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U.S. Department of State

Diplomacy in Action

FY 2007 U.S. Assistance to Eurasia


Bureau of European and Eurasian Affairs
FY 2007 U.S. Government Assistance to and Cooperative Activities with Eurasia
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Country Overview

U.S. FOREIGN POLICY AND FOREIGN ASSISTANCE OBJECTIVES & PRIORITIES

Located at a strategic crossroads between southeastern Europe, Russia, the Middle East, and Asia, Georgia is at the center of two core U.S. foreign policy interests. First, Georgia stands on the frontier of freedom – a Georgia that truly implements its ambitious reform agenda will serve as a beacon for a region that still largely fails to meet international standards for democratic processes. Second, Georgia’s location positions it as a vital link in the Southern Caucasus Corridor – without Georgia, the transportation of Caspian energy resources to international markets would be impossible, and the only air corridor to Central Asia and the battlefields of Afghanistan outside Russian or Iranian airspace would be inoperable.

The USG has five foreign policy priorities in Georgia including to: assist the Government of Georgia (GOG) in consolidating and advancing the array of democratic reforms it has undertaken since the November 2003 Rose Revolution; support Georgia’s territorial integrity within its internationally recognized borders and the peaceful resolution of the separatist conflicts in Abkhazia and South Ossetia; advocate Georgia’s integration with the Euro-Atlantic community, including NATO; encourage Georgia’s economic development, growth, and prosperity through the implementation of free-market reforms and increased investment; and, encourage the GOG’s efforts to attain energy security by diversifying its own energy sources and continuing energy sector reforms.

Since the Rose Revolution of 2003, the GOG has implemented an ambitious reform program designed to strengthen democratic processes and government institutions, improve the provision of social services, remove barriers to doing business, increase tax revenue, reduce corruption, stabilize the supply of energy, rehabilitate infrastructure, improve law enforcement, and enhance regional security cooperation. Notwithstanding the November demonstrations and subsequent declaration of state of emergency that compelled the GOG to reform the electoral system and hold presidential elections much earlier than previously anticipated, the GOG has made impressive progress in all these areas, most of them with the support of USG assistance. However, implementation of some reforms lags and the impact of many reforms has not been widely felt, especially outside the major commercial centers of Tbilisi and Batumi. USG assistance is directly aligned with policy priorities and focused on the consolidation of reforms made to date and on working with the government and private sector to develop and implement the next phase of the government’s development and security strategies.

OPERATING ENVIRONMENT

The output of the Georgian economy declined by more than two-thirds in the aftermath of the collapse of the Soviet Union, as Georgia lost access to markets and sources of raw materials that had sustained production during the Soviet period. Civil war and wars with breakaway regions resulted in the loss of GOG control over the regions of Abkhazia and South Ossetia and continuing hostility, suspicion, and simmering tensions. Infrastructure deteriorated, educational standards declined, and incomes fell as corruption sapped government revenues and misdirected investment until 2003, when Georgia was very near to failed-state status. Following the Rose Revolution in November 2003, the new government committed itself to thorough reform of the economy, social welfare systems, government structures and policymaking. Since then, the GOG has implemented reforms at a tremendous pace across every sector. Major achievements in controlling corruption and streamlining fiscal administration increased government revenues and allowed greater spending on infrastructure, education, and national security. Policy makers in all agencies of the GOG are open, and even eager, to work with USG assistance-implementing agencies to bring Georgia’s institutions and policies in line with best practices around the world. In September 2005, the GOG signed a Compact with the Millennium Challenge Corporation (MCC). MCC projects complement those funded under other USG assistance accounts by providing infrastructure development support (roads, water systems, and pipelines) and financing for agricultural- and tourism-based businesses.

In 2007 GOG reforms of taxation, customs, and regulation vaulted Georgia to number 18 in the world on the World Bank’s Ease of Doing Business Index. Inflows of investment that were attracted by the reforms in Georgia helped push the rate of growth of real GDP by more than 10% in FY 2007. Among the most significant foreign investments was a $400 million deal for sale of energy distribution and generation assets to the Czech company Energo-pro. The sale included the electric utility United Energy Distribution Company (UEDC), which had benefited from a management contract financed by USG assistance.

At the same time, the GOG’s pro-U.S. and pro-European orientation and its aspirations to become a member of NATO were not welcomed by the Russian Government. Displeasure with GOG policies led Russia to impose economic sanctions in 2006, including bans on imports of fruits and vegetables, wine, and mineral water and a cut-off of all transport links between the two countries. These sanctions continued throughout FY 2007. The price of natural gas supplied from Russia more than doubled on January 1, 2007. New supplies of gas that became available from Azerbaijan in 2007 and increases in hydroelectric generation capacity significantly reduced Georgia’s dependence on Russian gas. Prior to the imposition of sanctions in 2006, Russia was Georgia’s most important export markets and trading partners. The bans shook Georgia’s economy, but did not break it. By the end of FY 2007 Georgia had largely reoriented its exports away from Russia.

FY 2007 Country Program Performance

PEACE AND SECURITY

Georgia continued in FY 2007 to reform and modernize its law enforcement and military institutions while simultaneously facing real threats to its national security from the separatist regions of South Ossetia and Abkhazia, the problem of poorly-secured borders, and the reality of increasingly tense relations with Russia. Despite these challenges, the GOG has made noticeable improvements in anti-corruption, border control, and military preparedness in recent years. The unresolved conflicts of South Ossetia and Abkhazia, which comprise roughly 20% of Georgia’s territory, prevented the GOG from fully controlling its borders, and thus hindered GOG counter-terrorism and law enforcement efforts. The USG continued its support of Georgia’s territorial integrity and remained actively engaged in helping to find a peaceful resolution to these conflicts within Georgia’s internationally recognized borders.

USG assistance to advance peace and security in FY 2007 focused on: reorganizing, training, and equipping Georgia’s military forces to contribute to international peacekeeping and security and meet NATO standards; bringing together Georgians, South Ossetians, and Abkhaz for joint training and confidence building measures and the facilitation of the return of internally displaced persons; increasing the effectiveness and professionalism of the prosecutors and the police force; and, assisting Georgia to secure its borders by implementing international border control standards; and establishing an internationally coordinated response capacity against smuggling, terrorism, transnational crime, and other security threats.

Combating Weapons of Mass Destruction - The objective of USG assistance to combat weapons of mass destruction in FY 2007 was to help the GOG combat terrorism and transnational crime and to prevent the spread of weapons of mass destruction, biological weapons, and pathogens. The U.S. and Georgia worked together to combat illicit trafficking in radioactive material.

The USG assisted Georgia to develop a biological threat agent detection and response capability by creating a system of labs with modern technology and state-of-the-art data reporting and electronic integrated data surveillance systems. These USG-supported labs were the only facilities in the region that had the capacity and expertise to test for African Swine Fever (ASF) during a critical period in 2007 when outbreaks were reported in the South Caucasus.

USG activities worked to prevent the smuggling of radioactive materials by strengthening Georgia's ability to exercise effective regulatory oversight over radioactive materials, including licensing, inspection, and enforcement of civil and criminal penalties for noncompliance. This regulatory reform was essential given the large amount of legitimate use of radioactive sources; 439 organizations in Georgia own or work with sources of ionizing radiation. The USG assisted the GOG to develop draft revisions of these regulations, which were circulated during FY 2007 within the Georgian executive branch for clearance. Final revisions will be submitted to Parliament for review and adoption in early FY 2008.

The USG also helped draft new counter-proliferation laws to bring Georgia in line with international standards, that will, among other steps, ensure effective prosecution of nuclear smuggling rings, as well as scams where smugglers falsely claim to be selling nuclear or other WMD-related elements to defraud other smugglers.

Stabilization Operations and Security Sector Reform – Defense, Military, and Border Restructuring Reform and Operations - In FY 2007, USG assistance supported the Georgian Border Police and Customs Service in its efforts to fight smuggling, increase revenue, and improve border control. The USG continued to fund the construction of land border crossings at Kazbegi on the Russian border, at Lagodekhi, and at seven smaller outposts on the Azerbaijani border. The Kazbegi construction began in 2004, will be completed in fall 2008 while the outpost construction began in 2006, and will be competed in spring 2008. The USG also finalized the construction of a radar facility at Anaklia as well as a grass airfield at Mestia in fall 2007 and began construction for the Gonio radar station in fall 2007. The USG also continued support for the Customs (Revenue Service) Training Academy, which received FY 2005 funds and remains under construction. In FY 2007, the USG completed and turned over to GOG a coastal radar station at Chakvi and a land border crossing at Sadakhlo on the Armenian border.

In FY 2007, the USG trained 240 Border Police officers on subjects related to maintenance, upkeep, and use of the communications system, including the Personnel Identification Reporting System (PIRS). This passport control system, begun in 2006 with a completion date of 2008, gives the Border Police at all of Georgia’s major ports of entry access to wanted persons lists, illegal border crossers, visa violations, and denied entries on a real time basis. Accurate utilization of PIRS resulted in 996 detentions or visa-related violations in 2007. During FY 2007, 37 Georgian Customs Service and Border Police personnel were trained in the United States. Another 10 senior executives from Border Police, Customs and Financial Police toured training facilities in the United States, and eight senior executives, including the Chairman of the Border Police and the Head of the Revenue Service, participated in an Executive Orientation Program trip to the United States. In addition, the USG installed Radiation Portal Monitors and provided handheld contraband detection equipment to enable agencies tools with which to discover illicit goods.

