Private sector and human-resource development in Georgia

Bank Group Program

Part-ners

WB Performance

Indica-tors for End FY06

Improvement of Governance

· Development of a compre-hensive, long-term concept and action plan of executive government reforms, and of a program to improve structure and number of employees in organizations under budgetary financing

State Chancel-lery, Ministry of Justice, Ministry of Finance

relevant execu-tive government bodies

Assistance to the State Chan-cellery in carrying out a functional analy-sis of the central gov-ernment agencies and assess-ment of budget-ary em-ployment, remu-nera-tion, and training pol-icy; on the basis of the above studies, de-velop recommendations

Widely owned program to improve functioning of gov-ernment administration and agencies; remuneration and retrenchment policy for core civil service introduced, and plans for civil service training developed

Public Sector Management Project

DFID, USAID, UNDP

Initiation of reform and re-structuring of civil service

· Inventory of normative acts defining the competence of government agencies to avoid duplication of local government functions

State Chancel-lery of Georgia, Ministry of Justice

Review of the existing legal framework

Initiation of legislative change and amendments

Public Sector Management Project; Public Expenditure Reviews

DFID

EU USAID UNDP

Duplications and overlap among the central state agencies reduced, mandates more clearly defined

· Distinction of municipal property from central gov-ernment and private prop-erty

State Chancel-lery, Ministry of Economy, Industry and Trade, Agency of State

Property Man-agement, Min-istry of Justice, Ministry of Finance

Advice on financing mechanism for transfer of road and transport properties and legal mechanisms for owning and managing very low volume farm access roads

Revised functional/admini-stration classification of roads; sound allocation formula for divid-ing Road Fund revenues be-tween road owners

Secondary Roads Project; Trade and Transport Fa-cilitation Pro-ject; Rural Infra-structure Study

Kuwait Fund for Eco-nomic Devel-opment

New road classification; new procedures for manag-ing the road fund, including allocation of funds between road owners

Macroeconomic Stability

· Preparation of indicative plans of development for the economy for 2004 and 2005

Ministry of Economy, In-dustry and Trade

Improvement of linkage be-tween policy, re-source constraints and budgets

Develop a more realistic me-dium-term budget framework

Public Expen-diture Re-views, PRSC in High Case

IMF

DFID

Budget execution closer to planned

· Initiate the process to con-vert a portion of government debt liabilities into long-term debt instruments

National Bank

Assistance to the MoF develop long-term debt instru-ments, e.g. gov-ernment bond market

MoF starts to use medium to long-term government bonds to replace the rolling of short-term debt instruments

Financial Sector Advi-sory Program

IMF

1-10 year government bond market in place

· Improvement of the man-agement of international re-serves of the NBG

National Bank

Advise to National Bank on management of reserves

Increased import coverage

Financial Sector Advi-sory Program

IMF

Gross foreign reserves to reach over 2 months of im-ports

· Completion of tax and cus-toms administration reform

Ministry of Finance, State Tax and Cus-toms Depart-ments

Development of a busi-ness-friendly tax envi-ron-ment

Increased collection of excise taxes and improved VAT ad-ministration

Public Expen-diture Re-views, Busi-ness Environ-ment Study, PRSC in High Case

IMF USAID EU

Collection of excise taxes to reach over 2 percent of GDP

· Implementation of treasury reform, centralization of treasury service; develop-ment and introduction of commitment accounting and control system; develop-ment and introduction of expenditure control system

Ministry of Finance

Assistance to the MOF to improve its cash and debt man-agement ca-pacity and skills

Consolidation of effective control system, and adoption of a single treasury account

CPAR Up-dates, Public Expenditure Reviews, PRSC in High Case

IMF

Improved cash management and debt management ca-pacity

· Improve government pro-curement system and ex-pand scope of its cover-age

State Procure-ment Depart-ment, Ministry of Economy, Industry and Trade

Establishment of a transparent state pro-curement system; decentralization of State procurement functions to line agen-cies

Greater efficiency and compe-tition within the system; re-duced delays and corruption in procurement process

