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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: 310 - (26/10/06)

Nearly three years after the Rose Revolution protests propelled him to power, the U.S.-educated president of Georgia, Mikhaikl Saakashvili, has seen his popularity plunge, with Georgians increasingly disenchanted at the weak economy and widespread poverty.

Government wins local and regional elections
Nevertheless, the populace appears to still just about support his party and the government at a time of mounting tension with Moscow. His United National Movement won a majority of the votes in local and regional elections in early October.
That appears to be the message of the latest elections, if international monitors are correct. In spite of the crisis, many Georgians could have been thinking more about bread-and-butter issues when they cast their votes for more than 1,700 members of municipal and regional councils that will in turn elect mayors and administration heads. The highest regional posts - envoys - are appointed by the president. 
Opposition leaders alleged on October 6th that the elections were riddled with fraud, after Saakashvili claimed victory for his party in the continuing vote count. International observers said, however, that the balloting was conducted "with general respect for fundamental freedoms." 
The vote was seen as an important test of the pro-Western government's popularity at a time when Georgia faces a worsening confrontation with its former overlord, Russia. "We got a minimum of 70 percent across Georgia," Saakashvili told supporters at his party's headquarters on October 5th. Saakashvili also cited exit polls reported by Georgian television, which said his United National Movement party was ahead with around 56 percent of the vote, followed by the joint opposition Republican-Conservative bloc with 8.1 percent. The exit poll methodology could not be verified. 
The Central Election Commission said on October 6th that preliminary results showed the United National Movement won 66.4 per cent of the vote in the capital, Tbilisi, where about 890,000 of Georgia's 3.2 million registered voters live. 
Labour Party head Shalva Natelashvili, who hoped to unseat Saakashvili ally Gigi Ugulava from the post of Tbilisi mayor, said that the opposition had been subjected to tremendous pressure during the campaign before the local elections. "Those who didn't want to vote for Saakashvili were branded agents of another state," he said. "These elections failed, by European and international standards, and we will appeal to international courts to declare them false and illegitimate," he said. 

OSCE endorsement 
But the joint mission of the Organization for Security and Cooperation in Europe (OSCE) and the Council of Europe offered a relatively positive assessment - though it noted that "the blurred distinction between the authorities and the governing party reinforced the advantage of the incumbents." Monitors pointed to "highly visible social aid programmes" used by the ruling party, which paid out pension bonuses and provided temporary jobs. 
Conservative Party leader Koba Davitashvili dispute this and has accused the government of dragging out the vote count in an effort to fix the results. "Not even an hour passed after the end of elections that President Saakashvili said that his party had done better than in the past elections and got a minimum of 70 percent of the vote and now the electoral commission is trying to reach that figure," he said. 
Saakashvili rejected charges of vote-rigging. "We conducted democratic elections.... And I want to say that we conducted clean elections despite our opponents' pouring dirt on us," he said. 

Cold War with Russia 
Russia's chilly relations with Georgia have worsened steadily since Saakashvili came to power, vowing to take the country out of Russia's orbit, rein in breakaway provinces, Abkhazia and South Ossetia, and join NATO. Georgia accuses Russia of backing the separatists, which Russia denies. 
Following Georgia's arrest of four Russian military officers on spying charges on September 27th, Moscow suspended air, sea, road, rail and postal links with its southern neighbour, paralyzing trade with economically dependent Georgia. Moscow has also cracked down on Georgian migrants and businesses in Russia, threatening to cut off their remittances back home. Up to a million Georgians live in Russia, according to some estimates, and send home hundreds of millions of dollars (euros) every year to their families. 
The arrest of the four Russians on spying charges was taken as a gross provocation in Moscow. The Russians have two bases in Georgia, due to be terminated in 2008. This is now in doubt. It might have been wiser to wait until their departure then before picking a quarrel with the mighty Russian colossus.

