About Tacis and GEPLAC Georgian Economic Trends Is a Publication

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About Tacis and GEPLAC Georgian Economic Trends Is a Publication About Tacis and GEPLAC Georgian Economic Trends is a publication which is now funded by the Tacis Programme through the Georgian-European Policy and Legal Advice Centre. The Tacis Programme is a European Union Initiative for the New Independent States and Mongolia which fosters the development of harmonious and prosperous economic and political links between the European Union and these partner countries. Tacis does this by providing grant finance for know-how to support the process of transformation to market economies and democratic societies. It is the largest programme of its kind operating in the region, and has launched more than 3,000 projects worth over ECU 4,220 million since its inception in 1991 and through 1999. Tacis works closely with its partner countries and provides know-how from a wide range of public and private organisations including advice and training, developing and reforming legal and regulatory frameworks, institutions and organisations, and setting up partnerships, networks, twinnings and pilot projects. Tacis also cultivates links and lasting relationships between organisations in the partner countries and the European Union to promote understanding of democracy and a market-oriented social and economic system. The Georgian-European Policy and Legal Advice Centre (GEPLAC) was established in 1998 by Tacis in order to support economic and legal reform in Georgia. Activities under GEPLAC’s programme include the production of Georgian Economic Trends and of the Georgian Legal Review, and the provision of economic policy and legal advice to the Georgian Government. One of the major tasks of “GEPLAC III” is the elaboration of the “National Programme of Harmonisation of Georgian Legislation with that of the European Union”, pursuant to the PCA. Georgian Economic Trends Quarterly Review 2002 No. 2 This publication is financed by the European Union’s Tacis Programme, which provides grants finance for know-how to foster the development of market economies and democratic societies in the New Independent States and Mongolia. GEORGIAN ECONOMIC TRENDS Georgian Economic Trends (GET), a quarterly GET also publishes feature articles by outside publication, aims to provide all those interested in contributors: academicians, government officials, the progress of economic reform in Georgia with a members of parliament, independent scholars and review of developments and transition. GET was researchers, etc. on economic issues of established in 1995 and is published in Georgian contemporary relevance in Georgia. Before being and English. This and previous editions of GET are accepted for publication, all articles will be reviewed available on the internet at: by members of GET Editorial Board that may also seek permission to edit such articles. Articles will www.geplac.org be published only if they are deemed to be consistent with GET editorial policy. Contributors The following people worked on this edition (in are requested to submit their papers either in alphabetical order): English or in Georgian by e-mail as an attached Word file to Veronica Schneider, editor-in-chief at George Eradze, Mark Hudson, David Jinjolia, [email protected] or to deliver them as a Word Natalia Kakabadze, Dimitri Kemoklidze, file on a diskette to the address below. Gocha Kereselidze, Vakhtang Marsagishvili, Erekle Natadze, Veronica Schneider, The ideas, opinions, findings, interpretations and Simon Stone, Irakli Tsereteli conclusions contained in the feature articles are those of the author(s) only and do not necessarily GET draws on information from a wide range of coincide with those of GET Editorial Board, neither government and non-government sources including do they represent any official view of the European in particular the State Department for Statistics, the Commission, the Georgian-European Policy and National Bank of Georgia, the United State Social Legal Advice Centre or the Government of Georgia. Safety Fund, the Ministry of Finance, the Ministry of Foreign Affairs, the Ministry of Economy, Industry Readers may quote any information used provided and Trade, the Ministry of State Property it is properly acknowledged. Management, the Ministry of Health and Social Affairs as well as other Government ministries and For further information or comments please contact: departments. Wherever possible every care is taken to ensure that data sources are fully Veronica Schneider acknowledged since without the full co-operation Editor-in-Chief and support of information providers, including Georgian Economic Trends regular consultation, it would not be possible to Georgian-European Policy and Legal Advice Centre produce this review. (GEPLAC) 42, Kazbegi