Private sector and human-resource development in Georgia (стр. 10 из 26)

· Lack of published information on the various administrative procedures required for business establishment and operation. For example, the official gazette is significantly behind schedule and the business stamp approval procedure is still issued by the police at the cost of 10 GEL. The challenge of publishing and disseminating timely and current information among officials and the public is even greater because of the ongoing changes to existing laws. However, timely publication and dissemination is necessary in order to minimize information gaps and opportunities for corruption.

· Absence of effective mechanisms for holding public officials accountable. In principle, the Administrative Code and the Civil Code include provisions on the conduct and accountability of public officials. However, in practice these provisions are not enforced. Efforts to introduce and implement codes of conduct for taxation and customs officials have had limited effect to date.

· Absence of effective appeals mechanisms and the inadequate capacity of the courts. The Administrative Code provides for the public’s right to be heard in protesting or seeking clarification on the actions of most government agencies. However, there is no provision for an independent or autonomous arbiter to provide recourse. This function is apparently to be carried out by the courts. However, the integrity of the courts is often suspected and the capacity of the courts to address these issues is limited.

1.8 Institutional Arrangements

1.3.1 Securities Industry

The institutional structure of the securities industry includes the following market participants: reporting companies (i.e. the private companies whose shares are traded at Georgian Stock Exchange), securities brokerage companies, share registrars, clearing banks, Georgian Central Securities Depository (GCSD) and Georgian Stock Exchange (GSE). The overall supervision is carried out by the National Securities Commission of Georgia (NSCG). The rights of the securities market participants are protected by the Georgian Securities Industry Association (GSIA). The structure of Georgian Stock Market is presented in Fig. 1.3.1.1:

Fig. 1.3.1.1. The Structure of Georgian Stock Market

2. Society

2.1 Poverty issues

Poverty Trends. The relatively slow rebound from the economic collapse after independence has led to a severe decline in welfare. Georgia’s annual income per capita is about 56 percent below the pre-independence level, unemployment rates are high (16 percent in 2001) and many Georgians are underemployed. In the circumstances, poverty, vulnerability and inequality have all increased over the period. Georgia clearly needs to achieve and sustain higher economic growth rates to improve living conditions. Given the small size of the domestic market, this can be achieved only through a stronger expansion in export activities, especially of those in which Georgia has a comparative advantage and the potential to generate new job opportunities, such as agro-processing.

Poverty Profile. Strengthened economic performance resulted in an reduction of poverty in the mid 1990s. However, Georgia’s growth rate slowed considerably between 1998 and 2000, and consequently inequality and poverty increased as measured by any of several methodologies increased (see Table 2.1.1). Growth was affected by a number of shocks, including the 1998 Russian crisis, severe droughts in 1998 and 2000, and the increase in the price of energy imports in 2000. These problems were compounded by internal and external political instability. Growth recovered in 2001-02, leading to a slight reduction in overall poverty.

Table 2.1.1. Change in poverty in Georgia between 1997 and 2002

Poverty Headcount (% of population)
Poverty definitions (lines)	1997	1998	1999	2000	2001	2002a/
Official minimum	46.6	50.5	53.0	52.5	52.0	51.3b/
Urban	46.7	53.3	60.4	56.6	54.3	53.7
Rural	46.4	47.1	44.6	48.0	49.6	48.8
US$4.30 per capita/day at PPPc/	13.6	19.8	23.2	23.0	22.8	21.7
Recommended poverty line (baseline)	13.6	19.8	23.2	23.0	22.8	21.7
Urban	13.8	22.2	27.4	24.6	24.1	22.6
Rural	13.4	16.8	18.4	21.4	21.3	20.7
US$2.15 per capita/day at PPP c/	9.7	11.8	14.5	15.4	14.8	13.5
US$1.075 per capita/day at PPP c/	1.7	3.0	3.2	3.3	3.4	2.7
Source: SDS SGHH primary data and World Bank, see Georgia Poverty Update, Report No. 22350-GE. Note: The official poverty line uses a normative basket and CPI price data to cost it and is around 100 GEL (about US$50 at current exchange rate) per equivalent adult per month. The recommended poverty line was developed jointly by the World Bank and SDS in 1998; it uses actual consumption patterns of the population and survey prices (its non-food component is fixed in real terms to 1996 and deflated using the CPI for non-food items); it is about 55 GEL (US$25) per month per equivalent adult. The equivalence scale used in the official and recommended methodology is the scale developed by SDS and used in Georgia to determine the social assistance payments. International poverty lines expressed in dollar terms (US$ in PPP) are per capita and use the latest (1996) revision of the World Bank, updated with the Georgia CPI. All figures are averages of quarterly data. a/ Preliminary estimate; corrections for changes in the Survey not made. b/ Bank estimates using official methodology. c/ Using 0.33 as PPP conversion factor.

