Issue #864 Business by Georgia Today

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Issue no: 864/37

• JULY 26 - 28, 2016

• PUBLISHED TWICE WEEKLY

FOCUS ON FRIENDS IN US CONGRESS

Jason Chaffetz, Chairman of the Committee on Oversight and Government Reform, PAGE 4 reaffirms support to Georgia

PRICE: GEL 2.50

In this week’s issue... Ministry of Finance Presents New Income Tax System at International Forum

PAGE 3

Import of Oil Products to Georgia Increases in H1 2016 PAGE 4

Batumi Botanical Garden Introduces New Pier BY EKA KARSAULIDZE

atumi City Hall announced that following rehabilitation works of the summer leisure area Green Cape in the city’s Botanical Garden, the new pier has finally been opened. USD 425,455 (997,676 GEL) was allocated from the state budget to finance the recent stage of Green Cape rehabilitation works. The newly restored 131.5 meter long pier utilizes refurbished wooden planks and comes with a sturdy metal railing and lights. According to the Batumi Mayor’s Office, it is now again available for the local population and tourists to enjoy. Continued on page 2

EBRD Invests $155 Million in Georgian Ammonia Production Development

PAGE 5

Stability And Instability In Georgia POLITICS PAGE 11 Prepared for Georgia Today Business by

Markets As of 22ͲJulͲ2016

STOCKS Bank of Georgia (BGEO LN) GHG (GHG LN) TBC Bank (TBCB LI)

COMMODITIES Crude Oil, Brent (US$/bbl) Gold Spot (US$/OZ)

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111.50 (YTM 5.46%)

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GEBGG 07/17

104.56 (YTM 2.79%)

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45,69

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6 730,48

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841,36

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TRY / USD

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GT Index (USD)

707,67

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Azerbaijan Spends Over $600 Million on BTK’s Georgian Section

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JULY 26 - 28, 2016

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zerbaijan announced it has allocated USD 611.5 million (1435 million GEL) for the construction of the Georgian section of the Baku-Tbilisi-Kars (BTK) railway as of July 1, 2016, since the start of financing of this project by the country’s State Oil Fund (SOFAZ), reported Trend News Agency on July 23. According to the agreement signed between the Azerbaijani and Georgian governments, the funds were transferred to Marabda-Kartsakhi Railway through the International Bank of Azerbaijan. The Marabda-Kartsakhi Railway was created to design, construct, rehabilitate, reconstruct and operate the Marabda-Turkish border railway section and relevant infrastructure projects.

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Batumi Botanical Garden Introduces New Pier

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In total, Azerbaijan allocated a loan of USD 775 million (1819 million GEL) for the construction of BTK’s Georgian section. SOFAZ is financing the project in accordance with the Azerbaijani President’s Decree of February 21, 2007. The Baku-Tbilisi-Kars railway is being constructed on the basis of a Georgian-Azerbaijani-Turkish intergovernmental agreement. It is planned to be commissioned by late 2016. The peak capacity of the railway will be 17 million tons of cargo per year. At the initial stage, this figure will be one million passengers and 6.5 million tons of cargo.

“The Green Cape has clear waters and this coastal strip is very important for tourists, but the road and infrastructure were in poor condition following on from the Soviet collapse- for 25 years nothing was done,” noted Batumi City Hall representatives. In order to make the Batumi Botanical Garden even more attractive for visitors, plans are in place to widen the streets in the Green Cape area, creating pavements, proper drainage systems, curbs and protective walls. Decorative slabs and outdoor lighting will also be installed. Parallel to these works, the territory adjacent to the entrance to the Botanical Garden is also to be remodeled. The full works are expected to amount to an allocated USD 1.02 million (2.4 million GEL) from the Budget.