Ivanov plays it all down
Russia's defence minister, Sergei Ivanov, played down Russian measures against Georgia as "economic pressure," denying allegations Moscow has imposed a blockade on the impoverished South Caucasus nation. "We are indeed bringing economic pressure to bear [on Georgia] - I acknowledge as much - but no sanctions are in place, nor a blockade," Sergei Ivanov said. 
This is distinctly disingenuous. In practice that is exactly what has happened.
He also dismissed reports Russia is contemplating military action against Georgia. "Military threats are out of the question," he said. "It takes a madman's imagination to picture Russia going to war with Georgia." 
Speaking of Georgia's bid to join NATO - a prospect Russia is obviously not happy about - Ivanov said: "Georgia is free to make any decisions about entering any bloc or organization - NATO, the EU, a beer lovers' alliance, whatever." 
Ivanov, fancied as the likeliest successor to Putin in 2008 by the Moscow cognoscenti, is clearly a colourful character.

                                             ******
The following is an interview with a key player in Georgian politics, now entrusted with a most important set of task:-

Integration Minister Says 'We Try To Be Patient' 
Giorgi Baramidze, a former Georgian defence and interior minister, now serves as the country's state minister on European and Euro-Atlantic integration. He was in RFE/RL's Prague headquarters and spoke to correspondent Rob Parsons about Georgia's prospects for further integration with the EU and NATO. The interview came as NATO foreign ministers gathered in New York prepared to offer Georgia a step forward in its membership talks.

RFE/RL: NATO is offering Georgia Intensified Dialogue status in its bid to join the alliance. How important a step is that for Georgia? 
Giorgi Baramidze: It's crucially important because it is recognition of Georgia's reforms, not only in the military sphere but also in the sphere of strengthening the rule of law and fighting against corruption, strengthening our democracy and improving the situation in the economy. In parallel, the World Bank granted Georgia the world's best reformer status. It's a great achievement for us. And on conflict resolution, every step toward NATO gives us a better chance to solve those conflicts peacefully. 

RFE/RL: But you had hoped for more, hadn't you? Because there had been talk of a Membership Action Plan of the type granted to Albania and Macedonia and you didn't get that. 
Baramidze: Certainly, we are always ambitious but we try to be patient. And we know that it is not enough just to do good homework. Twenty-six NATO countries have to agree with each other and there has to be consensus. So we learn by moving forward. Certainly we are now anticipating another step, which would be a Membership Action Plan and anyway we will very soon start to behave as if we already had a Membership Action Plan. 

Worries About Democracy And The Rule Of Law 
RFE/RL: If I can interrupt, the view in NATO appears to be that while Georgia is doing well as far as military progress is concerned, that there are still some doubts about its progress on the democratic front, particularly judicial reform. There was the recent report about the state of Georgia's prisons and there are questions about what direction the media are moving in. Is Georgia ready to accept these criticisms and do something about them? 
Baramidze: We certainly accept these criticisms, because we know the situation in the penitentiary [system] is quite bad. That's why we put the issue of the rule of law as a first priority for us in the [EU] New Neighbourhood Policy action plan and this is one of our major tasks -- to change the judiciary system, to reform the judiciary system. This is the weakness of our system and we certainly recognize this. We are doing our best to achieve results, although it takes time, certainly. We are proud to have a free press. We have certainly a press which has sympathy toward the government, [but we also have] those who are criticizing us every day, and on that regard we don't have a problem. But certainly democracy is something which should always be exercised and fought for, and we welcome the activities of the European Union to strengthen our civil society. 

Russia And The Frozen Conflicts 
RFE/RL: Russia is not going to be happy about you getting Intensified Dialogue status. Does it make sense, do you think, for Georgia to be constantly poking Russia in the eye? Isn't it time for Georgian foreign policy to start improving relations with Russia?
Baramidze: Actually, we are trying to engage Russia positively. Nothing we do objectively contradicts Russia's security or any other interests. We offer a win-win solution rather than a zero-sum game. We think that we have lots of common interests, including Georgia's NATO membership. It's not really, if we talk sincerely, a threat to Russia, because Russia itself has a strategic partnership with NATO and after the end of the Cold War has never considered NATO a threat. So why should Georgia in NATO should be considered by Russia a threat?

