Country Overview

Since the collapse of the Soviet Union in 1991 Georgia has undergone deep crises resulting from severed trade links, civil war, and political and social upheaval. Rampant corruption drove most aspects of the economy to be conducted in the “shadows” while infiltrating aspects of everyday social life. Nearly two million Georgians emigrated over the last decade mostly as economic migrants.

The November 2003 Rose Revolution has left an indelible mark on Georgia’s history, giving the Georgian people renewed hope for a democratic and prosperous future.

The current government led by President Mikheil Saakashvili, have undertaken sweeping reforms that have won praise from the international community. Notably, it instituted a tough crackdown on corruption in the areas of Customs, Tax and Police, that resulted in increased budget revenues and a steady improvement in the economy.  Recent Transparency International survey has moved Georgia 99^th place in the world’s corruption perception ranking – ahead of other regional neighbors including Russia (121) and Azerbaijan (130). According to the World Bank 2006 accounts, Georgia was named the No1 economic reformer in the world placing the country among France, Spain and Slovenia in terms of ease of doing business. 

The western educated and reform minded government has also implemented a new Tax Code deemed the most liberal in all of the former Soviet Union, and has repeatedly stated its commitment to attracting foreign investment and simplifying business in the country. To this end, a new Customs Code has been introduced draft, a new Law on Licenses and Permits reduces to 156 from over 900 the number of activities requiring such authorization.

One of the most significant successes of the current administration was the return of the breakaway region of Adjara to central government control. This region along the Black Sea coast holds significant national interest, both as home to the only deep sea port and transit route for Caspian Sea oil, but also as a tourist haven. The peaceful settlement of this conflict in May 2004 provides optimism that the protracted conflicts with the remaining two breakaway regions of Abkhazia and South Ossetia could soon be similarly resolved.

The final settlement of Georgia’s long term territorial integrity will go a long way for mitigating concerns of future conflict and return the thousands of internally displaced persons back to their homes. Additionally, the recent agreement reached for the withdrawal of the last remaining Russian military bases by 2008 bodes well for Georgia’s long-term independence. In spite of the myriad of positive political development since the Rose Revolution, Saakashvili’s administration came under criticism for certain important issues, eg slow pace of judiciary reforms and insufficient framework for property rights.

This resulted in series of mass demonstrations held in Tbilisi by the political Opposition in November 2007, demanding resignation of the government and changes in the constitution. To offer a democratic and constitutional mean of resolving the political impasse, president Saakashvili announced snap presidential elections to be held on January 5, 2008, as opposed to the originally scheduled planned autumn 2008.

The elections saw Saakashvili, acting on the platform “Georgia without Poverty” re-elected as Georgia’s president. This was soon followed with dramatic changes in the ruling cabinet, including Prime Minister level, and the new administration now continues the country’s general course towards economic prosperity and integration with the western world.

Along with the continued foreign assistance from Europe and the U.S. with much of the funds earmarked for state institutional reform and capacity building, increase in the economic growth of Georgia is primarily achieved through attracting private capital into the country’s economy. The forecast for 2008-2011 says that the GDP would continue to grow by approximately 7%, while IMF’s data for GDP in 2007 place Georgia in the same range with Morocco, Syria, Armenia, with approximately $1,800 of per capita income.