Issue 4, 2015. August-September



PMCG recently hosted a high-level, two-day knowledge-sharing workshop in Tbilisi with the support of the International Visegrad Fund to bring together Georgian and Moldovan businesses and governments to discuss the potential costs and benefits of the EU integration process. PMCG invited practitioners and business-sector representatives from Poland, Hungary, Slovakia and the Czech Republic to hear about their experiences and receive advice about the process. The event particularly focused on the Deep and Comprehensive Free Trade Agreement (DCFTA), which represents the most challenging part of the Association Agreement for Georgia and Moldova.

Nino Samvelidze,
EU Programs Manager at PMCG

The Georgian and Moldovan governments have agreed to harmonize their legislation with that of the Single European Market - an obligation that requires meeting various rules and standards.

While the DCFTA will bring many benefits for Georgia and Moldova, dialogue between the public and private sectors is crucial to ensure the efficient and timely implementation of the agreement.

In particular, SMEs (small and medium enterprises) are one of the most vulnerable groups in this process since they have to adapt to a new environment and have to adopt standards that match those in the EU. In the long-term, this will be beneficial. But the transition may also prove costly for SMEs if not carefully analyzed and well thought out.

Based on the discussions during the workshop, Georgia and Moldova need to focus on three key areas in order to fully benefit from the DCFTA:

1. Coordination with the Private Sector in the implementation process. Experience shows that some pieces of legislation are adopted in a hurried manner without proper consultation and engagementwith the private sector, which leads to negative consequences for businesses. Therefore, the public and private sectors have to be in constant coordination to adopt legislation suitable and relevant to the current business climate.

2. Strengthen knowledge and awareness of the EU law approximation process. It is often understood that Georgia and/or Moldova have to copy EU member states' legislation and completely re-write their respective national laws. This is incorrect; in reality, the national legislation of the EU member states varies in each sector but complies with EU general principles and directives. That means there is a need to empower public and private sectors in the process of meeting EU approximation in order to ensure legal harmonization that willprevent misinterpretation and negative impacts.

3. Prevent overregulation. It is essential to consider local trends and the business climate when harmonizing regulations. But the overregulating of any sector, without proper analysis of local needs, might harm business development in the country - and bankrupt the very SMEs that play a crucial role in countries' economic and sustainable development.

While considering Slovakia's example, one can see that recent liberal economic reforms in this country resulted in fast development and the modernization of industries. For example, Slovakia is currently one of the frontrunners in the automotive industry. In contrast, the example of the Czech Republic showed that a lack of proper public-private dialogue decreased business confidence and the country could not fully utilize free-market principles. When it comes to Poland, frequent changes in the law and excessive regulations have become the main obstacles for SMEs in its EU integration process. Hungary's experience demonstrated the need to support SMEs to be competitive on a new market.

The following participants shared their views on the event and the broader issue of the path of EU integration for Georgia and Moldova. "From our experience, we would highly encourage/recommend intensive formal and informal dialoge and communication between the government and public in general, including dialog with representatives of employers, employees, NGOs and others," Ivan Mikloš, former Vice Prime Minister and Minister of Finance of Slovakia, said.

"The EU Association Agreement offers the opportunity to have a transformative impact on the Georgian economy...[I]t is essential that the implementation of this agreement does not have the unintended effect of making it harder to do business in Georgia.

"Knowledge sharing with other countries provides essential insights about the problems to look out for, and how to proactively engage with the government in order to avoid them," George Welton, President of AmCham in Georgia, said.

It was widely acknowledged during the workshop that Georgia is a frontrunner among Eastern Partnership [EaP]countries when it comes to economic and business-enabling reforms. PMCG is actively involved in the EU approximation agenda of EaP countries and is sharingits expertise and successful institutional reforms in the region. Follow-up events will be held in Chisinău, Moldova, on October 21-23, 2015 as well as in Minsk, Belarus in October 24-26, 2015. The workshops are part of the International Visegrad Fund project "Sharing Experience of Public-Private Dialogue in EU Integration Process for Moldova and Georgia," implemented by PMCG.