Analysis                                                                                  representations.                                  states.
Possible time-
frames for
execution. (if                                                                                 Current
current, when it
started)
Expected Results     Reduction of crime        Provision of               Professional and          Protection of           Improvement of            Operative and secure
                     and other cases of        inviolability of           qualification upgrade     diplomatic missions,    health conditions and     delivery of specially
                     law-violations.           borders, reduction of      of staff.                 residences, specially   physical development      important, completely
                     Forecast of expected      law violation cases at                               important state         state of the servants.    secret and secret
                     danger for the state;     state border, border                                 objects, national       Reduction of the          correspondence and
                     provision of              line and sea space of                                treasure.               number of ill and         other documentation
                     protection of rights      the state, provision of                                                      incapable to work.        (parcel, special
                     and freedoms of           boating security and                                                         Medical rehabilitation    cargo).
                     citizens, localization    protection of the rules;                                                     of ill and wounded;
                     of natural disasters      elimination of                                                               medical provision of
                     and catastrophes and      import/export of                                                             those retired in
                     liquidation of their      narcotic means,                                                              reserve, and their
                     results; improvement      weapons, explosives                                                          families.
                     of security of the        and means of mass
                     movement on the           destruction .
                     roads.                    Reduction of




                                                                                      69
                                                export/import of
                                                contraband goods to
                                                minimum.
Criteria for         Raising the level of       Raising the level of       Increase of the            Raising the level of       Improvement of social
Evaluation of        public order and state     security of state          number of                  security of National       conditions of servants      Improvement of
Results              security.                  border.                    professional and           Treasure and                                           keeping state secrets.
                                                                           qualified staff.           diplomatic
                                                                                                      representations
Possible             Provoking instability in the country, attempt to affect territorial integrity, and activating spying activities of foreign countries.
preventive factors




                                                                                       70
                                     Ministry of Education and Science: Medium Term Action Plan 2008-2011

Spending Agency      Ministry of Education and Science

Priority             1. Finalization of institutional set-up,          2. Availability of high quality education,          3. Application information-communication
Directions           improvement of education management system        integration in common European and Euro-            technologies in the study process, development
                     and development of material-technical base.       Atlantic education space, support to the civil      of science, support to the formation of
                                                                       integration process within the country.             knowledge based society.

Justification of     In 2004-2006, Ministry of Education and           Close cooperation with Euro-Atlantic States,        Sustainable development of the country is
Priority             Science initiated reforms in the sphere of        goal of becoming EU and NATO members                linked with raise of competitiveness of business
Directions based     education and science. Elaboration of             creates relevant demands towards education          and creation of the environment favorable for
on Current           legislative base of the reforms has been          sphere and considers set up of education system     investments and innovations. It will become
Situation Analysis   finalized, decentralization of system             according to international standards, in order to   possible, if the country has high quality human
                     management process started, general and high      insure high quality education.                      capital, efficient education system and
                     education and science institutions were                                                               innovative system which will support scientific
                     transformed into Public Law legal Entities,                                                           research, generating and implementation of
                     which increases the degree of their               National Study Plan has been created for            updated knowledge, based on the interests of
                     independence. Management organs of                general education. In 2005-2006 piloting            cultural and social development.
                     autonomous institutions were chosen. Important    process started. In 2006-2007, its
                     functions of education and science management     implementation commenced in 1st, 7th and 10th       Wide usage of Information-communication
                     were delegated to the newly created structures:   forms, new textbooks were spread. Process of        technologies is one of the components of such
                     “Public Law Legal Entity – Center of National     piloting and implementation continues in the        environment. President Program for
                     Examinations”, “Public Law Legal Entity –         rest of the forms. From 2008, 12 year studying      computerization of schools “Jump of the Deer”
                     Center for Study Plans and Evaluation”,           process will be introduced.                         is part of education system reform. By the end
                     “Public Law Legal Entity – Center for                                                                 of 2007, program will provide all the schools
                     Professional Development of Teachers”,            High Education turned to three stage system-        with computers and Internet connections and by
                     “Public Law Legal Entity –National Center of      Bachelor, Master, Ph.D.                             2008, it will reach the ratio of 1 computer for
                     Accreditation” “Public Law Legal Entity –                                                             20 pupils. Information-communication
                     National Science Fund”. Territorial               Accreditation of high education system has          technologies will be integrated in the study
                     management system of education has been           been elaborated. In 2005-2006, institutional        process. 100% of the pupils and 70% of the
                     changed, territorial organs of the Ministry of    accreditation took place twice. As result,          teachers will acquire basic computer skills.
                     Education and Science have been created-          number of accredited institutions reduced to 43.    Basic infrastructure will be created based on
                     Education Resource Centers. In the sphere of      In 2007, checking of license conditions of          which, permanent update of technological base
                     childcare, implementation of alternative forms    education institution will take place.              of schools will be possible. IT should be
                     of childcare started.                             Preparation for accreditation of general school     actively used in professional and high
                     Optimization of the agencies subordinated to      is underway. According to the “Law on High          education.
                     the ministry has been implemented. Schemes of     Education, Quality Management Services have




