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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: 306 - (29/06/06)
Georgia is under immense pressure from Russia. This is taking
several forms, banning its wines for specious technical reasons recently. It is
all about the deep resentment that the Kremlin harbours towards the Georgians
for breaking away from them in the Rose Revolution two and a half years ago.
Russian resentments
It might seem odd that the Kremlinites take it so badly. But one must remember
that Georgia was a very special appendage of Russia for them, the best place by
far in the USSR to live, magnificent scenery and beaches, great food and wines,
a comparatively good climate, certainly better than Russia's.
Withal the ideal location for one's holiday dacha.
It was also the home republic of Stalin, the greatest Soviet leader of all,
excepting possibly Lenin.
Actually the Russians still de facto have a considerable stake in Abkhazia,
which is a breakaway constituent of Georgia's that has a splendid Black Sea
coastline. But two years ago they lost any sort of surrogate control in Batumi,
capital of the other resort district, Adjaria, that also sought to be
independent of the Georgian state.
Turning the tables on Moscow
Aslan. Abashidze, the local boss, a Soviet apparatchik, seized control as the
Soviet Union crumbled in the early 1990's, and then shut Batumi off from the
world while conducting what Interpol said was a lucrative underground trade in
guns and alcohol.
He was ousted on May 5, 2004, by Mikheil Saakashvili, the Georgian president who
assumed power in 2003, vowing to assert control over the country's three
separatist regions - two in former beach resort areas.
The refugees in Batumi come from the still-unresolved conflict in Abkhazia - and
therein lies the secret of the money now pouring into Batumi to have a crash
programme of tourism.
Georgian officials hope to use Batumi to demonstrate to the other breakaway
regions the potential rewards that follow when a separatist region becomes part
of a recognized state. The city, they say, is becoming a showcase of how quickly
one of the so-called "frozen conflicts" of the former Soviet Union -
Nagorno-Karabakh, which has been fought over by Armenia and Azerbaijan; Abkhazia
and South Ossetia in Georgia; and Transnistria in Moldova - can thaw out.
"We should communicate to them that they have a future," Mr.
Saakashvili said of residents of nearby Abkhazia, in an interview in May.
"It will take two or three years, but they will notice. When we have yachts
in the harbour, they will see."
Like Beirut on the Mediterranean Sea, a cosmopolitan seafront town that dropped
off the map because of war, Batumi on the Black Sea is slowly shaking off its
stupor.
The transformation is moving rapidly.
Two years after Mr. Abashidze, the separatist leader, fled to Moscow, Novotel,
the French hotel chain, has signed a contract to open a hotel. A golf course is
planned in place of a former Russian tank base, which sat on an open bluff over
the sea that suggests the rolling green fairways of the Pebble Beach golf course
in California. An amusement park is going up this summer.
Batumi officials expect 300,000 tourists this season, up from almost none
through the 1990's. In the past two years workers have paved about 79 miles of
streets and roads, compared to 10 in the previous 13 years.
In the largest investment to date, the TuranAlem bank of Kazakstan bought 21
hotels - including the Meskheti. As part of the investment, the bank will pay
each family US$7,000 to move out, enough for a modest apartment in an outlying
district.
When the refugees are gone, the Kazak investors will raze and rebuild some
hotels and refurbish others. The hotels are now home to 1,912 families, or about
6,000 people. So far, 1,400 people have moved out.
Ten miles south of town is a Byzantine castle with a crenelated wall, now
guarding a courtyard of citrus trees, also making a debut to the modern world as
a tourist attraction; during Soviet times, it was in a closed border zone and
off limits.
The detritus of stone Roman waterworks is scattered under a magnolia tree; the
pleasing aroma of mandarin orange trees in bloom wafts over the old rocks.
The now abandoned castle is emblematic of the tourist potential in Georgia,
where the landscape resembles the south of France.
"It will be a key part of economic growth," Irakli Chogovadze,
Georgia's economic minister, said in an interview in May, while attending a
ribbon-cutting at the Intourist Palace hotel in Batumi. "Wherever you put
your finger on the Georgian map, you have potential."
