The European Union and Georgia sign the Association AgreementAssociation with EU leads to privileged trade relations (Source EC/ EU Neighbourhood Info Centre)

Trade Insight• The European Union and Georgia sign the Association Agreement 1

DCFTA Highlights • Investor’s Conference - Highlights 3• Association Agreement and DCFTA Highlights 3Georgia adopts a Competition Law

•Facilitating Georgia's integration into the EU market 4• Georgian Revenue Service and taxation: better control, 5better service, better legislation.

• Regions towards EU integration 6

Topic At A Glance • Georgia 2020 SOCIO-ECONOMIC DEVELOPMENT STRATEGY 7 • STATE PROGRAMME "PRODUCE IN GEORGIA" 8Agriculture • EU and FAO assist in the elaboration of the Agriculture Development Strategy 9

• EU supports the National Food Agency 9• Agriculture cooperatives gain momentum 10

DID YOU KNOW THAT… 11Upcoming events 12

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Issue 6 July 2014

1D E l E G A T I o n o F T h E E U R o P E A n U n I o n T o G E o R G I A

A screengrab from afootage showingGeorgia’s PM IrakliGaribashvili signingAssociation Agreementin Brussels on June 27,2014. He said theagreement represents“master plan forGeorgia’smodernisation.”

In today’s challenging economic environ-ment, boosting trade, improving businessclimate and attracting more investments

are the most effective ways to bolster eco-nomic growth and create jobs. This visionunderlies the EU’s policies towards its East-ern neighbours, both in bilateral relationsand in the multilateral framework of the

Eastern Partnership. Progressive trade liberalisation is the corner-stone of the new Association Agreements(AAs) between the EU and its partner coun-tries, which include provisions establishingDCFTAs. Georgia, together with the Republic ofMoldova, initialled the AA/DCFTAs, ➜

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on 29 november 2013, during theEastern Partnership summit in Vilnius.on the 27th of June, this process hasbeen completed: the EU and Georgiasigned the Association Agreement inBrussels.

What does it mean?The immediate phasing out of exist-ing customs tariffs and regulatorybarriers will increase the variety andquality of products and services,

boosting competition and exports,improving the business climate, at-tracting investors while ensuringhigher levels of social, environmen-tal and consumer protection. It willprovide stable and more pre-dictable governance rules, especially for SMEs, which are morevulnerable. Better products andservices will enhance the overallstandard of living for consumersand citizens. The country will be ex-

pected to bring its legislation closerto that of the EU in a wide numberof regulatory policy areas.An independent study predicts thatthe DCFTA will increase Georgia’sexports to the EU by 12% and im-ports by 7.5%. Georgia’s GDP couldincrease by 4.3% or €292 million inthe long term, provided that theDCFTA is implemented and its ef-fects sustained.

For more information:Reading guide on the EU-GeorgiaDCFTA

Myths about the EU-Georgia Associ-ation Agreement

EU-Georgia trade – EU statistics

➜ ➜ ➜Progressive tradeliberalisation is thecornerstone of thenew AssociationAgreements (AAs)between the EU andits partner countries

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Competition was one of thekey trade-related policyareas where reforms were

recommended in order to start thenegotiations for a DCFTA with theEU. Competition policy is relevantfor trade as it provides a level-play-ing field for companies on the mar-ket, for domestic and foreign onesalike. Fair competition leads to bet-ter business environment and in-novation. It therefore helpsenhancing the country's competi-tiveness on the global market andpromotes economic welfare. Free

competition supports a betterchoice of products at lower pricesand promotes innovation and pro-ductivity.A law on Competition was ap-proved and published on 31 March2014. The provisions of the law areconsistent with EU standards. Inparticular the law establishes theprinciples for protection of freeand fair competition from unlawfulrestrictions, and provides a frame-work to ensure that companies op-erate in the market on the basis ofthe same rules. In particular, the

law eliminates barriers to marketentry, prohibits the abuse of adominant position and any agree-ment or concerted practice withthe objective of restricting compe-tition between economic agents,and identifies the form of state aidthat endangers competition. Ac-cording to the law, an independ-ent competition authority(Competition Agency) has beenestablished to oversee the imple-mentation of the law. Integral text of the Competitionlaw in Georgian language.

