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Georgia (01/07)


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

Flag of Georgia is red cross on white background, with smaller red cross in each of four quadrants.

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 2006): 4.7 million.
Population growth rate (2006 est.): -0.34%.
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 (2006 est.)--17.97 deaths/1,000 live births. Life expectancy (2006 est.)--76.09 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: 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 (2005)
GDP: $6.46 billion.
GDP per capita: $3,400, purchasing power parity.
GDP growth: 9.3%.
Inflation rate: 6.2%.
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 (2005 est.): Exports--$1.4 billion. Partners--Russia, Turkey, Azerbaijan, Turkmenistan, Bulgaria, Armenia, Ukraine, Canada. Imports--$2.5 billion. Partners--Russia, Turkey, Azerbaijan, Germany, Ukraine, Germany, United States.
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 remain in effect. In Abkhazia, the Commonwealth of Independent States (in fact, only Russian forces) maintains a peacekeeping force, 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.

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; his 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. Fresh parliamentary elections were held in March 2004, in which President Saakashvili's party, the National Movement, combined with Speaker Burjanadze's party, Burjanadze's-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 to elect 1,732 members of 69 local councils and seven city governments.

Principal Government Officials
President--Mikheil Saakashvili
Prime Minister--Zurab Noghaideli
Speaker of Parliament--Nino Burjanadze
Foreign Minister--Gela Bezuashvilii
Defense Minister--David Kezerashvili
Interior Minister--Vano Merabishvili
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
President Mikheil Saakashvili came to power following his near-unanimous election in early 2004 on the heels of the Rose Revolution in November 2003. The revolution swept out nearly all the old, discredited politicians in the previous government and replaced them with young, often Western-educated officials. With most of the former opposition now in the government, and with Saakashvili's National Movement still enjoying wide popularity, opposition parties are weak and disunited, although they are free to organize and actively campaign for office.

Beginning in 2004, the government announced its goals of building democracy, increasing prosperity, and peacefully reincorporating Georgia's separatist regions. The political status of the Russian-supported separatist regions of Abkhazia and South Ossetia remains unresolved, however, and continues to challenge the government.

Since 2004, the Government of Georgia has built an increasingly cohesive nation with maturing democratic institutions and a growing economy. Parliamentary and municipal elections have been judged to be largely free and fair, although problems exist with voter lists and balloting procedures. One of the Georgian Government's primary goals is integration into Western institutions, particularly the North Atlantic Treaty Organization (NATO) and eventually the European Union (EU). The new government took action against endemic corruption. It completely reorganized the traffic police, which was infamous for its corruption prior to the Rose Revolution. Corrupt judges were dismissed, and a fair examination system for entering the universities was implemented. A great deal of progress has also been made in reforming Georgia's military, bringing it closer to the standards required for NATO membership. This progress was recognized in September 2006 when NATO granted Georgia Intensified Dialogue on requirements for membership in the organization.

The Saakashvili government has been criticized for concentrating too much power within the executive branch of government. However, some power has been decentralized to local governments, and constitutional amendments signed into law in 2006 addressed this by providing for increased independence of the judiciary. 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 begun a successful effort to combat trafficking in persons.

The separatist conflict in Abkhazia continues to simmer, with frequent accusations from the Georgian Government that ethnic Georgians inside Abkhazia are being discriminated against by the Abkhaz de facto authorities. The Abkhaz 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 Renault. A "Group of Friends" of the UN Secretary General (consisting of the United States, France, Germany, Russian Federation, and the United Kingdom) supports the UN-led peace process. The Organization for Security and Cooperation in Europe (OSCE) also plays a role in helping advance negotiations between the Georgians and the Abkhaz toward a comprehensive settlement consistent with Georgian independence, sovereignty, and territorial integrity. UNOMIG and other organizations are encouraging grassroots cooperative and confidence-building measures in the region. The Georgian legislature has passed a resolution on the CIS peacekeepers in Abkhazia, declaring its belief that the peacekeepers have been ineffective in establishing conditions to allow the return of the 300,000 ethnic Georgians displaced by the conflict. Therefore, the Parliament has repeatedly expressed its desire for the peacekeepers to be replaced by an international police force; however, no official demand has been made by the Georgian Government that the peacekeepers in Abkhazia leave immediately. 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 separatist conflict in South Ossetia differs from the conflict over Abkhazia because of the stated goal of the South Ossetian authorities to leave Georgia and ultimately become part of Russia. The situation in South Ossetia also differs from that in Abkhazia because of the ethnic makeup of the region, which is comprised of a patchwork of Georgian villages interspersed with ethnic Ossetian villages. The peacekeeping presence in South Ossetia consists of three contingents of up to 500 troops each from Georgia, Russia, and Russia's North Ossetia region. South Ossetian peacekeepers, however, serve in the North Ossetian contingent. Talks on South Ossetia are held under a Joint Control Commission (JCC) with Georgian, Russian, North Ossetian, and South Ossetian delegations participating. The JCC is responsible for overseeing the peacekeeping force. The Georgian Government has frequently complained that the current format for talks puts them at a disadvantage, and would like greater participation by the international community. International donors, including the United States, launched an economic rehabilitation package in 2006 to help establish a peaceful and prosperous future for South Ossetia within Georgia. An alternative leader in South Ossetia emerged in November 2006, when ethnic Georgian Dmitry Sanakoyev was elected in an unrecognized, de facto presidential election by the ethnic Georgian population. Sanakoyev has set up an alternative government in Kurta, South Ossetia. 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 and envied locations in 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. Now, 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 hard hit 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, reduced regulation, and control of corruption.

