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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)

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



Update No: 300 - (01/01/06)

Georgian-Russian tensions have reached a climax
There is no doubt that these are tense days in Georgia. The political aggravation in the country, the confrontation of the opposition and the government is entering an increasingly dangerous phase. 
It had a great revolution in 2004. But revolutions set off their repercussions: opposition rallies, scuffles in the parliament, pensions issue and the demand to bring the government to account. A rising People's Front seeking general elections for mayors and heads of administrations. The opponents of the government keeping on talking about social crisis, mass media restrictions, government PR campaigns. On top of this, calls for seceding from the CIS - a demand that makes the opposition look bigger in the eyes of the people.
The opposition parties are running nose-to-nose in their, sometimes biased, criticism of the government. But pressuring the government are forces not only at home but also abroad. The tensions with Russia have reached their climax. Russia puts up the gas price, stops issuing visas for Georgian citizens; the Russian foreign minister appears with a note of protest against Georgia's new national military concept with some Russian politicians urging their authorities to bombard Tbilisi. Russia's annoyance is quite understandable: for two years already the country has in vain - and luckily - been trying to inspire a new conflict in Samachablo. Also clear is the fact that Georgia has not yet escaped the danger of a new war. 
All the above realities are pressing hard on the government, and nobody knows if it will be able to overcome this pressure, first of all, not to be pressed by Russia into resuming war in Samachablo. The Russian pressures, the social hardships, the mistakes and glaringly undemocratic steps of the government are giving the opposition hope for an early political crisis and government change in Georgia. That is exactly why the opposition is as active now as ever before. There is also one factor shaping the present political situation in Georgia - Salome Zourabichvili and her movement.
Given Georgia's past experience, Zourabichvili does not trust the existing political spectrum including the opposition and is trying to forge an absolutely new political force that will gain the people over and will be free from any political obligations both inside and outside the country. Unlike many other oppositionists, Zourabichvili does have a chance to do this.

Deputy madhouse
The situation is getting increasingly tense in Georgia with every passing day: the opposition is threatening street actions, some government officials are raising fists at their opponents and there are forces foretelling new revolution, reports Rezonansi on December 5th. Political analyst Ramaz Sakvarelidze says that the tensions in Georgia are steadily growing with more and more citizens displeased and more and more rallying in the streets. 
But one should not expect a revolution at the moment. There is a feeling in society and, especially, among the politicians that any new revolution will have the same scenario and the same result. Especially as a new revolutionary change of government would be a heavy blow on Georgia's image abroad. Leader of the Freedom Institute Levan Ramishvili says there will be no revolution. Judging from the incidents in the parliament, Ramishvili infers that one should take urgent measures, including legislation or regulations changes, to provide against any possible recurrences in the future. Be it a mandate service or something else, but it should have the authority to take adequate measures against a deputy, official or ordinary citizen violating elementary norms of demeanour.
That is, it is necessary to create the same legislative terms that are applied to courts - when fines and administrative arrest are imposed on those showing disrespect for the court. Head of the Association of Young Lawyers, Anna Dolidze, says that the recnet incidents have shown that there is evident escalation of violence in the country. These facts are contrary to the supremacy of law and the state must not just accept somebody's apologies or resignation. If there is a pretension that there is a law in the country there should also be knowledge that there is punishment for any physical insult. When it comes to ordinary people the police are very effective in investigating their cases, but the supremacy of law means equality of all before the law, irrespective of their office, and so whoever offers a physical affront must be made responsible for an illegal action, says Dolidze.

Abashidze wanted
The Batumi municipal court granted the petition by the prosecutor generals office of Georgia to announce a hunt for the former leader of Ajaria Aslan Abashidze, reported Free Georgia on Dec 6th. Abashidze is facing the charges of abuse of office, misappropriation of 98 million lari and terrorism. Abashidze's lawyer Shalva Shavgoulidze says that his client has been given guarantees of immunity by Georgian President, Mikhail Saakashvili, after he was ousted by the people from the office and Ajaria on May 6, 2004.
There is no proof that Abashidze is hiding or pressuring witnesses, says Shavgoulidze, while the prosecution says that there are no legal documents on this, and so Abashidze can be wanted internationally. It took the investigator as many as 40 minutes to read out all the charges made against Abashidze. The lawyers are going to dispute the verdict at the Batumi Court of Appeal. In May 2004 Aslan Abashidze was forced to leave Georgia with his family and comrades. In July, the prosecutor general office of Georgia brought a criminal action against him. Some sources report Abashidze as owning a controlling interest at the Russian Krasny Oktyabr confectionery, to live in Moscow and to enjoy the protection of the local mayor Yuri Luzhkov.
Mikhail Saakashvili said that he supports the court verdict to hunt for Abashidze. "We have not promised anything to anybody." "We allowed Abashidze to freely leave Ajaria when his life was in serious danger," Saakashvili said noting that now some details of his activities have come to the surface, people have blown up on a mine laid when Abashidze was in office. "No state will forgive such actions to anybody," Saakashvili said. 

