Category Archives: Economy

When You Call Georgia, Who Picks Up the Phone?

misha

Georgian President Mikheil Saakashvili, courtesy of wikicommons

As Europe increasingly began integrating the European Union and becoming more of a bloc than a constellation of self-interested nations, Henry Kissinger once famously retorted, “When you call Europe, who picks up the phone?”

Georgia, which is now going through its first experience with divided government, faces a similar problem with its foreign policy.

Although the Georgian Dream government, which won parliamentary elections last fall, has formed its own cabinet and staffed the Foreign Ministry itself, that hasn’t kept officials from the previous government from representing its own foreign policy vision on trips abroad and in public statements.

After all, the United National Movement party still holds the executive branch and a sizable minority in the parliament. But, after presidential elections this October, a new Constitution will take effect and transition the country into a parliament-centric system where the president is largely a figurehead. Until then, however, the country is still run by a system with a powerful executive president.

So who’s in charge?

Technically both parties are, but they have been unsuccessful thus far in coordinating their new foreign policy together, so each side has been making foreign visits, each espousing very different viewpoints on where the country should be headed. Foreign leaders and outside observers can be forgiven for being confused by the display.

The focal point of the schizophrenic statements is, of course, Russia. Since his initial election in 2004, President Mikheil Saakashvili has styled himself as an anti-Russian, pro-Western crusader. Prime Minister Ivanishvili, who took power in October, meanwhile, campaigned on a pledge to improve ties with Russia. The open disagreement has already made it awkward for a number of Georgia’s partners, who also straddle the balance between Russian and Western interests.

Azerbaijan is a perfect example. Last December, Ivanishvili began his tour of Georgia’s neighbors in Azerbaijan with a delegation from the new government. In late February, President Mikheil Saakashvili did the same, this time taking with him members of the minority. No Foreign Ministry officials accompanied him. Continue reading

Tbilisi Hangout 011 with Mathias Huter

So this week on the Tbilisi Hangout we were had the great opportunity to have Mathias Huter on the show of Transparency International Georgia and TBLPOD fame.

In this episode, we discuss in detail the National Library incident and the poor state of the Georgian government’s “cohabitation” as well as Mathias’ own research into the murky ownership structures of the country’s media and internet service providers. He knows more about that than probably anyone else outside of Georgia’s shadow elite and he tells us why that’s a problem.

Check it out!

Also if you prefer to hear us in better quality or if you’d just as soon not see my face while tuning into the show, we’ll be on GIPA radio 94.3 at 8 p.m. tonight.

The circle of trust improves between business and government in Georgia

In addition to writing about Poti’s port upgrades in the summer issue of Investor.ge, I also took a look at the government’s attempts to regain the business community’s trust after a period of aggressive raids by tax authorities left Georgia’s big businesses feeling besieged.

While the Georgian government has tried to get back in business’ good graces, the perceptions of the general public has also gradually become more positive towards the economic elite. But why?

Despite a rocky relationship with business in the past, the government is working hard to create better ties with the private sector.

New state intiatives – including a business ombudsman to advocate for tax-payer rights and a business council in parliament – are easing tensions between the government and business.

Last December, President Mikheil Saakashvili said in a speech that there were “many deficiencies” in the relationship between the government and the private sector, admitting that business leaders felt that “the State does not listen to them appropriately and treats them unfairly”.

The speech marked a step in the president’s year-long campaign to repair the frayed relations – damaged, in large part, by a period of increasingly aggressive raids and hefty punishments for tax crimes at the hands of Georgia’s Financial Police.

Giorgi Pertaia

Lawrence Sheets, International Crisis Group’s Caucasus project manager, said in an interview with Investor.ge that the government’s ballooning foreign debt, which is projected to reach 43.2 percent of GDP in 2011, put pressure on the authorities to increase tax collections, resulting in a soar in both the frequency of tax raids and amounts of the eventual fines. Georgia’s economy also contracted by 3.9 percent in 2009 following its 2008 war with Russia, further straining tax revenues.

The government responded to the growing gulf of distrust between the public and private sectors by first hiring former AmCham customs specialist Giorgi Pertaia to advise the prime minister’s office and serve as a “bridge” between business interests and government authorities.

To continue reading, click here.

Renovations begin under the Poti port’s new owner

courtesy of wikicommons

In this month’s issue of Investor.ge I reported on a couple of bits of news — first, the transfer in owner ship of Georgia’s main cargo port, Poti.

