1

The “Rose Revolution”:

fi nal conclusions

An independently researched white paper

Tbilisi 2012

2

Team of contributors:

Iosif Archvadze – Economist, Demographer, ProfessorGeorge Vekua – Politologist, Publicist

Gulbaat Rtskhiladze – Politologist, PhD, Chairman of the Eurasian Institute

Nana Devdariani – Journalist, former Ombudsman of Georgia

Levan Osidze – Politologist, Professor, Technical University of Georgia

Contents

From the authors ..........................................................................3

The Socio-economic Situation in Georgia ....................................4

Government, Business and Corruption ......................................13

Democracy, Nationhood, Sovereignty ........................................21

Relations with her Neighbors .....................................................26

Science and Education ..............................................................35

Afterword ...................................................................................40

3

From the Authors

This paper aims to draw conclusions on what the Rose Revolution has brought to Georgia. Almost 9 years have passed since this event, so it is completely appropriate to consider coming to conclusions — all the more so as critically important parliamentary elections await the nation. These elections will be an opportunity for the people to deliver a verdict on the Rose government. These upcoming elections will be a watershed for this nation regardless of which political forces are victorious. The Rose Revolution stage in the life of Georgia is coming to a close.

Against this background several independent experts from the world of politics and economics have tried to focus on the most critical aspects of the life of the country and in looking at these areas offer for the reader’s consideration the most important facts which are of most import in the political and economic life of the country. The role of the analyst is to pick out the most important facts for the people and the state from the plethora of information. Politicians are used to manipulating with facts, blowing insignifi cant events out of proporation, and to playing down the importance of signifi cant events when this serves their interests. This is quite noticeable in Georgia, where the ruling party tries to shift the people’s attention from matters of primary importance to secondary ones (for example, laying asphalt compared to the unemployment situation is a secondary issue). And the opposition for a variety of reasons is not in a position to counter the propaganda efforts of the powers that be. So, this paper seeks to at least partially to fi ll the information vacuum and lay the foundation for a deeper analysis and study of this stage in Georgia’s most current history. This paper has been written intentionally in accessible language and has not been weighed down with statistics and bibliographic references. To completely omit statistical data would also be wrong, and this was also taken into consideration by the authors.

Even though this paper considers the Rose Revolution critically, we believe this analysis is objective. Not one critical observation is put forth here without supporting facts. And each fact is either common knowledge or can be confi rmed if the reader so wishes.

4

Georgia’s Social and Economic Situation

In the last few years important institutional reforms have been introduced in Georgia and the macroeconomic situation in the country has improved. Specifi c changes include the especial ease with which one can start and conduct business. According to a number of international organizations, Georgia is one of the top countries in the world in this regard.

That said, the quantitative indicators for Georgia’s economy are not impressive enough to speak of a «Georgian Miracle.» In fact, some parameters indicate a slide backwards.

How does the leading position Georgia occupies in implementing economic reforms fi t with its unenviable position in actual development?

In truth, despite the rate of economic growth (which is not especially high: since 2003, the GDP growth rate on average has been 5.2%), the levels of absolute growth indicators for obvious reasons have not been enough to overcome the challenges, risks, and the underdevelopment in which Georgia found itself in the fi rst half of the 1990’s. Currently, an absolute comparison would demonstrate that Georgia’s economic growth today compared to countries with developed economies and some post-Soviet states is much lower than in the late 1980’s. This is because after the disintegration of the USSR, countries with roughly the same level of development did not experience such a dramatic economic collapse. So, the magnitude of each percentage point of growth in other countries exceeds in an absolute sense analagous indicators in Georgia. For example, a single percentage point of growth in Azerbaijan in an absolute sense corresponds to 3.8% growth in the Georgian economy. So, for Georgia to catch up, it needs to grow not by several percentage points but at a much greater rate. Without this higher level of growth, Georgia will be unable to close the gap with developed countries and the European states of the post-Soviet space.

In real terms, Georgia’s gross domestic product (GDP) in 2011 grew 1.6 times in comparison to 2003 (nominally it grew by 2.8 times); total GDP in 2011 was 24.229 billion lari (14.370 million dollars). Growth expressed in dollar terms was even more impressive: 3.6 times (and 3.4 times per capita). State revenues in 2011 were 7.3 the level in 2003 and expenditures 5 times.

5

In the past few years the fi nance sector has grown the fastest. In monetary terms it has grown by 4.1 times. The telecom sector has grown at a fast rate (2.5 times) and the real estate (2.3 times) sector has as well. On the other hand, the mining industry has experienced a relatively slow rate of growth (1.3 times). Instead of growth, the agricultural sector has seen a contraction (almost 16%). The main reasons for this include insuffi cient resource provisions, weak government support, and inadequate facilities. This sector, in which more than half the population works, received less than 20% of direct foreign investment and less than 1% of all bank loans.

Because of the difference in growth rates, in this past period the sectoral structure of the economic has changed signifi cantly: there has been a sharp drop in the agricultural share of the GDP. It has decreased by more than half and is currently only 9.3% of GDP (in 2003 it was 20.6% of GDP). This drawn out crisis in the agricultural sector has also been refl ected in the food market; more than 2/3 of all food is now imported.

Trade has played a leading role in the Georgian economy since 2010: more than 1/6 of GDP (17.3%) comes from this sector. Industry, even though it is the second largest contributor to GDP (14%) has in comparison to 2003 contracted. Industry’s share of GDP is the lowest for all of the post-Soviet space. For example, industry has twice as large a share of GDP in Armenia than in Georgia.

Despite the real growth of GDP, per capita GDP is last among the states of the Transcaucasus. Georgia was fi rst in per capita GDP in 2003, but because of modest growth as soon as in 2005 it had moved to second place, and by 2006 shifted to third place, behind Azerbaijan and Armenia. Georgia held on to this «prized» third place until 2011. For example, in 2003 Azerbaijan’s per capita GDP was 91.6% of Georgia’s, but by 2011 it was 212.9% of the latter’s for this indicator. Armenia’s per capita GDP has ranged from 95.1% in 2003 to 94.4% in 2011 (in 2010, Armenia’s GDP exceeded Georgia’s by 8.3%). In 2011, Armenia’s per capita GDP compared to Georgia’s decreased from 108.3% to 94.5% because of the 12% devaluation of the Armenian dram relative to the US dollar and the appreciation of the lari by 5.4%. If these currency rate changes had not taken place, Armenia’s per capita GDP in 2011 would have been 5.5% greater.

The reason for Georgia’s slide is its low and inedquate GDP growth. After 2003, Georgia’s share of the economy of the South

6

Caucasus decreased each year by 1.7%. If Georgia’s GDP was 28.4% of the region’s GDP, then in 2011 it was just 16.5%.

Even though it is easy now for foreign investors to start a business in Georgia, the country still has not become attractive for the outside world. 2007 was a peak year; in that year foreign investment was 19.8% of GDP. Currently this indicator is at 7.8% of GDP. Direct foreign investment per capita trails Azerbaijan’s rate by 3.7 times, and Armenia’s by 2 times.

Just 10% of direct foreign investment in the Caucasus region come to Georgia; this is signifi cantly less than Georgia’s economic weight among the states of the Transcaucasus (by 1.6 times) as well as its share per capita. (by 2.6 times)

Of course, foreign investors in Azerbaijan are most interested in oil and gas extraction and transport. Investment levels in these sectors in Azerbaijan have been decreasing year on year and currently are not more than 36%. Even if oil and gas foreign investment in Azerbaijan were not counted, per capita foreign investment there would be 2.4 times higher (585 US dollars compared to 248).

The level of foreign investment is signifi cantly less than the size of cash remittances from abroad.

In the last few years, one indicator has been growing dramatically: cash remittances from abroad to Georgia. In comparison to 2003 the volume of such money transfers has grown by 6.5 times (196.5 million dollars in 2003 and 1.268 billion dollars in 2011). Viewed more broadly, the sharp increase for this indicator is a red herring. A growing level of cash remittances from abroad points to the high number of our country’s migrant laborers working in other countries. Even though in the past few years the rate at which people have emigrated from Georgia has subsided somewhat, this process has not stopped. So, the number of our fellow countrymen who live abroad continues to grow, if not as quickly as before.

