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Books on Georgia
REPUBLICAN REFERENCE
Area (sq.km)
69,700
Population
4,693,892
Principal
ethnic groups
Georgians 68.8%
Armenians 9%
Russians 7.4%
Capital
Tbilisi
Currency
Lari
President
Mikhail Saakashvili
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Update No: 290 - (25/02/05)
A human catastrophe
Georgian President Mikhail Saakashvili has said he would temporarily fulfil the
executive duties of prime minister following the apparently accidental death of
Zurab Zhvania. Zhvania, prime minister, who has died in what is believed to have
been an accidental poisoning from a natural gas leak.
The prime minister of the former Soviet republic died at the Tbilisi house of a
political friend, who also died, Deputy Prime Minister, Georgy Baramidze, told
CNN. An investigation has been launched which may settle the mass of speculative
rumours about this.
Zhvania had gone to the home of Raul Usupov, deputy governor of Georgia's
Kvemo-Kartli region, to play cards and relax recently and was found dead the
next morning, Baramidze said. Bodyguards broke into the house after they
couldn't get in touch with the prime minister for several hours, he said. They
found both men dead inside the house.
New PM critical to the reform process
Georgia lacks a natural successor to Zhvania, who possessed the most political
and administrative experience of any member of Saakashvili's reformist
administration. Devi Khechinashvili, president of the Partnership for Social
Initiatives, a public policy think tank, contended that one government leader
who could at least replicate Zhvania's independence is Kakha Bendukidze, who
oversees economic reforms. An influential businessman, Bendukidze returned last
year to his native Georgia after nearly a decade in Russia.
During his tenure in 2004 as economics minister, Bendukidze's proved an
effective policy planner, but his advocacy of an aggressive privatisation
campaign generated considerable controversy. "He has no network here, he is
a guy by himself, he has power by himself, and he can push things through, but
he will have no political ambitions," said Khechinashvili.
Georgian newspaper reports have also focused on Defence Minister Okruashvili as
a leading candidate to replace Zhvania. Though Khechinashvili agreed that
Okruashvili's close ties to the president could enhance his chances, he
expressed doubt that the 31-year-old defence minister, often portrayed as the
most radical member of the Saakashvili administration, would accept the post of
prime minister if nominated. "His [current] position is very powerful, and
he is concentrated on a main priority of this government [modernization of the
military according to North Atlantic Treaty Organization norms]. So what is the
rationale [for him] to deal with social or economic issues right now?"
Khechinashvili said. "It is much easier to upgrade the military than it is
the social sphere or economy."
Ultimately, how the government navigates the transfer of power to a new prime
minister will prove critical to the reform process, both analysts said. The most
immediate impact of Zhvania's death will be on the speed of reforms, Ramishvili
said. "We have to revise the division of powers between the president and
the prime minister. The president will have to take on more strategic and
tactical responsibilities to make sure that the government continues on with
reforms," Ramishvili said. With Zhvania gone, the powers of the ruling
party could become more concentrated, added Khechinashvili, but how that will
affect the quality of reforms is unknown.
With the country still in shock over Zhvania's passing, government leaders
remain intent on projecting an image of stability. Foreign Minister Salome
Zourabichvili announced that she, along with Saakashvili, who has assumed much
of Zhvania's responsibilities on an interim basis, would fulfil all of Zhvania's
scheduled appointments in the coming days. Top government ministers, meanwhile,
stressed in televised statements that key political and economic policies would
not change.
Saakashvili attends the Davos Forum
Mikheil Saakashvili, the president of Georgia, travelled in late January to
Switzerland to attend the Davos Forum, the international economic forum aimed
partly at coordinating efforts to reduce poverty in the world. Last year he had
visited the forum as the triumphant leader of the Rose Revolution. This year he
arrived on the back of the Orange Revolution in Ukraine, for which the Rose
Revolution provided the model, and of his and Ukrainian president Victor
Yushchenko's joint nomination for the Nobel peace prize.
The Davos Forum has created a US$25bn world budget to eradicate poverty, and
Saakashvili was obviously hopeful that Georgia might be a recipient of part of
these funds, although it was never likely to gain much, given that the project
is aimed primarily at African and Asian nations.
Nevertheless, given the attendance of the leaders of the richest countries of
the world, and the possibility afforded developing nations in both formal and
informal meetings to attract investment, it is no wonder that the president was
accompanied by Minister of Economic Development, Aleksi Aleksishvili, and State
Minister for Economic Issues, Kakha Bendukidze. Their attendance was not without
success, and the Swiss government has already promised 750 million Swiss francs
for Georgia to finance social programmes and support the development of tourism
infrastructure in the country.