Flipping the Poti port has been one of the government’s major development goals, and is a key to increasing Georgia’s potential as a logistics and transit hub for East-West goods trade. APM Terminals, a subsidiary of the Maersk Group bought the port earlier this year and it says it has already begun to assess its renovation plans aimed at increasing its safety, efficiency and cargo capacity.

All good news, but they have a long way go to. Read more below.

Since acquiring an 80 percent share of the Poti port earlier this year, APM Terminals now plans to invest $100 million on upgrading the port facilities, and is eyeing additional investment projects in the region, company officials said.

APM Terminals, part of the Moller-Maersk Group, announced that it had acquired an 80 percent share of the Poti Sea Port in April, and officially took over from UAE-based RAKIA, in May.

APM Terminals’ Senior Vice President and Head of New Terminals, Peder Sondergaard, said APM intends to “add value” to the port, meeting the demand for a “high-quality port infrastructure in the Black Sea.” In the same press release, he also said APM would be investing $100 million in the port facilities over the next five years.

RAKIA continues to operate the Poti Free Trade Zone (FTZ), which occupies about 100 hectares adjacent to the port. RAKIA, which bought the zone in 2008, hopes to develop it into a major logistics and industrial center, pledging a $200 million investment.

APM Terminals’ Vice President for Business Development, Hans-Ole Madsen said in an interview with Investor.ge that the first stage of APM’s development plan has already begun, with engineers surveying the port’s existing equipment and determining which terminal cranes will be updated and which will be scrapped.

To continue reading, click here.

South Caucasus internet vulnerable to shut down — accidental or intentional

My most recent article in The Faster Times was intended for another publication, but the unfortunately changed their freelance policy literally hours after I sent it in and it didn’t run.

Be on the lookout for more Faster Times stuff from me, covering protests across the Caucasus.

In recent years, internet security has become an issue of increasing concern for governments around the globe, but in the turbulent South Caucasus, local experts say the threats against both the physical internet infrastructure and cyberattacks against governments and organizations are a reality.

The fragility of the South Caucasus internet infrastructure was underlined this March when a 75-year-old Georgian woman allegedly shut off the internet for 90 percent of Armenia as well as large parts of Georgia and Azerbaijan, by accidentally cutting a fiber-optic cable while digging for copper wire.

Network monitors in Western Europe alerted Georgian authorities to the source of the disruption, and the internet was restored five hours later.

Currently, most internet coverage in the three South Caucasus countries, Georgia, Armenia and Azerbaijan, comes from a single fiber optic line that traverses the Black sea into Georgia. From there, the system is neither properly protected, nor properly backed-up said Thomas Van Dam an internet expert who worked with online marketing firm, MatchCraft, in Georgia until 2010.

“There is zero redundancy in the system,” he said. “This is strange because the concept of ’99 percent uptime’ is only possible when you have fully redundant systems.”

Representatives from Georgian Railway Telecom, which owns Georgia’s fiber optic lines, said the company is currently “undergoing reorganization” and were unable to respond to media queries.

To continue reading, click here.

Sharks in the waters of the Georgian casino industry

For more than a decade, Georgia has been virtually the only place in the region to go for (legal) gambling. Unfortunately for the Georgian casino industry, that’s about to change. But not all change is bad, and although the industry faces new threats, new opportunities are also beginning to emerge.

When I wasn’t running around Abkhazia or teaching English over the last couple of months, I have been looking into this trend for Investor.ge.

Georgia has seen few industries boom in the   years since its independence like the casino industry. While neighboring countries banned or tightly limited gambling throughout the 1990’s, Georgia allowed it to flourish; as a result there are more than 500 slot clubs currently operating in Tbilisi. But the gambling business is now facing new threats. In the last several years, Georgian casinos have increasingly been the target of proposed tax legislation as the government vied for a bigger slice of the industry’s traditionally murky profit pie. Furthermore, although Georgia once occupied the title of the Las Vegas of the region, it is no longer the only game in town.

In Azerbaijan gambling has been illegal since 1998; however, as of January this year state-run gambling houses are now allowed to operate. In the same month Armenia issued licenses to dozens of gambling organizations, which, once relegated to the outskirts of Yerevan, are now working their way into the city.

But Vedran Bajat, General Manager of Casino Adjara, said that he has been closely watching these changes in the market and in his opinion they will not have a significant impact on the Georgian casino business.

