Note: This document may not always reflect the actual appropriations determined by Congress. Final budget allocations for USAID's programs are not determined until after passage of an appropriations bill and preparation of the Operating Year Budget (OYB).
GEORGIA
FY 1998 Assistance to the NIS Request . . . . . . . . . . . . . . . . . $41,900,000 Introduction
The emergence of a democratic, prosperous and independent Georgia is in the United States' long-term interest. Buoyed by a free and fair presidential election and the end of internal armed conflict, Georgia has consolidated democratic rule and taken significant steps to build a market-oriented economy. As a strategically located free-market democracy, Georgia has the potential to become a major stabilizing force in the Caucasus Region. The country already plays a pivotal regional transportation role because of its ports and rail systems. Humanitarian aid and other goods are transported to Armenia and Azerbaijan through Georgia, while the nation's pipelines carry critical energy resources from Central Asia and Russia. Much of the vast oil resource of the Caspian Sea area is expected to be exported through Georgia. The United States also has distinct humanitarian concerns in Georgia. Although Georgia's ethnic conflicts have subsided, large numbers of internally displaced persons (IDPs) remain.The Development Challenge
Georgia has a population of 5.2 million in an area the size of West Virginia. Over the past several years, Georgia's economic and political stability has been severely hampered by internal conflicts (the Abkhazian revolt and South Ossetian separatist movement) and the disruption of regional trade caused by the break-up of the former Soviet Union. The fighting has ceased, a sense of optimism prevails, and Georgia's political and economic situation has begun to stabilize. Corruption continues, although progress has been made to reduce overt lawlessness. President Eduard Shevardnadze, the internationally respected former Soviet Foreign Minister and one of the most reformist leaders in the former USSR, has strong support of the recently elected pro-reform legislature.After a late start following independence, Georgia has made great strides in macroeconomic stabilization. Georgia successfully negotiated a one-year $112 million Stand-By Arrangement with the International Monetary Fund (IMF). The program calls for reducing inflation through tight financial policies, removal of restrictions in the financial system, and liberalization of prices, commerce, and foreign trade. Results are already evident. Inflation was down to two and a half percent a month during the first half of 1995 (from over 60% a month in 1994). Georgia has maintained a stable exchange rate since the end of 1994, first with the "coupon" and now with its new currency. The fiscal deficit was reduced from approximately 19% of GDP in 1994, to six percent in 1995. While expenditures have been cut through the elimination of subsidies and government downsizing, growth in revenue collections has been disappointing.
Another brake on economic progress is Georgia's $1 billion debt burden, mainly the result of purchases of natural gas from abroad. This total is among the highest of the former Soviet republics in terms of the ratio of total debt to the value of exports. The Government of Georgia (GOG) is expected to get some relief on external arrears and debt servicing in negotiations with its international creditors.
Since 1992, the bulk of USAID assistance to Georgia has been in the form of emergency humanitarian assistance. USAID is gradually shifting its emphasis toward economic and social sector restructuring and democratization to meet the changing nature of the development challenge in Georgia. Given its late start down the reform path, Georgia's successful transition to free-market democracy will require donor assistance well beyond the year 2000.
USAID has been the largest bilateral donor, providing more than half of the country's emergency needs, and assisting over 750,000 Georgians since 1992. Human suffering has been reduced substantially. During the same period USAID assistance has financed the purchase of heavy oil for electricity generation and winter heating. Over 100,000 displaced persons have received non-food assistanceand over 35,000 supplemental food packages. In an effort to help heal the scars of war, more than 100 female victims of the Abkhazia conflict and their families have received assistance.
USAID has also financed humanitarian assistance activities of international organizations. One such activity was the UNICEF program to control diphtheria through the provision of vaccines to immunize those children and adults most at risk. The Caucasus Logistics Advisory Unit (CLAU - under the World Food Program) made possible the timely and efficient delivery of humanitarian assistance with its management of the rail, port, and communications network throughout the Caucasus. The CLAU operation, U.S. Center for Disease Control, and PVO programs --all financed by USAID-- helped to build GOG and local NGO capacity to manage and respond to humanitarian emergencies. Georgia's government and the NGO community will require further capacity strengthening to assure the efficient and effective delivery of social services and assistance.
Personnel exchanges, training, and other USAID technical assistance concentrate on economic restructuring, energy sector reform, and democratic governance. USAID-financed economic and legal advisors work with the Ministers of government, chairmen of key Parliamentary committees, and the President's Office (the State Chancery) to construct the legal and economic policy framework which will facilitate Georgia's progress toward becoming a full fledged democratic, market oriented economy. Such advisory assistance also helps the government meet IMF requirements and negotiate with the IMF and World Bank (IBRD) for stabilization and sector loan programs to address critical distortions and imbalances in the economy.
In concert with other donors, USAID's advice contributed to the reduction of Georgia's budget deficit, largely by proposing major cuts in expenditures. Most government subsidies for goods and services have been reduced and most subsidies to state enterprises eliminated. The civil service has been reduced by 30%. In adopting a new Central Bank law, the GOG has taken initial steps to increase the liquidity of state-owned and commercial banks. Under the privatization program, approximately 70% of identified small firms and 80% of medium-to-large enterprises have been privatized. However, despite the initial progress on policy reform, assistance is still required to help the GOG establish the necessary laws, codes, and regulations that encourage investment and private sector growth, and that regulate business in an open, competitive market.