BUSINESS

GEORGIA TODAY JULY 26 - 28, 2016

Ministry of Finance Presents New Income Tax System at International Forum BY EKA KARSAULIDZE

eputy Finance Minister Lasha Khutsishvili participated in a roundtable about the mobilization of domestic resources in partner countries and the Addis Ababa’s Tax Initiative in the framework of a United Nations high-level political forum last week, with the Deputy Minister sharing the Georgian experience. The Addis Ababa Tax Initiative was established in 2015 between Germany, the Netherlands, the UK and the US governments, and yet it brings together more than 40 countries and organizations that have expressed their readiness to increase efforts in partner countries

to support the mobilization of domestic resources. Georgia was one of the first to join the initiative and actively cooperate. During the meeting, Khutsishvili spoke

Georgia to Create Transport Corridor with Key Neighbors BY EKA KARSAULIDZE

eorgia, Armenia, Iran, Bulgaria and Greece intend to create a transport corridor that will connect the Black Sea and the Persian Gulf. Armenia’s Deputy Head of Ministry of Transport and Communication, David

Melkonyan, said details will be discussed in Sofia shortly. It will be the second meeting of the countries involved after the first took place in Tehran in June. The existence of a new transport corridor could allow Iran to become a trading hub for Europe and Central Asia. Bulgaria’s Prime Minister Boyko Borisov has already confirmed that the country is ready to join the project.

about Georgia’s activities regarding Base Erosion and Profit Shifting (BEPS) and named areas where the country needs help from donor countries. He also noted the importance of Georgia’s participaPhoto: Georgian Railways

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tion in current international projects like BEPS’ inclusive platform, which Georgia joined this June. Involvement in this platform makes it possible for Georgia to have equal rights, along with the Organization for Economic Co-operation and Development (OECD) and G20 countries, in fighting tax evasion, as well as to be part of the BEPS' working group and the Global Forum’s Experts Group of Tax Transparency and Information Exchange. Deputy Minister Khutsishvili reported on the already implemented tax reforms in Georgia and the new income tax system which will come into force from 2017. The Ministry of Finance claims that the organizers of the meeting marked Georgia’s involvement in international projects and the progress achieved by the tax reform.

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Job Vacancy

FARM MANAGER Provided By: Investment Company ARIC GROUP About the Company: Investment company ARIC GROUP is seeking a professional with minimum 5 years management experience of a large scale (500ha plus) planting farm (vineyard, stone fruit, nut and so forth). Location: #2 D. Gamrekeli Street, 0160, Tbilisi, Georgia Regular trips to Kakheti region, Georgia How to apply: Applicants whose qualifications match the above requirements are welcome to send their CV (English) to the following e-mail: INFO@ARIC.ge. Please include the position title in the subject line. Only shortlisted candidates will be contacted.

BUSINESS

GEORGIA TODAY

JULY 26 - 28, 2016

Mikheil Janelidze Meets Members of US Congress Delegation BY EKA JANJGAVA

eorgian Foreign Minister Mikheil Janelidze held a meeting with members of the US Congress delegation on their visit to

Georgia. The sides discussed the strategic partnership between Georgia and the US, emphasizing the US Government’s support for Georgia’s economic development, ongoing democratic reforms and foreign policy priorities. Discussions also focused on the situation in Georgia’s occupied territories and issues relating to regional security. “We spoke about the strategic partnership between Georgia and the US, about the political support the US Congress shows for Georgia in its statements and resolutions, and most importantly, about the firm support from the US for Georgia’s sovereignty, territorial integrity and Euro-Atlantic aspirations. Special attention was paid to the reforms the Government of Georgia is carrying out to bring the country closer to the North-Atlantic Alliance. The American side reaffirmed that Congress will continue to strongly support Georgia on this path,” Janelidze said following the meeting. The US delegation in Georgia is led by Jason Chaffetz, Chairman of the Com-

Import of Oil Products to Georgia Increases in H1 2016 BY EKA KARSAULIDZE

I mittee on Oversight and Government Reform. The delegation includes representatives from the committee as well as from the committees on Foreign Relations, Budget and Finance. The sides spoke extensively about the agenda of bilateral co-operation and the outstanding results that have been achieved under the US-Georgia Strategic Partnership Commission. Special accent was put on the importance of deepening co-operation with US legislative bodies with the Congress delegation reaffirmed the firm support of the US legislative authorities for the further strengthening of strategic partnership between the

countries. “Georgia has wide bi-partisan support from the US Congress,” said Chaffetz. “The delegations of the Congress will continue to visit Georgia in the future. Georgia has many friends in the US Congress, and we support what Georgia is doing and what it is going through in this tumultuous time.” Within the framework of this visit to Georgia, the delegation of congressmen is to hold meetings with representatives of the executive and legislative branches of the Government. They have already visited the Administrative Boundary Line.

