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GEORGIA



 

In-depth Business Intelligence

Key Economic Data
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 3,937 3,324 3,100 126
         
GNI per capita
 US $ 830 650 590 145
Ranking is given out of 208 nations - (data from the World Bank)

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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



Update No: 292 - (26/04/05)

A growing geopolitical profile
The Kyrgyz revolution is having repercussions right across the FSU, just as the Georgian one did and then that in the Ukrainian. These events are logical consequences of those of 1989-91. All three countries are now on the map in a way they were not beforehand.
The first in this second wave of revolutions was the Rose Revolution in Georgia in October 2003; the second was the Orange Revolution in Ukraine; the third was the Tulip Revolution in Kyrgyzstan. Saakashvili can speak as the senior exponent of this revolutionary botany.
"We have overcome our enemies in Georgia, Ukraine, and Kyrgyzstan, and have one more country on our list," President Mikhail Saakashvili said at a meeting on April 15th with Georgian General Prosecutor's Office workers. He did not specify the country, suggesting it would become known during the GUUAM (an organization formed by Georgia, Ukraine, Uzbekistan, Azerbaijan, and Moldova) summit, which was to be held in Chisinau on April 22nd. The answer almost certainly is Belarus.
At the same time the Georgian President named among the first priorities of Georgia the need to "snatch Abkhazia from the empire's claws." He again did not specify the empire, but mentioned that that empire "had nothing else left to do." Again the answer is obvious - Russia. 
The opposition politicians state that Saakashvili's announcement was made in view of the visit of U.S. President George Bush to Georgia, scheduled for May.

Internal affairs
On the same day, April 15th, the media spread the announcement by Chairman of the Defence and Security Committee Givi Targamadze that Tbilisi allegedly intended to solve the problems of Abkhazia and South Ossetia by force. 
But Targamadze called "wicked calumny" the Russian media's statements which attributed to him the threat to solve the problems of Abkhazia and South Ossetia in the nearest future by force. "It's true that we are forming a modern and powerful army. In order to reach peace, one must have a powerful army," he emphasized in his interview to Georgian journalists. "However, Georgia will not be the first one to start any military action in Abkhazia or in South Ossetia. We are exclusively for peaceful settlement of these problems." According to Targamadze, his words were taken out of context, and were intentionally misrepresented for propaganda purposes.
Nevertheless, independent observers cannot guess why such sharp announcements have been voiced just now. Not so long ago, Saakashvili had been saying time and again that he had no intention to export the revolution. However, lately, he has been often saying that Georgia's problems, including the restoration of its territory, "depended on being freed from Russia and the destruction of imperial structures on post-Soviet territory." 
Some observers supposed that these statements were made with hopes of gaining the support of other participants of the GUUAM summit, mainly Ukraine, but hardly Uzbekistan or Azerbaijan. Indeed, GUUAM seems not to be the obvious vehicle for democratic change with those two countries in membership, but a Georgia -Ukraine cooperation makes a lot of sense. According to Georgian media Saakashvili and Viktor Yushchenko have talked on the phone several times. Besides that, Yushchenko plans to visit Georgia in the nearest future, and in link with that, the media has been giving special attention to the subject that one of the main direction of GUUAM activities will be the support of democratic tendencies on the post-Soviet territory. 

Georgia is a friendly country for Russia - says Saakashvili 
Nevertheless, Saakashvili does not want to alienate the Russians, key to any peaceful solutions to Georgia's internal problems. "Russian citizens must know that Georgia is a friendly country. They will find it hospitable and warm, not only in the sense of weather, but also in the sense of attitude to Russians," he said in a recent speech. 
"Large Russian banks have started working here, and several Russian companies are taking part in the privatisation of government-owned facilities in Georgia. We will welcome the enlargement of Russian business projects in Georgia," he said.

New post-Zhvania government.
A fortnight after the death of Prime Minister Zurab Zhvania on February 3rd, Georgia's parliament voted in a new cabinet that pledges to make economic recovery its top priority. The new prime minister, Zurab Noghaideli, indicated that the government's immediate challenge would be reducing unemployment. 
The huge majority, 175-24, in the vote on February 17th in favour of Noghaideli came as no surprise. President Saakashvili's ruling National Movement-Democrats Party dominates the Georgian legislature and the confidence vote had been largely viewed as a mere formality, following Saakashvili's nomination of a new cabinet following Prime Minister Zhvania's death.
Saakashvili dominates Georgian politics in a more comprehensive fashion than his predecessor, Eduard Shevardnadze, who was ousted in the Rose Revolution of October 2003. He has a mandate for radical change in the impoverished Caucasus country. He is a highly educated man, who knows five languages, and has a cosmopolitan outlook. Moreover, he has left Shevardnadze the presidential palace, while he occupies a modest flat in central Tbilisi. The drive against corruption and ostentatious consumption is a cornerstone of the new order and the new president exemplifies it in his own person.
Nonetheless, there is an opposition all right, as always. Opposition deputies used the vote on February 17th to criticize the government sharply. The lack of tax exemptions for small and medium-sized businesses and an unwieldy state bureaucracy were among the points raised by the Conservative and Republican Parties, while New Rights-Industrialists leader David Gamkrelidze attacked Defence Minister Irakli Okruashvili for dismissing the armed forces' entire general staff on February 15th, a move that has gone largely without official explanation. All three parties voted against the Noghaideli cabinet. 
The new government remains largely unchanged from the last cabinet reshuffle in December 2004. Valeri Chechelashvili, Georgia's ambassador to Russia, will replace Noghaideli as finance minister, while former Supreme Court Chairman Kote Kemularia will head the justice ministry. Former Justice Minister Giorgi Papuashvili will instead head the Environment Ministry. All other posts will remain intact. 