In the energy sphere, USAID technical advice was instrumental in the GOG's decision to restructure the electric power sector and to create a national regulatory body. USAID advisors assisted in drafting the decree that was issued in May 1996 to reform the power sector. In the oil & gas sector, at the request of the GOG, USAID advisors provided legal advice relating to exclusive oil transit rights which cleared the way for a new agreement with the Azerbaijan International Operating Company (AIOC) and to the preparation of the presidential decree that created the Georgian International Oil Corporation (GIOC). They also provided legal advice to the GOG and GIOC which enabled the signing of the pipeline transport deal with the AIOC and the Government of Azerbaijan. The agreement was recently ratified by the Georgian Parliament.
Despite this progress, the oil and gas sector in Georgia faces many difficulties. For example, although the GIOC is an independent entity, other oil and gas enterprises (such as SAKOIL, SAKGAS, etc.) were recently subsumed into a massive State Fuel and Energy Corporation, which also includes the state power utility, Sakenergo. It was a move which is counter to the need for greater decentralization in the energy sector. Additionally, the GOG is receiving numerous oil and gas exploration, production, and development proposals. The GOG will need to evaluate all such proposals carefully to ensure that they are conducive to the future commercial development of the sector.
The people of Georgia have an excellent opportunity to build a prosperous, democratic society grounded in the rule of law if the country develops its external markets quickly and effectively, and harnesses its skilled labor force, underutilized agricultural resources and industrial capacity. Furthermore, if Georgia can attract outside investment it should be able to compete effectively in the international marketplace. Political stability is a prerequisite. The Government must seek expertise in law, commerce, finance, public administration, and social welfare to achieve sustainable growth in economic and political development. To sustain economic reforms, Georgia must reestablish external markets, reduce balance of trade deficits through export-led growth, and attract new technology as a result of increasing foreign investment. The agricultural sector appears to offer the most immediate opportunities to achieve these requirements. Georgia's leaders must strive to create an enabling environment for economic and political growth that promotes rather than controls business. With USAID assistance, Georgia is aggressively pursuing accession to the World Trade Organization so as to become a competitive producer and exporter to global markets. The Shevardnadze Administration gives every indication that it intends to move swiftly to implement bold economic reforms.
USAID assistance in the area of democratic governance is relatively recent. Georgia's November 1995 election process --supported with USAID-funded technical assistance-- was declared free and fair by international observers. This was a major achievement in a country just emerging from protracted civil conflict. The USAID-funded Parliamentary Human Rights Foundation, in 1995, installed an Internet link in the Georgian Parliament to give that body access to western legal resources, including those of the United Nations and the World Bank. Internet access has provided an indispensable resource for Georgians involved in reforming the country's legal infrastructure. Additional hookups for the Supreme Court, Executive Office, Constitutional Court, universities, and non-governmental organizations should help accelerate reforms and broaden the base of effective reformers.
Other Donors
Major donors include the International Monetary Fund, the International Bank for Reconstruction and Development, the European Bank for Reconstruction and Development and the European Union. Bilateral donors include Germany, Great Britain, Netherlands and Italy.FY 1998 Program
Strategic Goal: Economic Restructuring
The newly established Center for Economic Policy Analysis and Reform (CEPAR) will work directly with the Minister of Economy and the President's chief advisor for economic reform. The staff of the Center will work with the government and the international financial institutions (IFIs) to monitor the performance of the economy and to identify policy and institutional constraints which impede private sector growth. CEPAR will also identify opportunities for market-driven development. On the basis of consultations with government, parliament, and private businesses, CEPAR will conduct applied economic analyses to identify key policy options. CEPAR's medium term work program strongly focuses on Georgia's accession to the World Trade Organization and helping the GOG to launch the anti-monopoly service which was authorized by law in 1996. Legal assistance will be available through CEPAR to Georgian institutions and policy makers responsible for organizing, drafting, and enacting economic laws to stimulate private sector growth and exports. CEPAR's role will complement other legal work performed under USAID democracy objectives as commercial law and civic codes are integrated into Georgia's new Civil Code.
USAID will continue to assist in national budget formulation, including a review and implementation process. Expected results would be an improved and transparent system of annual budgeting and revenue and expenditure reporting which will lead to greater efficiency in the targeting of public expenditure and a reduction in the budget deficit. In FY 1997, the U.S. Treasury and USAID will initiate a debt management program and help establish a financial market for Georgian Treasury bills. Such a program will help the GOG to finance its budget deficit in a non-inflationary manner and provide monetary policy instruments to the National Bank of Georgia (NBG).
USAID has developed a comprehensive program to make the National Bank of Georgia the common platform of an electronic, real time payment system for both domestic and intentional transactions of the NBG and all commercial banks. The system will be fully integrated with the NBG's electronic accounting system. Hardware, software and technical assistance will be provided to the NBG for this effort while commercial banks finance their own connection to the NBG platform. USAID is also financing an NBG and commercial banker's training program featuring short courses and advisory assistance in credit analysis, asset and liability management, banking operations and international accounting standards. To help stimulate the demand for credit, the International Executive Service Corps will identify and assist clients in the preparation of viable investment and business plans. USAID, through a grantee, will provide technical assistance to farmers' unions in the areas of business management and member services, especially targeting qualifying farmers' unions to receive loans under a new Eurasia SME credit facility. A program of support for private agribusiness investment and development will also be initiated.