mport of oil products to Georgia in June 2016 increased by 2.4 thousand tons compared to May of this year, amounting to 104.9 thousand tons. Georgia received most oil products from Romania, Russia and Azerbaijan and diesel fuel was imported more than petrol, the Union of Oil Products Importers (UOPI) claimed. Growth of imports of petrol result from an increase in consumption as, due to lower prices for petrol, gas consumers have switched back to petrol, reported the UOPI. “Fuel consumption is also

directly linked with the intensification of the economy: agricultural works, infrastructure projects, construction and transit transport,” they said. The largest volume of imported gasoline and diesel fuel this June originated in Romania – 31,000 tons (29.6 percent of total imports), followed by Russia – 25,000 tons (23.8 percent), Azerbaijan – 22,100 tons (21.1 percent), Bulgaria – 12,000 tons (11.4 percent), Turkmenistan - 9,100 tons (8.6 percent), and Greece – 4,300 tons (4.1 percent). In general, imports of oil products to Georgia in the first half of 2016 increased by 14.3 percent compared to the same period last year, amounting to 519,300 tons.

BUSINESS

GEORGIA TODAY JULY 26 - 28, 2016

EBRD Invests $155 Million in Georgian Ammonia Production Development

Georgia’s Defense Minister Allows Military Personnel to Serve closer to Home BY TAMAR SVANIDZE

BY EKA KARSAULIDZE

he European Bank for Re c o n s t r u c t i o n a n d Development (EBRD) on Tuesday signed an agreement to provide USD 155 million (270 million GEL) to Georgia’s Rustavi Azot Company, a producer of nitrogen fertilizers. The EBRD will finance the company’s capital expenditure for the reconstruction, modernization and recommis-

sioning of an operational ammonia production line in order to cut energy consumption by 30 percent. The program includes an overhaul of the old Soviet-era production processes. The project will significantly improve the energy efficiency and environmental performance of the plant and will set new standards in the region, the EBRD said in its statement. Bruno Balvanera, the EBRD’s Regional Director for Caucasus, Moldova and Belarus, said the Bank’s investments for 2016 would be three times higher

than the previous year. “By signing this agreement, we reaffirm our belief in Georgia’s future,” said Balvanera. Rustavi Azot Company is a producer of nitrogen-based fertilizers. It is the primary fertilizer supplier in the Caucasus region with a production capacity of up to 220,000 tons per annum of ammonia and 14,000 tons of sodium cyanide. In 2015, the company generated 84 percent of its sales from exports making it one of the largest exporters in the country.

eorgia’s Defense Minister Tina Khidasheli issued a new order last week allowing Georgian military personnel to serve in units near their place of residence. According to the Ministry of Defense Press Office, soldiers, sailors and airmen who have already completed their first contracted service in the Georgian Armed Forces will be allowed to choose a unit close to their registered home address for the duration of their service. Khidasheli had previously said she would ensure the rules be changed in order to help recruit more professional contract soldiers. “One of the problems military servicemen face is the prospect of having

to serve far from home. We made a decision some time ago and promised the members of our Armed Forces that we would look into the matter. Fiftytwo servicemen from the 31st Battalion based in Batumi have already been reassigned to units near to their home,” Khidasheli said in her official statement. The Defense Ministry also said those serving in the Armed Forces would now be required to pass a psychological and physical examination after signing their recruitment papers after which they must undergo a vigorous 10-week basic military course. People between the ages of 18-35 and young people who have already passed their compulsory military or contractbased service can now be recruited into the military on a four-year contract. Military personnel then receive 950 GEL (USD 400) monthly during those four years. The salary increases based on rank, position and experience.

