Georgia - Economic analysis of government policies, investment climate and political risk.






GEORGIA: Economic Policy Analysis

This site presents an analysis of the Georgian government's economic policies compared to a revised list of 34 economic policies as prepared by Ia Inadze with the McKeever Institute of Economic Policy Analysis (MIEPA) in Fall 2011.

To read the analysis scroll through this site. To learn more about the background policies, click here: Introduction and Policy Recommendations

To learn more about MIEPA, click here Return to MIEPA's Home Page

The study is by Ia Inadze, a Georgian native who currently [December 2011] lives in San Francisco; this study presents the Gerogian government's economic policies as compared to the MIEPA list of policies as outlined above. The ratings herein are based on the following rating scale:


5.0 Perfect Facilitation of Wealth Creation
4.0 Midway between Perfect and Neutral
3.0 Neutral Effect on Wealth Creation
2.0 Midway between Neutral and Obstructionist
1.0 Perfectly Obstructionist to Wealth Creation
[Rating scale copyright Mike P. McKeever, 2011. Used herein with permission]

To read a disclaimer about the analysis in this file, scroll to the bottom of the file.

Return to MIEPA's Home Page





        1               4.0          12.0             15.0        80 %

        2               2.5           7.5             15.0        50

        3               4.0          12.0             15.0        80

        4               3.0           9.0             15.0        60

        5               2.0           6.0             15.0        40

        6               4.0          12.0             15.0        80

        7               4.0          12.0             15.0        80

        8               4.0          12.0             15.0        80

        9               4.0          12.0             15.0        80

        10              3.5          10.5             15.0        70

        11              2.0           6.0             15.0        40

        12              2.5           5.0             10.0        50

        13              4.0           8.0             10.0        80

        14              4.0           8.0             10.0        80

        15              4.5           9.0             10.0        90

        16              3.0           6.0             10.0        60

        17              4.0           8.0             10.0        80

        18              4.5           9.0             10.0        90

        19              4.0           8.0             10.0        80

        20              2.0           4.0             10.0        40

        21              3.5           7.0             10.0        70 

        22              4.0           8.0             10.0        80

        23              4.0           8.0             10.0        80

        24              1.0           2.0             10.0        20

        25              1.0           2.0             10.0        20        

        26              1.0           2.0             10.0        20

        27              4.0           8.0             10.0        80

        28              1.0           2.0             10.0        20

        29              2.0           2.0              5.0        40 

        30              2.0           2.0              5.0        40

        31              4.0           4.0              5.0        80

        32              4.0           4.0              5.0        80

        33              2.0           2.0              5.0        40

        34              4.0           4.0              5.0        80

   TOTAL              107.0         233.0            365.0        63.8%
                      =====        ======            =====        =====


1) Freedom from Internal Control: 4.0

Georgian people put high value on the freedom of expression and press. Post-Soviet governments chose to allow independent media. But as media grew more and more critical of the chaos, abuse of power and rampant corruption in the country, government pressure strengthened. There were two attempts to shut down Rustavi 2 TV, the killing of a prominent TV anchor, Giorgi Sanaia, and numerous other attacks against journalists. The biggest victory won by independent Georgian media has been the free and thorough coverage of the rigged parliamentary elections of 2003, leading to the Rose Revolution. Mainstream media reported that the results of exit polls and parallel vote tabulation contradicted numbers released by the Central Election Commission. Nevertheless, President announced that “Everyone has the right to freely receive and impart information, to express and impart his/her opinion orally, in writing or by in any other means.” Also, The Constitution of Georgia and the Law on Freedom of Speech and Expression guarantee freedom of press. The Law on Broadcasting regulates activities in the broadcast sector.

Source: Date of access: 12/1/11

2) Freedom of Speech: 2.5

In 2004, an important piece of legislation came into force after a democratic breakthrough and a five year struggle. The "Draft law on Freedom of Speech and Expression,” it was adopted by the Georgian Parliament shortly after it gained the approval of the Council of Europe Experts. The law sets out free speech guarantees, decriminalizes criminal defamation, envisages high protection for political speech, and includes clear distinction between private and public persons and facts and value judgments. However, the judiciary of Georgia has experienced diminished capacity due to constitutional amendments adopted in 2004 that increase presidential influence over the judiciary. However, every individual has the right to freedom of speech, thought, conscience, religion and belief.

However, freedom of speech doesn’t really exist in Rep. of Georgia especially when it comes to Media. Recently (12/1/11) there was a huge demonstration in front of Maestro Television, regarding shutting down the Mastro or terminating the owners and directors of that Television. It happened because Mastro was telling people the truth about Government and corrupted people in Rep. of Georgia. And Gov. didn’t like that.

Source: Date of access: 12/6/11

3) Effective , Fair Police Force: 4.0

Mikhail Saakashvili, president of Republic of Georgia fired all corrupted police force and hired new recruits, he emphasized that “The old police used to beat up people. They basically used what amounted to torture to extort the evidence. And the new police force was educated and is controlled in a way where nothing like this--there is zero tolerance towards torture. Zero tolerance.” Everybody thought that there was no way to keep crimes checked unless they occasionally beat them up or managed them with beating them up or blackmail them into something. But, examples show that they can reverse the crime trend even by being civilized.

And it took the president two to three months to find good guys and to give them initial training at an academy which is sponsored by the US. But what they also did, they gave them new, nice uniforms that look very much unlike the old Soviet ones. They gave them new, nice German cars, American radios, the US kind of looking badges and painting.

Source: –Date of access:

4) Private Property: 3.0

The process for purchasing property in Georgia can prove frustrating, as changes in law only came about relatively recently and the professionalism that would be expected of real estate agents isn’t present 100 percent of the time – though that isn’t to say there aren’t good agencies out there! As always with transactions of this type, a respected local lawyer should be employed to check all dealings are legally binding and that there are no mistakes in documentation and the like.