In response to the Trans-Caucasus Enterprise Fund earmark, USAID is establishing two finance programs intended to support private sector development and growth. The first is a private investment fund partially guaranteed by the Overseas Private Investment Corporation. The second is a small enterprise lending program, which reports directly to USAID. Activities intended to promote trade and investment are also planned for FY 1998, as part of the Partnership for Freedom initiative.
In energy, USAID's priorities are: (a) to create a climate that will attract private sector participation and ownership, with subsequent improvements in the management of resources and provision of services; and (b) to improve the efficiency of the sector in economic terms, with subsequent increases in capital and operating resources. USAID resources will be used in several key ways. First, activities will support the restructuring and organization of corporate enterprises in the electric power and oil and gas subsectors, including legislative and regulatory reform to promote private sector participation. Second, assistance will be used to strengthen the commercial operations of newly-created energy sector entities, including the introduction of improved metering and collections systems and the adoption of international accounting standards. Third, other activities will mobilize private/public financing for selected energy projects to rehabilitate the energy infrastructure and to reinforce the reform process. The European Union, the World Bank, and the European Bank for Reconstruction and Development are also expected to make other significant contributions to the energy sector.
Strategic Objective: Increased soundness of fiscal policies and fiscal management practices
Strategic Objective: Accelerated development and growth of private enterprises
Strategic Objective: A more competitive and market-responsive private financial sector
Strategic Objective: A more economically sustainable energy sector Strategic Goal: Democratic Transition
Progress in democratic political processes is further along in Georgia than elsewhere in the Caucasus. The parliament is one of the most progressive in the former Soviet Union. There is a perceptible strong will in the political leadership, in the media and among civic groups to advance and protect the new democracy, to establish a transparent system of public administration and the rule of law. The International Foundation for Electoral Systems (IFES) and the National Democratic Institute program to get out the vote and train election monitors from government and the NGO community fully demonstrated its value in successive local elections in the countryside. Since the November 1995 presidential elections, further progress has been evident. With the assistance of the German Government, a new Civil Code is being drafted. The committee system in Parliament, which includes efficient procedures for the conduct of legislative business, approaches the standards and practices used by parliaments in western democracies. Some 50 NGOs, with an interest in public policy, are making their impact felt on the national scene. Each of these has benefitted in some way from the assistance offered by the Institute of Soviet-American Relations (ISAR/ITIC) NGO Center funded by USAID. Independent media agencies and broadcasters are numerous and reasonably free from attempts of manipulation by government. USAID also has been instrumental in helping to establish approximately half of the independent TV stations in the country, and will continue to build on this success.
The legacy of Soviet law continues to be a barrier in legal and judicial reform. The general public harbors a deep distrust of judicial process and the activities of prosecutors whose powerful role is unchanged. In FY 1997, the Department of Justice will initiate a program to improve the efficiency, effectiveness and fairness of criminal justice procedures while USAID will provide assistance in judicial training and continuing legal education with the Georgian Young Lawyers Association.
The authorities and responsibilities of municipal government are not well established --and, as a result-- the basic infrastructure of local communities are deteriorating. USAID will continue to focus on the basic pre-conditions for a responsible municipal government program through training of parliamentarians, appointed municipal officials and other government and civic society representatives, and through efforts to establish an association of mayors which can objectively represent the capabilities and aspirations of municipalities.
Strategic Objective: Increased, better-informed citizens' participation in political and economic decision-making
Strategic Objective: Legal systems that better support democratic processes and market reforms
Strategic Objective: More effective, responsive, and accountable local government Strategic Goal: Social Stabilization
The USAID humanitarian program includes the financing of basic commodities such as fuel and food and, in concert with other donors, is strengthening the capacity of the Georgian government and local NGOs/PVOs to target and deliver assistance more effectively to those citizens who are most at risk. Through sub-grants, PVOS/NGOs implement "bridging" activities which promote self-reliance and stimulate economic recovery at the local community level. Future activities will include financing for rural and urban projects promoting income generation and enterprise development. In addition, USAID in cooperation with the World Bank, the Georgian Government and local NGOs, will continue a pilot Social Investment Fund scheme. Together, these efforts will help speed USAID's reorientation away from emergency humanitarian assistance and pave the way for the country's transition to a market economy. Humanitarian programs, however, will continue at reduced levels for the most vulnerable segments of the Georgian society.
Strategic Objective: Reduced human suffering and crisis impact
Cross-cutting and Special Initiatives
USAID funds a cross-cutting training program which offers learning opportunities for Armenians, mainly in the United States, in a number of sectors which support the strategic objectives of the USAID program. In those instances where activities implemented by other agencies do not directly support USAID's objectives, they are included as special initiatives.
GEORGIA
FY 1998 PROGRAM SUMMARY*
Strategic Objectives
Economic Restructuring Democratic Transition
Social Stabilization Cross-cutting / Special Initiatives Total Privatization -- -- -- -- -- Fiscal Reform 1,800,000 -- -- -- 1,800,000 Private Enterprise 10,300,000 -- -- -- 10,300,000 Financial Reform 3,400,000 -- -- -- 3,400,000 Energy 5,900,000 -- -- -- 5,900,000 Citizens' Participation -- 3,400,000 -- -- 3,400,000 Legal Systems -- 700,000 -- -- 700,000 Local Government -- 2,000,000 -- -- 2,000,000 Crises -- -- 9,400,000 -- 9,400,000 Social Benefits -- -- -- -- -- Environmental Health -- -- -- -- -- Cross-cutting / Special Initiatives -- -- -- 5,000,000 5,000,000 TOTAL 21,400,000 6,100,000 9,400,000 5,000,000 41,900,000 *FREEDOM Support Act (FSA) Funds
USAID Representative: Geraldine Donnelly
ACTIVITY DATA SHEET
PROGRAM: GEORGIA
TITLE: Fiscal Reform, 110-S001.2
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998: $1,800,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 1999
Purpose: Increased soundness of fiscal policies and fiscal management practices.
