November 17, 2006
GEORGIA
OWNERSHIP
1. Partners have operational national development strategies
a. Coherent long-term vision with medium-term strategy derived from vision
1.
Georgia’s long-term vision, articulated in the confirmation speech given by the
Prime Minister before Parliament in February 2005, focuses on the need to meet the
country’s energy needs, rehabilitate infrastructure, complete privatization, introduce a
poverty benefit and invest in education and health, while fighting to improve governance
and reduce corruption. The vision builds on the Government’s Report to the June 2004
Brussels Donors’ Conference, which focused on building prosperity through accelerated
economic growth and job creation, reducing poverty and protecting the vulnerable. The
Government is developing an Action Plan with the EU to promote closer ties with the
European internal market, in the context of the EU’s European Neighborhood Policy
(ENP), formally adopted in November 2006. The ENP Action Plan is largely consistent
with Georgia’s vision and includes measures aimed at strengthening democracy,
promoting the rule of law, upholding human rights, liberalizing trade and developing
energy and transport.
2.
The vision is consistent with the Economic Development and Poverty Reduction
Program (EDPRP), Georgia’s first PRS, which was prepared with a twelve-year horizon
through 2015. While the current Government recognizes the EDPRP as an important
reference, it does not consider it the primary framework guiding policymaking and has
formulated a separate Medium-Term Action Strategy for 2007-10. The Medium-Term
Action Strategy builds on the ENP Action Plan and an Individual Partnership Action Plan
for joining NATO.1
3.
The current Government has plans to update the EDPRP on a periodic basis to
reflect current developments. It is drafting an EDPRP update. The first EDPRP Progress
Report prepared in January 2005, that reviews progress to date, is also a forward-looking
document that outlines policies and programs for the period 2005-07. It sets out a threeyear action plan, which identifies broad investment and policy actions aimed at achieving
EDPRP goals. The action plan of the Progress Report is also reflected in the MediumTerm Action Strategy.
4.
The Government is developing detailed sector strategies in line with the MediumTerm Action Strategy sectoral priorities. Its Basic Data and Directions Document for
2007-10 identifies priority investments and action plans for each sector ministry. The
Basic Data and Directions Document, endorsed by the Cabinet, is currently guiding
preparation of the annual budget for 2007. The Government has also prepared a
development strategy for the Georgian banking system covering the period 2006-09, as
well as a comprehensive National Anti-Corruption Strategy completed in June 2005. The
Strategy on Criminal Justice Reforms in Georgia has been elaborated and an Action Plan
for its implementation is currently being finalized.
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The EDPRP was completed in June 2003. A Progress Report was completed in January 2005.
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November 17, 2006
b. Country specific development targets with holistic, balanced, and well
sequenced strategy
5.
The EDPRP focuses on achieving progress in six priority areas: i) governance; ii)
macroeconomic policies; iii) the business environment; iv) human capital; v)
vulnerability of the poor; and vi) the natural environment. The EDPRP also discuses the
areas of gender (very scarce information), science and information technology, and the
needs of post-conflict zones.
6.
The EDPRP is geared towards achievement of the Government’s reform
objectives including MDG targets. The Government has adapted the MDG targets to
country circumstances and added a target on socioeconomic rehabilitation of people
displaced by conflicts and natural calamities. Following the 2003 Rose Revolution, the
Government reasserted its commitment to the MDGs and established a Governmental
Commission on Realization of MDGs. Most of the MDGs are expected to be achieved by
2015, although non-income poverty indicators have shown little improvement to date.
While health outcomes, in particular, have not exhibited a positive trend, increased
expenditure allocations and plans for significant restructuring in the sector are expected
to help achieve targets. Access to quality education for the poorest and minority groups,
particularly in the mountainous regions remains an issue and progress towards primary
education completion rate goals has been slow.
c. Capacity and resources for implementation
7.
