Welcome! I am happy to meet people who are real patriots of Georgia. I would like to tell you that today I began my working day by visiting School No 87. Two years ago, when I was chairman of the city council, when I visited this school it was a ruin without any hope or any atmosphere. Today I went there and I saw new computer rooms. There are 18 new computers in that school. [Passage omitted]
We are becoming a normal country where there are hospitals, cinemas and roads of this [high] standard. There is still extreme poverty in many places, but the most important thing is that we, Georgians, can reach the standards of normal countries. That means that we have potential, that we are not a backward African country, although in some respects we may be at the level of many third-world countries and in some cases even at a very low level.
I am saying all this because where does the tripled or quadrupled salary of the headmaster of School No 87 come from? It comes from your pockets. We do not have oil. We do not have an inheritance. I discovered enormous debts run up by my predecessor. No-one believed that we could pay off those debts, yet almost all pension arrears have been paid, salary arrears have been paid. Now, for example, Sakaeronavigatsia's [Georgia's air traffic control service] accounts have been frozen in the Netherlands because the former government had one 30m debt, a second debt of 20m and so on. We didn't find anything good when we arrived.
We were faced with a ruined country, a country not just without cinemas, but in Tbilisi almost no roads had been repaired for 15 years, a country where most of the territory did not have electricity because there was no economy to speak of and there was no basic infrastructure. We have begun creating this with you.
When we say that we have increased the budget four- or fivefold and revenues in some sectors six- or sevenfold, we haven't increased them, you have, because this is money from your pockets. I would like to thank you all for that. Without that we would not have been so successful. [Passage omitted]
Our maximum revenue two or three years ago, before the revolution, with a bit of number fiddling, was a maximum of 800m lari. In reality it was 500m or 550m lari - the rest was the result of financial machinations and we all know very well how it was done. Now our honest revenue is up to 2.35bn lari. That is revenue from you. It has increased even though the number of taxes has been reduced from 22 to seven, the rate of social tax has been reduced from 33 to 20 per cent, progressive income tax has been reduced from 20 to 12 per cent and this year VAT has been reduced from 20 to 18 per cent. Therefore, there are fewer taxes but higher revenues. That is encouraging us to reduce them even further to see whether there will be even higher revenues. However, this is a partnership.
The second issue is how money from you is being spent. If we spend your money just on social programmes, which are very important - [changes tack] We must not have such poverty. Next year I want - economists have been arguing about it - to increase pensions by five lari from 1 March and by another five lari from 1 September, because this is the most deprived section [of society]. Second, we need a poverty reduction programme, which is currently being worked on for those people who today are on the brink of starvation. Everyone who gets less than the subsistence level will receive a top-up in addition to their 38 lari [pension]. That will happen in stages because it cannot be done all at once for everyone.
Your taxes are primarily being invested in the development of infrastructure. That is to say, your money comes back to you. You need good roads. I'll give you an example. The police are currently registering 150 cars a day, compared with just 25 in 2003. Can you imagine the difference? People have become more mobile. Two-and-a-half times as many people have received passports this year as in 2003. Six-and-a-half times as many people have received identity cards. The number of identity cards issued in a year has increased six-and-a-half times. It means that people want to be more mobile.
We will launch a new metro train tomorrow. It will take a year to replace all the metro trains. Two-and-a-half times as many people have used the Tbilisi metro this year as they did last year. The buses we bought abroad used to be empty, but now they are full. Society has become much more mobile. People need infrastructure in order to be mobile. Roads and the energy sector are the driving force of the economy. We have invested a lot of money in roads and the energy sector this year. We will invest more next year. [Passage omitted]
We will have new roads in every district next year. I intend to organize a car race on the new Samegrelo ring road on the 16th, as promised. At the beginning of the construction work we said that the road should be good enough for a car race on the revolution anniversary. I wasn't joking. There will be a car race on the 16th. You too can take part in it if you like. Be careful, however, as I do not want any of you to break your necks. I am inviting you there. Next year there will be a new road to every district centre.
Next year we will also start building the Tbilisi-Gori motorway and complete the section between Tbilisi and Kaspi, the section with the highest number of road accidents. In 2007 we will extend the motorway to Gori. We will then build the Gori-Batumi and the Gori-Sukhumi sections. I am sure that the more we build the quicker we will do it. However, we need your cooperation.