Background: Georgia has passed a national budget law but work is only beginning to develop the procedures, norms, regulations and calendar to fully implement the law across all national ministries and in coordination with the Parliament. The IMF is doing parallel work to establish a Treasury, which will consolidate in one account the revenue receipts and expenditures for the entire government. Georgia faces a major problem to develop a national budget system to apportion revenues between federal and regional levels; however the powers and responsibilities of local government units have yet to be defined in a local government law or delineated in the national budget law. Furthermore, the first local government elections will occur in 1997. Existing tax laws require strengthening to broaden the tax base and, as required by the IMF, to provide greater authority to the State Tax Service (STS) to collect taxes. While no USAID financed assistance is planned for the tax collection area, USAID proposes to finance a U.S. Treasury debt management advisor to work on establishing a Treasuries market for GOG securities, namely T-bills. Such a market, following a published schedule of auctions open to the public, and with timely settlements, would both serve as the first rudimentary capital market and as a non-inflationary means to help finance the GOG's still significant consolidated budget deficit.
USAID Role and Achievements to Date: USAID assists the government to improve national budgeting and expenditure systems, to reduce deficit spending, and improve government development programs. A US Treasury team has assessed Georgia's fiscal policies and, during 1996-97, will concentrate on national budget and debt management and securities market issues.
Description: USAID assistance to the Ministry of Finance concentrates on developing modern, streamlined, effective national budget functions: schedule for budgetary action; formulation process; review process (executive and parliamentary branches); and budget execution process, including controls. Laws to explain these new procedures will be developed in parallel. A federal budget system will include regional autonomy for both revenue generation and budgetary expenditures which will be consistent with the expected division of federal and municipal power in the newly elected government. The longer range goal will be to assist the government to develop a computerized financial management system that incorporates new executive budget and treasury functions, including federal and regional apportionments. U.S. Treasury debt management advisors will perform an assessment in early 1997 of the prospects for setting up a T-bill market and auction in Georgia and, if favorable, field an resident advisor to launch the program in the same year. A first year target would be to finance about 5% of the GOG's budget deficit through public auctions of 30, 60 and 91 days T-bills.
Host Country and Other Donors: USAID assistance in budget formulation augments the IMF assistance to develop a national treasury and to establish a Treasury securities market.
Beneficiaries: The national budgeting law will benefit all citizens who will know for the first time how their government allocates tax revenues for public expenditures. A Treasury Securities market will help the government to partially finance the budget deficit in a non-inflationary manner.
Principal Contractors, Grantees or Agencies: US Treasury.
Major Results Indicators: Baseline TargetFiscal balance as percent of GDP, excluding grants -7.5% (1995) -3.3% (1999)
% of GOG budget deficit financed by government securities less than 1% 12% (1999)
ACTIVITY DATA SHEET
PROGRAM: GEORGIA
TITLE: Private Enterprise, 110-S001.3
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998: $10,300,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 1999
Purpose: Accelerated development and growth of private enterprise.
Background: Georgia's current macroeconomic policies, legal-regulatory framework, and corresponding institutions are inadequate to fully support the country's transition to a market economy. Institutions with responsibility for economic policy, and commercial laws and regulations must develop their capacities to conduct policy analysis and formulation based on valid economic information and sound analysis. Private enterprise growth is stymied because corruption persists and personal relationships take precedence over competition in the market place. New laws, codes and procedures are urgently required to encourage and regulate business in an open, competitive market.
USAID Role and Achievements to Date: USAID technical advisors guided the government through its negotiation with the IMF and the IBRD to acquire credit to conduct the macroeconomic policy adjustments and structural reforms which have put Georgia on the road to a market economy. USAID economic policy and legal assistance works with Georgia's national leaders to develop economic policies, laws and regulations to establish the market environment for private sector, particularly export-driven, growth and the absorption of new technology. In 1996, USAID financed advisors led the donor community to provide technical assistance to Georgia in its initial efforts to gain accession to the WTO.
Description: The Center for Economic Policy Analysis and Reform (CEPAR) conducts applied economic analyses to identify key policy options but is most strongly focussed on mobilizing technical assistance to help Georgia gain accession to the WTO and providing legal expertise on the formation and operations of the newly legislated anti-monopoly service. The CEPAR will continue to support policy-makers and key national leaders in the formulation of economic reforms required to achieve an enabling environment for private sector growth and identify opportunities for market-driven development. CEPAR will continue to establish the analytical capacity in economic and legislative institutions to produce an integrated policy framework designed to accelerate the growth of private enterprise. CEPAR's role will continue to complement other legal work performed under USAID democracy objectives as new commercial law and civic codes are integrated into Georgia's new Civil Code. USAID-funded non-government organizations will identify and assist clients to prepare viable investment and business plans. USAID will encourage private agricultural sector investment and provide technical assistance to private farmers' unions and other producer groups to improve association organization, management and services to their membership. The private investment fund implemented through OPIC and the small enterprise lending program will also support private sector development.