Once a property is decided upon, a pre-contract should be signed by the buyer, seller and a notary and a deposit paid, usually of around 15 percent. The documentation is then sent to the local Land Registry for title deeds to be drawn up and made legal – this process was only introduced in the last few years and has been known to be slow at the best of times, though the service is getting better. Whilst the property is legally being signed over to the buyer, the main contract can be signed and the remainder of the fee paid. Once the title is received, fees to lawyers and notaries can be settled, along with any applicable taxes. If people want to sell their house first they have to provide the document that that house really belongs to them and only two documents are necessary for that. One has to be “privatization” document and other one has to be known who owns this house (how many people are under the privatization) that can be mother and children, just children or father. When it’s known who really owns the house during the selling process of the house they have to be removed from that document and will have to register to that person who will buy a house (new owner).

Source: - Date of access: 12/1/11; Personal

5) Commercial Banks: 2.0

The banking system in Georgia has passed through the same stages in its development as the banking system of the other countries that appeared after the break-up of USSR Central banks and sector-based state banks were created in the republics even before the independent states were formed. This new system functioned in practice according to the old rules, continuing to provide credit for certain sectors and industries of the national economy on a planned basis. At the same time, with the liberalization of legislation, new commercial banks began to appear. Commercial banks arose as a result of privatization or were founded on the basis of state firms. Moreover, individuals and private firms could obtain a license for banking activity. The liberal licensing policies, as well as the declines in the minimum amounts of authorized capital caused by high inflation, prompted the appearance of a host of new commercial banks in each republic.

Source: -Date of access: 12/1/11

6) Communication Systems: 4.0

Georgian business culture is noticeably less formal than in other countries. Shake hands with everyone upon arriving and leaving; maintain eye contact during the greeting; the person of the higher status should initiate the handshake. It is polite to wait for a woman to extend her hand. Academic and professional titles are commonly used with the surname, and always wait until invited before moving to a first-name basis. Business Card Etiquette, Business cards are exchanged without any formal ritual. It is a nice touch to have one side of your business card translated into Georgian or Russian. Georgians are not afraid to express their emotions no matter how bad. Do not be surprised if people do display anger or extreme disappointment during business. Similarly Georgians can be emotive speakers. When discussing a topic, voices may become raised and hand gestures increased. Although Georgia has a relationship orientated culture, they can also be very direct.

At the beginning of meetings introductions are the norm. These are generally made in order of seniority although women are often introduced first. They are prepared to give an overview of their background, experience and general purpose for their visit. It can also prove fruitful to send a full biography of everyone who will attend the meeting beforehand to save time and also offer a more thorough introduction.

Source: of access: 12/1/11

7) Transportation: 4.0

Republic of Georgia has much better transportation access then they had before. For example, trains all over the city, buses, and Marshytka (car which looks like a Van). And they run not only in the city but in the small towns as well.

In 1990 Georgia had 35,100 kilometers of roads, 31,200 kilometers of which were paved. Since the nineteenth century, Tbilisi has been the center of the Caucasus region's highway system, a position reinforced during the Soviet era. The country's four principal highways radiate from Tbilisi roughly in the four cardinal directions. Route M27 extends west from the capital through the broad valley between the country's two main mountain ranges and reaches the Black Sea south of Sukhumi. The highway then turns northwest along the Black Sea to the Russian border. Tbilisi was one of the first cities of the Soviet Union to have a subway system. The system consists of twenty-three kilometers of heavy rail lines, most of which are underground. Three lines with twenty stations radiate from downtown, with extensions either planned or under construction in 1994. The system is heavily used, and trains run at least every four minutes throughout the day.

Source: - Date of access: 12/1/11

8) Education: 4.0

The education system of Georgia has undergone sweeping modernizing, although controversial, reforms since 2004. Education in Georgia is mandatory for all children aged 6–14. The school system is divided into elementary (6 years; age level 6–12), basic (3 years; age level 12–15), and secondary (3 years; age level 15–18), or alternatively vocational studies (2 years). Students with a secondary school certificate have access to higher education. Only the students who have passed the Unified National Examinations may enroll in a state-accredited higher education institution, based on ranking of scores he/she received at the exams. Most of these institutions offer three level studies: a Bachelor's Programs (3–4 years); a Master's Programs (2 years), and a Doctoral Programs (3 years). There is also a Certified Specialist's Programs that represents a single-level higher education programs lasting for 3–6 years. As of 2008, 20 higher education institutions are accredited by the Ministry of Education and Science of Georgia.

The standard at Tbilisi State University is 15 students per teacher; and this number varies in other institutions depending on the profile. At secondary schools there were 808,000 students and 90,200 teachers in 1995 (among these 163,000 pupils and 14,000 teachers in Tbilisi). The dropout student are not as many as in U.S. because high school students have so much pressure from parents that they never disobey their parents and do everything what they say. While Georgians stay at school American high school students drop out. For example, every 29 seconds, another student gives up on school, resulting in more than one million American dropouts a year – or 7,000 every day. Moreover, studying in Georgian high schools are ten times harder than in American schools because Georgians are expected to do more than they are assigned (homework), getting a good grade is a huge deal there, if student bring C (3point)home they most likely will be punished or grounded. While American students have more freedom and free choi ce of education.

Source: –Date of access: 12/1/11 - Date of access 12/1/11.

