The Speech of the President of Georgia, Mikheil Saakashvili at the Business Forum

FROM THE REDACTION

Let me welcome everybody!
I am sure that your stay here will be interesting in spite of the bad weather.

Two years ago Georgia was a collapsed and ruined country. No one in the state administration, including the President, had a salary that was more than the cost of living. When I entered my office for the first time they brought me the salary for half a month which was the sum equal to forty dollars.
Then I went to Davos and was given thirty dollars for daily expenses during three days.
During the last years there were such salaries in Georgia, though even now the family of the former president is one of the richest.
The salaries of our ministers were still lower, but they had big houses not only in Georgia but abroad as well, they drove expensive cars and did not complain of their salary.
Three months ago, when I wanted to reduce the salary of ministers by 500 dollars, the Minister of Education declared that he wanted to retire since he had to pay the credit for his flat. This fact shows what a big progress Georgia has made.
At the initial stage the formation of the state machinery was our concern. We applied to the UN Development Agency with a request to allocate money for paying salaries to several tens of ministers and their deputies as well as tax officers and investigators, so that they would not think about additional incomes.
During the first two months tax collection increased by 40%, it contributed to development of the state machinery and systematic work.
During the first five months we had enough money to start the police reform.
We demanded honest and decent work from the police, otherwise they could be dismissed, but they did not take it seriously. Formerly, during the soviet period and especially over the past twelve years the government did not give cars, gasoline, uniform to the police, it did not pay salary to them but demanded that they should do their work. We found out that during two years the majority of policemen in Tbilisi had not get this ridiculous salary (equivalent to 20-40 USD), though a part of income obtained through corruption had to be paid to the heads of local departments and the ministers. It was a brigandage legalized at the state level. Moreover, in 1995 when such police defeated the existing at that time bandit organization “Mkhedrioni”, many people hailed this since they could know “more exactly” to whom they should give money. Eventually this kind of transactions caused flourishing of corruption at all levels of public administration.
It was an abnormal system that brought Georgia to the condition when the state budget along with the local ones made up a little more than 500 million USD. Now the Georgian state budget along with the local ones makes up two and a half billion USD and it may reach 3 billion soon.
This is the indication of reduced corruption and legalization. All this took place in conditions when, at the cost of big political risk, we reduced the state machinery and this budget maintains 40 % less people.
Also at the cost of risk we have decreased the number of licenses and permissions by 80-90 %, since the sanitary inspection was reduced sharply. I believe that not the state but a consumer is the main controller. If a consumer sees that there is insanitariness and dirt in some restaurant, he will not go there for a second time. Sanitary inspector went there, collected payment and was not at all interested whether there was cleanness there or not. We have liquidated all this and nothing terrible has happened.
Last year we disbanded the traffic police and there was no traffic police during two months.
Some people said that it would ruin us, but nothing out of the way has happened, since the police that existed at that time had not been doing anything for a long while.
Instead we hired new officers, gave them new cars, uniforms, portable two-way radios, increased the salary 10-20 fold, and achieved the result when, according to the inquiries, the people’s confidence towards them has increased from 5 to 95%. The people grew fond of the police, but quite recently one could not imagine this kind of thing in Georgia.
This kind of reforms were carried out in other spheres of the state machinery as well, and the state recovered those important functions that had been lost by it before.
It concerns protection of public order. If we look at criminality indicators, it will turn out that they have increased in terms of numbers, but this is so only from the formal point of view, there happened their legalization. Formerly a policeman concealed the real picture for two reasons. Firstly – he had a plan that should show absence of crime, and secondly – he took bribes from a lawbreaker and naturally the crime was not registered. Presently the crime rate has formally increased but in reality it has even dropped, and it happens in conditions when human rights are not infringed by the police.
As you know there exists a strict international organization for defending human rights – “Amnesty International” which a week ago published a report concerning Georgia. When specialists familiarized themselves with this article they were surprised since this organization has never been so “sweet” to anyone. The same thing was done by “The Human Rights Watch”…
We live in a rather difficult region, but I am proud that we are the first country in the region where people are not beaten, tortured, and the police does not use illegal methods any more, and in spite of it public order is preserved. There are no kidnapping cases in Georgia any more – during the last years of Shevardnadze’s rule it was the most widespread crime. There are no big criminal gangs left in Georgia, between which the territories were shared before the Revolution of Roses. This is the most important element of stability. The state has recovered its elementary functions.