Georgia’s cash remittances were 27.6% of the population’s total disposable income in 2011. So, we can confi dently conclude that the people’s income level and level of wealth depends more and more on external factors: the employment rate of those who have left the country. Considering that over half of the cash remittances come from Russia, clearly the well-being of Georgia’s population is very dependent on the Russian economy and the level to which our migrant compatriots are engaged there.

7

The banking sector has improved thanks to the developing economy and budgetary restraint. Today, total banking assets equal more than half GDP (52.7% , in 2003 it was 15.6%). The total amount of credits granted has also grown (in 2003 they were 8.8% of GDP; in 2011- 33.8%). Also, bank deposits for both individuals and organizations have grown signifi cantly: 9 times in absolute terms and more than three times as a share of GDP (7.6% in 2003 and 23.4% in 2011)

Nevertheless, this sector is experiencing many diffi culties. Based on qualitative indicators, banking in Georgia lags as compared to countries with developed economies many times over. For example, the level of bank deposits (23.4% GDP) is 2-3 times less than in the countries of Central and Eastern Europe.

Despite low infl ation levels, bank loans in Georgia are rather expensive and the spread between credit and deposit interest rates is among the world’s top ten. The costliness of credits affects the volume of available credits. Because of their high expense only two out of fi ve Georgian companies use bank credits for fi nancing.

The level of deposit dollarization remains high even though it has decreased- from 90.1% in 2003 to 58.6% in 2012.

And most bank revenue is derived not from commercial activity- servicing credits for people and for the economy- but from repossessed assets from unpaid or overdue loans. Just in 2011 the amount of property that was transferred to bank ownership grew by three times and was greater than the total amount of overdue loans and bad credits. Considering that the total mortgage load lags the properties’ market value by 2.5-3 times or more, one can assume that the banking sector in Georgia seized no less than half a billion laris worth of property from private citizens (for comparison, gross profi ts for the banking sector in 2011 were 324 million lari).

Total external and internal state debt at the end of 2011 was 5.3 billion dollars, almost 37% GDP. Almost 80% of state debt ($4.2 billion dollars)- that is, 29.2% of GDP- was external debt.

Per capita state debt is more than 1,250 dollars, which is 2.9 times greater than 2003 levels. Today, per household state debt equals 13 months of a family’s income. Since 2003 per capita state debt has increased by 500 dollars.

In 2011, total state debt signifi cantly exceeded 2003 GDP in absolute terms. 5% of of the state’s revenue go each year to servicing this debt (interest). In the last 4 years (2008-2011), just paying interest on external debts has totalled 313 million dollars,

8

and in the next four years 424.3 million dollars will have to be paid.External debt began to grow most dramatically especially after

2008. In the last three years (2011 in comparison with 2008), external debt in dollar terms grew by 56.1% while GDP in dollar terms grew only 12.3%.

The level of state debt is signifi cantly higher than state budget revenue (approximately 30% higher in 2011. Despite something of a lessening of indebtedness in the past few years, in the next few years state debt will not reach less than 100% of budgetary revenue.

Today, one needs 180 lari to buy the same goods that in 2003 would have cost 100 lari. Also, the buying power of the lari has decreased by 43.6% as compared to 2003, and from the day it was introduced it has decreased by 4 times.

The lari’s buying power has decreased even more for pensioners; for them one lari today equals 0.51 laris in 2003. First, they have less income than other groups, and second infl ation hits them harder. In contrast to the USA where the number of pensioners living under the poverty line is 1.7 times less than the national average, in Georgia most pensioners are economically disadvantaged, and have low income levels. They have almost no savings, and their income (a pension) covers just 70% of subsistence expenses.

Georgia’s infl ation has also affected foreign currency. In particular, in comparison with 2003, the US dollar has lost its value on the domestic consumer market by 2.2 times. That is, buying 100 dollars worth of goods in 2003 today would require $221.40. These indicators are not meant simply to be eye-opening. Even though offi cially the only means for payment in Georgia is the Georgian lari, foreign currency (the dollar and euro) are actively used in pricing on the domestic market and also for payments. The level of dollarization within the Georgian banking system is rather high: 80.3% of deposits of private persons and even 68% of credits given by banks are denominatd in foreign currency (primarily in dollars). As a consequence, the dollar exchange rate, its dynamic, plays an important role in the functioning of the Georgian economy.

According to offi cial statistics, 85% of the working age population is employed. 295,000 are unemployed.

After 2003, the total number of employed people decreased by 151,000 (while the population increased by 182,000). The unemployment level increased from 11.5% in 2003 to 15.1% in

9

2011 (in 2009 it reached 16.9%). Georgia’s unemployment level is higher than all of its neighbors (Azerbaijan- 6.0%, Russia- 6.6%, Armenia- 10.1%, Turkey- 10.5%)

Unemployment is high in the cities (26.5%) and relatively low in villages (6.5%). And in comparison with 2003, unemployment levels have risen considerably- by 1.2 times in the cities; 1.5 times in the villages. Since 2003 two-thirds of drops in employment have been in the villages.

Reductions in employment and the increase in unemployment in villages is a consequence of low levels of labor productivity, inadequate state support, insuffi cient agricultural subsidies, a lack of technical infrastructure, and also the mass migration from villages to the cities.

The development of a market economy assumes a certain level of unemployment. The scope and the persistence of this problem have taken on almost an existential quality since the 1990’s. The offi cial unemployment rate should ostensibly be no cause for alarm. The unemployed, their family, their loved ones, and society see this situation, however, in quite dramatic terms. Sociological surveys indicate that an absolute majority of respondents see unemployment as the the most critical economic and political issue.

Currently, Georgia has the lowest employment levels in all of the Transcaucasus. For every 1,000 people in Georgia, 141 are employed; in Armenia and Azerbaijan 162 and 154 people respectively are employed. This indicator is much worse in comparison with developed countries. This number is three times higher in the USA. And for the European Union it is 2.6 times higher.

High unemployment levels in Georgia persist while there high levels of labor migration. Experts estimate that 800,000 compatriots have left for economic reasons, and of these 720-750,000 are employed. They left Georgia because there were no jobs in the country; and if we add the army of unemployed it will turn out that the unemployment level will increase 28-30%.

The unemployment rate is especially high among youth (38% of those under 25 are unemployed; it is 21% in the European Union, by contrast, which also has a huge youth employment problem). For every 1,000 people under 25, only 96 are employed (and for all other age groups it is 235- 2.5 times more).

That said, Georgia is one of the world’s few nations (if not the only one) where the number of employed citizens abroad is more

10

than the number employed within the country.The country’s vector of economic development can be

conveyed well using the misery index, which is the sum of infl ation and unemployment levels. The misery index’s growth points to negative trends; and its decrease points to positive tendencies. The lower the value for this indicator, the more positive is the direction of economic development. And an increase in the misery index points to increasing negative conditions- macroeconomic instability.

Unfortunately, this index in Georgia has grown 1.5 times since 2003 and by the end of 2011 it reached 24.7% (in 2003 it was 16.3%).

The Misery Index in Georgia and Several Other States in 2011 (in percent)

Georgia Armenia Turkey Azerbaijan Russia USA EU27

In the past eight years pensions in Georiga have increased by more than seven times (from 14 lari in 2003 to 100 lari in 2011). Pension benefi ts remain one of the most critical issues for the nation. The average pension in Georgia is just 70% of subsistence

11

expenses. For comparison, this indicator is 85%, 15%, and 132% for Armenia, Azerbaijan, and Russia respectively.

The average pension in Georgia is 4.3 lower than Russia’s; it is 2.3 times lower than in Azerbaijan and 1.3 times lower than Armenia’s.

In the last few years the role, function, and proportion for salaries has changed considerably. The average monthly wage in 2011 was 761 lari, which is almost 6 times greater than the level in 2003; purchasing power is 3.4 times more than in 2003. But the growth in average wages was not accompanied by a corresponding growth in the number of people receiving wages. At the end of 2011, the number of people employed was only 2.1% more than the number in 2003. And if calculated per head, this number has even decreased. There are 55 people employed for ever 100 households in Georgia. And considering that in some homes two or more people are working, the share of households where no one is working is more than 60%.

Because of this situation, the sharp growth in wages has an impact only for those earners and not on a macroeconomic level.