9) Social Mobility: 4.0

Customary practices in the care of infants have been abandoned, such as the practice of rearing young infants in a special type of cradle that restricted the movement of a child. Children are the focal point of the family, and much attention is paid to their education and development, especially in the educated classes. Because kindergartens are less available today, retired grandparents often care for the children. Higher education and a diploma are highly valued even when the quality of education is unsatisfactory. It is almost impossible to have a career without a diploma, although higher education is not always correlated with a higher income. However, students graduating from universities have high chance to find a job with their profession but not always and not everywhere, but Tbilisi. People who finish universities they still seek for connections to find better paid jobs even though they still are able to find something (but low paid jobs).

Georgian Education Minister Alexander Lomaia played a prominent role in the Rose Revolution. Ever since then he has been trying to revolutionize the country's crumbling, Soviet-style education system. "After so many years of having widespread corruption at the entrance exams, we have finally come up with a system that almost surely excludes any possibility of bribe-taking." Today’s educational system is way different and lot better. Over the past year, the school curriculum has been modernized and dozens of head teachers have been replaced. Many professors and dozens of private universities have been disqualified from teaching. Mr. Lomaia admits that reforming the education system has been harder than he could have imagined because students have to study really hard to pass any exam, or even simple test.

Source: - Date of access: 12/1/11; - Date of access: 12/1/11; Personal

10) Freedom from Outside Control: 3.5

On 6 October 2010, the International Ratings Agency "Moody's" published Georgian sovereign credit rating with category Ba3 (Long Term Local and Foreign Currency Rating), that means, that Georgia's sovereign rating has improved with one step ahead. This rating shows the important progress of the country in building of social, political and economic institutions, existing healthy business environment, "unique in the region" and a preferential government loan. However, other countries can’t have control Rep. of Georgia anymore as Russia used to do. Russian army can’t come in the city and arrest the innocent civilians and even criminals because it’s not under their control. Not only Russia but any other country doesn’t have any right and power to come in the city and persecute any Georgian.

"Moody's" rating Ba3 represents BB-rating according to the Fitch and Standard & Poor's credit ratings. Georgia enjoyed such rating before the 2008 August Russian aggression conducted against Georgia. It is important that Georgia returned to that estimation that will increase the attractiveness of Georgia and will facilitate the flow of foreign investments and international capital to the country. It should be underlined, that granting the next credit rating to Georgia has been made as a result of the reforms carried out and anti-crisis program realized by the Government of Georgia. The IMF agreed to lend Georgia $750 million in September 2009. Gilauri(minister) said on May 15 (2009) that Georgia would probably receive three-quarters of the aid by mid-September. The government expected and had received $2 billion of aid contracts in the next three months, in addition to $1.3 billion already was sealed, he said. Georgia is like a baby attached to foreign aid, always relied on aid from other countries, mostly from United States.

Source: of access: 12/1/11;– Date of access: 12/1/11 ; Personal

11) Freedom from outside control: 2.0

Georgia faces many challenges in expanding trade. The major market to which Georgia has traditionally been linked is Russia. (For example, at one time nearly 100% of the Soviet Union's citrus fruits were grown in Georgia.) In 2006, Russia imposed bans on all Georgian exports of wine, fruits and vegetables, and mineral water; severed all direct transportation links; and eliminated postal service and visa issuance. Georgia has since (2011) reoriented its trade relations toward the EU, Eastern Europe, the Middle East, North America, and elsewhere. Georgia’s foreign trade turnover in 2010 was $6.731 billion, up 19% from 1 year earlier. The value of exports was $1.58 billion, up 38% from 1 year earlier, and the value of imports was $5.16 billion, up 14.5 % from 1 year earlier. Thus, exports were higher than imports and it didn’t balance t all.

Source: - Date of access: 12/1/11; Personal

12) Foreign Currency Transactions: 2.5

The Lari (Georgian money) is now fully convertible for current account transactions. The official currency is the Lari (GEL), which is divided into 100 tetri. Cash is the preferred method of payment in Georgia but major credit cards are accepted in established restaurants, hotels and shops in Tbilisi. Euros, Roubles or US Dollars can be exchanged at any of the widespread bureau de change, but other currencies should be changed at the bank. Traveler’s cheques in Euros or US Dollars are recommended and ATM machines can be found in the major cities. Trade on the foreign exchange market can amount to US $500 million a day.

However, Georgian people keep buying American Dollars and Euro on order in any way to avoid inflation. Currency: Lari, 100 tetri=1 lari Currency code GEL. Exchange rates:1 EUR = 2.25 GEL (October 2011)1 GBP = 2.59 GEL (October 2011)
Source: Personal –Date of access: 12/1/11.

13) Border Control: 4.0

As of 2011 there is no such a thing as illegal import because the borders are monitored and protected even though there are no contrabandists anymore. Every little thing people take with them from Georgia to other country their luggage and clothes are always carefully checked. Border control is accurately supervised by military and administration of border security.

During the Shevardnadze’s (former president of Rep. of Georgia) presidential years country was seriously suffering with border control over other countries around the world. Where people used to travel to other countries and were ripped off on the borders of Armenia, Azerbaijan, Turkey because Georgian government had “their people” meaning Mafia everywhere to take money, goods mostly from bus, and from train, passengers who cross the border. At that time contraband was very “legal” thing because government was highly involved with contrabandist who used to deliver or bring drugs, guns, and gold in Georgia from other countries. They also used to confiscate goods, money, souvenirs, and clothes from the passengers.

Source: Date of access: 12/1/11 Personal

14) Currency: 4.0

The currency of Georgia is the Georgian Lari, with one Lari equaling 100 Tetri. Notes come in denominations of GEL500, 100, 50, 20, 10, 5, 2 and 1, with coins coming in denominations of 50, 20, 10 and 5 Tetri. Smaller denominations of notes should be carried, as there is no guarantee there will be enough money to cover change in smaller establishments. Special exchange shops are available to change US Dollars, Pounds Sterling and Russian Roubles, but other currencies must be exchanged in banks. Traveller’s cheques are accepted, though to avoid additional conversion charges these should be in either US Dollars or Pounds Sterling. However, Lari is the main currency in Georgia, mainly used every small town or city of Georgia. Thus, for tourist they should exchange other currencies into Lari because they will need that the most.

