This annual report documents the results and progress made in the Economic Prosperity Initiative (EPI) in Georgia, covering the first year of operations, from September 30, 2010 to September 30, 2011. It starts by documenting EPI’s achievements in Year 1 and progress against high-level results and sub-component benchmarks. A detailed summary of completion of outputs and progress against the Year 1 work plan follows. Annexes illustrate the utilization of resources and cooperation with other U.S. government (USG) agencies, local partners and interns and include a table of the performance indicators from the Year 1 PMP.
During Year 1, EPI built the foundation for its value-chain (VC) driven activities and related business enabling environment and policy reforms. Starting with the first phase of the project (October 2010 – March 2011), EPI focused on identifying sectors and VCs in the economy with the greatest probable development impact by conducting macro-level and enterprise-level data analysis, focus group interviews, and surveys. During the second phase (April – September, 2011), EPI engaged with numerous VC groups and ent erprises to develop specific VC action plans. Similarly, during the first phase and continuously during the second phase, EPI analyzed and then prioritized addressable constraints in the business enabling and pol icy environment, creating and sharing several policy action plans with its key GoG counterparts.
While EPI’s focus during the first year has been in the area of analysis and action plan development, EPI also achieved several early successes across supported VCs, the business enabling environment, and crosscutting areas, some of which are highlighted below:
Greenhouse and Cold Storage Investment
- Through its investment promotion activities, EPI stimulated demand and interest among investors resulting in investments and pl anned commitments of USD 21.04 million in greenhouse operations and USD 21 million in cold storage facilities. EPI was instrumental in expediting the decisions by investors to examine Georgian greenhouses and cold storage solutions, instead of other investment plans under consideration. Recognizing that the returns on these investments are relatively risky given the rudimentary knowledge of greenhouse and c old storage facility management in Georgia, EPI is providing targeted technical assistance, such as technology,
managerial practices and modern agricultural techniques, so that greenhouse and cold storage operators sustain these investments over the long-term period and achieve desired increases in revenues and exports.
Apparel, Wine and MICE Tourism Sectors
- EPI’s strategic activities in the apparel, wine and MICE tourism sectors have catalyzed these areas into focus sectors by public and private sector in Georgia.
- EPI’s assistance to the apparel industry has already resulted in increased sales for local apparel companies to foreign markets and emergence of first foreign investors to avail their resources, technology, managerial practices and market linkages to Georgian apparel sector.
- An EPI-funded study tour to the U.S. (New York State and California) for wine and tourism private sector stakeholders resulted in an emergence of a new partnership between the Georgian Wine Association (GWA) and Georgian Incoming Tour Operator Association (GITOA) to share resources and jointly promote development of Georgian wine tourism. As EPI enters Year 2, it will work closely with both associations, who recently entered into a Memorandum of Understanding (MoU) to confirm their commitment to focus on wine tourism
initiatives. - EPI’s analysis of the MICE tourism VC received attention by multiple stakeholders in the tourism and hos pitality industry to start developing and promoting Georgian MICE tourism products, both in the public and private sector. The term “MICE tourism” is used for the first time in business and media communications, differentiating this market segment.
VAT Reforms in the Apparel and Transport and Logistics VCs
- EPI successfully advocated a business-friendly solution for customs treatment of wastage left over
from imported textiles used in the manufacture of apparel in Georgia, freeing wastage materials from being subject to import VAT. This removes an unnecessary burden from Georgian production. EPI successfully advocated a tax code amendment removing Georgian VAT over international cargo transportation and related services. This brings Georgia in line with international practice.
Implementation of Generalized System of Preferences (GSP+) for Turkish Materials Used in Georgian Manufacturing
- EPI helped the Ministry of Economy and Sustainable Development (MoESD) establish certification rules for bilateral accumulation of origin, allowing goods made jointly in Georgia and Turkey to benefit from the GSP+ program for duty free entry into the European Union (EU).
Best Practices in Business Process Reengineering (BPR)
- EPI conducted a comprehensive BPR assessment in preparation for an intellectual property rights
(IPR) e-filing system and delivered trainings on BPR methodology to the Ministry of Justice’s (MoJ) Data Exchange Agency (DEA) and other relevant government offices on BPR. This is building capacity of the GoG to plan and i mplement additional egovernment projects.
Customs Warehouse Regulations
- The Parliament of Georgia passed legislation in the fall of 2011, which streamlines customs supervision over customs warehouses providing temporary storage of imported goods. Facilitated by EPI recommendations, the new law provisions allow for simplified technical and s ecurity requirements for customs warehouses, creating a favorable logistics environment for foreign goods.
Investment Promotion Network
- By establishing the Georgia Investment Promotion Partnership (GIPP), EPI has brought together public and private sector players to coordinate to achieve their common goal of promoting investment in Georgia among targeted sectors. EPI is increasing overall capacity of the Georgian National Investment Agency (GNIA) and other government agencies engaged in investment promotion, while also creating the foundation to achieve tangible results in attracting investments into EPI VC sectors, starting with the apparel sector.
Leasing Reform
- The GoG has approved and submitted to Parliament proposed amendments to leasing regulation, which resulted from EPI’s technical guidance among a broad group of public and private sector stakeholders.