BUSINESS

GEORGIA TODAY

JULY 26 - 28, 2016

Russia Hopes for Better Trade Relations with Georgia BY EKA KARSAULIDZE

ollowing the announcement that Georgia had supported the extension of EU sanctions against the Crimea and Sevastopol on July 20, a member of the Foreign Affairs Committee in the State Duma of the Russian Federation, Yan Zelinsky, spoke of the necessity to introduce a ban on imports of Georgian wine and mineral water to Russia. However, both the Georgian and Russian sides later refuted this statement, highlighting that the countries remain important trade partners. “The restrictions on products produced in Crimea and Sevastopol were introduced by the EU in 2014. Georgia joined them the same year. Last year they were extended, and now extended again automatically,” said Zurab Abashidze, the Georgian Prime Minister’s Special Representative for Russian Issues. “Thus, it would be illogical for Russia to react this way to a decision which was adopted in 2014.” After a Russian media outlet reported Zelensky’s statement, the Head of the Foreign Affairs Committee in the State Duma, Aleksey Pushkov, also said that Russia does not consider it necessary to respond to the decision of Georgia and other countries with regards the extension of sanctions. “Russia does not accept this step as friendly, but at the same time does not

consider it necessary at this stage to respond to it,” Pushkov told the Ria Novosti News Agency. “First of all, it is a political step, largely dictated by the Georgian leadership to demonstrate their unity with the West, which was the initiator of these sanctions.” Pushkov also noted that Russia is committed to the gradual normalization of relations with Georgia and added that “there are [in Georgia] forces that are interested in it as well.” The Duma member expressed hope that after the parliamentary elections in Georgia this October, it will be possible to create better foundations for the normalization of Russian-Georgian relations

Source: www.nationalreview.com

across the board. “Recently, during our meetings with Georgian parliamentarians on international platforms, we have the impression that there is certain potential for the resumption of our interparliamentary relations, and Russia is ready for this," stated Pushkov. Trade relations will naturally take one of the main roles in this issue. Accord-

ing to the latest data from the National Statistics Office of Georgia (Geostat), Georgia’s foreign trade turnover with Russia this January-June grew by approximately 16.5 percent compared to the same period of 2015, amounting to more than USD 390.3 million- 6.8 percent of the total foreign trade turnover of Georgia.

To date, Russia remains the largest importer of Georgian wine, having imported wine to a total cost of USD 22.3 million, which is USD 4 million more than in January-June 2015. Additionally, export of Georgian mineral waters to Russia rose by USD 607,000, amounting to approximately USD 18 million. Diplomatic relations between Russia

and Georgia were terminated following the military conflict in 2008. At present, the dialogue between Russia and Georgia is supported by the Geneva International Discussions and regular meetings between the Georgian Prime Minister’s Special Representative for Russian Issues, Zurab Abashidze, and the Deputy Foreign Minister of Russia, Grigory Karasin.

BUSINESS

GEORGIA TODAY JULY 26 - 28, 2016

A Bountiful Harvest! 2000+ Jobs: Growth in Georgia Georgia Receives Project to Support Agriculture 30 Combines from Development in ABL Villages Azerbaijan BY EKA KARSAULIDZE

Photo: Ministry of Agriculture

BY EKA KARSAULIDZE

he government of Azerbaijan has given Georgia 30 combines to cope with a record-breaking harvesting season expected later this

year. The combines will be put to use by local farmers within the next 20-25 days, reported Azeri business website ABC.AZ.

“Compared with the previous years, we are expecting a record-breaking harvest,” said Deputy Agriculture Minister Levan Davitashvili. “The average productivity per hectare has almost doubled to four tons per hectare. For this year alone, more than 80,000 hectares of land was being used to grow wheat and more than 40,000 hectares for barley.” The Ministry of Agriculture will help farmers store the crops as they undergo stringent tests before being sold.

he Ministry of Agriculture of Georgia, in partnership with the United States Agency for International Development (USAID), launched a new ‘Growth in Georgia’ project to support the rural population. The project will focus on villages located near the conflict zones (near the Administrative Boundary Line, ABL). The presentation of Growth in Georgia took place in Nikozi village, Shida Kartli, near the South Ossetia ABL last week. Ministry representatives stated that Growth in Georgia is to be implemented in 70 communities in five regions of Georgia. The project will create 2000 jobs and increase incomes of 11 thousand families. As such, it is expected that it will significantly improve the economic situation of the population. Growth in Georgia is part of the fiveyear project implemented by USAID in cooperation with the Ministry of Agriculture of Georgia, the aim of which is to promote the sustainable economic development of the villages located near the dividing lines and conflict zones, the growth of rural incomes, and the deepening of market relations between producers and buyers. According to the Minister of Agriculture, Otar Danelia, it is particularly important to have the support of states and international organizations in and near to ABL villages.

