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GEORGIA



 

In-depth Business Intelligence

Key Economic Data
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 3,324 3,100 3,000 124
         
GNI per capita
 US $ 650 590 590 151
Ranking is given out of 208 nations - (data from the World Bank)

Books on Georgia

REPUBLICAN REFERENCE

Area (sq.km)
69,700 

Population 
4,934,413 

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

Capital 
Tbilisi 

Currency 
Lari

President 
Mikhail Saakashvili


  

Update No: 288 - (01/01/05)

Georgia's Rose Revolution: one year later
Revolutions generate euphoria, but this soon ebbs, as the problems mount. Just over one year later, Georgia's Rose Revolution has succeeded in making positive changes in the country's economic and political direction. But consolidating the gains already made will provide fresh challenges. President Mikheil Saakashvili's administration must concentrate on strengthening institutions, rather that relying on the force of individual will. Nevertheless, Saakashvili has set an example of personal incorruptibility, which is having an impact.
Three achievements are detailed below - a successful reduction in corruption, the reintegration of Ajaria and an overhaul of defence and security. But the integrity of the republic is still an issue. The two northern provinces, Abkhazia and South Ossetia, are in effect independent - or rather fully dependent now on Moscow. The economy is also still highly problematic.
The Rose Revolution - a popular protest over a rigged parliamentary election that cascaded into a political uprising -- forced former Georgian president Eduard Shevardnadze to resign on November 23, 2003. A November 18 roundtable - entitled Georgia's Rose Revolution: One Year and Beyond, and co-sponsored by the Washington, DC-based Georgia Forum and the Central Asia-Caucasus Institute at Johns Hopkins University - evaluated the successes and shortcomings of Saakashvili's effort to transform the country from a failed state into a Western-style market democracy. 

Campaign against corruption working
Panellists generally agreed that Saakashvili's aggressive campaign against high-level governmental corruption, waged since January, 2004 stands out among the year's many accomplishments. "Rampant corruption under Shevardnadze was crippling for Georgian development," noted one of the panellists, Lincoln Mitchell, the former Director of the National Democratic Institute's Tbilisi office. "But Saakashvili's actions have increased public confidence and hope in the government." 
Georgian citizens have seen immediate improvements in their day-to-day lives, panellists suggested, citing a significant decrease in police corruption. "Nearly 13,000 police officers, those commonly found on the streets of Tbilisi ready to shake down Georgian motorists, have been fired," said Ambassador David Smith, a US member of the International Security Advisory Board for Georgia. "Their replacements are well-trained, salaries have been increased, and extortion and bribery has dipped significantly."
Nevertheless, there are aspects of the anti-corruption campaign that are cause for concern. While the government's actions have enhanced the public perception of the government, the moves to punish corrupt officials have at times skirted the rule of law. In Tbilisi, non-governmental activists have complained that some anti-corruption prosecutions have been politically motivated, designed to cripple and intimidate Saakashvili's political enemies. In addition, some panellists pointed out that curbing the corrupt practices of middle- and lower-level bureaucrats will be a painstaking process, possibly testing the public's patience. 

Reintegration of Ajaria
The successful and relatively peaceful reintegration of the renegade region of Ajaria last year marked another shining moment for Saakashvili's administration. In May a tense political standoff ended in Georgia's autonomous republic. Its leader, Aslan Abashidze, had long refused to submit to Tbilisi's authority. But his confrontation with Georgian President Mikheil Saakashvili failed to escalate into civil war, as many had feared. 
Faced with a popular uprising, Abashidze fled into exile. Saakashvili announced the news on Georgian television: "Georgians: Aslan has fled! Adjara is free! I congratulate everyone on this victory. Georgia has to be united and rise up. Georgia will be united." 
The benefits of forcing former regional strongman Aslan Abashidze from power were multifaceted. The reestablishment of Tbilisi's authority in Batumi marked an encouraging first-step in efforts to promote Georgia's territorial reintegration. 
On an economic level, Abashidze's departure closed a major conduit for smuggling that had hampered development efforts. But perhaps the most important issue, according to Revaz Adamia, Georgia's ambassador to the United Nations, was the psychological impact of Ajaria: "It showed that major problems could be solved. It gave hope to the Georgian people," Adamia said. 

Defence overhaul
Panellists cited the reorganization of Georgia's defence establishment - something overshadowed by other developments -- as another important Rose Revolution success story. Under Saakashvili's watch, the US-sponsored Georgia Train and Equip Program (GTEP) ended successfully and now, in addition to US trainers, Georgians are training other Georgians. The Ministry of Defence also was placed under civilian control, and the defence budget was nearly doubled to 119 million lari (roughly US$45m). At the same time, the National Security Council cut over half of its personnel, and authority over the Interior Ministry's military roughly 8,000-strong force was transferred to the Defence Ministry. 
The civil-society implications of the termination of the Interior Ministry's influence over the country's armed forces are profound, Smith indicated. "Democracies do not have internal armies." 
A year ago, the military totalled roughly 22,000 troops. Today, the number is about 15,000. The incorporation of the Interior Ministry troops into the regular army will slow the streamlining process, but Defence Ministry officials say they are committed to reducing the overall force to 14,600. "They will do this by absorbing some into the new force, retraining others, and where appropriate dismissing others," Smith said. Officials in Saakashvili's administration express hope that in making the Defence Ministry more efficient, the government can boost the military's effectiveness in promoting national security goals. 

