Caspian Crossroads Magazine

As  economic interests become increasingly important to Georgia, its people are making courageous efforts to escape the shackles of the past and realize their own dreams for tomorrow. The government's primary economic priority is to stimulate and attract foreign investment, which will require a stable political climate; sound macroeconomics policy; a healthy, vigorous and competitive domestic private sector; a legal and institutional framework which encourages investment without discrimination; a liberal exchange regime; improved management capacity in the public sector; and development of necessary physical and human infrastructures. 

ECONOMIC TRENDS IN GEORGIA 

Before the disintegration of the Soviet Union, Georgia had a relatively prosperous economy based, in part, on export of agricultural products such as citrus fruit, tea, grapes, wine, and brandy. There was also a fairly well-developed tourist industry. Industrial products included the extraction of metals, especially manganese and the manufacture or assembly of a range of industrial products, some of them involving advanced technology. Georgia is not the least developed or underdeveloped in the traditional sense of these terms; it is simply mis-developed. The collapse of the Soviet Union, the legacy of long-standing economic mismanagement under a command economy, and internal conflicts harmed the Georgian economy as significantly as they harmed other new independent states. 

 Since 1994, Georgia has moved toward political stability, and is currently directing attention towards rebuilding its economy and implementing economic reform. The years 1994 and 1995 have been years of planning, theorizing, and preparing legislation to open the way for reform. We expect 1996 to be the year of accomplishment. The accomplishments of the past 12 months suggest that we can attain this goal; we succeeded in our cooperation with the IMF, and now have enhanced the Systematic Transformation Facility (STF) arrangement to standby loans covering 1995-1996; and the World Bank supports macroeconomics stabilization and structural reform programs by providing Georgia with Rehabilitation Credit and numerous other credits in the transport, agriculture, municipal services, health care, education, and energy development sectors. 
 
Georgia's comparatively small area represents a fortunate combination of minerals, hydropower resources, fertile soils, and climatic conditions favorable to recreation and health resort development. Spas, recreation and tourism comprise one of the most promising sectors of the Georgian economy. The country has a really remarkable combination of seaside (the bathing season lasts as long as six months peer year) and mountainous areas with fantastic landscapes. Georgia has at least 500 springs of thermal mineral waters. Many of them naturally crop out onto the earth surface. They are used as table waters and for medical purposes. 

TRANS-GEORGIAN TRANSPORTATION INFRASTRUCTURE SUPPORTS REFORMS 

As the choke point for land transportation across the Caucasus to Armenia and Azerbaijan, Georgia is strongly committed to building a functional TransGe6rgian transportation infrastructure connecting the Caucasus and Central Asian regions. Georgia's strategic location on the Black Sea is one of the country's foremost natural assets, and it remains the only feasible country for commodity distribution in the Transcaucasus. Georgia's largest seaports, Poti and Batumi, are of vital importance not only for Transcaucasian countries, but also for Central Asian republics. 

LEGAL INFRASTRUCTURE EXPANDS INVESTMENT OPPORTUNITIES 

In the past 10 months we have been able to adopt several basic laws, such as the Law on Enterprises, which includes the main principles of the commercial code, the Banking Law, and an entire set of laws and decrees regulating the Privatization process. 

The new Law on Foreign Investment, adopted July 25,1995, will greatly reduce bureaucratic difficulties in obtaining foreign investments. The main advantages of the Foreign Investment Law include: 
 

•  Guaranteed rights for immediate repatriation of profit and capital:
•  Unlimited remittance of profit and capital:
•  Unlimited duration on foreign ownership:
•  Unrestricted (100%) foreign ownership:
•  No discrimination with respect to local investors.

ECONOMIC INCENTIVES SURROUNDING THE PIPELINE DEBATE 

On October 9 the Azerbaijan International Oil Consortium approved the multiple solution concept and agreed to use two pipeline routes to export crude oil from the vast Caspian Sea reserves; one through Russia and other through Georgia. Before committing itself to the long-term arrangements, the Consortium had selected routes for the early oil, which is the first years' production from Azerbaijan fields. 

We stood firm on the earlier position on the pipeline because the early oil decision will strongly influence the development of a future route through Georgia to the Turkish port of Ceyhan. The Georgian route was strongly supported by both Turkey and the United States. The recent decision of the Consortium supports our perspective, and is a second recognition of Georgia's sovereignty. Had the American-dominated Consortium decided  to bypass the Transcaucasian region under political pressure, our countries would have been prevented from strengthening independence over the next crucial five to six years, thus notably diminishing our ability to move quickly on the road toward democracy and a free market economy. 

The proposal to construct the pipeline from the vast Tengiz oil field in Kazakstan, through the Russian Autonomous Republic of Daghestan, and into Georgia may be of interest to Kazakstan and Russia as well; this route-starting from eastern Georgia-would parallel Azerbaijan's major oil pipeline to Ceyhan and minimize construction and maintenance costs. We suspect that there will be no excuses for missing such an exceptional chance; it is not only a commercial, but also geopolitical and geo-strategic decision. 

CONCLUSION 

It is insufficient to have good laws if those laws cannot be enforced. We succeeded in disarming illegal paramilitary formations and we must continue our hard work to combat racketeering and organized crime-measures which, fortunately, have been introduced with relatively   little pain, unnecessary complications, or human loss. We have really accomplished much in this area, but we have more to do to ensure the irreversibility of those accomplishments. Our leader, Eduard Shevardnadze, surviving a recent assassination attempt, has managed to agree with the parliamentary opposition on a Constitution which balances the executive and legislative power and ensures the continued maintenance of law and order, liberal values, and democratic institutions. 

At this crucial moment in Georgia’s history, the support of the United States and other Western nations is critical to our success. What happens in Georgia and countries around it today is important for what will happen in Europe and Asia tomorrow. We are encouraged by the strong belief of some influential people here in Washington, DC, that American security interests are directly affected by stability in Georgia and other new independent states. Our search for understanding of this fact is the motive behind our search for friends and supporters in the United States.