All kinds of payments (shopping in stores and markets, paying restaurant, hotel and other services) are made in cash. Only several large hotels and banks accept credit cards and cheques.

Source: - Date of access: 12/1/1 -Date of access: 12/1/11

15) Cultural, Language Homogeneity: 4.5

Area: 69,700 sq km (N.B. 20% of Georgia’s territory is not under Georgian Government control.) Population: 4.4 million. Capital City: Tbilisi (population: 1.1 million) People: 71% Georgian (including subgroups of Svanetians, Mingrelians, Ajars), 7.7% Armenian, 6.5% Russian, 6% Azeri, 3% Ossete, 1.8% Abkhaz Languages: Georgian 71% (official), Russian 9%, Armenian 7%, Azeri 6%, other 7% note: Abkhaz (official in Abkhazia). But the main language is Georgian and its extremely hard to live in Georgia if you don’t speak Georgian because it is used everywhere. For example, jobs, clinics, banks and so on. Georgian language is primary and it makes easier for people to live in Georgia with knowing that language, Russian is still considered as second language but not as much as used to in Former Soviet Union. Religion(s): Orthodox 84%, Muslim 9%, Armenian Apostolic 4%. Currency: Lari (GEL). On October 2, 1995, the government of Eduard Shevardnadze replaced the provisional coupon currency with the lari, at a rate of one million to one. It has remained fairly stable since then. Georgia is a sovereign state in the Caucasus region of Eurasia. The Capital of Georgia is Tbilisi. Georgia is a unitary, semi-presidential republic, with the government elected through a representative democracy. Georgia is considered as homogeneous country.

Many things have been changed in a good way after collapsing of Soviet Union. Republic of Georgia started gaining more trust with businessmen, investors after Saakashvili cleaned out the city from corrupted government and Mafia. Georgia is making huge progress and is becoming more advanced in many areas. For example, more jobs, better health plans (for families and individuals), higher salaries, highly trained army, better protected lands, less crimes in the city, and small towns as well. Thus, if people compare to what Georgia looked like 5-7 years ago they would say its lot better now. The majority of Georgian population is happy with president Saakashvili because he is the one who made the change. Saakashvili promised better living conditions for people and more jobs and he is on that track.

Source: – Date of access: 12/1/11; - Date of access: 12/1/11; Personal

16) Political Effectiveness: 3.0

The Georgian people’s Rose Revolution of November 2003 strove to achieve a democratic society, improve human rights and living conditions, reduce corruption, and enhance the national economy. Accordingly, the Revolution and its heroes, led by Mikhail Saakashvili, received the support of the Bush administration, the EU, and its member states. Three years later, the euphoria that followed the Revolution, both within and outside the country, has gradually been replaced by more realistic assessments of the results of the post-revolution policies to date.

Georgian Red Cross (which is funded by U.S.) has very quick and effective response to people who were victims of earthquake, floods. Georgian government always repairs damaged houses, buildings, schools were people live or do other things, thus, Government maintains everything because of their safety. As the corruption has been significantly decreased in Republic of Georgia, you will find more businessmen and investors there because they aren’t scared (not anymore) to have business with Georgia which used to be lot dangerous, impossible and pointless. After new president came in Georgia many things has been changed in an effective way. He is a good businessman, intelligent, ambitious, and single-minded. Saakashvili is trying to change things in a good direction to give people (Georgians) opportunities for better life, and future success in many areas such as educational and career.

Source: Date of access: 12/1/11; Personal

17) Institutional Stability: 4.0

Republic of Georgia had seriously become more stabilized country than it used to be many years ago. After Saakashvili became president everything negative, violence and instability started changing towards good direction. Today, its little bit easier to find a job, lot easier to speak out, and lot lighter to have a business in Georgia. When everything used to be either impossible to do or have (business). In Shevardnadze’s (former president) period having successful business in Republic of Georgia was impossible because country was corrupted by the Government and Mafia who wouldn’t give a business owners “freedom” to actually own a business without paying them (Mafia) lots of money. But today tourism and investment have been increased radically which brings huge profit and success to the country. Also, having even a small shop in Republic of Georgia used to be very hard to handle without good connections (knowing local authorities) to maintain the safety in the shop, if businessman didn’t have connection with “Mafia” that time their shops would be robbed and vandalized all the time. But not anymore, and that is why Republic of Georgia is developing faster and becoming more successful country than it used to be.

Source: Date of access: 12/1/11; Personal

18) Honest Government: 4.5

The situation has been drastically changed in a good way. “Under Table” system doesn’t work in Rep. of Georgia anymore. There is left only few corrupted people who will be gone soon too because president Saakashvili does his best to clean the city from all corrupted administrative workers, such as from government and from Law Enforcement. “A prominent feature of Georgian life both before and after the Soviet period has been the influence of a powerful criminal network, the ‘thieves-in-law’. Its rise and endurance is closely linked to the changing character of the Georgian state,” says Gavin Slade. An interesting and somewhat neglected aspect of the study of post-Soviet Georgia is the particular character of the influential criminal network known in the Georgian language as Kanonieri Qurdebi (“thieves-in-law”). How can the endurance of this phenomenon be understood, and what does it reveal about the nature of Georgian politics and society in the two decades of the independent. The popular revolt of November 2003 known as the “rose revolution” ousted Shevardnadze and brought to power a young successor, Mikheil Saakashvili. His government launched an extensive anti-mafia campaign whose measures included the confiscation of property; new criminal legislation; and reform of prisons, police, and civic education. In December 2005, it was made a criminal offence to belong to the qurduli samkaro (“thieves’ world”); the very notion of “thief-in-law” now marked a boundary of criminality. Saakashvili definitely changed the structure of controlling the government and people in Rep. of Georgia, meaning out of 10 criminals you might barely find one because he literally “cleaned the city” out from Mafia.

