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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: 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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