Eastern Partnership and Socio-Economic Policy of Georgia

(Summary information)

General Information

The "Eastern Partnership",asthe EUnewinitiative, isanew program for Georgia and signifies theEU – Georgia relations transfer to a qualitatively new stage.After Georgia participation in the Partnership and Cooperation Agreement(PCA)andthe EuropeanNeighborhoodPolicy(ENP) program, the"Eastern Partnership", enables Georgia further approach to theEU integration. The participation of Georgia in the "Eastern Partnership” makes the country to facemany challenges andreforms to be implemented.On the one hand,harmonization ofthe unprecedentedopportunitiesandon the other hand thenecessity of theaccumulationof resources,are thesignificant challenges of the modern times.

The economicand social integration takes one of theimportantplaces in the generalcontext ofEuropean integration.Thesustainabledevelopmentand harmonizationof competitionpolicy,a comprehensive freetrade agreement (DCFTA)execution,highereducation,food safety,intellectualandindustrial property protection,povertyreductionandsocialequality,consumerrights protection,social partnership, andothers are among them.

For the reason of harmonization with the EU economic and social progress and identifying of existing challenges, the Caucasian Economic and Social Research Institute by the support of "Open Society - Georgia" implemented the project of the national platform stimulation, in the context of "Eastern Partnership" for the socio - economic development of Georgia. The project was carried out in the course of 2011 by the collaboration of the partner organization, Economic Problems Research Center.The project was financed within the Fund's initiative framework, which intended the public awareness rising about the "Eastern Partnership" and activation of the Eastern Partnership Civil Society Forum National Platform.

The book-"Eastern PartnershipandtheSocial-EconomicPolicy"wasprepared within the above mentioned project and initiative framework.The bookconsists ofthe materials related to EU economicandsocial integration, where the officialdocuments analyzeis made,theexperts views,opinionsand suggestions are represented;therole of the Civil Societywith the EU economic and social integration is discussed;as well asa briefoverview ofthe "EasternPartnership" ongoing reforms in the othercountries,and in the end,the best articles awarded in students’andmedia’contest, implemented within the project, are represented.

Hereby thesummarized chaptersof the bookare taken and due to thepublicationformat,only themain emphases are given.

Motivationsandperspectives of Georgia in the "Eastern Partnership"

Theallocationoffinancing for Georgia,within the initiative of the "Eastern Partnership”, have been significantly increased. In theperiod of 2007-2010,120millionEuros have been allocated which was implementedby the EuropeanNeighborhoodPolicy instruments; will be increasedby almost50%for 2011-2013, andwill reach180million Euros.Thefundingwill be spenton fourpriority sphereswithin which,the bilateraland multilateralcooperation programs promotion bythegovernmentof Georgia andthe EU will be held.

Obviously,theallottedamount funding within the "EasternPartnership"will not be able to cover the expenses ofthe reformsto be carried outby Georgia within thepartnership.If we consider thepoliticaland economicbenefitsthatwould be resultedfrom Georgia integration with European zone,allthe criticalargumentsthat hasbeen recentlyexpressed forthe Eastern Partnership lack offunding, become negligible.

For the execution of deepandcomprehensive free trade agreement(DCFTA) negotiationsstarting, Georgia has to carry out all the obligations set by theNeighborhoodPolicy ActionPlan. Despitea number of problems(which wasmainlyrelated to the factthatthegovernment's priority wasaliberal economicmodel), Georgiawill still haveto introducethe Europeantypes ofregulations(regarding to the LaborCode,in competition regulation, in the sphere of food safetyetc.),because this is a part of the association agreementnegotiations,as well asDCFTA. The recentdiscussionsabouthowGeorgia willbenefitfrom DCFTA-relatedrequirements, is not reasonable today, becauseon the one hand,the Economic Researchesshowed that the short termvision DCFTA-relatedrequirementswill be resulted inexpenditure for thestateadministration,as well asfor the privatesector.On the other hand,in the long termvision, Georgia will have a hugebenefit from thisagreement.According the experts assessment, through the DCFTA execution,theshare offoreign direct investment will increase from2.3billion(2008) up toUSD 11.36 billion (2020), andin addition there will be anincreaseofexports by 13.3%in everyfive years.[1]

The "Eastern Partnership"membership within theEU perspectiveis notenvisaged.This,in turn,makes the partner countries morecriticalwhen comparingcostsandbenefits in the process of transition to democraticEuropean standards.For Georgia, the "Eastern Partnership"policybenefitisa signing oftheEuropean Union association agreement. Although theassociation agreementdoes not includethe mattersof conflict resolution, a deepercooperationwith the EU"EasternPartnership"can beseenassome kind of implicit guarantee for safety.[2]

The "Eastern partnership" is also reflected in the revised document of the neighborhood policy.In the first place, the attention will be drawn to civil society groups more involvement and support.The aspect of regional cooperation will be brought forward in multilateral cooperation, as well as in bilateral cooperation framework.At this point, it can be said that the "Eastern Partnership" guiding principle will be "more for more", according to which the EU will estimate and support its partners’ successfully implemented reforms.For 2014 and the following years, the distribution of the planned financial assistance to partner countries will be relevant to successful reforms of 2010-2012.