Also of interest was the meeting of the Georgian president with Turkish Premier
Recep Tayyip Erdogan, a meeting which led to the further relaxing of the visa
and transportation regime between the two neighbouring countries. Additional
flights between the two countries with very cheap tariffs were agreed on and
this of course will contribute considerably in further economic integration
between the two neighbours. "As Turkey is a very good neighbour to us, we
want it to make more investments in Georgia and to be a preferential country in
investments in Georgia," Saakashvili said, according to Turkishpress.
NATO to open office in Georgia
It is Saakashvili's dearest wish to see Georgia integrated in the West. In
this he has the fervent support of the vast bulk of the Georgian people.
The glamour of the Rose Revolution has made it impossible for the West to ignore
these aspirations. Membership in the EU is some way off, given the enormous
complexity of the issues involved in meshing an impoverished, ex-Soviet country
and economy with such a sophisticated affair. But one day it will probably
happen.
Meanwhile, the West is offering closer cooperation with NATO, even though full
membership is not on the cards, given Russian sensitivity on the matter.
A group of NATO experts arrived in Tbilisi recently to prepare the official
opening of an office of the NATO Special Representative for the South Caucasus
and Central Asia, Nikolai Laliashvili, chief of the defence policy and European
integration Defence Ministry, said.
"It will be in Tbilisi, but will deal with Azerbaijan and Armenia, rather
than Georgia only," he said. Laliashvili underlined that the NATO special
representative's appointment is an extremely important event for his country in
terms of stepping up the interaction with the Alliance, especially in light of
the organisation's approving of the programme of cooperation with Georgia in
2004.
The decision to send liaison officers and a special representative of NATO to
Transcaucasia and Central Asia was made at the NATO 2004 summit in Istanbul.
Georgia voiced its intent to join NATO during the Prague summit in 2003.
No one pressing Russia out of Georgia
Aware of the extreme touchiness of Moscow about Tbilisi's overtures to the
West, Saakashvili has gone out of his way to describe as erroneous the opinion
that Russia is being pressed out of Georgia. "It's a great delusion that
someone is trying to press Russia out of the region, or that the Georgian side
is creating problems for Russia. The last thing Georgia wants is to be a source
of problems for Russia," Saakashvili told Interfax, stressing that there
were no anti- Russian moods in Georgia.
He said Georgia is counting on a thaw in relations with Russia, especially after
Russian Foreign Minister Sergei Lavrov's visit to Tbilisi, set for February. He
said some of the disputable issues in Russian-Georgian relations are being
touched upon in the bilateral framework agreement.
Nevertheless, this is for public consumption only. The Georgians want nothing
more ardently than to have the Russians right out of their hair. Unfortunately
this is never likely to happen. The two northern provinces of Abkhazia and South
Ossetia seem to be gone for good, to become 'de facto' appendages of Russia, in
all probability. The best thing for them to do is to make the best of what they
have left - a marvellous country as it so happens, one of the most attractive
places in the former Soviet Union.
Economy first - stupid
Saakashvili is entirely at one with the well-known precept of Clinton, that
won him two elections to the US presidency, "the economy first -
stupid." He is putting in place measures to revitalise the moribund
Georgian economy.
A financial amnesty law and new tax code became operative on January 5th. They
offer new rules for Georgian business and promise new jobs and economic growth
for the entire population.
However, it remains to be seen how they would create an impact on the country's
economic development in 2005. According to economists, there will be a lot of
confusion in the new legislation. Critics argue that both documents have been
rapidly adopted and brought into force. Last December the new tax code was
adopted by the parliament at an extraordinary session and came into effect
earlier in January, except for one paragraph which sees the decrease of
value-added tax (VAT) from 20 to 18 per cent, which would be effective in six
months time. Several economists argue that it would have been better if the
period between adoption and implementation had been longer, so as to allow
businessmen, experts and taxation officers time to study its implications more
thoroughly before it came into effect.
Ample time is required to study the document, which is 180 pages long, for
instruction and comments regarding particular paragraphs and items of the tax
code to be elaborated. Executive Director of the Federation of Georgian
Businessmen, Giorgi Isakadze, said that this lack of time to create special
instructions would necessitate a number of amendments to be introduced to the
tax code. Businessmen, meanwhile, have assessed the new tax code and said that
they are not pleased about the delay in introducing the two per cent decrease in
VAT.
