GEORGIA

Republic of Georgia

Sakartveld Respublika

CAPITAL: T'bilisi (Tbilisi)

FLAG: White rectangle, in its central portion a red cross connecting all four sides of the flag; in each of the four corners is a small red bolnur-katskhuri cross; the five-cross flag appears to date back to the 14th century.

ANTHEM: National Anthem of the Republic of Georgia.

MONETARY UNIT: The lari (l) was issued in 1995 to replace government coupons that were introduced in 1993. l1 = $0.54945 (or $1 = l1.82) as of 2005.

WEIGHTS AND MEASURES: The metric system is in force.

HOLIDAYS: New Year's Day, 1–2 January; Christmas, 7 January; Independence Day, 26 May; St. George's Day, 22 November.

TIME: 3 pm = noon GMT.

LOCATION, SIZE, AND EXTENT

Georgia is located in southeastern Europe, bordering the Black Sea, between Turkey and Russia. Comparatively, the area occupied by Georgia is slightly smaller than the state of South Carolina, with a total area of 69,700 sq km (26,911 sq mi). Georgia shares boundaries with Russia on the n and e, Azerbaijan on the e and s, Armenia and Turkey on the s, and the Black Sea on the w. Georgia's land boundary totals 1,461 km (906 mi). Its coastline is 310 km (192 mi). Its capital city, T'bilisi, is located in the southeastern part of the country.

TOPOGRAPHY

The topography of Georgia is mainly mountainous, with the great Caucasus Mountains in the north and lesser Caucasus Mountains in the south. The highest point in the nation is Mount Shkhara at a height of 5,201 m (17,064 ft) in the Greater Caucasus. The Kolkhida Lowland opens to the Black Sea in the west and the Kura River basin lies in the east. The Kura River is the nation's longest river with a length of 1,514 km (941 mi). Good soils occur in the river valley flood plains and in the foothills of the Kolkhida Lowland.

CLIMATE

Georgia's climate along the Black Sea coast is similar to that along the Mediterranean, warm, humid, and almost subtropical. Farther inland the climate is continental, with warm summers and cold winters. July's mean temperature is 23°C (73.8°f). The mean temperature in January is -3°c (27.3°f). The annual rainfall in Georgia is 51 cm (20 in). In the mountains it is much cooler, with snow and ice all year in altitudes above 3,600 m (12,000 ft).

FLORA AND FAUNA

The country's land is composed of gently rolling plains. The Caucasus Mountains in Georgia begin a series of high mountains in Central Asia. The subtropical zone of the Black Sea coast of the Caucasus Mountains has a distinctive vegetation: woods of black alder, oak, elm, and beech with a profusion of lianas and an admixture of evergreens. Mountain goats, Caucasian goats, Caucasian antelope, European wild boar, porcupine, and the leopard inhabit the Caucasus, and reptiles and amphibious creatures abound. As of 2002, there were at least 107 species of mammals, 208 species of birds, and over 4,300 species of plants throughout the country.

ENVIRONMENT

Georgia suffers from pollution of its air, water, and soil. Air pollution is especially heavy in Rust'avi. In 1996, Georgia's industrial carbon dioxide emissions totaled 2.9 million metric tons; in 2000, the total was at 6.2 million metric tons. The Mtkvari River and the Black Sea are both heavily polluted. Pesticides from agricultural areas have significantly contaminated the soil.

In 2003, 2.3% of Georgia's total land area was protected. There are two Ramsar wetland sites: one in central Kolkheti and the other at the Ispani II marshes. According to a 2006 report issued by the International Union for Conservation of Nature and Natural Resources (IUCN), threatened species included 11 types of mammals, 8 species of birds, 7 types of reptiles, 1 species of amphibian, 6 species of fish, and 10 species of invertebrates. Species on the endangered list include Atlantic sturgeon, slender-billed curlew, Mediterranean monk seals, Darevsky's viper, and the Armenian birch mouse.

POPULATION

The population of Georgia in 2005 was estimated by the United Nations (UN) at 4,501,000, which placed it at number 116 in population among the 193 nations of the world. In 2005, approximately 13% of the population was over 65 years of age, with another 19% of the population under 15 years of age. There were 90 males for every 100 females in the country. According to the UN, the annual population growth rate for 2005–10 was stagnant at 0.0%, a rate the government viewed as too low. The projected population for the year 2025 was 4,178,000. The population density was 64 per sq km (167 per sq mi), with the majority of the population living near the Black Sea or in the river valleys.

The UN estimated that 52% of the population lived in urban areas in 2005, and that urban areas were growing at an annual rate of -0.88%. The capital city, T'bilisi (Tbilisi), had a population of 1,064,000 in that year. Other cities and their estimated populations include Kútáisi, 268,800, and Rustavi, 181,400.

MIGRATION

With independence in 1991 came three secessionist movements in three autonomous areas and conflicts in two of them. The conflict in South Ossetia in 1991, followed by the conflict in Abkhazia in 1992 and 1993, resulted in the mass displacement of ethnic Georgians, Ossetians, and Abkhaz, as well as other ethnic minorities. As many as 200,000 Georgians may have fled the fighting in Abkhazia in 1993. By December 1996, Georgia had 280,000 internally displaced persons. In February of 1997, a voluntary repatriation plan was agreed upon for persons to return to South Ossetia. Hostilities resumed in Gali in May 1998, displacing some 40,000 residents. Georgia's first census in 2002 detailed 4,961 stateless and 8,058 foreign citizens.

By year end 2004 there remained 237,069 internally displaced persons, mainly in urban areas, 29.6% in T'bilisi and 46.4% in Samegrelo-Zemo Svaneti region. Repatriation of Meskhetian Turks began in 2003 and was planned to continue until 2011. Transit migration, trafficked migrants (primarily women from other former Soviet states), migrants from Asia and Africa, and irregular migrants were of increasing concern in 2004 as Georgia looked to membership in the European Union (EU). In addition, in that same year there were 2,559 refugees, mainly Chechen/Kist from the Pankisi Gorge, and 11 asylum seekers.

Georgian emigration during the 1990s was estimated between 300,000 to more than 1.5 million. In 2004, some 8,934 Georgians sought asylum in over 18 countries, mainly Austria, France, Slovakia, and Sweden. In 2005, the net migration rate was estimated as -4.62 migrants per 1,000 population, a significant change from -9.2 per 1,000 in 1990. The government views the migration levels as too high.

ETHNIC GROUPS

According to the 2002 census, 83.3% of the population are Georgian. The leading minorities are Azeris with 6.5%, Armenians with 5.7%, Russians with 1.5%, and others (including Ossetians and Abkhaz) with 2.5%.

LANGUAGES

Georgian is the official language and is spoken by about 71% of the population. Georgian is a South Caucasian language called Kartveli by its speakers. There is no article and a single declension with six cases. The alphabet is a phonetic one with 33 symbols. The literature dates from the 5th century ad.

Russian is spoken by 9% of the population, Armenian by 7%, Azeri by 6%, and various other languages are spoken by the remaining 7%. Abkhaz is the official language in Abkhazia.

RELIGIONS

In the 4th century ad Christianity briefly enjoyed the status of official religion, but successive conquests by Mongols, Turks, and Persians left Georgia with a complex and unsettled ethnic and religious heritage. According to the 2002 census, over 70% of the population are nominally Georgian Orthodox. About 13% are members of other Orthodox groups, including Russian, Armenian, and Greek. A small number of ethnic Russians belong to dissident Orthodox groups such as the Molokani, Staroveriy (Old Believers) and the Dukhoboriy. About 9.9% of the population are Muslims, most of whom are ethnic Azeris, Georgian Muslims of Ajara, and ethnic Chechen Kists. Less than 1% of the population are Roman Catholics. Smaller Christian denominations include Baptists, Seventh-Day Adventists, Pentecostals, Jehovah's Witnesses, the Armenian Apostolic Church, and the New Apostolic Church. There are also small numbers of Bahai's and Hare Krishnas. There are about 8,000 Jews in the country.

In 2002, the parliament ratified a concordat with the Georgian Orthodox Church (GOC) granting them special recognition; however, the constitution has established a separation of church and state and freedom of religion. Some non-Orthodox groups have complained of the privileged status granted to the GOC. For instance, the GOC is allowed to review public school textbooks and to make suggestions on content. Registration of religious organizations is not required, but many do so in order to gain the legal status necessary to rent office or worship space and import written materials.

TRANSPORTATION

Railroads in Georgia as of 2004, consisted of 1,612 km (1,003 mi) of broad and narrow gauge lines, all of which were electrified. Nearly all of the country's railways were broad gauge, accounting for 1,575 km (980 mi), with narrow gauge lines making up only 37 km (23 mi). Railways serve primarily as connections to the Black Sea for inland cities like T'bilisi, Chiat'ura, Jvari, and Tkvarcheli. Highways in 2003 totaled an estimated 20,247 km (12,594 mi), of which 7,973 km (4,959 mi) were paved. The maritime fleet of 175 ships (of 1,000 GRT or over) had a capacity of 855,908 GRT in 2005. Batumi and Poti are the principal Black Sea ports. As of 2004, Georgia had an estimated 30 airports, 19 of which had paved runways, and three heliports (as of 2005). Its only international airport is T'bilisi which is capable of handling 1,000–1,200 passengers per hour. In 2003 there were about 2,000 aircraft departures, and around 124,000 passengers carried on scheduled domestic and international airline flights.