Ave, Tbilisi 380077 The purpose of GET is to offer an independent Tel: (995 32) 53 71 40 / 53 71 42 / 53 71 43 analytical account of economic trends drawing on 53 71 45 / 53 71 46 information made publicly available. As part of this Tel/Fax: (995 32) 53 71 39 (direct) work, commentary and advice are offered on policy Fax: (995 32) 53 71 38 and on the collection and dissemination of E-mail: [email protected] economic and other information. These are always intended to support the process of economic reform To subscribe to GET, please, send an e-mail or fax in Georgia, and also to relate this to the Partnership stating your contact details and language of the and Cooperation Agreement between Georgia and edition to the e-mail address/fax numbers above. the European Union. However, they represent the view of the authors and editors only and do not represent any official view of the European Commission, the Georgian-European Policy and Legal Advice Centre or the Government of Georgia. GEORGIAN ECONOMIC TRENDS – 2002 No.2 GEORGIAN ECONOMIC TRENDS Contents Foreword 2 Part I. Economic Trends 1. Summary 4 2. National Accounts and Main Trends 8 3. Government Finance 14 4. Money and Finance 21 5. International Trade and Foreign Economic Relations 31 6. Privatisation 41 7. Employment, Incomes and the Social Safety Net 46 8. The EU-Georgian Relations 60 Calendar of Events 65 Part II. Appendix: Feature Articles Appendix I: A State Pension System in Transition 76 Address by Johan Verstraeten, President of the International Social Security Association to the International Conference “A State Pension System in Transition” organised by the Georgian Government and the United State Social Security Fund of Georgia Appendix II: Legislation of Social Insurance and Public Pensions 94 Presentation by Irakli Koplatadze, General Director of the United State Social Security Fund of Georgia to the International Conference “A State Pension System in Transition” organised by the Georgian Government and the United State Social Security Fund of Georgia Appendix III: Georgia: A Decade of Transition 98 By Lekso Liparteliani, Galt & Taggart Securities LLC Part III. Statistical Appendix Statistical Appendix 109 Abbreviations 122 GEORGIAN ECONOMIC TRENDS – 2002 No.2 1 FOREWORD Dear Reader We usually think of the summer as a time when nothing much happens, especially in the areas of economics and politics. This is rather strange, however, when you consider that, over the last two centuries, this season saw many world - shattering events, including the starting of wars, invasions, major battles and other unwelcome developments. So it should be no surprise that, this summer also, we saw interesting economic events of varying types, including: • Continuing accounting and “corporate governance” scandals in the United States. This further weakened the USD (which in fact reached Euro parity), as well as stock markets, resulting in a government demand for senior executives to personally certify the correctness of their companies’ accounts; • Serious floods in Central Europe. There was major damage, requiring considerable expenditure on rebuilding, in parts of Southern Germany. The Czech Republic was also hit and will receive financial assistance from the European Union; • Much more positively, The World Summit on Sustainable Development - “the Earth Summit” - in Johannesburg, which was attended by delegates from virtually every country of the world, including Georgia; But, of course, there are renewed concerns about possible war in the Middle East and the inevitable economic consequences. Fortunately, GEPLAC’s mission is less dependent on “events”, either positive or negative, since it is determined by more durable relationships, principally that between Georgia and the countries of the EU, as expressed in the Partnership and Cooperation Agreement (PCA), which came into force in April 1996. This may be an opportune time to say something further about PCA and how it does in fact define the activities of the Centre. Compared with most international agreements and treaties, the PCA is not a long document (62 pages), though it covers a very broad range of subjects. In essence, it records the intention of the signatories to develop political relations, to support the consolidation of democracy in Georgia and to complete the transition to a market economy. The EU has undertaken to provide technical assistance to Georgia, and GEPLAC is one of many projects under this heading. The coverage of the Georgian PCA, which is similar to that signed by many countries of the former Soviet Union, including Russia, is indeed broad. However, this at least serves the very useful purpose of reminding all interested parties of the scale of the task and the fact that the effort required should not be underestimated. Of greatest relevance for
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