Our armed forces have become more effective and meet NATO’s standards to a greater extent.
The emergency medical service did not exist in Georgia before the revolution. Now on the territory of the whole country, even in most distant villages there exists emergency medical service.
The first stage consisted in reformation of the state machinery. The second one – roads and energy. This stage envisages rehabilitation of the energy sector. This year, after gaining independence, there will be the first winter in Georgian history when theoretically there will be no deficit of electric power in the whole country. Theoretically – because electricity supply networks are not ready for continuous receiving of energy. Though, it will be the first year when Georgia’s demand for electric power will correspond to the supply.
This system has already been adjusted in Tbilisi and some other cities, but it has not been fully done in the regions and villages yet since over the past twelve years we practically did not have electric power, and if electricity is supplied there certain problems will arise because of damage of the system; though, I am sure, we shall overcome this too. It will happen at the expense of payments collection.
At the beginning of the year we collected only 7% of payments for electricity, now this indicator has reached almost 80%, and by the end of the year we will reach 100%. It happened because the state showed its persistence.
From the first day of our coming to power we were called populists but we did not take any populist steps in anything.
I know it well that people are hard up, but Georgia does not have oil and other natural resources to finance everything. We, the citizens are financing the state. That is, we shall have electricity if we pay for it.
I remember well when in August, during the visit of the Ukrainian President – Viktor Uschenko to Georgia, we were to go to a famous mountain-ski resort Bakuriani and people tried to block the road demanding electricity. We could spoil our international reputation because of their actions since a lot of journalists from different countries were there at the time, but we were not afraid of that.
The law is the same for everyone in spite of the circumstances.
During the pre-election period our candidate was running in Tkibuli (the poorest region in Georgia), electric power supply was cut off, but in spite of the fact that some our political activists proposed to turn on electricity for obtaining addition votes, we did not do it. Our candidate received about 90% of votes. Our people are very sensible and understand everything well if we treat them fairly. Now we are putting in order this infrastructure.
We managed to liberalize the state decisions. Our country has the lowest corruption indicator in the post-soviet space and in Eastern Europe. Our tax base makes up about 20% of the GNP – this is a maximum possible indicator. In relation to the GNP we spend twice as much for maintenance of the state social programs as, for example, China. – that means that we are collecting taxes and the level of legalization is high. It happens because we have taken tough anti corruption measures and simplified the system.
You know that two weeks ago we arrested the whole personnel of the country’s western regional customs, tens of officers of the new police were detained because of corruption, 15 former judges are serving their sentences, and we are in full control of this system in order not to allow the revival of corruption in Georgia.
We have started development of the infrastructure and repairing of the roads – this year twice as much money was spent on repairing of the roads in Tbilisi than during the past 12 years. Next year we will spend several times more money than during the past 15 years on repairing of roads all over Georgia. Roads and energy are the main arteries of the economy – we will have no economy without them.
We have started renovation and adorning of Georgian cities. Some people are dissatisfied with renovation of facades of buildings – they say that it is not the right time to renovate facades, roads and streets when people are still hard up. In this relation our reply is very simple – firstly, thousands of people are employed in this works, secondly – when everything is completed, millions and billions will be invested in tourist development. There are already the first results of this – Kazakh banks declared that they are going to invest more than a billion of USD in the development of tourism on Georgian Black Sea coast. This will start this year and continue for a year and a half.
Next year we will start construction of two big roads – one road having political and strategic importance in the direction of southern Georgia, it will be the shortest transit road leading from Azerbaijan to Turkey through Georgia and we will built it with the Americans; the second one will be a motorway leading to the west of the country, the construction of the first half of which will be completed in 2008, and I hope that it will be fully completed by the year 2012. This is what concerns the development of infrastructure in Georgia.
The next stage of our economic reform and our further initiative will concern the batch of bills that I submit to the parliament for consideration. We have a strong pro reform majority in the supreme legislative body.
