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Georgia (10/02)


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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 larger than South Carolina. 20% of total territory is not under government control.
Cities: Capital--Tbilisi (pop 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: 4.4 million (2002 census preliminary results. Does not include Abkhazia or South Ossetia.)
Population growth rate (2001 est.): -0.9%.
Ethnic groups: Georgian 70.1%, Armenian 8.1%, Russian 6.3%, Azeri 5.7%, Ossetian 3%, Abkhaz 1.8%, other 5%. (1989 est.)
Religion: Georgian Orthodox 65%, Muslim 11%, Russian Orthodox 10%, Armenian Apostolic 8%, other 6%.
Language: Georgian (official), Abkhaz also official language in Abkhazia.
Education: Years compulsory--11. Literacy--99%.
Health: Infant mortality rate (2001 est.)--52.37 deaths/1,000 live births.
Life expectancy--64.63 years.

Government
Type: Republic.
Constitution: October 17, 1995.
Branches: Executive--president with State Chancellery. Legislative--unicameral parliament, 235 members. Judicial--supreme court, Constitutional Court, and local courts.
Subdivisions: 67 districts, including those within the two autonomous republics (Abkhazia and Ajara) and eight cities.
Political parties: Political parties and leaders: Citizen's Union of Georgia or CUG [Avtandil Jorbenadze]; New National Movement or NNM [Mikhail Saakashvili]; New Rights [David Gamkrelidze]; New Democrats [Zurab Zhvania]; Industry Will Save Georgia or IWSG [Georgi Topadze]; Labor Party [Shalva Natelashvili]; National Democratic Party or NDP [Irina Sarishvili-Chanturia]; National Independent Party or NIP [Irakli Tsereteli, chairman]; People's Party [Mamuka Giorgadze]; Socialist Party or SPG [Vakhtang Rcheulishvili]; Union for "Revival" Party or AGUR [Aslan Abashidze]; Union of Traditionalists or UGT [Akaki Asatiani; 21 Century [Vakhtang Bochorishvili]; Greens Party [Giorgi Gachechiladze]; Georgian United Communist Party or UCPG [Panteleimon Giorgadze, chairman].
Suffrage: Universal over 18.

Economy (2001)
GDP: $3.6 billion.
GDP per capita: $682.
GDP growth: 4.5%.
Inflation rate: 3.4%.
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 (2001): Exports--$320 million. Partners--Russia, Turkey, Azerbaijan, Armenia. Imports--$684.1 million. Partners--Russia, Turkey, Azerbaijan, Germany, Ukraine, United Kingdom, Turkmenistan, United States.
Work force (1.85 million in 2000): Agriculture--52.1%; trade--10.0%; education--6.5%; public administration--6.0%; manufacturing--5.9%; health and social work--4.9%; transport and communications--4.1%; unemployment (2001)--11.4% official (ILO definition).

PEOPLE AND HISTORY  
Georgia's history dates back more than 2,500 years. Georgian is one of the oldest living languages in the world. Tbilisi, located in a picturesque valley divided by the Mtkvari River, is more than 1,500 years old. Much of Georgia's territory was besieged by its Persian and Turkish neighbors along with Arabs and Mongols over the course of the 7th to the 18th centuries. After 11 centuries of mixed fortunes of various Georgian kingdoms, including a golden age from the 11th to 12th centuries, Georgia turned to Russia for protection. Russia essentially annexed Georgia and exiled the royalty in 1801. Pockets of Georgian resistance to foreign rule continued. The first Republic of Georgia was established on May 26, 1918, after the collapse of Tsarist Russia. By March 1921, the Red Army had reoccupied the country, and Georgia became part of the Soviet Union. 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. However, almost 300,000 internally displaced persons present an enormous strain on the country. Peace in the separatist areas of Abkhazia and South Ossetia--overseen by Commonwealth of Independent States' (Russian) peacekeepers, the United Nations, and the Organization for Security and Cooperation in Europe (OSCE)--remains fragile, while local enmities remain strong. Considerable progress has been made in negotiations on the Ossetian-Georgian conflict. Negotiations are continuing on the stalemated Georgia-Abkhazia conflict under the aegis of the United Nations.