Economy
The prime minister and the government have submitted to the parliament the draft state budget 2006, reports Akhali Taoba on December 7th. The revenues and grants therein amount to 2,931,716,000 lari. Prime Minister, Zourab Nogaideli, briefed on the reforms and allocations in various spheres with the ministers dwelling on their respective domains. Nogaideli said that the government is doing its best for the economy and the population to have no problems in the winter. He confirmed the rise in the gas price but did not specify the amount. He said that Gazprom's raising the gas price for Georgia is a political step by Russia. 
The head of the motor road department, Roman Dalakishvili, presented the measures taken so far to restore the roads damaged by natural disaster. Some 12 million will be earmarked to this end. Education Minister, Alexander Lomaya, spoke about reforms and school computerization. He gave interesting figures - if earlier there were 200 children per 1 computer, this year the figure is 125/1 and next year will be 65/1. Lomaya believes that in 2007 there will be 20 children per 1 computer. 
Energy Minister, Nika Gilaouri, qualified as progress the no cut off situation this year. He spoke about supplying the population with electricity meters and noted that defaulters will get no electricity while conscientious payers will get it round-the-clock. Justice Minister, Kote Kemoulariya, was concerned for the broken down infrastructure of the penitentiary system, but was glad to report the opening of a new Euro-standard jail in Kutaisi. 
Deputy Defence Minister, Vasil Sikharoulidze, focused on the efficiency and fighting capacity of the army and spoke about joining NATO. He said that the budgetary financing will allow his ministry to fully equip and train two infantry brigades in 2006, which will enhance Georgia's defence capacity and will be a crucial advance in the country's Euro-Atlantic integration. 

IMF comments
The authors of the draft state budget 2006 promise no more than 5% average inflation rate next year, reports Khvalindeli Dge. Chairman of the parliamentary financial-budgetary committee, Irakly Kovzanadze, says that the national currency will get stronger. Meanwhile, people have long been complaining of inflation. This concern was recorded by IMF experts a few months ago. Is there a threat of commodity and service prices inflating to an alarming point? IMF Resident Representative in Georgia, Robert Christiansen, says that the 12-month inflation had grown to 7.9% by late Nov 2005 with the advisable rate being less than 6%. Despite being relatively high the rate is not alarming, says Christiansen. The Georgian government is reported to be looking forward to getting serious financial inflows from abroad in 2006. Will this influence the inflation? Christiansen says that Georgia is expecting big revenues: privatisation, Millennium Challenge program and private transfers will attract foreign currency into the country. This will impact both the currency market and the inflation rate. The government will face the need of inflation balancing. Christiansen says that the situation will be under control and the National Bank will carry out a rational monetary policy to curb inflation. Is MP Gigi Bokeriya right when saying that growing pensions will lead to the issue of additional lari and consequent inflation? Christiansen says that if the fiscal and financial policies are well coordinated the budgetary spending 2006 will not lead to lari devaluation. 

Corruption overview
The Transparency International - Georgia NGO has surveyed into what system is the most corrupt in the country, reports Free Georgia Dec 10th. The survey says that most corrupt is the judiciary - (51% of those questioned,) the customs office - 14%, political parties, taxation bodies, health care sector, parliament and licensing service. The public attitude to the police has considerably improved since the last year - down from the 1st to 9th rank on the list. Last year the NGO polled people as to their optimism and found out that Georgia was one of the most optimistic nations in the world. This year the optimism chart has dropped to 22%, with experts explaining that the past two years have marked the end of the revolutionary euphoria period.