RFE/RL: At the heart of the problem is the issue of the frozen conflicts. Why is it that Georgia is so opposed to Russian mediation? 
Baramidze: Well, unfortunately for us, Russia cannot be already a mediator because it was clear from the beginning that it was initiated by old Soviet rulers. After the dissolution of the Soviet Union the conflict was instigated by the early Russian leaders and now they still have the policy of divide and conquer. They have granted more than 90 percent of the population in the conflict areas -- Abkhazia and Tskhinvali region -- Russian citizenship. They provide all kinds of assistance, including military, economic, financial, political, and propagandistic, so Russia has there not peacekeeping forces but, in fact, police forces. So Russia cannot be neutral in this regard. We don't want to push Russia out of the negotiation process, but we don't want Russia to dominate this process. We want the European Union, the United States, and international organizations such as the OSCE and the United Nations to be equal partners during the negotiation process and the negotiating format with Russia. And we request the withdrawal of the so-called Russian peacekeepers from the territory of Georgia. 

RFE/RL: You mention those organizations but there is no sign, for instance, that the EU is ready to take on that role, and while the OSCE might be willing, Russia is not prepared to let the OSCE take on that role. 
Baramidze: We have in fact presented a peace plan on South Ossetia and that was endorsed by the OSCE, including Russia, including the [Russian] Foreign Ministry, last year in December in Ljubljana. All we request is to do what we have endorsed together. 

RFE/RL: Why is Georgia's relationship with Russia so complicated? What do you think lies at the heart of the problem?
Baramidze: It's better to ask President Putin why President Putin and the Russian leadership doesn't see the benefit to Russia of a stable, united and democratic neighbor on its southern flank, to use NATO terminology. Why don't they see the benefit of cooperation to fight against terrorism, to fight against aggressive separatism together, to fight against drug and weapons proliferation and organized crime and, on the other hand, to establish better economic cooperation and the benefits of economic cooperation: cooperation on energy issues, transportation, culture and so on and so forth. So, as I have said, we offer a win-win solution rather than a zero-sum game.

The Surge In Georgia's Defense Spending 
RFE/RL: The EU's external relations commissioner, Benita Ferrero-Waldner, complained recently that defence expenditure in the South Caucasus is going through the roof. Georgia's defence spending, as a proportion of the total budget, is huge at the moment. How can Georgia justify spending so much on defence when it has all these other problems? 
Baramidze: Very easily. Because I think you know that for decades or more, the Georgian military was not being paid and it was more of a threat for national security than a guarantee of security in the nation. Georgia has the smallest army in the South Caucasus. If you just compare it with Azerbaijan and Armenia, they have more than 90,000 [troops]. We have reduced our army from 35,000 to 26,000 as a ceiling. De facto we have 21,000. So certainly it's not a threat to anybody. But we need to have a NATO-capable army. Therefore we need to immediately repair barracks, improve the conditions for our military -- our soldiers, officers. It requires, certainly, a lot of money. And it's been more than a decade since we bought any new military equipment. So we need to re-equip our army. It's true that it takes resources. But it's important, in parallel, to look at how much Georgia spends on other issues. For example, we spent this year eight times more money for education than we did in 2003; five times more money for health care and social security. Ten times more money on road construction; and we're going to spend two times more than that in the next year. This is due to the fact that Georgia has significantly lowered the shadow economy from 80 percent down to 15 percent. By the way, the EBRD declared Georgia the first among the European transition economies with the lowest levels of corruption. So that means the money we already have in the budget this year is five times more than the budget we had three years ago. We have to spend this money properly, and according to our reform agenda -- the agenda of the IPAP with NATO, the Individual Partnership Action Plan, and with the European Union New Neighbourhood policy.