The Ministry of Finance has developed key principles and mechanisms for
medium-term expenditure planning and initiated work to develop a Medium-Term
Expenditure Framework (MTEF) during 2005 to ensure closer links between expenditure
planning and policy priorities. While experience shows that it takes several years to
develop an MTEF, the Georgian authorities are ahead of schedule. The MTEF document
directly derives from the Medium-Term Action Strategy, which is also included as the
first chapter of the Basic Data and Directions Document for 2007-10. MTEF priorities
are reflected in the yearly budget allocation process. A working group co-chaired by the
Ministries of Finance and Economic Development is in charge of linking the EDPRP to
the budget through hard budgetary ceilings and activity classifications. A Budget System
Law, adopted in April 2003 and effective since January 2004, introduced a more detailed
budget schedule and clearly outlined the responsibilities of the Ministry of Finance and
other government agencies in budget preparation. It eliminated certain protected
expenditures, facilitating the reallocation of expenditure to new priorities including those
outlined in the EDPRP. Expenditure allocations for the education sector have been
substantially increased in the 2006 budget. The 2005 and 2004 state budgets greatly
increased social protection expenditures, in line with EDPRP priorities, although it has
postponed introduction of the targeted poverty benefit program. Defense, public order
and state security expenditures have also increased (consistent with the Medium-Term
Action Strategy). The Government produces quarterly budget execution reports, via the
Treasury Service of the MoF.
d.
Participation of national stakeholders in strategy formulation and
implementation
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November 17, 2006
8.
The Ministry of Economic Development is the locus of initiative for the EDPRP
and the Office of the State Minister on Reform Coordination is the one for the MediumTerm Action Strategy. Individual Ministries prepared policy papers which fed into the
draft Medium-Term Action Strategy. In January 2006, the Government also issued a
Decree on the Procedures for Elaboration and Endorsement of the Ministries’ MediumTerm Action Plans. The 2007-10 Medium-Term Action Strategy has been endorsed by
the Cabinet. The Ministry of Economic Development coordinates and monitors EDPRP
implementation through the Economic Policy Department which is primarily responsible
for preparation of EDPRP Progress Reports.
9.
The Government is making efforts to foster public participation in decisionmaking and systematically consult stakeholders on the identification of development
priorities. In August 2005, it organized consultations to receive feedback on the draft
Medium-Term Action Strategy and has engaged in broad-based consultations on key
reform initiatives, including tax and education reforms. In December 2004, the
Government organized consultations to prepare the EDPRP Progress Report and is
expected to organize similar consultations with the forthcoming second EDPRP Progress
Report.
10.
Civil society participation in policy formulation and implementation has been
significant. Several NGO representatives took part in the work of the State Commission
for the preparation of the Medium-Term Action Strategy. The Government has sought
close involvement of civil society in EDPRP M&E, for example through the preparation
of the EDPRP Progress Report. During EDPRP preparation, the Government created a
database of 750 NGOs to allow for continuous consultations with civil society during
implementation. Two coalitions of NGOs organized several debates and workshops
aimed at discussing EDPRP development.
11.
The Government is completing work to establish a joint commission with the
business community to discuss economic policies. Business associations, including the
Alliance for Business Environment Development, were consulted for the preparation of
the EDPRP Progress Report. The private sector was involved in the formulation of the
EDPRP, as business associations - mostly employer organizations - participated in the
workshops organized by the Government.
12.
Parliament has been involved in strategy implementation through its role in
budget approval. In addition, individual Parliamentarians participated in the State
Commission charged with endorsing the Medium-Term Action Strategy. Parliament is
not required by the Constitution to approve national development plans. The Government
intends to facilitate more strategic and informed discussion of budgetary issues by the
Parliament and its Committees. To this end, it has plans to improve the quality of fiscal
and public expenditure information presented to Parliament, including quarterly budget
implementation reviews. The Government plans to invite members of the Parliamentary
Finance Committee and its secretariat to participate in some of the key workshop events
organized as part of the annual MTEF budget planning cycle. The 2005 Budget was
amended four times and 2006 Budget twice. These amendments comply with Georgian
Budget Law requiring reporting to Parliament on changes to the approved budget. In
2005 and 2006, the budget amendments were mostly due to reporting over-performance
in tax revenue collection.
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November 17, 2006
ALIGNMENT
2. Reliable country systems
13.
The Government is undertaking a Public Sector Financial Management Reform,
which aims at improving the transparency and effectiveness of public expenditure
management. It has developed a Strategic Vision for Public Financial Management
Reform, endorsed by the Government in January 2006. It has launched a Treasury
reform, with the introduction of a single Treasury account as of January 2006, and it will
strengthen the role of the Parliamentary Committee on Finance and Budget. The
Government has plans to introduce an integrated Public Financial Management System
(PFMS) by the end of 2009 to be fully operational in 2010. A Chamber of Control of
Georgia is expected to become an independent Supreme Audit Institution and deliver
audit services to the Georgian public sector in accordance with international best practice.