Host Country and Other Donors: The CEPAR provides an operational adjunct to the Minister of Economy, key parliamentary leaders, and the President's chief advisor for economic reform.
Beneficiaries: The government's economic policies, commercial laws and regulations and reformed institutions will set the stage for new investments and the rapid import of new technology which in turn will reemploy Georgia's skilled labor force in manufacturing and agriculture.
Principal Contractors, Grantees or Agencies: USAID activities are implemented by a contract to the US firm, Chemonics International, and PVO grants such as the International Executive Service Corps, VOCA and the Eurasia Foundation.
Major Results Indicators: Baseline TargetPrivate sector share of employment (%) 28% (1995) 75% (1999)
Private sector share of GDP (%) 74% (1995) 85% (1999)
Foreign direct investment (US$ Millions) $6m (1995) $75m (1999)
ACTIVITY DATA SHEET
PROGRAM: GEORGIA
TITLE: Financial Reform, 110-S001.4
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998: $3,400,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 1999
Purpose: A more competitive and market-responsive private financial sector.
Background: Successful economic recovery will depend in large part on an increased capacity to mobilize savings and the capacity of commercial banks to serve as efficient financial intermediaries between savers and investors. The formation of a viable banking sector currently is hindered by: (1) the absence of a modern electronic payments system (EPS) to conduct timely financial transactions; (2) managers untrained in modern portfolio management; (3) a regulatory environment that discourages lending to the private sector; and (4) financial institutions that are either lacking or do not respond to market forces. The development of market-oriented capital markets will attract domestic and foreign investment, resulting in workers being retrained according to market needs. Presently, the private sector has virtually no access to credit at affordable rates. Savings mobilization, commercial lending and foreign transactions will not be possible until Georgia's commercial banks operate like their western counterparts. The commercial banking sector should be opened to outside capital with appropriate guarantees for repatriation of profits and protection against arbitrary capital market controls.
USAID Role and Achievements to Date: USAID technical assistance has helped Georgian entrepreneurs develop small and medium enterprises and create new products and services.
Description: USAID supports implementation of electronic payments and accounting systems that will permit real time financial transactions to take place among domestic banks and between the central bank and its seven regional clearing branches as well as international transactions from the NBG platform provided to commercial banks. USAID is providing the on-site project manager to coordinate the installation of hardware and software and to supervise required technical training. USAID will also provide short-term technical assistance to train commercial bank managers and officers. The focus of this training will be credit analysis, portfolio management, asset and liability management, international accounting standards, and internal audit. In addition, USAID will work with IMF and World Bank Advisors to improve bank supervision though on the job training with U.S. State agencies and the Federal Reserve.
Host Country and Other Donors: The development of the electronic payments and accounting systems is a cooperative effort among USAID, World Bank and the IMF.
Beneficiaries: USAID will assist Georgia to create the backbone of a modern financial sector both to facilitate the mobilization of domestic savings and to attract foreign investment. In the long term, several million Georgians will benefit from financial sector development and reforms.
Principal Contractors, Grantees or Agencies: USAID's investments in the electronic payments system are directly managed by USAID and the KPMG Barents Group managers bankers training.
Major Results Indicators:*
Financial sector assets as percent of GDP
Spread between deposit & borrowing rates (%)
Level of deposits in commercial banks (index)
* Baseline and target data will be developed during the next planning period.
ACTIVITY DATA SHEET
PROGRAM: GEORGIA
TITLE: Energy, 110-S001.5
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998: $5,900,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2001
Purpose: A more economically sustainable energy sector.
Background: Georgia's energy situation is severe. Energy supplies are intermittent at best, and prolonged blackouts are commonplace. The shortages of electric power and oil, gas, and coal have accelerated the rate of economic decline that started in 1989 with the beginning of the breakdown of the former Soviet Union. The continuing shortage of energy threatens political security, stagnates the transition to a market economy, and endangers public health. The energy sector has been weakened by: (1) the dissolution of the Former Soviet union and its energy trading relationships; (2) civil disturbances that led to disruption of the energy and fuel supply networks; and (3) historically low energy prices and low collection rates that have both fostered excessive energy use and resulted in insufficient revenues to cover energy maintenance and investment needs, as well as cover the costs of imported fuel. While the Georgian energy sector begins to emerge from the crisis mode of operation that characterized 1992-1995, it must continue an important phase of reorganizing itself in order to provide improved energy services to the economy in a more sustainable fashion.