CPAR, Public Expenditure Reviews, PRSC, project lending (e.g. Secondary Roads and Trade and Transport Facilita-tion)

Recommendations of Country Portfolio Assess-ment Report implemented

· Gradual increase of the share of targeted programs in the state budget

Ministry of Finance, Min-istry of Econ-omy, Industry and Trade

Develop program-based budgeting

Improve consistency between medium-term indicative plan and the budget

Public Expen-diture Re-views, Public Sector Man-agement Credit, PRSC in High Case

DFID

Public Expenditure Reviews assessment of better target-ing of programs in the budget

· Inventory of budgetary arrears

Ministry of Finance

Establish accurate esti-mates of past govern-ment liabilities

Better information on, and reduc-tion in, arrears

CFAA Up-dates, Public Expenditure Reviews

IMF

Reduced arrears

· Increase the number of par-ticipants in treasury bill market and improve bidding mechanisms to increase maturity and re-duce the dis-count rate through market

Ministry of Finance, Na-tional Bank, Na-tional Com-mis-sion of Secu-rities

More competitive and efficient T-bill market

Short term: more partici-pants for competitive bidding, and for non-competitive quota; medium term: cash man-age-ment, coordination be-tween MOF & NBG on T-bills/open market operations; long term: independent debt man-agement office

Financial Sector Advi-sory Program, PRSC in High Case

USAID

FIRST

Lower T-bill yield

· Develop legislation promot-ing the activities of invest-ment funds in order to introduce best corporate management practice in enterprises and develop stock market

Ministry of Finance, Na-tional Commis-sion of Securi-ties

Help build legal envi-ronment for investment funds; provide infor-mation/advice

Establishment of legal envi-ronment for investment funds

Financial Sector Advi-sory Program

Regulation of investment funds in place; NCS has capacity to supervise those funds

· Prepare and adopt bill “on Personification and Regis-tration of Insurance Contri-butions to Social Insurance System” required for regu-larizing first (distributive) pillar of pension system and development of pensioners' personified registration system

Ministry of Labor, Health and Social Pro-tection

Support to Ministry of Labor, Health and Social Pro-tection on legal reforms and their implementation

Law adopted successfully

Social Protec-tion Reform Project

Regularization of 1st pillar of pension system; better links between pensions and con-tri-bu-tions

· For private pension funds, adopt statutory normative acts in accordance with the laws “on Non-Government Pension Funds” and “on Securities Market”

National Secu-rities Commis-sion, Minis-try of Labor, Health and Social Pro-tection

Support to National Secu-rities Commis-sion and Ministry of Labor, Health and Social Pro-tection on legal reforms and their implementa-tion

Normative acts developed and adopted

Social Protec-tion Reform Project

Improved regulatory envi-ronment in the area of pri-vate pensions

· Prepare amendments to the Tax Code and investment rules of pension assets to promote the development of non-banking financial sec-tor, including nongovern-mental voluntary insurance system

Ministry of Finance, State Service of Insurance Su-pervision, Na-tional Commission of Securities

Support to relevant agencies on amend-ments to tax code and investment rules

Improved functioning of non-banking financial sector, including insurance compa-nies/private pension funds

Social Protec-tion Reform Project

Greater and more effective role for non-banking finan-cial sector, including insur-ance companies and private pension funds



