CC BY
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OEO-ECONOMICS
Evgeni BARATASHVILI
D.Sc. (Econ.), professor, Georgian Technical University (Tbilisi, Georgia).
Alexander SICHINAVA
D.Sc. (Econ.), Georgian Technical University
(Tbilisi, Georgia).
Lasha BULIA
Doctoral candidate, Georgian Technical University
(Tbilisi, Georgia).
SOCIAL AND ECONOMIC ASPECTS OF EU-GEORGIA RELATIONS UNDER THE EUROPEAN NEIGHBORHOOD POLICY
Abstract
This article examines the approach proposed by the European Union with regard to its socioeconomic policy within the framework of the European Neighborhood Policy (ENP). The ENP implies the development by each South Caucasian state of an individual Action Plan based on its achievements and agreed with the Eu-
ropean Union. Economic integration is extremely important for steering a course toward Georgia’s integration into the European Union, which is why these issues receive special attention in this paper.
The authors provide concrete examples of customs duty, VAT and excise tax levied on some Georgian exports to the EU
market. They also focus attention on the priority areas covered by the five-year EU-
Georgia Action Plan in the sphere of socioeconomic policy.
I n t r o d u c t i o n
The approach proposed by the EU under the European Neighborhood Policy makes it possible to achieve significant economic results since it envisages enhanced preferential trade relations and increased financial and technical assistance. This policy also offers neighboring countries the prospect of a stake in the EU internal market based on the approximation of legislative and regulatory frameworks, participation in some EU programs and improved business relations and contacts with the European Union. The economic benefits from this process are expected to be substantial and to accrue both directly and indirectly. Directly, the reduction of tariff and other barriers to trade should produce efficiency gains and improve welfare through increased market integration. The indirect effects, particularly on partner countries, will be even larger, helping to bring the neighboring countries closer to the EU economic model. Due to the implementation of international best practices, the European Neighborhood Policy and particularly the proposed extension of the internal market will also improve the investment climate in partner countries and provide a more transparent, stable and enabling environment for an expansion of the private sector. The ENP has serious potential to improve economic and social conditions in EU neighbor countries. However, the actual achievement of such results requires effective implementation of the agreed measures and compliance with the relevant rules. Deeper integration with the EU, especially with respect to the liberalization of capital movements, may under certain circumstances increase macroeconomic and financial volatility. Accordingly, the implementation of the ENP will have to be properly planned and sequenced, tailored to each country’s specific circumstances and supported by sound macroeconomic, social and structural policies. The extent to which the ENP is perceived as beneficial depends on its effect on living standards. Participation in the ENP should be accompanied by active efforts to address poverty and inequality, and also to identify the priority areas of Georgian economic and social policy.
Priority Area 1
Improvement of Economic and Social Conditions in EU Neighbor Countries
The economic and social components of Action Plans should be consistent with the partner countries’ own strategies. Dialog in general should be strengthened through the relevant subcommittees. A major role here is assigned to ensuring appropriate coordination with international financial institutions. These can make a valuable contribution both in terms of financing and policy advice.
The Action Plans set out ways and means to ensure that the EU and its partner countries derive maximum benefit from the provisions on trade contained in the partnership and cooperation agreements or association agreements with the EU. Due attention will also be paid to initiatives at regional level. The ENP implies even greater openness of the market in accordance with the principles of the World Trade Organization (WTO). In the context of the Barcelona Process, a free trade area for goods has been agreed, and asymmetric liberalization has begun. The ENP provides ways and means to deepen trade liberalization and regional integration. The Action Plans set out concrete steps to exploit
THE CAUCASUS & GLOBALIZATION
to the full the opportunities provided in the EU frameworks. These steps depend on each partner’s needs, capacities and economic policy priorities. Regarding goods, steps should be taken to improve administrative cooperation and ensure the gradual elimination of non-tariff barriers to trade and the development of appropriate infrastructures. Free trade in services with and among partner countries requires further legislative approximation in fields such as company law, accounting and auditing rules. A comprehensive regulatory framework, combined with efficient and independent supervisory bodies, is particularly important for the financial services area. For the intensive development of business and promotion of investments, these countries must ensure the ability of their companies to operate at the international level. In combination with the above measures, access to the European financial market should eventually add to the stability of partners’ financial markets and help enhance their economic performance.
