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Georgia (02/08)


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For the most current version of this Note, see Background Notes A-Z.

PROFILE

OFFICIAL NAME:
Georgia

Geography
Area: 69,700 square kilometers; slightly smaller than South Carolina; 20% of total territory is not under government control.
Cities: Capital Tbilisi (population 1.1 million, 2002).
Terrain: Mostly rugged and mountainous.
Climate: Generally moderate; mild on the Black Sea coast with cold winters in the mountains.

People
Nationality: Noun and adjective Georgian(s).
Population (July 2007 est.): 4.65 million.
Population growth rate (2007 est.): 0.33%.
Ethnic groups (2002 census): Georgian 83.8%, Azeri 6.5%, Armenian 5.7%, Russian 1.5%, other 2.5%.
Religion (2002 census): Orthodox Christian 83.9%, Muslim 9.9%, Armenian Apostolic 3.9%, Catholic 0.8%; other 0.8%; none 0.7%.
Language: Georgian (official), Abkhaz also "official language" in Autonomous Republic of Abkhazia.
Education: Years compulsory 11. Literacy (2004 est.) 100%.
Health: Infant mortality rate (2007 est.) 17.36 deaths/1,000 live births. Life expectancy (2007 est.) 76.3 yrs.

Government
Type: Republic.
Constitution: August 24, 1995; amended February, April, and June 2004; December 2005; and January 2007.
Branches: Executive: president with State Chancellery. Legislative: unicameral parliament, 235 members. Judicial: Supreme Court, Constitutional Court, and local courts.
Subdivisions: 67 electoral districts, including those within the two autonomous republics (Abkhazia and Adjara) and five independent cities.
Major political parties and leaders: United National Movement-Democrats [Mikheil Saakashvili]; Industry Will Save Georgia (Industrialists) [Georgi Topadze]; Labor Party [Shalva Natelashvili]; National Democratic Party [Bachuki Kardava]; New Rights [David Gamkrelidze]; Republican Party [David Usupashvili]; Traditionalists [Akaki Asatiani]; Union of National Forces-Conservatives [Koba Davitashvili and Zviad Dzidziguri], Georgia's Way [Salome Zourabichvili].
Suffrage: Universal over 18 years of age.

Economy
GDP: $6.46 billion (2006).
GDP per capita: $3,800, purchasing power parity (2006).
GDP growth: 9.4% in 2006 and 11.4% in the 1st quarter of 2007.
Inflation rate: 7.3% (end of June 2007).
Natural resources: Forests, hydropower, nonferrous metals, manganese, iron ore, copper, citrus fruits, tea, wine.
Industry: Types--steel, aircraft, machine tools, foundry equipment (automobiles, trucks, and tractors), tower cranes, electric welding equipment, fuel re-exports, machinery for food packing, electric motors, textiles, shoes, chemicals, wood products, bottled water, and wine.
Trade (2006 est.): Exports--$1.76 billion. Partners: United Kingdom, Turkey, United States, Spain, Azerbaijan, Turkmenistan. Imports--$3.32 billion. Partner: Turkey, United States, Azerbaijan, Ukraine, Germany, Italy.
Work force (2.02 million in 2005): Agriculture: 40%, industry: 20%, services: 40%. Unemployment (2005 est.): 13.8%.

