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georgia

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GEORGIA



REPUBLICAN REFERENCE

Area (sq.km)
69,700 

Population 
4,989,285 

Principal 
ethnic groups 
Georgians 68.8%
Armenians 9% 
Russians 7.4%

Capital 
Tbilisi 

Currency 
Lari

President
Eduard Shevardnadze

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Background:
Georgia was absorbed into the Russian Empire in the 19th century. Independent for three years (1918-1921) following the Russian revolution, it was forcibly incorporated into the USSR until the Soviet Union dissolved in 1991. Russian troops remain garrisoned at four military bases and as peacekeepers in the separatist regions of Abkhazia and South Ossetia (but are scheduled to withdraw from two of the bases by July 2001). Despite a badly degraded transportation network - brought on by ethnic conflict, criminal activities, and fuel shortages - the country continues to move toward a market economy and greater integration with Western institutions. 

Update No: 265 - (28/01/03)

The stalwart of Tbilisi
The Georgian president, Eduard Shevardnadze, is a survivor if ever there was one. He was Gorbachev's right-hand man as Soviet foreign Minister in the opening up to the West in the late 1980s. Realising that the game would shortly be up, he resigned in December 1990, warning of the coming coup, the risk of which Gorbachev seemed blithely to ignore.
He headed back to Georgia, his own country, but did not make an immediate bid for power. He let the demented career of Ziad Gamsurkurdia run its course. Then he came in as an obvious successor in December 1992 and has been there ever since, winning presidential elections by embarrassingly high margins, as he says himself.

Opening to the Western world
What the Georgians realise is that Shevardnadze is more than a regional politician. He is an international figure, someone to whom the West can relate. He immediately demands attention.
The Georgian defence budget will be expanded by more than 60 per cent in 2003, President Shevardnadze said in a national radio interview. He announced that the financing of the Defence Ministry would be increased from 58 million laris to 93 million laris, mainly due to Georgia's recent application for admission to NATO. "It would be inappropriate to speak about entry into NATO, if Georgia's defence capacities fail to meet NATO standards," Shevardnadze stressed.
NATO entry is no longer a pipedream in the post-9:11 world. Georgia has been a great beneficiary of the anti-terrorist struggle, receiving US military personnel and material to help train its forces in operations against terrorists in the Pankisi Gorge on the border with Chechnya.
The post-9:11 situation is also making it just possible that a pipeline will link Baku-Tbilisi-Ceyhan giving Georgia and Turkmenistan abundant transit fees. But the finance still looks dodgy. As with so much else it all depends on what occurs in the Gulf.

Political re-alignment to secure the budget
The Georgian political scene has been changed by a recent development. Eight Georgian parliamentary factions and 17 independent deputies have already aligned to form a new pro-government parliamentary majority with the primary objective of ensuring the final voting of the 2003 draft budget, which failed at its first reading.
According to CBN reported, the factions that came together are the Citizens Union of Georgia (CUG), the Alliance for a New Georgia, Tanadgoma, the Socialists, Abkhazeti, the New Abkhazia-Christian Democrats, the Majoritarians (who are in favour of a first-past-the-post parliamentary elections system) and the Industrialists. Together they can count on a majority in Georgia's 235 seat parliament. This should ensure the ratification of the budget, which has become a bone of contention between the government and the opposition.
The budget was blown off course by a vote in parliament in which two votes alone decided it. This has triggered the new political alignment.
The newly-formed pro-governmental parliamentary majority seem sure to secure its passage. But it will now have to defend the budget against a proposal by United Democrats leader, Zurab Shvania to raise the minimum monthly salary from 25 to 115 laris.
According to Economy, Industry and Trade Minister, Giorgi Gachechiladze Zhvania's proposal is unrealistic. But it was also described as a "dishonest" proposal by Zhvania's political ally and leader of the National Movement Mikhail Saakashvili. Thereafter, Zhvania modified his demand to raise the minimum wage to a "sensible" level. Arguing against this increased social spending is likely to put Shevardnadze's allies in an awkward position.

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ENERGY

Georgia starts implementing Baku-Ceyhan pipeline project


Georgia is starting the practical implementation of a project to build the Baku-Tbilisis-Ceyhan oil export pipeline, Georgian President, Eduard Shevardnadze, said on his traditional address on national radio on January 15th, New Europe reported. 
He said that on January 14th the first ship with pipes and technical equipment for the construction of the pipeline was due to arrive at the port of Poti and a few days later similar freight would be delivered to Batumi. At the same time Shevardnadze noted that construction of auxiliary installations is already reaching completion along the route of the future pipeline. Locals are currently being hired both to build the pipeline and to guard it, he said. Shevardnadze said that all ministries and departments in the country should help to ensure that Georgia properly meets its obligations to investors and countries participating in the pipeline project. "The special government commission to assist the development of projects for the East-West energy corridor, which I run, will operate until these projects are completed," the Georgian president said. 
It is planned to begin work on the Baku-Tbilisi-Ceyhan pipeline, stretching a total of 1,752 kilometres, in spring 2003 and to complete the project by the start of 2005. The total cost of the pipeline will be US$2.9bn, of which it is planned to assign US$2.6bn for construction work.

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FOREIGN INVESTMENT

Georgian president calls for tax breaks for foreign investors

Georgian President Eduard Shevardnadze has proposed the introduction of tax benefits for companies building energy facilities. Shevardnadze said at a government meeting that otherwise investors who wished to build hydroelectric power stations were unlikely to invest in the country, Kavkasia-Press News Agency has reported. 
Shevardnadze cited the example of Chinese investors who were building Khadori hydroelectric power station in the Pankisi Gorge and who had expressed the desire to construct a similar, 20-30 MW facility in Qvareli.
The president said that the Chinese had paid taxes regularly while they were building the Khadori power station but they no longer wished to do so in the case of Qvareli. 
"We should encourage investors to build power stations, but we do the contrary - as soon as they show up we force them to pay taxes," Shevardnadze said.
Shevardnadze considers energy an area of highest concern. He once again raised the question of cancelling VAT on fuel and pointed out that the issue should be resolved once and for all.

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FOREIGN LOANS

Tbilisi secures US$35m in World Bank funding

The World Bank has given Georgia two long-term credits worth a total of US$35m. According to Interfax News Agency. The first credit, US$15.6m, is to finance a project to develop the republic's forestry complex, and the second, US$19.4m will finance municipal development and decentralisation project. These projects were confirmed by the World Bank's Board of Directors last August. 
The credits were granted to Georgia for 40 years with a 10-year grace period at 0.75% per annum. A source in the Georgian Finance Ministry said that these credits would start to be paid out after the republic's parliament ratifies the credit agreements

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