It must be said that a year or even half a year ago many people expected it to be disbanded.
The national movement that had unprecedented majority in the Georgian parliament has lost 7 MPs during this period, but after the majority elections it acquired 8 members. Proceeding from this, now we have more MPs than we used to have while entering the parliament (if we do not take into account 5-6 members of the party about whom we knew that they would abandon it).
This is solidity of the political system and the indicator of stability.
The above-mentioned batch of bills will accelerate our economic growth. These proposals envisage simplification of all export and import procedures, secondly it will concern liberalization of the banking system; in spite of the fact that in comparison with many neighboring countries we have a much more liberal system, certain permissions are necessary for the activity of foreign banks, and we want a complete liberalization and lifting of restrictions; thirdly it envisages simplification of judicial procedures, reduction of terms, and perfection of the system. A person should have a guarantee that he will find justice in the court.
What we have done already, along with liberalization and lifting of restrictions will produce a result.
Economic growth in Georgia will approximately make up 8%, and all this in conditions when increasing of oil prices has delivered a blow to the Georgian economy. Russia is oil producing country and economic growth there makes up about 5%. If Georgia had oil like Russia our economic growth indicator, according to our calculations and calculations of the IMF, would make up 20-23%. In Ukraine this indicator was, unfortunately, 2% less, and in August economic growth was not observed at all.
As you know, Georgia is a cradle of wine.After disintegration of the Soviet Union the regions (Kakheti and Racha) where wine was produced and which were practically ruined, started to revive in 2003. Last year we sold 50% more wine then before the revolution, and this year we produce and sell twice as much than last year. If we had more vineyards, according to the demand, we could produce 4-6 times more wine.The price of wine has increased approximately three fold. For instance, in Racha, as a result of the last harvest, the incomes of each family has increased four fold compared to the last year.
This is the result of the government’s active participation in this matter and it is interested in its promotion.
We have opened the way for wine export to Ukraine and Kazakhstan, where they passed a law on liberalization of our wine’s import. As a result of intensive work with Russia, many restrictions were reduced.We are working with the Turkish side on concluding a free trade agreement.
At the same time we are putting obstacles in the way of wine falsification and got down to this matter very strictly. There used to be a large-scale wine falsification, and technologists and managers were arrested in Georgia for the first time after disintegration of the USSR.
Representatives of local authorities were called to account for issuing false certificates of famous wine brands. We arrested the chairman of Kindzmarauli Sakrebulo because he issued a certificate for the grapes brought from Gori as if they had been grown in this Kakheti village.
This is a result of liberalization and also of effective and timely intervention of the state.
From the viewpoint of liberalization, we are going to take this kind of steps with respect to our neighbors.
We are preparing an agreement with Turkey that, on the one hand, envisages free trade which will open the way for Georgian produce to the Turkish market (for instance, Georgian wine will enter Turkey’s resort areas, or Georgian agricultural produce will be available for specific public), and, on the other hand, Turkish construction companies will get access to the Georgian market, since construction boom is starting in our country now.
It will be difficult for us to do without serious construction companies. Foreign capital must be invested in Georgian construction sector the way it takes place when the companies from other countries such as Netherlands, Germany, Turkey, etc. are building roads in the whole of Georgia, in order to overcome the difficulties that have been accumulating over 15 years.
We are learning everything anew – construction of roads, building professions, driving tunnels; we are learning very fast for the Georgians are talented people.
By the way, the education reform serves this purpose as well. Georgia has held the most successful national exams in Eastern Europe.This is not my appraisal, this is a conclusion of European specialists in the field of education. These exams were manifestation of social justice since the largest number of successful university entrants came from the provinces. They prepared for the exams without any coaches and became students thanks to their own efforts.
Formerly the whole system was so corrupted they did not have any chance of entering higher educational institutions.
Next year we are going to create a centre of vocational retraining, so that young people who did not manage to enter higher educational institutions could have an opportunity to acquire various professions related to civil engineering, services, agriculture, etc. We need professionals for development of agriculture, since there are villages in Georgia where, for instance, they collect a ton and a half of grapes, while in the same or some other village they collect 15-20 tons of grapes from the same area. This differentiation is stipulated by the technologies as well as the work of agriculture specialists.