Georgia’s thieves-in-law had responded to the government crackdown by following a useful survival-strategy for mafias in trouble: transplantation. Many moved to Russia, where the press highlighted the fact that 33% of all thieves-in-law from post-Soviet countries were Georgian (the highest ethnicity ahead of the Russians). But others moved across Europe.

Source: – Date of access: 12/1/11; Personal

19) Common Law: 4.0

Georgia is not a country of common laws. Further reforms have aimed at increasing respect for and strengthening the rule of law, such as 2006 constitutional amendments intended to increase the independence of the judiciary and 2007 legislation banning ex parte communication (prohibiting parties to a case from communicating with judges during the pre-trial investigation period and the trial). Legislation establishing a legal aid office was passed, making available assistance and representation in court proceedings to those indigent who request it. The Parliament passed a new, Council of Europe-compliant Criminal Procedure Code in October 2009, which entered into force in October 2010. The code encourages accountability and professionalism in the police force by barring the use of illegally seized evidence and includes better-defined rights and due process protections for those arrested.

The code provides for the right to a jury trial in cases of aggravated murder, and includes measures intended to increase the speediness of trials and to allow for equal access by the defense to case discovery. Implementation of judicial reforms is ongoing, and has not fully addressed claims that the judiciary remains under pressure from the executive branch. The internal management process for hiring, promotion, transfer, and discipline of judges remains ill-defined. The government launched an aggressive campaign to combat trafficking in persons, and Georgia has had a Tier 1 ranking in the State Department’s annual Trafficking in Persons Report since 2008.

Source: - Date of access: 12/1/11; Personal

20) Central Bank: 2.0

The National Bank of the Republic of Georgia (hereinafter, the National Bank or the NBG) is the central bank of the Republic of Georgia and a legal entity. It doesn’t keep inflation low and it doesn’t promote the jobs in Rep. of Georgia. There is no Central Bank in Republic of Georgia but there is National Bank. Moreover, NBG acts in accordance with this Law and the legislation of the Republic of Georgia, basing on the rules and procedures, adopted by the international banking practice. It has the right to make agreements and contracts, purchase, own and dispose of real estate and movable property, be a plaintiff and a defendant in the court of law.

The basic functions of the NBG is to : work out , approve and pursue the monetary policy of the Republic of Georgia; work out, approve and pursue the currency policy of the Republic of Georgia; carry out licensing and supervision of banking activity and currency exchange offices at the banks; own, keep and dispose of official international reserves; be the banker, advisor and fiscal agent of the Republic of Georgia; facilitate effective functioning of the taxation system; facilitate establishing of a reliable and stable monetary system aiming at defending the interests of depositors.

Source: - Date of access: 12/1/11; Personal

21) Domestic Budget Management: 3.5

In the most recent year, total government expenditures, including consumption and transfer payments, rose to 36.4 percent of GDP. The budget deficit peaked at 9.3 percent of GDP, and public debt surpassed 30 percent of GDP. Privatization of state-owned enterprises is winding down. Ministry of Finance of Georgia reviews the submits information and, taking into account existing resources, no later than in 15 days after publishing of the state budget law making a decision about quarterly and/or monthly breakdown of the state and consolidated general budgets (in their expenditure part). The Budgetary Code of Georgia. Article 47.2.In the event the Parliament of Georgia fails to adopt draft state budget prior to the third Friday of December, the same draft budget or the amended document jointly prepared by the Conciliation Commission of the Government of Georgia and the members of the Parliament may be voted again within the period of 10 days, but no later than December 31. The Budgetary Code of Georgia. Article 39.11.

The Supreme Council of the Autonomous Republic approves the new annual republican budget before the beginning of a new budgetary year. The Budgetary Code of Georgia. Article 102.2.Local self-government representative body publicly reviews the budget and before the beginning of a new budgetary year makes a decision on adoption of the budget of the local self-government body.

Source: - Date of access: 12/1/11; Personal

22) Government Debt: 4.0

In many cases, the economic disruptions created by the break-up of the former Soviet Union were compounded by diverse shocks, including armed conflicts and massive changes in the terms of trade. In several cases, a large volume of external debt has also been accumulated, undermining prospects for growth and poverty reduction. Total Government Gross Debt (% of GDP) for Georgia in year 2010 is 39.072 %this makes Georgia No. 97 in world rankings according to Total Government Gross Debt (% of GDP) in year 2010. The world's average Total Government Gross Debt (% of GDP) value is 46.17 %; Georgia is 7.10 less than the average. In the previous year, 2009, Total Government Gross Debt (% of GDP) for Georgia was 37.30 % Total Government Gross Debt (% of GDP) for Georgia in 2010 was or will be 4.76% more than it was or will be in 2009. In the following or forecasted year, 2011, Total Government Gross Debt (% of GDP) for Georgia was or will be 41.69 %, which is 6.71% more than the 2010 figure.

Despite the severe damage the economy of Georgia suffered due to civil strife in the 1990s, Georgia, with the help of the IMF and World Bank, has made substantial economic gains since 2000, achieving robust GDP growth and curtailing inflation.GDP growth, spurred by gains in the industrial and service sectors, remained in the 9–12% range in 2005–07. In 2006 and in 2008, the World Bank named Georgia the top reformer in the world.

Source: – Date of access: 12/1/11; - Date of access: 12/1/11.