                                                                                  71
education and science financing changed.           been created in high education institutions.        Elaboration of knowledge based society
Amount of financing increased. Update of           Ministry supports and coordinates development       development strategy and its realization plan
material base of education started. The            of university curriculums and new textbooks.        should be elaborated.
implemented activities lead to reduction of        These activities are aimed at improvement of
corruption in the system.                          education quality.                                  Continuation of science sphere reform. The
                                                                                                       most important among implemented activities
At this point, for provision of system of          Georgia became the member of Bolonia                at this stage is elaboration of competitive
changes, it is necessary to start reforms in two   process and is determined to become the             system of development of science. In 2006, as a
directions: Pre-school education reform is         member of common European Education                 result of grant competition 113 projects from 44
aimed at child development, social integration     Space, which means: improvement of education        organizations have been financed, total amount
and support to parents. Development of             programs oriented on the results and demands        of financing - GEL 11136842. High and
professional education should lead to              of labor market, elaboration of National            scientific education integration process started.
preparation of qualified and competitive           Qualification Framework comparable with
professionals. On the basis of existing primary    European, attention towards social aspect of        Continuation and intensification of scientific
professional schools professional study centers    education and equal availability of education,      and education system integration process will
were created.                                      creation of study opportunity during the whole      lead to further development of this direction.
                                                   life, support to the mobility of students.          Support to creative processes in different
On the basis of existing secondary professional                                                        spheres, considering the needs of the country.
education and high education institutions          Though, for full membership, unity of society       Special support has to be given to the priority
implementation of high professional education      of the country and retention of national identity   scientific-research projects. In Georgia, main
programs will start. These programs are            is very important. Following programs are           objective of science and research should be
oriented on preparation of high education          aimed at the abovementioned: Civil Integration      elaboration of scientific products and
professionals in short period, in accordance       Program, Program for Studying National              technologies and their implementation in the
with market demands.                               Language at non-Georgian schools, School            national economy.
                                                   Partnership Programs etc.
Serious attention will be focused on                                                                   Special attention should be given to support to
professional preparation and re-training of all    Following activities are aimed at orientation of    the international cooperation, participation in
levels of teachers and assisting personnel.        education and science system on protection of       different programs and projects, including EU
                                                   cultural diversity and support to cultural          Framework programs.
Provision of new decentralized management          development. Program of translation of
model needs time and efforts. Functioning of       textbooks for non-Georgian pupils, also,
such model is linked with activeness of            elaboration of plan for studying non-Georgian
stakeholders, it requires knowledge and            languages within the National Study Plan.
qualification in education and management
issues. Thus, it is necessary that definite
programs are focused on preparation and
qualification upgrade of staff of education
system management and members of elected
organs.




                                                              72
Possible time-     2004-2011                                          2004-2011                                           2004-2011
frames for
execution. (if
current, when it
started)
Expected Results   Optimization of education network institutions     Turning of general education to 12 year             Computerization process of schools will be
                   will be finalized. Number of schools where the     studying period and implementation of new           over, all the schools will be connected to
                   number of pupils is less than 300 will be          education programs will be finalized, 85% of        Internet and common network, which includes
                   reduced. Centers of Professional Studies and       subjects will be taught according to new            Ministry of Education and resource centers.
                   Colleges of high professional education will be    programs, new textbooks will be used in             Process of update of school databases will start.
                   created.                                           education process.
                                                                                                                          Computer programs will be widely used in
                   Elaboration of decentralized management            National evaluations will be held at least in 2     teaching different subjects.
                   system of ministry will be finalized; system       subjects in 4th and 9th forms of general
                   includes Ministry of Education and Science,        education schools. Georgia participates in          Professional and high education process will be
                   elected management organs of autonomous            international evaluation systems PISA, PIRLS,       provided with Information and computer
                   education and scientific research, 80 education    TIMSS.                                              technologies.
                   resource centers, Public Law Legal Entities-
                   National Centers and Funds, which perform          80% of schools will use self-evaluation             Integration process of high education and
                   regulating functions in education sector on        procedures.                                         scientific research institutions will continue.
                   behalf of the State; National Professional
                   Agency will be founded, licensing of               Accreditation procedures for general education      Priority directions of scientific researches will
                   professional education institutions will take      institutions will be elaborated, accreditation of   be clarified and different forms of its
                   place.                                             general education institutions will start.          organization and support will be defined. Grant
                                                                                                                          financing of science by National Scientific
                   Common information system for education            National professional standards of school-          Fund will continue.
                   management will be elaborated, which will          teachers will be elaborated and implemented.
                   function on every level of management. 80% of                                                          Mechanisms for financing social and
                   schools, high and professional education           Registration of school-teachers and their           Kartvelological research will be created and
                   institutions will use the reporting methods        certifying process will start.                      activated, programs for their support will be
                   based on information-computer technologies.                                                            implemented. Science Development Support
                   Ministry and resource centers will use data of     Implementation of new education programs for        Fund will become active.
                   information system in the decision-making          preparation of teachers at high education
                   process. Computer data base will include           institutions will start. Accreditation of these     Number of Georgian scientists participating in
                   information on education institutions, students,   programs will take place.                           international projects and programs will
                   pupils and teachers and it will become available                                                       increase.
                   on different levels of management.                 National Study Plans and Evaluations Center
                                                                      will elaborate new professional education           Adult citizens will be able to take part in Adult




                                                                                  73
System of training and re-training of school          standards and programs, their piloting will take    Education Programs.
administrators and accountants will be created.       place, implementation of programs will start at
                                                      the centers and colleges of professional            Competences needed for sustainable
Reports reflecting activities of ministry of          education.                                          development of society will be integrated in the
education and science, resource centers,                                                                  study programs on every stage of studies.
education institutions will be prepared and           Common Evaluation system will be created at
published on the regular bases.                       professional study institutions.

Voucher schemes of education financing are            Based on the standards of professional study
functional at every stage of general,                 teachers, re-training of the teachers will take
professional and high education. Amount of            place.
financing will increase.
                                                      At high education institutions, implementation
Scheme of student loans will be broadened,            of education programs for preparation
number of commercial banks involved in this           professional study teachers, certification system
process will increase, conditions of the loans        for the teachers will be created. Certifying of
will improve.                                         teachers and experts will take place.

