The most discussed topic recently is EU-Georgia Association Agreement.

Diversification for a market is very good, especially when EU market is not an ordinary one; it is a market of the richest 500 million people of the planet. The question is, how much ready are we for this market, what is the benefit that we expect or will receive from the Agreement and will signing the Agreement trigger political-economic processes, that instead of improving our poor economy, deteriorate it?

Let’s review the conditions of the Agreement.

From the very beginning I would like to emphasize that I will not be discussing the topics such as standardization, European norms of sanitary and phyto-sanitary, etc. which, as you might be aware, are problematic in our country. I would like to discuss the Agreement only in fiscal direction.

First of all, it is noteworthy that customs duties are abolished within this Agreement, which is good.

The fact that the country will not have to pay customs duties while exporting its product and importing from abroad will result in the decrease of prices (let’s consider that accumulation of less amounts of money in the budget due to abolishment of customs duties will be compensated at the expense of the increased goods turnover), is welcoming. The fact that imported high-quality goods, because of its low prime cost will overwhelm our domestic production is not problematic at this stage.

Well, it will not overwhelm anything as there is nothing to overwhelm. But…. and there emerge many “buts”. As you know friendship is a bilateral type of relationship. Especially, when one of the friends is far stronger and insists to be your friend the intention should be proved by actions.

The list of products, exempt from customs duties, but at the same time taxed by the “market admission tax” while exported, given in the Annex II – B attracts attention.

The idea of the tax is that as Georgian product is cheaper compared to the one produced in the EU, will equal to the price of products on their internal market. In plain words, apple from Gori, Georgia should not be cheaper than the apple from Spain not to “oppress” it.

The list actually covers all the fruit characteristically grown in Georgia and some of the vegetables. Namely: cucumber, tomato, almost every type of citruses, grapes, apple, pear, peach, apricot, cherry, sweet-cherry, plum, etc. Unfortunately pineapple and banana cannot be grown in Georgia due to climate conditions. All the above listed products create profile of our agriculture. This is the Agreement we are going to sign.

As it is known, economy is the base of everything. Ignoring and putting this postulate on the second stage inflicted us a huge damage in the ‘80s. We should not make one and the same mistake twice.

According to surveys currently the number one problem in Georgia is unemployment. The country should be trying to solve this problem in the first place. For finding a solution to this problem as soon as possible, we should analyze the structure of the population of Georgia.

In Georgia the number of village population is high. According to the data provided by Geostat last year, 47% of the whole population live in village. This is especially high indicator. If we want to achieve tangible progress in terms of decreasing unemployment level on the backdrop of the above-given data, model of economic development, intended, in the first place, for involvement of this segment of population should be developed, which should be viable in economic terms and have development prospective.

Based on the above-stated, I consider that it is good, when the government helps its village population through various projects; however, it is not even near to enough. Establishing processing plants for agriculture products and obtaining stabile market for the processed product is necessary. This must be the main economic message for overcoming unemployment, which, on its part, is fully harmonized with the development of small and medium business.

The problem is clearly visible.

Due to Georgia’s current economic development, natural conditions, structural peculiarities of the population, lack of qualification of workforce and other factors, no other option exists. However, one main problem emerges here – the problem of sale’s market.

For developing any direction in economy, sale’s market is necessary. The Government should support national producers in gaining foothold on the export market. The State should ensure admission to and maintenance of sale’s market.

At the end of the ‘80s, selling of every factory in parts started in the country. We have squandered away everything. Economy was not developing. We have also lost the qualified workforce. The country had to import everything. Subjective factors causing the above mentioned, and the people interested in such developments, is another topic of discussion. Though the facts remain to be facts. In 2013, import equaled to USD 8 billion, whereas export was USD 3 billion, plus in this export USD 700 mln.accounted for re-exporting automobiles. Such is the situation that we are having today. Though, from the end of 2013 and starting of 2014 export has revived in the country. We should pay attention to this fact as it is further considered below.

In October, 2012, by the order of the European Commission, modeling of economic effects triggered by the above mentioned Agreement was conducted in the country. According to the research, increase of GDP by 1,7% in the short-term and by 4,3% in the long-term, as well as increase of export by 9% in the short-term and by 12% in the long-term is forecasted.

