Welcome, Everybody!
Despite bad weather I hope your stay here will be interesting.
Two years ago Georgia was totally disintegrated and destroyed country. Everybody at the state apparatus, including the president himself, received the salary, which was below the minimum wage.
When I entered my cabinet for the first time I was given in an envelope half of my monthly salary equivalent to USD 40. Then I went to Davos for that trip I was given USD 30 for everyday expanses.
People had been receiving such low salaries for the last years, however even today the previous president is one of the richest men, if not the most rich in Georgia.
The ministers received much less salaries, however they owned big houses not only in Georgia but abroad, they had luxurious cars and were not grumbling at all about having low salaries.
Three months ago when I decided to cut the ministers' salaries by GEL 500, the Minister of Education and Science said that he would resign because he had to pay the house loan. This fact vividly shows the progress Georgia has achieved.
Our key concern, when we came into power, was to create a state apparatus. We addressed the UNDP for help in order to start paying high enough salaries to few dozen ministers, deputy ministers and investigators, so that these people did not start looking for some other sources of revenue. We received over USD 10.000.000 from the UNDP, which was sufficient enough to start loud anti-corruption cases and improving tax collection.
In the first two months we had 40 per cent increase in tax collection which promoted the development of the state apparatus and the beginning of a coherent work.
In the first five months we had sufficient money to start reforming the police force. We demanded from the policemen to work honestly and warned them that otherwise they would have been sacked.
In the soviet period and in the last 12 years the government was not giving either cars, or gasoline, or uniforms, or salaries to the policemen, and were demanding from them to work.
We also found out that many of the policemen in Tbilisi were not receiving even that ridiculous salary (equivalent to USD 20-40), whereas they had to give part of their corrupt income to their heads and ministers.
This kind of franchise resulted into horrible corruption at every level of state administration. This was an ugly system, which caused a drastic reduction of the state budget. In November 2003 the overall budges of the country was little more than USD 500.000.000.
Today the overall budget of Georgia is USD 2,5 billion and can soon reach USD 3 billion. This is the result of a reduced corruption and legalization. Despite the fact that we faced great political risk, we downsized the state apparatus. Thus now we have to pay to 40 per cent less people.
We reduced almost 80-90 per cent of licenses and permissions. At that moment we also faced big risk since the sanitation inspection was drastically downsized. I think the customer is the main one who checks, not the state. If a customer sees that there is insanitariness at the restaurant, he would not go there for the second time. The main job of the sanitary inspector was to extort money rather than check the sanitation. We abolished it and nothing tragic had happened.
Last year we fired the whole traffic police and it did not exist for two months. People were saying, "are you crazy?". But nothing dramatic had happened because that police was doing absolutely nothing for a long time. In there place we recruited new policemen, gave them totally new cars, new uniforms, new radios, 10 to 20 times higher salaries. As a result the recent opinion polls have shown that the police force enjoy 95 per cent confidence rate among the population (later it was 5 per cent).
Nobody could have ever imagined in a country like Georgia that people would love the police force.
We implemented the similar reform in other spheres of state apparatus; as a result the state regained its key functions, which were totally lost in the past years. It is about protecting public order.
If we look at crime rate, we would find out that the number of crimes committed has increased. However, this is not true, since we have legalized it.
In early years the policemen were hiding the crime for two reasons. The first reason was that he was receiving a bribe from the convict; therefore he did not have any incentive to register the crime.
Formally, nowadays the rate of crimes committed is increased, however in reality it is even decreased, still then when the police force no longer violate human rights.
As you know there is a very firm international organization called Amnesty International, which has published a report about Georgia last week. When the specialist read this report they were astonished, since this organization has never been so positive and "sweet" towards nobody. The same did the organization Human Rights Watch . . .