Despite the fact that a steady stream of Armenian and Azeri thrill-seekers has traditionally been a boon for the Georgian casinos, Bajat estimated that Casino Adjara, which attracts an average of 1,000 players per day, has a clientele that is 90 percent local. In addition, he pointed out that Azerbaijan has only legalized sports betting and lotteries, so Azeri crapshooters and card-players will still have to make the trip west to Tbilisi or Batumi to get their fill.

Still, the increased competition, high taxes and a steep 5 million GEL ($3 million) annual licensing fee for casinos seems to have made it difficult to break into the market. Currently, only two casinos operate in Tbilisi: Casino Adjara and Iveria Casino. A third, Grand Sakartvelo closed recently.

To continue reading, click here.

“Turkish Investment and Trade Booms in Abkhazia” – Tabula magazine

Turkish sailors in Sokhumi beside their ships adorned with both Turkish and Abkhazian flags in February 2011.

Anyone who has been following my writing on Abkhazia over the past couple of months, will not be too surprised by the conclusions of my piece published in the English edition of Tabula magazine yesterday. In it, I talk to one of the very few analysts who have dug deep into Turkey’s quietly deepening trade ties with Abkhazia, Argun Baskan, a researcher with the Economic Policy Research Foundation of Turkey.

Although Georgia continues to officially maintain an embargo on the breakaway republic of Abkhazia, experts and local observers now believe that the Georgian Coast Guard may have backed off enforcing the embargo and is no longer seizing Turkish ships bound for Abkhazian ports.

Abkhazia has been under an official blockade and a ban on all economic activity imposed by the Commonwealth of Independent States since 1996. Although Russia began progressively lifting economic sanctions on Abkhazia in 2000, causing land trade to increase, Georgian navy patrols continued to make sea trade with Abkhazia sparse and treacherous.

More than 60 ships were reportedly captured by the Georgian navy between 1999-2009. Often times the ships were later auctioned off and their crews briefly imprisoned. But, Argun Baskan, a researcher with the Economic Policy Research Foundation of Turkey said that since Russia recognized Abkhazia as independent in 2008, economic and cultural ties between Turkey and Abkhazia have greatly increased.

Baskan, who co-authored a report on the issue in December 2009 entitled “Abkhazia for the Integration of the Black Sea,” said that the Abkhaz diaspora community in Turkey, numbering about 500,000 people, has been very active in lobbying Ankara for a restoration of transit links and deeper economic and political ties with Abkhazia.

To continue reading, click here.

Return to Abkhazia: Day 4 – Turks, trade and terrorists

So part IV of my “Return to Abkhazia” series finally ran at the Faster Times, and it’s already gotten me thinking about an epilogue. In fact, I kinda like tis style of writing. Maybe I should just ditch this journalism nonsense for the much more stable profession of book-writing …

Russian Coast Guard sailors in Sokhumi practice firing flares in April 2010.

On my second full day in Sokhumi, I wanted to focus less on the political opposition, which dominated my first day in the de facto capital, and more on the increasing Turkish trade and investment in Abkhazia.

So, I wandered down to Sokhumi’s main pier past the crowded tables of old men smoking, drinking Turkish coffee and feverishly playing Backgammon and dominos to the docks. The one fully functional pier in Sokhumi is a microcosm of the city itself. Parts of it have rotted and rusted away, left as is. A few fishermen sat alone drinking beer and casting their lines on the sturdier sections, and some workers were trying to weld together a makeshift set of stairs at one of the loading areas – I guess the previous jury-rigged steps had broken. At the end of the 200 ft pier sat a swanky two-story open air sushi bar and lounge called “Apra.”

In the summer, Apra is definitely the place to be if you don’t mind shelling out executive prices. In the warmer months they open the windows and let the sea breeze blow through the billowy white curtains that envelop the main eating area. What’s more, the sushi is actually the best I’ve ever had in this part of the world. This time, however, sushi and scotch were not in the cards. I had come to write for a couple of Georgian magazines, so I didn’t have the budget to treat myself.

Standing around, I furtively snapped some photos of the ships that had come into harbor – all of them Turkish. In between photos of their crews and masts bearing the Abkhazian and Turkish flags, I took some shots of the sea, of the restaurant, of my shoes – whatever to make myself look less like a spy.

Over the two days I had seen four ships in Sokhumi – three fishing boats and one container ship that had been unloading something all day. This was far more than I had seen in previous visits, and Akhra Smyr, the political analyst I had talked to the night before, said that their presence had boomed since late 2009. That fact was quite interesting, because that meant that this sudden increase followed two key international incidents, which likely encouraged the Georgian Coast Guard to halt the enforcement of their blockade on all trade and economic activity with Abkhazia.