Further liberalization of capital movements provides new opportunities. The objective of improving the investment climate (including transparency, project predictability) and simplifying these countries’ regulatory frameworks is to facilitate and increase two-way investments. Non-discrimina-tory treatment of investors is an essential element in this process. The decisive role in removing administrative barriers to the development of business and improving the investment environment is assigned to measures aimed at enhancing a systematic dialog covering all investment-related issues and consultations with stakeholders. Convergence of regulatory systems in trade-related areas will certainly bring economic benefits both in terms of reforms and in terms of enhanced investment climate in partner countries. In particular, improvement of the mechanism for protecting intellectual and industrial property rights as well as effective enforcement of such rights, along with regulatory convergence and improved market access in the area of public procurement, will have a decisive influence on economic development and investment levels. Measures could also be taken to increase the harmonization and sustainability of statistical systems. In addition, partners should be encouraged to promote competition. This task could be performed by independent competition authorities with adequate powers and resources as well as proper training. In order to advance toward convergence with the EU internal market, partner countries will have to harmonize the relevant approaches and definitions, as well as anti-trust and state aid regulations. These measures will undoubtedly help to develop business and stimulate trade. The business climate will be improved by actions to modernize the tax system and increase its transparency. This implies convergence with the EU Code of Conduct for Business Taxation in line with WTO requirements and the adoption of conventions for the avoidance of double taxation. Measures to strengthen tax administrations and improve cooperation between them will also promote the effective functioning of market economies.
The enlargement of the European Union on 1 May, 2004, which is seen as a historic step in political, geographic and economic terms, has further reinforced the political and economic interdependence between the EU and Georgia. As a result of this enlargement, the EU and Georgia have an opportunity to establish a closer relationship going beyond cooperation and implying deeper economic integration and effective political partnership. The EU and Georgia are prepared to use this opportunity and enhance their cooperation in promoting stability, security and welfare. This attitude is founded on the principles of partnership, participation in joint activities and the EU’s differentiated approach to each partner country.
The successful development of democracy and a market economy in Georgia is of long-term strategic interest to the European Union. The EU is interested in promoting sustainable development in neighboring countries and in establishing mutually beneficial political and economic relations with them. As a result of enlargement, the EU has moved even closer to the South Caucasus and, accordingly, these challenges have become even more relevant. In March 1990, Georgia declared its independence and withdrawal from the U.S.S.R. The EU was among the first to provide assistance to Georgia during the difficult transition period. This assistance, rendered both by EU institutions and EU member states, was provided through support for national and regional initiatives. In previous years, such assistance usually came in the form of humanitarian aid and was meant to meet the pop-
ulation’s urgent and essential needs, subsequently developing into large-scale technical and financial support. The ENP Action Plan for Georgia was adopted on 14 November, 2006, following its endorsement by the EU-Georgia Cooperation Council. The Action Plan, which covers a timeframe of five years, will help to fulfill the provisions of the Partnership and Cooperation Agreement and to build ties in new areas of cooperation; it will encourage and support Georgia’s objective of deeper integration into EU economic and social structures.
The implementation of the Action Plan will significantly advance the approximation of Georgian legislation to the legislative norms and standards of the European Union. It will build solid foundations for further economic integration. For its part, this integration is based on the adoption and implementation of economic and trade-related rules and regulations designed to enhance trade, attract more investments and ensure general economic growth. The Action Plan will also help to devise a policy and implement measures to promote economic growth and social cohesion, to reduce poverty and protect the environment. And this, in its turn, will help the country to achieve its long-term objective of sustainable development
Georgia and the EU intend to cooperate closely in implementing the Action Plan. The EU-Geor-gia ENP Action Plan sets the following priorities: strengthening of democracy and reform of state institutions; economic development and poverty reduction; reform of the judicial system; regional cooperation; and peaceful resolution of internal conflicts.