BUSINESS

GEORGIA TODAY

JULY 26 - 28, 2016

Georgia’s Remote Regions to Receive Hi-Speed Internet Access BY TAMAR SVANIDZE

ore than 2,000 towns and villages throughout Georgia are to receive high-speed Internet network access, Georgia’s Prime Minister Giorgi Kvirikashvili announced at a cabinet session last week. The government has already approved a state

program on broadband infrastructure development in Georgia and said the new program would be completely financed by Cartu Fund, owned by Georgian billionaire and former Prime Minister Bidzina Ivanishvili. Kvirikashvili said the USD 100 million charitable program would be implemented with the support of the Economy Ministry’s Innovation and Technology Agency. “This is a truly historic achievement as access to information is the main condition to creating a free

The USD 100 million charitable program would be implemented with the support of the Economy Ministry’s Innovation and Technology Agency

society. It is of critical importance for education and for the development of civil society," Kvirikashvili said. He also indicated that all interested private providers will be allowed to use the infrastructure to provide Internet across Georgia. According to the Georgian National Communication Commission just 600,000 of Georgia’s 3.5 million people have regular internet access, 79 percent of which reside in the capital, Tbilisi. The Caucasus Research Resource Center in 2015

said that young, educated Tbilisi residents use the Internet more frequently than other Georgians. The same study highlighted that the most vociferous Internet users are 18 to 35-year-olds with a full 81 percent of them in Tbilisi, 61 percent in other urban settlements and 39 percent in rural settlements. Only 1 percent of Georgians has never heard of the Internet, lower than in previous surveys which showed that as much as 6% of Georgians had no previous knowledge or experience with the Internet.

BUSINESS

GEORGIA TODAY JULY 26 - 28, 2016

New Metallurgical Plant to Be Built by South Korean Investors

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market value. POSCO currently operates two integrated steel mills in South Korea, in Pohang and Gwangyang. In addition, POSCO operates a joint venture with US Steel, USS-POSCO, which is located in Pittsburg, California, United States.

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outh Korea’s largest multinational steel-making company POSCO has indicated its interest in investing USD 500 million in building an ultra-modern metallurgical plant in Georgia. The news was announced following a recent meeting of the POSCO Senior Vice President, Jin Sik Choi, and Georgia’s Deputy Foreign Minister, David Jalagania, in Georgia’s capital, Tbilisi, on July 22. The Ministry reported that during the

meeting the two parties introduced the investment project and revealed their future plans regarding Georgia. Georgia’s Deputy Foreign Minister welcomed Korea’s interest in Georgia and updated the Korean delegation on the political and economic situation and investment environment in Georgia, as well as on the increasing level of bilateral relations between Georgia and Korea. POSCO is a multinational steel-making company headquartered in Pohang, South Korea. It had an output of 39.1 million tons of crude steel in 2011, making it the world’s fourth-largest steelmaker by this measure. In 2010, it was the world's largest steel manufacturing company by

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Monitoring Report Says Georgian Media Making Progress in Pre-Election Coverage TIFLIS 7.5x6cm ING.indd 1

BY EKA KARSAULIDZE

WEEK DAYS

BY TAMAR SVANIDZE

he results of a media monitoring report ahead of Georgia’s Parliamentary elections in October were released last week showing areas of progress during the pre-election season by local media outlets. Three non-governmental organizations, Internews Georgia, the Georgian Charter of Journalistic Ethics and Civic Development Institute, observed more than 40 local online, print, broadcasting and radio outlets over a six-week period to compile the results. The European Union and United Nations Development Program (UNDP) supported the process of gathering infor-

