Georgian Economy At A Glance

Galt & Taggart Securities (does this ring a bell?), Bank of Georgia’s (group of companies I used to work for) investment arm and one of the leading investment banks in Georgia last week circulated to it’s analytics subscribers a presentation on current state and immediate prospects of the Georgian economy.

It’s a short, but rich in numbers report in answer to recent enquiries from bank’s “clients, friends and well-wishers”. Such reports are very rare as financial information about Georgia is very hard to find. More I was delighted to discover that G&T’s view on the economy agrees with mine (here and here).

“The slides you are about to glance at do spell out our strongly held view that the Georgian economy is resilient and on the growth path from which it will not be easily dislodged.

“Additionally, we have tried to dispel in this presentation the rather widely held (and, we believe, not entirely accurate) belief of Georgia’s supposed dependence on its Northern neighbour for energy sources.”

The key points that characterize the economy according to the presentation are:

• High GDP growth
• Stable currency
• Reasonable interest rate environment
• Strong fiscal performance
• High degree of energy security and low level of dependence on Russia
• Increasing consumer spending with very low levels of consumer indebtedness
• Unprecedented government spending on infrastructure, driving productivity growth
• No currency or capital controls since the mid-1990s
• Progressive new tax code
• The majority of customs duties abolished
• Massive deregulation and liberalization
• Dramatically reduced corruption
• Improving corporate governance practices
• Increased foreign investor activity
• Ahead of most CIS economies in the 2005EBRD Transition Indicators
• Named number one reformer by World Bank in its 2006 Doing Business global survey
• Well ahead of its CIS peers in the Heritage Foundation Index of Economic Freedom

The complete presentation is here (86,7 kb PDF)

Russia Steps Up the Pressure On Georgia

The only Russian-made products I still use in my daily life are gas in my kitchen and matches I light it with. While I cannot yet expect the disappearance of matches – as they apparently aren’t a product strategic enough for Russia to cut it’s supply to Georgia – soon I won’t be able to tell for sure that the gas I’m using is Russian.

As Gazprom, the alfa tool of the Moscow’s foreign policy, plans to double the price from current USD 110 to USD 230 per 1000 cubic meter in 2007 for supplied gas Tbilisi is already doing it’s homework to diversify energy sources. As Civil Georgia points out “Russia will not be the only supplier of gas to Georgia next year” – the other sources of cheaper fuel are Turkmenistan, Azerbaijan and Iran.

Gas is almost the last thing that Moscow has left itself to annoy Georgia with after banning Georgian wine and mineral water, severing trade and transport links and cracking down on ethnic Georgians living in Russia and their businesses. The only reason why Russia is not stopping it’s gas supply to Georgia altogether is the need to keep gas transit to Armenia to which Georgia is the only route.

But, contrary to Russian pundits, who always tend to exaggerate the Russian ability to punish it’s disloyal neighbors economically, government and experts in Tbilisi agree that gas price hike will have somewhat limited effect. According to Standard & Poors, as reported by News Georgia, efforts by the Georgian government to diversify supply and decrease overall use of the expensive energy source will limit the impact on the economy to 1% decrease in GDP growth next year which is projected to grow at around 7% otherwise.

Russia slowly mounted economic sanctions against Georgia since the beginning of the year forcing businesses to seek alternative to Russian markets and replacement of Russian supply. Tbilisi responded by liberalizing it’s economy and general improvement of the business environment. If the trend continues the only Russian product I’ll be left at home with will be an indecently pro-Putin Pervy Kanal news, which I don’t watch anyway.

Doing Business in Georgia

Johan Norberg in his Liberalism-Capitalism-Globalization Blog

I mentioned that Georgia is reforming. More than anyone else, actually. According to the Doing Business index 2007, Georgia has moved from place 112 to 37 in just one year – unprecedented in the history of the report.

Georgia has reduced the minimum capital required to start a new business by 90 percent, and the number of days to meet bureaucratic requirements to export from 54 to 13 days. The labor market has been deregulated and social security contributions have been reduced from 31 percent of wages to 20 percent.

At the same time, the number of new businesses has increased by 20 percent and unemployment has fallen by 2 percentage points.

The problem is implementation. The new laws are not always upheld by the local civil servant and policeman. So the priority is improved governance and anti-corruption reform. And, naturally, deregulation that strips the bureaucracy of powers entirely.

For example, the Georgian government recently decided to abolish all tariffs until 2008. Way to go.

