GEORGIA
Section 201 of the FREEDOM Support Act amended Section 498A of the Foreign Assistance Act of 1961 to require that the President "take into account not only relative need but also the extent to which that independent state is acting to:"
Section 498A(a)(1): "make significant progress toward, and is committed to the comprehensive implementation of a democratic system based on principles of the rule of law, individual freedoms, and representative government determined by free and fair elections."
Since 1991 Georgia has made uneven progress toward the implementation of a democratic system based on principles of the rule of law, individual freedoms, and representative government determined by free and fair elections. The Georgian parliament adopted a new constitution in August 1995. Presidential and parliamentary elections were held for the first time under the new constitution on November 5, 1995. Local elections were held for the first time in November 1998, although the central government continues to appoint key local officials. Georgia's November 2, 2003 parliamentary elections were marred by fraud and irregularities which resulted in popular demonstrations. Former President Eduard Shevardnadze resigned on November 23, 2003 and the Speaker of the Parliament Nino Burjanadze assumed duties as the Interim President. New presidential and parliamentary elections were called for early 2004.
Parliament passed significant legislation instituting legal, institutional and procedural reforms supportive of rule of law, individual freedoms and representative government. However, Parliament amended the Criminal Procedure Code in 1999, and several amendments substantially weakened protections against arbitrary arrest and detention. Law enforcement agencies have made little progress in adapting their practices to democratic norms. Although the 1995 Constitution provides for an independent judiciary, the judiciary is subject to executive pressure.
Section 498A(a)(2): "make significant progress in, and is committed to the comprehensive implementation of, economic reform based on market principles, private ownership, and integration into the world economy, including implementation of the legal and policy frameworks necessary for such reform (including protection of intellectual property and respect for contracts)."
Georgia made notable progress toward macroeconomic stabilization from 1996-1999, evidenced by a strong economic recovery, price and exchange rate stability, and sharp reduction in inflation, which has remained at around 5 percent since 2001. The period also saw gradual harmonization of economic legislation with international best practice. In the area of structural reforms, progress on banking sector reform was substantial, and fiscal and energy sector reforms also advanced, albeit with delays.
The National Bank of Georgia (NBG) has allowed the national currency, the lari, to float since 1998. The currency depreciated steeply at that time, but remained relatively stable through 2002. The NBG has made significant progress in introducing key reforms in the legal and regulatory frameworks for banking supervision, and in strengthening its capacity to implement these measures.
Developments in the first half of 2003 were less favorable, particularly with respect to fiscal performance. Budget assumptions on external and privatization receipts were overly optimistic and tax evasion was rampant. Corruption was pervasive, diverting scarce public resources, exacerbating income inequalities, adding to the cost of doing business, and weakening confidence. Georgia slipped to 124th place out of 133 countries on the 2003 Corruption Perception Index, down from its 85th place in 2002. IMF staff estimates that the shadow economy in Georgia is probably over 50% of GDP.
While progress was made in the context of the last two IMF-supported programs, the results fell short of expectations during the last Poverty Reduction and Growth Facility. In August 2003, the IMF suspended the PRGF after the parliament failed to approve belt-tightening measures. Dwindling tax revenues in the years since independence have reduced the Government's ability to fund basic state functions. In November 2003, the IMF reported that the very weak fiscal scenario was exacerbating funding of Georgia's poverty reduction strategy. Tax revenue collection was extremely weak, receipts from privatization were low, donor grants were falling, and the EU, as donor, was retrenching. Remittances from abroad have been high and have helped stabilize the balance of payments. Annualized GDP growth in 2003 was 8.3% in the first three quarters of 2003, but the tax base of the economy is very narrow and GDP growth was largely generated by BTC pipeline construction, which does not generate tax revenue.