The Georgian Government is committed to economic reform in cooperation with the IMF and World Bank and stakes much of its future on the revival of the ancient Silk Road as the Eurasian energy transportation corridor, using Georgia's geography as a bridge for transit of goods 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; his constitutional successor is the Chairman of the Parliament.

The Georgian state is highly centralized, except for the autonomous regions of Abkhazia and Ajara, whose precise legal statuses have not been determined by law. Those regions were subjects of special autonomies during Soviet rule, and the legacy of that influence remains. Presidential elections were held in 1995 and again in April 2000, when President Shevardnadze was reelected to another 5-year term, following which he is expected to step down in 2005. Parliamentary elections were held in 1995 and 1999, and are scheduled for 2003. Parliament currently consists of 15 factions, with final coalitions yet to be determined. Local elections, marred by irregularities, were held in June 2002.

Principal Government Officials
President--Eduard A. Shevardnadze
State Minister--Avtandil Jorbenadze
Secretary of the National Security Council--Tedo Japaridze
Speaker of Parliament--Nino Burjanadze (independent)
Chairman of the Supreme Court--Lado Chanturia
Foreign Minister--Irakli Menagharishvili
Ambassador to the United States--Levan Mikheladze

Georgia maintains an embassy in the United States at 1615 New Hampshire Avenue, NW, Suite 300, Washington, D.C. 20009, telephone (202) 387-4537, fax (202) 393-4537.

POLITICAL CONDITIONS
Since surviving assassination attempts in August 1995 and February 1998, President Shevardnadze consolidated his leadership and declared an ambitious reform agenda. Elections on November 5, 1995, described as the freest and fairest in the Caucasus or Central Asia, gave him the presidency and resulted in a progressive parliament led by sophisticated reformers. Since 1998, however, the reform process has encountered serious obstacles and made limited progress.

The political status of the breakaway provinces of Abkhazia and South Ossetia is unresolved. Sporadic outbreaks of violence continue to erupt in Abkhazia. About 300,000 people displaced by these conflicts have yet to return to home.

Renewed fighting in the neighboring Chechnya (Russia) has generated concerns that the conflict will spill over into Georgia. Several thousand Chechen refugees moved into Georgia's Pankisi Gorge in late 1999, adding to the refugee/internally displaced population. The Abkhaz separatist dispute absorbs much of the government's attention. While a cease-fire is in effect, about 300,000 internally displaced persons (IDPs) who were driven from their homes during the conflict constitute a vocal lobby. The government has offered the region considerable autonomy in order to encourage a settlement, which would allow the IDPs, the majority of whom are ethnic Georgians from the Gali region, to return home, but the Abkhaz insist on independence.

Currently, Russian peacekeepers, under the authority of the Commonwealth of Independent States, are stationed in Abkhazia, along with UN observers. Their activities are hampered by land mines and guerrilla activity. Years of negotiations have not resulted in movement toward a settlement. Working with France, the United Kingdom, Germany, and Russia and through the United Nations and the Organization for Security and Cooperation in Europe (OSCE), the United States continues to encourage a comprehensive settlement consistent with Georgian independence, sovereignty, and territorial integrity. The UN observer force and other organizations continue to encourage grassroots cooperative and confidence-building measures in the region.

The parliament has instituted wideranging political reforms supportive of higher human rights standards, including religious freedoms enshrined in the constitution. Problems persist, however, largely as a result of the unwillingness of law enforcement and criminal justice officials to support constitutionally mandated rights. Violence against religious minorities and mistreatment of pretrial detainees are significant and continuing problems, as is corruption.

Political Parties
There are 15 major political parties in Georgia, although hundreds of small regional and single-issue parties exist. Of these the Citizen's Union of Georgia (CUG), headed by State Minister Avtandil Jorbenadze, is clearly pro-government, with the majority of the remainder regarded as opposition. Presently there are 15 "factions" in Parliament, with membership of each hovering between 10 and 20 members of Parliament, one political block, and about 20 independent representatives. While specific issues have formed the basis for cross-party, issue-based coalitions, there is no clear majority in Parliament. Parliamentary elections are scheduled for fall 2003.