Summit highlights investment climate
A two-day business and investment summit was organised in Georgia by the Brussels-based European Finance Convention foundation in partnership with local business organisations, Federation of Georgian Businessmen and the American Chamber of Commerce, The Messenger reported.
The summit focused on investment and trade opportunities in Georgia and on the financial services sectors. "We plan a complete privatisation of the energy sector. Electrokavshiri will also be privatised in the beginning of next year," Prime Minister, Zurab Noghaideli, said in his keynote opening speech. Electrokavshiri is the state-owned telephone operator. High ranking government officials at the summit announced that the Georgian government is expecting avenues for investment to open in 2006 as it intends to privatise state-owned telecom and energy facilities. Minister of economic development, Irakli Chogovadze, and Minister of Finance, Aleksi Aleksishvili, also addressed the gathering of over 250 representatives from the business and international community. Business representatives attended the summit from more than 15 countries. The investment forum had panel discussions on trade, export, regional and EU-cooperation, SMEs, financial service development; and privatisation and foreign investment.

Saakashvili to improve business climate
Recently Georgian president, Mikhail Saakashvili, met with representatives of the business community. During the meeting, Saakashvili undertook to improve the business environment in Georgia through adoption of a new legislative initiative which he intends to submit to the Parliament for consideration in one months time.
Saakashvili said that these new initiatives aim at "lessening interference and regulation by the state." He said, "Our long-term interest is to create conditions for the development of your business. This will in itself settle the problem of unemployment. The first proposal involves further simplification of the Tax Code of Georgia; the second one concerns simplification of export-import procedures - since these procedures are very complicated today; we also plan to liberalise and simplify the Labour Code." He added that another proposal concerns judiciary reform, envisaging simplification of judicial procedures on the one hand and simplification of the language of law on the other in order to avoid double interpretations.

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ECONOMIC NEWS

Polish banker eyes economic reforms in Georgia 


During his recent visit to Georgia, the head of the Polish National Bank, Leslek Balcerowicz, met with the government's economic team to inform them of Georgia's economic direction, New Europe reported.
He suggested that Georgia's tax burden should reduce as it is currently too high at 20 per cent maximum. In addition, Balcerowicz called for a decrease in taxation on the ground that tax revenues should not amount to more than 20 per cent of the entire gross domestic product.
"In Georgia fiscal reforms must still be approved. People should have more money in their pockets and they should pay fewer taxes," Balcerowicz was quoted as saying. It was recalled that Balcerowicz served as economic advisor to the Georgian government. According to Balcerowicz, the two main problems that Georgia is currently facing are smuggling and the bad quality of fiscal policy. He said that these problems were largely ignored; otherwise Georgia would have been a more stable country on an economic basis. Balcerowicz said he appreciated Georgia's reforms passed by the new government but added that some things are still left for Georgia to do in order to access European Union membership, and that the economic development must be taken into consideration. Commenting on the privatisation procedure, he said that it should be transparent and secondly should be carried under the supervision of private individuals instead of political parties, 24-Saati reported. An honest and effective court system and a transparent judiciary are necessary for Georgia, he said. According to Balcerowicz, Georgia is moving slower than the post-communist countries that are able to pass market reforms and achieve economic results. 

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PRIVATISATION

Big privatisations to begin next year in Georgia 

The government wants to elevate the position of Georgia as a trade centre in the Black and Caspian Sea regions by implementing changes in customs procedures and tariffs which are expected to start at the beginning of January, The Messenger recently reported.
In the initial stage, the customs tax rates will decrease, as it is currently higher than 30 per cent. This is the source of corruption, Minister of Finance, Irakli Chogovadze, recently announced at a government session. He explained that lower rates would attract potential investors especially from the import-export business.
Next year the government has also planned to privatise Elektrokavshiri landline telecommunications network and the UDC power company. Before these assets are put on sale, a special adviser for financial and judicial issues will be appointed to prepare the privatisation process. This move will attract some powerful investors.
A new, 300-ton, Ukrainian transformer is to be installed at the Enguri Hydroelectric station by the end of January 2006. The transformer is manufactured and will soon be transported to the Enguri complex. This project was developed with the financial assistance of the European Bank for Reconstruction and Development (EBRD).
Energy Minister, Nika Gilauri, suggested that the transformer could be shifted by sea via the port at Ochamchire.
The government also discussed the privatisation of the Batumi Circus and the adjacent territory belonging to the Circus. State Minister for the Coordination of Reforms Kakha Bendukidze said that the privatisation of these assets was already announced but had been delayed.
According to Bendukidze, the terms of the privatisation were not pleasing as they specified that the controlling organisation had to be registered in Batumi in order to carry out reconstruction work on Batumi Circus territory. He considered such a condition to be discriminatory against companies that are not based in Batumi and pointed out this issue to the Adjaran ministry of economy.

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