Georgia has undertaken significant privatization over the past decade. Virtually all small firms and over 1,000 medium and large ones have been privatized. However a significant proportion of large enterprises continue to be state-owned. The Government has not effectively controlled these firms, many of which systematically evade taxes and dividend payments to the budget. Total privatization proceeds for 2003 are projected at 0.3 percent of GDP. Georgia began to privatize its energy sector in 1998: the Telasi electricity distribution company was sold to American-owned AES group in 1998 (subsequently sold in August 2003 to the Russian UES group), and the thermal power plant at Gardabani was privatized in January 2000. The Wholesale Energy Market privatization was completed in 2001 Efforts to improve payment discipline by disconnecting non-paying customers have been constrained by technical, governance and political problems. Taxation of energy companies has changed frequently and erratically, and the sector has been burdened by old debts. These factors, combined with periodic droughts and breakdowns of thermal plants, have hampered supplies and the finances of the energy companies. Further progress in energy sector reform is needed to achieve the ultimate goals of a reliable energy supply and financial stability.
Low collections and pricing below cost have generated quasi-fiscal deficits of 6% of GDP a year in the electricity sector. They are "quasi-fiscal" because there is no line-item in the state budget to give away free energy, but their policy has the same net effect in that the Government sustains the cost. Social energy subsidies have been poorly targeted and those to enterprises have helped perpetuate non-viable industries. The quasi-fiscal losses were initially financed by accumulation of foreign debt, representing a major part of the overhang in indebtedness. When foreign resources dwindled, financing shifted toward de-capitalization of the system, putting much of the infrastructure in its current state of disrepair. As a result protracted blackouts have undermined economic activity and provoked social discontent.
Parliament passed legislation on the privatization of the state telecommunications monopoly in 2000, but when the tender closed in November 2000, there were no bidders. With U.S. assistance, a land-titling program helped to implement low-cost, transparent titling and registration processes for approximately 1.5 million agricultural parcels out of a total of 2.4 million parcels surveyed and identified.
The current account deficit (including grants) has narrowed by 4 percentage points over the past four years to 6 percent of GDP in 2002. However, international reserves remain low, and the slow improvement in domestic revenue mobilization has caused the servicing of the external debt to remain very burdensome.
Georgia has sought to ease the debt burden through a series of eleven bilateral deals. In March 2001,the Paris Club granted Georgia a debt flow rescheduling in a two-year deal with a goodwill clause for a third year of concessional treatment. In the spring of 2003, the Paris Club declined to extend the agreement to the third year of concessional treatment due to weak performance under the IMF program. Payment arrears continue to build up. In October 2003 the Government informed the Paris Club that it expected to seek a rescheduling of all maturities that fell due in 2003, as well as those that will fall due during the period of a successor IMF program.
A December 30, 2003 IMF ex-post assessment of Georgia's performance under Fund-supported programs concluded that Georgia must reinvigorate the reform process by aggressively tackling the country's pervasive corruption and increasing institutional capacity.
Georgia is a member of the International Monetary Fund, World Bank and European Bank for Reconstruction and Development. Georgia acceded to the World Trade Organization (WTO) on June 14, 2000. Georgia has enacted some legislation on protection of intellectual property rights (IPR), but there are still shortcomings and further steps need to be taken to meet all of Georgia's international IPR obligations. Enforcement of intellectual property regulations is weak due to lack of resources and expertise. A bilateral investment treaty entered into force in August 1997. On November 9, 2000, Congress authorized the President to determine that the provisions of Title IV of the 1974 Trade Act (which includes the Jackson-Vanik Amendment) should no longer apply to Georgia. Pursuant to this authorization, on December 29, 2000, the President extended normal trade relations to Georgia. However, foreign direct investment is not increasing, due largely to a non-transparent business environment. An Overseas Private Investment Corporation agreement has been in force since 1992, and in 2001 the President designated Georgia as a beneficiary under the Generalized System of Preferences (GSP).
Section 498A(a)(3): "respect internationally recognized human rights, including the rights of minorities and the rights to freedom of religion and emigration."