Difficulties ahead
While initial developments are encouraging, the Rose Revolution's ability to meet its goals are far from assured, the panellists said, adding that Saakashvili's administration faces some difficult decisions in the coming months and years. Given Georgia's lack of well-developed institutions, the choices made by Saakashvili stand to have an especially powerful influence over the country's near-term development. 
Perhaps the thorniest issue that Saakashvili will wrestle with for the foreseeable future concerns Georgia's territorial integrity. Saakashvili appears determined to restore Tbilisi's control over its two separatist-minded regions - Abkhazia and South Ossetia. 
Panellists agreed that Abkhazia and South Ossetia will remain crucial in years to come. Georgian government attempts over the summer to replicate the Ajaria experience in South Ossetia failed, putting the two sides on the brink of a full-blown armed confrontation. The Tbilisi-Tskhinvali tension has, in turn, stoked confrontation between Georgia and Russia. "It is clear that Georgia needs Western help to solve these frozen conflicts, and they also deserve our help," said Cory Welt, a fellow at the Centre for Strategic and International Studies. 
Through Georgia's participation in international peacekeeping initiatives in Afghanistan, Kosovo and Iraq, Saakashvili has sought to encourage Western support for Tbilisi's territorial reintegration agenda. In addition, Georgia has moderated its reintegration concept by placing greater emphasis on minority rights. In Welt's words, Tbilisi now seeks to forge a "civic identity and not an ethnic one" for the country. 
Whether such moves will succeed in securing strong Western backing remains an open question. Panellists noted that the Bush administration appears reluctant to confront Russia openly at this time because, as Smith put it, Washington's "national security plate is pretty full." However, he pointed out that several times in the past year, the [Bush] administration "has sent strong signals to Moscow" on Georgia's behalf. Ultimately, as Welt said, unless the United States gets more involved, the South Ossetia and Abkhazia conflicts are unlikely to be resolved. "It is simply too difficult for Georgia to negotiate directly with Russia, especially with their ongoing support to Abkhazia and South Ossetia," Welt said. 

Economic plan needed
As for the country's broader economic performance, it is too early to judge the Saakashvili administration's performance, the panellists indicated. "The real economic question for Georgia is how it manages the assets and the liabilities inherited from the previous regime," said Ross Harrison, Executive Vice President of Tapco International and Treasurer of the America-Georgia Business Council. 
"The results over the past year are unclear," Harrison stated. A vibrant business community is blossoming and foreign direct investment is growing, but Harrison noted that the Georgian government has yet to set forth a clear economic strategy that leverages Georgian assets, like its strategic position in the East-West energy corridor and its once attractive tourism industry. 
Saakashvili has yet to develop a medium-to-long-term economic plan that could help guide his administration in confronting the challenges ahead. "The government has focused on its short-term populist appeal and not on developing a long-term strategic outlook," Harrison said. In the future the pace of Georgia's economic development will be determined by the "balance between popular expectations and a more comprehensive economic strategy." In examining the country's near-term political prospects, panellists emphasized a need for the Saakashvili administration to develop institutions. At present, the lack of a developed system of checks and balances, along with a shortage of qualified personnel to staff the three branches of government, leave Georgia in a precarious position. One individual, the president, wields an inordinate amount of influence - something that can compound the consequences of policy mistakes. Some panellists suggested that any attempt to further concentrate power in the hands of the president would be counter-productive in meeting the Rose Revolution's aims. 
"Democracies represent more than just their elections, but also a sense of ownership, of political accountability, of a legal and legitimate process," Mitchell said. "Democracies are about institutions and not individuals." 
Saakashvili will have to sacrifice individual authority in order to allow Georgian democracy to flourish, Smith suggested. "Greater parliamentary oversight of the executive branch will be crucial to cement Georgia's democratic transition."

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ENERGY

Chinese-owned hydropower project starts in Georgia

The 24 megawatt Khador GES hydropower project was put into commercial operation in the Pankisi Gorge of the Republic of Georgia on November 20th, an official at the Sichuan Electric Power Import and Export company, the contractor and major shareholder of the project said, Interfax news Agency reported.
With an investment of about US$30m, the Khadori hydropower project is China's biggest investment in Georgia and the first overseas investment by the Sichuan Electric Power Import and Export Company, he noted.
On being asked about the future operation of the hydropower project, the official said that the Sichuan Electric Power Import and Export Company would run the hydropower station for 25 years as specified in the contract, with returns mainly from power generation at the hydropower station. 
Should the power station turn out to be profitable after the 25-year contract period expires, the company may opt to retain its ownership.
Asked about other overseas projects by Sichuan Electric Power Import and Export Company, he said that two Build-Operation-Ownership (BOO) projects, one for the construction of a transformer substation and the other for the construction of a power grid, are currently underway in Pakistan.

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FOREIGN BUSINESS

Georgia hopes to draw in Italian business

A two-day business forum that included the participation of representatives from Georgian and Italian business circles, opened in Tbilisi on November 29th, Civil Georgia reported.
Georgian Prime Minister, Zurab Zhvania, while addressing the forum said that Georgia seeks Italian investments. "Relations with Italy and the Italian business community is one of our priorities," Zhvania said in his opening remarks. However, many of the Italian businessmen who participated in the forum expressed the desire for the creation of a more favourable investment climate in Georgia and more security guarantees, according to the Inter-press news agency. While visiting Tbilisi on November 24th, Italian Deputy Foreign Minister, Margherita Boniver signed an agreement with his Georgian counterpart, Kakha Sikharulidze, over the establishment of the consultation forum on economic relations between the two countries. Georgian President, Mikhail Saakashvili has scheduled an official visit to Italy for March.

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