We live in a complicated world. But I am proud that we are the first country in this region, where people are no longer beaten up and tortured and the police do not commit illegal acts. Despite this [that we live in a complicated region] public order is maintained in Georgia. There are no records of people being kidnapped in Georgia, whereas it was the most widespread crime in the last years of Shevardnadze's presidency.
There no longer exist big organized criminal groups in Georgia, which had had the spheres of influence on the Georgian territory before the rose revolution.
This is the key element for stability. The Georgian state regained its basic functions. Our armed forces have become flexible, effective and are more and more meeting NATO standards.
Emergency care service did not exist in Georgia before the rose revolution. Today we deliver free emergency service even in the most remote villages of Georgia.
The first stage of our development was reforming the state apparatus.
The second stage is building roads and improving energy sector.
This winter, for the first time after gaining independence, Georgia would not have electricity shortage. Every region will have electricity supply if they pay the consumed electricity fare.
However due to the damaged energy system there might be power interruptions.
In the first half the year we could collect only 7 per cent of the consumed electricity. Now this figure has reached 80 per cent. At the end of the year it will reach 100 per cent.
We achieved it just because the state demonstrated it commitment, firmness and strong will.
From the very moment we came into power people called us populists. However we did not do any popular thing.
I know very well that people live in misery, but Georgia does not have either oil or any other natural resources to fund everything. We, the citizens, fund our state. Therefore if we pay we would have electricity supply.
I remember very well when Mr. Yushchenko was visiting Georgia and we were to visit Bakuriani, a well-known mountain resort of Georgia, people had been planning to block the road and demand electricity. If they had done it our international reputation might have been spoilt, because many foreign journalists were visiting Georgia to cover the events. But this threat did not frighten us. It does not matter what is the situation, everyone is equal in the face of law.
Tkibuli (which is the poorest region of Georgia) in pre election period, where our candidate was running for the parliamentary elections, did not have electricity supply. Despite the fact that many of our political activists were advising us to deliver electricity to this region in order to get more votes, we did not do it. Our candidate received approximately 90 per cent of votes. Our people are witty and understand everything.
We are reconstructing this infrastructure now. We made our state decision liberal.
We have one of the lowest corruption rates in the post soviet space and in the Eastern Europe.
The share of taxes in our GNP is about 20 per cent. This is the maximum.
We managed it because we carried out strict anticorruption activities and simplifies the system.
As you know we detained the whole western customs officers on corruption charges. We arrested 15 judges and dozens of officers in the new police force. We strictly control this system in order to avoid the corruption overwhelm the whole country again.
We started improving our infrastructure. Started building roads. Twice more money has been spent on roads reconstruction works this year in Tbilisi than it was totally spent in the last 12 years. Next year we will spend much more on road reconstructions all over Georgia than it was spent in the last 15 years.
Roads and energy sector are key for the economy, otherwise we would not have any economy.
We started renewing and making our cities and towns more beautiful.
Some are dissatisfied that we are repairing the facades of the buildings. They are saying that when people live in misery there is no time for repairing the facades.
Our reply to such complaints is the following: first of all hundreds of thousands of people are employed in these works. The second is that when everything is finished millions and billions of investments will be made in tourism development.
We see its first results: the Kazakh banks have claimed that they would invest more than a billiard dollars in the development of the Black Sea tourism. This project will start this month and would continue a year and a half.
Next year we are starting building two big highways. One of them will cross the South Georgia and will be of a political and strategic importance and also a shortest rout from Azerbaijan to Turkey through Georgia. We are building this road together with the Americans. The second is the highway from Tbilisi to the west of Georgia. The first half of the highway will be finished by 2008 and the whole highway, we hope, will be finished by 2012.
This is all about infrastructure development in Georgia.
The next stage of our economic development and our next initiative is about a packet of a draft law, which I am submitting to the Parliament.