Because of the astronomical difference between the number of job openings and the number of job seekers (the proportion is approximately 1:1000) and because of the employer-friendly labor code, it is becoming more and more important for employees to be cooperative and loyal to their employer. In the last few years, employers seek to hire not only those who do quality work but who also are personally devoted and loyal to their employer.

Overall, the «qualitative» improvement in the growth of wages has not been accompanied by a «quantitative» improvement in the number of workers. As a consequence, high levels of labor migration remain as well as the corresponding level of motivation among the economically active part of the population.

This data on the country’s socioeconomic development create an ambiguous impression. On the one hand, we have economic growth, an increasing state budget, greater integration into the global economy, higher wages, and a wealthier populace.

On the other hand, the Georgia’s economic development lags behind its neighbors in the Transcaucausus. As a result, Georgia’s contribution to the region’s economic capacity has contracted (by 1.7 times). Currently, Georgia’s share in the region’s economic capacity is 10% lower than in the past if calculated on a per capita basis for the whole region.

12

Georgia lags by 43% in average level of economic development for the Transcaucasus. By contrast, in 2003 it was 4.3% above this average level. There is inadequate foreign investment. Based on this indicator, Georgia lags behind Armenia and Azerbaijan signifi cantly. Just 10% of direct foreign investment to the Transcaucasus comes to Georgia; this is 1.6 times lower than 2003 levels. Foreign investment in Armenia and Azerbaijan is several times higher than in Georgia. Georgia has a high trade defi cit and its current accounts balance is worse than all of its neighbors. The growing dependence of the economy and the country’s populace on imports at a time of persistent contractions of the real economy limits the likelihood that the nation will be able to overcome the challenges presented by negative external conditions.

The credit-to-GDP ratio is also low and the credits themselves are quite costly. So, besides the ease with which one can start a business in the country- of which the powers that be are quite proud- something else is needed; more foreign investment and accessible credits are necessary.

Georgia has an older population than its neighbors, Armenia, Azerbaijan, and Turkey. This demographic burden has approached alarming levels, and it is much higher than in neighboring states.

Unemployment levels are higher than in neighboring countries, as are the number of unemployed as compared to number of people with a job.

And in parallel to the situation with the growth of wages, there are signifi cant differences between the different sectors. The situation in education is especially alarming, which has been lagging in the past few years. And in the meantime we see quite the opposite in neighboring states.

Despite the implemented reforms, the economic situation in Georgia is not very encouraging. We note regression in several areas as compared to 2003 levels.

UNDP data indicate that Georgia’s GDP lags from the world average two or more times. So, set against the nation’s recent achievements, we can conclude that the country has many problems and challenges and much needs to be done to overcome them.

There is a long list of problems, risks, and challenges before Georgia’s economy; this uncertainty can seriously slow the state’s development of the country, complicate the socioeconomic situation for the populace, and negatively affect the offi cial stated process of moving towards European integration.

13

Government, Business, and Corruption

The Rose Revolutions’s achievements in economic development actually appear rather modest. This is while the current government boasts of its successes and points to the pre-2003 situation. Indeed, by some parameters there has been success. First, the state budget has grown.It is impressive that as compared to 2003 the budget has grown 6-7 fold. This was achieved, unfortunately, not thanks to the economy but rather using administrative measures, some of which were draconian and illegal. One such means was racketeering against businessmen. Pre-2003 criminal racketeering was replaced by state extortion. It is no longer a secret for anyone, but nevertheless it is hard to avoid being shocked by the actual details of the arrests of businessmen. Recently, on the Internet portal Politforumi.com journalist Lasha Gabiskiriya published a list of 140 businessmen who have had criminal cases brought against them. Most of them are still in prison. Below Gabiskiriya writes how the state budget has grown and the ruling party’s coffers are fi lled as a consequence:

«Practically not a single businessman who has refused to pay tribute to the United National Movement has avoided the punitive hand of the Saakashvili government. Every entrepreneur who makes a profi t must contribute to the UNM’s coffers. The government knows how much each businessman is making and forces them to pay tribute if they want to stay free. This can only be called the government extorting business. Businessmen are left with just enough from their earnings so that they do not die of hunger. The government takes the rest. Any self-respecting person would refuse to do business in such conditions, but most entrepreneurs cannot allow themselves this choice as they have invested everything they have into their business. Besides, they have to pay back their bank loans with interest...So, by default, Georgian businessmen continue to run their businesses and when they cannot take it anymore and protest even weakly, they end up in prison....

Most businessmen are serving sentences for violating article 210 of the Criminal Code. This article has to do with making, selling, and using counterfeit credit and charge cards. Article 194 is in second place. This has to do with money laundering. Many have had cases brought against them for Article 180 (fraud) and

14

for Article 182 (embezzlement and misappropriation of funds). Some have been tried under Article 223 (creating an illegal armed group, leading such a group, or participating in such a group). Others have had cases brought against them under Article 314 (espionage), Article 260 (drug offenses), Article 286 (computer hacking), Article 193 (fraudulent business practices), and Article 214 (violating customs regulations). A few other businessmen are being detained under other articles.

An analysis of these articles leads to the conclusion that most of these businessmen did not commit a crime and that these are fabricated charges. Often they have committed a minor offense, one which anyone is liable to commit. And if it were not for the desire to seek revenge, these misdemeanors would never have been noticed.... Interestingly, most of these entrepreneurs and businessmen have been sentenced to inordinately long terms as compared to the gravity of the crime they have committed or have been falsely accused of committing.

Experts believe that it is imporssible for industry and business to grow freely in such a climate. They are also of the opinion that the government by some calculations does not want to see the resumption of industry and entrepreneurship in Georgia. Rather, they want the populace turned into service personnel. They do not want to see the people earning a good salary for their labor».

It is unlikely that with the huge economic and social challenges facing the nation and which the Rose government created or aggravated that Prime Minister Vano Merabishvili will be able to solve them. He is used to using force. The government believes that PR on television and creating and imposing a virtual reality can take the place of developing the real economy. But that is not the case.

The problem does not have to do just with certain offi cials. All of the «revolutionaries’» policies are faulty. This lamentable situation is a consequence of their indifference to domestic industry and agriculture.… Instead of providing subsidies to farmers and peasants and protecting the domestic market from the fl ood of imports (if only at the very least with veterinary checks as done in other countries without violating WTO regulations), the government does nothing. In Bendukidze’s «ideology,» such actions would be protectinism and as a consequence are not permisseble.

15

Aside from economic considerations, it is worth looking at corruption, which is one of the main obstacles to creating a healthy economy. Unfortunately, in contrast to stated anti-corruption goals, the government has encouraged the creation of a faulty, corrupt system. And this system is gift-wrapped in pretty slogans.

After the Rose Revolution, the process of monopoly creation accelerated; they were primarily import-orientated monoplies. There are several large companies in Georiga that import everything- from frozen meat, liquor, and sugar to pastries and household appliances. No one is surprised that under the new regime the gas and cigarette-importing monopolies have a greater hold. The interests of the power elite stand behind the nation’s largest companies.

The emphasis is on import for an import monopoly means lots of easy money. In contrast to manufacturing, such business does not require great intellect nor ingenuity. Manufacturing, industry, agriculture are much more labor-intensive and require signifi cant intellectual capital and fi nancial outlays.

16

Recall the sudden increase in the cost of meat in Georgia. In the fall of 2010 it was announced that peasants must take their cattle to a slaughterhouse belonging to a businessman close to the powers that be, Tsezar Chocheli. This «innovation,» which in no small measure was dictated by the frozen meat importers’ lobby signifi cantly increased the cost of meat in Georgia. And together with meat, a number of other food items also increased in price. Eurasia Institute website (October 2010):

«Recently, at the grand opening of a beef house in Natakhari, Saaskashvili yet again surprised the people of Georgia, saying that in Georgia we don’t know how to process meat. He also didn’t forget about the occupiers who «look down from the mountains and envy us.

According to the president, the Georgian government has done everything to keep its promise: it has created jobs for the people driven from the Liakhvi River Valley.

The Natakhtari Meat Processing Facility took 6 months to build. 100 people currently work there, 20 of whom are internally displaced persons. They earn on average 400 laris (approx. 220 USD). “They live better than Russian offi cers”, declared Saakashvili.