USG assistance helped the Georgian Border Police to improved border control by making it more difficult for undocumented travelers and smuggled goods to cross Georgian borders. During FY 2007, the Georgian Border Police detected 186 wanted persons, made 27 contraband seizures, arrested 335 illegal border crossers, detected 19 forged documents, denied entry to 539 persons, and detected 810 visa violations. The Georgia Customs Service (Revenue Service) reported that in FY 2007, it detected 2,112 violations, filed 494 cases, pursued 767 administrative violations, and considered 515 cases violations under the Tax Code.

In FY 2007, the GOG continued to take on greater responsibility for increasing state funding for border security. It doubled the budget of the Georgia Border Police from 2006, reorganized the Customs Service, and placed the Customs Service into the newly formed Revenue Service. The GOG paid for renovations of the Border Police’s Rapid Reaction Unit facility, continued renovations at the Border Police training facility, and began construction or renovation of four Border Police field facilities.

USG assistance helped the Georgian military increase its readiness and conformity to NATO standards. Since entering into "Intensified Dialogue" status with NATO in 2006, the GOG continued to undertake structural reforms to achieve further integration with NATO. U.S. military advisors assisted Ministry of Defense officials and officers in their defense transformation and NATO-accession efforts. The U.S. advisors assisted Georgia with the development of the Strategic Defense Review, which was submitted to the NATO Allies in July 2007. This is a key component of the NATO accession process and Georgia’s was well-received by the NATO Allies. The advisors also assisted the MOD to develop and institute a Programming, Planning and Budgeting System (PPBS) and worked with the MOD to fully implement this system and various subsystems. Acquisition planning has been a focus of NATO criticism of Georgia, and the advisory team has provided recommended acquisition concepts and directives which are still under review by the MOD.

Advice on the development of a modern Military Personnel Management System (MPMS) has been instrumental in slowly eroding a Soviet style personnel management system, and includes development and adoption of a personnel evaluation system, military occupation specialty system, professional military education system, officer/NCO distribution and assignment system and the issuance of Identification Cards to all Georgian Armed Forces (GAF) personnel. In order to support the increased contribution of Georgian soldiers to Iraq, the team also has drafted and provided casualty assistance and reporting system.

In the area of logistics, the advisory team has provided supply chain management advice and concepts; including maintenance concepts and NATO based Host Nation Support Catalogue and concepts. The team is currently assisting Georgia to develop a logistic support concept for deployed Georgian forces, which is a multi-year project. In addition, Georgia has a poorly organized national intelligence system, and the advisory team has been working with the MOD to develop a national intelligence concept to fuse information provided to and by the MOD with information from other national agencies in order to supply timely and accurate intelligence to senior leaders.

In FY 2007, Georgia increased the size of its troops deployed in Iraq from battalion to brigade size. Following the GOG’s decision to increase its forces in Iraq, U.S. military advisors completed training for and equipping of the 2000 soldiers in Georgia’s Third Infantry Brigade for deployment to Iraq in FY 2007. These troops directly supported the mission of U.S. troops in Iraq. The U.S. also began training and equipping the First Brigade, which will replace the Third Brigade in Iraq in 2008. The Georgian military has committed to take control of Wasit province southeast of Baghdad. Their mission is to intercept weapons, equipment and supplies coming from Iran to Baghdad. They are establishing six checkpoints throughout the province and a combat outpost. They conduct mounted patrols throughout the province and surprise traffic control points. USG assistance also helped the Georgian military become more interoperable with NATO forces; Georgia has volunteered forces for Afghanistan

U.S. efforts to improve the Georgian professional military education and training systems have resulted in Georgia developing its own, U.S.-style officer and non-commissioned officer courses. In 2007 U.S. trainers assisted in the development of the Georgian Logistics Captains’ Course, trained 25 brigade and battalion intelligence officers and NCOs to help Georgia develop its own military intelligence branch, and sent the first two Georgian students to the U.S. Army Warrior Leaders Course. Following their return, these students were tasked with creating a similar course for in-country training on leadership topics for their colleagues.

Stabilization Operations and Security Sector Reform – Law Enforcement Restructuring, Reform, and Operations - USG assistance to promote rule of law in FY 2007 worked on raising the standards, skills and professionalism of Georgian legal and law enforcement officials, including the Police, the National Forensics Bureau Laboratory, the Office of Public Prosecutions, and the Ministry of Interior (MOI).

USG assistance to enhance forensic capacity and accuracy was critical for the development of proper crime scene security, evidence collection, and forensic laboratory analysis needed to enable Georgia’s January 1, 2008 transition to adversarial criminal justice proceedings, including trial-by-jury in some cases. In FY 2007 USG assistance refurbished the Ministry of Justice's National Forensic Bureau Laboratory, provided forensics training, and assisted with development of policies and procedures for the laboratory's professional operation so that the laboratory will meet international standards. In addition, the USG provided ballistics equipment and training to allow forensic laboratory firearms examiners to properly examine and compare bullet and cartridge cases associated with suspected criminal activity. USG assistance also sponsored the creation of three regional evidence collection centers to properly store evidence collected from crime scenes outside of Tbilisi. The USG assisted the police in FY 2007 continuing the construction of a new Police Academy building which will seat 250 students, house 125 students, and include a pistol range.

In FY 2007 the USG provided the MOI with a Fire Arms Training System for simulated target shooting on which hundreds of officers were trained. The new system provides shoot/don't shoot scenarios that are true to life, sharpening decision-making skills for potential lethal force situations. Also provided was training for 24 law enforcement officers and officials regarding methods and techniques for successful resolution of crisis and/or hostage situations to increase basic negotiation skills for defusing crisis situations. Installation of a new mobile police communication system that provides patrol officers with access to the motor vehicle registration database was completed along with training for the officers. The system filters out multiple entries of the same vehicle to allow the police to accurately identify those that are indeed stolen. The new system increased the accuracy of police record checks in FY 2007 from 30% to 80%. USG assistance supported the renovation and upgrading of the kennels and several other buildings at the MOI's canine training facility, in response to the death of 60 dogs due to unhealthy conditions. In the now safe and healthy facility, police officers can successfully train the dogs to carry out official police activities, without the worry that sickness or other health issues may impede their skills.

In part due to USG-funded law enforcement training and equipment, the Georgian police force has become more professional and more effective in carrying out its duties. According to GOG statistics, 18% more crimes were solved in the first six months of 2007, compared to the same period in 2006. The overall crime rate for the first six months of 2007 decreased by 4.6% as compared to the same period in 2006. Serious crimes (murder, robbery, drug dealing) decreased by 62.5%.

In FY 2007, USG assistance also helped to build the GOG's capacity to combat and prosecute money laundering cases by assisting with the re-organization of the Office of Public Prosecution’s anti-money laundering unit. USG assistance funded the polygraphing of new unit staff, arranged for a roundtable for the anti-money laundering unit and its GOG counterparts to discuss their specific responsibilities, and sponsored a seminar to improve the various anti-money laundering units' investigatory and prosecutorial skills.

Transnational Crime - In June 2007, the U.S. Department of State's Trafficking-in-Persons Report ranked Georgia as a Tier 1 country in recognition of the GOG's recent significant efforts to eliminate severe forms of trafficking in persons (TIP) through prosecution of TIP perpetrators, protection of victims, and prevention of TIP crimes. The GOG demonstrated in 2007 greater inter-agency and international coordination and adopted a victim-centered approach.

The USG supported GOG anti-TIP efforts by training 48 representatives from the Ombudsman's office, non-governmental organizations (NGOs), judges and airport personnel. The USG and GOG jointly ran the TIP victims' shelter in Adjara, on the border with Turkey, and legal aid hotlines for citizens in Tbilisi, Batumi and Kutaisi. With USG support, in FY 2007 lawyers conducted 120 legal consultations and represented trafficking victims in 16 criminal and two civil cases. In November 2006, the State Interagency Coordination Council adopted the national referral mechanisms document, a product of joint GOG and USG work. The national referral mechanisms document governs the process by which a person is officially recognized as a victim of trafficking protected under Georgian law and sets out the rules regarding referral of victims to a wide range of social and government services.

In January 2007 the President of Georgia signed the State Action Plan for 2007-2008 to fight human trafficking, developed collectively by the GOG, local NGOs, international organizations and relevant experts. The USG supported meetings of experts who drafted the plan, which addresses protection, prevention, and prosecution. In July 2007, the State Interagency Coordination Council approved the TIP victim rehabilitation and reintegration strategy, developed jointly by the GOG, USG, and international and local organizations. This comprehensive document establishes the key objectives of state anti-TIP activities, including those related to ensuring effective rehabilitation and reintegration of TIP victims into the society, and encourages the active participation of NGOs, international organizations, social workers, and government in the reintegration process.

USG assistance in FY 2007 increased public awareness of TIP and its dangers through a wide range of public awareness activities, including anti-TIP radio spots, TV public services announcements, booklets, and meetings with different target groups. In addition, free legal assistance was provided to trafficking victims. Legal consultations were also offered to potential victims, i.e., individuals who were looking for employment opportunities abroad. A second trafficking victims’ shelter was established in Tbilisi with USG and GOG support. The existing shelter in Adjara and the new shelter in Tbilisi provide assistance to TIP victims from the entire country. Although the USG in FY 2007 provided financial assistance to manage the shelters, the GOG funding for their management and maintenance was gradually increasing and expected to cover 100% of expenses by October 2008.

Conflict Mitigation and Reconciliation - Peaceful resolution to the conflicts in Abkhazia and South Ossetia is a key USG foreign policy objective in Georgia. The unresolved conflicts prevent Georgia from realizing its potential for stability and reform by undercutting national unity, social stability and economic growth. In FY 2007 USG funds supported confidence-building linkages between Georgians and citizens of breakaway regions; the availability of and access to independent media and information; opportunities for dialogue on key democracy, economic, and social issues; and regional reconciliation processes.