The customsregulations,tradefacilitationandEUstandards

The freeaccessof Georgian product to EUmarkets is one of the majorfactorsand thepreconditions for Georgia'seconomic development,investment attracting, living standards improving.

It should be mentionedthatdespitethe greatimportanceof tariffbarriers,a crucial importance for Georgia is an overall reductionofnon-tariffbarriers.Today, Georgia operates withtariffpreferences; however,they havenot causedrevolutionary changesin the geography ofour export.It should be consideredthatthe working towards the trade barriers removalbetween the EU and Georgia hassignificant experience accumulated.Despite the fact, thatthishas not beenreflectedin a significantstimulation ofexports, theprocess has started andgivesa cause foroptimism.

Actually,today’s freeaccessto EUmarkets forGeorgian product is interrupted duetoexistence of the customs procedures,customs non-tariffbarriers,standards and quality control mechanisms.Therefore, theapproach of Georgia and theEU within these particularareas makes the realopportunity of the mentionedbarriers reduction.

EU is a major trade partner for Georgia.In recent years, 20-25% of Georgian exports are realized inEU,andtheentire volumeof goodsfrom the EUimportsis about 30%[3].Obviously,considering that the Russianmarket is actuallyclosed,themarketpenetrationgrowth is aseriousfactor inthe Georgian economyrising.

For the Generalized System of Preferencesof GoodGovernance andSustainable Development(GSP+)[4], in 2008, theEuropean Union hasextended the terms up to three year(2009-2011) for Georgia. Withinthissystem,theoretically, the preferences are applied on 7200 product unit producedin Georgia, but unfortunately, actually, we use only30from them.Furtherdiscussionon this issue was originally scheduledfor Decemberof 2011,butin May of 2011the European Commission hasdecided to extendtheGeneralized System of Preferencesfor Georgia automatically (as well asfor similar countries)until the end of2013.

It can be saidthat theGSP + formatis lessusefulfor Georgian export diversification:by this scheme,again, the Georgiantraditionalexport productsaremainly exported. In 2010Georgianexport was carried out byGSP + regime in 23EU countries, in 2009 by this scheme in 21 countries, andin2008-inthe18 countries. In addition,fivelargest tradingpartners have been substantiallychanged:in 2010,the UnitedKingdom, Franceand Romania were deducted fromtheranksand replaced byItaly,Bulgariaand the Netherlands.Thus, the GSP + -utilization geographic area has significantly expanded in lasttwo years.[5]

In May 2008, bythe Commission'srequest,the PolishorganizationCASEhad completedthe research related to Georgia-EU freetrade agreement(FTA)opportunitystudy.According to the study,a deep and comprehensivefree tradeagreement signing will have a positive effect.[6]

The EU focuses onadeepandcomprehensive free tradeagreementsigning. This agreement, apart from the commodityagreement implies:services trade,capitalflow,harmonization of customsprocedures andregulating legislation, sanitary andphyto-sanitarystandards harmonization, public procurementprocedures andthe investmentlegislation harmonization,consumerrights andintellectual propertyprotection,competition provision,also internationalenvironmentalandlaborstandards protection, harmonization ofthe energysector, etc.

In 2008 the European Commission specialmissionof expertson trade issues by the management of Deputy Director General,PeterBalashishadvisited Tbilisi.The purposeof the missionwas the situation study in Georgia, the ongoingeconomicreformsandevaluation thereadiness of Georgiafor deepandcomprehensivefree tradeagreement negotiations.The above mentionedreportwas published inthe spring of 2009.The reportnotes thatGeorgia has madesomeprogress inthe reformingitseconomy,but there are some areas whichalso requirenecessaryreforms.[7] In the conclusionare noted the fieldsin which thereformsshould beimplementedandthe relevant recommendationsfor their implementation are given.Therecommendations aredivided into two parts:the first,performance of whichare consideredto benecessary for a deepand comprehensive freetrade agreementnegotiation startingandthe second,the fulfillmentof which is assumedto be necessary forsigningthisagreement.