HISTORY

Georgia has existed as a state on a sporadic basis since classical times. The first Georgian state can be traced to the 4th century bc. Throughout its history Georgia has been conquered by the Romans, Iranians, the Arabs, the Turks, the Mongols and the Hordes of Tamerlane. Georgia did enjoy independence for short periods of time from the 6th to the 12th centuries ad. The Mongols invaded and conquered Georgia by 1236. Later the Ottoman and Persian empires competed for control of the region. Western Georgia became a Russian protectorate in 1783. All of Georgia was absorbed directly in the Russian empire during the 19th century.

During the tumult of the Russian revolution, Georgia declared its independence on 26 May 1918. Twenty-two countries recognized this new state, including Soviet Russia. Nonetheless, the Soviet Red Army invaded in February 1921 and Georgia's brief independence came to an end.

Many Georgians fell victim in the late 1920s and 1930s to Soviet collectivization, crash industrialization, and Stalin's purges (despite his Georgian-Ossetian ethnic origins). Nationalist riots were brutally suppressed in 1924 and 1956, and nationalist mass demonstrations occurred in 1978 and 1988. In April 1989, many Georgian demonstrators were murdered, some with shovels, by Soviet military and police forces during a peaceful protest against perceived Russian support for Abkhaz autonomy demands.

Georgia's first multiparty legislative elections, held in October 1990, resulted in a victory for the party coalition Round Table-Free Georgia, headed by academic and dissident Zviad Gamsakhurdia. He was subsequently selected by the deputies to serve as chairman of the legislature. Following a March 1991 referendum, a formal declaration of independence was unanimously approved by the legislature on April 9. Gamsakhurdia was popularly elected as president in May, but still faced opposition from, among others, parties belonging to the National Congress, a national liberation body formed in October 1990. The Mkhedrioni paramilitary group, led by Jaba Ioseliani, was allied with the National Congress. During 1991, Gamsakhurdia's erratic attempts to remake Georgian society and politics caused the head of the National Guard, Tengiz Kitovani, to also join the opposition. The National Guard and Mkhedrioni spearheaded a general assault to overthrow Gamsakhurdia in December 1991, forcing him to flee the country in early January 1992.

A military council formed by Ioseliani, Kitovani, and others assumed power, suspending the Soviet-era constitution (and replacing it with one from 1921), dissolving the legislature, and declaring emergency rule. Former Georgian leader Eduard Shevardnadze (the Communist Party boss of Georgia from 1972 to 1985) was invited in early March 1992 to head a provisional government. He formed a civilian State Council to rule until elections could be held, and was elected head of its four-member presidium. During legislative elections in October 1992, he was elected speaker in an uncontested race. The new legislature granted Shevardnadze wide-ranging powers as head of state pending completion of a new constitution. In May 1993, Shevardnadze moved to consolidate his power by securing the resignations of Kitovani and Ioseliani from government posts. Gamsakhurdia returned from exile in September 1993 to the western Georgian region of Mingrelia and led a revolt to unseat Shevardnadze. Pro-Shevardnadze forces, assisted by the Russian military, were able to put down the revolt by early November 1993. Gamsakhurdia's death was reported in early January 1994. In further moves by Shevardnadze to consolidate power, Kitovani was arrested in January 1995 for planning an illegal paramilitary attack on Abkhazia, and he neutralized Ioseliani's Mkhedrioni.

Several of Georgia's ethnic minorities stepped up their dissident and separatist actions in the late 1980s and early 1990s. South Ossetians in 1989 called for their territory to be joined with North Ossetia in Russia, or for independence. Repressive efforts by former Georgian president Gamsakhurdia triggered conflict in 1990, reportedly leading to about 1,500 deaths and 50,000 displaced persons, mostly ethnic Georgians. In June 1992, Russian president Boris Yeltsin brokered a cease-fire, and a predominantly Russian military "peacekeeping" force numbering about 500 was stationed in South Ossetia. A coordinating commission on settlement of the Georgian-Ossetian conflict, composed of OSCE, Russian, Georgian, and North and South Ossetian emissaries, meets regularly, but rapprochement remains elusive. The November 1999 OSCE Summit Declaration urged Georgia and South Ossetia to agree on resettling displaced persons and called for international aid for the region. In his state of the nation speech on 9 February 2000, Shevardnadze praised the Russian peacekeepers and successes in reconciliation between ethnic Ossetians and Georgians.

Georgia's southern Ajaria region is to a large extent self-governing, under conditions resembling a police state. Ajaria's authorities claim that regional laws take precedence over national laws, and Shevardnadze has had to undertake extensive negotiations to establish national law in the region.

The Abkhaz conflict has resulted in about 10,000 deaths and over 200,000 refugees and displaced persons, mostly ethnic Georgians. In July 1992, the Abkhaz Supreme Soviet declared its effective independence from Georgia. This prompted Georgian national guardsmen to attack Abkhazia. In October 1992, the UN Security Council (UNSC) approved the first UN observer mission to a NIS state, termed UNOMIG, to help reach a settlement. In September 1993, Russian and North Caucasian "volunteer" troops that reportedly made up the bulk of Abkhaz separatist forces broke a cease-fire and quickly routed Georgian forces. Abkhaz-Georgian talks leading to a cease-fire were held under UN auspices, with the participation of Russia and the OSCE. In April 1994, the two sides signed framework accords on a political settlement and on the return of refugees and displaced persons. A Quadripartite Commission was set up to discuss repatriation, composed of Abkhaz and Georgian representatives and emissaries from Russia and the UN High Commissioner for Refugees. The next month, a cease-fire was signed by Georgia and Abkhazia, providing for Russian troops (acting as Commonwealth of Independent States or CIS peacekeepers) to be deployed in a security zone along the Enguri River, which divides Abkhazia from the rest of Georgia. The Russian Defense Ministry in 1999 reported the deployment of about 1,700 peacekeepers.

A major point of contention between the two sides is Georgia's demand that displaced persons be allowed to return to Abkhazia, after which an agreement on broad autonomy for Abkhazia may be negotiated. The Abkhazians have insisted upon recognition of their "equal status" with Georgia as a precondition to large-scale repatriation. The CIS in 1997–1998 endorsed Shevardnadze's call for creating a special Abkhaz-Georgian administration, with UN and OSCE participation, to first seek peace in Abkhazia's Gali area, and to expand the security zone and give Russian peacekeepers police powers. Abkhazia refused to countenance changing the peacekeeping mandate. Although Shevardnadze has criticized the failures of the Russian peacekeepers, in February 2000 he stated that he saw no alternative to their presence, since no other international forces have come forward.

After a hiatus of two years, UN-sponsored peace talks were reconvened in mid-1997. In late 1997, the sides agreed to set up a Coordinating Council to discuss cease-fire maintenance and refugee, economic, and humanitarian issues. Coordinating Council talks and those of the Quadripartite Commission have been supplemented by direct discussions between an envoy from Vladislav Ardzinba, whom Abkhazian separatists have elected as their president, and the Georgian State Secretary. Abkhaz forces in mid-1998 reportedly expelled 30,000–40,000 ethnic Georgians who resided in the Gali area. In June 1999 in Istanbul, the two sides agreed to resume contacts they had cut off the year before, and a working group agreed to implement the separation of warring forces.

In November 1995, Eduard Shevardnadze was elected to the recreated post of president, receiving 74.32% of the vote in a six-person race, and a new parliament was selected. International observers termed the elections generally free and fair nationwide except in the region of Ajaria.

Seven candidates were registered to run in Georgia's 9 April 2000 presidential election. The major challengers to Shevardnadze were Jumbar Patiashvili, former first secretary of the Georgian Communist Party (who ran in the 1995 presidential race), and Aslan Abashidze, chairman of the Ajarian Supreme Council. Both challengers were leaders of the Revival Bloc that contested the 1999 legislative races. Abashidze did not actively campaign and withdrew from the race one day before the vote, alleging an unfair contest. Other speculation was that he withdrew in return for concessions from Shevardnadze on local power and finances. Voting did not take place in Abkhazia or South Ossetia. The Georgian Central Election Commission (CEC) reported that Shevardnadze received 80% of 1.87 million votes and Patiashvili received 17% (less than he received in 1995). The 150 OSCE monitors reported on April 10 that the election did not meet OSCE standards, though "fundamental freedoms were generally respected during the election campaign and candidates were able to express their views." They stressed that the government aided the incumbent, state media were biased, vote counting and tabulation procedures lacked uniformity and, at times, transparency, ballot box stuffing had taken place, and some voting protocols reportedly had been tampered with.