Well, what is wrong with opening a new plant where new jobs are created? Ibermeat is not the only enterprise in Natakhtari; there is a brewery and soft drinks bottler and the Barambo Confectionary Plant. All of these companies use infrastructure built with state budget monies, which explains the high profi ts of the companies’ owners. And they are all connected with the governor of the region, Tsezar Chocheli, who got rich overnight. So, the opening of the small entreprise involved quite a lot of noisemaking and the presence of the president himself. He doesn’t give up the opportunity to be present at the grand opening of any facility. As politicans and experts are wont to note maliciously: he has presided at the grand opening of some of the same facilities several times, and some of them have shut down immediately after the departure of the president.

Things are a little different, however, with Ibermeat: after the plant’s opening, meat disappeared from shelves in Tblisi for several days. It turns out that markets could not accept meat without certifi cation confi rming that the cattle was slaughtered at Ibermeat. Here is how the processing plant’s pricing works: every peasant who

17

wishes to slaughter his cattle and bring it to market has to bring it to Natakhtari and pay 1.30 lari (approx. 0.80 USD) for each kilogram and then when he receives the certifi cation he can bring it to market. Of course, transporting live cattle, paying for the slaughterhouses’s services, and then transporting the meat to Tbilisi drives the price of meat up. Just several days after introducing these measures the wholesale price of meat jumped from 7 laris to 8.40 (a 12% increase!). The retail price reached 10 laris. By all accounts the price should increase even more. Peasants from nearby villages have gotten rid of their cattle as it is too onerous to raise them now. Small grocery stores selling meat have also suffered. There are fewer and fewer buyers. No doubt even the meat processing plant’s workers who earn 400 laris a month (and that’s on average!) will only be able to afford meat on important holidays.

This approach to creating market monopolies is not new; the pharmceuticals market has long been a monopoly. As a result, the price for medications is artifi cially high (some medicines are up to 400% more expensive!). Things have gotten to such a point that medications produced in Georgian cost much less in Yerevan than in Tbilisi. And this is the case in spite of the cost of shipping, customs duties, taxes, etc.

If one can give up meat (or eat it less), we have to purchase medications. Siphoning money from the sick is now happening on a grand scale: one pharmaceutical company has its own clinics, a pharmaceutical factory, and a large chain of pharmacies. So, they rip off the patient at each step of the way. First in the clinic, where he has to pay for treatment like in a fi ve star hotel. Then, he is prescribed medications that are made in their labs or imported by them, and then he buys their medication in their pharmacy. In other words, this has become a zero-waste money siphoning operation.

We have presented just two examples of unfair competition in Georgia. In reality this has become a common way of dominating the market. This is why street trading has been banned and markets have been torn down. The populace is forced to buy only in large, expensive shopping centers, depriving people of choice. The closure of the Antimonopoly Service in 2004 was the fi rst step toward creating huge opportunities for monopolists very closely connected to the powers that be.»

The term «elite corruption» accurately describes this

18

situation in the country: the government gets its share and gives preferential treatment to these large companies which are primarily import-oriented. And if there is any production within the country, the government’s appetite is whetted. Shevardnadze-era civil servants and their close relatives seem like simpletons compared to the riches accumulated by those in the upper echelons of power today. We, of course, mean fi rst of all the president and his family. When MP Bagaturia reminded Mr. Saakashvili of this while parliament was in session, the latter fl ed the chambers as if bit by a snake. Georgia will never forget this scene.

Naturally, import-dependent Georgia (a frightening statistic: 80% of external turnover is imports; just 20% is exports) cannot stop price incerases on global markerts. But prices have gone up in Georgia even when in the world they have dropped signifi cantly. Professor Nodar Dzhavakhishvili, the ex-president of the National Bank of Georgia, in a paper devoted toeconomic issues and produced by the research organization, Kavkazskoe Sotrudnichestvo (Caucasian Cooperation) speaks to this:

«The situation in 2009 was a cause for great concern: there was a palpable decrease in world prices for goods, and yet the cost of imported consumer goods actually went up. This paradoxical situation is unfathomable in a country with a free market economy.

Clearly, we are up against wide-scale limits placed on competition, price fi xing between importers, and consequently with the mass monopolization of the consumer market. And this, of course, does not take into account the interests of consumers. There is not even a hint of doing business in a free manner regardless of whatever level of freedom international fi nancial institutions- even the most infl uential ones- bestow upon Georgia. It was thanks to keeping prices at 2008 levels (with 3% growth)- in other words at the expense of the people of Georgia was it possible to limit the decrease in GDP by 3.9%. And this occured when there was a 30% decrease in imports. These statistics are manipulated even by respected international institutions like the IMF, the World Bank, and the EBRD.

And fi nally, let’s address corruption, which Georgia’s top leadership loves to say it is successfully fi ghting (and hoping at the same time for the ovations of international fi nancial institutions and

19

countries which are friends of Georgia). In spite of signifi cant cost-cutting, importers did not reduce their prices on imported goods and in part actually increased prices. So, they must have had increased profi ts. So, consequently we should see more corporate profi ts taxes added to the state coffers. In actuality, profi ts and corporate income tax in 2009 was only 1.57 billion laris, which is 240 million laris less (13.2%) than 2008 levels.

We leave international institutions which rate corruption in Georgia to research the question of where these huge profi ts acquired from robbing the people of Georgia went. Studying this question is not within our capacity after all.»

So, the issue of corruption continues to be relevant in Georgia. And it seriously slows down the economic development of the county. Added to this is the collapse of the agricultural sector, the sell-off of our forests and agricultural lands to foreigners, and other decisions implemented under the banner of privatization. So we have a really sorry picture.

Separately, we can point to utility rates as one of the forms of massive, «elite» corruption seeing as the the costliness of fuels is artifi cially created.

Tbilisi has an absurd system for paying utilities: the more electricity one uses, the higher the per unit cost for electricity (the principle of a market economy requires the opposite to be true: the more we buy, the lower prices must be.): up to 100 kilowatt-hours of electricity per month costs 13.5 tetris (100 tetris = 1 lari); 100 to 300 kilowatt-hours/month costs 16.5 tetris, and more than 300 kilowatt-hours costs 17.7 tetris. The government has created this system under the pretext that disadvantaged groups use less electicity (!). And what should families with many children do- those who clearly have to use more electricity? The government doesn’t address this.

Another horrifi c outcome of the Rose Revolution is binding trash pickup rates to electricity usage, which is a great source of dissatisfaction in Tbilisi. The powers that be don’t care: most important is to suck the most money possible out of the pockets of the people.

The government reminds and chides the people by saying that «in Shevardnadze’s time there were daily black-outs.» They put fear

20

in the citizenry before elections. The role of «Team Saakashvili» in creating the pre-2003 situation, including the electricity shortage, should be a topic for a separate study. We’ll leave this aside for now. And today, electricity is not uninterrupted. As proof we point to the inhabitants of Kobuleti, who blocked the streets this summer demanding that the electricity be turned back on. People could not use the refrigerators in stores in this resort town… Some parts of Tbilisi and many cities in the country get drinking water according to a schedule.…But this is not the most important thing. What is more important is that the government is reproaching its own people with unfathomably expensive electricity and natural gas! In terms of costliness of electricity Georgia is top among post-Soviet states and does not lag much from developed countries. For example, a kilowatt-hour in Armenia in laris is less than 10 tetris; in Russia — 12 tetris; and in Ukraine- just 5 tetris. And lest we forget- in Georgia it is 13.5 to 17.7 tetris. Natural gas rates are almost in same exact sorrowful situation: it is sold to the people at clearly infl ated prices (while as a result of an agreement with Azerbaijan, Georgia receives a quota of cheap gas from Shakh-Deniz). The system for calculating rates is opaque and cannot be monitored by the people. It is probably unnecessary to remember that the electricity, water, and gas companies are monopolits and diversifi cation is not expected even in the far future. A monopoly has set gasoline prices, too.