On 8 September 2009, atthe 33rd commission meeting of Georgia integration with EU, the documents, elaborated by theinter-agency coordinating group related to a deepandcomprehensivefree trade agreement within the mentionedCommission framework,had been discussed:"Strategy ofCompetitionPolicy",“The food safetystrategy”, "Standardization,accreditation,conformityassessment,technicalregulation and metrologystrategy",“A programof legislativereform andthe introductionof technical regulations",as well asinformation related theintellectual property requirementsfulfillment.

2010On March 11, atthe 36rd commission meeting of Georgia integration with EU, the documents had been discussed elaborated on the basis of the mentioned Commission'srecommendationsand amended in accordance of theEuropean partners notes:Strategy of"competitionpolicy",“The food safetystrategy”, "standardization,accreditation,conformityassessment,technicalregulation and metrologystrategy",as well as“A programof legislativereform andthe introductionof technical regulations”.

By the end of 2010,the government of Georgia hasapprovedthe all above mentionedstrategyand started thepractical implementation of them.

In March 2009the European Commissionhanded over to the Georgian sidea ReadinessAssessment document of afree tradeagreementnegotiationsandrelated package of recommendations,whichinitiallyimplied 11fields, butat the beginning of 2010,4keyfields had been identified, which are considered by European Commission as very decisive for open negotiations:the technicalbarriers of trade, the sanitaryandPhyto-Sanitarycontrol; theintellectual propertyrightsand competition policy.[8]

The Government supposes that in general, by the end of 2010, in all and among them in four key areas, the significant progress has been achieved. But, despite the officially declared euro-integration, the changes in various spheres are not relevant to the declared statements, which seriously hamper the deep and comprehensive free trade agreement signing between EU and Georgia.[9]
Despite the fact that Georgia exploits the GSP+ preferences, export geography and its composition has not changed significantly since preferences system starting.It seems, that European tariff barrier is not the only barrier in the process of entering to the integrated European markets. The non-tariff barriers removal is possible only with the institutional changes and with economic regulation European institutions establishment in Georgia.

It is importantthat the authorities should clearlyestablishnot only thestrategies,which are undoubtedlya step forwardin terms ofEuropean integration,but start theactual implementation of thesestrategies.Thisprimarilyrelatesto those particularinstitutional reformsthat will providenon-tariffbarriers exceptionandtheentrance of Georgia into theintegrated Europeanmarket.
Special attentionshould be drawn tostandardizationof the technicalrequirements, harmonization ofcustomslegislation.It is also important, that the lawshould be stable in this areaandnotto be often changed.

Sustainabledevelopment systemanda "green"business

The European Unionis serious aboutsustainabledevelopmentstrategyadoptedin 2001(by the relevantprocessing), andis consistentwith itspracticalrealization.TheEuropeanstrategy among the mainobjectives considerstheeconomicwelfare as:"Support to a rich, innovation and education-oriented,competitiveandenvironmentallyefficienteconomycreation,which provideshighlivingstandardsandfullandhigh-qualityemploymentthroughout theEU".

On the assumption of the Georgian reality comparison purposes, it is highly important, how the European strategy analyzes the policy interaction theme, to be implemented in the various components: "the environmental, economic and social issues such kind of integration, which will be consistent and reinforce one another, using the comprehensive tools-set for better regulation, such as, impact assessment and consultations with interested parties.To achieve this goal, all EU institutions should consider, that important policy decisions should be based on the impact assessment of sustainable development, social, environment related and economic aspects, and also take into account the consequences of inactivity".

Due to the fact that the modern concept of sustainable development does not acknowledge any dogmas, success is directly related to the monitoring, research, analysisandconstantprocessofadjustment.It is important thatthestrategywill considernot onlythe long-term,butthe short termstudiesnecessity, as wellas, a propermethod of development indicators targeting: "The researchin the field ofsustainabledevelopmentshould includebothshort-term, “supportive” projects,as well aslong-termconceptualvision, and cover theglobaland regionalcategory problems.Thesestudiesshould contribute tointer–and Interdisciplinaryapproaches insocialandnatural sciences, toreduce the distance ofthe scientificresearch,policyformationandimplementationprocesses. The role of a technology inan "intelligence"development requires thefurtherstudy. Also,furtherstudy (research)is essential for thesocial,economicandecological systemsof interactionmechanisms, as wellas ahazardanalysis,prognosisand preventionsystems".[10]

The European integrationprocess,which has been initiated by a "Partnership andCooperation Agreement" (PCA),at the presentis implemented withinthe framework of the" EuropeanNeighborhoodPolicy Action Plan"; it includes 8prioritiesand relatedgoals and objectiveslisting.From here,the general economicissuesarereflected inthe 2nd and 3rd priorities andinthelist ofgoalsand objectives in -paragraphs4.4and4.5 (sectoredissues-paragraph4.6).The analysis of thoseissuesand related governmentalactivities,whichare based on the "EuropeanNeighborhoodPolicy ActionPlan Implementation"strategy for 2010-2011,on the 2010 implementationplan report and the document"the countrybasicdataandtrendsfor 2011-2014",showed the evidence ofthat particularweakandstrong points,which todayarecrossed on the way towardsEuropean integration.