USAID Role and Achievements to Date: USAID's emphasis is two-fold: (a) to create a climate that will attract private sector participation and ownership, with subsequent improvements in the management of resources and provision of services; and (b) to improve the energy sector efficiency in economic terms, with subsequent increases in capital and operating resources. USAID technical assistance in the electric power and oil & gas subsectors has been pivotal in achieving the progress to date. In the electric power sector, USAID's technical assistance was instrumental in the GOG's decision to restructure the electric power sector and to create a national regulatory body. USAID advisors assisted in drafting the decree that was issued in May 1996 to reform the power sector. However, despite this progress, much work is still needed to implement the reforms and solidify them so that they cannot be easily reversed. In the oil & gas sector, USAID contributed to the following successful developments:
1)Advised the GOG that a claim of exclusive oil transit rights did not appear to be legally enforceable, and cleared the way for the new arrangement with the Azerbaijan International Operating Company;
2)Assisted in the preparation of a presidential decree that created the Georgian International Oil Corporation (GIOC), with control of sufficient pipeline and right-of-way assets to make it the legal counterpart to the AIOC; and
3)Provided advice to the GOG and GIOC that allowed the pipeline transport deal with the AIOC and the GOAZ to come to closure and be signed. The agreement was recently ratified by the Georgian Parliament.Despite this progress, the oil & gas sector in Georgia faces many difficulties. For example, while GIOC is an independent entity, the other oil & gas enterprises (SAKOIL, SAKGAS, etc.) were recently subsumed into a massive State Fuel and Energy Corporation, which also includes the state power utility, Sakenergo, a move counter to the need for greater decentralization in the energy sector. Additionally, the GOG is being bombarded with a variety of oil & gas exploration, production, and development proposals which the GOG will need to carefully evaluate to ensure that they are conducive to the future commercial development of the sector.
Description: While initial USAID assistance to the energy sector involved the provision of critical equipment and fuel supplies, USAID assistance is now focused on the systemic economic reform of the sector. Energy sector reform is an essential and critical input to Georgia's transition to a market economy. The two energy subsectors having the greatest impact on the Georgian economy are: the electric power subsector, which is vital to residential uses and to industrial productivity and; the geo-strategic oil subsector which is linked to the development of oil reserves in the Caspian Sea and exports to the region and outside the region. USAID resources will be used to support the restructuring and establishment of public-private corporations in the electric power, oil and gas subsectors. Our assistance to bring about legislative and regulatory reform is focussed upon promoting private sector participation in the sector. Our assistance will strengthen the commercial operations of newly-created sector businesses with the introduction of improved metering and collection systems and the adoption of international accounting standards. Our assistance will also mobilize private/public financing to reinforce the reform process, to undertake selected new energy projects and to rehabilitate the existing energy infrastructure. Assistance is channeled through three institutional contractors: one provides technical assistance in support of energy sector restructuring and privatization, including legislative and regulatory reform; another provides technical assistance and commodity support to facilitate restructuring and privatization as well as energy supply system rehabilitation; and the third is providing short term training in all activity areas.
Host Country and Other Donors: The European Union has undertaken a series of comprehensive assessments in the areas of tariff structure, accounting, billing, and metering practices while the World Bank is conducting a $45 million loan appraisal of maintenance and rehabilitation work in the areas of electric generation, transmission, and distribution. USAID complemented World Bank activities with a pre-loan analysis of the Inguiri Hydroelectric Station. The European Bank for Reconstruction and Development approved an $18.1 million loan to the local power company to rehabilitate the Rioni hydro station and improve operations and water treatment at the major thermal station.
Beneficiaries: Approximately 1.3 million residential and commercial consumers of electricity.
Principal Contractors, Grantees, or Agencies: Three institutional contractors: Hagler Bailly (restructuring and privatization); Burns and Roe (rehabilitation of power systems); and the U.S. Energy Association (training in all energy areas).
Major Results Indicators:*
Number of independent regulated utilities with meaningful financial statements
% of independent regulated utilities with sufficient current earnings and profits to sustain operations,
by sub-sector
Energy consumption per unit of national economic production
Number of independent power producers
State-owned enterprises fully divested by sub-sector
% changes in recovery of cost of production by utility
*Indicators will be refined, and baseline and target data will be developed, during the next planning period.
ACTIVITY DATA SHEET
PROGRAM: GEORGIA
TITLE: Citizens' Participation, 110-S002.1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998: $3,400,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1993; ESTIMATED COMPLETION DATE: FY 2000
Purpose: Increased better-informed citizens' participation in political and economic decision-making.
Background: Like other countries emerging from the shadow of communist rule, Georgia is struggling to consolidate nascent democratic institutions and practices. Civil society is weak and fragmented: political pluralism, independent media, and indigenous non-governmental organizations (NGOs) need to be developed and strengthened for democracy to survive, and for a market-economy to flourish.
USAID Role and Achievements to Date: USAID-funded activities in the area of independent media led to the establishment of the first independent television network in Georgia. Internews, with USAID and USIS funding, worked to train and develop independent media outlets and implementors in Tbilisi and outlying regional cities. A series of Internews' sponsored conferences prompted seven of the country's strongest independent television stations to agree to form Georgia's first independent television network. The network is expected to serve as a nation-wide platform for objective news coverage and quality documentaries, as well as a coordinating unit for independent television journalists. Additionally, USAID activities supported the development of the country's first domestic election monitoring NGO, and continue to support the strengthening of this indigenous organization. The National Democratic Institute (NDI), with USAID funding, provided substantive consultation, training and resources to a coalition of Georgian NGOs interested in developing a domestic monitoring organization. With NDI's assistance, this domestic monitoring organization, the Georgian Fair Election Society (FES), trained and deployed more than 1,500 domestic monitors for the November 1995 election.