Material base will improve-new schools will be        Accreditation procedures for professional
built, rehabilitation of all education institutions   education institutions will be elaborated.
will be finalized, heating systems will be            Accreditation of professional education
installed, sport squares will be built.               institutions will start.
Laboratories and libraries of science and
research institutes and schools will be               Process of turning high education to the three
equipped.                                             stage system will be finalized, programs for
                                                      high professional education will be
Work on construction standard of schools will         implemented. Programs of high education
be finalized, it will be used in the licensing        institutions will be renovated.
process of schools.
                                                      Accreditation of high education programs will
In order to support consolidation process of          take place.
schools, system for transportation of pupils to
the schools will be created.                          National qualification framework will be
                                                      elaborated. High education will turn to the
System of renting the school textbooks will be        European system of credits.
created for socially vulnerable pupils of
primary classes.                                      All non-Georgian schools, 80% will start
                                                      teaching new education programs and using
Children of different capacities will be              new text-books.




                                                                 74
              maximally involved in the education process.
                                                                Number of the representatives of the national
              Alternative forms of childcare will be broadly    minorities admitted at high education
              used which will reduce the number of              institutions will increase.
              institutions.
                                                                80% of teachers at non-Georgian schools will
                                                                be prepared in Georgian language.

                                                                In order to absorb new methods of teaching the
                                                                Georgian language, 100% of teachers of non-
                                                                Georgian schools will undergo trainings.

                                                                All non-Georgian schools will be provided with
                                                                relevant resources for studying and teaching
                                                                Georgian language. Number of foreign students
                                                                will increase at high education institutions of
                                                                Georgia.
Criteria of   Education expenses – as percentage to GDP on      Indicators of involvement of pupils at schools.     Indicators of using IT in teaching process.
Results       different levels of education.
Assessment                                                      Number of Professional Study Center                 Indicators of scientific base and capabilities for
              State expenses per each pupil and on different    graduates.                                          knowledge generation. (financing scientific
              levels of education.                                                                                  research, financing of fundamental research).
                                                                Employment indicators of professional and
              Number of newly built and renovated study         high education program graduates.                   Indicators of generating commercial potential
              institutions, sport squares, laboratories,                                                            knowledge (financing of applied and
              libraries.                                        Education quality indicators on OECD scale.         experimental research, patents).

              Share of education institutions by elected        Results of the pupils in international evaluation   Indicators of participation of Georgian
              organs of management. Percentage of general       systems: PISA, TIMSS, PIRLS.                        scientists in international scientific projects.
              education institutions, where re-elections were
              held.                                             Results of the pupils in national evaluation.       Indicators of financing scientific projects from
                                                                                                                    foreign sources.
              Number of transporting units in charge of         Number of foreign students in education
              transportation of pupils.                         institutions of Georgia.                            Percentage of scientific works published in
                                                                                                                    cooperation with foreign co-authors.
              Indicators of education and science financing     Indicators of certified teachers at schools.
              and material - technical provision in relation
              with international standards.                     Number of non-Georgian school graduates
                                                                admitted at high education institutions.




                                                                           75
Share of small contingent education institutions
and students at those institutions in relation     Number of teachers of Georgian at non-
with general indicators of relevant education      Georgian schools, who absorbed modern
level.                                             approaches of teaching Georgian language.

Share of education expenses in total               Amount of relevant resources needed for
expenditures of internal economy.                  teaching and learning Georgian language at
                                                   schools.
Resource application efficiency indicators-ratio
pupil/teacher.                                     Percentage of high education programs which
                                                   underwent accreditation.

                                                   Indicators of student mobility.




                                                              76
                          Ministry of Culture, Monument Protection and Sport: Medium Term Action Plan 2008-2011
Spending Agency      Ministry of Culture, Monument Protection and Sport
Priority             1. Institutional Reform     2. Museum Reform                    3. Rehabilitation,              4. Rehabilitation of sport     5.Art Education System
Directions                                                                           systemization,                  and culture infrastructure     Reform
                                                                                     documenting and
                                                                                     popularization of
                                                                                     monuments of cultural
                                                                                     heritage

Justification of     State policy for                 Necessity of reform            The program is the result of    In fact, culture and sport     Art education is
Priority             management of culture            implementation is              extremely poor state of the     infrastructure doesn’t exist   inseparable part of culture
Directions based     sector maintained Soviet         conditioned by following       cultural heritage               in the country. In the         and education policy of the
on Current           inertia till 2004. Priorities,   characteristic features of     monuments, lack of regular      regions there is no            country. Therefore, its
Situation Analysis   legislative forms of culture     present situation of           care and management             material-technical base for    retention is necessary on
                     management organs and            museum system: gap             mechanisms, also, lack of       development of                 the one hand, for
                     organizations of the system      between society and            documentation on                infrastructure. Culture        maintaining and
                     were not clearly defined.        museums, very few              rehabilitation – restoration.   houses and clubs, stadiums,    development of culture,
                     Mechanisms for financing         visitors, new generation                                       gaming squares and sport       spiritual and material
                     organizations and target         being unfamiliar with                                          group of buildings do not      heritage, art, and on the
                     programs were ineffective.       museum life, poor                                              function normally.             other hand, for
                                                      conditions of exhibits, lack                                                                  improvement of common
                                                      of information on exhibits                                                                    education space. Necessity
                                                      stored in funds; lack of                                                                      of the reform is
                                                      modern technologies, old                                                                      conditioned by:
                                                      material technical base;                                                                        Social and cultural
                                                      improper management                                                                             changes in Georgia and
                                                      systems.                                                                                        international society
                                                                                                                                                      Inadequacy of old Soviet
                                                                                                                                                      System-based, art
                                                                                                                                                      education principles and
                                                                                                                                                      methodologies with
                                                                                                                                                      demands of modern
                                                                                                                                                      study, standards, new
                                                                                                                                                      technologies, market
                                                                                                                                                      economy.
                                                                                                                                                      General education
                                                                                                                                                      system reform and the
                                                                                                                                                      necessity of organic