PEOPLE AND HISTORY
Georgia's recorded history dates back more than 2,500 years. Georgian, a South Caucasian (or "Kartvelian") language unrelated to any other outside the immediate region, is one of the oldest living languages in the world, and has its own distinctive alphabet. Tbilisi, located in the picturesque Mtkvari River valley, is more than 1,500 years old. In the early 4th century Georgia adopted Christianity, the second nation in the world to do so officially. Georgia has historically found itself on the margins of great empires, and Georgians have lived together in a unified state for only a small fraction of their existence as a people. Much of Georgia's territory was fought over by Persian, Roman, Byzantine, Arab, Mongol, and Turkish armies from at least the 1st century B.C. through the 18th century. The zenith of Georgia's power as an independent kingdom came in the 11th and 12th centuries, during the reigns of King David the Builder and Queen Tamara, who still rank among the most celebrated of all Georgian rulers. In 1783 the king of Kartli (in eastern Georgia) signed the Treaty of Georgievsk with the Russians, by which Russia agreed to take the kingdom as its protectorate. In 1801, the Russian empire began the piecemeal process of unifying and annexing Georgian territory, and for most of the next two centuries (1801-1991) Georgia found itself ruled from St. Petersburg and Moscow. Exposed to modern European ideas of nationalism under Russian tutelage, Georgians like the writer Ilya Chavchavadze began calling for greater Georgian independence. In the wake of the collapse of tsarist rule and war with the Turks, the first Republic of Georgia was established on May 26, 1918, and the country enjoyed a brief period of independence under the Menshevik president, Noe Zhordania. However, in March 1921, the Russian Red Army re-occupied the country, and Georgia became a republic of the Soviet Union. Several of the Soviet Union's most notorious leaders in the 1920s and 1930s were Georgian, such as Joseph Stalin, Sergo Orjonikidze, and Lavrenti Beria. In the postwar period, Georgia was perceived as one of the wealthiest and most privileged of Soviet republics, and many Russians treated the country's Black Sea coast as a kind of Soviet Riviera. On April 9, 1991, the Supreme Council of the Republic of Georgia declared independence from the U.S.S.R.

Beset by ethnic and civil strife from independence in 1991, Georgia began to stabilize in 1995. The separatist conflicts in Georgia's regions of Abkhazia and South Ossetia remain unresolved, although cease-fires are in effect. In Abkhazia, the Commonwealth of Independent States (CIS) maintains a peacekeeping force (in fact, composed only of Russian forces), and the United Nations maintains an Observer Mission in Georgia (UNOMIG), both of which monitor compliance with the 1994 cease-fire agreement. In South Ossetia, the Organization for Security and Cooperation in Europe (OSCE) has the prime role in monitoring the 1992 cease-fire and facilitating negotiations. A Joint Peacekeeping Force composed of Georgian, Russian, and Ossetian troops patrols the region.

The Georgian Government stakes much of its future on the revival of the ancient Silk Road as a Eurasian transportation corridor, using Georgia's geography as a bridge for the transit of goods, including oil and gas, between Europe and Asia. Georgians are renowned for their hospitality and artistry in dance, theater, music, and design.

GOVERNMENT
Georgia has been a democratic republic since the presidential elections and constitutional referendum of October 1995. The President is elected for a term of 5 years, limited to 2 terms; the constitutional successor is the Speaker of Parliament.

Parliamentary elections on November 2, 2003 were marred by irregularities and fraud according to local and international observers. Popular demonstrations ensued in the streets of Tbilisi; protestors carried roses in their hands and these peaceful protests became known as the Rose Revolution. Former President Eduard Shevardnadze resigned on November 23, 2003, and the Speaker of Parliament Nino Burjanadze assumed the role of Interim President. President Mikheil Saakashvili was elected to a 5-year term in January 2004. Parliamentary elections were re-held in March 2004 and President Saakashvili's party, National Movement, combined with Speaker Burjanadze's party, the Burjanadze-Democrats, won the majority of seats.

On May 24, 2005, the Parliament passed legislation to decentralize power from the central government in Tbilisi to local government authorities in the regions. Elections were held on October 5, 2006 for 1,732 members of 69 local councils and seven city governments.

In September 2007, following the arrest of former Defense Minister Irakli Okruashvili, nine opposition parties formed the United National Council (UNC) and issued four demands to the government, including moving up parliamentary elections from the fall to the spring of 2008. The Council organized protests throughout Georgia in October and staged a large rally in front of the Parliament on November 2. Opposition leaders began to demand the president's resignation, and violence ensued when the police dispersed protesters in front of the Parliament on November 7. As a result, President Saakashvili officially resigned on November 25 and called snap presidential elections for January 5, 2008.

On January 5, President Saakashvili was reelected to a second 5-year term with 53.45% of the vote. Levan Gachechiladze, the UNC candidate, earned 25.68%. Voters also overwhelmingly voted in two plebiscites in favor of NATO integration and spring parliamentary elections.