23) Economic Statistics: 4.0; for population; 3.0 for outsiders.

Georgia’s economic freedom score is 70.4, making its economy the 29th freest in the 2011 Index. Its overall score is unchanged from last year, with gains in monetary freedom largely cancelled out by increased government spending. Georgia is ranked 15th out of 43 countries in the Europe region, and its overall score is higher than the world average. The Georgian economy has maintained its status as a “mostly free” economy in the 2011 Index. Notable reforms in business freedom, trade freedom, fiscal freedom, and labor freedom have spurred economic development in recent years. Despite a sharp contraction due to the Russian invasion and the global recession, the economy has averaged 4.8 percent annual growth over the last five years. Nowadays people in Republic of Georgia have better chance to be fully informed about real things and conditions. It’s also possible to get the latest news on TV and radio about to what’s going on in politics and in economy.

Georgia is well positioned to resume economic expansion. The business environment is supported by a competitive tax regime and an efficient regulatory framework. Reforms in public financial management are ongoing. Corruption weighs heavily on overall economic freedom, but anti-corruption measures since 2003 have made some progress.

Source: - Date of access: 10/20/11; Personal

24) Protection of Public Health and Safety: 1.0

Western standard medical care in Georgia is limited, but Georgian healthcare continues to improve. There is a shortage of medical supplies and capabilities outside of Tbilisi, Kutaisi, and Batumi. Elderly travelers and those with pre-existing health problems may be at risk due to inadequate medical facilities. Travelers are encouraged to bring medicine to treat diarrhea, which regularly afflicts newcomers. Georgian doctors and hospitals often expect immediate cash payment before rendering medical services.

Many people suffer with diseases and they don’t have money to go to hospital because it’s way too expensive. Many citizens are unemployed and they can’t afford any kind of doctor’s check up, thus, they do blood test once in 2-3 years which should be done every year. Hospitals in Tbilisi are more organized and cleaner than it used to be years ago but it’s still not clean enough not to infect the patients. Nurses have minimum pay which pays only their bills and they hardly support their families. Moreover, HIV/AIDS adult prevalence rate: less than 0.1% (2007 est. People living with HIV/AIDS: 2,700 (2007 est.) Deaths: less than 200 (2003 est.) Infant mortality rate: total: 16.22 deaths/1,000 live births male: 18.21 deaths/1,000 live births female: 13.97 deaths/1,000 live births (2009 est.)

Good information on vaccinations and other health precautions can be found via the Centers for Disease Control and Prevention (CDC) website. For information about outbreaks of infectious diseases abroad, consult the World Health Organization (WHO) website. The WHO website also contains additional health information for travelers, including detailed country-specific health information. Tuberculosis is an increasingly serious health concern in Georgia. For further information, please consult the CDC's information on TB.

Sources: – Date of access: 12/1/11; Personal

25) High Wage Policies: 1.0

Nowadays living in Republic of Georgia is very hard because there are no sufficient jobs for people and if there is some they receive the low wage (exact amount is not founded). It’s very hard to support oneself and families because their pay is very low just to pay for bills, to buy some food, and to have little money to live till next paycheck. People can’t afford to get out from the country or even from the city to go somewhere like they used to do before Soviet Union broke-up. Also, credit system is extremely poor and undeveloped, thus, people pay buy everything only with cash.

The break-up of the Soviet Union led to Georgia’s independence, but it also brought hardship for many Georgians, and especially for rural people. More than 80 per cent of the country’s rural people depend entirely on their own farms for subsistence, and a typical household consumes more than 70 per cent of what it produces. More than half of the labor force works in agriculture, but the sector produces less than one fifth of gross domestic product (GDP). Productivity is low, underemployment and unemployment rates in the sector are high, and income is inadequate. Overall, and especially in rural areas, households headed by women with children are particularly vulnerable to poverty. Although women have equality under the law, in practice Georgian families are strongly patriarchal and women are traditionally considered homemakers. They generally have fewer employment opportunities and comparatively lower wage levels.

Source: - Date of access: 12/1/11; Personal.

26) Environmental Protection: 1.0

Georgian Government does pretty much nothing (2011 year) to make better environment for population. Beginning in the 1980s, Black Sea pollution has greatly harmed Georgia's tourist industry. Inadequate sewage treatment is the main cause of that condition. In Batumi, for example, only 18 percent of wastewater is treated before release into the sea. An estimated 70 percent of surface water contains health-endangering bacteria to which Georgia's high rate of intestinal disease is attributed.

The war in Abkhazia did substantial damage to the ecological habitats unique to that region. In other respects, experts considered Georgia's environmental problems less serious than those of more industrialized former Soviet republics. Solving Georgia's environmental problems was not a high priority of the national government in the post-Soviet years, however; in 1993 the minister for protection of the environment resigned to protest this inactivity. In January 1994, the Cabinet of Ministers announced a new, interdepartmental environmental monitoring system to centralize separate programs under the direction of the Ministry of Protection of the Environment. The system would include a central environmental and information and research agency. The Green

Party used its small contingent in the parliament to press environmental issues in 1993. As nobody ever took environmental issue seriously it continues to be still hazardous for people living in Republic of Georgia. Also, Government does nothing to improve environmental protection and to decline the harmful condition for people.

Source: – Date of access: 12/1/11; Personal

27) Strong Army: 4.0

The GAF were established in the early 1990s from former Soviet Army units on Georgian soil, irregular militias, and Georgian personnel returning from other posts within the former Soviet Armed Forces. Georgia has very physically powerful and tough soldiers; they will do everything to protect their people and land. In 2011 Russian army attacked Georgia and killed many civilians in small towns of Georgia but Georgian army didn’t give up even though Russia has strong army and they have many different weapons, Georgia’s army attacked Russia’s army and made them to pull back. Georgian Army is considered very strong army; they will give their lives for their Georgian people and for their country; they are very patriotic and dedicated to their country.