However, given that about 50 per cent of the current budgetary revenues come
from VAT, the government's move is understandable. The tax increases are
justified by the government as necessary to try to reduce high levels of smoking
and drinking in the country, but smokers and drinkers are naturally unhappy
about the increases, meaning that initial reactions to the code among ordinary
citizens have been fairly negative.
Georgian economists as is standard with economists, remain divided over the
effects the tax code and financial amnesty law will have, some arguing that
their impact will be little, due to faults in both laws resulting from their
hasty adoption, others arguing that the bills have much to commend them and
would certainly have a positive effect on the economy. The other economic issue
of note for 2005 relates to whether the government will be able to further
increase budgetary revenues in 2005 following last year's increased revenues.
This depends on several factors, including the sources of increased budgetary
revenue. If the increase was the result of economic growth, and statistics
suggest that the country experienced strong growth in 2004, then further
increases can be expected this year.
However, several economists think that financial progress was achieved as a
result of better administration of tax revenues rather than economic growth.
They note too that money expropriated from former officials was an important
source for the budget, particularly now the new financial amnesty law has been
brought into force.
The amnesty law and tax code is very hopeful. It was felt in 2004 by many
commentators that the Saakashvili administration was unlikely to turn the
economy around in its first twelve months, and that 2005 would be the turning
point for the economy, assuming the efficacy of its policies. The Georgian
people will certainly hope that this is the case, and that the new legislation
results in the increased investment leading to economic growth that the
government promises.
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ENERGY
Tbilisi to import 1.3x more electricity from UES
Georgia recently reached an agreement with the Unified Energy System (UES) of
Russia energy utility on larger electricity exports to Georgia, sources in a
Georgian delegation, led by Energy Minister, Nika Gilauri, said, Interfax News
Agency reported.
The UES press service confirmed the report, noting that electricity exports will
be increased to 350 megawatts from the almost 270 megawatts Georgia imports now.
Also, UES and the Georgian Energy Ministry discussed the operation of Georgian
enterprises controlled by the Russian energy holding, including the Telasi
energy company in Tbilisi. Gilauri told the press that electricity imports much
be increased, given plans to shut down the Inguri hydro-power plant for
scheduled repair on March 15th. The repair work is expected to last until
mid-June.
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SHIPPING
Armstrong Holding purchases Georgian Ocean Shipping Co
Armstrong Holding purchased the Georgian Ocean Shipping Company
for US$161m, The Messenger quoted the late Georgian Prime Minister, Zurab
Zhvania, as telling a news conference organised by the Tbilisi-based Imedi radio
station on January 31st.
This statement is a reversal of the Georgian government's earlier announcement
that a British-Austrian consortium led bought ASP Ship Management Company
privatised Ocean Shipping Company. "It was my mistake, when I announced the
British-Austrian consortium as the winner of the privatisation of the Shipping
Company. These companies have not set up a consortium. The new owner of the
Georgian Ocean Shipping Company has become Armstrong Holdings Corporation, which
was founded in 2004; while ASP Ship Management will simply conduct the
management of purchased ships," Zhvania said.
Detailed information about the newly established Armstrong Holding company is
unavailable. "It is a widespread practise, when there is a company, which
owns ships and other company conducts the management," he added. He also
said that ASP Ship Management was among those companies, which made
privatisation bids. "However, after the price went up the company gave up
loans to participate in the privatisation," Zhvania said.
Initially, the Georgian government reported that seven companies were bidding
for the Shipping Company excluding Armstrong Holding. Zhvania explained that
Armstrong Holding made its bid on January 10th, just one day before the deadline
for making bids expired. Under the contract, Armstrong Holding will have to pay
US$161m, out of which US$89m will go to the state budget and US$72m to cover the
debts of the Georgian Ocean Shipping Company.
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TRANSPORT
South Caucasus countries discuss regional railway
Visiting Russian Transport Minister Igor Levitin was expected to discuss the
issue of restoring the Georgian-Russian railway link via Abkhazia with the
Georgian leadership. Armenian and Azerbaijani governmental delegations were also
expected to join the talks in Tbilisi on January 10th, The Moscow Times
reported.
Levitin, who visited Georgia and Armenia last November, proposed that the
countries of the South Caucasus set up a joint
Russian-Georgian-Armenian-Azerbaijani company that would restore traffic on the
TransCaucasus Railway, which ceased functioning after conflicts in Abkhazia and
Nagorno-Karabakh in the early 90s. The railway, which stretched more than
2,300km during Soviet times, connected Black Sea ports with central Russia,
operated passenger services and handled more than 15m tonnes of transit cargo
per year.
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