Differential Impact of Rising Poverty. IDA, in close collaboration with the State Department of Statistics, prepared a Poverty Update covering the 1998-2000 period. The study found that the increase in poverty affected various socioeconomic groups differently, with growing differentiation among the poor, and signs that the poorest became even poorer. Poverty depth and severity increased in the observed period by 84 and 94 percent respectively. Driven by the volatile economic environment and absence of an adequate safety net, vulnerability to poverty for the average household rose significantly, with female-headed households being the most vulnerable. Although the extent of absolute poverty at any point in time remained around 20-24 percent, 40 percent of the population experienced poverty at least once during the year 1999-2000, and 60 percent of the population faced a real risk of experiencing poverty in the medium term. The high degree of vulnerability of households led them to apply strategies which may tend to increase chronic (long-term) poverty (e.g., shifting to subsistence farming, or pulling children out of school).

Urban and Rural Poverty. The trend in overall poverty reflects somewhat different developments in urban and rural poverty. In 1997, rural and urban poverty incidence were almost the same. In 1999, the urban poverty headcount doubled in comparison to 1997, whilst the rural headcount increased by 37.3 percent. Then in 2000, responding to the non-agricultural sector recovery after the Russian crisis, urban poverty dropped by 10.2 percent, stabilized in 2001 and declined further by 6.2 percent in 2002. Because of the drought, rural poverty increased in 2000, remained unchanged in 2001 and only in 2002 decreased by 2.9 percent. As a result, the difference between the urban and rural headcount has narrowed -- while in 1999, the urban poverty headcount was almost 50 percent over that in the rural population, in 2002 it was 9 percent higher.

Determinants of Poverty. The Georgia Poverty Update identified that the strongest determinants of poverty risk in Georgia in the period between 1998 and 2000 were economic: employment status, sector of employment, ownership of productive assets and education. It found an elevated poverty risk among urban households, households with an unemployed head and female headed households, as well as children aged 7-15, the disabled, those with low levels of education, single pensioners and orphans were experiencing. The working poor are becoming the majority, often employed in the informal sector with insecure, temporary and low productivity jobs.

Non-Income Indicators of Poverty. Non-income indicators of poverty in Georgia, inherited from Soviet times, still compare favorably with those of countries with similar per capita income. The UNDP 2003 Human Development Report ranks Georgia 88^th among 175 nations. However, Georgia faces a major challenge in sustaining these relatively favorable indicators. Studies conducted by various international organizations (UNICEF, USAID, EC, etc.), indicate that there has been no improvement in the indicators during the 1990s. In fact, maternal mortality rate, immunization rates, access to health and education, access to safe water and sanitation and other living conditions indicators have deteriorated and the quality of social services has worsened substantially in comparison to the pre-transition situation.

Internally Displaced People. IDPs vulnerability to poverty is magnified by their lack of access to land. Thus IDPs living in collective centers are 3½ times less likely to have access to land than the local population, and those living in private accommodations half as likely. In addition, IDP’s rate of unemployment is very high -- 40% among IDPs living in collective centers. Government benefits do seem, however, to be reaching the IDPs, with 80% to 90% receiving a government benefit.

Millennium Development Goals. The estimates of Georgia’s prospects for achieving the Millennium Development Goals (MDGs) show a mixed picture based on Georgia’s current performance, as indicated in Table 2.1.2.