Structural Reforms
· Assess magnitude and share smuggled goods and those manufactured in informal sector of the econ-omy by various commodity groups	Ministry of Economy, Indus-try and Trade; State Department of Statistics	Support for initiatives to reduce smuggling and the shadow econ-omy	Reduction in smuggling and in the shadow economy	Trade Facilita-tion Project; Private Sector Development Project; Public Sector Reform Project; PRSC in High Case	USAID	Increase in tax revenues, including increase in reve-nues from petroleum prod-ucts and cigarettes to over 2.5% of GDP
· Develop proposals to encour-age investment	Ministry of Economy, Indus-try and Trade; Ministry of Fi-nance; Ministry of Justice	Intensified dialogue with Government on reform of the banking system as a means of improving the invest-ment climate	Increase in banks' capitaliza-tion; better corporate govern-ance principles and internal control systems; expansion of banking networks; real time banking settlement; anti-money-laundering legislation; deposit insurance introduced	Private Sector Development Project; Financial Sector Advi-sory Program; Business Envi-ronment Study	USAID IMF FIRST	Minimum capital raised to €3.5m; im-proved confidence in bank-ing system; better access to finance; anti money laun-dering regulations in compli-ance with FATF require-ments
· Implement export promo-tion measures	Ministry of Economy, Indus-try and Trade; Ministry of Finance	Support for removal of institutional (govern-ance) obstacles to ful-filling Georgia's Export Potential	Progress in implementing rec-ommendations of Trade Study/Workshop	Trade and Transport Facili-tation Project; Private Sector Development Project; Business Environment Study; Rural Development Project	USAID	Improved perception of environment for exporters in business surveys
Human Capital Development
Improvement of Health
· Revise government commit-ments in healthcare sector to ensure full financing	Ministry of Labor, Health-care and Social Protection; Ministry of finance	Assist government to define health financing strategy focusing on improvements in mobi-lization, allocation and management of public and private resources, help build government capacity in evidence based policy-making, planning, monitoring and evaluation, as well as regulation	Definition of basic benefit package, financing methodol-ogy and co-payments, as well as recurrent costs; improved resource mobilization and allocation, including introduc-tion of incentive-compatible provider payment systems	Health Sector Note, JSDF Grant on community health insurance	JSDF SIDA DFID WHO	Definition of basic benefit package, financing methodology, co-payments, and recurrent costs; better resource mobilization and allocation, including introduction of incentive-compatible provider payment systems
Improvement of Education
· Develop programs for basic education	Ministry of Edu-cation, Ministry of Culture	Improving quality of education and access of the poor	Stakeholders actively engaged in improving education quality and outcomes	Education Project	SOROS	97 percent enrollment in basic education for the poorest quintile; 60% of consolidated education ex-penditures continue to be allocated to pri-mary/secon-dary education
Improvement of Social Risks Management
· Definition of nature and periodicity of government commitments in the social sector to ensure full financ-ing	Ministry of La-bor, Healthcare and Social Pro-tection; State Social Security Fund; Ministry of Finance	Timely execution of Government obligations in the social sectors; fiscal affordability and sustainability	No-arrears in social transfers, increased poverty alleviation impact	Public Expen-diture Re-views, PRSC in High Case		No new arrears; poverty incidence decreased by 6 percentage points
· Enforce package of draft bills on compulsory social insurance	Ministry of Labor, Health-care and Social Protection, State Social Secu-rity Fund	Support to implemen-tation of social insur-ance system	Better performance of the pen-sion system	Social Protec-tion Reform Project		No pension arrears; financ-ing of social insur-ance/assistance benefits separated
· Phased increase of pensions	Ministry of Labor, Health-care and Social Protection, State Social Secu-rity Fund	Dialogue on pension policies	Increase in pensions	Public Expen-diture Re-views; Social Protection Reform Pro-ject		Average real pension in-creased by 20%; extreme poverty among elderly re-duced
· Fiscal sustainability of pen-sion system based on com-pulsory social insurance	Ministry of Labor, Health-care and Social Protection, State Social Secu-rity Fund	Dialogue on pension policies	Satisfactory performance of the pension system	Public Expen-diture Re-views; Social Protection Reform Pro-ject		Improved fiscal sustainabil-ity of pension system
Development of Priority Branches of the Economy
Energy and Infrastructure
· Reorganize electricity whole-sale market to resume the functions of financial and technical operator	Ministry of Fuel and Energy	Support for direct con-tracts between genera-tors and large end con-sumers, subject to transparent terms and implementation	Direct contracts between gen-erators and large end consum-ers	EMSP	EBRD KfW USAID	Electricity market success-fully reorganized
