Georgia Gap Analysis

Europe & Eurasia (E&E) Bureau USAID

February 2015

Bulgaria

Croatia

Czech R. Estonia

Hungary Latvia Lithuania

Poland

Romania

Slovakia

Slovenia

Albania

Bosnia-Herzegovina

Macedonia

Kosovo

Serbia

Montenegro Kazakhstan

Kyrgyz Republic

Tajikistan

Turkmenistan

Uzbekistan

Armenia

Azerbaijan

Belarus

Georgia

Moldova

Russia

Ukraine

1

2

3

4

5

1 2 3 4 5

Eco

no

mic

Ref

orm

s

Democratic Reforms

Economic and Democratic Reforms in 2013-2014

Ratings are based on a 1 to 5 scale, with 5 most advanced. Freedom House, Nations in Transit (June 2014), & EBRD, Transition Report (November 2014).

Romania, Bulgaria, Croatia Threshold, 2006

Figure 1

E&E Graduates The Balkans E&E Eurasia CARs

Georgia’s Reform Profile

Figure 2

Economic Reforms, 2014 Democratic Reforms, 2013

Small Scale Privatization,

4.0 Trade and Foreign

Exchange, 5.0

Price Liberalization,

5.0

Large Scale Privatization,

4.0

Enterprise Restructuring,

2.3

Competition Policy, 2.0

Banking Reform, 2.7

Non Bank Fin. Reform, 1.9

Infrastructure Reforms, 2.7

1

2

3

4

5

Drawn from EBRD, Transition Report and Freedom House, Nations in Transit. The blue line represents current reform progress of the 11 E&E graduate countries.

Electoral Process, 2.7

Civil Society, 3.2

Independent Media, 3.0

National Governance,

2.0

Local Governance,

2.0

Rule of Law, 2.3

Anti-Corruption, 2.7

1

2

3

4

5

The projections are extrapolations from the average annual trends from 2009-2013. The economic reform data are drawn from the EBRD’s annual Transition Report, and the democratic reform data are drawn from Freedom House’s annual Nations in Transit series.

1

2

3

4

5

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Eco

no

mic

an

d D

em

ocr

atic

Re

form

Ave

rage

Georgia’s Reform Trajectory

Actual 1998-2013 Projected 2014-2018

Romania-Bulgaria-Croatia 2006 Threshold

Figure 3

Drawn from the EBRD Transition Report (2014 and earlier editions).

Figure 4

Belarus

Azerbaijan Ukraine

Moldova

Russian Federation Georgia

Armenia

1

2

3

4

5

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

1 t

o 5

, wit

h 5

th

e m

ost

ad

van

ced

Macroeconomic Reforms in E&E Eurasia

Figure 5

Georgia

E&E Eurasia

Romania, Bulgaria, Croatia 2006

1

2

3

4

5

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

1 t

o 5

, wit

h 5

th

e m

ost

ad

van

ced

Stage 1 Macroeconomic Reforms

Drawn from the EBRD Transition Report (2014 and earlier editions). First stage reforms include price liberalization, trade liberalization, and small-scale and large-scale privatization.

Figure 6

Georgia

1

E&E Eurasia

Romania, Bulgaria, Croatia 2006

1

2

3

4

5

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

1 t

o 5

, wit

h 5

th

e m

ost

ad

van

ced

Stage 2 Macroeconomic Reforms

Drawn from the EBRD Transition Report (2014 and earlier editions). Second stage reforms include banking reforms, non-bank financial sector reforms, infrastructure including energy, governance, and competition policy.

World Bank, Doing Business 2015 (October 2014). The Distance-to-Frontier score represents the gap between the economy’s performance and measures of best practices across the World Bank’s 10 components of doing business. On the Distance-to-Frontier 0-100 score, 100 represents the frontier, the optimal outcome.

Figure 7

0

10

20

30

40

50

60

70

80

90

100D

ista

nce

to

Fro

nti

er

Sco

res,

th

e h

igh

er

sco

re, t

he

be

tte

r th

e e

nvi

ron

me

nt

2014 Business Environment in the World

Tajikistan

Lithu

ania

Bo

snia -H

Serbia

Kazakh

stan

Armenia

Azerbaijan

Belarus

Georgia

Moldova

Russian Federation

Ukraine

0

10

20

30

40

50

60

70

80

90

100

2009 2010 2011 2012 2013 2014

Pe

rce

nti

le R

ank

, wit

h 1

00

th

e m

ost

ad

van

ced

Business Environment in E&E Eurasia Over Time Figure 8

World Bank, Doing Business 2015 (October 2014).