The structure of the Georgian Land Forces is based on brigade and battalion sized military units. The main operational regular force consists of five infantry and two artillery brigades. The Army Brigades consist of several battalions and companies having manpower of up to 5.500+ each including non-combat personnel. The overall strength of Land Forces is 36,553 from which 21 are high ranking officers, 6,166 officers and sergeants, 28,477 corporals, 125 Cadets and 388 civilians

Source: - Date of access: 12/1/11; - date of access: 12/1/11; Personal.

28) Foreign Trade Impact: 1.0

The Soviet Socialist Republic of Georgia was one of the most prosperous areas of the Soviet Union. Political turmoil following Georgia’s independence had a catastrophic effect on the country’s economy. Today, the largest share of Georgia's GDP is produced by agriculture, followed by trade, manufacturing, and transport. Georgia's main exports are metals and ores, wine, and nuts. Although Georgia experienced some years of growth in the mid-1990s, it was significantly affected by the Russian economic crisis of 1998-99. Exports GDP: Turkey 14.1%, Azerbaijan 11.2%, Bulgaria 10%, US 9.8%, UK 9%, Canada 6.7%, Ukraine 6.1% (2010)..Imports GDP: Turkey 15%, Ukraine 9.2%, Azerbaijan 8.5%, Russia 6.5%, Germany 6.1%, US 5.9%, China 5.4% (2010)..Trades in Republic of Georgia is very poor and country can’t depend on to its own profit for country’s success.

GDP growth for 2010 is conservatively estimated at between 2% and 3%, although some predictions range up to 5%. In response to the damage suffered during the conflict, 38 countries and 15 international organizations pledged to provide U.S. $4.55 billion to Georgia at the Brussels donors’ conference on October 22, 2008. Of the U.S. $4.55 billion, U.S. $2 billion are grants and the rest consists of low-interest loan guarantees.

Source: - Date of access: 12/1/11; - Date of access: 12/1/11; Personal

29)Management of Foreign Currency Budget: 2.0

Georgia's economy has traditionally revolved around Black Sea tourism, cultivation of citrus fruits, tea and grapes; mining of manganese and copper; and output of a big industrial sector producing wine, metals, machinery, chemicals, and textiles.

Like many post-Soviet countries, Georgia went through a period of sharp economic decline during 1990s, with high inflation and large budget deficits, due to persistent tax evasion. In 1996 Georgia's budget deficit rose to as much as 6.2%. During that period international financial institutions played a critical role in Georgia's budgetary calculations. Multilateral and bilateral grants and loans totaled 116.4 million “lari” in 1997 and totaled 182.8 million lari in 1998. Exports $1.134 billion (2009 est.) Export goods scrap metal, wine, mineral water, ores, vehicles, fruits and nuts. Main export partners Turkey 19.9%, Azerbaijan 14.6%, Canada 10.3%, Armenia 7.8%, Ukraine 7.3%Bulgaria 7.2% (2009)

In recent years, Georgia became a major exporter of electricity in the region, exporting 1.3 billion KW•h in 2010. Hydropower stations of Georgia produce 80-85% of the electricity utilized within the country, the remaining 15-20% is produced by thermal power stations. According to Ministry of Energy, so far Georgia has been exploiting only 18% of its hydro resource potential.

Source: – Date of access: 12/1/11; Personal.

30) Layers of Collective Action: 2.0

There is no election system where you can vote for any other boards such as school and city council but only presidential election. President can be elected only for five year term by the people. The Parliament of Georgia, also known as the Umaglesi Sabcho (Supreme Council) has 235 members, elected for a four year term, 150 seats by proportional representation and 75 in single-seat constituencies and 10 members represent displaced persons from the separatist region of Abkhazia. The electoral system adopted in August 1990, which represented a compromise between competing versions put forward by the Patiashvili government and the opposition, created the first truly multiparty elections in the Soviet Union. The new Georgian election law combined district-level, single-mandate, and majority elections with a proportional party list system for the republic as a whole.

This way apparently makes things harder for people because if they have a problem and want to solve it in authorized order then they have to go through many different and harsh processes before they get any result, and this is called a bureaucracy.

Source: - Date of access: 12/1/11; Personal

31) Pro-business Climate: 4.0

Georgia has a liberal business environment, relatively low levels of corruption, modernizing infrastructure, enviable proximity to other high-growth markets in multiple regions, and a government that gets outsized attention from the West; by many measures, this small Caucasian republic is an emerging market investor’s dream. But to most investors, Georgia doesn’t represent a business opportunity as much as a fault line of conflict and upheaval.

While the Shevardnadze era might seem like another world to many Georgian today, the Rose Revolution only took place about 8 years ago. And within that time, Georgia has also been beset by the protests of 2007 and 2009 and, of course, a war in 2008. That’s a lot of troubling activity to fit in the space of less than a decade.

Looking at it that way, it’s nothing less than a minor miracle that Georgia has been able to attract any investors at all. The Georgian government may have swapped their plutocratic structures for more modern institutions and Georgian President Mikheil Saakashvili may speak good English peppered with American colloquialisms, but that doesn’t change the reality that Georgia is an eminently high-risk investment prospect for the unflappably bold or the moderately insane. The idea, of course, is that placing one’s chips on Georgia runs the chance that the return would be higher in a ‘safer’ market like, say, Turkey or South Korea. Georgia already has a steep hill to climb to attract investors. And not just any investors, but credible ones with sustainable cash flow projections and diverse portfolios and an eye to the long-term — something that erstwhile FDI champ Rakia obviously had in no great supply. Furthermore, Georgia used to run business involving a lot of criminals because that’s how the structure of business used to be. For example, if anyone living in Georgia would have business running in the city someone higher than them (government, others) would come by to collect their share(which supposed to be “0” but because of fear of shutting the place down or even threatening of hurting their families they would share their share with them)..But, today after Rose Revolution, Mr. Saakashvili ended such a corruption and violence between businessmen and others civilians.