INVESTOR'S CONFERENCE – HIGHLIGHTS

The Investors' conference, withparticipation of the EuropeanCommission President José

Manuel Barroso, was held in Georgiaon 13 June 2014. The conferencepreceded by a few days the signingof the EU-Georgia AssociationAgreement including Deep and

Comprehensive Free Trade Area(AA/DCFTA) on 27 June 2014. The conference was opened byJose-Manuel Barroso, President ofthe European Commission, IrakliGaribashvili, Prime Minister of Geor-gia, Maia Panjikidze, Minister of For-

eign Affairs of Georgia, and GiorgiKvirikashvili, Vice-Prime Minister,Minister of Economy and Sustain-able Development of Georgia.The conference focused on businessactivity and investment in Georgia,because experience shows these arethe areas where agreements such asthe Association Agreement bringthe biggest long-term economicbenefits.one of the main benefits of the con-ference to investors in Georgia hasbeen the discussion of practical im-plication of the AA/DCFTAs for busi-ness. The conference also providedopportunities for businesses to pro-mote themselves, their productsand services. In his opening remarks, PresidentBarroso hailed Georgia’s progress to-wards signing of the AA and saidGeorgia was a frontrunner of theEastern Partnership countries. hepointed to the highly anticipatedsigning of the Agreement betweenGeorgia and the EU."Georgia has already undertakenmany important reforms in recent

years. More will be needed. ourjointly agreed Association Agendaprovides a glimpse of what we haveidentified as key areas to addressover the next three years as we workto implement the Agreement,” Bar-roso said.he believed the goal of the EU-Geor-gia partnership was to help thecountry deliver on its own ambitions."The Association Agreement is onlythe beginning of EU-Georgia’s coop-eration”, he added.

"The Deep and Comprehensive FreeTrade Area is a great responsibility[and] we do not export ready-madesolutions. The EU offers only instru-ments and expertise as we could notreplace your eagerness. only youcan really make that happen but we,as the European Union, can help youdo so”. Several hundreds of represen-tatives of the government, diplo-matic corps, business sector andinternational and non-governmentalorganisations took part in the event.Speech by President Barroso at theGeorgia Investment Conference.

Association Agreement and DCFTA HighlightsGeorgia adopts a Competition law

DCFTA HIGHLIGHTS

President Barrosohailed Georgia’sprogress towardssigning of the AA andsaid Georgia was afrontrunner of theEastern Partnershipcountries

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DCFTA HIGHLIGHTS

The signature of the Associa-tion Agreement marks the be-ginning of the official process

of integration with the EU throughreforms. Georgia has alreadystarted the reform process and hascome a long way in a number ofpolicy areas. This progress enabledthe conclusion of the negotiationson the Association Agreement, andhelped determine the next steps.The reform agenda contained in theAssociation Agreement paves theway for continuation in the path ofreforms that will benefit trade andthe development of the private sec-tor. In particular, the engagementof the Government of Georgia to-wards a genuine Small andMedium-sized Enterprise (SME) pol-icy and strategy will necessarily gothrough the strengthening of keyinstitutions in the trade and busi-ness areas. The EntrepreneurshipDevelopment Agency (EDA) andGeorgia's Innovation and Technol-ogy Agency (GITA) will play a keyrole in supporting and counsellingGeorgian enterprises interested inexporting to the EU market and

start-up innovative businesses.The EU is supporting Georgia's inte-gration with the EU market by fur-ther strengthening core institutionsand economic actors including SMEsalong the DCFTA process.A new programme intended to helpreap the benefits of the Agreementis under preparation. With the "Sup-port to the DCFTA and SMEs" to-talling € 51 million, the EU iscombining a full spectrum of meas-ures targeting trade reforms andsupport to the private sector, in par-ticular SMEs. Budget support (di-rectly benefitting the Georgianbudget) will be complemented by agrant scheme for civil society andGeorgian business associations, atwinning with the market surveil-lance authority, and technical assis-tance delivered through the Germanagency GIZ, the European Bank forReconstruction and Development(EBRD), and the FAo.

Budget support represents 60% ofthe total EU financial support forGeorgia, the remaining being com-plementary measures. During its 60

months of implementation, the pro-gramme will address the need tofurther strengthen key regulatorypolicies and institutions vital fortrade and private sector develop-ment, with a close eye to GeorgianSMEs to be better prepared to adjustto a new regulatory environment.

The programme is in line with Geor-gia's socio-economic strategy "Geor-gia 2020" where SME developmentis recognised as a way to overcomepoverty and reach sustainable andinclusive growth. In this sense, theEU programme will contribute to fa-cilitate understanding of the DCFTAfor business, especially for SMEswhich are the most vulnerable seg-ment of the Georgian economy. While contributing to boost SMEcompetitiveness, improve public-private dialogue on DCFTA and thecapacities of business associationsto deliver better services, the EU ac-tion will ensure the continuation ofreforms in key trade-related policyareas like food safety and quality in-frastructure, to the benefit of thepopulation at large.

