The European Union ’ s Tacis TRACECA programme

1. Common Legal Basis for Transit Transportation The European Union’s Tacis TRACECA programme for Armenia, Azerbaijan, Bulgaria, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Romania, Tajikistan, Turkey, Turkmenistan, Ukraine, Uzbekistan MainstrategicdirectionsofIntergovernmentalCommissionofTRACECAinthedevelopmentoftransportnetworksofinternationaltransportcorridor “Europe-Caucasus-Asia” (TRACECA) for 2005-2010 Tbilisi, May 18-19 2004 Europe Aid Funded by the European Union Project implemented by Lamnidis & Associates

2. Factors influencing staged development of countries’ economies • Maintaining stable economic growth • Increasing investments into the economy • Suspending the outflow of capital • Building-up high-technology sphere • Harmonization of the transport legislation

3. IGC TRACECA main tasks • inclusion of a transit programme into the national priorities list; • Development of a common action plan for the development of the transport corridor TRACECA and its transport networks for more effectiveTrade and Transport facilitation; • reduction of the tax burden on the transport infrastructure development projects; • greater allocation of financial resources from international grants and loans for the development and reconstruction of transport and communication infrastructures; • adoption of reasonable measures for the protection of transport companies, ship owners, ports, railways and other transport infrastructure facilities involved in transit transportation process;

4. IGC TRACECA main tasks 6. development of institutional basis for investment activity; 7. implementation and development of modern and more flexible forms of investment attraction from international financial institutions and particularly from private investors; 8. establishmentanddevelopmentof the basis for cargo insurance and liability of carriers, operators, stevedore companies, etc. 9. creation and development of the TRACECA Single Transport System concepttoform conditions for free movement of goods, capitals and services; 10.extension of international cooperation in the field of transit transport ; 11. implementation of active and adequate PR activity in the area of trade and transport facilitation.

5. Project’s activity Project Recommendations: Creation of attractive investment environment • Facilitation of investment in the field of transport along the TRACECA routes Draft New Technical Annex to the Basic Agreement on TRACECA investment, Article 2 • Creation of attractive environment for IFI’s and private investors by implementation and improvement of modern and flexible form of investment: • Modern forms of concession of the transport infrastructure objects with active participation of private investors (BOT etc.); • Free economic areas or zones; • Transport logistic centers (hubs); • TRACECA Guarantee Trust Fund; • TRACECA Economic Interest Grouping; • TRACECA Industrial Advisory Forum/Panel; • Settlement of Disputes. Source: Draft MainstrategicdirectionsofIntergovernmentalCommissionofTRACECAinthedevelopmentoftransportnetworksof internationaltransportcorridor “Europe-Caucasus-Asia” (TRACECA) for 2005-2010 • Promotion of investment flows and insurance of non-commercial risks Convention Establishing the Multilateral Investment Guarantee Agency, 1985, Chapter 1, Article 2

6. Stages of development of regional investment policy Recognition of investment process as a major factor of economic development Assisting to the state economies in joining to worldwide economic system through production and investment coopertaion Increasing investment attractiveness Creation of mechanisms for regional investment cooperation Determination of countries’ risks as major factors affecting investment environment evaluation

7. Actions to be taken to improve attractiveness for investors • tax preferences (particularly, property tax) on transport facilities and systems of transport infrastructure; • increase of availability of credit resources for realization of investment infrastructural projects at the expense of partial subsidizing of bank interest rates from means of the state budget, and also the state guarantees under loans; • granting the state guarantees on capitals of domestic and foreign investors involved in financing the most significant investment projects; • creation of the normative legal base providing precise legislative distribution of rights, responsibilities and risks between the state and investors;

8. Actions to be taken to improve attractiveness for investors • definition of priority fields of application of the private-state partnership on transport; • stability of the legislation on finance, currency, tax, tariff and nontariff regulation of investments; • elaboration of procedures and the mechanisms protecting investors from wrongful actions of controls; • decreasing in costs of investors not concerning to direct expenses for realization of certain projects; • granting of guarantees of a reflexivity of the investment (credit) resources involved in realization of investment projects and programs.

10. Types of country risks political economic financial

11. POLITICAL • Probability of radical changes in structure of the government or in its policy; • Policy of expropriation; • Policy of nationalization; • The attitude of the public to foreign investments; • Applicable legislation regulating property rights; • State interference in operation of business; • Prevalence of the negative attitude to private property; • Mutual relations with the neighboring countries; • Protectionism in relation to the local companies; • Bureaucratism; • Freedom of mass-media.

12. ECONOMIC • Real rates of economic growth; • The balance of payments of the country; • Scales of economy / market capacity; • Presence and cost of a local labour; • Dependence on access to energy sources.

13. FIANACIAL • Convertibility of national currency; • Stability of national currency; • Restrictive measures related to movement of the goods and capitals; • Price control; • Rates of the taxation; • Rate of inflation; • Presence of external debts; • Local needs for foreign investments; • Opportunities of access on the market of the countries of European Economic Community.