Georgia And Europe 
RFE/RL: I just wanted to get onto that. Georgia has negotiated a Neighbourhood Policy action plan with the EU and frequently proclaims its desire for integration with Europe. What does this mean in practice? Does Georgia see itself one day as a member of the European Union, bearing in mind all the problems of resistance to further expansion within the EU?
Baramidze: First of all, I have to tell you that at this stage we are not even talking about membership, because we are realistic. We know that we are not ready, Europe is not ready. We don't want to be anybody's headache. We want to be good neighbours and good partners of Europe. Therefore, we are happy about the new [European] Neighbourhood Policy. Moreover, Germany is planning to strengthen the new ENP, have it as a kind of "ENP-Plus," or enhance the ENP. So we will be concentrated on the ENP, and building our relationship with the European Union based on ENP and then on the new structural document that will define our relationship. So we're taking our time, particularly because we know that we need to keep our economy as liberal as possible, without too many regulations that the EU already has. So we need to keep the speed of our economic growth intact, because last year we had 9.3 per cent real GDP growth, this year we anticipate at least 11 per cent. So we need to keep going in that direction and have an open economy as much as possible. And therefore we think we have to be concentrated on the new Neighbourhood Policy. Now we are concentrated on trade issues. A free trade agreement is a priority with the European Union. Before that, we hope that the EU allows Turkey to sign with Georgia a free trade agreement alongside the one, by the way, with Syria -- Turkey has signed this agreement with Syria, but now we're requesting the same status, and I hope it won't be a big problem. So we are concentrated on the economy. And through strengthening our economy we hope we can move forward on democratic reforms, and it greatly contributes to the peaceful conflict resolution as well.

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BANKING

Societe generale buying 60% of Republic Bank 


One of France's leading banks, Societe Generale, has agreed to buy 60 per cent of Georgia's Republic Bank, one of the biggest in the country, the bank said recently, New Europe reported.
The European Bank for Reconstruction and Development (EBRD) is acquiring another 10 per cent of the bank at the same time. The EBRD notes Societe Generale is the first major western bank to acquire a majority stake in a Georgian bank. "With its contribution the EBRD will strengthen the bank's capital base, corporate governance and thus support the bank's further growth, which will foster competition in the market," EBRD business Group Director for Financial Institutions, Kurt Geiger, said.
Societe Generale said the transaction goes in line with the development strategy of its international retail banking business, which the bank says is strongly implemented in Eastern Europe. The bank also hopes the acquisition will strengthen its presence in the region. "Societe Generale will bring to Bank Republic its financial strength, international network, universal banking expertise and product development know-how among other things," Jean-Louis Mattei, head of the international retail banking department of Societe Generale said. He added that with its well-known local brand, strong domestic distribution channels, local expertise and the high quality of its top management, Societe Generale would enable the bank to become the leading bank in Georgia. "In this context and further to the rigorous restructuring programmes undertaken, the banking sector achieved a very good performance in 2005, notably in the development of loans and customer accounts and enjoys strong growth prospects," Societe Generale noted. Republic Bank has 21 sales outlets, 474 employees, is actively developing on the retail market and has 74,000 clients.

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FOREIGN COOPERATION

Kuwait promises intensive cooperation 

Kuwait intends to donate US$17.3 million for road reconstruction in Tbilisi through the Kuwait Foundation for Arab Economic Development, Kuwaiti prime minister His Highness Sheikh Nasser Al-Mohammad Al-Ahmad Al-Sabah, announced on September 15th, New Europe reported.
During his visit to Georgia, the Sheikh was accompanied by a delegation of Kuwaiti businessmen and expressed confidence that Georgia will be an attractive prospect for Kuwaiti investors, reported The Messenger. Al-Sabah signed an agreement to allocate US$17.3 million for road construction in Tbilisi through Kuwait Foundation for Arab Economic Development. After the signing ceremony, Al-Sabah said Kuwait has donated a large amount for investment in Tbilis's road rehabilitation programme. He cited this investment as the first step of cooperation between Georgia and Kuwait and urged for active cooperation with Georgia. He said, "We will mediate to deepen the relationships between Georgia and the states of the Persian Gulf." He added that Georgia has professionals in medicine and technical fields. After completion of the project, Kuwait will await further suggestions from Georgia. The agreement comprises a part of the two countries ongoing cooperation project. With the Kuwait Foundation for Arab Economic Development's money, approximately 25 streets will be rehabilitated, squares will be laid out and whole districts will be renovated. The project is scheduled to commence in 2007. On his part, Georgian Prime Minister Zurab Noghaideli said that Al-Sabah's visit to Georgia is very important as Georgia also wants to intensify cooperation with Kuwait. On September 15th, Georgia and Kuwait Foundation for Arab Economic Development signed a significant agreement.

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