In March 2001, officials from Georgia and Abkhazia signed an accord stating they would not use force against one another. However, meetings between the two sides were cancelled later in the year due to continuing hostilities and hostage incidents. On 8 October 2001, a UNOMIG helicopter was shot down over Abkhazia, and all nine people on board were killed. As of February 2003, those responsible for the downing had not been identified. In August 2002, Georgia and Abkhazia failed to come to an agreement on the withdrawal of Abkhaz fighters from the Kodori Gorge, the only enclave controlled by Georgia in Abkhazia. Georgia was concerned that Russians were supporting the Abkhaz fighters. In January 2003, UN Secretary-General Kofi Annan declared little progress had been made on talks to determine the future status of Abkhazia, and that the mandate for UNOMIG should be extended another six months, until 31 July 2003.

Upon coming into his second term in office, Shevardnadze claimed he would fight corruption and low living standards, undertake market reforms, and protect the territorial integrity of Georgia. Georgia desired NATO membership, and on 22 November 2002, Shevardnadze formally requested that Georgia be invited into the alliance. Russia did not immediately react to the announcement. In 1999, the OSCE demanded that Russia remove all of its troops from Georgia. In 2001, Russia vacated the Gudauta and Vaziani bases and the Marneuli military airfield, but did not agree to a time frame for a departure from the Akhalkalaki and Batumi military bases. One sore spot in Georgian-Russian relations remains the situation in Chechnya. Russian officials have accused Georgia of aiding Chechen rebels, especially in the Pankisi Gorge region of Georgia. Russia regards the armed conflict in Chechnya as a part of the international campaign against terrorism, and has demanded Georgia cooperate in combating Chechens in the region. In September 2002, Russia warned Georgia that it would take military action if Georgia failed to deal with Chechen rebels in the Pankisi Gorge. The United States, since 11 September 2001, has claimed that members of the al-Qaeda organization are operating in the Pankisi Gorge, and has enlisted Georgia's support in undertaking antiterror operations there. In April and May 2002, US Special Forces arrived in Georgia to train and equip troops for counterterrorist operations. On 8 February 2003, Russia claimed that terrorists recently arrested in Great Britain and France had trained in the Pankisi Gorge, and used laboratories built there to produce the poisonous toxin ricin that can be used as an agent in chemical warfare.

The end of 2003 brought with it drastic changes for Georgians. The parliamentary elections that were held on 2 November 2003 were criticized by national and international organizations as being grossly rigged. Mikhail Saakashvili, who received a law degree from Columbia University and worked in the United States for a short while, denounced the election results and urged the population of Georgia to nonviolent civil disobedience against the authorities. People responded to Saakashvili's call and mounted protests in T'bilisi (the so-called "Rose Revolution"), crying for fair elections. (The "Rose Revolution" inspired similar movements in other parts of the world, most notably in Ukraine where the "Orange Revolution" brought about long awaited change.) President Shevardnadze eventually bowed down under the pressure, and on 23 November 2003 resigned from his post, leaving parliamentary speaker Nino Burjanadze in charge until fresh presidential elections could be staged. This move was followed by a decision of the Supreme Court to annul the parliamentary elections results.

On 4 January 2004, Saakashvili emerged victorious in the presidential elections—he received support from all the opposition parties and garnered a 96.3% of the votes. His party, the National Movement-Democratic Front, subsequently won 67.6% of the votes (and 135 out of 150 party list seats in parliament) in the re-run of the parliamentary elections; the Rightist Opposition got 7.6% (15 seats), while other parties received less than 7%. The new prime minister was Zurab Noghaideli.

This victory, however, came in a context where Georgia was very politically, socially, and economically unstable. Aslan Abashidze, the leader of the Ajarian Autonomous Republic in western Georgia, accused Saakashvili of planning to invade Ajaria and declared a state of emergency and the mobilization of armed forces. He failed to attract support from Russia though, and intense criticism from several foreign governments and international organizations forced him to resign in May 2004 and leave for Moscow. These events were followed by tensions in the other two problematic regions—South Ossetia and Abkhazia. Parliamentary elections in South Ossetia in May 2004, and troubled presidential elections in Abkhazia in October 2004, were not recognized by the government in T'bilisi. A proposal on autonomy for South Ossetia presented by Saakashvili was consequently refused by the South Ossetian leaders who asked for full independence.

In May 2005, George W. Bush became the first US president to visit Georgia. That same month, the Baku-T'bilisi-Ceyhan pipeline was officially opened, with US secretary of energy Samuel Bodman joining the presidents of Kazakhstan, Azerbaijan, Georgia, and Turkey at the opening ceremony. A year later, oil began flowing through the pipeline.

GOVERNMENT

Until 1995, Georgia was governed according to a constitution dating back to 1921. Shevardnadze, though, pushed for the adoption of a new constitution giving the president added powers. A new constitution was approved by the legislature in August 1995. It re-establishes a strong presidency, though affirming a balance of executive and legislative powers more equitable than those in most other new constitutions approved by former Soviet republics. The president is elected for a five-year term. The constitution establishes a unicameral, 235-member legislature elected by single-man-date constituencies (85 seats) and party lists (150 seats). Legislators serve four-year terms. Government ministers are responsible to the president, who is assisted by a state minister. Shevardnadze in December 1999 decreed enhanced powers for the state minister "equal to those of a prime minister." The speaker's only constitutional powers are to sign bills and serve as acting president in case the president is indisposed or dies. The legislature agreed that federal provisions would be added to the constitution after Georgia's territorial integrity has been assured. The breakaway regions of South Ossetia and Abkhazia are currently not under the control of the central government, and Ajaria is at least partly self-governing.

Voting for the new legislature took place on 5 November 1995, simultaneous with the presidential race. Only three of the 54 parties running received at least 5% of the party list vote required to win seats, though other parties won representation through constituency races; they have formed eight legislative factions. The elections were judged "consistent with democratic norms" by international observers.

Legislative elections were held in the spring of 2004. Voting was by party lists (150 seats) and single-member constituencies (73 seats; 12 sitting members representing separatist Abkhaz districts were allowed to retain their seats). Fifteen parties and blocs were registered but only two parties received at least 7% of the vote needed to gain party list seats (the new minimum was approved in July 1999). The National Movement-Democratic Front won 135 seats; the Rightist Opposition won 15.

POLITICAL PARTIES

Major political parties that won representation in the legislature elected in 1999, based on their share of the party list voting, included Shevardnadze's Georgian Citizens' Union (gaining 891,000 of 2.1 million party list votes cast), Ajarian leader Abashidze's pro-government Revival Union (537,000 votes), and Industry Will Save Georgia (151,000 votes). The Georgian Labor Party just failed to gain enough votes to win party list seats (141,000 votes). Other parties that gained more than 1% of the party list vote included the opposition National Democratic Party (NDP; it won the second-largest number of such seats in 1995), the People's Party, and the United Communist Party. Most of the minor political parties and groups characterized themselves as opposed to the government.

In November 2003, former President Eduard Shevardnadze resigned from office in a bloodless "Rose Revolution" following protests against his rule and what were seen to be fraudulent parliamentary elections. The election results were later annulled. Presidential elections were held on 4 January 2004, and Mikhail Saakashvili was elected president. His party, the National Movement-Democratic Front, won 135 seats out of the 150 that are on the party lists; the Rightist Opposition won the other 15.

LOCAL GOVERNMENT

Georgia's administrative subdivisions include the Abkhazian and Ajarian Autonomous Republics. The Georgian Supreme Soviet stripped South Ossetia of its autonomous status in late 1990, following its demands to secede and become a part of Russia. Abkhazia and South Ossetia consider themselves self-ruling, and Ajaria has substantial effective autonomy. There are 53 districts (rayons ) and 11 cities, whose governors or mayors are appointed by the president. Local assembly (sakrebulo ) elections were held for the first time under the new constitution in November 1998. Thirteen parties participated in the voting for more than 150,000 candidates for 10,000 municipal and district (rayon ) assemblies or councils. In small towns and villages of fewer than 2,000 voters, 654 majoritarian elections were held, while elsewhere 377 proportional elections by party lists took place. The Citizen's Union Party won the largest number of seats, followed by the Revival bloc, the National Democratic Party, and the Labor Party, though 12 of the 13 parties won some seats. Inadequate funding and the absence of legislation limited the functions of the new locally elected governments. Opposition parties accused the government and the ruling Citizens' Union Party of retaining the effective power to appoint the mayors of the largest cities and the regional leaders. There remains considerable contention between the central government and the Autonomous Ajarian Republic over the scope of local powers.

Local elections were held on 2 June 2002, and 4774 sakrebulo seats in regional Georgia were decided, along with 49 seats in T'bilisi. Independents won 2,749 of the regional seats, with the New Right Party taking 544 seats; Industry Will Save Georgia taking 478 seats; and the Revival Party/21st Century Bloc taking 195 seats. The Citizens' Union of Georgia won only 69 seats in a major defeat, faring poorly in both T'bilisi and the regions. This was attributed to a split between the two main factions of the party prior to the elections, both of which strove for the right to campaign as the CUG. The conservative faction won the right to campaign as the CUG in the week prior to the elections, and the reformist faction campaigned as the Christian Conservative Party.