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mation for the monitoring report, as well as a series of monitoring rounds that will end in November, a month after the elections take place. “We have been conducting the project for six years, with the support of the EU. We carried out several monitoring missions before the previous five elections… we can honestly say that there is progress regarding the overall media coverage of the pre-election process. We hope this trend will continue,” said Natia Natsvlishvili, UNDP’s Resident Representative in Georgia. The Journalistic Ethics Charter, which has been conducting monitoring of local TV channels, emphasized that Georgian TV programs had been focusing their attention on the conduct of the various branches of government. Leading TV station Rustavi-2 focuses

13/06/16 15:16

on negative aspects of the government, while arch-rival GDS, owned by the rapper son of the Georgian billionaire and former Prime Minister Bidzina Ivanishvili, consistently praises the government’s performance. Civil Development Institute representative Giorgi Jologua said the main challenge for Georgia’s media is the issue of constant violations of ethical standards. According to the report, radio reports are the most balanced and unbiased among other local mediums for the media. Representatives of Internews Georgia noted that they objectively cover events that create the pre-conditions need to provide balanced information. All reports are available online: www.MediaMonitor.ge and Facebook page: www. facebook.com/MediaMonitor.ge

Tel: (995 32) 2 45 08 08 E-mail: info@peoplescafe.ge

BUSINESS

GEORGIA TODAY

JULY 26 - 28, 2016

Council of Europe Releases Assessment Report on Public Service Media in Armenia, Georgia and Azerbaijan BY THE COUNCIL OF EUROPE

wenty five years have passed since Armenia, Georgia and Azerbaijan – the Transcaucasian countries – came out from under Soviet rule and were able to develop their own independent public media. But twenty five years on, how are they dealing with the challenges of maintaining a credible system of public service media? To help answer that, the European Audiovisual Observatory, part of the Council of Europe (CoE) in Strasburg, has just released a unique new report entitled Public Service Media in Transcaucasian Countries. This new IRIS Extra report is authored by Ekaterina Abashina, a researcher at Lomonosov Moscow State University. She opens by analyzing the evolution of the public service broadcasting concept in Georgia, Armenia and Azerbaijan. Public service companies were first established in this region in the early 2000s, replacing the Soviet model state-run broadcasters. Moving on to look at the governance of public

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service broadcasting, Abashina makes a useful comparison of the three systems. Common elements emerge from her analysis such as a declaration of commitment to public service broadcasting values through their stipulation in the relevant legal framework; the application of state funding, detailed regulation of appointment procedures of governing bodies, and general content requirements (though these are formulated more as guidance principles). She then focuses on programming policies in the three countries. In the cases of Armenia and Azerbaijan, their respective Boards are entitled to approve programming schedules and program structures but they do not communicate these to the public and do not announce or present them in any way. The Georgian PSB Board issues quite a detailed and annually updated programming concept (“Programming Priorities”) – made available on the website of the broadcaster annually; the “Programming Priorities” of the Georgian PSB are indeed purely advisory in nature. It is clear that the creation of PSB companies in Georgia, Armenia, and Azerbaijan was fostered by their joining the Council of Europe (CoE). The author focuses her penultimate chapter on the role of international organizations such as the CoE and the OSCE Representative on Freedom of the Media (OSCE RFOM). Their membership of the CoE has imposed upon these countries the adoption of or amendments to existing national broadcasting laws to incorporate the CoE principles on PSB. In addition, regular evaluative CoE reports are written about the media in all their member states; although these rather play an interpretative and explanatory role for the regulation and operation of public broadcasting. For its part, the OSCE RFOM has designed specific recommendations for the development of PSB in this region and on the creation of an inter-regional platform for the exchange of ideas and experience on PSB practice within the region. Abashina concludes that PSB in these countries has suffered from “common weak spots” such as “the lack of safeguards for the independence of PSB companies from political interests due to loopholes in appointment mechanisms for the governing bodies […]; unstable funding sources; lack of specific legal programming requirements; and absence of effective mechanisms of interaction with its audiences and audience research.” She does, however, underline the role of international organizations like the CoE and the OSCE who, while they cannot directly influence PSB systems, “are active and consistent promoters of PSB values and best practice in the Transcaucasian region.”