Economic revival the top priority
Analysts interpreted the 41-year-old former finance minister's appointment as prime minister a sign of the central role Saakashvili needs economic revitalization to play for the success of his reforms. On February 15th, Noghaideli confirmed those forecasts, telling reporters that the government's "key priority" during the next three months will be cutting unemployment and developing "entrepreneurship," the Inter-Press news agency reported. On February 17th, the prime minister went on to list improvements in Georgia's lacklustre investment environment, revitalization of agriculture and the country's energy network as well as the completion of ongoing educational and military reforms as also on the post-Zhvania task list, the television station Rustavi-2 reported. 
Since Zhvania's death, government officials and Noghaideli himself have emphasized continuity in economic policies, but details on how the government plans to tackle unemployment remain elusive. The quarterly Georgian Economic Trends cites national rates for 2004 at between 10.7 and 13.1 per cent, depending on methodologies. One highly placed government official said that it is, in fact, not "realistic" to expect Georgia's unemployment rate to drop significantly in "only one year." 
What is known is that the state budget is growing, fuelled in large part by privatisation. The government has announced that it plans to revise its 2005 budget revenue figures upward by as much as 500m lari or roughly $275m. Right now, planned expenses currently outstrip revenues by some $200m to stand at 2.2bn lari, or $1.2bn. Budget amendments with revised figures are expected to be submitted to parliament the week of February 21.

Privatisation the key
Pinpointing the role to be played by Noghaideli in setting the future course for privatisation, however, has proven difficult to define. Previously, the late Prime Minister Zhvania appeared played a central role, announcing sales and pending deals. The prime minister's involvement, though considered unusual by some analysts, was explained by the economy ministry as critical for the resolution of "strategic" sales such as that of the Georgian Ocean Shipping Company, which sold in late January for a record $161m. 
Since Zhvania's death, State Minister for Economic Reform Kakha Bendukidze, a former economy minister, has been the official most frequently seen on television addressing privatisation questions, even though technically the portfolio falls to Economy Minister Alexo Alexishvili. 
The minister's visibility, however, has prompted some opposition members to charge that Bendukidze, who earned millions as head of the Russian firm United Heavy Machineries, sees the sale of state properties as a prime business opportunity for former Russian business colleagues. 
"Mr. Bendukidze has equated the [government's] entire economic policy with property sales instead of really developing a free market and free business," charged New Rights Party leader David Gamkrelidze in parliament on February 10th. "He equated it with transferring this property to his friends and acquaintances in a hasty, illegal and non-transparent way." 
Driving the speculation is the January 19 sale of the Chiatura manganese mining complex and Vartsikhe hydropower plant to the Russian firm EvrAzHolding and the Georgian-Austrian concern DMC Ferro for $132m. EvrAz Holding won the bid despite remarks by Economy Minister Alexishvili that the Ukrainian Interpipe Corp. had submitted the "better" bid. To explain the decision, officials, including Bendukidze, charged that Interpipe had allegedly urged the government to let it also take control of Zestaponi Fero-Alloy Plant, a property owned by DCM-Ferro. In response to Bendukidze's accusation of "banditry," Interpipe has charged that Georgia's privatisation campaign is "a vague process with no rules." 
Controversy has dogged the privatisation process since its kick-off in the summer of 2004 when then Economy Minister Bendukidze's declaration that the government would sell everything "but our conscience." 
The latest flare-up occurred on January 31st, just days before Zhvania's death, when the late prime minister announced that he had made a mistake in naming ASP Shipping Company as the purchaser of the Georgian Ocean Shipping Company. Instead, the sale went to Armstrong Holdings Corporation, with ASP Shipping Company, a British-Australian firm, holding responsibility for management of the company's ships. 
For the detail-oriented Zhvania, the slip-up was unusual, but officials have been quick to stress that this was a minor mistake that does not jeopardize privatisation's future in any way. 
"We have overcome all difficulties," Deputy Economy Minister Natia Turnava said in a February 17th interview. Amendments to improve the efficiency of the evaluation and sales process for listed state properties are expected to go before parliament. Turnava did not provide details on these amendments, but noted that a law that stipulates a 50 per cent discount in asking prices for firms not purchased following the announcement of a sale as a major obstacle to the efficiency of the government's privatisation campaign. Turnava commented that the law "needs to be more flexible," to allow a greater range of possible discounts. 
Privatisation-related sales are expected to bring in as much as $250-$300m in 2005 to state coffers, according to the most recent official statements. The amount would total as much as 8 per cent of Georgia's Gross Domestic Product for the first nine months of 2004. 