At the GOG’s request, the USG provided legal advisors to support the chief GOG official negotiating with the Abkhaz de facto authorities to achieve a peaceful resolution to the conflict in Abkhazia. The USG also continued to fund mine clearance activities in Abkhazia’s Ochimchire and Sukhumi regions, which were expected to be declared landmine-impact free by the end of 2007. However, mine clearance activities in Abkhazia’s lower Kodori Gorge were hampered by the GOG’s restricting access to minefields. USG assistance helped clear mines from 990,726 square meters of land in the region of Abkhazia, destroying 194 anti-personnel mines, 319 pieces of unexploded ordinance, and five cluster bomb sub-munitions.

The USG, along with other international donor organizations, provided resources in FY 2007 to the South Ossetia Economic Rehabilitation Program, implemented by OSCE. USG funding supported joint business-skills training for 1,320 individuals from 59 Georgian and 48 Ossetian villages, facilitated business linkages, and initiated a dialogue on methods to address relevant licensing and registration issues that must be overcome to enable cross-regional trade and introduce new services in South Ossetia, such as microfinance opportunities. Several commercial linkages were created; apple nurseries and fish hatcheries located outside South Ossetia started to provide supplies to farms in the conflict zone.

To help improve relations between Georgia and the Abkhazia region, the USG sponsored two mixed-study tours to the U.S. for media professionals and civil society activists. Twenty-four participants were trained to counteract entity-centric view points, better understand the linkages that can be created between an unbiased media and effective civic advocacy, and promote regional peace and reconciliation. The USG also assisted an NGO to produce an action plan for developing an economic model for the conflict zones, which addresses the problem of unemployment in the area.

In FY 2007, the USG facilitated the work of GOG representatives, de-facto South Ossetian and Abkhaz officials, international donors, and NGOs on an assessment of assistance interventions needed in South Ossetia and Abkhazia. The assessment established the need for continued economic rehabilitation projects and training to support the physical rehabilitation of key facilities in South Ossetia as well as programming to improve economic opportunities, transnational health and social development, and dialogue in Abkhazia. The assessment also provided detailed media intervention recommendations and highlighted the potential for successful activities to be expanded from other areas of Georgia into the conflict zones in 2008.

In FY 2007 the USG facilitated regional dialogue among Georgia, Armenia, and Azerbaijan on how to manage the shared water resources of the Kura-Aras river basin. Mid-level technical agency working groups were complemented by a trilateral small grants program and public forum meetings. More than 100 women took part in workshops, media and gender leadership training and bio-monitoring task forces. Government representatives from Armenia, Azerbaijan and Georgia discussed trans-boundary water issues on TV shows produced and broadcasted with USG support, part of a media campaign to promote greater understanding of benefits of regional cooperation. The three water monitoring agencies agreed to common water monitoring and quality parameters and the three hydro-meteorological centers signed a Declaration of Intention to enable joint monitoring and forecasting of water resources. A U.S.-based Center of Excellence at the University of Maryland and local institutions entered into a partnership to ensure sustainable joint monitoring of water resources. Other donors agreed to build on the results of the USG program once it ends in 2008.

GOVERNING JUSTLY AND DEMOCRATICALLY

USG assistance for governing justly and democratically in FY 2007 focused on: strengthening municipal governance capacity; improving public sector transparency; enabling a fair and efficient court system; promoting integration of Georgia’s ethnic minorities; and, fostering broader public participation in the nation’s political life, including elections.

Rule of Law and Human Rights - During FY 2007 the USG continued to support activities centered on the new Criminal Procedure Code (CPC), which is expected to be adopted in early 2008. Once implemented, the new CPC will replace Georgia’s current quasi-Soviet criminal justice system with an adversarial system compliant with Euro-Atlantic standards, including trial by jury in selected criminal cases. The new system will provide for accountability and transparency because both pretrial investigative procedures and trial proceeding will be conducted with evidence presented and tested in an adversarial manner before a judge or jury. In support of the CPC, the USG provided criminal procedure exemplars, funded U.S. and European experts to advise the GOG on how to incorporate modern investigative tools and procedural safeguards into the new Code, and helped train over 60 Georgian prosecutors on the use of adversarial trial skills necessary to properly implement the new CPC. This included interactive trial skills demonstrations, practical workshops, the creation of training materials and trial skills presentations, and monthly mock trials. A train-the-trainers component armed 30 Georgians with modern and effective teaching techniques. As a result, the Office of the Public Prosecution began to institutionalize a CPC training program using its own cadre of local expert trainers and curricula to train prosecutors.

The USG also continued to assist the judiciary develop and adopt a comprehensive ethics code, setting the stage for follow-on ethics training provided for newly appointed and sitting judges by the High School of Judges. The USG provided a training-of-trainers course for the High School of Judges faculty on interactive teaching methods and lesson planning. The USG also developed a computer program to conduct judicial qualification exams and provided continued monitoring of the exams, which the High Council on Judges continued to administer without USG support. The USG assisted the efforts of the Georgian Supreme Court by supporting the analyses of 2005 and 2006 Supreme Court decisions in electronic format, which resulted in the publishing of a civil law judicial bench book. Further, USG support conducted a series of trainings for 58 judges on media relations, judicial integrity, courtroom comportment, jury trials, and domestic violence. Participants included judges from the first instance courts, the court of appeals, the Constitutional Court, the Supreme Court, as well as magistrate judges. USG assistance helped to draft a brochure entitled "Journalists' Guide to the Courts" that helped media to better understand the court system and details of court proceedings, improving the accuracy of reporting.

The USG supported the development and sustainability of the Georgian Bar Association (GBA) by supporting the opening of branches in Batumi and Telavi and facilitating their contact with the Bar Association of Israel. USG assistance contributed to the creation of GBA‘s continuing legal education committee and continuing legal education curriculum, as well as the initiation of an internship program. Thanks in part to USG assistance, the Georgian Bar Association’s ethics commission processed complaints on a timely basis and improved public awareness on ethics. Amendments to the code of ethics and disciplinary procedure were drafted.

The USG helped strengthen legal education by institutionalizing new teaching methods and curricula for graduating law students by helping new law faculties to develop an elective legal ethics course. With USG support, the Batumi Law Clinic and Tbilisi, Batumi, and Kutaisi State Universities incorporated legal education into their curriculum, and students received academic credit. Accreditation standards had not yet been developed by the end of FY 2007 due to lack of political consensus, but a resolution is expected in 2008. The USG provided funding to the winning Georgian team for the Willem C. Vis Moot Court Competition and partial funding for their participation in the Jessup Moot Court Competition international round.

To increase public awareness of rule of law, 640 high school students participated in street law classes; 56 law students received training-of-trainers assistance; the street law program was expanded to the Georgian Technical University; and a teachers' manual was developed. USG assistance promoted gender equality and human rights protection through legal advocacy, training for judges and lawyers, and disseminated brochures on human rights. The USG supported the provision of free legal services on issues including domestic violence, family law, and labor law. The USG also assisted the GOG to implement the action plan on the law on domestic violence, harmonized national legislation with the UN Convention against Corruption, and conducted public outreach on the anti-corruption strategy action plan.

Good Governance - The GOG has implemented an impressive program of governance reform, anti-corruption initiatives, and democratic institution building since 2003. However, despite progress, work remains to be done. In FY 2007 USG assistance worked to increase the human and institutional capacity of the Parliament, strengthen executive branch institutions, and bolster the capacity of recently elected local governments. In order to sustain Georgia's democratic transition, the USG supported public sector transparency and accountability at national and local levels and promoted the needed balance between branches of government.

USG assistance in FY 2006 and 2007 supported cross-party dialogue on reforms to parliamentary rules of procedure. This facilitated the creation of a technical working group, which was later complemented by the formation of a political working group. In spring 2007, a conference brought together members of the two working groups to draft a consensus proposal on amendments to the rules of procedure. USG assistance also continued to train prospective women leaders. Assistance supported discussions on public service reform which resulted in the responsible parliamentary committee unanimously agreeing to present draft legislation to the Parliament. USG assistance also increased the Parliament’s research capacity by providing qualified interns to parliamentary committees, factions and offices. The program facilitated three regional public hearings for select parliamentary committees, which were attended by more than 300 citizens. USG-supported consultations with parliamentary factions resulted in an increased number of written questions put to the executive branch tabled by Members of Parliament to the executive branch. The Parliament took on management of the Speaker’s Advisory Board, which had been initiated with USG support.

The USG continued to work with Georgia’s civil registry by helping the Civil Registry Agency create an organizational development strategy and train 132 middle-level managers in office and human resources management, customer service, team-work, and relevant legislation. The Civil Registry Agency introduced procedures for passport and identification issuance and the registration of civil acts that improved the quality and transparency of services.

To improve communications, a USG-sponsored Intranet system installed in the Office of State Minister on Conflict Resolution Issues was harmonized with those in counterpart institutions, such as the Ministry of Foreign Affairs. The minister’s website was translated into three languages. Public administration management training was provided on managerial skills for 17 senior officials from Adjara.

In FY 2007 a USG advisor worked within the Ministry of Finance to facilitate comprehensive budget reforms to ensure transparency and public participation. During FY 2007 USG assistance contributed to the evaluation of all financial management systems using the Public Expenditure Framework Assessment indicators created by the World Bank and European Commission. The U.S. advisor’s recommendations resulted in the creation of a three-year plan to improve the development of the capital budget, which represents 30% of the total state budget. The USG also provided assistance in developing a new system for intergovernmental financial transfers from the national government to local governments to equalize the financial capacity to provide services. Finally, the transparency and accessibility of the budget to the public was enhanced through the publication of a citizen’s guide to the 2008 budget. A total of 470 public officials were trained in essential managerial skills, laying a foundation for GOG public administration reform efforts.