Principal Government Officials
President--Mikheil Saakashvili
Prime Minister--Lado Gurgenidze
Speaker of Parliament--Nino Burjanadze
Foreign Minister--Davit Bakradze
Defense Minister--David Kezerashvili
Interior Minister--Vano Merabishvili
State Minister of Refugees and Accommodation--Koba Subeliani
State Minister for Reintegration Issues--Temur Iakobashvili
Justice Minister--Nika Gvaramia
Ambassador to the United States--Vasil Sikharulidze

Georgia maintains an embassy in the United States at 2209 Massachusetts Avenue, NW, Washington, DC 20008, telephone (202) 387-2390, fax (202) 393-4537.

POLITICAL CONDITIONS
Since 2004, the Government of Georgia has turned a nearly failed state into a rapidly maturing market democracy. In 2006, Parliament passed sweeping local government reforms designed to decentralize power to the regions and give local governments increased authority. Presidential, parliamentary, and municipal elections have been judged to be largely free and fair, although problems remain with voter lists, abuse of administrative resources, media access, and intimidation of voters. The government has taken action against endemic corruption, completely reorganizing the notorious traffic police. Corrupt judges were dismissed, and a fair examination system for entering the universities was implemented.

Georgia has received high marks from the World Bank and others on the government's aggressive anti-corruption campaign. Democratic institutions were strengthened as public service reform gained momentum and judicial reform was acknowledged as a priority. Constitutional amendments signed into law in 2006 increased the independence of the judiciary; further reforms have aimed at increasing respect for and strengthening the rule of law. In July 2007, legislation banning ex parte communication was passed, prohibiting parties to a case from communicating with judges during the pre-trial investigation period as well as during the trial. Legislation requiring the Ministry of Justice to establish a legal aid office was also passed, making available assistance and representation in court proceedings to those who request it. The Georgian legislature has instituted political reforms supportive of higher human rights standards, including religious freedoms that are enshrined in the constitution. The government has launched an aggressive campaign to combat trafficking in persons.

Georgia is seeking membership in Euro-Atlantic institutions, particularly the North Atlantic Treaty Organization (NATO) and eventually the European Union (EU), and much progress has been made reforming Georgia's military. In September 2006, NATO granted Georgia Intensified Dialogue on requirements for membership in the organization.

The separatist conflict in Abkhazia continues to simmer, with frequent accusations from the Georgian Government that ethnic Georgians in Abkhazia face discrimination from the Abkhaz de facto authorities. The Abkhaz de facto authorities seek full independence from Georgia, and are currently refusing talks following the reassertion of Georgian Government control over the upper Kodori Valley area of Abkhazia in the summer of 2006. Since December 1993, the United Nations has chaired negotiations toward a settlement in Abkhazia. The UN mediator is the Special Representative of the Secretary General (SRSG), currently Ambassador Jean Arnault. The Group of Friends of the UN Secretary General on Georgia (consisting of the United States, France, Germany, the Russian Federation, and the United Kingdom) supports the UN-led peace process. UNOMIG and the Friends continue to encourage the adoption of confidence-building measures in the region. The Georgian Government has repeatedly expressed its desire to internationalize the CIS peacekeeping contingent but has made no official demand for the peacekeepers in Abkhazia to leave. For more information on the separatist conflict in Georgia's Abkhazia region, see the Department of State's fact sheet on Abkhazia http://www.state.gov/p/eur/rls/fs/53745.htm. The United States supports the strengthening of Georgia's territorial integrity through peaceful means. Unilaterally and as a member of the Group of Friends, the U.S. seeks to advance negotiations toward a comprehensive settlement of the conflict, including on Abkhazia's future status within Georgia and the safe and dignified return of refugees and internally-displaced persons.