0

10

20

30

40

50

60

70

80

90

100

Mad

ag…

Ukr

ain

e

Mal

awi

Bu

rkin

a…

Be

nin

Mau

rit…

Nig

er

Cô

te…

An

gola

Zim

bab

…

Mo

ldo

va

Uzb

eki

…

Afg

han

i…

Ind

ia

Cab

o…

Gab

on

Bu

lgar

ia

Mya

nm

…

Leso

tho

Erit

rea

Isra

el

Lith

uan

ia

Slo

vak…

Kaz

akh

…

Ku

wai

t

Latv

ia

Nep

al

Co

mo

ros

Gre

nad

a

Bah

rain

Suri

na…

Lib

ya

Un

ite

d…

São

…

Do

min

i…

Ch

ile

Solo

mo

…

Mau

riti

…

Geo

rgia

Fin

lan

d

Pan

ama

No

rway

Trin

ida…

An

tigu

…

Ho

ng…

Ice

lan

d

Swit

zer…

Ko

rea,

…

Dis

tan

ce t

o F

ron

tie

r Sc

ore

s (t

he

hig

he

r th

e s

core

, th

e b

ett

er

the

en

viro

nm

en

t)

Getting Electricity in the World

World Bank, Doing Business 2015 (October 2014). Getting Electricity is one of 10 components that comprise the World Bank’s Ease of Doing Business rankings. The Distance-to-Frontier score represents the gap between the economy’s performance on getting electricity and measures of best practices globally. On the Distance-to-Frontier 0-100 score, 100 represents the frontier, the optimal outcome.

Figure 9

Tajikistan

Lithu

ania

Bo

snia -H

Serbia

Kazakh

stan

Drawn from Freedom House, Nations in Transit (2014 and earlier editions) and Freedom House, Freedom in the World (January 2015).

Figure 10

Belarus Azerbaijan

Russia

Georgia

Moldova Ukraine

Armenia

1

2

3

4

5

1 t

o 5

, wit

h 5

th

e m

ost

ad

van

ced

Democratic Reforms in E&E Eurasia

Figure 11

Drawn from Freedom House, Nations in Transit (2014 and earlier editions)

Electoral Process

Civil Society

Independent Media

Governance

Rule of Law

Anti-Corruption

1

2

3

4

5

1996 1997 1998 1999/2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

1 t

o 5

, wit

h 5

th

e m

ost

ad

van

ced

Democratic Reforms in Georgia

International Monetary Fund (IMF), World Economic Outlook (October 2014). The Eurasian energy importers include Armenia, Belarus, Georgia, Moldova, Kyrgyzstan, Tajikistan, and Ukraine.

Figure 12

Eurasian Energy Importers

Georgia

-8

-6

-4

-2

0

2

4

6

8

10

12

14

16

An

nu

al p

erc

en

t ch

ange

Economic Growth and Contraction in Georgia vs. the Eurasian Energy Importers

International Monetary Fund (IMF), World Economic Outlook (October 2014).

Figure 13

Russia

Georgia

-8

-6

-4

-2

0

2

4

6

8

10

12

14

16

An

nu

al p

erc

en

t ch

ange

Economic Growth and Contraction in Georgia vs. Russia

Data taken from EBRD, Transition Reports.

Figure 14

Azerbaijan

Belarus

Armenia

Georgia

Moldova

Russia

Ukraine

0

20

40

60

80

100

120

140

160

180

200

220

240

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

% o

f 1

98

9 G

DP

Real GDP as % of 1989 GDP in E&E Eurasia

World Bank, World Development Indicators (July 2014). Data are 2012 for Slovenia, Slovak Republic, Lithuania, Latvia, and Hungary.

Figure 15

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

Cu

rre

nt

Inte

rnat

ion

al (

PP

P)

$

Gross National Income Per Capita in Eastern Europe & Eurasia in 2013

Figure 16

Exports

Foreign Direct Investment

Current Account Balance

-30

-20

-10

0

10

20

30

40

50

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

% o

f G

DP

Georgia's Economic Integration in the World

World Bank, World Development Indicators (2015 online).

Figure 17

Exports

Foreign Direct Investment

Current Account Balance

External Debt

-30

-20

-10

0

10

20

30

40

50

60

70

80

90

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

% o

f G

DP

Georgia's Economic Integration in the World (including external debt)

World Bank, World Development Indicators (online 2015).