                                                                                      77
                                                                                                                                                integration of art
                                                                                                                                                education in the system
                                                                                                                                                Activating of Laws on
                                                                                                                                                secondary, professional
                                                                                                                                                and high education
Possible time-     2004-2011                     2004-2011                     2004-2011                      2005-2011                       2006-2011
frames for
execution (if
current when it
started)
Expected Results   Minimizing bureaucracy        As a result of                Implementation of program      Implementation of culture       Reform of art and sport
                   and qualification upgrade     implementation of the         will lead to the definition    and sport infrastructure        education system in
                   in the system of the          reform we will have           of diagnostic and              rehabilitation program,         accordance with laws on
                   ministry, definition of       information on the            rehabilitation directions      culture objects in the          professional and high
                   legislative norms for the     conditions of the main        needed for saving the          regions will be                 education and considering
                   organizations of culture      collections of the country,   monuments. Examples of         rehabilitated. They will be     demands of international
                   system, and basing them on    inventoried exhibits.         national importance will be    provided with modern            experience and standards.
                   the modern principles of      Visual, scientific and        saved. Prestige of the         project, musical and voice
                   management. Program,          educational function of the   sphere will be rehabilitated   recording, sport,
                   target and adequate           museum has been               and international standards    multifunctional group of
                   financing of organizations.   rehabilitated.                implemented for                buildings will be
                                                                               protection, rehabilitation     rehabilitated,
                                                                               and management of              multifunctional amateur
                                                                               cultural heritage.             sport squares, mini-
                                                                               Activation of cultural         football squares, main
                                                                               heritage, as a factor of       directions of priority fields
                                                                               economic development.          (wrestling, judo)
Criteria for       Time frames for reform,       Physical condition of         Number of implemented          Number of sport circles         Mobility of art education,
Evaluation of      public opinion,               storehouses of National       and legalized conservation-    and creative groups on the      recognition of diplomas,
Results            independent expertise of      Museum and important          restoration projects,          basis of rehabilitated          program accreditation
                   the results of the reform.    regional Museums.             number of rehabilitated        objects. Number of people       results of art education
                   (local international)         (independent expert           examples, degree of public     involved in them. Amount        institutions, highly
                                                 conclusions). Number of       involvement in physical        of private investments          qualified creative groups,
                                                 expositions consistent with   activities, increase of                                        achievements of Georgian
                                                 modern standards, number      budget revenues from                                           art representatives on
                                                 of visitors, amount of        infrastructure. Increase if                                    international arena.
                                                 private investments.          the share of financing from
                                                                               private sector in the sphere
                                                                               of cultural heritage.




                                                                                78
                                   Ministry of Refugees and Resettlement: Medium Term Action Plan 2008-2011

Spending Agency - Ministry of Refugees and Resettlement

Priority Directions   1. Creation of relevant       2. Integration of refugees     3.Elaboration of common        4. Intensive relationships     5. Fulfilment of
                      conditions for decent and                                    national policy for            with Georgian diasporas        commitments before EC
                      secure returning of                                          migration processes            abroad. Support to             taken in 1999 on
                      refugees.                                                                                   development of ethnic          repatriation of Muslim
                                                                                                                  identities in diasporas.       Meskhs.
                                                                                                                  Active involvement of
                                                                                                                  Diaspora representatives in
                                                                                                                  the process of building
                                                                                                                  Georgia, creation of
                                                                                                                  motivation for double
                                                                                                                  citizenship, holding
                                                                                                                  common cultural-
                                                                                                                  educational and charity
                                                                                                                  activities.
Justification of      Elementary rights of the      Almost half of refugees live   Common migration system        Further implementation of      Commitment of Georgia
Priority Directions   refugees returned             in collective centers. These   doesn’t exist. As a result,    the will of the Government     towards EC taken in 1999
                      spontaneously are not         buildings lost their primary   illegal migration,             of Georgia to intensify
                      provided. Security of         function, they are not         trafficking, using of the      relationships with Georgian
                      refugees is not guaranteed,   relevant for living.           country by organized           Diasporas, danger of losing
                      their property rights are     Compared with general          criminal as transit is high.   Georgian conciousness
                      violated on the regular       indicators- high               Lack of legislation and        from the side of diasporas
                      bases, Living conditions      unemployment rate and low      policy in relation with eco-   and misuse of their
                      and possibility of getting    economv activity is recorded   migrants leads to reverse      potential in the building of
                      social service is on the      in the parts of the city       migration and ineffective      new Georgian State.
                      minimal level.                dwelled by refugees.           spending of budget
                                                                                   resources.
Possible time-        2008-2011                     2008-2011                      2008-2010                      2008-2011                      2008-2011
frames foe
execution
Expected results      − Living conditions of the    − Long-term decision on        Improvement of migration       − Strengthening of ethnic      Fulfilment of
                        spontaneously returned        improvement of living        system of the country            consciousness of             commitment.
                        refugees will be              conditions of refugees.                                       Georgian diasporas.
                        improved.                   − Primary function will                                       − Development of
                      − Better conditions will be     return to the Collective                                      Economy of Georgia