The prime minister yesterday toured an asphalt plant in Kaspi District. The plant can only produce enough to resurface 10 km of road a month, at most. Ten kilometres is nothing.
We have enough money to build between 300 and 400 schools next year. I want to ask the representatives of construction firms present here if they can build between 300 and 400 schools. We will build 500 if you can. Schools are necessary because this is our investment in our future. I opened a school equipped with computers in Shatili [remote mountain village]. A child with a computer in Shatili can do as much as a child with a computer in Singapore, London, San Francisco or anywhere else. We can't lose out on this investment.
Modern children have a completely different mentality. They belong to a different generation. We need to act quickly and invest money. As soon as there is money available, we should invest it in education, in our children and in modernizing this system. Again, we need your help.
We have equipped every school in Ajaria so that it has access to the Internet. However, most of the companies refurbishing Batumi schools have reached their full capacity. Next year we will have to hire Turkish firms because our firms can't cope with the workload. Several foreign firms are involved in road works in Tbilisi because our firms can't cope with the workload. By the way, they [Georgian companies] learnt how to work well as soon as competitors arrived. We do not have much time, and I want you to understand that we are not magicians.
Georgia was being destroyed for 10-12 years. Everything was crumbling. In 1991 our per capita income was almost the same as that of Lithuania and Estonia. Estonia was slightly ahead but we were level with Lithuania. Now our income is just above 1,000 dollars. If you take into account the cost of living in Europe, it translates into around 3,000 dollars. They have 9,000-11,000 dollars. That is to say, our income is a third or a quarter of theirs.
The economy can't grow by more than 10-13 per cent in a country that does not have oil. We all expected our economy to grow by 6-7 per cent this year. The high oil prices have hit us very hard because we do not have oil. Russia has oil. Its economy grew by 5 per cent this year. Ukraine has a metal industry but does not have oil. Unfortunately for me - I say unfortunately because they are an important partner for us - their economy shrunk by 2 per cent in August. If everything goes well, the Georgian economy will have grown by 8.5-9.0 per cent by the end of the year, double the Russian figure, and Russia has oil.
However, we need double-digit annual growth for the next five or six years if we want to catch up with even the poorest European countries. European economies grow by 7 per cent, 6 per cent, 3 per cent, 2 per cent. That's not good enough for us. We need our economy to grow by at least 10 per cent year on year for the next five to seven years if we are to reach current levels in Romania and Bulgaria. That is our main task.
We are facing many geopolitical risks. Unless we become rich, unless we move forward, unless you become rich - you make the economy rich - we will be in a geopolitical environment in which we will face not just economic risks but also the risks of separatists getting stronger, the risks of being unable to restore our territorial integrity and risks to our defence capabilities, not to mention our competitiveness and public morale. Therefore we are facing huge challenges. We need to cooperate very closely. [Passage omitted]
Within a month we will also be ready to introduce a package of laws concerning a whole range of issues. First, we need to further liberalize the Tax Code. For example, the register [Georgian: "zhurnali"] should be abolished. I think it is just a fifth wheel on a car, which is unnecessary. Second, we need to simplify export-import procedures. Today many things are very complicated.
By the way, we have simplified quite a few things. For example, a car importer had to visit several [customs] terminals in the past, but now everything is done in one place and all the procedures take a maximum of 40 minutes. By the way, most countries do not have that. This - I mean the procedure for a private person importing a car - should spread to business as a whole. In general, export-import procedures should be extremely straightforward, extremely transparent and extremely speedy.
Third, we need to liberalize labour legislation and simplify it as much as possible. Our current Labour Code is a labour code of the Socialist and Communist era. There are so many regulations in it that even if you really wanted to hire legal labour, it would be impossible to do if you followed the letter of the law. There are all sorts of provisions for someone to take legal action against you, all sorts of fines that could be imposed on you. Therefore, of course, no-one can stick to the rules.
We need a labour code that reflects the economic system in which we live. It should be easy to have a mobile workforce, it should be easy to hire new people, it should be easy to establish a second or a third enterprise, it should be easy, if necessary, to close down or relocate an enterprise. In a word, it should be easy for an entrepreneur to do business legally.