Since its inclusion in the ENP in 2004, Georgia can use what is known as the European Neighborhood and Partnership Instrument (ENPI).
Assistance provided by the European Commission (EC) to Georgia in 1992-2006 amounted to almost €506 million. In 2007, €24 million was allocated to Georgia under the ENPI to address the priorities set by the ENP Action Plan. In 2008, EC assistance to Georgia after the August crisis amounted to €120 million. This was part of a €500 million development and stabilization package for 2008-2010 promised to Georgia by the European Commission after the military conflict. In 2008, EC assistance to Georgia totaled €150 million, including €120 million in the form of post-conflict assistance, and €42 million as regular funding.
The Action Plan contains a set of priorities, some of which relate to areas specified in the Partnership and Cooperation Agreement (PCA), while others are beyond the scope of the PCA. All these priorities are of equal importance, but particular attention should be given to the second and third priority areas, which reflect the EU’s social and economic policy toward Georgia.1
Priority Area 2
Improvement of the Business and Investment Climate through a Transparent Privatization Process and a Continued Fight against Corruption
Specific actions:
■ develop and implement a special program to improve the business climate, in particular to improve the conditions for starting a business, hiring and firing workers, registering property, getting credit, protecting investors, enforcing contracts, and closing a business;
1 See: European Neighborhood Policy. European Union-Georgia Action Plan, available at [http://www.delgeo.ec. europa.eu/trade/Booklet%2oa4-2.pdf].
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adopt a new Customs Code (2006) and implement it in line with EU and international standards;
adopt and implement the necessary implementing provisions to the revised Customs Code in order to simplify and streamline customs procedures and to address the issues of customs ethics in line with EU and international standards;
create a mechanism for regular consultation/information of the trade community on import and export regulations and procedures;
strengthen the overall administrative capacity of the customs administration, in particular to increase the transparency of customs rules and tariffs, ensure the correct implementation of customs valuation rules, implement the principles of risk-based customs control and postclearance control, and to provide the customs administration with sufficient internal and external laboratory expertise and sufficient information technology capacity;
continue the modernization, simplification and computerization of the tax administration; ensure the strict enforcement of the Tax Code by defining all necessary administrative structures and procedures, including a fiscal control strategy, audit and investigation methods, cooperation with taxpayers and tax compliance;
ensure a transparent privatization process both as regards divestiture and use of privatization proceeds;
establish administrative capacities for creating an effective and transparent licensing system.
Priority Area 3
Encouragement of Economic Development, Enhancement of Efforts to Reduce Poverty and Ensure Social Equality, Promotion of Sustainable Development, Further Convergence of Economic Legislation and Administrative Practices
Specific actions:
■ maintain macroeconomic stability by implementing prudent monetary and fiscal policies, including through ensuring the independence of the National Bank of Georgia; further improve strategic planning through a Medium-Term Expenditure Framework;
■ conduct a systematic review and revision of the government’s reform strategy document, with particular emphasis on poverty reduction;
■ continue reforms in public finance management, including by implementing a Medium-Term Expenditure Framework fully consistent with the Georgian government strategy;
■ develop an effective research and innovation policy directly relevant to Georgia’s sustainable and equitable economic development policy objectives;
■ encourage life-long and life-wide learning opportunities, as well as further the reform efforts in the field of education, science and training to promote sustainable development of human resources and human capital;
■ reform the science management system through the creation of an appropriate regulatory framework, financing model and governance based on scientific excellence, capacity building and joint initiatives;
■ foster the development of education, information and communication programs and technologies;
■ improve quality in statistics;
■ jointly explore options for further enhancing bilateral trade relations between the EU and Georgia, including the possible conclusion of a free trade agreement between the parties. In this context, the European Commission will undertake a feasibility study with due regard for regional trade and economic integration aspects;
■ cooperate in the area of food safety;
■ ensure effective cooperation in order to establish and strengthen in Georgia a modern institutional system of market surveillance.
