population has high expectations, which
the government is striving to meet
Positioned at the crossroads of Europe and
Asia, where Caspian oil and western goods flow
increasingly between east and west, the Caucasian
state of Georgia is itself in transition. A
new generation of leadersyoung, dynamic,
and western orientedis steering the former
Soviet republic towards a more prosperous future
after a bloodless revolution that swept the
old guard out of office towards the end of last
Georgia once enjoyed one of the highest standards
of living in the former Soviet Union, but suffered
a dramatic decline into poverty under the former
administration led by Eduard Shevardnadze, the
former Soviet Foreign Minister. Things became
so bad there was a mass exodus, with one in
five Georgians leaving the country.
Basic institutions were failing, and
corruption was institutionalized, says
the new President, Mikhail Saakashvili.
That was how the country was run.
Mr. Saakashvili has an indisputable electoral
mandate for the reforms with which he and the
government are seeking to transform governance
and the economyin January, he won 97 percent
of the vote in the presidential election.
The government knows that it has much to do
and that the expectations of the Georgian people
are high, but it has got off to a confident
start. We are very different from the
previous administration, says the President.
We are the first CIS country to have had
a genuinely post-communist government. We have
a much fresher look. Almost the whole political
class comes from western educational institutions,
and this is making a huge difference; we have
experience in the modern management mentality.
The new approach is, in any case, the
only way forward, he adds. We need
to succeed because there is no other option
for this country at the moment.
Priority is being given to fighting poverty,
overhauling the legal system, boosting development
outside the capital, Tblisi, and attracting
much needed foreign investment. Sweeping reforms
are being introduced at every level of governance,
and clear progress has already been made. The
crime rate has been cut dramatically, and state
revenues from tax collection have increased
An aggressive privatization policy is being
initiated, with no sector of the economy excluded.
Major assets expected to go up for sale include
the important seaports of Batumi and Poti (see
article below), and all the countrys airports.
Mr. Saakashvili says, We want to set
the standards for reforms. We are dramatically
reforming government structures, downsizing
bureaucracy, reducing government functions,
increasing salaries for government officials
and putting an end to corruption.
Under the former regime, corruptionofficial
and unofficialwas a major deterrent to
investment. Foreign capital is required to help
Georgia develop the economy and make urgently
needed improvements to its infrastructure, and
the government is working hard to restore investor
SAAKASHVILI President of Georgia
Speaker of Parliament
Mr. Saakashvili enumerates Georgias advantages.
We are becoming part of the European environment
and we have competitive labor costs. We have
access to the neighboring markets of Russia,
Ukraine, the Middle East, Iran, and Turkey,
and serious investments in terms of energy projects
and pipeline construction."
Georgias economy has proved resilient.
According to the State Department of Statistics,
gross domestic product rose by 11.1 percent
last year, led by activity in the construction
and agricultural sectors, and the economy looks
well set to comfortably exceed the 6 percent
target for this year.
The country enjoys some of the highest standards
in the CIS in terms of media freedom. It has
a vibrant civil society, and its government
institutions have become more transparent. Mr.
Saakashvili promises that following the introduction
of the new tax code the country will have the
lowest tax tariffs in the region.
In the former Soviet Union, Georgias
ski resorts and spa areas made it the main tourist
destination for eastern Europeans and for other
Soviet states, attracting up to 5 million tourists
a year. There are fantastic possibilities
for developing a very targeted and high quality
tourism, says Mr. Saakashvili.
Irakli Managadze, President of the National
Bank of Georgia, praises the new governments
approach to fiscal and monetary policy. If
you compare the state of fiscal affairs immediately
after the revolution with what it is now, you
get a very impressive picture of adjustment
and improvement. Pensions and salaries are paid
on time, and the government has started to pay
the arrears accumulated previously.
Discussions are under way with the international
creditors of the Paris Club about Georgias
significant external debt burden, which needs
to be restructured. "If we succeed in restructuring
the foreign debt this will facilitate a steady
economic growth and build investor confidence,
says Mr. Managadze.
He adds that, despite the difficulties of
recent years, Georgia has a firm foundation
for solid economic growth. We have maintained
a stable currency and a low level of inflation,
and we have transformed the banking sector.
Six years ago Georgia had 57 banks. Since
then the number has more than halved, resulting
in a leaner, more stable sector that has enjoyed
impressive growth, with assets rising by 20
percent in recent years. Minimal capital requirements
have been increased in line with EU standards.
In terms of foreign policy, Prime Minister
Zurab Zhvania says Georgia regards the United
States as a vital strategic partner, and that
integration into NATO and European Union is
the countrys goal. We are strengthening
relations with NATO. We believe that the most
stable arrangement for the security of our country
is to be found within the Euro-Atlantic alliance.
Nino Burjanadze, Speaker of the Georgian
Parliament, accepts that it will take time.
She says, The main priority for Georgia
is to build good relations with neighboring
countries, and to become a member of NATO and
the EU. This is not in prospect in the short
term, but we are taking steps in this direction.
Georgia has a partnership and cooperation
agreement with the EU, and participates in NATO's
Partnership for Peace program. The EU, which
sees Georgia as a key route for transporting
Caspian Sea oil to the west, has been steadily
strengthening relations. Meanwhile, steps are
being taken in Georgia to ensure that all sectors
of government are harmonizing their practices,
standards and regulation with the EU.