· Amend tariff policy in line with model of wholesale market and consider liber-alization of prices	Ministry of Fuel and Energy; Energy Regula-tory Commis-sion; Ministry of Economy	Tariff policy; adequate appropriations to en-ergy in state budgets	Lower commercial losses; state budgets fully cover en-ergy costs; higher collections by state energy companies in distribution, transmission; improved financial viability	EMSP	EBRD IMF KfW USAID	Cash payment collections at the wholesale electricity market above 65%; dis-semination to public of de-tailed sector performance indicators
· Approve strategy to manage energy sector debts	Ministry of Fuel and Energy, Ministry of Fi-nance	Establishment of a pro-fessional Debt Re-structuring Agency for the power sector	Legacy debt no longer a threat to the financial viability of the power sector	EMSP	EBRD IMF KfW USAID	Debt Restructuring Agency led by international experts in full operation; legacy debt issue resolved
· Transfer energy sector com-panies, including National Distribution Company, un-der management contract in accordance with existing strategy	Ministry of Fuel and Energy	Georgian Unified Dis-tribution Company (GUDC) under long-term management con-tract	GUDC under long-term man-agement contract	EMSP	EBRD KfW USAID	GUDC under long-term management contract; other management contracts fully operational
· Improve transport regulatory administration	Ministry of Transport and Communication	MOTC restructuring	Improved functioning of re-structured MOTC	Secondary Roads Project; Transport Fa-cilitation Pro-ject		SDRG restructured and road financing arranged to pro-vide stable source for road funding to maintain and improve roads
· Technical monitoring of emergency conditions, re-store status of premises and constructions of strategic importance and special complexity of the energy, transportation, communica-tion and construction infra-structure as well as those damaged from earthquakes	Ministry of Economy, In-dustry and Trade, Ministry of Fuel-Energy, Ministry of Transportation and Communi-ca-tion, State Department of Highways	Development of road data bank for SDRG to take prompt, cost-ef-fective action in emer-gencies	The data bank is used to pri-oritize annual road program	Secondary Roads Project; Transport Fa-cilitation Pro-ject		Road data bank in use and SDRG expanded to cover local rural roads
· Improve implementation of road construction plan, identify strategic projects and sources of financing	State Depart-ment of High-ways	Road construction plan, equipping SDRG with tools to develop and manage the plan	5 year rolling plan a standard procedure in SDRG	Secondary Roads Project; Transport Fa-cilitation Pro-ject	EU, Kuwait Devel-opment Fund	Performance indicators to be developed in Secondary Roads project
· Form information network covering the entire country	State Depart-ment of Infor-mation	Improving rural access to tele-communications services	Better and more affordable access by the rural population to telecommunications	Rural Tele-communica-tions Project		Higher proportion of the rural population having af-fordable access to telecom-munications
Tourism
· Prepare special program to attract additional funding from international donor or-ganizations to develop tour-ism	State Depart-ment of Tour-ism and Resorts	Development of com-munity-based tourism	Realistic development strategy for tourism -- especially com-munity-based tourism -- that promotes broad-based local development, reduces admin-istrative barriers to tourism, and supports preservation	Community-based tourism		Realistic development strat-egy for community-based tourism, including reduced administrative barriers and more focus on preservation
Agriculture and Food
· Establish water consumer associations in rural areas	Ministry of Agri-culture, Meliora-tion System Man-agement De-partment	Support to establishing new, and strengthening existing, water users associations to manage irrigation facilities	More and better functioning water user associations	Irrigation and Drainage Re-habilitation Project	EU TA-CIS	Legal framework for WUAs established; number of wa-ter user associations regis-tered increased
· Develop unified geographic computer system of land ca-dastre and registration	Ministry of Agri-culture and Food, State Department of Land Man-age-ment	Support to strengthen-ing capacity of State Department of Land Management to carry out land registration based on cadastre sur-vey	Increased capacity of State Department of Land Manage-ment	Agriculture Development Project	IFAD, USAID KfW	Eleven land registration centers established; satellite imagery used for titling in mountainous regions
· Establish private veterinary services	Ministry of Agri-culture and Food, Veteri-nary Depart-ment	Dialogue with Gov-ernment on Veterinary reforms	Law to establish private vet-erinarians passed	ARET	USAID	Government starts veteri-nary reform process
· Structural reorganization of plants protection services	Ministry of Agri-culture and Food, Plant Pro-tection Service	Discussion with MAF on reform of plant pro-tection services	Follow-up to merging of three agencies into a single plant protection agency	ADP	USAID	Reduced illegal trade of agro-chemicals; relevant laws passed