While the Constitution incorporates human rights protections, the Government's human rights record remains poor. In 1995, the constitutionally mandated office of the Public Defender, or ombudsman, was created. The National Security Council's human rights advisor, who has a mandate to investigate claims of abuse, as well as the Public Defender were active in several individual cases involving police misconduct. While government representatives have been effective in specific cases, neither they nor NGOs have been successful in prompting systemic reform.
The 1995 Constitution provides for an independent judiciary, delineates the authorities of individual courts, and sets forth principles to safeguard citizens' rights. Significant problems remain, however, because the judiciary has not yet developed sufficiently to carry out the responsibilities set forth in the constitution and does not exercise much independence from the executive branch. Judicial corruption and denial of fair and expeditious trials continue. A judicial reform law resulted in the removal of many corrupt and incompetent judges. They were replaced with judges who had passed a qualifying exam and vetting process. However, failure to pay judges in a timely manner has undermined reform efforts.
Prolonged pre-trial detention is a problem. Impunity and corruption in law enforcement are widespread. Torture is illegal; however, security forces continue to beat, torture and otherwise abuse detainees, usually to extract money or confessions. NGOs blamed several deaths in custody on physical abuse, torture, or inhumane and life-threatening prison conditions. Arbitrary arrest and detention remain problems. There are lengthy delays in trials and prolonged pretrial detention remains a problem.
The ICRC had full access to detention facilities, including those in Abkhazia, and access included private meetings with detainees and regular visits. However, local human rights groups reported increasing difficulty in visiting detainees, especially in cases with political overtones. International and local human rights groups agree that there are several political prisoners, but disagree on the number.
Freedom to travel and emigrate is generally respected, as is freedom of the press, although independent media have on occasion been subject to harassment and intimidation by government officials.
In 2003, the status of religious freedom continued to deteriorate, attacks by orthodox extremists against religious minorities increased in frequency, and these acts of violence occurred with near impunity during the period covered by this report. Police and other officials at times have harassed members of some religious groups and foreign missionaries. Police have remained passive when faced with - and at times even participated in - a growing number of violent attacks on religious minorities, particularly Jehovah's Witnesses. Since 1999, followers of excommunicated orthodox priest Basili Mkalavishvili (Basilists) have engaged in numerous violent attacks on nontraditional religious minorities, including Baptists, Seventh-day Adventists, and especially members of Jehovah's Witnesses. During the period covered by this report, the Basilists, as well as members of another orthodox extremist group called "Jvari" (Cross), continued their series of attacks, at times together. The attacks involved seizing religious literature, preventing and breaking up religious gatherings, and beating parishioners. The attacks have been publicized widely, in part by the Basilists themselves who videotape the incidents. After the United States urged Georgia to prosecute Basili Mkalavishvili and his violent followers, the Procuracy opened a new office on Human Rights which was assigned to investigate the handling of the case in spring 2003. Since then, the court found one party guilty.
Members of the Assembly of God, Baptists, Pentecostals, evangelicals, and Hare Krishnas have also experienced difficulties. Parliament passed a resolution condemning religious violence and some investigations have been opened to look into the attacks. However, the Ministry of Interior (including the police) and Procuracy generally have failed to pursue criminal cases against extremists for their attacks against religious minorities.
Section 498A(a)(4): "respect international law and obligations and adhere to the Helsinki Final Act of the Conference on Security and Cooperation in Europe and the Charter of Paris, including the obligations to refrain from the threat or use of force and to settle disputes peacefully."
While progress has been made toward the observance of international legal obligations and the Organization for Security and Co-operation in Europe (OSCE) commitments in the area of human rights, the status of Abkhazia and South Ossetia, two separatist regions within Georgian territory, remain unresolved. The United States continues to work bilaterally and with the UN, the OSCE and other nations to encourage all parties to pursue a peaceful resolution of both conflicts in a manner that safeguards both the territorial integrity of Georgia and the rights of individuals belonging to ethnic minorities. In November 1999, Georgia joined the other OSCE states in signing the Charter for European Security, which reaffirms full adherence to all OSCE documents already in force.