The new government has made strides in fulfilling its aims. It reduced the number of taxes from 21 to 7 and introduced a flat income tax of 12%. It 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 were 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 2007 "Doing Business" report, ranking it as the world's 37th easiest place to do business, in the same league as countries such as France, Slovakia, and Spain. 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 a strong program of economic and institutional reform, and reported reductions in the burden of bribes paid by firms in the course of doing business.

Economic growth has remained strong, reaching 9.3% in 2005. Inflation was 6.2% in 2005, but was forecast to increase to 8.6% in 2006. 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 government's budget deficit was 0.2% of GDP in 2005, but was set to increase in 2006.

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 services. 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 also usually entails bringing in modern management methods as well. The Georgian Government is eager to welcome foreign investors. In 2004, FDI totaled $489 million, more than half of which was invested in construction of the now-completed Tbilisi-Baku-Ceyhan oil pipeline and the South Caucasus gas pipeline. Foreign investors are beginning to take notice of the changes in Georgia. FDI reached $539 million in 2005, and inflows of investment exceeding $1 billion are expected in 2007.

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 consumption was produced 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 mass 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.

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 not only to foreign investment, but also to 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 are assisting Georgia's transition to democracy, creation of a functioning market economy, and poverty reduction. 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, which 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. Since 2004, the International Monetary Fund (IMF) has monitored a Poverty Reduction and Growth Facility that will 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 similar, and include assisting in conflict resolution in Abkhazia and South Ossetia, energy and transportation development, legal and administrative reform, health, and many other areas. The United States has played an important role in coordinating international assistance to Georgia, beginning with a donor conference held in Brussels in 2004.

FOREIGN RELATIONS
Georgia's location, situated between the Black Sea, Russia, Armenia, Azerbaijan, 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 relationship with Russia. Following Russian bans on imports of Georgian wine, water, and agricultural products, and the severing of transportation links in 2006, Georgia 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 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 September 2006, Georgia was granted Intensified Dialogue with NATO to formalize discussions on Georgia's membership aspirations. 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 countries in the European Union (Austria, 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 OSCE, the Council of Europe, Organization for Democracy and Economic Development-GUAM, and the Commonwealth of Independent States.

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.

In recognition of the extensive assistance provided to Georgia and the political dynamic of the time, in September 2003, the United States completed a comprehensive review of U.S. foreign assistance to Georgia. Following the Rose Revolution in November 2003, the United States increased assistance to the Georgian Government in response to its progressive reform plans and its ambitious anti-corruption plans. We continue to work together to help Georgia establish itself as a successful market economy and democracy.

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 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 the 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 further taken a number of constructive steps to combat trafficking in persons. In 2003, Georgia was placed on Tier 3 status with regard to the Trafficking Victims' Protection Act, which could have led to a suspension of all non-trade, non-humanitarian related assistance. During a 90-day grace period the Georgian Government took sufficient steps to warrant a reassessment and subsequently was placed on Tier 2, preserving its eligibility for assistance. Since then, the U.S. has worked with Georgia to help strengthen its anti-trafficking regime. In 2006, Georgia remained on the Tier 2 list. Georgia does not yet fully comply with the minimum standards for the elimination of trafficking; however, the U.S. recognizes its significant efforts to do so.

Principal U.S. Officials
Ambassador--John F. Tefft
Deputy Chief of Mission--Mark Perry
Political/Economic/Commercial Affairs--Bridget Brink
Public Affairs--Rowena Cross-Najafi
Defense Attach´┐Ż--Alan Hester
USAID Director--Robert J. Wilson
Management Officer--John Bernlohr

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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