                                                                                   79
                  created for decent and         centers of public                                           − Increase the
                  secure returning of            importance.                                                   effectiveness of foreign
                  refugees.                  −   Collective centers of                                         policy.
                − Real-estate property of        commercial meaning
                  refugees will be               will be freed for private
                  registered.                    investments.
                                             −   Capabilities of social
                                                 institutions will increase.
                                             −   Budget expenditures on
                                                 refurbishment of
                                                 communal
                                                 accommodation objects
                                                 will be reduced.
                                             −   Increase of self-
                                                 sufficiency of refugees,
                                                 reduction of dependency
                                                 on State.
                                             −   Reduction of the amount
                                                 of state allowance for
                                                 the refugees
                                             −   Full involvement of
                                                 refugees in State social
                                                 programs.
Criteria for    − Number of refugees         −   Number of refugees who        − Reduction of illegal       − Quality and intensity of     Number of repatriates.
evaluation of     returned sponteniously         left the objects of             migration flow.             cultural-educational
Results         − Their living conditions.       compact                       − Number of reverse           activities held by
                − Their possibility to get       accommodation, or               migrants and harmed         diasporas in the countries.
                  adequate social service.       privatized them.                families receiving state   − Amount of the attracted
                − Data base on the real-     −   Number of compact               assistance.                 investments,
                  estate of refugees in          accommodation objects                                       implementation of
                  Abkhazia and Tskhinvali        of the closed type;                                         economic and other
                  regions.                   −   Number of those objects                                     projects, success of
                                                 of compact                                                  Georgian interests abroad.
                                                 accommodation which
                                                 acquired function of the
                                                 shelter;
                                             −   Reduction of annual
                                                 allowance for refugees




                                                                               80
                                                        from the budget.
                                                    − Number of re-trained
                                                        refugees who managed
                                                        to find jobs.
                                                    − Number of the refugees
                                                        who involved
                                                        themselves in
                                                        agriculture.
                                                    − Increase of economic
                                                        initiative indicator
                                                        among refugees.
                                                    − Involvement of poor
                                                        refugees in State social
                                                        programs;
                                                    − Reduction of the number
                                                      of refugees benefiting
                                                      from state assistance, on
                                                      the expense of those who
                                                      do not need social
                                                      support.
Possible preventive   Ignoring international        − Obstacles in decision-       Lack of relevant financing.   Weak links of Georgian
factors               norms from the side of de-      taking on privatization of                                 diasporas with Georgia,
                      facto administrations, non-     the objects of compact                                     non-organization of
                      fulfillment of commitments.     accommodation (by                                          diasporas, persecution of
                      Ineffectiveness of              investors and refugees).                                   Georgian Diasporas in the
                      peacemaking missions in       − Lack of sufficient                                         countries ill-disposed to
                      conflict regions.               financial support.                                         Georgia, Legislation of the
                                                      Insufficient information                                   country where the diaspora
                                                      supply to the refugees.                                    exists, in relation to the
                                                                                                                 issue of giving double
                                                                                                                 citizenship to the diasporas.




                                                                                   81
                             Ministry of Labour, Health and Social Protection: Medium Term Action Plan 2008-2011

Spending Agency       Ministry of Labour, Health and Social Protection
Priority Directions   1. Increase of financial access to public health 2. Improvement of quality and geographical        3. Reduction of poverty and vulnerability of
                      and healthcare services;                         access to healthcare services;                    the population;

                      Improvement of financial access of the           Renovation/development of medical                 Development of social aid system.
                      population to public health protection and       infrastructure in accordance with the needs of    Further development of the mechanisms of
                      necessary healthcare services;                   the population;                                   management of social risks of population:
                      Creation of affordable health insurance basic    Development of professional human                 Improvement of the system of provision of
                      package and inclusion of poorest population      resources (medical personnel, managers of         pensions to pensioners;
                      in the package.                                  health institutions);                             Improvement of mechanisms of management
                                                                       Raising the efficiency of healthcare system by
                                                                                                                         of social risks related to labour (temporary
                                                                       improving State management of the sector;         disability, job-related accidents, professional
                                                                       Provision of consequent implementation of         diseases and etc);
                                                                       institutional and functional reform of the
                                                                                                                         Development of the system of evaluation
                                                                       health sector;
                                                                                                                         planning and provision of social needs;
                                                                       Provision of support to the reform and
                                                                       participation of the stakeholders;
                                                                       Introduction of proof –based policy analysis      Support to rehabilitation and social
                                                                       practice;                                         integration of the people in need of special
                                                                       Development of heath information system;          care, victims of trafficking and family
                                                                       Strengthening of state regulation of the sector   violence. Support to childcare and de-
                                                                       (permissions, licenses and certification          institutionalization.
                                                                       system);
                                                                       Improvement of remuneration system of
                                                                       health service providers;
                                                                       Improvement of the quality of medicines in
                                                                       circulation.
Justification of      Consuming necessary healthcare service is        Quality and economic efficiency of                16% of population of Georgia is beyond the
Priority Directions   very low, especially, by poor and vulnerable     healthcare, also level of geographic access to    extreme poverty line; social aid programs
based on Current      population. Out-patient visit per person on      high quality medical service is low;              (allowance, family aid), will be aimed at the
Situation Analysis    average was 1.6 (average European indicator-     Medical infrastructure under state ownership      needs of poor and vulnerable population.
                      7). 49% of the population do not consult a       (buildings, equipment) is old and inconsistent    Their realization will reduce the poverty of
                      doctor while illness.                            with needs in relation with geographic            population.
                      Expenditures for deterioration of health         accessibility and quality of medical service.
                      conditions is huge financial load for the        Knowledge and skills of professional human        In parallel with fulfillment of the social
                      population, especially for its poor part (55%)   resources is not sufficient for provision of      commitments of the state, financing subsidies,




