WASHINGTON—Georgia is entering a period of political transition and will have a new constitution after parliamentary and presidential elections in 2012 and 2013. While the current government has made progress in building a functioning state, the country’s economic situation is increasingly uncertain.

In a new report, Thomas de Waal examines the challenges facing Georgia and argues that the government must start building institutions and choose a long-term development model after years of governing in an informal and improvisational way. The governing elite has no serious domestic political opposition and risks turning Georgia into a one-party state.

Models for Georgia’s Future:

• The “old Georgia” model: This conservative option representing the country’s traditional value system and way of doing business offers little as an economic or political model.
• The “Singapore” model: Opening Georgia to worldwide investment enjoys support, especially from an influential libertarian group seeking greater deregulation. But with foreign investment falling, this model does little to solve problems like rural poverty and high unemployment
• The EU model: A comprehensive free trade agreement with the European Union would offer privileged access to the EU single market in return for institutional reform. Although a painful process, this is Georgia’s best hope for long-term development.

“Georgia now faces real dilemmas whose resolution will determine how the country develops,” de Waal writes. “Greater integration with the EU will not deliver an economic miracle to Georgia, but having a European anchor would ensure greater political stability for Georgia, which in turn would benefit the economy.”

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Click here to read the full report

Thomas de Waal is a senior associate in the Russia and Eurasia Program at the Carnegie Endowment, specializing primarily in the South Caucasus region comprising Armenia, Azerbaijan, and Georgia and their breakaway territories, as well as the wider Black Sea region.

The Carnegie Russia and Eurasia Program has, since the end of the Cold War, led the field on Eurasian security, including strategic nuclear weapons and nonproliferation, development, economic and social issues, governance, and the rule of law.

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