The Georgian economy grew 9 per cent last year. Foreign visits were up by 14 per
cent.
For now, most of the visitors are coming from the former Soviet Union, Turkey
and Iran. The Iranians began slipping over last summer for a few days of
freedom, drinking and girl-watching, none of which is allowed in their strictly
Islamic country.
Georgia has ambitions of joining NATO one day. Still, the new governor here,
34-year-old Levan Varshalmoidze, brushes aside questions about NATO, saying that
it is not within his local mandate, and that it is unlikely a military base will
be built in his region.
Besides, he said, "I'll use all the flat land for hotels before they get
here."
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ECONOMY
IMF assesses recent economic developments
The head of the International Monetary Fund (IMF) mission to Georgia and the
division head of the Middle East and Central Asia Department, John Wakeman-Linn,
visited Georgia on May 12-19 to review Georgia's recent economic developments
and evaluate progress made in governmental economic reforms, The Messenger
reported.
During the talks with senior governmental officials, the IMF representative said
real GDP growth in 2005 was more than nine per cent and the overall fiscal
deficit (cash basis) for 2005 was 2.4 per cent of GDP. At the end of April,
12-month inflation was about six per cent. The mission supported the
authorities' efforts to target an annual inflation rate of between five and six
per cent for 2006. "Inflation is a slight area of concern," the head
of the mission said, noting it was low at the beginning of the year but
accelerated in April. IMF estimates that ban on imports of Georgian products to
Russia will reduce GDP growth by less than one per cent this year however this
figure could increase to 1.2 per cent next year. The mission noted that the
restriction of exports to Russia would reduce external financing. The mission
urged the adoption of a cautious fiscal stance that includes greater
accumulation of international reserves.
Wakeman-Linn said the government should not spend privatisation proceeds but the
National Bank of Georgia should accumulate them as foreign exchange reserves to
help the economy in case relations with Russia deteriorate. "If the
situation continues to deteriorate, it will have a more serious impact on the
Georgian economy," Wakeman-Linn said on May 19th.
Meanwhile, Wakeman-Linn noted Georgia's macroeconomic performance remains
"strong." The IMF mission also discussed the government's plan to
reform the financial sector and said they supported the authorities' goal of
liberalising the financial system, including opening it to more international
competition. At the same time, the mission noted several challenges the
authorities should face, including the importance of continued enforcement of
anti-money laundering legislation. The mission plans to return to Georgia in
August to conduct discussions for the fourth review, under the Poverty Reduction
and Growth Facility (PR GF) arrangement. If the parties come to an agreement
over economic policies, the IMF's executive board may consider completing the
fourth review for Georgia in September.
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ENERGY
Wissol Petroleum becomes partner to Canargo Standart
Swiss company Wissol Petroleum Limited has become the foreign partner of Canargo
Standart Oil Product, which was set up in Georgia in 2000 with Britain's Canargo
Energy Corporation to import and sell oil products in Georgia. Parity was
maintained, Soso Pkhakadze, the board chairman at Wissol Petroleum Georgia, a
subsidiary of the Swiss company, said recently, Interfax News Agency reported.
The new partner's plans fully coincide with company strategy, which is aimed at
its further development, he said. "According to the agreement, profit will
be fully reinvested into company development over the next three to four
years," Interfax quoted him as saying. "Our key aim is to be a leader
on the Georgian oil products market both in terms of the volume of imported and
sold fuel and in the amount of filling stations," Pkhakadze said. Up to 25
filling stations will be added to the current 40 over the next two to three
years, he said. "At the present stage we serve about 3,000 private and
government organisations, which account for about 40 per cent of total company
sales," he said. The company's main efforts are currently aimed at
increasing sales to individuals and the arrival of a new investor should play an
important role in this, the board chairman said. The company had mostly been
importing oil products from Azerbaijan, but now supplies come mainly from
European countries, from refineries with which the Swiss partner has close
contacts, he said. "High-quality oil products account for 45 per cent of
the Georgian market's consumption and this segment is seeing a growth
trend," Pkhakadze said. Petroleum Georgia currently holds 20 per cent of
the Georgian oil products market. Other major players on this market are LUKoil-Georgia,
Eko Georgia and Rom Petrol.