                                                                                    82
and vulnerability is increased.                 high quality health-care services, also for        state pensions, state compensations and
Expenditures for 1 hospitalization exceeds      effective process, quality and results-oriented    academic stipends will reduce the risk of
monthly expenditures of average non-poor        management of health institutions.                 revenue loss by vulnerable groups.
family by 35%, in case of poor family - the     Efficiency level of state management of the
expenditure is 1.8-2.8 times more than total    sector is low;                                     Development of private pension system will
monthly expenditure of the family.              Coordination of the implementation of the          improve pension provision of future
In the total expenditures of the healthcare     reform of separate directions is improper and      pensioners and reduce the load of state social
80% are private expenditures, mainly            resource mobilization for that purpose is not      protection system.
informal “from the pocket”;                     perfect.
Price of the prescribed medicines reduces       Participation of the stakeholders in the health    Improvement of risk management
consummation of out-patient service. For that   care reform elaboration/implementation             mechanisms of job-related accidents and
reason, more than 43% of population does not    process is low.                                    professional diseases will provide secure job
consult ambulatory. This indicator is lower     Choice of the health policy, on the different      places and protection of labor conditions.
with vulnerable families.                       levels of decision-making is not based on the      Cases of job-related accidents and
                                                implemented policy analysis, problem               professional diseases will decrease. It will
                                                identification and choice of results-oriented      improve protection of staff from the risk of
                                                strategy. This is often conditioned by             revenue loss and reduce the load on social aid
                                                insufficiency of local proofs needed for           system.
                                                analysis.
                                                Collection and processing of data needed for       Creation of evaluation system for social
                                                evaluation of efficiency (clinical efficiency,     service needs will reveal the needs and aims
                                                cost effectiveness) of the policy (state health-   of different personified social services.
                                                care programs) initiated by the ministry is
                                                done using old forms, methods and                  Development of the system of social service
                                                technologies, which decreases the                  for persons in need of special care and other
                                                effectiveness of sector management decisions.      vulnerable groups will support their social
                                                At the same time, on the separate levels of        integration and reduce their vulnerability.
                                                health-care system, adequate power for
                                                accumulation and analysis of information is        Deinstitutionalization of persons in need of
                                                insufficient (or does not exist at all);           special care and implementation of the forms
                                                Sector regulation mechanisms do not enable         of alternative care will improve their personal
                                                to provide high quality medical service. In        development capacities, support their
                                                most cases, sector regulation instruments need     integration with society and reduce the load of
                                                to be reviewed or created. (for example:           social protection system.
                                                certification system for nurses).
                                                Nowadays, basic mechanism of financing
                                                medical service providers is retrospective
                                                compensation which does not lead to efficient
                                                and economic spending of resources.




                                                             83
                                                                     (including state resources). Falsified, low
                                                                     quality and outdated medicines remain in
                                                                     circulation)
                                                                     Adequate reporting processes and instruments
                                                                     do not exist between ministry and
                                                                     subordinated organs.
Possible Time-     Current                                           Current                                           Current
frames for
Execution (if
current when it
started)
Expected Results   Health conditions of Georgian population          Quality of healthcare service and financial       Identification of poor and vulnerable
                   is improved by means of increased                 accessibility to it improved.                     families.
                   financial accessibility to public health and      Medical infrastructure improved and in            Extremely poor and vulnerable families
                   healthcare services;                              accordance with standards, from the point of      receive cash benefit.
                                                                     geographic accessibility and quality of
                   Financial accessibility of the population to      healthcare service.                               Results of social risks realization cushioned.
                   necessary healthcare service and public health
                   is increased;                                     Medical institutions are renovated according      Security of job place and labor security
                                                                     to the needs of the population on healthcare      increased.
                   Financial accessibility of the population to      services and are consistent with standards.
                   necessary healthcare services is increased;       (construction quality); Medical institutions      Powers of planning and provision of social
                   Efficiency of public health activities is high;   equipped and consistent with needs.               diagnostics and service are developed.
                   Risky behaviour for the health of population
                   is improved;                                      Medical institutions are provided with            Improvement of environment for social
                                                                     relevant staff and are functioning.               integration of persons in need of special care
                   Knowledge and attitude towards behaviour                                                            and other vulnerable groups will be improved.
                   risky for health is changed;                      Knowledge and skills of professional human
                                                                     resources are improved as a result of
                   Rules defining the behaviour are adequate.        participation in professional training
                                                                     programs and fulfilment of certification
                   Negative impact of environment over health        requirements. They can provide:
                   is reduced;                                       Provision of high quality healthcare service;
                                                                     Efficient process, quality and results oriented
                   Financially accessible medical insurance          management of medical institutions;
                   basic package is created; inclusion of            Efficiency of public management of the sector
                   population in the basic package provided.         is increased;
                                                                     Implementation of separate directions of
                                                                     health care reforms are coordinated;




                                                                                  84
Power needed for reform coordination is
created;
Detailed plan for reform implementation
elaborated;
Implementation of the reform takes place in
accordance with the plan.
Participation of stakeholders in elaboration
and implementation of the directions of the
reform is high.
Format of participation shared;
Information provision to the stakeholders is
high.
Practice of proof based policy analysis
introduced;
Supply of the proofs increased;
Analytical production increased.
Health information system developed.
On different levels of the system, data needed
for efficient management, format of their
receiving, source, frequency of supply and
time-frames identified;
Power (human, technical) needed for
receiving information, its accumulation,
processing, analysis and communication
created.
Routine information flows are
institutionalized and in accordance with
needs.
State regulation of the sector (permissions,
licenses and certification system) is
strengthened;
Licensing (permissions) system of medical
and pharmaceutical institutions improved;
Licensing (permissions) standards
implemented;
Accreditation of medical institutions and
adequate legislative mechanisms elaborated;
Professional standards (passports) elaborated
and institutionalized;




             85
                                                               New methods of healthcare service financing
                                                               elaborated and implemented;
                                                               System of diagnostic groups (DRG)
                                                               elaborated;
                                                               National recommendations for clinical
                                                               practice – “Guidelines” and state standards
                                                               for clinical management – “Protocols”
                                                               elaborated and implemented.
                                                               System of diagnostic groups (DRG)
                                                               implemented;
                                                               Quality of medicines in circulation improved.