In FY 2007 the USG provided technical assistance and training to municipal staff, council members, and citizens in budgeting, service delivery, local economic development planning, and participatory decision making. USG assistance led to higher levels of participation of municipalities and the implementation of new approaches to budget planning and execution, and service delivery. More than 77% of all municipalities passed council resolutions to begin the program budgeting and service improvement processes and almost half have begun local economic development planning. The USG provided organizational capacity assistance to six local NGOs, public sector associations, and academic institutions involved in local governance and decentralization. To address the underlying issue of gender imbalance, with Georgian local government staff being predominantly male, USG assistance supported women's participation in all trainings. The USG also supported a Georgian-language Master of Public Administration (MPA) program that trained 30 women in 2007 alone, bringing 49% of the total to 53 women (or 49% of total participants) trained by the program). At the local level, 63% of all NGO staff trained though USG assistance was women. These programs focused on the basics of municipal budgeting and service delivery so that women can increase their role in the local decision making process.

The USG reached out to newly elected officials in all 65 municipalities across the country by providing assistance in budgeting, service delivery, local economic development planning, and participatory decision-making to over 1,500 individuals including municipal staff, councilors, and citizens. Assistance also targeted public sector associations, academic institutions and central government agencies to promote decentralization reform.

Political Competition and Consensus-Building - While fundamental civil and political rights were generally respected during the October 2006 local elections, there remained areas for improvement in Georgia’s electoral system. The GOG and opposition parties needed to take active steps to promote meaningful political competition in the run-up to the 2008 presidential and parliamentary elections; the GOG needed to increase efforts to advance the integration of ethnic minorities. In FY 2007 USG assistance helped improve election administration, supported NGO efforts to verify the integrity of the electoral process, and strengthened political parties’ capacity to compete in 2008 elections.

At the end of FY 2007 the USG began assistance to promote meaningful political competition and foster an informed and active electorate in the run-up to the 2008 presidential and parliamentary elections. USG assistance worked to improve voter lists and to promote adequate voter turn-out, voter education, and political competition through TV debates and roundtable discussions.

In order to strengthen political parties and increase competition,USG assistance provided training to senior decision-makers of political parties, mid-level managers, and heads of divisions. Party leaders were provided training on party organization management and the role of the party organization between election campaign cycles. Consultations aided parties in constructing a viable political organization, developing local networks, forming strategies, using polling data, crafting messages, and implementing tactics to communicate messages to voters. The USG supported training on media communications to public relations and press spokespeople departments within political parties. The USG worked with political parties to establish new and strengthen existing youth affiliates to expand their appeal and access to that constituency. The USG supported a sustainability enhancement program to strengthen organizations, such as educational institutions, think tanks, and NGOs that provide indigenous political party development training in Georgia. USG assistance continued to support public opinion surveys and focus group research to help political parties develop party strategies and to assist the GOG in understanding the sentiments and managing expectations of the Georgian electorate, especially in light of upcoming elections in 2008. USG assistance was also instrumental in facilitating coalition building efforts among fractionized and diverse political opposition parties. The USG assisted the establishment of a parliamentary elections working group to promote dialogue between the President’s party and the opposition to reach a compromise on election legislation, including the reduction of the electoral threshold from 7% to 5%.

The USG supported the formation of a national integration strategy and an action plan by establishing a group of public and civilian experts to work on the documents. The strategy, based on countrywide consultations which included ethnic minority groups, will be submitted to the government for review in 2008. USG assistance supported the launch of a weekly TV talk show on public television which exposed people to the benefits of diversity and promoted mutual understanding and integration. The USG issued a grant to promote cooperation among female entrepreneurs in ethnically diverse regions and the capital, through internships and trainings. The USG supported nine trainings in diversity management for 95 people in diversity management to including civil servants, representatives of civil society organizations and, media, ethnic Georgians, Azeris and Armenians. USG assistance supported the completion of a survey of attitudes, needs, and expectations of minority groups as well as of the Georgian population nationwide on issues of ethnic diversity and integration. This comprehensive study was based on interviews with 2,400 people and focus groups throughout the country, providing information about social, economic, educational, and cultural concerns of minority populations which will be used in the process of developing policy documents. The USG program cooperated with the office of the State Minister on National Integration on policy development issues and assisted the GOG in the preparation of the first report to the Council of Europe on implementation of the Convention on Protection of National Minorities.

Civil Society - In FY 2007 USG assistance worked to improve relationships between the government, NGOs, media, and the public by supporting a wide array of initiatives to expand community mobilization, build civil society capacity to advocate for reforms, advance government watchdog efforts, enhance education, increase corporate responsibility, and promote public-private partnerships. Forty-seven Georgian citizens were sent to the U.S. on short-term internships focused on NGO leadership and public diplomacy. Furthermore, 20 regional NGOs received assistance and 41 people were trained in strategic planning and program development and implementation. USG assistance was also provided to media organizations. The USG supported 17 grants to advocacy and watchdog NGOs to improve public policy and administration. Grants were targeted to increase transparency through civic monitoring of national and local government budget processes and service delivery, the healthcare sector to ensure more transparency in the hospital privatization process, and the privatization of state-owned agricultural lands. Other activities facilitated increasing civil society engagement in sectors such as natural resource management, community-based tourism and education reform. Some grants and training supported issue-based networking and raised public awareness of issues such as domestic violence and HIV/AIDS, while others supported national integration through the formulation of a model for economic development in the Abkhazia/Georgia conflict region and the development of community radio stations in isolated ethnic minority areas. Several USG-funded grants helped establish a local initiatives support coalition for 200 Georgian women to address problems of youth violence and Georgia-specific concerns on climate change. USG assistance also established links between U.S. and Georgian regions and communities. Individuals and delegations from West Virginia, Massachusetts, Michigan and Nevada hosted Georgian study tours and came to Georgia to further develop community relationships and explore business opportunities.

USG-sponsored public-private partnerships leveraged USG resources with those of private and public organizations, including the Department for International Development (DFID) of the United Kingdom and the OSCE. In-kind government support also came from the Ministries of Education, Economic Development, and Environmental Protection as well as municipalities, including renovation of facilities and equipment.

In order to increase Georgians’ access to independent information, the USG supported five community Internet centers, providing access to about 21,000 people in target areas. The program offered computer skill training courses for about 6,000 people, as well as NGO and media representatives, and provided communities with opportunities to communicate directly with policy makers. Through online forums, citizens were able to obtain information from officials about issues such as Georgia's territorial integrity, reforms in the education sector, reforms in the defense field and Georgia's security policy, and human rights protections. In FY 2007 Georgian officials responded to approximately 60 questions during such forums, thereby increasing the transparency of various governmental organizations.

ECONOMIC GROWTH

There objectives of U.S. assistance in FY 2007 for Georgia’s economic growth were to: build the skills and information infrastructure required for a competitive economy and labor market; improve access to credit and business expertise for small and medium enterprises; link local and international businesses; enable a broad and well-regulated financial sector; build capacity for sound agricultural, economic, fiscal and monetary policy making; and, develop secure energy sources and markets.

Macroeconomic Foundation for Growth - The GOG’s goal is to develop a well-functioning tax agency and increase voluntary tax compliance to broaden the tax base and reduce the shadow economy; create the sound fiscal administration necessary to manage the economy, properly budget and allocate funds, and generate the revenues needed for economic and infrastructure development and improved services. During the merger of tax, customs, and financial police into the new State Revenue Service, the USG provided capacity-building support in the form of technical assistance, training, and IT support. USG advisors provided operational and organizational advice to streamline appeals processes and business registration. A study tour was arranged for senior officials and coordination sessions were organized for the new management. The USG also assisted with the drafting of improved tax regulations and a simplified value-added tax return form. E-filing of monthly tax returns were expected to be implemented starting November 2007. These measures will ease taxpayer compliance burdens and improve the State Revenue Service’s control functions, increasing voluntary compliance.

USG assistance supported the Ministry of Finance (MoF) to issue tax rulings, eliminating ambiguities in the tax code, and implement case management and tracking systems for statistical analysis and performance monitoring. As a result, the MoF reported continued increases in both the number of registrations by taxpayers and the amount of revenue collected – an increase in tax revenue as a percentage of GDP from 17.5% to 22.7% between 2005 and 2006. Private sector compliance costs decreased as the time to register an individual taxpayer and a business were reduced from three days to one day and from five days to three days, respectively.

The USG also provided assistance to the State Revenue Service to implement new value added tax invoice processing software which will identify unregistered taxpayers and document disparities between invoices filed by buyers and sellers for the same transaction. The website was upgraded to enable taxpayers to check their balances online and confirm their tax payments, which is estimated to save taxpayers approximately $3 million a year.

Trade and Investment - Georgia suffers from trade deficits due to export inefficiencies and the need for expensive imported consumer products and industrial inputs, including energy. Foreign Direct Investment per capita is increasing as Georgia’s liberal trade and investment regime, as well as tax and regulatory reforms, take hold. While trade costs and delays were reduced in FY 2007, long-term efforts are needed to improve customs operations and increase compliance with global trade conventions. In FY 2007 the USG supported the GOG’s efforts to reduce customs clearance time and cost, and increase compliance with global trade conventions and standards. The USG partnered with the GOG to develop and implement seven legal and institutional actions to improve the country’s trade and investment-enabling environment, most of which are described elsewhere in the report. Simplified procedures for border-crossings were established; an authorized economic operator program was developed; tax, customs and financial police were merged into the unified State Revenue Service; a customs risk management system was piloted; a new Customs Code that complies with World Trade Organization (WTO) standards was enacted; a public-private sector task force to review customs regulations was created; and WTO valuations procedures were developed for large taxpayers.