5.1.6 The World Bank Partners in Georgia

SECTOR	LEAD NATIONAL AGENCY	PARTNERS
Agriculture	Ministry of Agriculture and Food	IFAD, FAO, DFID, UNDP, KFW
Culture	Ministry of Culture Fund for Cultural Heritage Protection	EU
Education	Ministry of Education	SOROS
Energy	Ministry of Fuel and Energy Georgian National Energy Regulatory Commission	USAID, KFW, EBRD
Financial Sector	Ministry of Finance and Tax Revenues National Bank of Georgia National Securities Commission Foreign Investment Advisory Council	IMF
Forestry	State Department of Forestry	FAO, WWF, CIDA
Governance	State Chancellery, Anti-corruption Policy Coordination Council	Netherlands, IMF, DFID, USAID, UNDP,
Health	Ministry of Labor, Health and Social Affairs	SIDA, DFID, WHO
Judicial	Ministry of Justice Supreme Court ALPE (Association of Legal Public Education)	EU, USAID, SOROS, ABA, DOJ
Municipal Development and Decentralization	Georgian Municipal Development Fund (MDF)
Poverty Reduction	Secretariat of Governmental Commission on PREGP (Poverty reduction and Economic Growth Program)	IMF, UNDP, DFID, USAID
Private Sector	Ministry of Economy, Industry and Trade	USAID, EBRD, BP
Protected Areas	State Department of Protected Territories, Preserves and Hunting Grounds	UNDP
Roads	Ministry of Transport, Telecommunications and Post State Department of Roads	Kuwait Fund for Economic Development
Social Infrastructure	Georgian Social Investment Fund (GSIF)	KFW
Transport and Communications	Ministry of Transport, Telecommunications and Post National Commission of Telecommunications and Transport

5.2 USAID

USAID assistance in the economic growth area focuses on strengthening agriculture sector, assisting the NBG to improve its supervision, inspection, and enforcement capacity, and furthering land market reform. The Georgian Enterprise Growth Initiative (GEGI) is a major new private sector development activity to be implemented in close coordination with the CAS programs. USAID has been actively involved in the energy and environmental sectors providing TA to regulatory bodies, supporting privatization of the energy sector and improvement of the international investment climate, assisting in elaboration of environmentally sound laws in the energy sector as well as policies in the sector oriented towards energy efficiency, conservation and water management. Through democracy and governance oriented projects USAID supports increased awareness of legal rights, judicial and BAR reform initiatives, strengthening local governments, building professionalism of independent mass media as well as capacity of civil society and NGOs. USAID initiatives in the social sectors include programs in the regions to support income generation and economic self-reliance activities among internally displaced persons, crisis assistance to the most vulnerable, health care partnership programs and reproductive health programs which promote improved maternal and perinatal services, safe motherhood, family planning, health information systems, and STI/HIV awareness and prevention.

5.3 EBRD

EBRD main objective in Georgia is to expand private sector development activities in the country. During years 2002 and 2003 it has been engaged in the active political dialogue with the Government to support the substantial reduction of administrative barriers to investments, representation on the board of companies and banks, support of the initiatives of local business associations. EBRD aims at further strengthening of the Georgian banking sector through ongoing support to the regulator, management training, and further consolidation. EBRD's interventions include financing to business start-ups and existing micro, small and medium-sized enterprises as well as selectively supporting critical investments in infrastructure with specific focus on those projects that promote the commercialization of infrastructure, particularly of the energy sector.