The only encouraging thing that has taken place in recent years in Georgia’s energy sector is the stable supply of natural gas from Azerbaijan and the increase in electricity production in Georgia. Georgia imports Russian natural gas in exchange for transporting it into Armenia. But we cannot say that Georgia has reached energy independence. Overall the power grid is unstable and there are many issues connected with the country’s main water reservoir and hydroelectric station, the Inguri Dam. The main questions have to do with its status and ownership. Also, when new hydroelectric stations are built, ecological issues are not taken into suffi cient consideration, and this is a direct threat to the future of our populace.

21

Democracy and Sovereignty

The Rose government sees itself as a bulwark of democracy and seeks to integrate itself into Western institutions. But it must be noted that the current government’s servility vis-a-vis the West and the USA in particular is hardly an indicator of being democratic. Democracy is measured by other parameters and not by the government’s pro-Western orientation which it needs to survive.

And at the same time, the citizens of Georgia are worked over with slogans like, «We’ve made it as a country.» They claim that only Russia is a threat to Georgia’s sovereignty, and that Russia would have no chance of being successful against Georgia because the latter has «a government that has made it.» It is also worth noting that independence and sovereignty does not mean showering Russia with insults and to create an enemy image of that country. On the contrary, this is a sign of weakness. The quality of sovereignty is measured differently.

The Rose Revolution is a Western initiative, and the West does not wish to recognize the undemocratic nature of its project (at least until now that has been the case). To list all the undemocratic actions of this government would take a long time. These include street executions of suspects, horrifi c tales from the prisons- torture and the murder of prisoners. The number of inmates- more than 30,000- is huge for a tiny country like Georgia. The number of inmates per 100,000 people (667) has almost reached the world leaders in this area: USA (689) and Russia (683). From 2007 to 2011 there were brutal crackdowns on protestors and armed gangs called Zonder Brigades took part in this repression Also of note are the violent takeover of the Imedi Television Company and the transfer of other independent television companies to government control. And the illegal ban on the installation of Channel 9 and Maestro satellite antenna must be noted. . Also, the judiciary has been robbed of its independence. Many other actions can also be cited.

22

Of course the government does the above in the name of democracy. For example, there is no independent judiciary; no one stands a chance of winning a suit against the government; no political party, no private citizen (offi cial statistics confi rm this) can be successful. Meanwhile, judges are situated in comfortable buildings with large salaries, wear robes like in Europe, etc. The politicized police tolerate the existence of the illegal Zonder Brigades and brutally deals with political opponents of the government.(often violating the law). And at the same time, the police sport new uniforms, ride in new cars, and work in sleek buildings. These facilities are mostly built from glass, which is supposed to symbolize the «transparency» of the police. Other examples can be cited, but the quality of democracy in the country would not improve as a consequence. Unfortunately, the government’s propaganda has worked to great effect, and most of the people have believed in the democratic nature of the country thanks to the examples of window dressing we have cited.

Thanks to the government’s propaganda, there has been the fi rm belief (which has persisted in part until now) that our state has «made it» as a sovereign entity under international law. In the

23

corridors of power which got the green light from the West they’ll say that limits placed on democracy are necessary for strengthening the state and to change the mentality of a «backward» people. ..

But even this sovereignty is superfi cial; its foundation is insults directed at Russia. And this is supposed to create the impression that if a small country does not fear a huge state which used to be the mother county, then the former is truly independent. Also, the effective work of the police, supplying and strengthening the army, reforming of government institutions, ending petty corruption, simplifying the process of receiving a passport and other offi cial documents indeed create the illusion that Georgia has become a sovereign and successful state. In reality, Georgia remains a small and weak entity. We have already seen this based on economic indicators. It is hard to say that this is a country that «has made it» when it has a huge external national debt, a society that looks to the «international community,», opposition politicians who look to the «diplomatic corps», a signifi cant portion of the country that has to roam the world to sustain itself, and meanwhile almost all the rest stay in the country without work. The expansion of the police cannot be an argument either. In our case this is an indicator of our country becoming a police state; it isn’t an indicator of sovereignty or nationhood. Commenting on the Gruzinform website, former Prosecutor-General Gia Meparishvili sees Georgia as an example of a police state. As a professional lawyer, he has looked carefully at all the draconian changes to the laws on police and has drawn conclusions. But even if we were to approach this issue externally- visually- we see many different police bodies operating under the aegis of dozens of government agencies. Just about every park and garden in Tbilisi has its own «police» armed with batons (and we have the so-called «mandaturi,» police in schools).

In reality, the armed forces have grown. There is no need to draw comparisons with the pre-2003 period. But one important fact underlines this fact: from 1992 to 1993 Georgia had no army at all, but Sukhumi was defended by Georgians for a whole year by the people and militas. Under the Rose government, a well-equipped army lost the war in practically two days, and the commander-in-chief was creeping on asphalt in Gori. However negatively we may view Eduard Shevardnadze, we never sw him crawling on the ground

24

when he visited the front! So, the the strength of the Georgian army is also a facade and is deceptive. This is neither the fault soldiers, nor the offi cers. This is the fault of a completely incompetent leadership lacking in military education and battle spirit. This government only has fi ghting spirit when fi ghting its own people, during crackdowns on protestors, but a more serious adversary strikes fear in its heart.

So, it is premature to call Georgia democratic and a truly sovereign state which can stand on its two feet. In this sense, the achievements of the Rose Revolution are deceptive and actually are based on brute force. We are very far from creating truly democratic institutions, to ensure, for example, the separation of powers. Much needs to be done to create especially an independent judiciary. And the press needs true freedom.

In Georgia not just the democracy is a facade. The so-called “construction process” is also a facade. Pictured: Tblisi today (close to downtown- David Kipiani St. by Dinamo Stadium). This is the typical state of Georgian cities. Despite all the revenues added to the state coffers in the past nine years, the Rose government has only been able to make improvements to streets in the downtown area.

25

It suffi ces to cite just one example of clan-based governance in Georgia. This is a very illustrative and sad example. We are referring to the murder of Sandro Girgvliani in January 2006. Of course this was a crime committed by people within law enforcement. The name of the wife of a minister came up in this case. And we also know that the murders received very lenient sentences: they were imprisoned in very comfortable cells. (and that only happened after the public’s outrage peaked) and their «imprisonment» ended after just three years. This and similar instances point to a clan-based approach to government today. And society does not look at the main reason for Girgvliani’s murder: even if Girgvliani had not been called, something unacceptable for a self-respecting minister would still have happened. This is of consequence for a government which claims to be democratic. It turns out that the minister’s wife spends time with the minister’s underlings, with police offi cials (no need to mention that these offi cials had been noted for their provocative behavior.) Just this one fact- unbecoming conduct for the wife of a minister- points to this clanishness. And this is enough grounds for a minister to resign in any country that has made it. Such a minister would just from shame would never want to appear before the public.

We live, however, in the Georgia of the Rose Revolution where clannishness and disgrace are passed off as «a country that has come into its own.»

Another anti-democratic phenomenon is government’s interference in church affairs. The powers that be see democracy only as the church’s noninterference in the state. True democracy, however, also assumes the state’s noninterference in the church. The public already knows of cases of government offi cials who have tried to pressure, blackmail, and buy over bishops A number of NGO’s organizations have taken part and continue to take part in the government’s provocations against the church.

26

Relations with Neighbors

Good relations with neighboring states are essential for the security and stability of Georgia. Our policies in this regard have not been successful with our largest neighbor, Russia, which has the longest border with us of all our neighbors- 900 kilometers. That relationship is practically completely decimated and after having provoked armed confl ict we are in something of a cold war with this country.

Georgia’s leadership consistenly pursued the path of worsening relations with Russia. While the anti-Russian course and anti-Russian rhetoric has been the norm since Shevardnadze, this only happened after the future Rose Revolutionaries had expanded their infl uence to Shevardnadze’s circle and took top posts. So, it should be no surprise that after the Rose Revolution bilateral relations worsened even more..

There was a change in the government in 2003 as a result of the Rose Revolution. Even though the key role in these events was played by the so-called Zhvania-Saakashvili team- and were already known for their anti-Russian pronouncements- the people and analysts did not expect a dramatic worsening of Russo-Georgian relations. Apparently, the visit of Russia’s Minister of Foreign Affairs at the time, Igor Ivanov, played a role as he even spoke at an opposition rally (this was when Shevardnadze’s fate was clear). Protestors led by Zhvania chanted, «Russia, Russia!» One of Saakashvili’s fi rst visits was to Moscow from the 10th to 11th of February, 2004.