Description: USAID contractors and grantees work with independent television stations, political parties, parliamentarians, and indigenous NGOs to foster the growth of civil society and grassroots democratic reform efforts in Georgia. NDI provides training to political parties and factions, both inside and outside the current parliament, on building organizational capabilities, operating as effective parliamentary factions inside the legislature, upgrading parliamentary skills, strengthening party-constituency linkages, and building substantive political platforms. As requested by the Georgian Parliament, a program for restructuring and retraining of parliamentary staff began in FY 1996. ISAR (formerly the Institute on Soviet-American Relations) and the Eurasia Foundation provides assistance to indigenous democratically-oriented (non-humanitarian assistance) NGOs, working to improve management and communications capacity, and working to strengthen these organizations' ability to participate effectively in the development of democratic legislative and social reform. Also, activities will focus on improving inter-NGO coordination and developing effective strategies for communicating NGO interests/positions to the press and the general public. By working with Georgian independent television journalists, USAID provides limited but critical equipment assistance, and training programs to bolster journalists' capacity to produce quality news reports on political developments. Media assistance also focuses on developing media associations and networks, providing training in management, advertising, and journalists' rights and responsibilities. Similar activities will continue in FY 1998, and evolve based on the changing needs and growth of Georgian civil society.
Host Country and Other Donors: The above activities are coordinated with other USAID activities, such as the Eurasia Foundation, as well as with the U.S. Information Service (USIS). Additionally, USAID's efforts are coordinated with international donors, including the United Nation's Development Programme, the European Union, and the Organization for Security and Cooperation in Europe (OSCE). The Georgian Parliament, and various Georgian NGOs are integrally involved in these efforts.
Beneficiaries: USAID-funded activities seek to benefit individuals and organizations actively involved in civic participation and democratic reform efforts, as well as the population at large over time, in encouraging further and deeper citizen participation in the country's transition to a democratic market-oriented state.
Principal Contractors, Grantees, or Agencies: Current grantees include Internews, NDI and ISAR. Additional grantees and contractors will be identified as assistance is expanded in this area.
Major Results Indicators:*
Number of NGOs working actively on public policy issues
Increase in % of citizens who listen to, watch, or read independent news
*Baseline and target data will be developed during the next planning period.
ACTIVITY DATA SHEET
PROGRAM: GEORGIA
TITLE: Legal Systems, 110-S002.2
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998: $700,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2000
Purpose: Legal systems that better support democratic processes and market reforms.
Background: Georgia inherited a Soviet legal infrastructure that presents substantial obstacles in the country's evolution toward a market-oriented society based on the rule of law. Georgia's legislative infrastructure, judicial structure, and overall legal system all require assistance in reform, reconstruction and retraining.
USAID Role and Achievements to Date: A USAID-funded constitutional law expert was extremely influential in the development of Georgia's new constitution. Specifically, his advice and cautions regarding an explicit separation of powers are positively reflected in what has been called the most solidly democratic constitution of all the former Soviet republics. USAID has also funded Georgian drafters of the country's Civil Code to travel to the Netherlands to participate in USAID-funded conferences which provided European and U.S. drafting expertise.
Description: USAID contractors and grantees began work in FY 1996 with legal institutions, such as the Parliament, Constitutional Court, Ministry of Justice, Procuracy and Executive Office, on legislative and institutional reform and restructuring. In addition, USAID sponsored assistance in the retraining of the country's judges, lawyers and parliamentarians in international legal norms, as well as work at the grassroots level with indigenous bar associations and legal advocacy non-governmental organizations, and the dissemination of legal information to the general population. These activities will continue in FY 1998, and evolve based on the changing needs and growth of Georgia's legal infrastructure.
Host Country and Other Donors: These programs are coordinated with other USAID-funded activities, particularly commercial law reform, with the economic restructuring activities of the Center for Economic Policy and Research (CEPAR) and international donors, including the United Nation's Development Programme, the European Union, and Germany's GTZ legal consultants.
Beneficiaries: These efforts seek to benefit Georgia's legal institutions and legal advocates in transition to a governmental system based on the rule of law and market principles, and, thus, will benefit the people of Georgia who rely on these institutions, both governmental and non-governmental, to support and protect their individual and property rights in accordance with the constitution and internationally recognized human rights statutes.
Principal Contractors, Grantees, or Agencies: The American Bar Association's Central and East European Law Initiative (ABA/CEELI) and ARD/Cheechi are the current grantees. Additional implementors will be determined, as appropriate.
Major Results Indicators:* Baseline TargetIncreased % of the population knows/understands basic civil & economic rights & restrictions
Membership in World Trade Organization attained No (1996) Yes (1998)
*Indicators will be finalized, and baseline and target data will be developed, during the next planning period.
ACTIVITY DATA SHEET
PROGRAM: GEORGIA
TITLE: Local Government, 110-S002.3
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998: $2,000,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2000
Purpose: More effective, responsive, and accountable local government.
Background: In the period following Georgia's independence in 1991, municipal officials were faced with major transition challenges. The de facto devolution of responsibility to local governments for many functions previously carried out by the national government, in combination with declining central budgets and shortage of skilled personnel, left local authorities increasingly isolated from the center and unable to halt the degradation of municipal services. Local and municipal governments need assistance in developing greater administrative capacity and efficiency, as well as developing a rational intra-governmental administrative and financial system.
USAID Role and Achievements to Date: USAID held off on local government assistance in order to benefit from an extensive World Bank assessment, as well as to develop a dialogue with the Government of Georgia on the scope of decentralization (i.e., the question of local elections and municipal taxing authority), prior to beginning activities in this area. FY 1996 was the first year for USAID funding of such assistance. Several key municipal officials and parliamentarians responsible for municipal and local government reform attended a Eastern European and NIS training symposium in Bulgaria to gain first handle knowledge of programs, reforms and systems.