Criteria for    Indicator of payments from the pocket for      Number of medical complication cases.            %-age of population which receives social
Evaluation of   necessary service;                                                                              allowance and escaped extreme poverty.
Results             − Indicator of payments from the           Share of population, which within the time
                         pocket for medicines in the target    interval needed for travelling, will reach       %-age of population social-economic
                         population;                           relevant medical institution for needed health   conditions of which are evaluated and
                    − Expenditures of poor and vulnerable      care service.                                    registered for target social programs.
                         internal economies on health, share
                         of expenditures in %-age and GEL      Indicator of consumer satisfaction.              %-age of the persons in need of special care
                    − Share of expenditures on poor and                                                         which are included in the social integration
                         vulnerable internal economies in      Share of renovated medical institutions in       support programs.
                         state expenditures on health;         comparison with power considered in hospital
                    − Indicator of medical service             sector and primary health care Master Plan,      Indicator of deinstitutionalized persons (%-
                         utilization for poor and vulnerable   which is consistent with engineering and         age).
                         population. Indicator of spread of    quality standards.
                         diseases conditioned by:                                                               %-age indicator of reduction of job-related
                              - Incorrect behavior of          Share of equipped medical institutions (%-       traumas and professional diseases.
                                   population;                 age) in comparison with number of
                              - Negative impact of             institutions considered in hospital sector and
                                   environment;                primary healthcare Master Plan and consistent
                                                               with equipment standards.
                Share of poor population which is provided
                with basic insurance package;                  Amount of investments and its share to
                    − %-age of population for which basic      planned (%).
                         insurance package is available.
                                                               Number of retrained professional human
                                                               resources in relation with the needed number:




                                                                            86
Number of doctors and nurses retrained
according to their profile in relation with
needed number:

Share of professional resources (%) certified
in the re-trained profile in relation with re-
trained professional resources.

Number of re-trained health care managers in
relation with needed number;
Number and quality of researches conducted
according to priority directions of health
sector development;

Health policy documents approved by
Government;

Concurring of reform implementation with
elaborated policy;

Share of existing power for reform
coordination in relation with needed one.

Detailed plan for reform implementation
exists/formalized.

Share of activities implemented within
definite time period in relation with the
number of activities considered in the detailed
Plan of reform implementation.

Number of meetings organized for
participation of stakeholders.

Share of monitoring and evaluation
framework indicators, which were used to
evaluate the efficiency of sector policy and its
implementation programs.




             87
                                                          Number of institutions authorized for medical
                                                          activities according to new permission
                                                          standards. (share of abolished licenses).

                                                          Share of formalized professional standards to
                                                          needed number of professional passports.

                                                          Share of personnel re-certified according to
                                                          new standards.

                                                          Diagnostic group system elaborated and
                                                          adapted.

                                                          Share of approved guidelines to total number
                                                          of diagnostic categories;

                                                          Share of “Protocols”-State standards for
                                                          management of implemented clinical
                                                          conditions towards approved amount.

                                                          Diagnostic group system formalized.

                                                          Share of low quality, falsified and outdated
                                                          medicines, revealed by State Control
                                                          Procedure of Medicines, in relation with
                                                          checked amount.

                                                          Share of checked medicines to the total
                                                          amount in circulation.
Possible Preventive   Growth of medical service fee;      Less than expected growth of budget revenues    Reduction of economic growth;
Factors                                                                                                   High inflation level;
                      Epidemic of dangerous infections;                                                   Less than expected growth of budget
                                                                                                          revenues;
                                                                                                          Non-sufficient development of social service
                                                                                                          powers;
                                                                                                          Unplanned natural and man-caused
                                                                                                          cataclysms, unfavourable migration
                                                                                                          processes.




                                                                       88
                                                      Ministry of Energy: Medium Term Action Plan 2007-2011

Spending Agency           Ministry of Energy
Priority Directions       Construction-rehabilitation of hydro and heat      Construction-rehabilitation of electric              Natural gas supply, rehabilitation-construction of
                          electric stations.                                 transmission means.                                  networks.

Justification of          Insufficient level of hydro-energy resource        Insufficient technical sustainability of energy      Insufficient internal networks and infrastructure,
Priority Directions       absorption, maximal consistency with the process   system and low reliability.                          increase of demand on natural gas.
based on Current          of working out the powers.
Situation Analysis

Possible time-frames      2008                                               2008                                                 2008
for execution (if
current when it
started)
Expected Results          Achievement of energy independence, rational       Improvement of reliability of the system and         Improvement of natural gas supply, increase of
                          usage of cheap hydro-resources, balancing local    quality of electric energy, strengthening of links   transit potential.
                          consummation.                                      with neighbouring systems, increase of
                                                                             possibility of using alternative sources.

Criteria for evaluation   Increase of powers, raise of economy and           Raising the effectiveness of electric energy         Raising the reliability of gas supply,
of Results                reliability, satisfaction of the demand of the     transmission, reduction of loss, increase of         transportation, main gas pipe-line and
                          country on electric energy.                        diversification of energy sources.                   exploitation of internal networks.


