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Emerging Markets

PM confident on Georgia deadlock deal

A deal under which the Georgian opposition will take the chairmanship of a commission on constitutional reform could break the political deadlock in Tbilisi, prime minister Nika Gilauri said yesterday.

“We are already making progress”, Gilauri told Emerging Markets. One of the streets barricaded this week by opposition protesters against president Eduard Saakashvili had been unblocked, he said.

“We have made a very good offer to the opposition: to have a broad inter-party group to decide on a new election code and other constitutional changes, which can be headed by a member of the opposition. I think it’s a very fair offer, and dialogue is ongoing.”

The Georgian opposition continues to demand Saakashvili’s resignation, though. “That’s not going to happen”, Gilauri said.

Gilauri admitted that the political conflict in Georgia had impacted economic recovery, especially in April. “I can feel the economic pulse pretty well through such indicators as budget revenues and the foreign exchange market”, he told a seminar at the EBRD business forum. “January and February were difficult, there were very good indications in March, and in April the situation deteriorated.”

The stand-off with the opposition “could have been serious, but serious conflict has been averted”, he said. “We made some mistakes, and we learned from them. We showed that Georgia is working as a democracy.” Police control of demonstrations could be favourably compared with western Europe, he said.

Georgia watchers generally believe the political crisis with the opposition. Some see national independence day on May 26 as a crucial date: Rustaveli Avenue, the traditional route of military parades, has been blocked this week by a protesters’ tent city.

Gilauri said that friction between Georgia and Russia – which has risen again this month, with NATO exercises in the Caucasian republic eliciting hostile comments from Russian president Dmitry Medvedev – was a big concern for investors.

“[Investors] love our tax system, they love the regulation – or rather the lack of it – and they love our fight against corruption. But Russia is the issue they always ask about.”

There are three reasons why the relationship should not obstruct inward investment, he said: the amount of international attention focused on Georgia since the military conflict with Russia in August last year, which meant it would not be repeated; the EU monitoring mission and the US’s recent strategic agreement with Georgia; and the fact that Europe had “woken” up to the need for a southern energy corridor, in which Georgia would play a crucial part.

Gilauri told the seminar that the support of international donors, who have put together a $4.5 billion package for Georgia, was a crucial factor in economic recovery. Diversification of exports, and business environment changes including the fight against corruption, have been crucial, he argued.

The August conflict with Russia had “put Georgia two months ahead” of other nations in terms of crisis management, Gilauri claimed.

Badri Japaridze, deputy chairman of the board of TBC, one of Georgia’s largest banks, told the seminar that the banks had stayed open through the military conflict and clients had later repaid them with loyalty.

Although there had been a sharp outflow of deposits in September, this had then stabilised. “The quality of the loan portfolio deteriorated in the second half of last year, and we have not seen foreign private investors coming in since that time”, he said. Since the August events, TBC switched from an expansionary strategy to aim for stabilisation.

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