Although the Georgian government has never publicly acknowledged ceasing to enforce the embargo (they specifically refused to comment to me on this issue), every sign pointed to the conclusion that they had. After Georgia seized a tanker ship in August 2009 with 2,800 tons of fuel and 17 Turkish crewmembers, Turkey’s previously neutral official position on the blockade-running activities of its citizens began to harden. When the ship’s captain was sentenced to 24 years in prison for violating the blockade, Ankara sprung into action to defend its own. Turkish Foreign Minister Ahmet Davutoglu promptly flew to Tbilisi, and five days after the conviction, the captain was released. Simultaneously, Russia declared that its coast guard vessels would be patrolling de facto Abkhaz waters and would fire on any Georgian ship attempting to interfere with Abkhazia’s maritime commerce.

Thus, by late 2009, the blockade had failed on the two most important fronts. First, Georgia had not only failed to convince Turkey to participate in the embargo, but by overreaching in its punishment of the tanker crew it had provoked Turkey to actively push for protecting Turkish ships that chose to take the risks of illicit trade. Secondly, with Russia involved, Georgia simply could not afford to continue chasing trade ships in de facto Abkhazian waters – Georgia’s two largest naval vessels were destroyed in the 2008 war, and thus the Georgian Coast Guard’s remaining patrol boats would be extremely exposed, risking firefights with ships from Russia’s Black Sea fleet. And, in the end, hampering Abkhazia’s economic development was simply not worth the chance of igniting another conflict with Russia. Continue reading

Saakashvili again makes me praise him and scorn him within two paragraphs

Today, I checked Civil.ge and saw a headline I have been hoping would emerge for a very long time: “Saakashvili Calls for ‘Active State Involvement’ to Boost Agriculture.

President Saakashvili said on March 8, that “active, direct state interference” was required in order to turn country’s “medieval agriculture sector into the agriculture of the 21st century.”

YES! Friggin’ finally.

More than half of Georgia’s population works in the agricultural sector, yet that industry only represented 9 percent of Georgia’s GDP in 2010 — down from 14.8 percent in 2005. Furthermore, Georgia has great agricultural potential with a good climate and 11.5 percent of it’s territory being arable land according to the CIA World Factbook. But, because most of Georgia’s farming and infrastructure remain undeveloped, Georgia imports 80 percent of its food, leading to an annual trade deficit of $1.3 billion — quite a lot for a country whose total GDP is $11.23 billion (official exchange rate).

Misha! Misha! Show us the way! (free roaming pigs outside Annanuri)

Continue reading

Return to Abkhazia: Day 3 – to the future via the past

Sunset in Sokhumi

Here’s part three of my four-part series on Abkhazia in the Faster Times. In it, I discuss how Sokhumi/Sukhum is shaping up two-and-a-half years since the Russian recognition. I also look at how the massive Russian investment is affecting local politics. The first of my two articles on Abkhazia will appear in the March 7 issue of Liberali magazine.

Enjoy, and, as always, click on the ads :)

Anyone who has traveled through the former Soviet Union knows that 50 or more years as a part of the socialist empire had profound effects on the countries involved. Today, twenty years since the Soviet Union’s fall, cities from Berlin to the Pacific coast of Asia bear the legacy of Lenin in their skylines, popular culture, and mentalities at both the administrative and family level.

This is particularly true in countries that were barely industrialized or urbanized before the arrival of the Soviets. Traveling east away from Europe, you will find ancient cities where 90 percent of their present-day structures were built during the Soviet times. This is not the case with Sokhumi, however, which was once a thriving port and playground for the Tsars and nobility of pre-revolution Russia. After the Bolshevik invasion, the grand palaces that dot the Abkhazian coastline became dachas for the Soviet elite. Many of the breezy houses with gated gardens full of flowers, palms and tangerine trees that make up most of Sokhumi’s structures have been taking in the salty sea wind since long before the red revolutionaries stormed the Winter Palace and the  Avrora fired the opening shots of Soviet century.

But, in many ways Sokhumi feels more Soviet than the austere industrial towns of Russia or the extravagant capitals of the ex- SSR’s. This is because, while even the poorest nations of Central Asia have upgraded infrastructure here and there and allowed foreign food and clothing chains to open franchises across their territory — Abkhazia has remained closed zone. To continue reading, click here.