UK companies reportedly interested in energy facilities
British companies have expressed interest in taking part in the privatisation of
energy facilities and the construction of new hydroelectric power plants in
Georgia, Georgian Energy Minister, Nika Gilauri, said recently, New Europe
reported.
"There's a great deal of interest in generation facilities put up for sale,
distributor companies and the construction of new hydroelectric power
plants," Gilauri said after returning from London, where he was part of a
Georgian delegation that took part in a business forum called Invest in Georgia.
"I didn't expect such interest in the Georgian energy market from European
companies," he said, although he did not specify any possible projects or
deals.
Nine large energy facilities are to be privatised in Georgia, including three
distributor companies and six hydroelectric power stations. Georgia expects to
receive at least US$119m from their privatisation. Bids to take part in
competitions and auctions for the facilities took place from May 16th to June
16th, 2006.
In addition, the Georgian Energy Ministry plans to announce a tender for the
construction of 32 small and three medium-sized hydroelectric power stations as
well as small and medium-sized wind-driven power plants with overall capacity of
about 1,000 MWt. About 20 companies from various countries have officially
announced their interest in the tender.
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FOREIGN INVESTMENT
EBRD to boost investment in Georgia
The Turkish consortium TAV-Urban, which is handling overhauls at the Tbilisi and
Batumi airports in Georgia, is to receive loans totalling 54 million Euro from
the International Monetary Fund and the European Bank for Reconstruction and
Development (EBRD), TAV-Urban Georgia said, Interfax News Agency reported.
Officials from the consortium signed agreements on the loans with IMF and EBRD
representatives in Istanbul. The loans are intended to finance the
reconstruction of the Tbilisi and Batumi airports. The Turkish consortium has
pledged to spend some 77 million Euro on the overhauls, including 62 million
Euro for the Tbilisi airport and 15 million Euro for the Batumi airport. The
EBRD plans to increase annual investment in the Georgian economy 80 per cent
from 85 million to 150 million. The press service of the Georgian prime minister
told Interfax that EBRD president, Jean Lemierre, announced this during a
meeting in London with Georgian prime minister, Zurab Noghaideli, as part of an
annual EBRD conference. The press service said that Lemierre and Noghaideli
discussed reforms and the economic situation in Georgia. It was decided to set
up an investment council in the republic, which will include representatives
from the EBRD, the Georgian government and the private sector of the economy.
Lemierre also said that the bank would take part in programmes for the
rehabilitation of energy infrastructure in Georgia, particularly in implementing
a project to rehabilitate Inguri Hydroelectric Plant and the North-South gas
pipeline.
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FOREIGN LOANS
China to grant 2.5m Euro to build juice factory
China has announced that it will grant 2.5 million Euro to Georgia to finance
the construction of a juice factory, Interfax News Agency reported.
Chinese president, Hu Jintao, and Georgian President, Mikhail Saakashvili, who
was on a visit to China, held a meeting on April 11th and signed a joint
declaration, which reaffirms the two countries' preparedness for developing
relations in various fields. Saakashvili, who arrived in Beijing, spent the
first part visiting the Great Wall of China and the Emperor's Winter Palace.
During his five-day visit to China, the Georgian leader also planned to visit
Shanghai.
Georgia receives 4th tranche of IMF loan
The National Bank of Georgia has received 14 million laris in the latest tranche
of a loan from the International Monetary Fund as part of a three-year Poverty
Reduction and Growth Facility (PRGF) programme, the bank said, Interfax News
Agency reported.
This is the fourth tranche of the PRGF loan, which the IMF executive council
decided to allocate at a meeting on March 31, 2006. Georgia received the first
three tranches in June-December 2004 and in August 2005 in equal shares of 14
million laris. The total size of the loan is 98 million laris. Taking into
account the latest tranche, Georgia has received 56 million laris (80.9 million
Euro), the bank representative said. All the funds are put in the National
Bank's international currency reserve.
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