A draft Law has been prepared to this end and presented to the Parliament. According to
this draft, the Chairman of the Chamber of Control of Georgia shall be appointed to
office for a period of five years by the majority of Parliamentary members on the
proposal of the Chairman of Parliament of Georgia. The same draft provides that the
annual budget of the CCG shall be prepared by the CCG and submitted to the Finance
and Budget Committee of the Parliament for discussion and approval. Once approved by
the Committee and the Parliament Bureau, the budget shall be sent to the Government of
Georgia and shall be included in the State Budget. The draft Law indicates that proposed
new budgets shall not be less then the budget of the previous year. The World Bank
Country Policy and Institutional Assessment (CPIA) performance criterion that assesses
the quality of budgetary and financial management places Georgia at 3.5 on a scale of 1
(very weak) to 6 (very strong).
14.
The Government is making efforts to enhance transparency and efficiency of the
public procurement system by strengthening information exchanges between the State
Procurement Agency and the Ministry of Finance. While the existing state procurement
system provides for basic standardized bidding documents and procedures, neither the
procedures nor the Law itself are fully in agreement with international best practice. The
current Law is not fully in agreement. The Government is making efforts to further
develop the system and the State Procurement Agency capabilities, including
introduction of e-Government Procurement.
15.
Georgia ranks 99th of 163 in the Transparency International 2006 Corruption
Perceptions Index; on a scale of 0 (highly corrupt) to 10 (clean), it scores 2.8. Other
surveys also highlight significant improvements in the area of corruption, such as the
2006 Doing Business Survey and the 2005 BEEPS survey, which identifies Georgia as
the transition country with the largest reduction in corruption in the 2002-05 period. In
addition, Standard and Poor’s has assigned Georgia a sovereign credit rating of B+ with
outlook ‘positive’, and the 2007 Doing Business Survey has ranked Georgia as the
number 1 reformer globally. The National Anti-Corruption Strategy approved by the
President in June 2005 introduces comprehensive measures for corruption prevention and
elimination. It focuses on i) civil service reform; ii) strengthening accountability and
public feedback mechanisms; iii) strengthening the rule of law; iv) strengthening control
bodies of all three branches of authority, as well monitoring by society; v) facilitating
competitive business sector development; and vi) international integration. The
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November 17, 2006
Government has developed an Annual Action Plan of Strategy Implementation, approved
by the President in March 2006. This Plan involves all major state agencies including
ministries, Offices of the Prosecutor General and Ombudsman, the High Council of
Justice and key sub-governmental agencies.
3. Aid flows are aligned on national priorities
a. Government leadership of coordination
16.
After the Rose Revolution, the Government made an effort to take more of a lead
in donor coordination. For instance, it chaired its first external partner meeting in March
2004, less then three months after coming to power, to outline its priorities within the
context of the EDPRP. A CG meeting was held in Brussels in June 2004, under the cochairmanship of the World Bank and the EC. A number of follow-up meetings with
external partners were held on the introduction of the MTEF, on financing needs for
restructuring the Ministry of Finance, the Government’s progress in its fight against
corruption, the energy sector situation and the preparation of the EDPRP Progress Report.
Regular donor meetings facilitate coordination and alignment with the Government’s
strategic priorities. The World Bank, together with UNDP, coordinates the activities of
the Donor Framework Group, which includes the IMF, the EC, the USA, the UK, France,
Sweden, the Netherlands and Germany, and aims at providing uniform development
assistance to the Government.
b. Partners’ assistance strategy alignment
17.
External partners are working with the Government to align their development
assistance strategies with the priorities expressed by the Government. The five major
external partners are the USA, the World Bank, Germany, the EC, EBRD and Japan,
accounting for approximately 87 percent of gross ODA in 2003-04. The IMF is also an
active partner. Net ODA accounted for 6.3 percent of GNI in 2004.2 The World Bank and
the Government developed a FY06-09 Country Partnership Strategy which supports
implementation of the Government’s priority programs and reforms, as outlined in the
EDPRP Progress Report. Germany’s development assistance strategy also covers a good
part of the Government’s policy priorities, including democratization and civil society,
market economy reforms and the improvement of energy supply. Georgia’s inclusion in
the EU Neighborhood Policy and the MCC are also important aspects of the new
Government’s engagement with development partners. Georgia has been a MCA eligible
country since FY04 and the Government signed a Compact consistent with its evolving
strategy in September 2005. A UN Development Assistance Framework for 2006-10 is
guided by EDPRP principles.
c. Partnership organization
18.