JUDICIAL SYSTEM

Before 1995, Georgia's legal system retained traces of the pre-Soviet era, the Soviet period, the Gamsakhurdia presidency, and the State Council period. Courts included district courts, a T'bilisi city court, a supreme court in each of the two autonomous republics, and at the highest level the Supreme Court of the Republic.

The 1995 constitution provides for an independent judiciary. However, the judiciary is subject to some executive pressure and pressure from extensive family and clan networks. The Law on Common Courts, passed in 1997, establishes a three-tier court system. District courts hear petty criminal and civil cases. Regional courts of appeal have original and appellate jurisdiction. They try major criminal and civil cases, review cases, and can remand cases to the lower court for retrial. The Supreme Court was envisioned as the highest appellate court, but it also hears some capital cases and appeals from the Central Electoral Commission.

A constitutional court was set up in September 1996. It arbitrates constitutional disputes between the branches of government and rules on individual claims of human rights abuses.

Administration of the court system was transferred from the Justice Ministry to a Council of Justice in 1997, to increase the independence of the courts from budgetary and other influence. The council consists of four members from each of the three branches of government.

The constitution provides for the rights to presumption of innocence, to have a public trial, to legal counsel, and to refuse to make a statement in the absence of counsel. A criminal procedures code was approved in November 1997, and a new criminal code was passed in June 1999. The criminal procedures code aimed at reducing the dominant power of prosecutors over arrests and investigations. Under the new procedures, judges issue warrants for arrest and detention orders, and detentions must follow correct legal procedures, including informing detainees of their rights, allowing visits by family members and lawyers, and treating detainees without brutality. In mid-1999, however, some of the liberal strictures on defendants' rights were reversed at the insistence of the prosecutors, who continue to have a major influence over the courts.

Under the Law on Common Courts, Georgia has launched a system of testing judges on basic legal principles; many of those who have taken the test have failed. Georgia's accession to the Council of Europe in April 1999 led to new legislation taking jurisdiction over the prison system away from the Interior (police) Ministry and giving it to the Ministry of Justice.

ARMED FORCES

Georgia had a total of 11,320 active personnel in its armed forces as of 2005, supported by 1,578 reservists in the National Guard. The Army was the largest force in terms of manpower, with 7,042 active personnel. The Navy and the Air Force each had 1,350 active members. The Army had 86 main battle tanks, 89 armored infantry fighting vehicles, 91 armored personnel carriers, and 109 artillery pieces. Major naval units included 11 patrol/coastal vessels and six amphibious landing craft. The Air Force had seven combat capable aircraft that included six fighter ground attack aircraft, plus another used in a training capacity. The service also operated three attack helicopters. Paramiltary troops numbered 11,700, including 6,300 Ministry of Interior troops and 5,400 border guards. Georgian armed forces were deployed to Iraq in a peacekeeping support role, and under NATO in Serbia and Montenegro. There are also troops from 25 countries in Georgia acting as observers and in a peacekeeping role. The nation's defense budget in 2005 totaled $44 million.

INTERNATIONAL COOPERATION

Georgia was admitted to the United Nations on 21 July 1992. The country is a member of several UN specialized agencies, such as the FAO, IAEA, ICAO, IFAD, ILO, IMF, UNCTAD, UNESCO, UNIDO, WHO, and the World Bank. Georgia joined the Commonwealth of Independent State (CIS) in 1993 and became a member of the WTO in 2000. The nation also belongs to the OSCE, the Council of Europe, the Black Sea Economic Cooperation Zone, the Euro-Atlantic Partnership Council, and the European Bank for Reconstruction and Development. Georgia has observer status in the OAS and is part of the NATO Partnership for Peace. In 2001, Georgia, Uzbekistan, Ukraine, Azerbaijan, and Moldova formed a social and economic development union known as GUAAM. Uzbekistan withdrew from the partnership in 2005.

In 1993, a UN Observer Mission (UNOMIG) was established in Georgia to monitor cease-fire agreements between the State of Georgia and the region of Abkhazia and to support ongoing CIS peacekeeping forces in that region. About 23 countries offer support for UNOMIG.

In environmental cooperation, Georgia is part of the Basel Convention, Conventions on Biological Diversity and Air Pollution, Ramsar, CITES, the Kyoto Protocol, the Montréal Protocol, MARPOL, and the UN Conventions on the Law of the Sea, Climate Change and Desertification.

ECONOMY

Over a decade after its emergence from the Soviet Union as an independent state, Georgia's economy has not fully recovered from the hyperinflation and economic collapse that by 1994 had reduced its GDP to 20% of its 1990 levels. In 2002 its GDP levels were still only at 40% of what they were in the 1980s. Continued civil strife and unresolved separatist struggles with Abkhazia and South Ossetia have combined with pervasive corruption, tax evasion, and a "shadow economy" larger than the legitimate one to stifle the country's economic progress. Shortfalls in revenues have caused the government to turn to external as well as domestic financing to cover chronic budget deficits. Foreign borrowing has in turn led to balance of payments problems and resort to IMF facilities. Georgia has entered into three programs with the IMF since independence. A short standby arrangement, June 1995 to February 1996, was followed on expiration by a multiyear program under the Extended Structural Adjustment Facility (ESAF), which was in effect to 13 August 1999 when the IMF withdrew due to the failure of Georgia to meet budgetary targets. In January 2001, a revised program with more realistic targets was approved under the Poverty Reduction and Growth Facility (PRGF). In March 2001, having an IMF-supervised program underway, Georgia was able to reach an agreement with the Paris Club for rescheduling some of its sovereign debt owed to Paris Club members. From May to October 2001, the IMF again suspended disbursements to Georgia because of its failure to meet the program's conditionals. The 2001 PRGF program was scheduled to expire in January 2004; the government sought and was awarded a new three-year PRGF in June 2004.

Georgia's mild climate makes it an important agricultural producer, raising a growing range of subtropical crops (including tea, tobacco, citrus fruits, and flowers) in the coastal region and exporting them to the northern republics in return for manufactured goods. Georgia supplied almost all of the former Soviet Union's citrus fruits and tea, and much of its grape crop.

In 1996, the government embarked on a program for the privatization of land holdings. The country also has deposits of manganese, coal, iron ore, and lead, plus a skilled, educated work force. There were several oil refineries operating at the Black Sea port of Batumi. Since low points in 1994 and 1995, there has been sustained growth, although not in all sectors, and inflation has been brought substantially under control. Inflation fell from 163% (consumer prices) in 1995 to 39% in 1996 and 7% in 1997. The growth in GDP reached double digits, 11.2% (1996) and 10.6% (1997), stimulated in part by work on the Baku-Supsa pipeline (opened in April 1999). Since 1998, however, GDP growth slowed to about 3% a year due a combination of the effect of economic crises in Russia and Turkey (which together supply 40% of Georgia's imports and buy over 40% of its exports), an influx of refugees since 1999 from neighboring war-torn Chechnya, severe droughts affecting Georgia's agricultural output in 1998 and 2000, and, from 2001, the global economic slowdown. In 1998, overall GDP growth slowed to 3%, as agricultural production dropped 10% and industrial production dropped 2%. Growth remained at only 3% in 1999. GDP growth was even lower (2%) in 2000, despite 11% growth in industrial production, due to a recurrence of drought which caused agricultural production to fall 15% in one year.

In 2001, agriculture recovered somewhat, growing 6%, but industrial production fell back 5%, reflecting in part an 11% decrease in exports to countries outside the CIS. Exports to CIS countries, by contrast, rose 23% in 2000 and 9% in 2001. Georgia official statistics report that the GDP grew overall by 4.5% in 2001, while the US CIA estimated growth at 8.4%. Inflation, which spurted to 19% in 1999, fell to moderate levels of between 4% and 5% in 2000 and 2001.

In 2002, the economy was hampered by the necessity of importing over 90% of the petroleum products consumed due to the shutting down of its only two remaining refineries. The larger 106,000-barrels-per-day refinery at Batumi was closed for modernization and expansion under an agreement with Japan's Mitsui Corp. A small 4,000 barrels-per-day refinery, built in 1998 and idle for much of 2001, was closed permanently in 2002 by its operation company, CanArgo, in favor of a plan to replace it with a larger 30,100-barrels-per-day facility. Georgia's future economic prospects were thought to have improved greatly in December 2002 however, with the announcement of an agreement on the Georgia portion of the Baku-T'bilisi-Ceyhan (BTC) pipeline, which opened in May 2005. In addition to the BTC project, which is to pipe oil from the Caspian Sea to the Turkish port of Ceyhan on the Mediterranean to supply Western European markets, Georgia and Turkey concluded another agreement to build a railway from T'bilisi to Kars, Turkey. The railway would transport oil to Turkish refineries. Plans also exist to develop Georgia into a transit center for natural gas.