Milking capacity of cattle in places where the European program is being implemented, for instance where they work according to Scandinavian technology, is ten times as much than in places where this kind of technologies have not been introduced. That is why we must learn this kind of things as well.
Georgia has a potential from the viewpoint of production of ecologically pure agricultural produce, and it can switch to from the third world standards to the standards of the developed countries. I am sure that we really have a potential for development of advanced technologies, since we have very clever and talented people.
Not long ago I visited Shatili, one of the smallest villages in the north of Georgia, where formerly there were no electricity, roads, school, dispensary, and practically a few people were left there. There we built a school, opened a dispensary, installed solar batteries to get eclectic power, and brought machinery. I saw what talented children live in Shatili – they sit at modern computers and in future they will become competitors of the children who sit at computers somewhere in Singapore or San-Francisco. This is absolutely clear.
We are planning to finish computerization of all schools during the period of 2-2,5 years.In Ajara region, the representative of which is Jemal Inaishvili, all schools have been repaired, equipped with computers and connected to the Internet. All this has been done within a 3 months period.
Ajara is one of Georgia’s most important regions in which this sphere was least developed.
Thus, Georgia is very attractive and dynamically developed country. All the data indicates this, and I am sure that next year increasing of volume investments and local economic activity will make up 13-14%. This will happen if the oil price will not decrease, but if it will, this indicator will rise still more.
Georgia is a country which is distinguished by the lowest corruption level in the region, and here, from the viewpoint of law, investments are protected best of all.
Georgia is the country through which the shortest way from Central Asia and Northern China to Europe. The same concerns air communication as well. This year we are launching construction of two new airports which will be completed next year. This is the new Tbilisi international airport, and Batumi airport. A new port is also being built in Kulevi, and using the potential of Poti and Batumi ports will become more effective.As to the railway, there the turnover of goods has increased by 40-50% compared to the last year.
The number of foreign tourists has increased by 50%, and with cancellation of the visa regime this indicator will increase considerably. By the end of the year visa regime with Turkey will be cancelled – we are working on it with the Turkish side, and the number of trips to and from this country will increase.
We have perfect relations with Azerbaijan and Armenia, which means that along with the growth of the economies of these countries, more investments will be made to our economy and more tourists will visit our country. First of all, for us this means opening of new jobs and social development.
All the above mentioned – state machinery, infrastructure, liberalization, judicial reform – should be followed by creation of new jobs and opening of new opportunities, and I am sure that we shall be able to do it.
In connection with resumption of construction of Khudoni hydroelectric power station, we are holding talks with some big investors. This is one of the largest hydroelectric power stations in western Georgia the construction of which will require 4-5 years and there is a serious chance that Georgia will resume its construction next year. In case of putting in operation Khudoni hydroelectric power station, Georgia will not only cover the ever increasing demand for electric power, but will be able to export it to the neighboring countries. Taking into account that there is a deficit of electric power in Russian Krasnodar Territory, we are thinking of provision of it with eclectic power.
These are the main prospects of our economic development.
Those who visited Georgia 6 months ago could notice that Georgia had considerably changed for the better. Tbilisi is becoming a different city. Those who will come in a year will notice still more changes.
Alexander Dumas called Tbilisi “an eastern Paris”, and I am sure that in two years it will be the most beautiful, attractive and interesting city of this part of Europe, like Prague in Central Europe and Paris in Western Europe.
All of us should share the success that Georgia will achieve.
Practically a cultural revolution has taken place in our country, the people has developed a different attitude with respect to their own state and national dignity.From the viewpoint of rational labor management, people have learnt to use their own talent, they acquired a sense of optimism.
The last year was the first one when more Georgians returned to the country than left it, when more were born than died. For the first time during 15 years the demographic indicator has increased. I hope that this tendency will remain this year as well.
I would like to hail all current and prospective investors, and tell them that Georgia is a special country. I have not seen a person (with rare exception) who would not want to return here after the first trip.
Formerly there were cultural and human relations, but now they will apply to the economy as well. This will be economic successes and progress.
I welcome you once again and wish you success in your work.