The USG provided assistance to the State Revenue Service to pilot a customs risk management system, which resulted in the release of 85% of shipments without physical inspection, while also revealing an ongoing scam to undervalue shipments. The USG, in partnership with United Nations Conference on Trade and Development, procured and installed database management software enabling the GOG to implement a cargo selectivity program, introduce paperless customs declaration processing, and increase compliance controls. The USG developed a diagnostic system that addresses customs processing delays. The pace of implementation of customs reforms was delayed due to GOG institutional reforms and personnel changes, including the merger of the tax, customs and financial police into the State Revenue Service.

The USG supported the opening of the new international airport terminal in Tbilisi. The USG provided recommendations on passenger processing and customer service training to 103 customs officials and border police employees. In addition, 418 line officers responsible for implementing the Customs Code received training on customs procedures. The USG also provided a cold storage facility which will enable opportunities for export not only of U.S. poultry to the Caucasus, but of other products from Georgia to the world, increasing opportunities for both U.S. and Georgian firms.

In FY 2007 the USG enhanced the capacity and promoted the sustainability of a countrywide network of business support organizations, which seek to build the trade capacity of micro-, small- and medium-sized enterprises (MSMEs). USG technical assistance to six business support organizations increased their sustainability and ability to provide trainings to 1,162 businesses and targeted assistance to 41 MSMEs in the areas of foreign trade facilitation, promotion and adoption of international standards, and securing financing and investment. To facilitate the sharing of experiences and cross-use of consultants, the USG helped establish the Business Consulting Network of Georgia, a countrywide network of business support organizations. In FY 2007 the Business Consulting Network of Georgia offices trained 121 individuals through eight training events on topics related to investment and trade capacity. Additionally, the USG supported the establishment of two business incubators for MSMEs. The incubator in the Kakheti region focuses on honey production and the incubator in the Svaneti region, founded through a USG grant to the Women in Business Association, assists start-up MSMEs.

In part due to USG support, trade turnover increased by 40% and foreign direct investment inflows more than doubled in CY 2006 over CY 2005; the trend was sustained during 2007. With USG assistance, the Georgian National Investment Agency, the public agency responsible for the promotion and facilitation of investment, was restructured to more effectively target foreign direct investment, develop investor materials, and modernize its online marketing.

Financial Sector - The financial sector has been one of the leading growth industries in Georgia. Yet, despite large increases in lending, an estimated $500 million gap remains between the demand and supply of credit to small- and medium-sized enterprises (SMEs) and the agricultural sector. In addition, financial services such as leasing and insurance remain underdeveloped. A USG priority in FY 2007 was to increase access to financial services, a key prerequisite to the expansion of SMEs and the agricultural sector. Agriculture comprises nearly 18% of GDP, but receives only 2% of commercial bank loans.

The USG was successful in establishing a strong training institution, the Georgian Banking Training Center, which provides training to both bank and non-bank financial institutions. The Center will provide training in international standards to financial sector professionals to increase the capacity and willingness of financial institutions to provide a wide array of financial services, particularly in the areas of microfinance and micro- and small-sized enterprise lending. Also, in FY 2007 the USG sponsored the Association of Banks of Georgia training of 126 loan officers, of which over 25% are women, to increase their understanding of international standards.

USG assistance contributed to increasing commercial banks’ loan portfolios, which experienced an unprecedented increase of 53% in 2006, followed by a 30% increase in 2007. During the same period, the total assets of microfinance institutions more than tripled. These statistics reflect not only the development of the financial sector, but also a rapid growth of micro- and small-sized enterprises with increased access to credit. Overall, the level of credit to the private sector increased from 14.7% to 19.4% of GDP in 2006 over 2005.

A $3 million Development Credit Authority loan portfolio agreement with the Bank Republic helped extend commercial credit to small- and medium-sized enterprises working in agriculture. In FY 2007 15 loans amounting to $1.1 million were provided to qualified agribusinesses. The loan portfolio guarantee not only provided funding for the sector, but also encouraged the participating bank to enter into a new type of financing. In FY 2007, the Georgian microfinance institution, Constanta, successfully attracted additional lending capital from an international financial institution using a $1.5 million Development Credit Authority portable guarantee.

Modern Energy Services - Energy security, source diversification, and stable supplies are USG foreign policy objectives for Georgia. These all depend on policies that encourage infrastructure investments that optimize indigenous energy use, regional energy trade, and international energy transit. USG support for GOG efforts has dramatically increased reliability, reduced corruption, increased revenues, and electrified disadvantaged communities. Weak regulation, crisis-driven planning, and lack of financing hamper investment.

USG assistance to the Ministry of Energy and a broad stakeholder dialogue on reform issues enabled the GOG to successfully oversee the restructuring of the electricity sector. Work began in 2004 to attract private investors to purchase and operate energy assets for the benefit of the country. A USG-funded management contract helped improve the commercial operation of Georgia's largest electricity distribution company. The USG's management team prepared the utility for privatization during major supply, consumer and policy disruptions. In June 2007, the GOG sold this vitally important asset to a Czech company Energo- Pro. Energo-Pro hired the same management team to maintain the momentum of reforms and to improve the operational efficiency of the second distribution company and five hydropower plants acquired by the owner.

Energo-Pro began implementing power distribution reforms in Adjara. At the end of FY 2007 93% of electricity purchases were measured electronically, controlling electricity flow. Individually-metered customers rose from 10% to 25%, enhancing bill payment accountability. With strong GOG commitment, collections increased to 95%, leading to the improved service reliability. U.S. advisory support to the Ministry of Energy contributed to the GOG's success in attracting a corporation from Kazakhstan to purchase the Tbilisi gas company. Overall, reforms have resulted in greater efficiency throughout the sector, and commercial distribution losses have decreased from 80% in FY 2003 to 10% in FY 2007.

The capacity of the electricity and gas regulator, which must balance investor and public needs, was improved through training. Power sources were diversified by rehabilitating the capacity of two small hydro plants and providing technical assistance to additional nine small hydro plant owners. USG funds were leveraged at a ratio of 1 to 5 (every dollar the USG directly invested in construction for five dollars from banks, owners, other donors and communities). In addition, three energy efficiency demonstration projects were implemented with 20% in-kind community labor, improving household budgets of concern to women. With strong commitment from the GOG to incorporate stakeholder input, particularly from small hydro plants owners, power market rules were amended to require the purchase of all small hydro plants production, thereby improving their commercial viability.

Agriculture - Agricultural production sustains the livelihoods of half of the nation’s population and constitutes almost 20% of GDP. However, low productivity, quality inconsistency, and a diverse geographic production base pose a challenge to developing new markets, which became a USG priority following the Russian ban on Georgian agricultural products. A second priority was increasing rural incomes. In general, the agricultural sector weathered the fallout from Russia’s ban on Georgian products fairly well. While total agricultural exports fell by 23% in 2006 and production declined by 29%, much of this drop was due to a poor harvest year. Early indications from the 2007 harvest and export sales data point to a fairly strong recovery.

In FY 2007 USG resources helped the National Service for Plant, Animal and Food Safety develop a draft National Food and Agriculture Strategy and refine the draft National Law on Food Safety. However, shortly after the government changed the leadership within the Ministry, a decision was made to delay adoption of the new Food Safety law and to replace the comprehensive agriculture strategy with short-term action plans within a few key areas. The strategy, while not fully adopted, was utilized to form the basis for shorter-term action plans in priority areas, such as agri-processor development. This has led to the GOG’s adoption of a “100 Georgian Businesses” program, which is designed to support the creation of 100 new businesses over a one-year period. In addition, the strategy played an important role in helping the GOG to determine the core areas that the Ministry should address over the short-term, including more aggressive marketing of Georgian products and reinvigorated efforts to promote investment opportunities in agriculture. This resulted in a joint USG/GOG program to support the participation of Georgian agribusinesses in leading international trade fairs. These efforts were especially important as Georgia worked to mitigate the impact of Russia’s embargo on Georgian agricultural products, up to 80% of which were traditionally sold into Russian markets.

USG activities in FY 2007 also focused on enhancing private sector competitiveness in agriculture. These included an agricultural education initiative, sanitary and phytosanitary systems capacity building, and support for market information systems and agricultural statistics gathering and analysis. USG funded agricultural education programs increased the ability of agricultural schools to provide education meeting international standards, training over 4,000 students, faculty, and administrators. USG sanitary and phytosanitary activities trained 89 Ministry of Agriculture employees on animal disease outbreak identification and containment, helping the GOG to deal with a serious outbreak of African swine fever in 2007. USG training of Ministry of Agriculture staff in statistical methodologies assisted the Ministry in making informed policy decisions. The USG trained almost 40% of the Ministry of Economic Development's Office of Statistics on utilizing reliable agricultural data. In November 2006 the Office of Statistics announced it is moving from a full reporting methodology to a sample frame methodology, reducing costs while increasing the accuracy of data. U.S. assistance also sponsored one Georgian Ministry of Agriculture employee to study in Missouri for two weeks to gain experience in animal health and veterinary inspections.