The economy experienced an explosive expansion in 2003, with a GDP growth rate of 11.1%. The economy cooled down in 2004, growing by 6.2%, but was expected to pick up again in 2005, with a projected growth rate of around 8.0%. The inflation rate was stable, fluctuating between 4% and 6%. As such, inflation did not pose a problem to the overall economy, although it was expected to rise in 2005 to 8.5%. The "Rose Revolution" in 2003 brought hope that the economy would take a turn for the better by emulating a Western development pattern. The Baku-T'bilisi-Ceyhan oil pipe lines and the Baku-T'bilisi-Erzerum gas pipe lines have brought much needed investment into the country and helped alleviate the chronic unemployment. However, Georgia's energy sector was still dependent on imports from Russia as of 2005, and its market needed heavy restructuring before it could reach functional economy status.

INCOME

The US Central Intelligence Agency (CIA) reports that in 2005 Georgia's gross domestic product (GDP) was estimated at $16.1 billion. The CIA defines GDP as the value of all final goods and services produced within a nation in a given year and computed on the basis of purchasing power parity (PPP) rather than value as measured on the basis of the rate of exchange based on current dollars. The per capita GDP was estimated at $3,400. The annual growth rate of GDP was estimated at 10%. The average inflation rate in 2005 was 8%. It was estimated that agriculture accounted for 16% of GDP, industry 26.8%, and services 57.2%.

According to the World Bank, in 2003 remittances from citizens working abroad totaled $246 million or about $54 per capita and accounted for approximately 6.2% of GDP. Foreign aid receipts amounted to $220 million or about $43 per capita and accounted for approximately 5.5% of the gross national income (GNI).

The World Bank reports that in 2003 household consumption in Georgia totaled $3.12 billion or about $684 per capita based on a GDP of $4.0 billion, measured in current dollars rather than PPP. Household consumption includes expenditures of individuals, households, and nongovernmental organizations on goods and services, excluding purchases of dwellings. It was estimated that for the period 1990 to 2003 household consumption grew at an average annual rate of 4.5%. In 2001 it was estimated that approximately 33% of household consumption was spent on food, 13% on fuel, 2% on health care, and 4% on education. It was estimated that in 2001 about 54% of the population had incomes below the poverty line.

LABOR

The labor force was estimated at 2.1 million in 2001 (the latest year for which data was available). Agriculture provided work to 40% of the labor force, with another 40% engaged in services and the remaining 20% in industry. The estimated unemployment rate was 17% in 2001.

Employees have the right to form or join unions freely. A confederation of independent trade unions has emerged with the abandonment of the old centralized Soviet trade unions. Georgia's main trade union is the Amalgamated Trade Unions of Georgia. Workers are permitted to engage in collective bargaining, but this practice is not extensive.

The minimum employment age is 16 except in unusual circumstances, and this minimum employment age is generally respected. The government sets public-sector salaries dependent on the pay grade of the employee. The lowest such wage was $10.80 per month in 2002. There is no state prescribed minimum wage for the private sector. In general, wages and salaries do not provide a decent standard of living for a family. The legal standard work-week is 41 hours with a 24-hour rest period weekly.

AGRICULTURE

About 15% of Georgia's total land area was considered arable in 2003. Since independence in April 1991, Georgian agriculture has become much more associated with the private sector; 99% of agricultural land is now privately held. In 2003, agriculture accounted for an estimated 20% of GDP.

During the Soviet era, Georgia produced almost the entire citrus and tea crop and most of the grape crop for the entire Soviet Union. In 2004, production levels (in thousands of tons) included corn, 410; wheat, 186; barley, 61; tea, 24; vegetables and melons, 490; and grapes, 180.

ANIMAL HUSBANDRY

Meadows and pastures account for about 30% of the Georgian land area. In 2005, the livestock population included cattle, 1,250,000; sheep, 689,000; pigs, 484,000; buffaloes, 35,000; horses, 44,000; and chickens, 9,100,000. Beef production in 2005 totaled some 51,000 tons; pork, 35,000 tons; and chicken, 15,000 tons. About 781,000 tons of milk were produced in 2005, as were 31,500 tons of eggs.

In mid-1993, a ban was placed on the export of dairy products (including milk), cattle and poultry, meat and meat products, and leather. Georgia does not produce enough meat and dairy products to satisfy domestic demand. Meat imports in 2004 exceeded $19.7 million.

FISHING

The Black Sea and Kura River are the main sources of the domestic catch. The total catch in 2003 was about 3,361 tons, with marine fishing accounting for 97%. Anchovies made up 67% of the total catch in 2003. Commercial fishing is not a significant contributor to the economy.

FORESTRY

About 44% of Georgia is covered with forests or woodlands, but the mountainous terrain inhibits forestry production. Timber production is primarily for domestic use; exports of forestry products amounted to only $17.9 million in 2003.

MINING

Georgia had significant mineral deposits, but the future of the industry depended on a more secure climate for investment, through greater political and economic stability. Manganese was the country's foremost mineral commodity in the Soviet era, producing 5 million tons in the mid-1980s; production has since fallen precipitously, reaching 59,100 metric tons in 2000, but had increased to an estimated 80,000 metric tons in 2002. Manganese came from the Chiat'ura basin; reserves of high-grade ore were almost depleted.

The Madneuli region was a major site of barite, copper, lead-zinc, gold, and silver mining. Lead and zinc were mined at the Kvaisi deposit, and arsenic was mined from the Lukhumi and Tsansa deposits. In 1995, the Georgian State Geology Committee, Gruzgeologiya, stated that Georgia had gold reserves of 250 tons and silver reserves of 1,500 tons, with another 250 tons of prospective gold reserves.

In 1996, Georgia permitted foreign firms to manage metallurgical enterprises. The Zestafoni ferroalloy plant was signed over to the Russian-Georgian Bank for Reconstruction and Development in conjunction with a US partner, North Atlantic Research, to be managed for a period of 10 years.

Mine output of copper was 8,000 metric tons in 2002. In that same year, gold output was estimated at 2,000 kg, and for silver, an estimated 33,000 kg. Also produced in 2002 were mine lead, barite, bentonite, mine zinc, and cement.

ENERGY AND POWER

Georgia must rely on imports for most of its energy needs. Its limited oil reserves were placed at about 30 million barrels in 2003. The country produced 2,000 barrels per day in 2004, much less than the 42,200 barrels of oil it consumed each day that same year. However, oil exploration is actively being carried out both on land and along the Black Sea coast. Most of the oil comes primarily from Azerbaijan, and Russia. Natural gas reserves in 2003 were placed at 0.3 trillion cu ft, with production and consumption at 0.6 billion cu ft and at 35.3 billion cu ft, respectively in that year.

Georgia has two oil refineries, a 106,000-barrel-per-day (bpd) facility at Batumi and a smaller refinery at Sartichala. Georgia plans on utilizing its Black Sea ports to become a significant transshipment point for oil produced by Azerbaijan (and the other republics of central Asia). On 8 March 1996, Georgia and Azerbaijan signed a 30-year agreement to pump a portion of the oil produced in the Azeri waters of the Caspian Sea to the Georgian port of Suspa. From there, the oil will be shipped across the Black Sea to western markets via Turkey. The pipeline along this route became operational in April 1999 following substantial upgrades. Additionally, improved ties with Iran will reduce dependence on energy imports from Russia, from which Georgia is trying to distance itself economically.

Deteriorating plants and equipment prevent Georgia's power sector from operating at full capacity, and power outages are common in many areas of the country. As with its imports of natural gas, Georgia is in arrears in paying for the electricity it has been obliged to import from Armenia, Azerbaijan, and Russia. The country has substantial untapped hydroelectric potential, however, and is planning to build two new hydroelectric plants on the Rioni River and a third, the 40-MW Minadze station, on the Kura River. In 2003, electricity production amounted to 6.7 billion kWh. In 2002, hydropower accounted for 83% of the electricity produced and 16.6% was from fossil fuel. Installed capacity in 2003 was 4.4 GW, with consumption at 6.8 billion kWh for that year. The two major power plants are a thermal plant at T'bilisi (with a capacity of 1,280,000 kW) and the Enguri hydroelectric plant (with a 1,325,000 kW capacity). Consumption of electricity in 2000 totaled 7.9 billion kWh.

Georgia is one of the 12 former Soviet republics to found the Intergovernmental Council on Oil and Gas (ICOG), which stresses international cooperation in the oil and natural gas industry and will entitle members to receive Russian energy resources in exchange for investment in Russia's oil and natural gas industries.

INDUSTRY

Heavy industry, based on the country's mineral resources, predominates, and includes metallurgy, construction materials, and machine building. Light industry includes food processing, beverage production, consumer durables, garments, and oil-processing. Hyperinflation in 1994 together with continuing political unrest severely affected industrial production. By 1995, industrial output of state enterprises was one-fifth of the 1990 level.