POLITICS

GEORGIA TODAY JULY 26 - 28, 2016

Stability And Instability In Georgia BY LINCOLN MITCHELL

he Georgia Analysis is a twice monthly analysis of political and other major developments in Georgia. Lincoln Mitchell is a political development, research and strategic consultant who has worked extensively in the post-Soviet space. He has agreed to share some of his analyses exclusively with GEORGIA TODAY. Since once again achieving its independence in 1991, the Georgian State has faced innumerable challenges and obstacles. One of the most significant of these was that Georgia found itself in a rough neighborhood. The conflict between Azerbaijan and Armenia in the early 1990s, the proximity to Iraq in the following decade, to the tumultuous Middle East in general in recent years, as well as to conflict-wrought parts of Russia, such as Chechnya, all made the project of state and democracy building in Georgia even more difficult. Additionally, the Russian actions, most notably in Abkhazia and South Ossetia, but in Georgia more broadly as well, have only made life more arduous for Georgia. Georgia’s immediate neighborhood remains riven with tumult and conflict. The Middle East is becoming more unstable with refugee crises and violence from that region having an increasingly global impact. Armenia and Azerbaijan are still frequently on the cusp of renewed conflict and the recent coup attempt in Turkey raised the specter of instability in a large neighboring country that is a member of NATO and has been an important trade partner and ally of independent Georgia. Interestingly, as Georgia’s region experiences even greater instability than in recent years, Georgia itself is slowly, and relative to only a few years ago, implausibly, emerging as something of an island of stability. While Georgia is certainly still characterized by contentious and polarizing politics, significant economic challenges and a Russian presence in Abkhazia and South Ossetia, the State itself is more stable than at any time in recent memory, particularly when compared to the rest of the region. Today, Georgia looks more stable than much of the Middle East, Turkey, Ukraine or either of its South Caucasus neighbors. This is seen in the general tone of political life, the often overlooked continuity on key policies between this government and the previous one and even in electoral politics shortly before parliamentary elections. The coming elections in the autumn are expected to be very competitive. It is very likely that three or more parties will exceed the five percent threshold for their party list to get into parliament, and possible that no party will win a clear majority of seats in the new parliament, making it necessary to form a coalition government. Of course, four years ago the governing party lost the parliamentary election, but four summers ago very few, other than Georgian Dream (GD) activists, thought that was possible. The defeat of the governing United National Movement (UNM) in

2012 was as much a regime collapse as a peaceful transition. The election this year, regardless of who wins, will not be a case of regime collapse or even regime change. This is evident by the encouraging reality that while rhetoric on both sides is strong, and will get stronger as the election approaches, the central dynamic of this election is not one of an opposition demanding regime change and a government presenting themselves as essential to the country’s future security and even survival. The recent six party declaration affirming Georgia’s commitment to NATO is further evidence of this. There are no guarantees that Georgia can maintain this stability. That is the nature of political stability in any country. It can seem permanent and strong one moment and dissolve relatively quickly the next. Moreover the path to meaningful enduring stability is a difficult one; and Georgia still has some distance to go to achieve that. An election that runs smoothly and ends peacefully in which the governing party may remain in power, but loses some seats, will help institutionalize this stability. Stability, however, is about more than just elections. Institutions must be strengthened, but there also needs to be a popular consensus around the nature of the Georgian State. This consensus is emerging, but it is not quite present yet. While the idea of democracy as the way to organize the Georgian State seems strong, fissures around the relationship between the State and Church, the struggle to fully incorporate ethnic minorities into the modern Georgian State, external pressure from Russia, the role of unelected leaders and ongoing economic pressure are all factors potentially working against the further institutionalization of stability. The sense of stability in Georgia is also partially a product of the GD’s style of governance. One of the most frequently heard criticisms of the GD government, particularly from those who are not strong UNM or GD supporters, is that the GD either has not done enough or is not working actively enough to solve Georgia’s problems. This assertion may or may not have some credence, but the contrast between the GD and the UNM in this respect is hard to miss. The UNM style of governance by adrenaline certainly brought great energy to bear on Georgia’s problems, and helped make possible the wave of reforms during the two or three years immediately following the Rose Revolution, but it was also a handmaiden to the low to mid-level crises of stability that characterized the last half of the decade or so the UNM were in power. As Georgia has become more stable it will continue to become more important to the West. Georgia has struggled to remain a top priority for the US and Europe since independence. Initially, this relevance rested largely on the figure of Eduard Shevardnadze. In the Rose Revolution period, Georgia sought to make itself relevant by being, in George W. Bush’s words a “beacon of democracy,” but once that was no longer plausible, it sought to position itself as an anti-Russian bulwark and libertarian paradise, but both of those concepts had