Some development assistance agencies are increasing their presence in the
country to be more involved in daily decision-making. The World Bank Country Director
is stationed in Washington, with a Country Manager based in Tbilisi. Six of nineteen
Task Team Leaders of World Bank-financed projects are based in the Country Office.
2
See OECD/DAC Aid Statistics at http://www.oecd.org/dataoecd/21/39/1881067.gif
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November 17, 2006
USAID has had an office in Tbilisi since 1993, which expanded to a regional office in
1998. GTZ and KfW have also opened regional offices in the capital.
4. Strengthen capacity by coordinated support
Coherent and coordinated capacity support
19.
The reform program is being implemented effectively particularly the reform to
curb corruption, to improve the business climate and to improve performance of the
electricity sector. To ensure these measures are safeguarded, institutional capacity needs
to be upgraded. The Government has fostered a project-by-project approach in
coordinating capacity-building support with different partners in investment projects.
However, one of the main objectives of the Donor Framework Group is that of
strengthening the Government’s capacity. In addition, an external partner working group
on governance issues has been meeting every two months since mid-2005. This group
primarily focuses on the areas directly related to functioning of the executive branch of
the government. This forum also shares information on developments in the legislative
branch and judiciary, whenever these have direct relevance to and/or impact on the
executive.
5. Use of country systems
Donor financing relying on country systems
20.
Some external partners are relying on country budget systems through policy
based budget support. The World Bank is supporting EDPRP objectives through a series
of policy based PRSCs, the first of which was approved in April 2005. Other external
partners, including the EC, USAID, UNDP, DFID, EBRD, the Netherlands and KfW, are
also contributing to the financing of the Government’s program. Around 40 percent of
Bank assistance is in the form of direct budget support, supplemented by funds from the
Netherlands and the EC.
21.
While country systems are not yet used for investment operations, for World
Bank financed investment projects, special accounts of all recently approved projects are
now held with the Treasury rather than a commercial bank. It is expected that the special
accounts for ongoing projects will also be gradually moved to the Treasury. All
government co-financing accounts are already with the Treasury starting from January
2006. As far as other external partners are concerned, DFID, SIDA and the Netherlands
also use the budget system for the pooled funding of the Public Sector Financial
Management Reforms Support project. National procurement rules are not applied for the
time being, pending upcoming CPAR conclusions. In addition to the existing database
on donor-sponsored projects, the MoF Department of Foreign Relations has developed a
Georgia Donor Assistance Database that keeps detailed and regularly updated records of
externally financed projects for the monitoring of commitments and disbursements
throughout implementation. The information from this database has also provided the
MoF External Debt Management Section with useful information facilitating the analysis
of tradeoffs of borrowing from different partners on different terms.
6. Strengthen capacity by avoiding parallel implementation structures
PIUs progressively phased out
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November 17, 2006
22.
The Government initiated and the World Bank has supported efforts to integrate
PIUs into regular line ministry structures in order to strengthen the Government’s project
implementation capacity. So far all the PIUs of World Bank-financed projects remain
legal entities of public law subordinated to the respective line ministries with steps taken
to consolidate some of them whenever appropriate (e.g. the Municipal Development
Fund consolidated with the Georgia Social Investment Fund, also three environmental
PIUs consolidated into the one). Also, design of recently approved World Bank-financed
projects (e.g. Public Sector Financial Management Reform Support Project, PreInvestment Facility Project) assigns primary responsibility for implementation to the
representatives of the relevant government entities while the role of the existing PIUs is
limited to day-to-day procurement and disbursement support. It is anticipated that the
related functions (procurement, project management, financial management) will be
eventually undertaken by the respective structures of the beneficiary ministries. In the
meanwhile, each ministry is working with relevant project teams to determine what
changes are needed to make line ministries directly responsible for project
implementation. The Government’s move towards PIU integration is expected to be
coordinated with other external partners to ensure consistency and greater aid
harmonization of procedures.
7. Aid is more predictable
Disbursements aligned with annual budgetary framework
23.
The Government is making efforts to enhance budget comprehensiveness and
reliability. As far as World Bank financed investment projects are concerned, during the
annual budget planning cycle the MoF consults with the respective implementing
agencies as well as the World Bank Country Office to ensure that project related
disbursements are properly reflected in the state budget proposal.