The 1992 Sochi Agreement established a cease-fire between the Georgian and South Ossetian forces, and defined both a zone of conflict around the South Ossetian capital of Tskhinvali and a security corridor along the border of South Ossetian territories. The South Ossetia region is comprised of a patchwork of Georgian villages interspersed with ethnic Ossetian villages. The Organization for Security and Cooperation in Europe (OSCE) monitors the ceasefire and facilitates negotiations between the Georgians and the South Ossetians toward a comprehensive settlement consistent with Georgian independence, sovereignty, and territorial integrity. The Agreement also created the Joint Control Commission (JCC) and a peacekeeping body, the Joint Peacekeeping Forces (JPKF). The JPKF is under Russian command and is comprised of peacekeepers from Georgia, Russia, and Russia's North Ossetian autonomous republic. South Ossetian peacekeepers serve in the North Ossetian contingent. Talks on South Ossetia are held under the auspices of the JCC, with Georgian, Russian, North Ossetian, and South Ossetian delegations participating. The Georgian Government has frequently complained that the current format for talks puts Georgia at a disadvantage, and would like greater participation by the international community.

In January of 2005, Georgian President Saakashvili put forth a proposal to give autonomous status to South Ossetia within Georgia. The United States welcomed President Saakashvili's initiative to resolve the conflict through peaceful means and continues to look for ways to encourage a lasting resolution of the conflict. An alternative leader in South Ossetia emerged in November 2006, when ethnic Ossetian Dmitry Sanakoyev was elected in a de facto presidential election, largely by the ethnic Georgian population. Sanakoyev heads a Temporary Administrative Unit in Kurta, South Ossetia.

The United States supports the territorial integrity of Georgia and supports a peaceful resolution of the conflict within Georgia's internationally recognized borders, while affording South Ossetia significant autonomy within a unified Georgia. The United States views Georgia's autonomy proposal as an important step in a peace process that should be marked by direct and frequent negotiations between the two sides. International donors, including the United States, launched an economic rehabilitation project in 2006 to help establish a peaceful and prosperous future for South Ossetia within Georgia. For more information on the separatist conflict in Georgia's South Ossetia region, see the Department of State's fact sheet on South Ossetia http://www.state.gov/p/eur/rls/fs/53721.htm.

ECONOMY
The Soviet Socialist Republic of Georgia was one of the most prosperous areas of the former Soviet Union. The political turmoil after independence had a catastrophic effect on Georgia's economy. The cumulative decline in real GDP is estimated to have been more than 70% between 1990 and 1994, and by the end of 1996, Georgia's economy had shrunk to around one-third of its size in 1989. 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, nuts, and aircraft.

Although Georgia experienced some years of growth in the mid-1990s, it was hit hard by the Russian economic crisis of 1998-99. The later years of former President Shevardnadze's administration were marked by rampant cronyism, corruption, and mismanagement. Public disaffection with the situation resulted in the Rose Revolution of 2003. The new government, led by Mikheil Saakashvili, promised to reorient the government and the economy toward privatization, free markets, and reduced regulation, to combat corruption, to stabilize the economy, and to bring order to the budget.

The government has reduced the number of taxes from 21 to 7 and introduced a flat income tax of 12%. It has significantly reduced the number of licenses a business requires, and introduced a "one-window" system that allows an entrepreneur to open a business relatively quickly. Strict deadlines for agency action on permits have been introduced, and consent is assumed if the agency fails to act within the time limit. The government intends to completely eliminate import duties by 2008, which should reduce costs and stimulate business.

The World Bank recognized Georgia as the world's fastest-reforming economy in its 2008 "Doing Business" report, ranking it as the world's 18th easiest place to do business, in the same league as countries such as Germany, Sweden, and Estonia. The World Bank's "Anti-Corruption in Transition 3" report places Georgia among the countries showing the most dramatic improvement in the struggle against corruption, due to implementation of key economic and institutional reforms, and reported reduction in the bribes paid by firms in the course of doing business.

Economic growth has remained strong, reaching 8% in 2006; inflation reached 10% in the same year but decreased to 7.3% in the first six months of 2007. Efforts to improve the efficiency of government operations since the Rose Revolution have required the government to release workers, pushing official unemployment to 13.8% in 2005. A strongly negative balance of trade is offset by inflows of investment and assistance from international donors. The fiscal deficit was 2.9% of GDP in 2006 according to the International Monetary Fund (IMF).