In 1996, although industrial production rose 6% for the year, less than 20% of the country's industries were operating, most at less than 15% of capacity. In 1997 another improvement of 7% was recorded, but in 1998, due mainly to the financial crisis in Russia, industrial production fell 2%. By the end of 1998, the privatization of small businesses was largely completed, with over 12,860 becoming privately owned. Among the large state enterprises, about 1,200 had been changed into joint stock companies, 910 of which have since been privatized.

Despite a model legal framework for the privatization of its enterprises, industry in Georgia had only been 15.2% privatized as of 2002, with the construction industry at about 18.5%, mainly because of a lack of buyers. The least privatized sector is energy, where, according to a recent USAID assessment, the infrastructure borders on catastrophic failure.

Growth in industrial production returned in 1999 and 2000, at 7% and 11%, respectively, but in 2001, there was a decline of 5%, due, externally, to declining export demand in non-CIS countries, and, internally, to the shutdown of most of Georgia's refinery production. Before independence, Georgia had several refineries, but by 2001, it had only two: one at the Black Sea port of Batumi with a 106,000 b/d capacity, and the other, a small 4,000 b/d refinery built in 1998 near CanArgo's Ninotsminda oil field called the Georgian-American Oil Refinery (GAOR).

In 2001, the GAOR operated only between July and September, and at less than 50% capacity. In September 2001, CanArgo shut it down, announcing plans to build a $200 million refinery in its place that would have a 30,100 b/d capacity. In 2002, the Batumi refinery was also closed, undergoing a $250 million upgrade and expansion directed by the Mitsui Corporation. As a result, Georgia has been obliged to import over 90% of its petroleum products. Mitsui has undertaken the work without Georgian government guarantees of its investment. The lack of such guarantees caused two other Japanese companies, Marubeni and JGC, to drop out of the project. Georgia's most promising industrial development came in December 2002, when agreement was announced for the construction of Georgia's part of the Baku-T'bilisi-Ceyhan (BTC) pipeline; the pipeline was officially opened on 25 May 2005.

Industry accounted for 26.8% of overall economic output in 2005, and it was the sector with the smallest representation in the working population; agriculture and services were by far the largest employers (both with an approximate equal representation in the labor force—40%), although they achieved different productivity levels—agriculture accounted for 16% of the GDP, while services came in first with 57.2%. Current important industries include steel, aircraft, machine tools, electrical appliances, mining (manganese and copper), chemicals, wood products, and wine.

SCIENCE AND TECHNOLOGY

The Georgian Academy of Sciences has departments of mathematics and physics, earth sciences, applied mechanics, machine building, and control processes, chemistry and chemical technology, agricultural science problems, biology, and physiology and experimental medicine. Georgia has 44 research institutes, many attached to the academy, conducting research concerning agriculture, fisheries, and veterinary science; and medicine, natural sciences, and technology. The academy's Sukhumi Botanical Garden is maintained at Chavchavadze. The Scientific and Technical Library of Georgia, with more than 10 million volumes in 1996, is located in T'bilisi. Eight colleges and universities offer degrees in basic and applied sciences. In 1987–97, science and engineering students accounted for 39% of university enrollment.

In 2002, research and development spending totaled $33.702 million, or 0.29% of GDP. As of that same year, high technology exports totaled $41 million, or 38% of all manufactured exports. As of 2002, there were 2,317 researchers and 241 technicians per million people actively engaged in R&D.

DOMESTIC TRADE

The war in Abkhazia severely disrupted domestic trade in 1993 and hyperinflation in 1994 led to widespread fighting in the nation and catastrophic economic decline. Economic conditions began to improve by the mid-1990s following the influx of foreign aid. Agriculture continues to be a primary basis for the domestic economy. The fastest growing segment of the economy, however, is in services, which accounted for about 55% of the GDP in 2002. Small privately owned shops are still more prevalent than supermarkets or larger retail establishments. Business hours are generally from 9 am to 6 pm, Monday through Friday.

FOREIGN TRADE

Traditionally Georgia has been heavily dependent on Russia for power, bridges, roads, and other economic essentials. In return, Georgia sends Russia fruit, wine, and other agricultural products. Georgia's current government, however, is pursuing closer links with the EU and Turkey.

In 2005, exports reached $1.4 billion (FOB—Free on Board), while imports grew to $2.5 billion (FOB). The bulk of exports went to Turkey (18.3%), Turkmenistan (17.8%), Russia (16.2%), Armenia

(8.4%), the United Kingdom (4.9%), and Azerbaijan (3.9%). Principal exports were ferro alloys, copper and gold, ferrous waste and scrap, iron and steel, wine, and mineral water. Imports included oil, gas, electricity, tubes and pipes, and automotives, and mainly came from Russia (14%), Turkey (11%), the United Kingdom (9.3%), Azerbaijan (8.5%), Germany (8.2%), the Ukraine (7.7%), and the United States (6%).

BALANCE OF PAYMENTS

Georgia's high level of imports, until 2000, was largely due to its capital account surplus, stemming from the inflows of investments, loans, and grants, rather than from weak export performance. Georgia's capital account subsequently fell into deficit.

The US Central Intelligence Agency (CIA) reported that in 2002 the purchasing power parity of Georgia's exports was $515 million

while imports totaled $750 million resulting in a trade deficit of $235 million.

The International Monetary Fund (IMF) reported that in 2000 Georgia had exports of goods totaling $459 million and imports totaling $971 million. The services credit totaled $206 million and debit $216 million.

Exports of goods and services reached $1.1 billion in 2004, down from $1.3 billion in 2003. Imports decreased from $1.9 billion in 2003, to $1.8 billion in 2004. The resource balance was consequently negative in both years, reaching -$583 million in 2003 and -$637 million in 2004. The current account balance was also negative, decreasing from -$391 million in 2003, to -$430 million in 2004. Foreign exchange reserves (including gold) decreased to $187 million in 2004, barely covering a month of imports.

BANKING AND SECURITIES

The National Bank of Georgia (NBG), the state's central bank, was founded in 1991. The NBG has the functions of a central bank, namely issuing currency, managing the exchange rate, controlling monetary and credit aggregates, and regulating the activities of the banking sector.

In September 1995 Georgia introduced a new currency, the lari (l), to replace its interim currency, the coupon, at the rate of l1 = coupon1,000,000. The coupon had been introduced in May 1993 after the collapse of the ruble zone in response to a severe cash shortage in the republic. The coupon experienced one of the steepest devaluations of any currencies in the former Soviet Union, plummeting from around coupon1,000 = $1 shortly after its introduction to coupon1,550,000=$1 by December 1994. The coupon was scarcely used by the private sector, where the majority of transactions were carried out in dollars and rubles.

The government has since had more success with the lari. The new currency was introduced at l1.3 = $1, and given the dramatic success in reducing inflation, by the end of November 1996 it had appreciated slightly to trade around l1.28 = $1. However, by 2001, it had lost some value, trading at l2.07 = $1.

At the time of independence there were, in addition to the NBG, five specialized commercial banks, about 200 small domestic commercial banks, and the former Georgian branches of the Soviet Savings Bank and Vneshekonombank. During 1993 and 1994, a large number of small banks were set up, peaking at 227 by mid-1994. Several of these have since collapsed, leaving creditors bankrupt. In December 1994, the central bank stripped 28 commercial banks of their licenses on the ground that they had insufficient funds. In June 1995, the head of the central bank, Nodar Javakhishvili, moved to further stiffen capital requirements and stripped 22 more banks of the licenses. This was followed in July and August with similar measures that resulted in 58 additional banks losing their licenses. Also during 1995 was the merger of three state banks (Eximbank, Industrial Bank, and the Savings Bank) into the United Georgian Bank. State-owned banks accounted for some 75% of banking sector assets.

The first foreign bank, the Georgian-US bank, was opened in T'bilisi in early 1994. In September 1996 a joint investment bank began its operations with its founding capital contributed by the United Georgian Bank, the Commercial Bank of Greece, and the European Bank for Reconstruction and Development (EBRD). Emlak Bankasi, a Turkish bank, and the Caucasus Development Bank, based in Azerbaijan, currently maintain offices in T'bilisi. In 1997, the EBRD announced that it is to lend $5 million to Absolute Bank, a US-Georgian joint venture, with 60% US ownership. The bank has $3 million in assets, making it one of the largest Georgian banks in terms of capital.

Other commercial banks include the Agricultural Bank (1991), the Bank of Industry and Construction (1991), Housing Bank of Georgia (1991), and the State Savings Bank (1989).

The International Monetary Fund reports that in 2001, currency and demand deposits—an aggregate commonly known as M1—were equal to $190.2 million. In that same year, M2—an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual funds—was $356.0 million. The money market rate, the rate at which financial institutions lend to one another in the short term, was 17.5%.

The Caucasian Exchange, a stock exchange, opened recently in Georgia.

INSURANCE

Georgia's insurance system is largely inherited from government-controlled Soviet institutions. The civil war impairs growth of the insurance sector.