Facilitating Georgia's integration with the EU market

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DCFTA HIGHLIGHTS

An 18-month EU twinning project tostrengthen the administrative ca-pacity of the Georgia revenue serv-ice in the area of taxation began inMay 2014. The project, which comeswith a budget of 1.3 million euro, isbeing implemented by the AustrianMinistry of Finance. The general aim of the project is toimprove the tax administration sys-tem for businesses and citizens inGeorgia. The specific aim is to bringthe administrative capacity of theGeorgia Revenue Service in line withEuropean Union and internationalstandards in terms of tax controls,tax collection, taxpayers’ services,legislation (e.g. VAT and excise) andhuman resources.In terms of tax controls, the aims in-

clude developing and producingbusiness sector guides, training au-ditors in specific taxation issues (e.g.offshore/tax haven issues) and draft-ing legislation for computer audit,using computer audit in tax controland producing guidelines for com-puter audit.As for tax collection, a number of re-sults are envisaged to help with theenforcement of tax debts. These in-clude putting in place methods to as-sess the effectiveness of enforcementprocedures, drafting legislation fordebt enforcement measures, trainingstaff and preparing guidelines aboutthese measures. Under taxpayers’ services, one resultenvisaged is for guidelines to bedrafted to do away with double tax-

ation according to double taxationagreements. Another is to put to-gether recommendations on im-proved regimes for businessstart-ups and SMEs.

Georgian Revenue Service and taxation: better control, better service, better legislation.

Title V of the Association Agreement EU-Georgia introduces clear principles of cooperation in the tax field:

“The Parties shall cooperate to enhance good governance in the tax area, with aview to the further improvement of economic relations, trade, investment and faircompetition.”

These principles have been put at the basis of economic relations between EU and Georgia and are alsoreflected in the DCFTA part of the Agreement.

The Article 280 of the Chapter 3

"The general aim of theproject is to improvethe tax administrationsystem for businessesand citizens in Georgia"

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September 2014 marks the start ofa new EU-funded project entitled'Georgians in Europe: lessonslearned from Visegrad countries'.Members of the Armenian andAzeri minorities in 6 municipalitieswill be able to meet and speak withteachers, doctors, farmers and fire-

men, people just like them, fromthe Visegrad countries about theirexperience of EU integration. Someof these municipalities already haveestablished contacts with counter-parts in the Czech Republic, hun-gary, Slovakia and Poland. Buildingon these relationships, 'local ambas-sadors' for European integration willbe supported to go out into theircommunities and explain the im-pact of the Association agreementand the DCFTA on people in theeveryday lives. An important part ofthe project is the use of twinningrelations – personal contacts be-tween schools, teachers, farmers'groups, CSos and others with theirVisegrad countries counterparts.Bringing together people with ashared will and common interest toconsolidate their efforts and put

their heart and mind into support-ing Georgia's aspirations towardsthe EU project becomes a powerfulengine for awareness-raising of thebenefits and impact of the Euro-pean Integration.

Regions towards EU integration

"An important part ofthe project is the use oftwinning relations –personal contacts be-tween schools, teachers,farmers' groups, CSosand others with theirVisegrad countriescounterparts"

DCFTA HIGHLIGHTS

• At least 30 local ambassadors in the following 6 municipalities - Marneuli, Bolnisi, Gardabani, ninotsminda,Akhalkalakhi and Akhaltsikhe - will get trained, informed and involved;

• At least 60 teachers will increase their knowledge on EU related issues through training and consultancy;• At least 320 students will get a better understanding of EU issues through training and participation in debates;• At least 30 firemen and rescue medical staff will learn more and establish contacts and partnerships with their

European collegues;• At least 3 schools will have twinning initiatives with Czech schools;• At least 12 farmer groups, cooperatives and rural associations uniting over 600 local farmers will increase their

knowledge and will be trained in EU agriculture and free trade related issues;• Representatives of the local NGO community, media and self-governments will be better informed and mobi-

lized in a support of Georgian reforms towards the EU integration.

The immediate beneficiaries of the project will be representatives of the target groups from the selected districts, ap-prox. 1.500 people.

The final beneficiary will be the population of 6 municipalities, approx. 200.000 people.

Facts and figures

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TOPIC AT A GLANCE

The socio-economic developmentstrategy "Georgia 2020", whichoutlines the social and economicdevelopment priorities and targetsover the period 2014-2020, wasadopted by the GovernmentalDecree nr 400 on 17 June 2014. Thestrategy is built around three pillars:private sector competitiveness,development of human capital andaccess to finance. Private sectorcompetitiveness has been identifiedas the most significant driver ofeconomic development. The

strategy rests on macroeconomicstability and effective publicadministration as preconditions forinclusive economic growth.Measures to improve the businessclimate and to attract capital remainamong the future Government'spriorities. A strong focus on socialpolicy measures to achieve moreinclusive growth and to protect thepoorest is evidenced. The enhancedrole of Georgia as a transit country,favoured by a well-established andwell-functioning transport, energy,

logistical and agricultureinfrastructure, is the key to boostcountry's competitiveness.