Fuels

Fuels & Minerals

0

5

10

15

20

25

30

35

40

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Fue

l & M

ine

ral E

xpo

rts

(as

% o

f M

erc

han

dis

e E

xpo

rts)

Georgia's Natural Resource Exports, 1996-2013

World Bank, World Development Indicators (2014).

Figure 18

EU-27

Russia 0%

10%

20%

30%

40%

50%

60%

70%

80%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

% o

f To

tal E

xpo

rts

Georgia’s Exports to Russia and the EU-27

World Bank, World Development Indicators (2012); EU-27 consists of Belgium, Bulgaria, Czech Republic, Denmark, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Malta, Netherlands, Austria, Poland, Portugal, Romania, Slovenia, Slovakia, Finland, Sweden, United Kingdom.

Figure 19

E&E Eurasia

Western Europe

Russia

Other

0%

10%

20%

30%

40%

50%

60%

70%

80%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

% o

f To

tal E

xpo

rts

Georgia’s Direction of Exports to the World Figure 20

World Bank, World Development Indicators (2012).

ALB

ARM

AZE

BEL

B-H BUL

CRO

CZE

EST

GEO

HUN

KAZ KOS

KYR

LAT LIT

MAC

MOL

MON

POL

ROM

RUS

SER

SLK

SLV

TAJ TRK

UKR

UZB

Eurozone

0

1

2

3

4

5

0 1 2 3 4 5

Fin

anci

al S

ect

or

Size

Financial Sector Stability

Financial Sector Size and Stability

Partners for Financial Stability Program, Deloitte Consulting, LLC for USAID (November 2013). Financial sector stability includes nine measures and the size of the financial sector, four measures. The quadrant parameters are determined by E&E average scores for financial sector size and stability.

II. Large and Unstable

III. Small and Unstable

I. Large and Stable

IV. Small and Stable

Figure 21

World Bank, World Development Indicators (September 2014). Domestic credit to the private sector as % of GDP.

Figure 22

E&E Graduates

Azerbaijan

Armenia

Georgia

Russia

0

10

20

30

40

50

60

70

80

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

% o

f G

DP

Domestic Credit as a Percentage of GDP in E&E Eurasia and E&E Graduates

Figure 23

Armenia

Azerbaijan

Belarus

Georgia

Moldova

Russia

Ukraine

0

10

20

30

40

50

60

%

Unemployment Rates in E&E Eurasia

IMF, World Economic Outlook (2014).

Kovtun D. et.al., Boosting Job Growth in the Western Balkans, IMF Working Paper, January 2014, World Bank, World Development Indicators (2015 online), IMF, World Economic Outlook (October 2014). Remittance data for Serbia is for 2012. Unemployment data for Kosovo and Montenegro are for 2011. All other data is for 2013.

Albania

Montenegro

Macedonia Serbia

Bosnia and Herzegovina

Kosovo

Czech Rep.

Hungary Romania

Poland Slovenia

Bulgaria

Estonia Slovakia Latvia

Lithuania

Croatia

Georgia

Armenia

0

4

8

12

16

20

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0

Re

mit

tan

ces

(% o

f G

DP

)

Unemployment Rate (as % of Total Labor Force)

Remittances and Unemployment Rates in Central and Eastern Europe and Georgia and Armenia in 2013

Figure 24

Figure 25

World Bank, World Development Indicators, Online Database (2015).

Moldova

Armenia

Georgia

Ukraine

Belarus Russia

Azerbaijan

0

5

10

15

20

25

30

35

40

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Remittances in E&E Eurasia, 2000-2013

40 45 50 55 60 65 70 75 80 85 90 95 100 105 110

Yemen

Kyrgyz Republic

Peru

Tunisia

Jordan

Malaysia

Macedonia, FYR

Azerbaijan

Bulgaria

Serbia

Bosnia and Herzegovina

Slovak Republic

Russian Federation

Ukraine

Lithuania

Italy

Latvia

Slovenia

Poland

Finland

Korea, Rep.

PISA Score, 2012

The Quality of Education (or Functional Literacy) in Select Countries in the World: Results from PISA 2012 Tests

Georgia

OECD, Programme for International Student Assessment or PISA (2013). The PISA 2012 survey includes math, reading, science, and problem solving (including an assessment of financial literacy) among high school students. Scores are adjusted so that the OECD average = 100. Scores from earlier PISA tests or TIMSS or PIRLS tests used where PISA 2012 data are not available.

OECD

Figure 26

Figure 27

World Bank, World Development Indicators (2015, online).