Source: -Date of access: 12/1/11, Personal.

32) Government Enterprises: 4.0

In 1990 about 20 percent of Georgia's 1,029 industrial enterprises, including the largest, were directly administered by the central ministries of the Soviet Union. Until 1991 Georgian industry was integrated with the rest of the Soviet economy. About 90 percent of the raw materials used by Georgian light industry came from outside the republic. The Transcaucasia Metallurgical Plant at Rustavi and the Kutaisi Automotive Works, as well as other centers of heavy industry, depended heavily on commercial agreements with the other Soviet republics. The Rustavi plant, for example, could not operate without importing iron ore, most of which it received (and continues to receive) from Azerbaijan. The Kutaisi works depended on other republics for raw materials, machinery, and spare parts.

Georgia contributed significantly to Soviet mineral output, particularly of manganese (a component of steel alloy found in the Chiatura and Kutaisi regions in west-central Georgia) and copper. In the late 1980s, Georgia's main industrial products were machine tools, prefabricated building structures, cast iron, steel pipe, synthetic ammonia, and silk thread. Georgian refineries also processed gasoline and diesel fuel from imported crude oil. Georgian industry made its largest contributions to the Soviet Union's total industrial production in wool fabric, chemical fibers, rolled ferrous metals, and metal-cutting machine tools. Moreover, Georgia has been very successful in terms of making things work there in a standard lawful way not like Russia where its ten times hard to do the same.

Source: Date of access: 12/1/11; - Date of access: 12/1/11,Personal.

33) International Security Agreements: 2.0

Russia continues to occupy the separatist regions of Abkhazia and South Ossetia. On August 26, 2008, Russia recognized these regions as independent, in violation of Georgia’s sovereignty and territorial integrity. February and April 2010 agreements between Moscow and the de facto Abkhaz and South Ossetian authorities, respectively, establishing Russian military bases in the separatist regions for 49 years, are inconsistent with the terms of the August 12 cease-fire agreement negotiated by French President Sarkozy and signed by Georgian President Saakashvili and Russian President Medvedev. The cease-fire agreement calls for the parties to: refrain from resorting to the use of force; ensure a definitive halt to hostilities; provide free humanitarian access to the separatist regions; withdraw forces to their pre-conflict positions; and open international discussions on security and stability in Abkhazia and South Ossetia. In accordance with this agreement, as well, the EU, UN, and OSCE co-host ongoing Geneva-based talks on security and stability arrangements in Abkhazia and South Ossetia. Membership in NATO remains a priority for Georgia. In support of this objective, Georgia's military continues to undergo a process of reform. In September 2006, NATO granted Georgia “Intensified Dialogue” on requirements for membership in the organization. In September 2008, NATO and Georgia established the NATO-Georgia Commission (NGC) to enhance NATO’s relations with Georgia, coordinate NATO post-conflict assistance efforts, and underpin Georgia’s efforts in political, economic, and defense-related reforms.

The agreement, however, was never fully implemented. The situation remained very tense with both sides accusing one another of ceasefire violations. On 1 October 1992, the ceasefire collapsed and the fighting resumed. The Abkhaz forces, supported by fighters from the North Caucasus region, quickly captured the major towns, and threatened to bring nearly 80 per cent of Abkhazia, including the capital city of Sukhumi, under their control. The raging fighting forced some 30,000 civilians to flee across the border to the Russian Federation. The parties to the conflict accused one another of human rights violations committed against the civilian population. By November 1992, the outbreak of inter-ethnic fighting in the North Caucasus region of the Russian Federation added another dimension to the already tense situation in the area. However, little substantial results have been achieved on the key issues of the negotiations, and the Georgian-Abkhaz peace process has remained stalled.

Source: -Date of access: 12/1/11; Personal

34) Protection of Domestic Enterprises from Government Mandated Costs: 4.0

Setting up a business in Georgia is a straightforward process. Compare to other neighbor countries such as Russia and Armenia, Georgia definitely has a big success in developing the business, and protecting its own investors. Procedures are simple and efficient, based on a transparent system that promotes the establishment of new enterprises. In fact, the registration process takes only 1 day to complete. Georgian economy and industry is very entrepreneurial and highly motivated to develop rapidly. As industries in Georgia develop, firms and investors are looking for opportunities to invest. The combination of dynamic economic growth, pro-business legislation, a liberal tax code, a strong legal framework to protect investors and an educated and skilled workforce presents a solid platform for successful business in Georgia.

Currently, there are approximately 260,000 businesses operating in Georgia, with more than 4,600 businesses established by foreign capital or with its participation. However, it’s pretty clear that starting business in Republic of Georgia can be very smart idea because of these reasons: Strategic geographic location which is an asset to any investor, Stable macroeconomic environment- policies is producing economic growth. Liberal trade regimes-Georgia has low tariffs, streamlined border clearance procedures and preferential trade regimes with major partners, including the EU, the U.S. and free trade with Turkey and CIS countries. Georgia has been a member of the WTO since 2000 and has no quantitative restrictions on trade. Also, it’s great to have business with Georgia because World’s Leader in Labor Freedom and Labor Force Literacy- Georgia’s new labor code hailed as one of the world’s best in international rankings which are true even today, it reduces labor costs and gives greater freedom of contract to employers and employees. Georgia basically offers the world’s most literate workforce, and very competitive prevailing wage rates.

Source: - Date of access: 12/1/11; Personal


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