Improved collection and administration of taxes have greatly increased revenues for the government. In two years, from 2003 to 2005, tax collections went up from 13.8% of GDP to 20.8%. The government has been able to pay off wage and pension arrears and increase spending on desperately needed infrastructure such as roads and electric energy supply systems. The government privatized nine times the value of state-owned assets in 2005 as it did in all of 2000-2003. It expects to have privatized all of the largest state-owned industries by the end of 2008, increasing revenues and removing a major temptation toward corruption from the control of state bureaucrats.

Before 2004, electricity blackouts were common throughout the country, but since late 2005, distribution has been much more reliable, approaching consistent 24-hour-a-day service. Improvements have resulted from increased metering, better billing and collection practices, reduced theft, and management reforms. Investments in infrastructure have been made as well. Hydroelectricity output increased by almost 27%, and thermal by 28%, from 2005 to 2006. Natural gas has traditionally been supplied to Georgia by Russia. Through conservation, new hydroelectricity sources, and the availability of new sources of natural gas in Azerbaijan, Georgia's dependence on Russia for energy supplies should decrease in the near future.

The banking sector is becoming more open to competition from foreign-owned banks. The sector is relatively stable, and is supplying more credit to domestic businesses. Credit from Georgian banks to the economy was 15% of GDP in 2005, compared to 10% in 2004--still low, compared to the average in the Czech Republic, Hungary, and Poland for 2005, which was 36%.

Foreign direct investment (FDI) is the most important source of capital for Georgia and other post-Soviet states. Such investment not only supports new plants and equipment, but usually entails bringing in modern management methods as well. The Georgian Government is eager to welcome foreign investors. From 2002 to 2006, FDI averaged 9% of GDP, with much of it dedicated to the construction of the Baku-Tbilisi-Ceyhan oil pipeline and the South Caucasus gas pipeline. In 2006, which saw diminishing pipeline investment as a function of total FDI, more than half of FDI went to the banking, manufacturing, and tourism sectors.

Georgia faces many challenges in attracting foreign investment and growing its economy. In 2006, more than 50% of the population lived below the official poverty line. With only 4.7 million people, most of whom have little disposable income, it is a small market in itself. 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, trade relations were plagued by politically motivated interruptions when Russia imposed bans on all Georgian exports of wine, fruits and vegetables, and mineral water. In October 2006, Russia severed all direct transportation links, as well as postal service and visa issuance. In addition, Russia undertook a campaign of deportations of Georgian nationals residing in Russia and closed the only legal land border crossing between Georgia and Russia, diverting traffic into the separatist regions outside of Georgia's control. In light of these restrictions, Georgian businesses are actively seeking new markets for their products in the EU, Eastern Europe, North America, and elsewhere. Reports confirm that the sanctions have not had an adverse effect on the economy; in fact, exports have increased since the beginning of 2006 because Georgia was forced to find alternate markets for its goods.

The government faces a major challenge in controlling corruption, which is a persistent problem. Shortly after President Saakashvili took office, his administration dismissed nearly the entire police force and replaced it with better-paid and -trained officers. Several high officials have been prosecuted for corruption-related offenses. On the other hand, widespread lack of confidence in the Georgian courts and system of justice is a major obstacle to both foreign and domestic investment. The new government has promised to tackle this difficult task, which requires balancing the objective of judicial independence with honest, fair, and competent decision making.