Georgia 2020 SOCIO-ECONOMIC DEVELOPMENT STRATEGY

"The strategy is builtaround three pillars: pri-vate sector competitive-ness, development ofhuman capital and accessto finance"

8D E l E G A T I o n o F T h E E U R o P E A n U n I o n T o G E o R G I A

TOPIC AT A GLANCE

The 46 million GEl (ca. € 19 million)state programme “Produce inGeorgia” is a positive stepundertaken by the GeorgianGovernment to strengthen the localagri-processing and industrialproduction, to enhanceentrepreneurship and to create newjob opportunities. The programme

started its implementation inJune 2014 and builds onthree components: financialassistance in the form ofpreferential loans,infrastructure support andconsulting services. Allinformation is available athttp://www.qartuli.ge.

STATE PROGRAMME "PRODUCE IN GEORGIA"

9

AGRICULTURE AND FOOD SAFETY

Funded by the European Union aspart of the EnPARD programme, theproject Capacity Development of theMinistry of Agriculture of Georgia hasbeen providing technical advice andexpertise in the preparation of the forthe Georgian Agriculture Develop-ment Strategy for 2014-2020. Theproject, which is implemented byFAo, has facilitated the process ofsharing the Strategy documentamongst all key stakeholders in thesector for their consideration andfeedback. In June 2014, after review-ing all comments and consolidatinginputs received from representativesof different donors, international or-

ganizations, nGos, academia andother key stakeholders, the final work-ing version of the document wasmade available to the Government ofGeorgia for final comments.

EU and FAO assist in the elaboration of the Agriculture Development Strategy

on 26 April 2014 the implementationof the first phase of the EU funded(EUR 2.5 million) Comprehensive Insti-tutional Building Programme to thenational Food Agency was com-pleted. The project, which aimed tosupport Georgia to enhance its sani-tary and phyto-sanitary standards to-wards those in the European Union,has successfully improved the skillsand capacities of the food inspectors,veterinarians and other staff of theAgency. The project also providedlaboratory and technical equipmentrequired for food-testing, assisted inthe rehabilitation of new branchesand offices of the Agency and con-ducted awareness campaigns to bet-ter control rabies, brucellosis andother animal diseases. Second phaseof this project (EUR 4.5 million) is dueto start in June 2014.

EU supports theNational Food Agency

"the European Union,has successfully im-proved the skills andcapacities of the foodinspectors, veterinari-ans and other staff ofthe Agency"

D E l E G A T I o n o F T h E E U R o P E A n U n I o n T o G E o R G I A

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Food Safety: where does Georgia stand ?

The concept and the potential offarmers' cooperatives in Georgia hashistorically been subject to numer-ous misconceptions; but this trend isnow changing.In May 2014 the EU-funded EnPARDprogramme conducted a survey onthe level of understanding and the at-titude of the small farmers regardingcooperatives. The survey saw that67% of the farmers have heard aboutagriculture cooperatives in the last 12months, largely thanks to the aware-ness efforts conducted by AgricultureCooperatives Development Agency(ACDA) and by the EnPARD project’spartners. According to the survey, halfof Georgian farmers now have a posi-tive opinion about business-orientedcooperatives and would be interestedin joining them.

More than 80 new agriculture coop-eratives were registered in Georgiauntil May 2014, in the framework ofthe Agriculture Cooperatives lawapproved by the Government in2013. The registration is managedby the ACDA, which also conductedawareness campaigns about coop-eratives and defines programmesand activities to assist the registeredcoops. The ACDA is supported bythe European Union in the contextof the EnPARD programme. In the EU, and in most of the devel-oping countries, a majority of thefarmers are members of coopera-tives. Cooperatives help farmers togain economies of scale, increasetheir production and ensure accessto the markets, while matching therequired standards.

Agriculture cooperatives gain momentum

"Cooperatives help farmersto gain economies of scale,increase their productionand ensure access to themarkets, while matching therequired standards"

GLUTEN

SUGAR TOMATOES

TECHNICAL REGULATION

STANDARDIZATION

METROLOGY

ACCREDITATION

CONFORMITYASSESSMENT WINE

GEORGIANMILK

MADE IN GEORGIA

AUTHORS / TAMAR KHURTSIA / MARIAM CHALAURI

DID YOU KNOW THAT…

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UPCOMING EVENTS

The Newsletter is solely distributed via electronic mail. Do not hesitate to forward it to interested persons or suggest new recipientsby sending an email to Mr. Antonio Lo Parco, Trade Attaché at the Delegation Of the European Union to Georgia:antonio.lo-parco@eeas.europa.eu

In September 2014, thePartnership for Road SafetyFoundation, supported bythe EU, will hold a seminarto increase awareness ofGeorgian road safety andtransport sector stakehold-ers, civil society, businessand media representativesabout the effect ofAA/DCFTA agreements intransport field.

II SeminarSafe and Sustainable Transport in Georgia