From 1994 until 2001, the pro-government CUG had a distinct advantage over other parties, through its name recognition, parliamentary majority, and presidential support. Political forces represented in the Parliament were largely pro-government, easily outvoting a weak opposition, and the existing political layout seemed stable. By late 2001, as a result of acute internal political confrontations and a deteriorating social-economic situation in the country, the established majority led by the CUG split apart and Parliament Speaker Zurab Zhvania resigned.

In May 2002, the former opposition parties united to demand that the fractured CUG cede committee chairmanships. New committee chairmen were elected, representing a broad range of political parties and platforms. The CUG's mandate eroded further with their widespread defeat in the June 2002 local elections.

The Union of Democratic Revival, a nationwide party, is effectively a vehicle in Tbilisi for political representation of the Ajaran region. MPs of the Abkhazia faction (in exile) remain vocal and influential in pushing for resolution for the Abhaz conflict.

ECONOMY
Georgia suffered severe political and economic turbulence during the years following the re-establishment of its independence in 1991. In the mid-1990s Georgia began to experience modest but increasing levels of GDP growth and foreign investment. Until 1998 Georgia's economy grew on average 7%. This growth was attributable to the introduction of a new, stable currency, reduced rates of inflation, and the re-establishment of both economic and political stability. Economic growth and reform slowed in 1998, due to the Russian financial crisis, drought, and political events, including a major outbreak of hostilities in Abkhazia and an assassination attempt against the President. However, the period also saw completion of the first major infrastructure project, the Baku-Supsa early oil pipeline.

Growth through 2002 has been positive, and Georgia's economic performance is slowly improving, with GDP growth of 3% in 1999, 2% in 2000, and 4.5% in 2001. Despite these setbacks, Georgia led the former Soviet Union in developing the legal infrastructure necessary for an attractive investment climate. Georgia maintains no currency controls, allows foreign investment in all but a few sectors deemed strategically important, and has implemented an impressive privatization program, including land privatization. Georgia also is the second country of the former Soviet Union to join the World Trade Organization, which will provide additional opportunities for development.

Economic activity in Georgia remains below potential. The low level of increase in trade and GDP are due to fundamental economic problems that have eroded investor confidence in Georgia. The poor fiscal situation, pervasive corruption, and arbitrary implementation of laws and regulations have inhibited economic growth in the country. Georgia's electricity sector is in critical condition. Shortages of electricity have resulted in public unrest each year. In 1998, Georgia began to privatize its energy distribution system and hoped to privatize its energy generation system by 2000, an objective that remains unrealized.

Privatization is the only means to generate the capital needed to rehabilitate the sector. Due to a lack of investment, Georgia's transportation and communication infrastructure remains in very poor condition. The Ministry of Transport and Communication's agenda to privatize the telecommunications industry has been hampered by the lack of bidder interest.

Corruption in Georgia, both official and otherwise, has been a significant and persistent obstacle not only to domestic and foreign investment, but also to economic development. Its pervasive nature and high visibility have stunted economic growth and seriously undermined the credibility of the government and its reforms. In July 2000 the government created an Anti-Corruption Commission that made its report in the fall of 2000. Based on this report, an Anticorruption Coordinating Council was created in summer 2001 to implement recommendations of the Anti-Corruption Commission. Its recommendations include several measures that, if implemented, would improve the investment climate. However, few, if any, of the recommendations have been acted upon.

Problems with fiscal policy affected macroeconomic conditions in recent years. An International Monetary Fund (IMF) program initiated in 1996 was put on hold in 1999 due to Georgia's failure to meet certain budgetary targets. However, an improved macroeconomic picture and a more realistic budget in the second half of 2000 paved the way for IMF Board approval of a new program for Georgia in January 2001. Though Georgia's fiscal performance since has been uneven, dialogue continues with the IMF and World Bank. The IMF program was halted repeatedly in 2001-02, following Georgia's continued difficulty in both reaching targets and complying with a number of requirements. Georgia is currently on track with the IMF. Georgia successfully concluded Paris Club debt rescheduling in 2001.