Section 498A(a)(5): "cooperate in seeking peaceful resolution of ethnic and regional conflicts."
Georgia is committed to negotiating a peaceful settlement to the conflict in Abkhazia, despite Abkhazia's unilateral declaration of independence in November 1994, its adoption of a constitution, its holding of presidential elections in October 1999 and 2001, and its demand that any settlement grant the region equal status with the Government in Tbilisi. Negotiations under the auspices of the UN remain ongoing. Special Representative of the UN Secretary General (SRSG) Heidi Tagliavini continued to press for adoption of a UN draft proposal on the distribution of constitutional competencies between Georgia and Abkhazia. Since 1992, an OSCE mission has been working in Georgia to facilitate a political settlement of the South Ossetia dispute. The Georgian Government has fully supported the mandate of the OSCE mission, which includes developing democratic institutions and encouraging respect for human rights throughout Georgia.
The Georgian Government and representatives of the Abkhaz separatist regime have cooperated with the UN and OSCE, which established a human rights office in Sukhumi, the capital of Abkhazia's separatist regime. The office monitors the human rights situation in the region and encourages practices consistent with international human rights standards.
Section 498A(a)(6): "implement responsible security policies, including --
(A) adhering to arms control obligations derived from agreements signed by the former Soviet Union;
(B) reducing military forces and expenditures to a level consistent with legitimate defense requirements;
(C) nonproliferation of nuclear, biological, or chemical weapons, their delivery systems, or related technologies; and
(D) restraining conventional weapons transfers."
Georgia has acknowledged it is a successor to the former Soviet Union's obligations under the INF Treaty. Although it does not actively participate in the Treaty's Special Verification Commission, Georgia continues to observe the Treaty's obligations.
Georgia ratified the CFE Treaty in 1992 and the 1996 Flank Agreement in 1997. Thereafter, Georgia participated actively in negotiations to adapt the CFE Treaty, which culminated at the November 1999 OSCE Summit in Istanbul with signature by all 30 CFE states of an agreement on CFE adaptation. Georgia has consistently made clear its commitment to achieving full implementation of the CFE Treaty. Georgia is in full compliance under CFE and has accepted CFE inspections of forces on its territory.
At the Istanbul Summit, Russia and Georgia agreed to a series of steps that were subsequently incorporated into the Final Act of the Conventional Forces in Europe (CFE) Treaty. In the Joint Statement of the Russian Federation and Georgia (Annex 14 of the Final Act), Russia agreed to reduce by no later than December 31, 2000 its Treaty-Limited Equipment (TLE) located within the territory of Georgia so as not to exceed 153 tanks, 241 armored combat vehicles (ACVs) and 140 artillery systems. Russia met this obligation on time. Russia also agreed to disband two of its bases in Georgia (Gudauta in separatist Abkhazia, and Vaziani near Tbilisi) by July 1, 2001. The Vaziani base withdrawal was completed according to the schedule, and equipment was removed from Gudauta in October 2001. However, Russia did not fulfill CFE transparency requirements during withdrawal from Gudauta, nor has it legally transferred the base to the Georgian side. The two sides have not yet agreed on the status of Gudauta as a CIS PKF facility. Additionally, Georgia and Russia have not yet reached agreement on the duration of the remaining Russian presence at bases at Batumi and Akhalkalaki. Following the OSCE's Porto Ministerial in December 2002, Russia and Georgia resumed discussions of withdrawal issues at the expert level. Russia's TLE withdrawal costs were reimbursed in the fall of 2003.
Georgia has submitted Confidence- and Security-Building Measures (CSBM) annual data declarations for years 1996 to present and has willingly undergone CSBM inspections and evaluation visits in accordance with the OSCE Vienna Document.
Georgia subscribed to the International Code of Conduct Against Ballistic Missile Proliferation in November 2002.