Possible Preventive       Deterioration of macroeconomic conditions.
Factors




                                                                                       89
                                             Ministry of Agriculture: Medium Term Action Plan: 2008-2011

Spending Agency        Ministry of Agriculture

Priority Directions    1. Development of agricultural infrastructure,         2. Promotion of development of viticulture         3. Ensure food safety and promotion of
                       reformation of management of amelioration system       and wine production and fighting with              quality assurance.
                                                                              falsification


Justification of         Low level of productivity in the sphere of primary      High level of falsification of Georgian wine      High risk of proliferation of epizootic and
Priority Directions      agricultural production                                Discrediting of Georgian brands of wine on         phyto-sanitary diseases
based on Current                                                                international market
Situation Analysis       Inefficient management of amelioration system           Inefficient system of control over quality of     High level of diseases caused by food
                          Ineffective management of main channels and           Georgian wine                                      products.
                         internal local irrigation network                      Specification of geographical origin of
                         Incorrect tariff policy                                production and implementation of inventory         Frequent cases of falsification of food
                         Dynamics for reduction of irrigated and drained        and passportization of vineyards                   products
                         lands                                                  (passportization –ongoing)
                          Disrepair of amelioration systems                                                                        Low level of self-regulation with the purpose
                         Damaged and dysfunctional main channels                                                                   of ensuring food safety
                         Low level of modern agricultural technologies                                                             Low productivity of animals
                         Lack of agricultural equipment in the country
                         Insufficient information among the farmers on new
                         technologies and scientific achievements

Possible time-frames   2006-2011                                              2006 - 2011                                        2006-2011
for execution (if
current when it
started)




                                                                                   90
Expected Results         Raise of productivity in primary agricultural                                                            Ensure maximum protection of consumers’
                         production                                            Reduction of the level of falsification of         health, life and economic interests related to
                          Increase of irrigated and drained lands              production and ensure protection of Georgian       food products
                         Effective management of amelioration systems          brands of wine on internal as well as external     Ensure retaining of epizootic and phyto-
                          Rehabilitated irrigation and drained facilities      markets                                            sanitary reliability and trustworthiness
                         Provision of the country with modern agricultural     Creation of efficient system of quality            Reduction of food falsification
                         equipment.                                            assurance of Georgian wine and ensure               Development of highly productive cattle-
                         Framers provided with modern information needed       taking into consideration of requirements of       breeding;
                         for agricultural production                           existing markets                                   Recognition of the country as favourable and
                                                                               Utilization of full potential of Georgian wine     reliable trade partner
                                                                               on internal and external markets



Criteria for             Total area of irrigated and drained lands             Amount of falsified production;                    Number of cases of diseases caused by
evaluation of Results    Timely and high quality agricultural activities.       Amount of exported products and                   food.
                         Number of agricultural equipment                      increased revenues.                                Prevention of epizootic diseases and
                                                                                                                                  identification of existing hearths
                                                                                                                                  Number of falsified cases

Possible Preventive     Non                                                  Foreign policy                                     Non-favourable environment for the spread of
Factors                                                                                                                         epizootic and phyto-sanitary diseases.




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                      Ministry of Environment Protection and Natural Resources: Medium Term Action Plan 2008-2011

Spending Agency       Ministry of Environment Protection and Natural Resources
Priority Directions   Implementation of the model of public-private Development of the system of        Reform of the policy in the         Transformation to the system of
                      partnership in the sphere of managements of    protected areas and ecotourism     sphere of waste management          management of water resources
                      forest resources (PPP)                                                                                                on the basis of water basin
                                                                                                                                            approach
Justification of        Unavailability of the strategy (policy) for      Protection of unique natural     Ineffective system of waste         Unavailability of
Priority Directions    development of the sector;                       monuments ;                       management;                         comprehensive model
based on Current        Inflexible and cumbersome bureaucratic          Underutilized potential of        Unavailability of strategy and      (vision) of management of
Situation Analysis     apparatus ;                                      ecotourism ;                      standards for waste                 the system of water
                       Extremely stringent and declarative               Underdeveloped and               management ;                        resources.
                       regulation                                       deteriorating infrastructure;     High risk of intoxication and       Irrational utilization of water
                       (unfeasible requirements ;                       Widespread illegal logging of     pollution due to hazardous          resources
                       Large scale of illegal logging of timber .       timber and poaching.              waste                               Low level of interest on
                       Demotivation of private interests.                                                 Demotivated private sector          behalf of the private sector;
                                                                                                                                              Inadequate legislative
                                                                                                                                              framework;
                                                                                                                                              High levels of pollution.
Possible time-        Until the end of 2009                           Until the end of 2009             Until the end of 2008               Until the end of 2010
frames for            (Started from the second half of 2005)                                            (started in 2006)
execution (if
current when it
started)
Expected Results        Minimal share of public sector and maximal       Increase in the number of        Minimization of number of           Transformation to the system
                        share of private sector ;                       tourists                          uncontrolled landfills in           of management of rivers on
                        Rational forest usage;                          Reduction of the scale of         urban and rural areas               the basis of water basin
                        _Simple and active system of forest usage       poaching;                          Increase motivation of             approach ;
                        monitoring.                                     Maximum retention of              participation of private sector     Increased role of the private
                        Rational forest usage.                          biodiversity                      in waste collection,                sector
                                                                                                          transportation and disposal         Introduction of adequate
                                                                                                                                              economic mechanisms in the
                                                                                                                                              sphere of utilization of water
                                                                                                                                              resources;




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Criteria for              Improved sustainability of forests;           Improved quality of              Reduction of pollution           Clear delimitation of
evaluation of             Reduced scale of illegal logging;             infrastructure                   caused by waste;                 competencies between public
Results                   Increase of budgetary revenues ;              Development of new               Rational usage of waste;         structures
                          Competitive environment in forest             protected areas                   Reduction of subsidies .        Rational utilization of water
                          utilization.                                  Transfer of protected areas of                                    resources;
                          Forest covered areas, transferred into long   low category of protection                                        Improved quality of water
                          term private usage (at least 35% of the       into management of private                                        Increased budgetary revenues
                          forest covered areas)                         entities
                          Increased share of legal employment           Increase of inflow of tourists
                      .                                                 and budgetary revenues.


Possible Preventive       low level of readiness of population          Heavy social background and      unclear division of              unclear division of
Factors               .                                                 consequently low level of        competencies between state       competencies between state
                                                                        readiness of population          structures;                      structures and unavailability
                                                                                                         Low level of public              of the policy for water
                                                                                                         awareness.                       resource management;
                                                                                                                                      .




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