Table 2.1.2: Millennium Development Goals

Millennium Development Goal	Present Situation	Prospects for Achievement by 2015
Goal 1: Eradicate extreme poverty and hunger. Target 1: Halve, between 1990 and 2015, the proportion of people whose income is less than $2.15 a day. NOTE: While the MDG indicator and target include $1 a day, a higher poverty line such as $2.15 is considered more appropriate in ECA given the extra expenditure on heat, winter clothing and food. (“The Millennium Development Goals in ECA”, World Bank, forthcoming) Target 2: Halve between 1990 and 2015, the proportion of people who suffer from hunger.	In 2002, the poverty incidence at the international poverty line of US$2.15 per capita/per month at PPP was 13.5 percent. While the exact percentage of people suffering from hunger in Georgia is not known, there is no evidence that would indicate that hunger is an issue in Georgia.	Likely. The Economic Development and Poverty Reduction Program of Georgia envisages economic performance that would allow Georgia to meet the MDG.
Goal 2: Achieve universal primary education. Target 3: Ensure that by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling.	Enrollment rates in basic education (grades 1-9) are close to 100 percent.	Likely.
Goal 3: Promote gender equality and empower women. Target 4: Eliminate gender disparity in primary and secondary education, preferably by 2005 and in all levels of education no later than 2015.	Surveys show no significant gender differences in access to primary and secondary education.	Likely.
Goal 4: Reduce child mortality. Target 5: Reduce by two-thirds, between 1990 and 2015, the under-five mortality rate.	According to the Human Development Report 2003, the under-five morality rate in Georgia in 2001 was 29 per 1,000 live births. This was better that the average for ECA (36/1,000); and much better than the average for medium human development group of countries – 61 per 1,000 live births.	Due to current efforts and actions planned under the EDPRP to keep immunization rates at high level, improve breast-feeding rates, provide appropriate case management and home and in community for acute respiratory infection, pneumonia and diarrhea and improve access to appropriate health care, reliable water and improved sanitation, it is estimated that Georgia will make a significant progress in reducing the U5MR. However, the MDG target (U5MR of 9.7 per 1,000 live births, which is close to the current U5MR level in developed countries) is estimated as unlikely to be met, given Georgia’s very low public spending on health.
Goal 5: Improve maternal health. Target 6: Reduce by three-quarters, between 1990 and 2015, the maternal mortality ratio.	Available data suggests the MMR doubled over the last 10 years to almost 59 per 100,000 live births in 2001. Only 59 percent of women complete the mandatory 4 antenatal visits but 96% of births are attended by skilled health personnel	Planned actions aimed at improving antenatal care are expected to result in decreased maternal mortality. However, given high maternal mortality rate and its recent increase, the MDG target (15 per 100,000 live births) is estimated as unlikely to be met.

Millennium Development Goal	Present Situation	Prospects for Achievement by 2015
Goal 6: Combat HIV/AIDS, malaria and other diseases. Target 7: Have halted by 2015 and begun to reverse the spread of HIV/AIDS. Target 8: Have halted by 2015, and begun to reverse, the incidence of malaria and other major diseases.	HIV/AID is spreading fast. The number of new HIV cases in 1997 increased nearly threefold compared with the previous year and accounted 21 cases; in 2001 93 cases were registered. From 1998 through 2001 more then a half of newly registered HIV cases have been attributed to IDUs. The percentage of new cases attributed to heterosexual contacts also increases, suggesting that the epidemic is leaking into the general population. HIV/AIDS is predominantly present in young people (21-35 years old). In 2001 over 87 percent of all new AIDS cases have been detected in 26-35 age group. The prevalence of TB has increased from 28.2 in 1991 to 85.8 in 2001, reflecting the spread of disease, but also better recording of incidence.	While Georgia has improved HIV recording and reporting, there is an urgent need to introduce prevention & education on a broad basis, as well as surveillance among high risk groups. The MDG target for HIV/AIDS is unlikely to be met Political commitment and additional resources are required to keep the spread of TB under control. An upcoming PHC Development program is expected to further improve the effectiveness of control measures. If measures are appropriately implemented, it is possible to arrest and reverse the trend.
Goal 7: Ensure environmental sustainability. Target 9: Integrate the principles of sustainable development into country policies and programs and reverse the loss of environmental resources. Target 10: Halve by 2015 the proportion of people without sustainable access to safe drinking water.	The National Environmental Action Plan and Biodiversity Strategy are a framework for environment and sustainable use of natural resources. The EDPRP highlights steps to mainstream environment into development, but implementation is limited. An environmental permitting system and other legislation are in place, but institutional weaknesses (unclear responsibilities, weak monitoring and enforcement, sometimes excessive and non-transparent regulations) limit enforcement. With regard the specific indicators, despite its unique ecosystems in Georgia 2.8% of the land area is protected to maintain biological diversity compared with the world average of 6.5%. Forest cover is 40% but the quality of management is inadequate. Energy intensity and carbon emissions indicators are not high, but there are severe problems with delivery of energy services to the population. In 1999, about 86% of urban population and 43% of rural population had access to piped water supply. Reliability and quality of services are serious problems. Water systems are largely in a state of severe disrepair. Low capacity of people to pay for the services together with limited government budgets represent real constraints to mobilize resources into the sector. Involvement of IFIs is critical to avoid total collapse of sector.	Political will and strong commitment as well as human and financial resources are needed to ensure environmental sustainability. If the governance environment and institutional capacity improve, and if resources for environment and natural resource management could be increased, it would be possible to meet target 9. About US$ 8-10 million annually will be needed for the rehabilitation of old deteriorated existing systems and expansion of access to piped water supply to an additional 0.5 million people if the target 10 were to be met. Given current low level of investments in the sector, it is unlikely that Georgia will meet this target.

3. Economics

3.1 Main economic indicators