This visit caused quite a commotion among the Georgian public even though the revolutionary fervor had not yet subsided. Even though it was reported that Saakashvili was late to his meeting with Putin, in his interview with Izvestia the Georgian president spoke quite highly of the Russian leader. Saakashvili claimed that he was able to establish good rapport with Putin, which Shevardnadze had been unable to do. The Georgian president explained that this was because Shevardnadze had consistently deceived his Russian counterpart.

This visit, however, turned out to be one of the few bright spots in contemporary Russo-Georgian relations, whether by default or

27

thanks to new agreements arrived at during this visit. During the turmoil in Adzharia, Moscow’s leadership demonstrated restraint. Even though Russia had many options to take action; for example, it had a military base in the region. Moscow was exceptionally cool while monitoring the information wars started by the Georgian leadership against the government of Aslan Abashidze. As a result, together with Shevardnaze, Abashidze was overthrown bloodlessly and received asylum in Russia. And ultimately Igor Ivanov appeared again, and Abashidze fl ew back to Russia in the former’s plane.

Immediately after Tblisi established control over autonomous Adzharia, it began working on South Ossetia. The Ergnestsky Market was shut down and the so-called «humanitarian assault» of Tskhinvali began. The Georgian government tried to break though Ossetian territory with cars loaded with humanitarian cargo ostensibly for the people there.

Moscow, this time, responded forcefully and warned Georgia that a repeat of the Adzharian scenario was unacceptable in South Ossetia. Overall, the Ossetians were hostile to Georgia’s plans for the region’s re-integration. Gradually, the situation escalated to an armed confl ict. Georgia’s military and police appeared in force. There were clashes between Georgian and Ossetian forces and several people died on both sides. But a further escalation of the confl ict was avoided. Moscow clearly communicated to Tbilisi that it would not allow for a military conclusion to that region’s confl ict, nor would it permit Tbilisi to reestablish control over this previously autonomous part of Georgia. Georgia’s forces withdrew from South Ossetia and the previous status quo was re-established.

The two countries, however, were not able to repair their relations. Over time relations between the two nations worsened and became catastrophic. This was especially palpable in 2006, when the when war of words between the Georgian leadership (including Saakashvili personally) and Moscow and Putin reached its peak. A number of incidents followed, more notable is the arrest of «Russian spies.» The detained Russian offi cers were shown on Georgian television. They were under escort by policewomen, intended probably as a kind of public humiliation. Moscow’s leadership and Kremlin circles were outraged.

Economic sanctions against Georgia followed. A number of Georgian imports were banned, which had a severe effect on

28

some parts of the Georgian economy, namely agriculture, and by extension peasant farmers.

The rising tensions between the two countries continued into 2007. And starting in Febrauary 2008- when a number of Western nations recognized Kosovo’s independence- relations deteriorated into open confl ict. Curiously, despite Russia’s obvious preparation for war in the Caucasus, Georgia took no steps to de-escalate the situation. Rather, Georgia sought to further aggravate and provoke its neighbor. Georgia’s purchase of spy drones from Israel and fl ying them over Abkhazia and South Ossetia are one such example. The drones were shot down by Russian military aircraft. These incidents generated further tensions.

In July and the beginning of August of 2008 the Georgian government and the military launched offensives in South Ossetia. Several acts of sabotage took place and as a result Ossetian rebels and servicemen died. In response, the Ossetians took action and the situation in the Tskhinvali Region reached its worst point. Everyone knows what followed. After the Five Day War, Moscow recognized the de jure independence of Abkhazia and South Ossetia, and Georgia broke diplomatic relations with Russia, left the CIS, and declared the breakaway republics «occupied territories.» This situation has remained this way to the present. In the last few months, however, on the eve of Georgia’s 2012 parliamentary elections, there have been a few signs of a quiet reevaluation of Georgia’s policy vis-a-vis Russia.This might have to do with the shaky situation in which the current regime has found itself now that billionaire Bidzina Ivanishvili has appeared on the scene. Also, this might be a result of Western pressure on Saaskashvili not to continue serving as president when his term ends in 2013. In the last few years, however, Saaskashvili and his team have created such a catastrophe in Russo-Georgian relations that it will be very diffi cult to repair them.

Most recently, the Georgian public seems obviously inclined to take a sober view of events. More than 85% of those polled in many sociological surveys support normalization of Russo-Georigan relations. Everyone has to recognize that relations with Russia is not just a discrete foreign policy issue. Russo-Georgian relations have a bearing on almost all aspects of Georgian society and its government, from the economy to military security. The

29

worse relations are with Russia, the greater the tensions within Georgia. And as a consequence, the Georgian economy will continue to suffer. Despite protestations that Georgia no longer needs the Russian market and that this market has been replaced with other ones, the reality is quite different. The reality is poor economic indicators which have been mentioned above. This is not to mention, of course, Moscow’s forced recognition of Abkhazia and South Ossetia as «independent states. (indeed, Moscow was compelled to act this way; Medvedev hinted at this quite broadly in his «recognition» of Sukhumi and Tskhinvali August 26, 2008: «This was a diffi cult decision to make.»). This was a direct consequence of the artifi cial escalation of tensions with Russia. It is possible that Georgia went to war in August 2008 precisely because it was approaching economic collapse because of the 2006 Russian economic embargo. The war allowed the government to distract the people from economic troubles and focus instead on «Russia’s aggression.» And at the same time, it could receive several billion dollars from the West. These 4.5 billion dollars stabilized and saved the economy from complete collapse. Ultimately, however, this was of course a stopgap solution: today it is obvious how impoverished the country is; and the Georgian people continue to suffer.

Besides, Russia has traditionally been our primary trade partner and preferred location for our migrant workers. A powerful Georgian diaspora lives there; and it sends hundreds of millions of dollars in cash remittances to relatives back home. So, to consciously damage relations with Russia is simply stupid. There are no grounds- not even morally- to artifi cially create tensions with Russia. No matter the differences in the changing political interests, the Russian and Georgian peoples are connected by a shared history, one faith, and similar worldviews. Georgian identity, our religous and cultural distinctiveness can best be preserved in a globalizing world by maintaining close relations with a people similar to us (of course, that does not mean that we should give up our territorial integrity. There can be no compromising in this regard. That said, we do need to clarify what we mean by «territorial

30

integrity.» Do we see the Akhazians and the Ossetians as having equal rights? Or do we see them as second-class minorities that need to be ruled from the «capital?!»

So, the current sad reality of the relationship between Russia and Georgia (including Russia’s recognition of Abkhazia and South Ossetia) is one of the most unfortunate negative consequences of the Rose Revolution. It might even be considered one of the Revolution’s crimes. That said, our relations with our other neighbors are not perfect either.

The second most important partner among our neighbors after the declaration of independence was Turkey. And after 2005-2006 when the dramatic worsening of Russo-Georgian relations took place and consequently bilateral economic relations became much more limited, Turkey became the single most important partner for Georgia in the region. An important factor in this was that the Azerbaijan-Turkey oil and gas pipelines that transited through Georgia began working at full capacity.

Turkey is Georgia’s primary trading partner. Trade between the two countries has been growing continuously and long ago surpassed a billion dollars a year mark. More than 3/4ths of this trade is the export of Turkish goods into Georgia. Today Turkey exports to Georgia a volume equal to our nation’s total imports in 2003. A consequence of the Georgian market being fl ooded with Turkish goods is that Georgian industry suffers. And at the same time according to the estimates of Georgian experts 60,000 new jobs have been created in Turkey. To be fair, tens of thousands of Georgian citizens work in Turkey. They are, however, earning very low wages (500 USD on average); and the working conditions are barely tolerable, sometimes even inhumane.

Turkish investment is also growing, however it is going primarily into Adzharia. And this is a cause for concern among some in Georgian society (including in Adzharia itself) and in political circles.