The United States is helping to enhance Georgia's security through the U.S.-Georgian Border Security and Law Enforcement (Border Guards) Program, Foreign Military Financing (FMF), and International Military Education and Training (IMET). Other countries have also provided some military assistance, but the Georgian military remains ill-equipped. The $64 million Georgia Train and Equip Program seeks to accomplish our broader goals of military reform, while enhancing Georgia's capability to secure control of its territory and combat terrorism.
We are not aware that Georgia has engaged in the proliferation of any nuclear, biological, or chemical weapons, their delivery systems, or related technology. Georgia acceded to the Nuclear Non-Proliferation Treaty as a non-nuclear-weapon state on March 7, 1994. Georgia signed its NPT safeguards agreement, as well as the Additional Protocol, with the International Atomic Energy Agency on September 29, 1997, but this has not yet entered into force. Georgia is a state party to both the multilateral Chemical Weapons Convention and the Biological Weapons Convention (BWC), which call respectively for the elimination of chemical, bacteriological and toxin weapons and prohibit their development, production, and stockpiling. Georgia provided its annual voluntary BWC-related CBM Data Declaration only once in 2000. We do not believe that Georgia has engaged in significant transfers of conventional weapons. In addition to contacts with other western governments, Georgia has closely engaged with the United States on cooperative efforts to establish an effective export control system and works with the United States closely under the Cooperative Threat Reduction program. In 1999 Georgia adopted a new law on export controls and recently reorganized its export control structure, placing the Ministry of Economics and Trade as the lead agency. The only control list in use is that of the CIS, but Georgia committed during the 1999 Caucasus and Central Asia Regional export Control Forum to adopt the EU List. The Government of Georgia hosted the 1999 conference, and export controllers used the attention it attracted to strengthen its export control system internally.
Section 498A(a)(7): "take constructive actions to protect the international environment, prevent significant transborder pollution, and promote sustainable use of natural resources."
Georgia faces an array of environmental problems ranging from air and water pollution to deterioration of soils as a result of inefficient agricultural practices. Deforestation and the illegal export of timber remain serious problems.
The Government of Georgia has taken some steps to put in place public policy mechanisms to address environmental issues, including the establishment of a ministry of environment. National environmental NGOs continue to gain access to the policy-making process on environmental issues. Georgian interest in regional cooperation on environmental issues also continues, but effective coordination and information sharing on transborder issues is progressing slowly. The Georgian Government is committed to meeting its requirements in environmental monitoring and evaluation capabilities as outlined in the Host Government Agreements for the Baku-Tbilisi-Ceyhan oil pipeline and the Shah Deniz gas pipeline. Evidence of the priority placed on the environment is exhibited by the resolution in November 2002 of concerns expressed by the Georgian Government and environmental NGOs over the environmental impact of the chosen pipeline route for BTC. The United States and the European Union are supporting and co-financing the Regional Environmental Center (REC) located in Tbilisi an independent, non-profit and non-political organization, the mission of which is to strengthen civil society and support sustainable development by promoting public awareness and participation in regional environmental decision-making. The World Bank has also undertaken a program, administered in cooperation with the National Park Service of the U.S. Department of the Interior, to help Georgia protect habitats, promote biological diversity and environmental protection, and develop management of park and natural areas
Section 498A(a)(8): "deny support for acts of international terrorism."
The Government of Georgia does not officially grant sanctuary from prosecution to individuals or groups that have committed acts of international terrorism or otherwise support international terrorism.
Beginning in autumn 1999, Russia has charged Georgia with allowing Islamic fundamentalists providing support to the Chechen insurgents to use Georgia as a staging area and transit point for fighters and materiel. Georgia has made efforts to close its border with Chechnya to fighters and those who wish to smuggle money, weapons and supplies to them, but has been hindered by lack of resources and internal corruption. In 2003, Georgian internal troops continued to carry out operations to rid the Pankisi Gorge of terrorists. The U.S. provided USD 17 million in FY 2003 to enhance Georgia's ability to control its borders. Georgia is a party to six of the twelve international terrorism conventions.