5.4 EU

EU's Partnership and Cooperation Agreement (PCA) provides for cooperation in a wide range of areas including Food Security Program (in amount of € 25 million for the period 2002-2003), rehabilitation in conflict zones (Engury Power Plan in Abkhazia), macro-financial assistance (establishment of an agricultural credit institutions, reforms in accountancy and audit, assistance to the insurance sector and securities market regulation), support to trade liberalization, customs, and development of transport infrastructure networks, advice on economic legislation and country legislature harmonization with the EU standards, investments in primary health care reconstruction program and development of the Georgian National Health Program and training of medical and administrative personnel as well as provision of the technical assistance for the development of the model of Regional Health financing. TACIS is the main financial instrument supporting the implementation of the PCA.

5.5 GTZ

GTZ, working on behalf of German Government, provides support in the health sector primarily focusing on structural improvements and training for medical technicians, promotes vocational training sector to improve commercial and agricultural training and upgrading, implements projects to privatize agriculture and build up effective land- and debt-management systems, promotes export and investment, and has been assisting in judicial and legal training as well as practical application of civil law in Georgia. German assistance is also channelled through KfW supporting credit line to agriculture sector enterprises, participating with an equity stake in Procredit Bank, is conducting cadastral works almost all over the country, and contributing to social infrastructure in the districts bordering Borjomi-Kharagauli National Park as well as supporting the Government to rehabilitate schools and health facilities damaged during the recent earthquake.

5.6 CIDA

Bilateral assistance also comes from Canada (CIDA) mostly through the regional projects supporting trade policy capacity, expanding the micro credit programs, promoting NGO capacity development program that supports the principles of good governance, strengthening health reform through the appropriate application of health information technology and information management strategies, and contributing drought victims relief operations.

5.7 DFID

DFID has recently approved a new Primary Health Care (PHC) Development project through which technical assistance will be provided to the Government in the areas of human resource development for the PHC system, health care financing, health management information systems, capacity building for the health policy development. DFID has been supporting the SDS in the multi-sector household and labor market surveys. The ongoing program also has a component aiming at development of good governance and civil society in two regions of Georgia as well as conflict reduction and confidence-building component.

5.8 The Government of the Netherlands

The Netherlands has provided support for a wide range of activities, focusing on good governance, human rights and peace building, as well as substantial budget support in conjunction with SAC III. Dutch support in the three focus areas will continue, including for . election preparation, prevention of trafficking in human beings, confidence building measures in Abkhazia and support for NGOs involved in poverty alleviation and human rights

5.9 IFAD

In the agriculture sector IFAD supports rural development program for mountainous and highland areas and credit-union development and rural credit activities for small farmers, while FAO provides financial support to hazelnut sector rehabilitation project.

5.10 UNDP

UNDP in Georgia focuses its program activities in three areas: (a) democratic governance; (b) poverty reduction; and (c) environmental protection, as outlined in the second Country Cooperation Framework for Georgia (2001-2005). In the sphere of Governance, major ongoing initiatives include support to Foreign Investment Advisory Council, strengthening the Anti-corruption Promotion Group, and assistance to the Constitutional Court and Public Defender's Office. UNDP has been active in capacity building of the Georgian International Oil Corporation and of the National Security Policy Management. UNDP is contributing to land market development through creation of a computerized program of registration. Technical and financial inputs have been provided to strengthen the capacity of Georgian institutions responsible for national statistics, notably the State Department of Statistics. Environmental challenges are being addressed through the projects supporting recovery, conversation and sustainable use of Georgia's agro-biodiversity, removal of barriers to small hydro power sector development, and capacity building of the Ministry of Environment.

5.11 UNICEF

UNICEF priorities in Georgia include: education, integrated childhood development, immunization, fighting HIV/AIDS, and protecting children from violence, exploitation, abuse and discrimination. It has been assisting the Government in national training of health workers and professionals and in providing universal access to basic health services for women and children. UNICEF has been helping the Government in promoting the implementation of the Convention on the Rights of the Child. Support also includes ensuring inclusive education for children with disabilities and providing psychosocial support to children in need of special protection as well as introducing alternative, non-institutional methods of childcare. Child de-institutionalization has been also supported by SIDA through provision of technical assistance during social protection reform project preparation and implementation phases.