After the Russian-Georgian war, the following issues became a subject of wide debate, discussion and assessment: How have the August events affected various spheres of life? What are the losses suffered? What are the prospects and possible ways of development? Naturally, this applies to all spheres: the socioeconomic status of the population, environment, energy, construction business, banking system, etc. In this case, we are concerned with relations between Georgia and the European Union. What has changed since the August events against the background of the EU’s increased political activity with regard to the Russian-Georgian crisis? What is happening within the framework of the Neighborhood Policy? Especially since integration into the EU is among the top priorities of Georgian foreign policy.
Since economic integration plays an extremely important role in maintaining the course towards Georgia’s integration into the EU, we will focus our attention on economic issues.
In 1999, Georgia became a beneficiary of the EU General System of Preferences (GSP), which removed customs duties for some Georgian exports to the EU market.2 And since 2005 it has been a beneficiary of the second arrangement under the General System of Preferences known as the Special Incentive Arrangement for Sustainable Development and Good Governance (GSP+). Its first stage was completed on 31 December, 2008, and its second stage took effect on 1 January, 2009 and will be valid until 31 December, 2011.
The division of the whole GSP scheme for 2005-2015 into separate stages was dictated by the need to monitor each country’s compliance with all conditions established for acquiring or maintaining GSP beneficiary status. In 2005, when the GSP+ scheme came into effect, EU regulations required that in order to obtain the status of a beneficiary a country had to ratify 16 core U.N. conventions, and by the end of 2008 countries enjoying such preferences and new countries wishing to apply for them already had to ratify 27 international conventions on human rights, sustainable development and good governance. In addition, they had to present reports on the implementation of these conventions. Applications from countries wishing to acquire GSP+ status or to continue benefiting from it, with attached documents on the ratification of the 27 international conventions, had to be submitted to the European Commission not later than 31 October, 2008. By the summer of 2008, out of the 27 international conventions Georgia had yet to ratify two conventions, which
2 See: Commission of the European Communities. European Neighborhood Policy. Country Report Georgia. Brussels, SEC(2005) 288/3.
THE CAUCASUS & GLOBALIZATION
became a serious obstacle to its retaining the GSP+ beneficiary status. There were also difficulties due to the absence of provisions in Georgian legislation required by the conventions of the International Labor Organization (ILO). In September and October 2008, the Georgian parliament summarily ratified the two remaining conventions (the Cartagena Protocol on Biosafety and the U.N. Convention against Corruption). As a result of intensive consultations and negotiations with the ILO, the Georgian government resolved problematic issues in this area and informed the European Commission about this. On 31 October, 2008, the Georgian Ministry of Foreign Affairs submitted an application for the continuation of the GSP+ scheme in 2009-2011, with all the necessary documents. By decision of the European Union, Georgia remains a GSP+ beneficiary in 2009-2011.
The new scheme covers 6,421 products. It should be noted that imports of 2,452 products (from any country) are currently subject in the EU to zero customs duty, and GSP+ adds another 6,421 products to this list, which makes a total of 8,873 items.
In exports to the EU market, 8,873 Georgian products (92% of the total list) are not subject to customs duty, and the remaining 824 items (at present, the total EU product list includes 9,697 items) are subject to customs duty at the existing rate.
The European Union has intensified its negotiations with Georgia on the issues of free trade and visa facilitation.
A free trade agreement (FTA) provides for the removal of tariff barriers in all areas and for all types of trade, both in services and goods. It also minimizes non-tariff barriers. But this requires convergence of Georgian legislation with that of the European Union so that the standards of goods produced in the country and the standards of their production are brought into line with EU requirements. Current tariffs are very low (2.3%), and it is precisely non-tariff barriers that are mandatory standards limiting access for Georgian goods to the EU market.