Section 498A(a)(9): "accept responsibility for paying an equitable portion of the indebtedness to United States firms incurred by the former Soviet Union."
In October 1991, shortly before the Soviet Union dissolved, Russia and nine other Soviet republics signed a Memorandum of Understanding declaring themselves jointly and severally liable for the pre-October 1991 debt to foreign creditors of the Soviet Union. In December 1991, Russia and seven other republics signed an agreement that assigned to each of the newly independent states a share of all the external assets and foreign debt of the former Soviet Union (FSU). Georgia signed both the October and December 1991 agreements. The December 1991 agreement provided that Georgia's share of the FSU debt would be 1.62 percent. In 1992, Russia sought to replace the joint and several liability principles by seeking full liability for the debt in return for all the external assets. On September 14, 1993, Georgia signed a "double-zero option" agreement with Russia transferring Georgia's share of the FSU debt to Russia in exchange for its share of FSU assets. The Georgian Parliament ratified the "zero option" agreement in March 2001, thereby entering it into force.
Please see section 498A(a)(9) of the Russia assessment regarding indebtedness to the United States incurred by the former Soviet Union.
Section 498A(a)(10): "cooperate with the United States Government in uncovering all evidence regarding Americans listed as prisoners-of-war, or otherwise missing during American operations, who were detained in the former Soviet Union during the Cold War."
The U.S. effort to uncover evidence of American POWs and MIAs in the former Soviet Union is being conducted through the U.S.-Russian Joint Commission on POWs/MIAs that was established in March 1992. The Commission visited Georgia in May 1996 and met with President Shevardnadze and other high level officials who promised cooperation.
Section 498A(a)(11): "terminate support for the communist regime in Cuba, including removal of troops, closing of military and intelligence facilities, including the military and intelligence facilities at Lourdes and Cienfuegos, and ceasing trade subsidies and economic, nuclear, and other assistance."
We have no evidence from which to conclude that the Government of Georgia is providing military and intelligence, economic, nuclear, or other assistance to the Government of Cuba.
GEORGIA
Section 498A(b)(1): Has the President determined that the Government of Georgia has "engaged in a consistent pattern of gross violations of internationally recognized human rights or of international law"?
No. The President has not made such a determination at this time. However, there are continuing serious shortcomings in a number of areas. We remain committed to addressing these problems not only through diplomatic efforts but also through assistance programs.
Section 498A(b)(2): Has the President determined that the Government of Georgia "has failed to take constructive actions to facilitate the effective implementation of applicable arms control obligations derived from agreements signed by the former Soviet Union"?
No. The President has not made such a determination at this time. While there were minor flaws in its implementation record in the first years after independence, Georgia has been a constructive and responsible participant in arms control undertakings.
Section 498A(b)(3): Has the President determined that, after October 24, 1992, the Government of Georgia "knowingly transferred to another country --
(A) missiles or missile technology inconsistent with the guidelines and parameters of the Missile Technology Control Regime; or
(B) any material, equipment, or technology that would contribute significantly to the ability of such country to manufacture any weapon of mass destruction (including nuclear, chemical, and biological weapons) if the President determine[d] that the material, equipment, or technology was to be used by such country in the manufacture of such weapon"?
No. The President has not made such a determination at this time.
Section 498A(b)(4): Is the Government of Georgia "prohibited from receiving such assistance by section 101 or 102 of the Arms Export Control Act or sections 306(a)(1) and 307 of the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991"?
No.
Section 498A(b)(5): Has the President determined and certified to the appropriate congressional committees that the Government of Georgia "is providing assistance for, or engaging in non-market-based trade (as defined in section 498B(k)(3)) with the Cuban Government? If so, has the President taken action to withhold assistance from Georgia under the Foreign Assistance Act within 30 days of such a determination, or has Congress enacted legislation disapproving the determination within that 30-day period?"
No. The President has not determined that the Government of Georgia is providing assistance for, or engaging in non-market-based trade with, the Cuban Government.