After Turkey recognized Georgia’s independence, both sides affi rmed that the Treaty of Kars referenced in a framework agreement between Georgia and Turkey on July 30, 1992 was still in effect. This treaty defi nes not only the borders between Turkey and Georgia, it also guarantees the autonomous status of Adzharia. So, we have a situation today where a neighboring

31

country- one much larger and populous than ours and much more powerful- has almost unfettered access to its neighbor’s border region. For example, the Batumi Airport is managed by a Turkish company and is listed as a domestic airport in Turkey in order to keep airfare to Turkish cities low. Many of the new hotels and other facilities built in Adzharia in the past few years have been built thanks to Turkish investment. Many of the people working at these facilities- including the service personnel- are from Turkey. This is especially true for Batumi.

While inter-governmental relations between Turkey and Georgia at fi rst glance seem perfect, in the last few months public opinion has become critical of Turkey’s «expansion» into Georgia, especially into Adzharia. Tempers fl ared especially around a proposed «deal» between the governments of Turkey and Georgia. This agreement would have Turkey renovate four buildings of signifi cant cultural import (ancient churches). And in exchange, Georgia would agree to the building of two mosques (in Adzharia and Akhaltsikhskii District). Turkey’s intent was to restore the Azize Mosque in Batumi to its original state; it was built in 1866 right before Adzharia became part of the Russian Empire. As a result of the protests by the public and the Georgian Patriarchate, this deal has been blocked. In Akhaltsikhe, however, a signifi cant Ottoman cultural site has been restored: a mosque that is not actually functioning as a place of worship.

Georgia and Turkey became much closer at the end of the 1990’s when a decision was taken to build the Baku-Tbilisi-Ceyhan Oil Pipeline. This friendship continued with the new government in Georgia. Two large projects have been implemented (this oil pipeline and the so-called South Caucasus Pipeline, also known as the Baku-Tbilisi-Erzerum Pipeline). Also, there is railway construction underway; the Tbilisi-Akhkalaki-Kars Railway will connect Turkey and Azerbaijan by train. In the last few years, Georgia has been seen as part of a «horizontal» chain — Turkey-Georgia-Azerbaijan (and counterweight to a vertical chain- Russia-Armenia-Iran). Georgian experts are critical of such a one-sided orientation for the country. After all, this leads to overdependence on our Turkey neighbors who have their own interests in Georgia. But the worsening of relations with Russia, which happened mostly at Georgia’s initiative, left the Georgian leadership no choice. Nevertheless, some barely perceptible steps have been taken in

32

recent years to bring some balance to Georgia’s foreign policy.Above all, we are starting to see a more engaged policy with

respect to Iran. The fi rst step- initiated by Iran- has been the ending of the visa regime between the two countries. This had led to a sharp increase in Iranian tourists in Georgia. Last year 60,000 Iranians visited Georgia. In Adzharia, where in the past few years there has been an increased Turkish presence economically and in other ways, we are starting to see Iranian tourists, too. A consulate for the Islamic Republic has opened in Batumi. Trade volumes between Georgia and Iran are not growing that quickly yet; it is 15-20 times less than trade between Georgia and Turkey. In the last year, however, Iranian investment in certain areas have grown. In particular, we see investment in real estate and offi ce leasing, especially in Tbilisi and Batumi.

Together with tourists and enterpreneurs from Turkey and Iran, there has been an infl ux of Azeri and especially Armenian tourists in Adzharia. If Batumi is where Turkish citizens are concentrated, then Kobuleti plays an analagous role for Armenians.

Since the declaration of independence, Armeno-Georgian relations have been noted for their stability and for being free of signifi cant problems. The relationship, however, has not been very close. Armenia is the only neighbor with which Georgia has a positive trade balance; this is mostly a consequence of re-exportation of goods.

Economic relations between the two countries are not fully developed; Georgia serves more as a transit corridor for trade between Armenia and Russia, the former’s primary trading partner. Seeing as Armenia’s borders with Turkey and Azerbaijan are offi cially closed, all freight sent between Russia and Armenia passes through Georgia. The worsening of relations between Georgia and Russia also affects this trade route. The rail system passing through Abkhazia has been closed. After the August 2008 war, the Larsi border crossing on the Russo-Georgian border crossing used by the Armenians was closed. A consequence of Armeno-Georgian negotiations in 2011 was that this crossing was re-opened. The gas pipeline which delivers natural gas from Russia to Armenia is functioning normally. There is news, however, that an Azeribaijani state company intends to purchase controlling stake in this pipeline. This has not taken place. Currently, a plan is being developed to build a tunnel through a mountain range

33

in Adzharia, offering quick access for Armenia to the Black Sea. There are mixed reactions to this proposal among the Georgian public as there is fear that this can lead to Armenian expansion into the coastal areas of Adzharia.

The touchiest issue between Georgia and Armenia is the situation in Javakheti. After the Russian military withdrew from this region, many expected the situation there to become tenser as a signifi cant fraction of the populace were employed at that military base or they depended indirectly economically on the base. There has been no increase in tensions, however. Armenia has no interest in worsening its relationship with Georgia, as the latter serves as a «bridge» between it and Russia.If the Georgian government takes dramatic steps threatening the interests of Russia and Armenia in the Transcaucasus, increased ensions in this area cannot be ruled out. This is because the Armenians in Javakheti have not integrated fully into Georgian society and this is not to be expected in the near future.

Because of the confl ict between Armenia and Azerbaijan, both sides aim to prevent Georgia from becoming too close to their neighbor; at the same time, they aim to develop a closer relationship with Georgia. As soon as Georgia allows Armenia to have economic relations with Russia, this causes a reaction in Azerbaijan. Georgian-Azerbaijani relations have been markedly warmer than Armeno-Georgian relations. This is because Georgia and Azerbaijan have collaborated on several large-scale international projects (the Baku-Ceyhan Pipeline and other projects.)

Azerbaijan is a major trading partner of Georgia and is one of the top three trading partners both in terms of exports and imports. But, just as with Armenia, the issue of densely populated ethnic Azeri enclaves in parts of Georgia does exist; and this can always lead to worsening relations between these two countries. Also, it must be borne in mind that in contrast to the Armenians from Javakheti, the Azeris in Kvemo Kartli and some parts of Kakheti have high birth rates. If some of the villagers from these areas had not left for Azerbaijan and Russia, Azeris would have constituted 15% of Georgia’s population; and this could have become an demographic threat to ethnic Georgians.

Azeris (just like the Armenian minority and a large part of the Georgian public) are very interested in opening the border between

34

Russia and Georgia and to have full freedom of movement and free trade. This would signifi cantly ease the socioeconomic and demographic situation in Georgia.

Georgia’s ostensibly perfect relations with Azerbaijan and Armenia are actually aggravated by serious issues. It has still not been clarifi ed with Azerbajian to whom belongs one part of the David Garedzhi Monastery. And the Armenian Church has been claiming ownership of several ancient Christian churches in Georgia. In both cases the Georgian leadership hasn’t been decisive or diplomatic. These issues remain up in the air; and the public sees this as a sign of Georgia’s weakness.

So, overall the Rose Revolution government sought to quickly integrate itself into Western institutions by ruining its relations with Russia. And Turkey was supposed to replace Russia for Georgia economically, militarily, and in other respects. But today it is clear that Georgia cannot join NATO and other Euro-Atlantic institutions without Russia’s consent. Georgia has been able to replace the Russian market as an export destination, especially for agricultural goods. So, normalization of Russo-Georgian relations will be something any future Georgian government will have to address.

35

Education and ScienceMuch has been said and written about how the traditional system

of education has been destroyed. And that the basic sciences have been thrown out of colleges. The government declared that fundamental sciences are unnecessary and offer no one any prospects. In reality, this means that once young people graduate university, they do not seek to become physicists, mathematicians, or linguists. But students and parents have high expectations from low-content majors like business management, international economics, and others. The commonly-held belief that the government wants to turn the people into service personnel may not be that far from the truth. At best, universities prepare people to be IT specialists or work in banks. Professional technical training has been phased out completely; Georgia does not prepare people to work in the trades anymore. The country is being refashioned as a «service center». In banks you have tellers. In offi ces you have IT specialists. In hotels and restaurants you have bell boys and waiters... Of course we need all these professions, including well-trained service personnel. But it is a crime, really, that the government intentionally has turned away from the basic sciences, especially since we inherited a strong science foundation for free from the Soviet Union. A gifted physicist, chemist, or mathematician won’t stay in Georgia. She or he will go someplace abroad, where they value basic sciences (and that’s assuming that in current conditions that is gift for the sciences could become apparent in today’s education system in Georgia).