PUBLIC FINANCE

Georgia has been notorious for mismanaging its budget. In 1999, the IMF put one of its programs in the country on hold because Georgia could not meet the conditional budgetary targets the IMF set forth. A more realistic budget in the second half of 2000 paved the way for a new IMF program beginning in January 2001. Georgia's progress towards those new budgetary goals has been uneven, but it has remained on track.

The US Central Intelligence Agency (CIA) estimated that in 2005 Georgia's central government took in revenues of approximately $872.5 billion and had expenditures of $1 billion. Revenues minus expenditures totaled approximately $871.4 billion. Total external debt was $1.9 billion.

The International Monetary Fund (IMF) reported that in 2003, the most recent year for which it had data, central government revenues were l933.3 million and expenditures were l1,009.8 million. The value of revenues was us$435 million and expenditures us$471 million, based on an exchange rate for 2003 of us$1 = l2.1457 as reported by the IMF. Government outlays by function were as follows: general public services, 34.1%; defense, 6.0%; public order and safety, 10.7%; economic affairs, 8.8%; housing and community amenities, 0.6%; health, 1.0%; recreation, culture, and religion, 2.5%; education, 4.1%; and social protection, 32.4%.

TAXATION

As of 2004, Georgia has a standard corporate profits tax of 20%. Capital gains are considered part of taxable profits and are taxed at the corporate rate. Taxes on dividends, interest, and management fees are withheld at the source at a rate of 10%. Foreign entities not permanently established pay a withholding tax of 10% on dividends, interest, and royalty payments. There is also a withholding tax of 4% on insurance premiums and payments for international telecommunications and transportation services. A 1% tax on property of enterprises (TPE) is charged foreign companies that have permanent establishments in Georgia. There is also a personal

income tax, paid by resident and nonresident individuals, which has four brackets, the first one being a negative income tax of 12% up to an income of l200 (about $93). For l201–350 (about $165), the tax is l24 ($11) plus 15%. For l351–600 ($286), the tax is l46.5 ($22) plus 17%. Above l600, the tax is l98 ($42) plus 20%. Social charges are deducted from employees' salaries: 15% for the health protection fund and 1% for the social security fund. Employers' contributions are 3% for the health protection fund, 27% for social security, and 1% for unemployment. There is also a value-added tax (VAT) of 20% (reduced from 28%), in addition to various excise taxes, ranging from 10–90%

Georgia has one of the worst rates of tax compliance in the world. Chronic shortfalls in revenue collection means that the state must turn to external financing and loans from the National Bank of Georgia to make up for budget deficits. External borrowing to cover budget shortfalls have been the primary reason Georgia has had to turn to the IMF and the Paris Club for stand-by credit agreements and rescheduling of sovereign debt. The high rate of tax evasion puts legitimate business at a competitive disadvantage with a large "shadow economy," estimated officially to constitute 40–60% of the economy, but generally believed, according to the US State Department, to be much higher. Estimates of underpaying of taxes by enterprises have been close to 80%.

CUSTOMS AND DUTIES

Georgia has an open trade regime, with most commodities carrying tariffs of either 5% or 12%, although automobiles have considerably higher rates. Some goods, such as grains, humanitarian goods, and aviation fuel, are exempt from carrying customs tariffs. Imported goods are also subject to a value-added tax (VAT) of 20% and an excise tax of 5–100% is levied on luxury goods.

FOREIGN INVESTMENT

Georgia was one of the first former Soviet republics to adopt market reforms on foreign investment. However, political instability has hampered efforts to attract capital from abroad. Oil and gas pipeline projects and expanded privatization sales promised to reverse this trend. By the mid1990s both GDP and total foreign investment began to grow steadily. In September 1998 the decision was made to make all future economic regulations in full conformity with the norms of the European Community. Legislation in 2000 extended the scope of the privatization program, created a capital market, and provided for the registration of enterprise and agricultural land, all conducive to improving Georgia's investment climate. Also in 2000, the currency appeared to have stabilized. The main hindrances to foreign investment flows are not the legal framework but pervasive corruption and arbitrary and biased administration.

Annual foreign direct investment (FDI) inflow swelled to $242 million in 1997 and $265.3 million in 1998 mainly due to work on the Baku-Supsa pipeline and on the Supsa terminal. FDI flows fell to an annual average of $124.3 million 1999 to 2001. Total FDI stock from 1990 to 2000 was an estimated $672 million. The United States has been the leading source of foreign investment, accounting for about 22%.

Investment levels have, as expected, soared in recent years. Mainly due to work on the Baku-Tibilisi-Ceyhan pipeline and the Shah Deniz gas pipeline, FDI levels have grown from $163 million in 2002, to $336 million in 2003, and $490 million in 2004. Preliminary data for 2005 shows that inflows of capital have reached $284 million in the first half of the year. An encouraging fact is the winding down of the effects of the pipeline projects, and the increase in foreign investments as a result of privatizations done by the government.

ECONOMIC DEVELOPMENT

In late 1992, the government inaugurated its Medium-Term Program of Macroeconomic Stabilization and Systemic Change focusing on price and trade liberalization, budget constraints for public enterprises, and privatization. As part of a small enterprise privatization program, the first auction of small-scale assets was held in T'bilisi in March 1993. Practically all housing has been privatized, as well as a high percentage of agricultural land. Privatization was progressing as of 2003, and the government was developing the legal framework necessary for a good climate of investment. Nevertheless, due to a lack of enough foreign direct investment in 2003, the transportation and communication infrastructure remains in poor condition.

In spite of these reforms, political instability continues to hamper Georgian economic development. Although the Baku-T'bilisi-Ceyhan oil pipeline brings much needed foreign investment, most observers feel that the fate of the Georgian economy hinges on the ultimate fate of the Caucasus.

Corruption hampers economic development, and has undermined the credibility of the government's economic reforms. The size of the shadow economy is also a concern. The Paris Club rescheduled Georgian debt in 2001. That year, Georgia negotiated a three-year $144 million Poverty Reduction and Growth Facility (PRGF) Arrangement with the IMF, which was due to expire in 2004. The IMF encouraged the country to implement tax reform, to improve revenue collection, strengthen the banking system, and to combat corruption and smuggling.

The construction of the Baku-T'bilisi-Ceyhan oil pipe lines and the Baku-T'bilisi-Erzerum gas pipe lines have been extremely beneficial for the economy of Georgia. The economy has registered impressive growth rates (11.1% in 2003, and 8% in 2005), unemployment has been alleviated, and the privatization of several national enterprises has been made easier as a result. A strong industrial sector, together with higher productivity rates in the agricultural sectors, will ensure that the impressive economic expansion will continue at similar rates for at least another couple of years. The government needs to speed up reforms however, and ensure a proper economic restructuring by developing and diversifying its manufacturing and export bases.

SOCIAL DEVELOPMENT

All employees are eligible for old age benefits, which are funded primarily by employers, who contribute 31% of payroll. Disability and death are not covered. A special social pension exists for the aged and disabled who do not qualify for the employee pension system as determined by need. Paid maternity leave is provided for up to eight weeks, although it is reported that employers frequently withhold benefits. Temporary disability is only payable if the employer is responsible for the injury, although unemployment and permanent disability benefits are provided. Medical services are provided to needy residents by government health officials. Family allowances, initiated in 2002, provide for all needy residents, and is funded by the government.

Women remain predominantly in low-skilled, low-paying jobs, regardless of qualifications. Female participation in politics has been discouraged, and women rarely fill leadership positions in the private sector. Discrimination and harassment in the workplace are common. Violence against women is a serious problem and there are virtually no mechanisms to assist victims. Societal bias discourages the reporting of domestic abuse or sexual violence. In 2004, kidnapping of women for marriage still occurred.

Human rights abuses by the police and security forces continue, often to obtain confessions or extract money. Prison conditions are inhumane and life threatening, and corruption is endemic in the judicial and law enforcement systems. There is some discrimination against ethnic minorities.

HEALTH

Since 1995 there have been wide-ranging reforms to the centralized system of health care inherited from the former Soviet Union. Staffed by a disproportionate number of specialists, and supporting a relatively high number of hospital beds, the system proved too costly and inefficient to maintain. In the period immediately following independence, financial shortages led to delayed payment, or even nonpayment, of medical staff salaries; a virtual halt to investment in new medical equipment and buildings; and the emergence of a black market in pharmaceuticals. Changes in health care policy since 1995 include introduction of a health insurance system and an end to free health care outside a basic package of health benefits, as well as new systems of provider payment. The network of rural and urban primary care centers is still largely a holdover from the Soviet era, but the payment structure for services has changed. Health care expenditure was estimated at 2.8% of GDP.

In 2004, there were an estimated 391 physicians, 372 nurses, 29 midwives, and 30 dentists per 100,000 people. Immunization rates for the country in 1997 were as follows: children up to one year old were vaccinated against tuberculosis, 76%; diphtheria, pertussis, and tetanus, 92%; polio, 98%; and measles, 95%.

