GEORGIA IN RECENT SURVEYS: GOOD NEWS ON PACE OF

UNCLAS SECTION 01 OF 02 TBILISI 002889

SIPDIS

E.O. 12958: N/A
TAGS: PGOV ECON GG
SUBJECT: GEORGIA IN RECENT SURVEYS: GOOD NEWS ON PACE OF
REFORMS, MIXED REVIEWS ON MEDIA FREEDOM


1. Summary: Annual surveys on media freedom, anti-
corruption, poverty reduction, and the general pace of
reforms show Georgia doing well compared to other post-Soviet
nations but behind former Warsaw-Pact and Baltic nations
whose reform experiences the GOG is eager to emulate.
Georgia is a top performer in the region on the general pace
of reforms but still struggles with poverty and corruption.
Although Georgia scores higher on media freedom than most
other post-Soviet countries, it has been on a downward trend
since the Rose Revolution. End summary.

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Media Freedom
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2. According to the 2005 worldwide Media Freedom Index
released by the media-freedom watchdog Reporters Without
Borders, Georgia ranks 99 out of 167 countries in terms of
media freedom. This ranking is part of a downward trend in
which Georgia has dropped 26 spaces from being ranked 73 in
2003, in the era of former President Shevardnadze. Although
Georgia is the second highest ranked CIS country behind
Moldova (74),Georgia is very far behind former Warsaw-Pact
nations such as Poland (53) and Slovakia (8),and the Baltic
Nations of Estonia (11),Latvia (16),and Lithuania (21),
whose reform experiences the GOG is eager to emulate.

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Corruption
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3. Georgia is ranked as 130 out of 159 countries in
Transparency International's 2005 Corruption Perception Index
(CPI). Georgia is tied with Kyrgyzstan. In comparison,
Turkey is ranked at 65; Armenia, Moldova, Iran are tied for
88; Belarus, Kazakhstan, and Ukraine are tied for 107; Russia
is ranked 126; Azerbaijan and Uzbekistan are tied for 137;
Tajikistan is ranked 144 and Turkmenistan is 155. Although
Georgia performs well in the CIS, it is still behind Poland
(70),Latvia (51),and Lithuania (44).

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Poverty
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4. The World Bank recently released its report on Growth,
Poverty, and Inequality in Eastern Europe and the Former
Soviet Union, analyzing the impact of economic growth from
1998-2003. The report is based on household consumption
surveys and builds comparable indicators of living standards
across the 27 countries of Eastern Europe and the former
Soviet Union. The report indicates that poverty has been
reduced overall in the region from 20 percent to 12 percent,
however, experts say Georgia has lagged behind due to
"jobless growth." Georgia had a poverty level of 50% in

2003. Russia and Kazakhstan witnessed shifts in the
distribution of income towards the poor, thus decreasing
poverty levels. In Georgia, poverty actually rose. Most
economic activity during the given period was related to
investment in the BTC pipeline, which did not trigger
significant job-creating growth.


5. The authors of the World Bank report indicated that in
Georgia fiscal income was not distributed in favor of the
poor population. They called for an increase of pensions
and social assistance, stimulation of the investments and
support for the private sector. Investments were
implemented only on the account of privatization, while new
owners have consistently reduced jobs.

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Pace of Reforms
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6. In September 2005, the International Financial
Corporation (IFC) published its annual report, which
provides a global ranking of 155 economies on key business
regulations and reforms. The report tracks a set of
regulatory indicators related to business startup,
operation, trade, payment of taxes, and closure by measuring
the time and cost associated with various government
requirements. Georgia was the top reformer in the region
and the number 2 reformer globally--making it easier to
start a business, cutting the number of activities licensed
from 909 to 159, easing the cost of firing redundant
workers, cutting the time and cost to register property, and
introducing a new tax law with fewer and simplified taxes.


7. Although Georgia was a top reformer, by economic
indicators its current rank at 100 of 155 countries suggests
that it is has room for further improvement. Looking at
Georgia's ranking in particular areas, IFC finds several
obstacles to obtaining licenses, as the new legislation has
just been passed and not yet implemented. Another
indicator where Georgia falls short is in credit
information, leading to less access to affordable credit.
Georgia scores particularly badly in indicators tracking
trading across borders, with relatively more time needed to
export or import goods than its neighbors and three times
the regional average for signatures needed to import and
export. Finally, Georgia scores relatively poorly on the
Corporate Governance indicator which includes the
accountability of directors, the disclosure of information,
and the ease of shareholder suits.
TEFFT