In FY 2007 USG resources helped build functional export-oriented value chains; introduce modern production, post harvest handling and packaging technologies; support the entry of agricultural products to alternative markets; and link small-scale local producers with local processors, distributors, and retailers. This included the establishment of modern consolidation centers, processing plants, pack-houses, dairy processing plants, milk collection centers, dairy farms, irrigation systems, drying structures, and greenhouses. In partnership with the Ministry of Agriculture, agribusinesses were sponsored to attend leading agricultural trade fairs in locations such as England, Poland, Germany, Ukraine, and the U.S. Small-scale farmers were organized and linked up with large buyers, thus facilitating their transition from '”tailgate” to higher-value market chains. These activities benefited 19,383 rural households, 236 producer organizations and business associations, and 376 agribusinesses, and resulted in more than $10 million in domestic and export sales. For the first time Georgian products are now being sold in markets in Germany and the UK, and directly to large supermarkets in the Ukraine. In the past few years, rural poverty rates have actually declined somewhat; incomes for rural enterprises receiving USG assistance increased by an average of 400%.

Private Sector Competitiveness Area - The USG supported Georgia’s economic growth through assistance in free market reforms and workforce development. While significant progress has been made, elements of the business environment remain unfavorable, restricting investment and private sector development. Key commercial legislation needs to be improved and licensing and registration procedures streamlined. The tourism industry has been highlighted as an area of possible growth, but much basic training in tourism is lacking.

USG efforts in establishing effective commercial legislation, rationalizing regulations and licensing procedures, creating functional property markets and streamlining land privatization contributed greatly to improvements in Georgia’s ranking on several of the World Bank's Doing Business Survey indicators. USG assistance aided Georgia to rise from 37th to 18th place in the World Bank’s Doing Business 2008 report, and improve its ranking in that report on Protecting Investors (from 135 to 33), Dealing with Licenses (from 42 to 11), Starting a Business (from 36 to 10) and Registering Property (from 16 to 11) indices.

To reach Georgia’s long-term goal of eliminating legal barriers to doing business, the USG supported improved core commercial laws, streamlining of licensing and registration, and privatization of 32% of the state-owned farmland available for privatization. A USG-supported “Business Comes to Parliament” forum demonstrated the benefits of the public-private partnership, facilitating a dialogue between the business community and the GOG.

To help Georgia develop a modern tourism industry that can attract western investors and clients, the USG brought in two U.S. experts to lecture for a week to 100 tourism industry trainers and leaders in Batumi and Tbilisi. USG assistance also supported a distance learning course on tourism management and gave small local hotels an opportunity to create web-pages both in Georgian and English. As a result, 65 web-pages were created and the number of customers of these hotels increased by 20%. A USG-sponsored tourism study will enable the government to create a sound investment policy for tourism infrastructure and contribute to economic growth and job creation by increasing service exports.

The USG also advised the GOG on several legal changes. The Law on Securities Market and the Law on Entrepreneurs were amended to protect minority shareholders. Business registration was simplified, reducing the time and expense to start a company. Draft laws on electronic signature and secured financing were prepared and a secure payment system for registry users was designed. The National Agency of Public Registry was assisted in designing a collateral registry. The automation of tax liens reduced the risk and administrative costs for commercial lending. The State Minister for Reforms Coordination and the Ministry of Economic Development received recommendations on leasing and mortgage finance. With USG support, a draft construction code was developed and approved by the Ministry of Economic Development, introducing a one-stop process, thereby reducing the time and cost to obtain a construction permit.

USG assistance helped establish secure property systems and titled property that can be used as collateral, improving the business-enabling environment and increasing access to credit. The Ministry of Economic Development and the National Agency of Public Registry received capacity-building assistance and 50 municipalities received training on managing the privatization process. Mandatory notarization of property transactions was eliminated, reducing the time and cost of property transactions. An agricultural land privatization network was established and provided assistance to more than 4,900 businesses. A total of 310,102 secure titles were issued to immovable property, of which 108,894 were for agricultural land. Three key legislative acts were drafted and enacted, streamlining the land privatization process and setting forth transparent procedures. Public outreach campaigns on the land privatization program reached over one million people, and more than 3,900 free consultations on land issues were provided. Increased access to credit and investment, the establishment of a customer-oriented property registration system, and improvements in the legal framework for real estate have contributed to the development of effective land markets. By the end of FY 2007 the USG assisted the GOG to privatize over 90,000 hectares of agricultural land, including over 16,000 hectares of unused farmland, equal to approximately 32%.

USG assistance also resulted in new initiatives under workforce development. A vocational education program was developed to establish a modern, Western-style system. The USG assisted an NGO to produce an action plan for developing an economic model for the conflict zones, which addresses the serious problem of unemployment in the area. In addition to individual long and short-term training programs in the U.S. and Central and Eastern Europe, the USG introduced human and institutional capacity development methodologies to the Ministry of Education and Science (MES) and Tbilisi State University (TSU), Georgia's flagship higher education institute, training 70 instructors, directors, and MES staff. The USG helped TSU’s information technology (IT) resource center develop capacity for technology-based learning and research and establish IT accreditation standards. USG activities included an assessment of the university’s capabilities to manage an IT center and integrate IT into course work and research activities; procurement and installation of 75 computers, network equipment and peripherals; and training in Estonia and the U.S. for university staff. As a result, TSU is including in its strategic plan the integration of IT into all faculties, course work, and administrative operations. MES is working with the university on a national strategy for integrating IT into all universities nationwide. TSU replicated USG assistance and is establishing four more centers with its own resources.

In 2007 the USG sponsored nine Georgians to participate in four-week training programs in hospital administration, agribusiness association development, road construction, and oil pipeline management. Alumni attended training in 2007 on strategic planning techniques in Georgia. After participating in a Food processing and Packaging Program, one alumnus created an Association of Entrepreneurs and Consumers. He used the new association to promote international standards such as ISO 9000 and ISO 15000, and assisted Georgian companies to implement these systems. Another alumnus restructured his pharmaceuticals company based on his experience in the U.S. His enterprise hired an additional 60 employees and received ISO certification. The city of Kobuleti has a new water disinfection system resulting from knowledge gained by an alumnus' visit to the U.S.

Economic Opportunity Area - In Georgia, 33% of the population lives below the poverty line and the average monthly per capita income is about $60. Official unemployment is 15.3% and under-employment two to threefold greater. Micro-, small- and medium-sized enterprises (MSMEs) have the potential to become a force for job creation. Therefore, one USG assistance priority is to support economic opportunity programs that increase the share of the economy for MSMEs, as well as liberalize policy environment for MSMEs and improve their access to financial, business, and training services. U.S. assistance also works to implement policies that encourage lending to the sector and establish business service and training providers.

In FY 2007 USG resources assisted in the development of a legal framework to improve access to credit for micro- and small-sized enterprises (MSEs). By the end of 2007, the Law on Credit Bureaus developed with the assistance of USG advisors will be adopted, followed by the establishment of this institution in early 2008. A well-functioning credit information bureau responsible for providing reliable enterprise-level credit information to financial institutions will help reduce the risks and costs associated with commercial lending. In addition, the U.S. helped the National Bank of Georgia streamline reporting requirements for microfinance institutions and commercial banks, improving the quality of information submitted by microfinance institutions and banks, thereby increasing their accountability.

USG assistance contributed to the increase of commercial banks’ loan portfolios, which experienced an unprecedented rise of 53% in 2006, followed by a 30% increase in 2007. During the same period, the total assets of microfinance institutions more than tripled. These statistics reflect not only the development of the financial sector, but also a rapid growth of MSEs with increased access to credit.

The USG, through direct technical assistance to the Business Consulting Network, supported the expansion of MSEs. Consultations in management consulting, financial reporting, taxation, business start-up and linkages, and getting credit were provided. Best practice models in agriculture were disseminated and support was given to those agribusinesses that expressed interest. Farmer-to-farmer linkages are being developed to continue this practice. In addition, linkages were created between rural producers and suppliers and regional centers.

INVESTING IN PEOPLE

USG assistance in the area of investing in people in FY 2007 was designed toimprove the delivery of health and social services, by helping to: implement the decentralization and accreditation of education systems; strengthen vocational education, including agricultural science education; increase access to affordable, quality health services, including infectious disease prevention, reproductive health, and maternal and child health; and, develop capacity to formulate, monitor, and regulate social sector policies.

Health - Low public expenditures on health, weak health service provision, and inadequate water supplies threaten social stability. The GOG made health sector reform a national priority. To reach its five-year goal of improved access to quality essential health care, the GOG will need to: control the spread of HIV, TB, and water-borne disease; expand/improve maternal and, child health care, and family planning services; improve disease surveillance; reform regional health care; and pilot well managed non-communicable disease services.

Health - HIV/AIDS - In 2007 Georgia remained in FY 2007 among the relatively low HIV/AIDS prevalence countries, although it continues to have high potential risk for an expanded epidemic. By September 2007 there were 1,406 HIV cases registered, a 300% increase in the number of registered cases over the past four years. The actual number of HIV/AIDS cases is believed to be about 4,000. Of note, the rate of HIV prevalence in the republic of Abkhazia was four times higher than in the rest of Georgia.

The USG’s long-term goal is to assist Georgia to contain the epidemic through HIV prevention, counseling, and testing services, and by reaching out to key high risk groups. The USG provided technical assistance to complement and support Georgia’s $23.6 million grants for HIV from the Global Fund for Tuberculosis, HIV/AIDS, and Malaria. Georgia was among the first countries to offer free antiretroviral treatment. Currently, all those eligible for treatment receive free antiretroviral: 290 patients out of 593 registered with developed AIDS. The USG provided outreach and testing to the most at-risk populations, who were offered clinical services for sexually transmitted infections. USG programs also supported behavioral surveillance within these most at-risk groups.