In the Parliament we have a strong, reform-oriented majority. It is worth mentioning that a year ago and even six months ago many expected that our majority would be dissolved. The National Movement Party, which took an unprecedented majesty seats at the Parliament, has been left by seven MPs during this period, however as a result of majority elections eight new MPs were added to it. Hence, now we have more MPs in the Parliament than we had for the first time (if we exclude those five or six members of the party, whom from the very beginning we knew would desert it).
This shows that the political system is stable and steady.
The aforementioned draft law will enhance our economic development. This initiative is about facilitating an export and import process. The second is about liberalization of the banking system. Nowadays, despite the fact that we have much more liberal banking system compared to many of our neighboring countries, special permits are required for the foreign banks. We want full liberalization and removal of all the restrictions. The thirds is about simplifying court procedures and perfecting the system. A person must be guaranteed that he cold find justice in the court.
The economic growth of Georgia will be about 8 per cent just at the time when the increase of the price on oil badly affected the Georgian economy.
Russia is rich in oil, therefore its economic growth will be about 5 to 5,5 per cent.
If Georgia had that much oil, according to the calculations of our economists and the economists of the International Monetary Fund, we would have had 20-23 per cent economic growth. Unfortunately this index was less than 2 per cent in Ukraine, moreover in august there was practically no economic growth there.
You know that Georgia is a cradle of wine.
After the break up of the Soviet Union those regions (Kakheti and Racha), which produced wine, were basically destroyed, though in 2003 it started returning to life.
Last year we sold 50 percent more wine than we did before the revolution. As for this year we are producing and selling twice more wine than in the last year.
If we had more wineyards we could have produced four and six times more wine because there is a demand for this product. The price of wine has tripled. In Racha, for example, the families received four times more revenue this year than last year. This happed because of active government intervention and because it is interested in getting this business of the ground.
We export our wine in Ukraine and Kazakhstan. These countries adopted a law on the liberalization of the import of Georgian wine to their countries.
Due to intensive work with Russia many of the restrictions have been removed. We are also working with Turkey on similar issue and also on signing a free trade agreement.
We are also actively fighting against wine fakery, which was a very frequent occurrence in Georgia after the break up of the Soviet Union. For the first time we arrested production engineers and managers for the wine fakery and the local government officials for granting forged certificates. We detained the chairman of Kindzmarauli city council because he gave a certificate for the grapes grown in Gori as if they were grown in that very village. This is the outcome of the liberalization and a timely and efficient intervention of the government.
In terms of liberalization, we are going to make the similar steps with our neighbors also.
We are preparing an agreement with Turkey, which on the one hand will promote free trade and enable the Georgian production enter the Turkish market (for instance the Georgian wine will be sold in the Turkish resorts, or the Georgian agricultural products will be available only for a specific group of people), on the other hand it will help the Turkish building companies enter the Georgian market since a construction boom is just beginning in Georgia.
Without serious construction companies we would have a hard time.
Dutch, German, Turkish and the companies of the other countries are building roads all over Georgia. Foreign investment should also enter the construction sector so that to put in order everything that had been destroying in 15 years.
We are studying everything from the very beginning - how to build roads, tunnels. We study them very fast because Georgians are very intelligent and witty people.
Education reform, by the way, serves exactly this purpose.
Georgia has held the most successful nationwide exams in the Eastern Europe. This is not my evaluation. This is the evaluation made by the European specialists working in the education sphere.
These exams were the demonstration of social equity, because the most successful students came from the regions.
These people were studying without any private tutors or paying extra money. Owing to their knowledge they become students.
Due to over corrupt system these people did not face any chance of sitting the exams.
Next year we are founding a vocational training center so that to train those people who couldn't pass the exams in different spheres of construction, agriculture etc.
We need professionals to develop agriculture since there are certain villages in Georgia where we can produce one and a half ton of grapes on one hectare of land, however on the same area in the neighboring village we can produce 15-20 tons of grapes.
These differentiations are made as a result of work of the production engineers and agriculturalists.
The cattle give ten times more milk where a European program, for instance a Scandinavian technology, is used, than in those places where these technologies are not established. Therefore we should study it also.