A couple of days ago I’ve been talking to a friend of mine who’s starting a consumer electronics import business. He is a specialist in the trade and has worked in the industry in Russia for years. Due to a recent changes to the customs laws he will have nothing to pay when importing his goods. It took him and his partners a couple of months to transform the idea to an actual start-up, financed by a bank loan and ready for the first import in coming 4 weeks. As of now he has not have pay a single bribe. He agrees that was he in Moscow things would have been very different.

Kaxa Bendukidze is actually the one who is to be thanked for the liberalism in the economy.

Saakashvili To Visit Israel: Russia’s irritated

Russia is apparently irritated by the upcoming visit of Georgian President Mikheil Saakashvili to Israel and planned meeting to Ekhud Olmert, reports NEWSru Israel.

Saakashvili, who holds the honorary doctorate from Haifa University, plans to visit Israel in the end of October to participate in the official opening of the modern energy problems research center.

“As Saakashvili doesn’t cancel his visit despite Iran’s irritation, so we don’t cancel his visit [despite Russia's irritation],” – said Dr Brenda Schaffer who heads the center. “We don’t want a quarrel with Russia, but we consider Saakashvili to be the Mandela of 21st century. He symbolizes the non-violent dissemination of democracy and fights corruption.”

Russian sources tried to play down the visit. “It’s not that offencive as it is impossible to understand. Impossible to understand what is Israel is expecting from Saakashvili. We cannot understand why is he visiting Israel as a best friend. That will gain nothing for Israel. That’s the same as if it was the President of Iceland visit.”

There is quite large of part of the Georgian speaking population in Israel which traditionally keeps close ties with Georgia.

FT On Possible US-Russia Horse-Trading

A UN decision on Iran’s nuclear program next week coming, The Financial Times writes, that while majority of observers think that US exchanged last week’s resolution on Georgia for Russia’s support of sanctions against North Korea the Bush administration rejects any suggestions of the horse-trading with Russia.

“We will not sell out Georgia,” declared Matt Bryza, a State Department official who took part in negotiating resolution 1716 on Abkhazia. Explaining the US concessions last week, he told a conference hosted by the Hudson Institute think-tank: “We were isolated, frankly, at the UN.”

“It’s flat out wrong,” commented Kurt Volker, senior official in the State Department’s Europe bureau. “They know we are not in the trade-off business,” he said of Russia. Zeyno Baran, director of Eurasian studies at the Hudson Institute, says Russia is “playing all sorts of games” over North Korea and Iran and seeks to gain a free hand in putting pressure on Georgia in exchange. But she doubted the Bush administration would yield. “It would be so against Bush’s policy on freedom and democracy,” she said.

Caught in the midst of a crisis he cannot influence, Georgia’s president, who has strong popular support for his pro-western orientation, is assuring the US he will avoid “rash acts” that might give Russia the pretext to “smite the success story to its south”. However, writing in the Wall Street Journal last week, he urged Georgia’s allies to stand by it. “If any one of us gives in to bullying or tolerates the politics of ethnic hatred, we are all at risk,” he said.

Vladimir The Cinical

The Guardian reports interesting details of the informal EU-Russia meeting in Lahti last Friday. As expected Putin used well-known European divisions on Russia openly jeering at Balts when they tried to rise the issue of Russian treatment of Georgia.

Jacques Chirac, the French president, indicated that Europe should adopt a light touch. But Aigars Kalvitis, the prime minister of Latvia, and Valdas Adamkus, president of Lithuania, voiced strong concern at the treatment of Georgia – once, like them, part of the Soviet Union. Mr Putin turned to talk to Mr Kalvitis and pretended not to be able to pronounce the word for Latvia, before saying that he seemed to remember that Russia had a pipeline dispute with its neighbour; he then “corrected” himself and said the dispute was with Lithuania.
The dinner with Mr Putin started well when EU leaders spoke with one voice of their concern over Russian gas and oil supplies to Europe, 25% of the EU’s fuel imports. They are nervous as winter approaches after events last January, when Moscow cut off supplies to Ukraine and briefly reduced flows to the EU. Mattin Vanhanen, the Finnish leader who hosted the summit, spoke for all EU leaders when he called on Mr Putin to provide greater security for European investments which Russia needs if it is to develop its oil and gas industries. The atmosphere changed when Georgia was raised. One observer of the dinner said: “The energy discussion was fine, because Europe spoke with a united voice. When it came to Georgia there were different views, with the Baltic states speaking out. Putin turned very sarcastic.”

Also very characteristic of Putin is this last para from the report:

Mr Putin said he would take no lectures from European leaders about corruption in Russia. He cited the case of Marbella in southern Spain where a number of Spanish council officials have allegedly been involved in a multimillion pound property scam.

