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IMGXYZ1207IMGZYXDespite the current financial crisis and the August 2008 Russia-Georgia conflict, Georgia’s economy remains resilient. This strength derives from the fact that since the ‘Rose Revolution’ Georgia has pursued a program of wide ranging economic reforms.
Discussing the nature of these changes, as well as the rationale for countries to continue support for Georgia, Former State Minister of Reforms Coordination of the Republic of Georgia, Kakha Bendukidze, spoke at the Carnegie Endowment. Ambassador (Retired) James F. Collins moderated the discussion.
Georgia’s Reforms
Both Georgia’s political and economic sectors have been subject to wide-ranging reform since the ‘Rose Revolution.’ Bendukidze offered examples of several key changes that have transformed Georgia’s political and economic landscape. On the political front, the Georgian government has significantly reduced the amount of bureaucratic red tape by decreasing both the number of ministries and the number of public servants, which has helped increase salaries of remaining civil servants by nearly 15 fold.
In the economic sector, changes in Georgia’s visa policies have been particularly important. Today citizens of up to 56 countries can stay within the country with no visa requirement for up to 360 days. If a visa is needed, it may be obtained at the border. This has made Georgia a welcoming society for foreign business and activity. To further help business growth, the government has streamlined business registration by decreasing registration time from 30 days to 1 hour while also reducing the cost of this process. The annual number of business registrations has more than doubled from 2003 to 2007.
As a result of these changes Georgia’s GDP, foreign direct investment, and foreign trade have shown large growth.
Political Stability
Bendukidze warned, however, that while Georgia’s economy is flexible enough to withstand the current financial crisis, it may falter should the nation experience political instability. Bendukidze argued that although Georgia is not threatened by the rising opposition, the country must end the dangerous practice of holding elections at the whim of any single person or coalition. Instead, he said the country must hold elections as specified in its Constitution.
He also noted that despite allegations of government crackdowns, he has not seen less transparency and openness in the government.
Moving Forward
When asked about what the Georgian political class needed to do at the current moment, Bendukidze responded with a list of several items:
- Continue reforms
- Consolidate the political system
- Not have unscheduled elections at this moment.
- Develop more transparency and openness
- Develop closer ties to the U.S. and Europe
When asked about what would happen should promised foreign aid not materialize, Bendukidze replied that he did not feel that foreign aid was beneficial to Georgia. Instead, Bendukidze noted that Georgia can weather the financial crisis by continuing to obtain foreign direct investment. He noted that Georgia would need only a sum of $2 billion in investment in order to achieve a 10 percent growth rate in GDP.