Health - Tuberculosis (TB) - The USG’s long-term goal is to assist Georgia to establish a national multi-drug resistant TB program. In FY 2007 the USG helped improve the managerial and oversight capability of the National TB Program and the Country Coordinating Mechanism decision-making authority. The GOG still lacks the technical and managerial capacity to battle TB without donor-financed technical assistance. As a result of USG assistance, the GOG is making some headway. With USG assistance, the GOG prepared a strategic plan and successful application to the World Health Organization (WHO) Green Light Committee that attracted millions of dollars of second-line drugs to fight multi-drug resistant TB. Key achievements of USG-funded TB programs included increasing case detection of TB to 91% (surpassing the WHO case detection target of 70%), major improvements in laboratory case detection, and 100% adoption of directly observed therapy short course (DOTS). These three successes have led to expanded access to care. The USG supported DOTS spots in three locations - Tbilisi, Poti, and Adjara region. The Tbilisi DOTS spots served 46% of all Tbilisi TB patients, with observation increased from 20% to 96%. However, TB continued to be a pressing public health threat for Georgia, with a treatment success rate of 65%, falling short of the target of 84%. Treatment default for new patients was high at 13%. The retreatment success rate was extremely low at 49%, with the default rate at 22%, which created a serious danger of developing multi-drug resistant TB. Multi-drug resistant TB was estimated at 6% in new cases and 28% in previously treated cases.

Health - Other Public Health Threats - A report published in 2007 found that between 2004 and 2005, Georgia saw a rise in adult mortality rates from 11 to 125 per 1,000 population. The premature death of men and women is an economic burden to Georgia. Modifiable lifestyle factors such as smoking, lack of physical activity, unhealthy diet, and alcohol consumption, along with uncontrolled high blood pressure affecting 57% of the population in Georgia, contributes to the heavy burden of chronic diseases. USG assistance continued a community-based pilot project to prevent cardiovascular disease and stroke by controlling high blood pressure. During FY 2007 the program expanded to four new districts, training health providers in appropriate medication, international protocols, better blood pressure measurement, and health promotion. Sixty-eight percent of enrolled patients achieved desired blood pressure levels at a cost of $8 per patient per year, demonstrating that community-based high blood pressure control can be cost effective and can be reached by in-service training at the primary care level. The program also addressed management of other common chronic diseases such as bronchial asthma and cancer through the development and dissemination of evidence-based guidelines and staff trainings.

At the request of the Ministry of Health, the U.S. in FY 2007 continued to support local experts to develop a strategy that would guide the national implementation of clinical guidelines and protocols in the health sector. National Health Account data was used to develop and adjust case-based reimbursement rates for hospital services. A draft pharmaceutical policy and law were developed.

Health - Maternal and Child Health - USG assistance made important contributions to saving women and newborn lives by reducing unnecessary, outdated medical procedures. The prevalence of contraceptive usage dramatically increased in 2006. The rates for cesarean sections declined from 47% in 2004 to 10% in 2007. Rates of postpartum hemorrhage, the leading killer of women during delivery, went down from 9% to 3%. The use of unnecessary drugs and routine episiotomies declined as companion deliveries became an accepted practice. Fifty percent of the country’s maternity hospitals now use modern delivery practices initiated and modeled by USG programs. In 2007 60% of the country’s births were handled by provider teams trained by a USG-funded program. Reductions in newborn mortality were achieved due to the introduction of a cost effective ($3.00 per newborn) series of measures to protect newborns from overexposure to cold temperatures, preventing hypothermia after delivery.

As a result of USG assistance, the GOG allowed qualified personnel other than obstetricians and gynecologists to provide family planning service at the primary care level, expanding access to services. The GOG also applied licensing standards for maternity units that were developed with USG assistance. USG activities advised the national reproductive health council that reviews and updates maternal and child health and reproductive health polices and guidelines, with a USG-funded project serving as the technical secretariat for this ministerial council. A USG-funded immunization program achieved 91.7% of DPT3 (three doses of vaccine against diphtheria, pertussis and tetanus) coverage. GOG funding and procurement of vaccines ensured sustainability of the program.

Health - Family Planning and Reproductive Health - By promoting family planning, USG assistance directly contributed to reductions in abortion of between 9% to 21% depending on the site. The distribution of free contraceptives offered women a strong alternative to abortion. Youth were reached through 15 youth-friendly pharmacies. USG assistance introduced family-centered reproductive health care that reached 3.9 million consumers by working at every level of care, reaching men and women at maternity centers, schools, medical campaigns, and pharmacies. In 2006 600 pharmacists were trained to counsel and make referrals on family planning methods; 15 youth-friendly pharmacies reached youth and 922 medical professionals were reached through in-service training and continuous supervision. Modern contraceptive prevalence (CPR) in Georgia increased from 20% to 27% in five years. In only one year, from 2006 to 2007, CPR increased by 3% in some regions.

Health - Water Supply and Sanitation - Safe drinking water is essential to ensuring environmental safety and human health. However, distributed water quality in Georgia is below average acceptable health standards. Technical and sanitary conditions at the water intakes of most water supply facilities across the country are inadequate, leading to regular outbreaks of water-borne diseases. Service is also a problem, as most of the settlements of Georgia receive water with interruptions, resulting in daily contamination of distribution systems through groundwater inflow. These problems are strongly linked to the poor management and institutional capacity which currently exist in the sector. Lack of a well thought-out water sector policy, the legal foundation to support it, inadequate resources, and weak institutional capabilities to manage companies to deliver water consistently and treat discharged sewage are the main reasons for the persistent problems in the water and sanitation sector.

In FY 2007 the USG conducted a water sector assessment to assist the GOG Water Reform Commission in developing an Action Plan for its water utility sector reform. The assessment found that assistance is needed to build the capacity of the key decision makers in the sector and create a foundation of public support for the GOG’s reform initiatives. The USG will provide technical assistance and commodity support to two water utility companies in the country to introduce and implement computerized hydrodynamic network modeling systems which will enable them to identify water network vulnerabilities. Recommended network improvements will reduce energy consumption and increase the reliability and quality of distributed water, thereby diminishing the likelihood of adverse health impacts associated with inadequate, contaminated water supplies.

Education - Georgia’s legacy of a centrally-managed, corrupt education system of poor-quality severely constrains the country’s human capital. With USG support, the GOG put in place a national education strategy and action plan. This blueprint for education reforms was coupled with better management of finances, adoption of a national education accreditation plan for higher and basic education, and more grassroots involvement in decision-making. USG support led to improve transparency in higher and basic education. Last year a broad merit-based system across all levels of education was put in place. This included a unified national university entrance exam for students; selection of school principals by the USG-supported Education Resource Centers; and election by communities of Boards of Trustees composed of parents and community leaders for school oversight. The GOG commitment to education was reflected in a steady, annual 12% increase of public expenditure in 2007 and 2008.

Education - Basic Education - The USG’s long-term objective is to help the GOG improve the quality of and access to basic education, particularly in rural areas. The MES applied the education reform framework’s concept of Education Resource Centers (ERC) by launching 69 centers simultaneously serving the country's 2,300 schools as a resource for newly-elected school boards of trustees. In FY 2007 65% of all ERCs became fully functional. The USG continued training for all center staff in strategic and operational planning, school management data collection, education management information systems, and in effective functioning of boards of trustees. Centers applied a merit-based system of school director selection; 30 centers developed individual three-year strategic plans for communities and schools. The performance monitoring system piloted for 25% of Education Resource Centers was integrated into the MES’s national system of education monitoring and evaluation. The USG supported local decision-making and increased professionalism of school administration by training 2,300 school boards of trustees and principals. Boards of Trustees played a key role in oversight of finances, which resulted in equitable distribution of school resources and revenues, redressing decades of inequality for schools in marginal communities.

The USG in FY 2007 also continued to support the adoption of a strategy and system for general education accreditation. At year’s end, the proposal was being reviewed by the National Education Accreditation Center. The USG also supported critical training for MES heads of departments on education reform, communication, and ministry outreach to the public. The USG also funded courses on research, monitoring and evaluation.

Seven small USG-funded centers throughout Georgia introduced Georgians to U.S. culture and educational opportunities. Over the course of 2007, the centers received 27,862 visitors and hosted 141 events or presentations. The USG helped 29 libraries throughout Georgia enrich their collections with approximately 1,400 new titles on children’s literature and textbooks to meet their users’ needs for English-language materials. USG assistance continued to support the American Academy, a 200-student, American-style, four-year high school which served as a model school for the MES in curriculum and text-book development and in teacher training. In 2007, all 38 graduates of this high school enrolled in universities; 13 of them in the U.S., a figure which represents a disproportionately high 14% of all Georgian undergraduates in the U.S. The MES hired two of the American Academy’s teachers to develop training modules for teachers in the regions; the school’s Deputy Director was working with the MES on a pro bono basis to develop professional education programs. The MES shot a training film at the American Academy, featuring teachers, students and methods.

At the request of the Minister of Education and Science, USG assistance supported a digital video conference with three U.S. experts on combatting school violence after a particularly brutal incident claimed the life of a student in a playground fight. Hand-picked MES staff, including the Minister and Deputy Minister and a number of senior Ministry staff, attended.

Education - Higher Education - USG support to higher education in FY 2007 was primarily directed to strengthening the organizational, technical, and financial management capacity of the newly formed National Education Accreditation Center, charged with university accreditation. Implementing a strong, transparent higher education accreditation process will help shift Georgia’s universities to the modern, quality, tailored higher education system keyed to the needs of the labor force. The USG assisted the National Education Accreditation Center to develop, adopt, and apply both the standards and the system for accrediting universities. USG assistance organized over 100 stakeholders to work on these standards and trained 65 members of the newly-established quality assurance teams representing all universities. These teams will assure that universities comply with the new outcome-based standards. The National Education Accreditation Center’s five-year strategic plan, developed with USG support, was an important tool for directing and sustaining the accreditation reforms.