Saakashvili comments on Putin’s accusations

Saakashvili slamed Putin over the accusations that Georgia is to blame for the worsening of relations with Russia.

“I remeber general Grachev [Russian minister of defence 1993, during the war in Abkhazia], saying that Georgians paint jet-fighters in Russian colors and bomb their own cities [in Abkhazia]. The difference [beetwen Putin's and Grachev's accusations] is very little.”

Putin accused Georgia in worsening of the relations with Russia speaking to the press after meeting with EU leaders in Finland last Friday. The tensions between Goergia and Russia acutally escalated when Russia imposed economic sanctions in retaliation of Georgia dataining GRU alleged spies in Tbilisi. According to Putin, sanctions were an answer to the Georgian leadership’s aim to “restore its territorial integrity through military means” which Saakashvili strongly denied.

Misha wants it again

Amid escalated confrontation with Russia and no perspective of things getting better there Georgian President Mikheil Saakashvili is apparently trying to guarantee himself and his ruling United National Movement (UNM) from surprises due to a possible Moscow involvement.

Saakashvili asked the parliament to cut his term by several months and hold parliamentary and presidential elections simultaneously early in 2008. By uniting two election campaigns Saakashvili, who’s widely expected to stay for the next term, hopes to help his party win a clear majority in the parliament while his popularity will be still high.

This is exactly what the opposition doesn’t like about the President’s unexpected proposal. All major opposition leaders voiced their protest against the move while one of them, Republican Party leader David Usupashvili, called it a step “towards “turkmenization” of Georgia”. While “turkmenization” is the least probable scenario here it seems that Georgian government is taking the threat from Russia very seriously.

First of all, Saakashvili wants to avoid the Ukrainian pre Orange Revolution situation where the direct involvement and support of Yanukovich by Russia transformed presidential elections into a crisis. Parliament Chairperson Nino Burjanadze hinted this telling the press that the president “reduced his term to avoid serious expenditures and finally bring the state in the working environment from the one of constant elections.”

Second, Saakashvili wants to have free hands in the parliament in case relations with Russia get worse enough for a war in Abkhazia or South Ossetia to start, as Putin predicted in Finland.

Georgia is a presidential republic where both the president and the parliament are equally legitimized by national elections. To have (probably Moscow controlled) opposition dominate the parliament in times of crisis is asking for a trouble, similar to a power deadlock that leaded to an armed confrontation between Yeltsin and Duma in Russia in 1993. It’s good, that Saakashvili uses legal means. But there is no guarantee that he’ll continue to do so next time he’ll need to strengthen his power.

Meet Chechnya’s psycho zookeeper

Popbitch – это еженедельная коллекция британских “светских” сплетен, которая, как говорят, оперативнее даже The Sun. Кадыров попал в выпуск вместе в Боно, принцем Гарри и другими завсегдатаями британских таблоидов.
Коротко, ясно и по делу. 15 минут славы Рамзана только начинаются.

Meet Chechnya’s psycho zookeeper

Did Ramzan assassinate his harshest critic?

Prime suspect in the murder of Russian journalist Anna Politkoskaya, other than scary Russian President Putin, is the even scarier Chechnyan prime minister Ramzan Kadyrov. Ramzan inherited the position on the death of his father and has only just turned 30. He manages to combine the life of a Scorsese gangster with an LA trust fund celebutante – in Grozny.

• Is best mates with Mike Tyson, now called Malik Abdul Aziz. Tyson has come to fight at Ramzan’s Grozny boxing club, “Ramzan”. Grozny is covered in posters showing Tyson and Ramzan together.
• Bought a Siberian tiger cub, because Tyson used to own one. He also has a lion, a wolf, a bear and fighting dogs in his private zoo.
• Before cuddling any of his animals, spits in their faces. To stop them giving him the evil eye, of course.
• Hung the head of a prominent guerilla from a gas pipe, as a warning to would-be rebels.
• Human rights groups say his private army, The Kadyrovtsky, is responsible for 70% of all torture, rape, murder and kidnapping.
• There is a cell phone video on a Chechen website of an allegedly drunk Kadyrov with prostitutes in Moscow.
• Anna Politkovskaya recently claimed she had video footage of a man identical in appearance to Ramzan ordering murders and kidnapping. His army have begun using their picture phones to record videos of themselves torturing Chechens.

Why the West needs to stand by Georgia

“If Russia is allowed to continue bullying its neighbour, its neo-imperialist appetite will spread to our front door“.- Edward Lucas The Times, UK

Перевод на русский на Georgia Online (хороший саит с информацией из и о Грузии).