The high level of these requirements is dictated by the desire of EU member states, on the one hand, to protect the health of their citizens, and on the other, to create conditions for fair competition in the EU market, i.e., to keep out goods produced in conditions and using technologies that do not meet EU standards and, accordingly, are low-cost, thus gaining a certain competitive advantage in the market. There is an initiative of the World Trade Organization known as the Doha Agenda, which provides for mechanisms to facilitate developing countries’ access to Western markets. This initiative is supported, among others, by the European Union. Tariff barriers to trade are characterized by a general tendency to decline to zero. As for non-tariff barriers, the European Union is unlikely to agree to their removal in all cases, since this issue affects not only competition, but also human health and safety, living standards and quality of life.3 That is why we do not expect procedures in this area to be simplified. The European Union thinks it right that when food products are imported, non-tariff barriers that ensure compliance with health protection and food safety standards should remain in place. Naturally, the EU is doing all it can to create insurmountable barriers to the entry of low-quality products from developing countries that can be hazardous to the health of consumers. All of this requires the existence of a proper system of technical regulation and standardization. From this perspective, the situation in Georgia leaves much to be desired. Unfortunately, many areas that should be subject to government regulation were virtually beyond its scope. For example, such issues as food safety, industrial standards, building regulations, energy security and environmental protection (i.e., all that relates to economic activity) are regulated in EU countries in accordance with certain rules, and proper quality assessment systems are in place. All of this should also exist in Georgia at an appropriate level.
In the event of free trade, tariff barriers will be reduced to zero, although many free trade agreements provide for a negative list of products to which the agreement does not apply. This is a matter
3 See: M. Ganiashvili, “The EU Will Not Reduce Non-Tariff Barriers. Visa Facilitation and Problems of Free Trade with Europe,” Sakartvelos ekonomika, No. 11, 2008 (in Georgian).
Volume 4 Issue 3-4 2010
of bilateral agreement. We hope that with respect to Georgia there will be virtually no such list of exclusions. We should try to achieve an agreement under which not a single product is subject to tax. It may take us two or three years to reach the stage of conclusion of an agreement, depending on the intensity of government efforts and the degree of priority given to this area.
In February 2004, the European Union launched its Export Helpdesk [http://exporthelp.europa. eu], an online service that has made it much easier for third county exporters to obtain information required for access to the EU market. This online service, provided by the European Commission, is meant for third country exporters. It offers comprehensive information on customs duties, value added tax (VAT) and excise taxes applicable in the EU member states, customs documents required for import of products into EU territory, and trade statistics useful to business people. This service enables third country exporters to obtain information on whether or not EU trade preferences cover their products (and if they do, to what extent). This information helps developing countries to get a better understanding of how to use there preferences. It should be noted that, according to statistics, only 52% of all goods produced in developing countries that are covered by trade preferences are exported to the EU market.
Below we give concrete examples of customs duty, VAT and excise tax levied on some Georgian exports to the EU market. Exports of goods from third countries to the EU market are mainly subject to three kinds of tax: customs duty, VAT and excise tax. In the EU market, different products are taxed differently, so that the above taxes change depending on the type of goods. Moreover, whereas customs duty on a particular type of goods is roughly the same in all EU member countries, VAT and excise tax rates vary from country to country. To demonstrate the practical application of the EU Export Helpdesk, below we present tables showing how customs duty, VAT and excise tax are levied on some Georgian goods imported into the EU. The tax rates in these tables are given for each EU member country. Each table for a particular product is supplemented with a description of this product based on the Harmonized System (HS), the Combined Nomenclature (CN) and TARIC codes. This description also contains data on tariff quotas and preferences applicable to the product in question when it is exported to the EU.