In 2007 institutionalization of criteria-based accreditation resulted in only 41 of the 227 existing universities receiving accreditation. It is generally believed that some of the nonaccredited institutions will strive to meet the standards, while many may close. Universities that meet quality standards should have increased resources for their operations, which in turn will translate into better quality programs. Universities, with USG support, are addressing the critical issues of consistent and equitable grading across faculties and institutions.

In FY 2007 the USG continued to provide institutional support for the Georgian Institute for Public Affairs, a not-for-profit Georgian institution providing American-style, hands-on, graduate and advanced-degree instruction to professionals in the fields of public administration, public policy, international affairs, law, and journalism. In FY 2007 the Georgian Institute for Public Affairs enrolled approximately 380 students, and graduated 103. Nine education advising centers throughout Georgia provided information on university and graduate study in the U.S. to just under 5,000 students, and individual consultation sessions to 441 students on university admissions, the application process, financial aid, resume writing, etc. Education advising center advisers also conducted pre-departure orientation sessions for students preparing to study in the U.S and held courses for 132 students to prepare for the Test of English as a Foreign Language; 98 students took the Internet-based exam at the education advising centers.

HUMANITARIAN ASSISTANCE

Humanitarian assistance focuses on helping the GOG meet the basic needs of vulnerable groups, particularly those living in institutions or remote areas, through distribution of commodities, such as medical and other relief items and through provision of disaster response services as needed. In FY 2007 the USG provided donated humanitarian assistance (HA) commodities such as food, clothing, medicines, and medical equipment and supplies to vulnerable populations in Georgia through numerous airlifts and ground transportation. Although Georgia continues to grow at an impressive rate, poverty levels remain high, and many internally displaced people (IDPs) from the conflict zones lack access to basic health services. In addition, the Russian embargo on agricultural products and unexpectedly high energy costs has placed additional burdens on families at risk.

In FY 2007 five hospitals in Tbilisi received medical equipment, supplies and training, and installation of the equipment by a professional USG medical team. Furthermore, USG assistance helped renovate two village ambulatory health centers, one outpatient clinic and one maternity hospital in Georgia. Additional activities included: Primary Healthcare Initiatives; Primary Care Rural Nurses Program; Medical Mobile Units; Medical Distribution Project; Children’s Immunization Initiative against MMR; and, a major hospital upgrade project. Over 7,500 boxes of Meals Read to Eat (MRE) were distributed to over 30 soup kitchens. Over 20,000 kilograms of iodized salt was distributed to infants, small children, and lactating mothers benefiting more than 95,000 people.

Protection, Assistance and Solutions - USG assistance leveraged additional assistance through the Assistance Partnership Program. Working with several key NGOs, humanitarian assistance was extended to more communities throughout Georgia. The primary focus in FY 2007 was to increase medical assistance to the medical community and so support the Georgian medical infrastructure. While efforts are ongoing, HA assistance has already increased the capacity and capability of the Georgian medical community. This in turn has increased the accessibility of medical care to a larger, though still limited segment of the population. U.S. assistance contributed to the following programs including: Primary Healthcare Initiatives (PHCI); Primary Care Rural Nurses Program; Medical Mobile Units; the Medical Distribution Project; and the Children’s Immunization Initiative against MMR.

Disaster Readiness - The objective was to assist Georgia through preparation for the identified vulnerability to the Avian Influenza virus. The GOG’s National Center for Disease Control identified the potential pathogen and preliminary tests from a laboratory in London confirmed cases of H5N1 highly pathogenic avian influenza in 13 dead swans in Batumi. More than 9,500 personal protective equipment (PPE) kits were provided giving Georgia a method to protect its populations that are at greater risk of exposure. These populations include potentially affected communities, medical staffs and the responding emergency personnel. Three ministries were directly involved: Ministry of Internal Affairs; Ministry of Defense; and, the Ministry of Health.

Migration Management - More than 25 communities of IDPs living in regions from the Abkhazian border to Adjara received medical equipment and supplies through our Partnership Program in FY 2007. Medicines and medical supplies were distributed to 60 partner health facilities and 173,861 patients were served at partner health facilities. Two training sessions were completed (“training of trainers”) in appropriate use of pharmaceuticals to 60 doctors/trainers. Approximately 500 health providers were then trained by the original 60 doctors/trainers. Communities of vulnerable populations were the recipients and include boarding schools for handicapped children and orphanages. Success with the medical progress is determined through accountability in prescription practices. In FY 2007 there was an improvement of 15% to 18% in inspections between the pre-training and post-training tests, indicating that the prescriptions were correctly managed. These activities were coordinated closely with the Ministry of Health.

FY 2007 Measures of Country Performance

The following data are based on the Monitoring Country Progress in Europe and Eurasia system developed by the United States Agency for International Development (USAID) to measure and track progress in the region. The system uses four different indices to monitor progress, drawing on readily available standardized country-level data on economic reform, economic structure and performance, democratic reform, and human capital. The primary data sources are the European Bank for Reconstruction and Development (EBRD), the World Bank, the United Nations Children’s Fund (UNICEF), and Freedom House. The data for each of the four indices are converted and standardized to a 1-to-5 scale, with a “5” representing the best performance of the Eastern Europe and Eurasia region, and a “1 the least advancement of the region.

Georgia’s Democratic Reform* Scores in 2006 compared to Romania and Bulgaria in 2002

Date: 01/01/2008 Description: The graph to the left shows Georgias democratic reform scores in 2006* (the grey shaded area) as compared to the average of Romanias and Bulgarias democratic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership. State Dept PhotoThe graph to the left shows Georgia’s democratic reform scores in 2006* (the grey shaded area) as compared to the average of Romania’s and Bulgaria’s democratic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership.

*Actual 2007 scores not yet available

Georgia’s Democratic Reform Scores in 2006 compared to its Reform Scores in 1999

Date: 01/01/2008 Description: The graph to the left shows Georgias democratic reform scores in 2006* (the grey shaded area) as compared to its democratic reform scores in 1999 (the bold line). State Dept PhotoThe graph to the left shows Georgia’s democratic reform scores in 2006* (the grey shaded area) as compared to its democratic reform scores in 1999 (the bold line).

*Actual 2007 scores not yet available

*Democratic reforms include the electoral process (the extent to which elections are free, fair and competitive), civil society (primarily NGO development), the independence of media, public governance and administration, rule of law (primarily judicial reform) and the scope of corruption as well as anti-corruption income.

Georgia’s 1st Stage Economic Reform* 2007 Scores Compared to Bulgaria and Romania in 2002

Date: 01/01/2008 Description: The graph to the left shows Georgias stage one economic reform scores in 2007* (the grey shaded area) as compared to the average of Romanias and Bulgarias economic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership. State Dept PhotoThe graph to the left shows Georgia’s stage one economic reform scores in 2007* (the grey shaded area) as compared to the average of Romania’s and Bulgaria’s economic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership.

Georgia’s 1st Stage Economic Reform 2007 Scores Compared to its Scores in 1999

Date: 01/01/2008 Description: The graph to the left shows Georgias stage one economic reform scores in 2007* (the grey shaded area) as compared to its economic reform scores in 1999 (the bold line). State Dept PhotoThe graph to the left shows Georgia’s stage one economic reform scores in 2007* (the grey shaded area) as compared to its economic reform scores in 1999 (the bold line).

Georgia’s 2nd Stage Economic Reform 2007 Scores Compared to Bulgaria and Romania in 2002

Date: 01/01/2008 Description: The graph to the left shows Georgias stage two economic reform scores in 2007* (the grey shaded area) as compared to the average of Romanias and Bulgarias economic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership. State Dept PhotoThe graph to the left shows Georgia’s stage two economic reform scores in 2007* (the grey shaded area) as compared to the average of Romania’s and Bulgaria’s economic reform scores in 2002 (the bold line) when they were invited to join NATO and received favorable indications of future EU membership.

Georgia’s 2nd Stage Economic Reform 2007 Scores Compared to its Scores in 1999

Date: 01/01/2008 Description: The graph to the left shows Georgias stage two economic reform scores in 2007* (the grey shaded area) as compared to its democratic reform scores in 1999 (the bold line). State Dept PhotoThe graph to the left shows Georgia’s stage two economic reform scores in 2007* (the grey shaded area) as compared to its democratic reform scores in 1999 (the bold line).

*Economic reforms include “first stage” reforms of privatization, stabilization, and liberalization (domestic price liberalization and trade liberalization), and “second stage” reforms in the financial sector, infrastructure (physical and energy), corporate governance and competition policy.

Georgia’s Progress on the USAID Country Progress Indices between 1998 and 2007

Date: 01/01/2008 Description: Georgias Progress on the USAID Country Progress Indices between 1998 and 2007. State Dept Photo

(1) Economic reforms index include “first stage” reforms of privatization, stabilization, and liberalization (domestic price liberalization and trade liberalization), and second stage reforms in the financial sector, infrastructure (physical and energy), corporate governance and competition policy.

(2) The economic structure and performance index tracks indicators such as the size of the private sector as % of GDP, export share of GDP, and the size of the small and medium enterprise sector as % of GDP, economic growth, inflation, debt, and foreign direct investment.

(3) The Democratic reforms index include the electoral process (the extent to which elections are free, fair, and competitive), civil society (primarily NGO development), the independence of media, public governance and administration, rule of law (primarily judicial reform), and the scope of corruption as well as anti-corruption efforts.

(4) USAID tracks progress on the Human capital index by analyzing trends in health (life expectancy, under five mortality rates, and public expenditures on health), education (secondary school enrollment rates and public expenditures on education) and per capita income.



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