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somewhat limited ideological relevance. Today, Georgia, whether the leaders recognize it or not, is arguing that stability is what makes it important and relevant. Georgia can only be an ally in the struggle against an aggressive Russia to its north, or against the wellsprings of Islamic terror to its south, if it is stable. Demonstrating this is no small part of the reason that Georgia continues to make steady, if slow, progress towards NATO and the EU. Stability is both real and perception based. Therefore, it is important for Georgia to be both stable and perceived as stable. Moreover, as a given country becomes more broadly seen as stable, international actors behave in a way that helps that country become more stable, for example, by investing more, bringing Georgia even closer to NATO and the EU, and even sending more tourists here. However, to become more stable, and prompt this kind of behavior from western countries, Georgia must continue to present itself to the world as more stable. Elections that are not presented or seen as an existential referendum on the country’s future, less talk of eminent Russian invasion, even as the threat from Russia remains real, and a politics that does not vilify opponents or make unrealistic promises are all ways Georgia can make itself seen as more stable. The current government has made steps in all these directions, but there is a good deal of work still to do, and not simply by the government. Election related violence of the kind in Kortskheli a few months ago endangers Georgia’s democratic evolution, but also sends the world a message that Georgia is less than stable. The frequent comments from the Governor of Odessa that he will return to Georgia in the near future is not exactly a harbinger of calm either. A definitive end to political reprisals, the continued reduction of the role of unelected individuals in the country’s governance and

Journalists: Tony Hanmer, Tamar Svanidze, Zviad Adzinbaia, Beqa Kirtava, Meri Taliashvili, Eka Karsaulidze, Zaza Jgarkava, Maka Bibilashvili, Karen Tovmasyan, Dimitri Dolaberidze, Maka Lomadze, Tim Ogden, Ana Akhalaia, Robert Isaf, Joseph Larsen, Will Cathcart, Vazha Tavberidze, Nugzar B. Ruhadze

Georgia’s path to greater stability is far from guaranteed, but there are indications of a significantly smoother path than there was three, five or ten years ago

fewer cabinet shakeups would also contribute to greater stability here. Stability, in Georgia, or anywhere else, is both difficult to predict and identify and also frustratingly transient. The space between stability for the foreseeable future and instability that is viewed as inevitable is frequently very limited. That should be particularly apparent to people who remember the last years of the Soviet Union. Nonetheless, there is reason to believe the movement is in the right direction for Georgia. This provides an important opportunity both to consolidate some of its gains, but also to change the nature of the international discussion about Georgia. Ultimately, a reduction in discussions of whether a government has pro-Russian elements, or if the former government will seek to destabilize the country to return to power, is good for all Georgians. The benefits of an increasingly stable Georgia are clear, but the drawbacks, at least for some, cannot be overlooked.

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Those politicians, within both major parties and others who have built their political base by claiming that one government or another is bent on destroying Georgia, or who can only remain part of the political discussion by relying on cataclysmic rhetoric and fear mongering are among the domestic actors who lose out by greater stability. Moscow, would obviously be a big loser in a more stable Georgia, as would terrorist organizations to Georgia’s south who benefit from instability everywhere, but particularly in the region. Georgia’s path to greater stability is thus far from guaranteed, but there are indications of a significantly smoother path than there was three, five or ten years ago. If you would like to be on the Georgia Analysis mailing list or are interested in more research, analysis or consulting for your business, government, campaign or other organization, please email lincoln@lincolnmitchell. com.

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