Life expectancy in 2005 was an average of 75.88 years and the infant mortality rate was 18.59 per 1,000 live births. The total fertility rate has decreased from 2.9 children per woman of child-bearing years in 1960 to 1.1 in 2000. The under-five mortality rate was 59 per 1,000 live births. The maternal mortality rate was much lower than the average in Eastern Europe. In 1995 there were 22 maternal deaths per 100,000 live births. The estimated overall mortality rate as of 2002 was 14.6 per 1,000 people. There were approximately 2,000 civil war-related deaths in 1992. A diphtheria epidemic has spread through the former Soviet Union. In most affected countries, the incidence rate of reported diphtheria has increased two- to tenfold every year.

The HIV/AIDS prevalence was 0.10 per 100 adults in 2003. As of 2004, there were approximately 3,000 people living with HIV/AIDS in the country. There were an estimated 200 deaths from AIDS in 2003.

HOUSING

Before independence, most urban housing was regulated by the government while most rural housing was privately owned. Beginning in the mid 1990s, legislation towards privatization led to the legalization of an open real estate market. Unfortunately, the need for adequate housing is far greater than current supplies. In 1989, there were 152,033 people registered and waiting for adequate housing. Overcrowding became a problem as extended families stayed together in one household simply because of the lack of alternative housing. Natural disasters have caused trouble for an already problematic housing situation. Mudslides are common in some areas. In 1987, a mudslide destroyed 210 homes and seriously damaged 850 more. In 1991, an earthquake destroyed 46,000 homes. Civil unrest has caused a great deal of homelessness as well. As of 2001, there were about 300,000 displaced persons throughout the country.

During 1995 a total of 55,423 sq m of dwelling was built in the republic, but this represented only a 4.4% increase in new dwelling area since 1987. Building costs are high, with the price of one square meter often between $500 and $1,000. At the 2002 census, there were 1,243,158 private households, with the average size of household at 3.5 persons.

In western Georgia, a typical older home is wooden, raised off the ground slightly in areas where flooding or very damp ground is problematic. In the drier climate of eastern Georgia, stone (later brick) houses with flat roofs were constructed along roads. In urban regions, two-story brick or cement block homes are not uncommon.

EDUCATION

Georgia's educational system was based on the Soviet model until the late 1980s, when there was a de-emphasis of Soviet educational themes in favor of Georgian history and language. Georgian students are taught in a number of languages, including Georgian, Russian, Armenian, Azerbaijani, Abkhazian, and Ossetian. Education is compulsory for nine years, beginning at age seven. Elementary school covers six years of study. This is followed by either seven years of general secondary school or six years of technical school. The academic year runs from September to June.

In 2001, about 41% of children between the ages of three and five were enrolled in some type of preschool program. Primary school enrollment in 2003 was estimated at about 89% of age-eligible students. The same year, secondary school enrollment was about 78% of age-eligible students. It is estimated that about 82% of all students complete their primary education. The student-to-teacher ratio for primary school was at about 16:1 in 2000; the ratio for secondary school was about 8:1.

There are 24 state institutions of higher learning in the country and 73 private accredited institutions. These include the Iran Dzhavakhiladze University of T'bilisi, Georgian Technical University, Abkhazian State University, and State University of Batumi. In 2003, about 38% of the tertiary age population were enrolled in some type of higher education program. The adult literacy rate has been estimated at about 99%.

As of 2003, public expenditure on education was estimated at 2.2% of GDP, or 11.8% of total government expenditures.

LIBRARIES AND MUSEUMS

The National Library in T'bilisi holds over six million volumes, while the Georgian State Public Library has eight million. The largest library in the country, however, is the Scientific and Technological Library of Georgia, which contains 10.1 million volumes. There are dozens of private libraries held by various scientific, cultural, and religious organizations and extensive university library holdings. Chief among the latter are T'bilisi State University (three million volumes), the Polytechnic University in T'bilisi (1.14 million volumes), and the Pedagogical Institute in T'bilisi (336,000 volumes).

Most of the country's cultural institutions are in T'bilisi, including the State Art Museum, the Museum of Fine Arts, the State Museum of Georgia, the T'bilisi Museum of History and Ethnography, and the Georgian State Museum of Oriental Art. There are local or specialty museums in Gori, Suchumi, and Kútáisi.

MEDIA

Georgia has international telecommunications links via landline to other former Soviet republics and Turkey. There is also a low capacity satellite earth station and connections via Moscow. In 2003, there were an estimated 133 mainline telephones for every 1,000 people; about 138,800 people were on a waiting list for telephone service installation. The same year, there were approximately 107 mobile phones in use for every 1,000 people.

In 2004, there were 54 independent television stations in the country, but only three provided national service. Though independently operated, most stations rely on some amount of support from the national or regional governments. There are at least 10 radio stations in operation, most of which are privately owned. Primary news agencies include the state operated Sakinform, and the privately held Prime-News, Iprinda, and Kavkasia-Press. In 2003, there were an estimated 568 radios and 357 television sets for every 1,000 people. About 12.4 of every 1,000 people were cable subscribers. Also in 2003, there were 31.6 personal computers for every 1,000 people and 31 of every 1,000 people had access to the Internet. There were 11 secure Internet servers in the country in 2004.

In 2001, there were about 200 independent newspapers throughout the country. The most widely read was Sakartvelos Respublika, with a 1995 circulation of 40,000. In T'bilisi, the major daily is Vestnik Gruzzi (Georgian Herald ). There are also several general and special interest periodicals available.

The constitution and a 1991 press law provide for a free press, but in practice the government is said to restrict some press rights. Libel laws, as well as pressure from business and society leaders and government authorities, inhibit hard core investigative reporting.

ORGANIZATIONS

Georgia's Chamber of Commerce and Industry promotes trade and commerce with its fellow members of the CIS. The country belongs to the International Chamber of Commerce as well. Union organizations in Georgia include the Confederation of Independent Trade Unions, an umbrella organization. Important political organizations include the all-Georgian Mecrab Kostava Society and the Paramilitary group Mkhredrioni.

The Georgian Academy of Sciences, promoting research and education in all branches of science, was established in 1941. The Georgian Medical Association serves as a physician networking organization while also promoting research and education on health issues and working to establish common policies and standards in healthcare There are also associations dedicated to research and education for specific fields of medicine and particular diseases and conditions, such as Georgian Association of Cardiology.

Youth organizations include the National Youth Council of Georgia (through the Department of Youth and Sport), the United Nations of Youth: Georgia, YMCA/YWCA, and scouting programs. There are also several sports associations promoting amateur competition in such pastimes as baseball, track and field, badminton, and figure skating.

Volunteer service organizations, such as the Lions Clubs and Kiwanis International, are also present. There are national chapters of the Red Cross Society and Caritas.

TOURISM, TRAVEL, AND RECREATION

Bounded by the Black Sea and the Caucasus Mountains, Georgia has been known for its lucrative tourist industry, but tourism declined after independence due to political and economic turmoil. Mtskheta, the ancient capital, is home to the Svetitskhoveli Cathedral, an 11th-century edifice that is the spiritual center of the Georgian Orthodox Church, and a major tourist attraction. The present-day capital, T'bilisi, is over 1,000 years old and offers historic citadels, cathedrals, and castles, as well as warm springs and dramatic mountain views. In 2002, approximately 298,469 tourists visited Georgia. There were 3,712 hotel rooms with 8,250 beds and an occupancy rate of 71%.

In 2005, the US Department of State estimated the average daily expenses for T'bilisi at $245. Other areas ranged from $96 to $128 per day.

FAMOUS GEORGIANS

Eduard A. Shevardnadze (b.1928), a key figure in the Soviet government, was president of Georgia from 1992 until 2003, when he resigned in the midst of mounting criticism following disputed elections, known as the "Rose Revolution." Mikhail Saakashvili (b.1967) was elected president in January 2004. Joseph Stalin (1879–1953), a key figure in the Soviet period, was born in Gori, Georgia. The medieval poet Shota Rustaveli, who was from Georgia, wrote the masterpiece Knight in the Tiger's Skin. Nineteenth-century poets include Ilia Chavchavadze (1837–1907), Akaki Tsereteli (1840–1915), and Vazha Pshwda. Writers of that century include Titsian Tabidze (1895–1937), Giorgi Leonidze, and Irakli Abashidze. Painters include Niko Pirosmanashvili (1862–1918), and Irikli Toidze. Composers include Zakhari Paliashvili (1871–1933) and Meliton Balanchivadze (1862–1937).

DEPENDENCIES

Georgia has no territories or colonies.

BIBLIOGRAPHY

Giannakos, S.A. (ed.). Ethnic Conflict: Religion, Identity, and Politics. Athens: Ohio University Press, 2002.

Nationalism and History: The Politics of Nation Building in Post-Soviet Armenia, Azerbaijan and Georgia. Toronto, Canada: University of Toronto Centre for Russian and East European Studies, 1994.

Streissguth, Thomas. The Transcaucasus. San Diego, Calif.: Lucent Books, 2001.

Transcaucasia, Nationalism and Social Change: Essays in the History of Armenia, Azerbaijan, and Georgia. Ann Arbor: University of Michigan Press, 1996.