Instead of producing higher qualifi ed teachers, we are giving up basic sciences. This wrong-headed approach to educational reform has led to the opposite result. It would be impossible to imagine that a student in the Soviet period to seek a teacher’s help in solving a textbook math problem and to hear, «I can’t solve this problem right now. Let me take this question home and get back to you.» This is a typical scene in post-Rose Revolution Georgia. This is because a process of «standardization» is underway with schoolteachers so that one teacher can teach several subjects (perhaps this is the same idea behind government offi cials serving in several ministries with different profi les).

36

So, there are increasingly fewer and fewer single subject teachers- a Georgian language teacher, math teacher, chemistry teacher, etc.

The Rose government set a course for signifi cant changes in the educational system. A number of education ministers succeeded each other, each of which proposed different education reforms. The overall picture is a march backwards, not progress. Below we consider the situation in Georgia’s public schools over the past few years.

0.2% of Georgia’s budget is allotted for education while in the world’s successful countries 0.6% of GDP (and not the budget!) go towards education. So at fi rst glance it is clear that this indicator is three times lower- and in reality many times lower- than what is needed. The Georgian government knows that to succeed in suppressing Georgian national consciousness engineering the collapse of the educational system is point of intervention. So, unsurprisingly in the last eight years odd and unprofessional people- former Soviet apparatchiks- have headed Georgia’s Ministry of Science and Education. These ex-offi cials received continuing education training through NGO’s created and fi nanced by foreigners; and these people had very little prior, if any, connection to science and education. Let’s recount who has headed this ministry since the Rose Revolution: professional plumber and “C” student Kakha Lomaya; Gia Nodia, a student of Marxism in the Soviet period who after the collapse of the USSR switched over to the democrats as an advocate for minority rights; the young Deputy Prosecutor-General Nika Gavaramia, who fi rst was appointed Minister of Education (probably for taking part in the academic TV quiz show Erudit) and then sent abroad paradoxically to “to further himself academically;” Ms. Maya Miminoshvili who had consistently opposed the president and then after several months in the post for some reason fell from disgrace; she was replaced by Dmitrii Shashkin, previously head of the Georgian Department of Corrections and currently Minister of Defense (Shashkin originated the mandaturi (school police)); and fi nally, Khatia Dekanoidze, the current Minister of Education, who previously was the dean of the Police Academy, and has now taken on this joyful burden. It is too early to draw any conclusions about her if only to take her police background into account. And why not have such a person as minister? If a the deputy prosecutor and minister of the prison system have served as Minister of Education, it means that this is God’s wish.

37

As for the mandatury system in schools, there is nothing wrong with having order there and to uproot criminality, and for children to learn in a safe environment. But the task given to the mandatury- to rid schools of teachers who side with the opposition- is, to put it mildly, a huge mistake. Teachers see the mandatury not as allies in the schools but as people who have created a network of spies and informers from teachers and students. After classes these informers report to the mandatury and with rare exceptions the teacher is always at fault for the reported transgressions. It is this reality and also that mandatury can act with the authority of the school principal that now the education sector is completely politicized. Other attempts to keep teachers in a kind of servitude also have been a negative factor. Namely, teachers are not allowed to give interviews to journalists without the permission of the Ministry of Education! So, the aim has been to build this kind of “democracy.” What the children will learn, what knowledge he will acquire almost isn’t a consideration.

Below are some of the problems that have arisen as a consequence of mistaken K-12 policies.

Most preschools have been closed down; the remaining ones are private and they do not seek to help children develop into free citizens with humanistic values. In the last year there have not been subject-based nor club-based activities in kindergartens. This makes the learning process monotonous and unengaging. So, when children begin school, they are unprepared. The child cannot really be present during lessons, does not know how to listen or conduct himself appropriately, to work well with others, etc.

In elementary school English is taught in parallel with Georgian, which we believe is mistaken as this blurs the line between one’s native tongue and a foreign language. This affects one’s national identity and can reduce the child’s patriotism. Also, experience shows that beginning foreign language learning in the fi rst grade does not guarantee that the child will learn it well. We believe it more appropriate to began foreign language study in third grade.

As for middle school and high school, hardly any education takes place here. The textbooks do not serve the purpose of preparing the next generation to be educated, progressive thinking, and patriotically-minded. Teachers (of all subjects) are unhappy with the current situation as the content and the structure of the textbooks contradict each other. The curriculum and what

38

children receive grades for do not correspond. So, children are disengaged from the learning process and learning practically cannot happen. As a consequence, most graduates do not meet the minimum requirements for college study. So, parents have to pay out of pocket for tutors. I would like to note that I see the situation worsening over the past eight years. The amount of knowledge that students acquire today have plummeted. An “A” student today with rare exceptions would not equal an average student in your typical Soviet school. Single subject exams, which test for general knowledge and for meeting a minimum level do not aim to check for knowledge of specifi c facts. So, they are a poor indicator of learning. The only thing that our youth know how to do well is to use the computer and Internet, but this is primarily at a skill level adequate to entertain themselves.

We believe standardized state tests are a progressive change but they have exhausted their potential. At this point, it is premature to end university entrance exams. This issue needs to be approached with care and considerations. It is appropriate to on occasion allow students into university without an entrance exam. This process however will not improve education in schools, nor will it motivate students. America and many European states are returning to the Prussian (German) eduational model which we have ignored and are turning away from contemporary approaches to schooling as they have failed everywhere. In our country however, school offi cials have been consistent in experimenting in education. We need to bring the teaching of the history of Georgia as a separate subject and also teach world history, but not at the expense of class hours for Georgian history (which is the case today).

Salaries in education – the economic sector with the largest number of employees in Georgia-are two or more times lower than the average wage nationally. This salary gap has only grown in the past few years. Here, the situation in Georgia lies in dramatic contrast to neighboring states. The typical Georgian schoolteacher earns just 47.4% of the average wage for the country. Teacher earnings is Armenia, Azerbaijan, and the Russian Federation are respectively 80%, 74.1%, and 67.2% of the average wage for their nation. The average monthly wage for a Georgian schooltecher is 31 dollars (14.4%) lower than in Armenia; 174 dollars (47.5%) lower than in Azerbaijan, and 265 dollars (58.4%) lower than in Russia!

Clearly, things cannot continue on like this. Sadly, the

39

government has no need for an education system, nor does it need an educated future generation. The closure of research institutes and the downgrading of the status of the Academy of Sciences are evidence of this. Policies here must be radically changed. State standards much be developed for schools and colleges; the Academy of Science needs to be returned to its previous role; and there much be state programs developed on the role of youth and the task of education for the future. Progressively-minded teachers who had been driven out for political reasons must be brought back into the schools; and teaching professors must be brought back to the universities.

40

Afterword

Even at a quick glance at the issues raised in this white paper- and we take into account all subjects we were unable to address in this publication- it is clear that the positive consequences of the Rose Revolution are outweighed by the negative ones. In the beginning of this paper, we said we aimed to focus on issues of primary consideration- major policy questions- and to avoid discussing less signifi cant aspects of the Revolution. Negative consequences of the Rose Revolution include: the outbreak of war (if one wishes to call this something else and cannot openly admit that the government has initiated war, perhaps we can say that the leadership has been unable to prevent war); the loss of Georgian villages in Samachablo and the Kodori Gorge (called Upper Abkhazia by the government); the loss of our primary export market, Russia; the drop in the people’s buying power; lagging socioeconomically with all neighboring states; state racketeering and corruption at the highest levels of power; window-dressing democracy and false patriotism; lack of clear foreign policy with respect to neighboring states; a superfi cial approach to education and science; and contempt for the Church and a stealth war against it (this paper did not have space to give detailed consideration to this question). Positive consequences of the Rose Revolution include: a strengthening of the police; a drop in crime; a ruthless fi ght against criminal activity (and criminal thinking); a signifi cant increase in wages and pensions; discrete attempts at municipal capital improvements; ending petty corruption; and implementation of infrastructure project. We see that the negative results far outweigh the positive ones.

Any future government could easily continue those positive achievement. But the currently government is incapable of addressing the problems it has created as it simply does not see them as issues. Nor does it see itself as having made any mistakes.

Tbilisi September 3, 2012