Foreign direct investment (FDI) has declined in recent years to $61.8 million in 2001, compared to $83.65 million in 1999. Key sectors of economic activity in Georgia include energy, agriculture, trade, tourism, and transport, as well as significant projects in the food processing and telecommunications industries. The United States is the largest foreign investor in Georgia, annually contributing between 20%-34% of overall FDI in recent years. The construction of the Baku-Tbilisi-Ceyhan oil pipeline and the Shah Deniz gas pipeline will offer opportunities for investors in the energy sector as well as related infrastructure. Additional privatization is planned in the energy sector, including power distribution outside of Tbilisi and hydropower facilities.

Georgian agricultural production is beginning to recover following the devastation caused by the civil war and sectoral restructuring necessary following the breakup of the Soviet Union. Livestock production is beginning to rebound, and domestic grain production is increasing. Both will require sustained political will and infrastructure improvements to ensure appropriate distribution and return to farmers. Tea, hazelnut, and citrus production have suffered greatly as a result of the conflict in Abkhazia, an especially fertile area. Supported by European Union assistance, Georgia has taken steps to control the quality and appropriately market its natural spring water. Georgian viniculture, well developed during Soviet times, is internationally acclaimed and has absorbed some new technologies and financing since 1994.

To encourage and support the reform process, the United States is joining other donors in shifting the focus of assistance from humanitarian to technical and institution-building programs. Provision of legal and technical advisers is complemented by training opportunities for parliamentarians, law enforcement officials, and economic advisers, complemented by extensive educational exchanges programs. The United States and other donors have increasingly imposed conditions on assistance in order to encourage improved performance on key issues and in key sectors, including energy. Georgia continues to depend on humanitarian aid, which is increasingly targeted to most-needy groups.

FOREIGN RELATIONS
Georgia's location, nestled between the Black Sea, Russia, and Turkey, gives it strategic importance far beyond its size. It is developing as the gateway from the Black Sea to the Caucasus and the larger Caspian region, but also serves as a buffer between Russia and Turkey. Georgia has a long and close relationship with Russia, but it is reaching out to its other neighbors and looking to the West in search of alternatives and opportunities. It signed a partnership and cooperation agreement with the European Union, participates in NATO's Partnership for Peace program, and encourages foreign investment. France, Germany, Greece, Italy, Switzerland, the U.K. all have embassies in Tbilisi. Germany is a significant bilateral donor. Georgia is a member of the UN, the OSCE, and the CIS. It is an observer in the Council of Europe.

U.S.-GEORGIA RELATIONS
U.S.-Georgia relations have been and continue to be excellent. Georgian leaders note that U.S. humanitarian assistance was critical to Georgia's recovery from civil war and economic difficulties following independence. Extensive U.S. assistance is currently targeted to support Georgia's economic and political reform programs, with an emphasis on institution building. The U.S. also is working with the Georgian Parliament on draft laws and establishing procedures and standards consistent with the country's 1995 Constitution. The United States provided Georgia approximately $1.2 billion in assistance through 2001, averaging about $100 million annually.

The United States also provides Georgia with bilateral security assistance, including through the International Military Education and Training (IMET) program. Evolving U.S.-Georgia partnerships include the Georgia Train and Equip Program, intended to enhance Georgia's military capability and stimulate military reform, programs by 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.

Principal U.S. Officials
Ambassador--Richard Miles
Deputy Chief of Mission--Patricia Moller
Political/Economic/Commercial Affairs--Nicholas Dean
Public Affairs--Sharon Hudson-Dean
Defense Attache--Thomas Newcomb
USAID Director--Michael Farbman

The U.S. Embassy in Georgia is located at 25 Antoneli Street, Tbilisi 380026, telephone 995-32-98-99-67, fax 995-32-93-37-59.



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