The United States and other international donors have targeted foreign assistance to promote democratic reform, resolve regional conflicts, foster energy independence, assist economic development, and reduce poverty. The U.S. seeks to help Georgia consolidate democratic gains since the Rose Revolution. The U.S. Government lends significant diplomatic and funding support to Georgia's efforts to resolve the separatist conflicts of South Ossetia and Abkhazia. With U.S. Government assistance, Georgia is working to free itself from near total energy dependence on Russian sources of energy. Georgia is one of the first countries to receive a compact, in the amount of $295 million over five years, from the United States Millennium Challenge Corporation (MCC). MCC offers grant assistance to countries that meet certain requirements for good governance and commitment to reform. In 2004, Georgia's debt to the Paris Club was restructured. From 2004, the International Monetary Fund (IMF) monitored a Poverty Reduction and Growth Facility that was to terminate in 2007. The World Bank, European Bank for Reconstruction and Development, EU, OSCE, and the UN are all active in Georgia. Their goals are complementary, and include assisting in conflict resolution in Abkhazia and South Ossetia, energy and transportation development, legal and administrative reform, health, and many other areas.

FOREIGN RELATIONS
Georgia's location between the Black Sea, Russia, Armenia, Azerbaijan, and Turkey gives it importance as a transport corridor far beyond its size. It is developing as the gateway from the Black Sea to the Caucasus and the Caspian basin. Following Russian bans on imports of Georgian wine, mineral water, and agricultural products, and the severing of transportation links in 2006, Georgia has reached out to other neighbors and to the West to diversify its export markets. It signed a partnership and cooperation agreement with the European Union, and in 2006 signed an action plan under the European Union's European Neighborhood Policy for reforms aimed at building a closer relationship with the EU. Georgia participates in NATO's Partnership for Peace program. In addition, Georgia has reached out to a number of countries that have expressed interest in investing in the country. China, Russia, Switzerland, Turkey, and Ukraine, as well as a number of European Union countries (including Austria, the Czech Republic, Denmark, France, Germany, Greece, Italy, Latvia, Lithuania, the Netherlands, Poland, Romania, Spain, Sweden, and the United Kingdom) maintain embassies in Tbilisi. Georgia is a member of the United Nations, the Organization for Security and Cooperation in Europe, the World Bank, the International Monetary Fund, the European Bank for Reconstruction and Development, the World Trade Organization, the Council of Europe, and the Organization for Democracy and Economic Development-GUAM.

U.S.-GEORGIA RELATIONS
U.S.-Georgia relations continue to be close. Extensive U.S. assistance is targeted to support Georgia's democratic, economic, and security reform programs, with an emphasis on institution-building and implementing lasting reforms. The United States has provided Georgia approximately $1.7 billion in assistance since 1991. On September 12, 2005, Georgia signed a compact with the Millennium Challenge Corporation for a five-year $295.3 million assistance package. Information about U.S. assistance to Georgia can be found at http://www.state.gov/p/eur/rls/fs/66198.htm.

The United States works closely with Georgia to promote mutual security and counterterrorism interests. The United States provides Georgia with bilateral security assistance, including English-language and military professionalism training, through the International Military Education and Training (IMET) program. The multi-year Georgia Train and Equip Program (GTEP) ended in 2004, achieving its intended goals of enhancing Georgia's military capability and stimulating military reform. Launched in January 2005, the Georgia Sustainment and Stability Operations Program has advanced GTEP's goals and trained the Georgian contingent participating in coalition operations in Iraq. Partnership with the Georgia (U.S.) National Guard, visits by the Sixth Fleet and the Coast Guard to Georgia, and the Bilateral Working Group on Defense and Military Cooperation are also important components of our security relationship with Georgia.

Promoting democracy and reform is another strategic pillar of our bilateral relationship with Georgia. In April 2006 the government passed a strong anti-trafficking-in-persons law. Since then, the government has taken further constructive steps to combat trafficking in persons. In 2007, Georgia moved up to the Tier 1 list, meaning that it fully complies with the minimum standards for the elimination of trafficking.

Principal U.S. Officials
Ambassador--John F. Tefft
Deputy Chief of Mission--Mark Perry
USAID Director--Robert J. Wilson
Political/Economic/Commercial Affairs--Bridget Brink
Public Affairs--Cynthia Whittlesey
Defense Attaché--Matthew Brand
Management Counselor--John Bernlohr
Regional Security Officer--John Galido

The U.S. Embassy in Georgia is located at 11 George Balanchine Street, Tbilisi, Georgia, 0131, telephone (995 32) 27-70-00, fax (995 32) 53-23-10.



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