8. Aid is untied
24.
All multilateral assistance, including that from the World Bank, is untied. While
some bilateral assistance is tied to procurement from the country of origin, it is notable
that the most recent significant provider of bilateral assistance, the MCC, provides untied
assistance. The World Bank and the EBRD are providing supervision services to the
MCC on part of its assistance.
HARMONIZATION
9. Use of common arrangements or procedures
25.
A number of external partners, including DFID, the Netherlands, SIDA and the
World Bank, are supporting the Government’s Public Sector Financial Management
Reform through a pooled funding arrangement. This arrangement is in line with the
Government’s preference for sector-wide approaches, as opposed to individual external
partner support.
10. Encouraging shared analysis
Joint missions
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November 17, 2006
26.
There is no formal mechanism in place to track joint missions. Decisions to have
joint missions are made on case-by-case basis in consultation with the Government.
Analytical partnership
27.
External partners have begun undertaking joint analytical work. The World Bank
and the UK collaborated to produce a CFAA in February 2003 in close consultation with
the Government. The World Bank plans a Country Economic Memorandum in FY07 and
a Public Expenditure Review in FY08. As of October 2006, external partners have
posted 19 documents on the Country Analytic Work website.3
MANAGING FOR RESULTS
11. Results oriented frameworks
a. Quality of development information
28.
Data quality and availability are limited, although some progress has been made
in improving government statistics. The Government intends to start preparations of a
statistical development strategy, with the support of a multi-donor trust fund managed by
the World Bank. The State Department of Statistics prepares quarterly Integrated
Household Surveys within the framework of the Living Standards Measurement Survey,
which combines Household Budget Surveys, Labor Force Surveys and Health and
Education components. However, its capacity still needs strengthening, particularly in the
areas of national accounts and balance of payments statistics. The Government and the
World Bank are conducting a Programmatic Poverty Assessment to enhance the capacity
of the Government to collect and analyze poverty data each year.
b. Stakeholder access to development information
29.
The public is largely aware of the EDPRP, due to substantial media coverage,
stakeholder meetings and Government publications. Publication of fiscal data is a legal
requirement, and the Ministry of Finance has developed a Transparency, Information and
Communication Strategy to foster greater transparency within the budget process. One of
the objectives of the Communication Strategy is to improve the quality of the information
on fiscal and public expenditure policies on its website; public documents on the MTEF
and budget have been made available online accordingly. 4 The EDPRP is in Georgian
and English, but it is not available on a Government website. The Medium-Term Action
Strategy and a summary of the Communication Strategy are included in the Basic Data
and Directions Document for 2007-10, which has been posted on the MoF website. The
full Communication Strategy will be posted on the website of the State Minister’s Office
on Reform Coordination.5
c. Coordinated country-level monitoring and evaluation
30.
The EDPRP includes a comprehensive set of targets and outcome indicators,
which were explicitly linked to the MDGs. In 2003, work was launched to pull this set of
indicators into a single system and make it accessible for users. The Government is
considering integrating the MDG framework into the Medium-Term Action Strategy but
3
www.countryanalyticwork.net
http://www.mof.ge/?lang=EN
5
www.reforms.ge
4
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November 17, 2006
no steps have yet been taken in this regard. The DevInfo database program, originally
designed to monitor progress towards the MDGs, was chosen to be used for the
assessment of progress against both EDPRP and MDG programs. Several adjustments
and revisions have been introduced, and the process of combining MDG and EDPRP
indicators is expected to be addressed in the upcoming second EDPRP Progress Report
MUTUAL ACCOUNTABILITY
Development effectiveness assessment frameworks
A joint framework with indicators to assess government and external partner
performance in strengthening aid effectiveness is not in place. Georgia has not yet
endorsed the Paris Declaration on Aid Effectiveness. However, the MoF has been
pursuing activities toward this goal, including consulting other countries on their
experience in this area.
31.
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November 17, 2006
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November 17, 2006
__________ (2005), Georgia – Reform Support Credit Project. Implementation Completion
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Related Websites
INTOSAI :
www.intosai.org
Transparency International :
www.transparency.org
World Bank Country Policy and Institutional Assessment (CPIA):
http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/IDA/0,,contentMDK:2093360
0~pagePK:51236175~piPK:437394~theSitePK:73154,00.html
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