Wine of fresh grapes (see Table 1)
Classification of the product:
■ HS chapter 22—Beverages, spirits and vinegar;
■ HS heading 2204—Wine of fresh grapes, including fortified wines;
■ HS subheading 2204 29—Other (implies wines other than sparkling wines referred to in subheading 2204 10 and wines with fermentation prevented or arrested by the addition of alcohol referred to in Subheading 2204 21);
■ CN subheading 2204 29 75—Other (implies wines other than those referred to in subheading 2204 29: bordeaux, bourgogne, tokaj, etc.);
■ TARIC subheading 2204 29 75 10—Wine of fresh grapes;
■ customs tariff for third countries: €9.9 per hectoliter (1 hectoliter = 100 liters);
■ tariff preferences (including under the GSP): not provided;
■ import tariff quota for up to 20,000 hectoliters: €8 per hectoliter.
Hazelnuts in shell (see Table 2)
Classification of the product:
■ HS chapter 08—Edible fruit and nuts;
■ HS heading 0802—Other nuts (implies nuts other than coconuts, Brazil nuts and other nuts referred to in heading 0801);
■ HS subheading 0802 21—Hazelnuts;
■ CN subheading 0802 21 00—Hazelnuts in shell;
■ customs tariff for third countries: 3.2%;
■ as an EU GSP+ beneficiary, Georgia has special preferences, so that customs duty on the import of hazelnuts into the EU for Georgian exporters is equal to zero;
■ import tariff quota for this product: not established.
Table 1
Customs Duty,
VAT and Excise Tax on Georgian Exports of Wine of Fresh Grapes to the EU Market
No. Country Customs Duty per 100 Liters VAT, % Excise Tax per 100 Liters
1 Austria €9.9 20 0
2 Belgium €9.9 21 €47.0998
3 Bulgaria €9.9 22 90 Bulgarian leva
4 Germany €9.9 19 0
5 United Kingdom €9.9 17,5 194.8 pounds (alcohol content 5.5%-15%)
6 Denmark €9.9 25 614 Danish kroner
7 Estonia €9.9 18 1,040 Estonian kroons
8 Spain €9.9 16 0
9 Ireland €9.9 21 €273 (alcohol content 5.5%-15%)
10 Italy €9.9 20 0
11 Cyprus €9.9 18 €45
12 Latvia €9.9 18 30 Latvian lati
13 Lithuania €9.9 18 80 Lithuanian litai
14 Luxembourg €9.9 12 0
15 Malta €9.9 18 0
16 Netherlands €9.9 19 €68.54
17 Poland €9.9 22 136 Polish ztotys
18 Portugal €9.9 12 0
19 Rumania €9.9 19 0
Table 1 (continued)
No. Country Customs Duty per 100 Liters VAT, % Excise Tax per 100 Liters
20 Greece €9.9 19 €45
21 France €9.9 19.6 €3.4
22 Slovakia €9.9 19 0
23 Slovenia €9.9 20 0
24 Hungary €9.9 20 0
25 Finland €9.9 22 €233
26 Sweden €9.9 25 €21.58 (alcohol
content 8.5%-15%)
27 Czech Republic €9.9 19 0
S o u r c e: EU Export Helpdesk [http://exporthelp.europa.eu].
During the past five years, bilateral trade between the European Union and Georgia has been growing steadily. The EU is Georgia’s main trading partner (in 2006, its share of Georgia’s overall external trade was 29.2%). In 2007, the total turnover of EU-Georgia bilateral trade was €1.563 billion; exports to the EU amounted to €1.081 billion, and imports, to €482 million. However, Georgian exports to the EU are very limited and should be further diversified.
Table 2
Customs Duty,
VAT and Excise Tax on Georgian Exports of Hazelnuts in Shell to the EU Market
No. Country Customs Duty, % VAT, % Excise Tax
1 Austria 0 10 0
2 Belgium 0 6 0
3 Bulgaria 0 20 0
4 Germany 0 7 0
5 Denmark 0 25 14.25 Danish kroner per kg
6 United Kingdom 0 0 0
7 Estonia 0 18 0
8 Spain 0 7 0
9 Ireland 0 0 0
10 Italy 0 4 0
Table 2 (continued)
No. Country Customs Duty, % VAT, % Excise Tax
11 Cyprus 0 0 0
12 Latvia 0 18 0
13 Lithuania 0 3 0
14 Luxembourg 0 12 0
15 Malta 0 0 0
16 Netherlands 0 6 0
17 Poland 0 3 0
18 Portugal 0 12 0
19 Rumania 0 19 0
20 Greece 0 9 0
21 France 0 5.5 0
22 Slovakia 0 19 0
23 Slovenia 0 8.5 0
24 Hungary 0 20 0
25 Finland 0 17 0
26 Sweden 0 12 0
27 Czech Republic 0 9 0
S o u r c e: EU Export Helpdesk [http://exporthelp.europa.eu].