OECD

E&E Graduates

Balkans

E&E Eurasia

CARs

Sub-Saharan Africa

Georgia

45

50

55

60

65

70

75

80

85

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Ye

ars

at B

irth

Life Expectancy at Birth

Economic Policy

Economic Performance

Education

Health

Democracy, Human Rights, and Governance

Peace and Security

1

2

3

4

5

2005 2006 2007 2008 2009 2010 2011 2012 2013

1 t

o 5

, wit

h 5

th

e m

ost

ad

van

ced

Country Data Analytics: Development Trends in Georgia

Country Data Analytics (CDA). The indicator composition of the sector indices is shown in Figures 28 and 29. Indicator definitions are available in the CDA Source Guide (January 2015) , available upon request.

Figure 28

Figure 29 Country Data Analytics: Georgia’s Development Profile (I)

Economic Policy, 2013 Economic Performance, 2013

Health, 2012 Education, 2012

Microeconomic Policy,

4.8

Regulatory Quality, 3.9

Trade Policy, 5.0

Fiscal Policy, 2.3

Monetary Policy, 4.7

1

2

3

4

5

GDP Per Capita, PPP,

1.9 Export

Sector, 2.4

FDI, 2.6

Energy Security, 3.8 Economic

Inequality, 3.2

Environment, 2.2

Domestic Credit, 2.0

Economic Gender Gap,

3.7

1

2

3

4

5

Literacy Rate, 5.0

Government Spending on Education,

2.3

Secondary Enrollment,

4.2

Tertiary Enrollment,

2.4

Education Gender Gap,

4.8

1

2

3

4

5Under 5 Mortality,

4.6 Adult

Mortality, 4.5 Out of

Pocket Health

Spending, 1.3

Modern Contracepti

ve Prevalence,

2.8

Government

Expenditure on Health,

2.3

Stunting, 4.5

Access to Improved

Sanitation, 4.7

Maternal Mortality,

4.8

1

2

3

4

5

E&E Countries Receiving USG Assistance

Country Data Analytics (CDA). Indicator definitions are available in the CDA Source Guide (January 2015) , available upon request.

Figure 30

Country Data Analytics: Georgia’s Development Profile (II)

Democracy, Human Rights, and Governance, 2013

Peace and Security, 2013

E&E Countries Receiving USG Assistance

Political Rights, 3.7

Civil Liberties, 3.7

Rule of Law, 2.8

Media Freedom, 2.9

Control of Corruption,

3.0

Government Effectiveness

, 3.4

Political Gender Gap,

1.8

1

2

3

4

5Counter

Terrorism, 3.1

Combating WMD, 2.2

Stabilization and Security

Sector Reform, 3.1

Counter Narcotics, 2.3

Combating Transnational

Crime, 2.5

Conflict Mitigation, 4.1

1

2

3

4

5

NOTES

Figure 31

1 2 3 4 5

Syrian Arab RepublicSouth Sudan

MyanmarIran, Islamic Rep.

Guinea-BissauZimbabwe

Venezuela, RBColombia

Dominican RepublicIndia

Egypt, Arab Rep.Peru

AngolaCambodia

GeorgiaBelize

BahrainDjibouti

MadagascarIsrael

SurinameMoldovaVietnam

GhanaBosnia and Herzegovina

SwazilandArgentina

Equatorial GuineaCosta Rica

MontenegroBahamas, The

FijiMacedonia, FYR

MauritiusSingapore

Korea, Rep.Spain

HungaryPolandFrance

CanadaAustria

BelgiumFinland

1 to 5 , with 5 the most peaceful and secure

Peace and Security in the World, 2013

Georgia

1

2

3

4

5

1 t

o 5

, wit

h 5

th

e m

ost

pe

ace

ful a

nd

se

cure

Peace and Security in Europe & Eurasia in 2013 Figure 32

Country Data Analytics (CDA).

Peace and Security Index

Counter Terrorism

Government Capacity To

Combat Terrorism

Severity of Terrorism

Political Stability

Combating WMD

Control of Chemical and

Biological Weapons

Control of Nuclear

Proliferation

Government Capacity To

Combat Terrorism

Stabilization & Security

Reform

Security Apparatus And

Governance

Physical Integrity Rights

Violent Crime

Political Globalization

Rule of Law

Counter Narcotics

Government Capacity To

Counter Narcotics

Government Effectiveness To

Counter Narcotics

Combating Trans Nat.

Crime

Piracy of Intellectual

Property

Money Laundering

Trafficking in persons

Criminalization of the State

Government Capacity to

Counter Narcotics

Conflict Mitigation

Bad Neighborhood

Conflict History

Risk of Instability

Figure 33