Georgia, in terms of producing ecologically pure agricultural products, has a big potential to move from the third world standards to the standards of a developed world. I am sure we have the potential to develop high technologies because we have a very intelligent and witty people.
Recently I visited Shatili, one of the smallest villages of the western Caucasus. This village did not have either electricity or road, or school, or dispensary. Because of this situation many deserted this village and there were only few families left.
We built a new school there, opened a dispensary, fixed solar batteries for electricity and took equipments there. I saw how witty children live in Shatili. They are now sitting at the computers and in the future they will become a competitors of those children sitting at the computers in Singapore, San Francisco. It is more than apparent.
We are going to finish the process of equipping every school of Georgia with computers in maximum two or two and a half years.
In Adjara, whose representative is Jemal Imnaishvili, all the schools have been repaired, equipped with computers and connected to the Internet in three months. Adjara is one of the most important Georgian regions, where this sphere was the least developed.
Thus Georgia is a very attractive and dynamically developing country. Everything proves it and I believe that the increase of investments and local economic activity would amount to 13 to 14 per cent. Such increase will be in case the oil price does not decrease. But in case it decreases this figure will certainly increase.
Georgia is the country, which is distinguished for the low level of corruption and where the investments are protected by the law.
Georgia is the country, which is the shortest rout to connect central Asia and North China to Europe. The same can be said about air communication. This year we are starting building two new international airports in Tbilisi and Batumi, which will be finished next year. We are also building a new port in Kulevi and are working on efficiently utilizing the potential of Batumi and Poti ports.
As for the railway, a turnover has increased by 40-50 per cents compared to the last year.
The number of foreign tourists coming to Georgia have also increased by 50 per cent. However, as soon as we abolish a visa regime this figure will significantly increase.
By the end of the year a visa regime with Turkey will be abolished. We are actively working on this issue with Turkey.
We have a very good relation with Azerbaijan and Armenia, which means that as soon as the economy of these countries boosts as more investments will be made in our economy and as more tourists will come to Georgia.
But fists of all it means new working places and social welfare.
All what we have mentioned above, the state apparatus, infrastructure, liberalization, court reform must serve the purpose of creating new working places and giving new opportunities. I believe we will achieve it.
We are holding negotiations with several important investors on renewing the process of building Khudoni hydropower plant. This is one of the biggest hydropower plants in the western Georgia and it will take 4-5 years to build it. There is a real chance of renewing its building process next year. If Khudoni plant is built Georgia will not only satisfy the increased local demand but would have a surplus energy power to export. Since there is an electricity shortage in Krasnodar Territory, we think of supplying electricity to them.
These are the main perspectives for the development of our economy.
Those who visited Georgia six moths ago would have noticed that it has changed for better. Tbilisi is becoming a totally new city. Those who will visit Georgia after a year will notice even more changes. Alexandre Dumas called Tbilisi a Paris of the East and I believe that after two years it will be the most beautiful, most attractive and the most interesting city in this part of Europe, just like Prague in the central Europe and Paris in the Western Europe.
We must all share in the successes Georgia will achieve.
Basically, a cultural revolution took place in Georgia. People started to have different relations towards their own state, towards their own national conscience, towards their place in the state.
People have learned how to use their intelligence and started to have the sense of optimism.
Last year was the first year when more Georgians returned to Georgia than left it, the year when the birth exceeded the death. For the first time in the last 15 years the demographic figure has increased. Hope this tendency will sustain this year also.
I would like to welcome all the acting and potential investors and tell them that Georgia is a special country.
I have not seen a single man (except some rare exceptions) who after visiting Georgia for the first time did not fall in love with it and did not have a desire to come here again.
Before, it applied just to cultural and human relations, however now it applies to economic relations also. We will have an economic success and a progress.
Once again I welcome you and wish you a successful work.
Communications Office
of the President of Georgia