Limited progress is recorded in the area of regulatory convergence with EU legislation on trade and investment, as provided by the Partnership and Cooperation Agreement and the ENP Action Plan. The adoption of such legislation in Georgia is necessary to improve the practical access of Georgian products to the EU market. Negotiations on a bilateral agreement on the protection of geographical indications (including wine and alcoholic beverages), which started in 2007, were concluded on 29 July, 2010. The text of the Agreement was initialed. Some successes have been achieved in the approximation of customs legislation and procedures with European and international standards. The new Customs Code of Georgia entered into force in January 2007. It reduces the number of customs regimes and contains general provisions on free zones and free warehouses. The structure, terms and principles of this Code are broadly compatible with the Community Customs Code and the revised Kyoto Convention on the Simplification and Harmonization of Customs Procedures.4 However, the lack of implementing provisions to the Georgian Customs Code hampers its implementation and reduces the transparency of customs rules for economic operators. Particular attention should be paid to valuation rules and post-clearance controls.
4 See: Commission of the European Communities. Commission Staff Working Document. Implementation of the European Neighborhood Policy in 2007. Progress Report Georgia. Brussels, 3 April 2008, SEC(2008)393.
Georgia is a key transit country for the supply of Caspian energy resources to the EU market. The most significant event for Georgia in this area was the full operation of the Baku-Tbilisi-Cey-han (Turkey) oil pipeline and the first gas flows through the Baku-Tbilisi-Erzurum (Turkey) gas pipeline. Georgia, Poland, Lithuania, Azerbaijan and Ukraine have reached an agreement to work together on the extension of the Odessa-Brody oil pipeline to Gdansk in Poland. This agreement will help to increase significantly the supply of Caspian energy resources. Natural gas imports from Azerbaijan have opened opportunities for diversification in Georgia, which was fully dependent on Russian gas supplies. Options for underground gas storage have also been studied. Georgia has actively cooperated in the European Commission’s feasibility study regarding the Trans-Caspian (Black Sea) energy corridor. Together with Kazakh investors, it plans to build an oil refinery at the Batumi Port. These developments are also important for strengthening the EU’s energy security, particularly in relation to projects such as the construction of the Nabucco gas pipeline (from Turkey to Austria).
C o n c l u s i o n
The current European Neighborhood Policy has serious potential to improve economic and social conditions in the EU neighborhood, enhance the investment climate, and provide a more transparent, stable and enabling environment for private sector-led growth in partner countries.
The implementation of this policy will help Georgia in its efforts to reduce poverty, enhance social equality and ensure the country’s sustainable development.
Avtandil SILAGADZE
D.Sc. (Econ.), Professor, Corresponding Member of the National Academy of Sciences of Georgia
(Tbilisi, Georgia).
ECONOMIC THOUGHT IN FEUDAL GEORGIA
Abstract
The author takes a look at the outstanding literary and legal works of feudal Georgia—The Knight in the Tiger Skin by Shota Rustaveli (11th-12th cc.); The Code of Laws of Beka and Agbuga (14th-15th cc.); The Royal Court Regulations of
George V the Illustrious (1314-1346); The Description of the Kingdom of Georgia by Vakhushti Bagrationi (1696-1757); The Book of Law of King of Kartli Vakhtang VI (1675-1737); Kalmasoba by Ioann Bagrationi (1768-1830); and The Book of Wis-