Description: USAID contractor/grantees will work with senior municipal staff, to provide training in key technical areas, e.g., taxation, city management, and budgeting, in selected cities. Contractor/grantees will also work to develop a mayors' municipal association, which aids in the dissemination of lessons learned and best practices among municipal officials and helps to create an effective mechanism for lobbying the central government on issues of concern to local governments.
Host Country and Other Donors: USAID coordinates it's efforts with World Bank activities and the European Union which is working with the Government of Georgia on civil service reform at the central government level.
Beneficiaries: This effort seeks to benefit Georgian citizens in a few targeted cities. However, the number of beneficiaries can grow through an evolving network of municipal/mayors' association. Georgian citizens can also benefit from more transparent, effective and efficient local governments with the capacity to provide municipal services which insure a higher standard of living.
Principal Contractors, Grantees, or Agencies: USAID funded AED - Training and Exchange project and other grantees being determined.
Major Results Indicators:*
Increase in the % of citizens who think local government is responsive to needs
Percent of citizens who think local government provides effective services
*Indicators will be finalized, and baseline and target data will be developed, during the next planning period.
ACTIVITY DATA SHEET
PROGRAM: GEORGIA
TITLE: Crises, 110-S003.1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998: $9,400,000 FREEDOM Support Act
INITIAL OBLIGATION: FY 1994; ESTIMATED COMPLETION DATE: FY 1999
Purpose: Reduced human suffering in Georgia.
Background: The economic crisis and associated collapse of the social safety net coupled with internal conflicts, left Georgia's most vulnerable populations without viable means of support. Until economic conditions improve and internally displaced persons (IDPs) are repatriated, employment and household income will continue to decline, increasing the size of the vulnerable population. Currently the Georgian government does not have the resources to provide adequate support and benefits to those in need, specifically IDPs, which necessitates continuing international assistance in the short term. As international resources available for humanitarian assistance decrease, it becomes increasingly important to better target aid to those who are most in need. At the same time, the government must become increasingly responsible for managing its vulnerable population, particularly refugees and internally displaced persons.
USAID Role and Achievements to Date: Since 1993, USAID has provided humanitarian assistance through U.S. non-governmental organizations (NGOs) and international organizations to assist Georgia's vulnerable population, particularly IDPs. This assistance met critical and immediate needs over the past three years for supplemental food, non-food household items, pharmaceuticals, medical services, water and sanitation facilities, some basic agricultural inputs, and heavy oil for emergency energy needs. Together with the International Office of Migration (IOM), USAID and a USAID funded PVO, Save the Children, assisted the Government of Georgia (GOG) establish its Coordination Bureau for International Humanitarian Assistance (CBIHA) which was later turned over to the GOG to manage. The CBIHA monthly report is still the primary source of quantitative data used by assistance agencies, NGOs and GOG ministries to target and coordinate humanitarian aid.
Description: USAID provides humanitarian assistance in the form of food, pharmaceuticals, water and sanitation rehabilitation, and heavy oil for emergency energy needs. USAID-funded NGOs are also implementing bridging activities in micro-enterprise development, income generation, provision of inputs and technical assistance in agriculture, and reactivation of light industry in vulnerable communities. In order to refine the targeting of humanitarian assistance, USAID co-financed a major national assessment of vulnerability in partnership with the UN's Department of Humanitarian Affairs (UNDHA), European Community Humanitarian Organization (ECHO) and CBIHA and funded the team leader of the assessment. Household data on income, nutrition and health status was collected to establish country-specific vulnerability criteria for identification of humanitarian aid beneficiaries. While USAID continues to fund IOM to carry out capacity building within the GOG in the areas of emergency management and coordination of humanitarian aid, USAID has initiated a Social Investment Pilot project to allow NGOs to develop and implement projects which are critically needed in their local communities.
Host Country and Other Donors: Humanitarian assistance are provided in partnership with UNDHA, EU/ECHO and better targeted by CBIHA. USAID works closely with IOM, the UN High Commission for Refugees, UN Development Program and MRR on migration issues. Other assistance is provided by the European Union, the World Food Program, and the UN Children's Fund.
Beneficiaries: The estimated vulnerable population is expected to drop from 700,000 to 500,000 with improved targeting methods. Of this number, USAID activities benefit some 200,000 persons, both IDPs and non-IDPs, through bridging activities such as income generation and direct humanitarian assistance. Food assistance is provided to 185,000 vulnerable people in western Georgia. Pharmaceutical assistance provided coverage for over 429,000 women and children in Tbilisi. Water, sanitation and other rehabilitation efforts targeted over 6,000 IDPs living in Western Georgia. Provision of heavy fuel oil for emergency energy benefits most of the population.
Principle Contractors, Grantees, or Agencies: USAID funds humanitarian assistance through U.S. PVOs and international multilateral organizations, including Save the Children Federation, International Rescue Committee, United Methodist Committee on Relief, International Orthodox Christian Charities, International Federation of the Red Cross, UN World Food Program and other UN agencies.
Major Results Indicators:*
Number and % of vulnerable populations decreases
Numbers of people who have improved access to basic services (e.g., food, shelter, clean water, etc)
Number of people with increased personal income due to USAID income generation activities
* Baseline and target data will be developed during the next planning period.
![[USAID Home]](/images/usaid.gif)
[USAID Home]
[CP 98 Home]