In general, it is very important, how is the Government's vision in regard of sustainable economic development component.In the first, it refers to the overall development strategy.The European approach focuses on the innovative, education-oriented economy formation, which at the same time provides a high standard of living and a full-fledged, high-quality employment.On the other hand, Georgia still does not have a complete concept of sustainable economy development and consequently – the indicators and the targets.Of course, it may imply that the state fully shares the European strategic approach in the process of European integration, however, the reform policy, the decision makers’ rhetoric and what most important, the target parameters contents, give us the less possibility of such assumption.

So, thekeyissues, that implied thesustainabledevelopment ofthe strategicplanning andthe provision of coordination between the involved subjects, by mistake, were attached to the territorial subject issues, and because of that were consigned not to the Prime Minister competence,orthe Economy andSustainableDevelopment Ministry's competence but in thecompetence oftheRegional Development and Infrastructure Ministry.It is clear thatthe realgoalremainedunrealized.Also, the wrongunderstandingof "relevant actor"causedthat oneof the mostrelevant(i.e.topic-related)part-the civilsociety, has not been involved in theworking out processof sustainabledevelopmentstrategy.

The similarproblemoccurred inthe case of Ministry of Environment Protection.In any case,the mentioned organizationcouldnotbethe only one.An operating subject can’t bethe only onecomponent in determining of the sustainable development strategy elaboration and implementation preparing,as wellas environmentalprogram.It would be desirable towork together, at least on “Green Business” strategy elaboration, with the Ministry of Environment Protection,SustainableDevelopment andthe Ministry of Finance.

During the projectworking process, the correspondence with the ministry of SustainableDevelopment confirmed that the government considers the role of ministry mostly in the context of “Green Business” andnot asa unified coordinationcenter.

It is noteworthy thatthe action plan had notexperienceda fundamentalchange for even 2011.However,discrepanciesexistnot onlyin this issue.For example, for "effectivemeasures forpovertyreduction-oriented"policy, whichaims"reductionthe numberof personsbelow the poverty lineandimprovement ofsocial equity",is responsible Ministry ofLabor,Health andSocial Welfare.In 2010,and alsoin 2011,the ministry,by the challenge responding, implemented"provision the cashassistanceandmedical insurance to socialsecurity to the familieswithbelow the poverty line",which isclearly contradictorywiththe primaryobjective.

Considering that the qualitative statistical information is a key precondition for sustainable development indicators processing andcontrol,the directinterestof the researchwas thepriorities of the government'sin this area.It should be mentionedthat in theoriginal version of the "Action Plan"is marked out:"The development of statisticalmethodsfully compatiblewith European standards,furthermodernization ofthe Departmentof Statistic forthe reason of independenceof official statistics and strengthening of sustainablefunctioning.” From here, only thesecondparthas remained in the 2010action plan,"The Department of Statistics furthermodernization, forthe reason of independenceof official statistics and strengthening of sustainablefunctioning",and for theaction program has been determined -"The strengtheningandreorganization of newly establishedStateNational StatisticsOffice,based on the law passed by the Georgian Parliament. In other words,beyondthe plan the maingoal remained: "development the statistical methods fullycompatiblewith EU standards”. In 2011those defects were improved,however despitea newdefinition,theaction plandoes not containa keycomponent:the most importantgoal of theNational StatisticsOffice -to defineandmaintainthe sustainable developmentcontrol indicators in cooperation withrelevantstakeholders, orat least,givethepublicenough informationto do this.Moreover, the information deliveryto civilsociety(as well asother entities),became chargeable.

The documentalsocontainssomeinconsistencies,such asComputer andEnglish LanguageCourses, which had been set as economic developmentincentivesprimary program,but itis clear thatthe issue ofsustainable development requiresthe better organized approaches and appropriate responsible agencies involvement. Otherwise, the problem of unadjusted reforms implementation and therefore, theproblem of inefficientandineffective expenditure ofresources will remain.