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BANKING

Bank of Georgia launches Microloan Plus


Bank of Georgia recently announced a new project called Microloan Plus, which has been designed for the owners of small businesses. This project would enhance the development of small enterprises in Georgia and would extend to all Georgian regions, New Europe reported.
Microloan Plus will offer loans and other bank products like debit and credit cards and insurance. The interest rate of the micro loan starts from 16% and the maximum size of the loan is US$50,000 while the maximum term for the loan is five years. The bank administration recently said that on receiving a loan, a person would also get VISA Electron and Maestro debit cards. They would also get life and work capacity insurance. Bank of Georgia had also announced the launch of enhanced current accounts for individuals and corporate clients and adopted a new nine-digit account numbering system.

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FOREIGN ECONOMIC RELATIONS

Yerevan and Tbilisi target improved trade relations

Georgian Prime Minister, Zurab Noghaideli, met Armenian President, Robert Kocharian, on a recent visit to Yerevan. During the meeting, both leaders talked about cooperation in the energy sector and development of trade and economic relations between the two countries. Kocharian said that the Armenian-Georgian intergovernmental commission on economic relations would continue its activities headed by the prime ministers of both countries, The Messenger reported. 
Noghaideli also spoke about the completion of the construction of the road between Sadakhlo on the Georgia-Armenia border and Marneuli. Both sides also discussed the construction of a new border checkpoint in Sadakhlo. Noghaideli said, "For the first time we did not discuss past problems but issues of future cooperation between Georgia and Armenia."

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FOREIGN LOANS

EBRD provides aid for Georgia's wine sector

The European Bank for Reconstruction and Development (EBRD) is lending 7.3m Euro for seven years to Georgian Wines and Spirits Ltd, a leading wine producer in Georgia and a subsidiary of Pernod Ricard Europe SA, the world's third largest producer and distributor of alcoholic beverages, New Europe reported recently.
This is the second transaction with Georgian wines (GWS), following a five million Euro loan in 1999. This loan will enable GWS to improve its marketing, packaging and wine quality, as well as to restructure its distribution and management systems. Hans Christian Jacobsen, director for Agribusiness at the EBRD, said that this project will help GWS become more competitive and indicated the Bank's support of the Georgian wine sector with three investments currently in that industry. The EBRD is the largest investor in the agribusiness sector in a region that spans 27 countries, with over 220 investments for a total commitment value of 3.25bn liras. GWS was established in 1993.

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TRANSPORT

Georgia launches new ferry service

The Georgian-Russian ferry line between the ports of Poti and Kavkaz was inaugurated on March 23rd. This ferry crossing which the Minister of Economic Development, Alexei Alexeishivli, and the Russian Minister of Transportation, Igor Levitin, agreed in January is scheduled to operate every three days. The ferry represents a new wave of cooperation between Georgia and Russia's transportation systems and is the forth ferry route that is operating out of Georgia. Meanwhile, railway officials said the line was unable to make up for the loss of the Abkhaz section of the railway line in terms of shipping goods in and out of Georgia. Abkhaz de facto President Sergei Baghapsh said that Georgia-Abkhaz talks should begin with the operation of the railway, the Messenger reported.
An agreement regarding the operation of the railway via Abkhazia was signed during a Shevardnadze-Putin meeting held in Sochi in 2002. Currently, the Georgian government has made its stand clear by announcing that the opening of the railway is related to the secure and protected return of Georgian refugees to Abkhazia. Tbilisi also called for restoration of jobs for ex-railway workers. So, agreements have been reached over the restoration of the railway and Russian officials have also helped to open a line connecting Abkhazia with Russia but Tbilisi is not pleased in its efforts to return IDPs to the region. Armenia has also expressed an interest in the reopening of the railway via Abkhazia. The country believes that this railway would act as an outlet to the Russian and European economies. Over recent months, Armenia has met Georgian counterparts and the issue of restoration of the railway was often discussed. Armenia argued that blockades with Azerbaijan and Turkey have reduced its ability to trade beyond Georgia and Iran. However, Georgia is pondering whether the restoration of the railway would settle conflict with Abkhazia. 

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