We will complete [the drafting of] the new labour code in two weeks' time at the latest. We would like to examine it with you again in order to make sure that it is indeed a straightforward code, a code that really helps to create jobs, a real labour code, not the formal piece of paper which we have today and which everyone ignores. We know as well as you do that it is being ignored.
We need judicial reform. We need to simplify court procedures as much as possible. On the one hand, we are fighting crime and there will be no compromises here, no compromises. We have established good cooperation with business in this area.
We have studied several regions in Georgia in which business was not developing despite all our efforts. We concluded that the main cause was not a shortage of talented people but the fact that criminals were still operating there.
Now there are effectively no more kidnappings in Georgia. There are no organized crime bosses in Georgia, not a single one. There are no criminal gangs openly operating in Georgia. When we build new prisons, no-one will be able to make mobile phone calls and terrorize people from there because we are planning to cut these lines of communication. It means that people like Vato Qipiani will no longer be able to manage things from prison - from businesses to the views of some MPs. We will put an end to that once and for all.
We will manage to neutralize criminals, but without the courts it is very hard to speak of protecting business. The courts are no Prosecutor's Office or police, they are a completely different kettle of fish. That is why we want to put an end to never-ending court cases. If you are sued, the case should not drag on for four years. There should not be 50 different tiers involved, there should be no recalls, no delays, no intercessions and so on, which in practice means that the case is not moving forward. We will simplify that too in a straightforward way. All court cases should be completed in three, four or, at most, five months. There should be no delays and one should not have to wait for years.
Also, the legal language should be simplified as much as possible. Some of our laws are worded in such a way that everyone, including the courts, can interpret them any way they want. The language should be such that a court should be unable to interpret it differently. If it does, it will be dealt with by the disciplinary board. That is why here, too, we need your help and advice on how to tackle that. I see judicial reform as one of the most important elements of that package.
Another element is further simplification and liberalization of the banking sector. We had consultations with Roman Gotsiridze [Georgian National Bank president] on that. Here, too, many procedures should be simplified. Several years ago Georgia thoughtlessly undertook obligations that were completely unacceptable to us. After all, even the most developed countries, until they finally joined the EU and received subsidies of 2 or 3bn - I am referring to the Baltic states and Cyprus - they did not make life so difficult for themselves. Why did we complicate our banking procedures so much without getting anything in return? It is still a mystery to me why the previous government did it.
We are planning to simplify and liberalize banking procedures as much as possible. We also need more freedom for foreign banks here. We need less regulation in almost every field. Naturally, as you well know, regulation cannot be completely scrapped in every field. However, the state should have transparent and simple procedures in this field too and it should have no means for such intervention. That is very important in order to attract more capital to Georgia.
We will also continue cutting the number of licences. We will continue liberalizing this field as much as possible. It is no accident that the World Bank has ranked Georgia second in the world as regards the pace of reforms. We are in such a condition, the country has wasted so many years that even being in first place is not good enough. We should be much more radical in order to get ourselves out of this swamp because no-one is pulling us from there by the hair. You and we have to tackle these problems ourselves.
Finally, I wish to tell you that we will continue strengthening state institutions. It is very important that we enjoy a great deal of public trust. I do not only mean the government, though the government is trusted. The majority party [National Movement] won the last elections [parliamentary by-elections in October] in all five constituencies. It won it in such a way that for the first time in Georgian history the opposition was unable to say that the elections were rigged. [Passage omitted]
Before the revolution we were not a proper state, but now we are and I am proud of that. In two years this state has achieved in many areas as much as Holland or, for example, Germany achieved over 10, 15 or 20 years after the war. It turned out that all that talk about Georgians being unable to be well organized, support each other, be patient and take a longer-term view of things was complete nonsense, which was invented by people who themselves were good for nothing. It turned out that Georgians are the most sensible people, some of the most sensible people in the world, some of the most well organized people when it matters. See how representatives of various agencies are working, or how new businesses that have been set up or many people in your own businesses are working. It means that they can do it.
It turned out that we can have very strong state institutions. In the space of two years several institutions were created out of virtually nothing and are now running smoothly. It turned out that we are capable of building infrastructure that meets international standards. Give me one or two more years and you will see what all Georgian towns and, above all, Tbilisi will be like. We will again be able to say that we live in one of the most beautiful countries in the world. [Passage omitted]
This translation is published with permission from BBC Monitoring, Reading UK
Communications Office
of the President of Georgia