I think that the fact, that in January-February, 2014 only, export increased by 23% compared to the previous year, speaks itself. The increase is caused by the export on Russian market.

As we can see from the above stated, even the economic effect calculated by European experts does not have surprising effect, when the expectation of people is absolutely different.

Though, as I have mentioned above, generally, diversification of the market and gaining admission on a market of such magnitude and potential is a positive fact. This is unquestionable. But, there is one threat.

The possibility that signing the Agreement will result in problems of exporting our products to Russian market is high, which is bad. It is unfair though real. It was exactly ignoring reality which put us in the current state.

The unfortunate fact is that by today’s condition, if we want development of agriculture and its connection to the relevant processing industry, in order to create employment, it is impossible without Russian market.

So, what shall we do?

Should we not sign the Agreement?

The question should not be put this way. At least, today. This is a political issue.

In parallel with signing Association Agreement between Georgia and EU, the Government should conduct active dialogue with the government of Russia. Otherwise, we may end up in a very hard economic situation as the thesis: “implementation of Association Agreement will yield specific benefit to the citizens of Georgia”, is only an illusion.

In consideration of the Agreement conditions, current and potential future situation in the country and many other factors, it is only desirable.

The European market is totally imbued with the product that creates export profile of Georgia. Plus, on many types of such products tax for equaling the price of our product with theirs is added and there is lack of awareness on our product on Euro-market, etc.

Thus, if we leave alone the product which they did not release from the price with the reason of protecting their own product and look back at, let’s say, wine export from Georgia, we will clearly see that this reviving sector will get back to stagnation and crisis if Russian market closes for it. For example, in 2013, right after partial opening of the Russian market, 44% of the total export of wine went to the Russian market and it was only the beginning.

Thus, the decision on signing the Association Agreement, especially in its current form, cannot be equivocal.

It should be emphasized that the Chapter IV: Trade and issues related to Trade, is unequal for the parties. To leave all the rest alone, the Agreement sets restrictions only for Georgia.

Based on the all above-stated, if we lose the most “important” market in attempting market diversification, it will put us in more difficult situation than we are in today.

To summarize, everything depends on the Government and it is natural that they should bear responsibility in directing general policy of the country.

MamukaChkheidze, Economics expert.

On 27February Global Research Center conducted a seminar on the developments in Ukraine.Participants of the seminar were the following experts: Soso Tsintsadze, Ramaz Sakvarelidze, Soso Archvadze, Valerian Gorgiladze, PetreMamradze, Zaza Firalashvili, Nana Devdariani, representatives of The Club of Young Political Analysts- Irakli Ubilava and Giorgi Mdivani, as well as journalists.

Petre Mamradze: like all of us, I have also been observing the situation in Ukraine for many years and since 1992 very closely due to its importance. The situation resembles to the condition of other post soviet countries, when society is not ready, civil society is not developed enough to control the authority on daily basis.

As you know, power corrupts and absolute power corrupts absolutely, people see it-even without control, i.e. without daily connection and feedback, people see, the wrath accumulates, then breaks out and therefore revolution takes place in this or that way; new government comes into power and everything starts over.

Countries of Latin America have undergone these processes for many times, with relevant consequences so to speak.I have told in my speeches, if you buy fresh meat even of the best quality and put it without a fridge and see it after 60 days, you will see that it is stinking. Nobody is surprised by this; however when they find out that a political group, after coming into power 2-3 years later becomes extremely corrupted, have toilet seats worth€ 360 000,  they are surprised by this fact-but not by the previous one. This works as the law of thermodynamic in physics.

I want to remind you that Yanukovych was prime minister in 2004 and after rigging the elections (the main thing is that the population perceivesit as rigged), the orange revolution took place. As for Russia’s role, it is enough to remark that president Putin has repeatedly congratulated Yanukovych on his presidency. When everything was over, the President Putin claimed that he was misinformed.

Nana Devdariani: he had the right information, but would not assume that Ukraine would go to the third round.

Petre Mamradze: then, as you know the government of Yushchenko-Tymoshenko was not as good as to prevent people from making other choice, though with small difference Yanukovych got 49% and Tymoshenko-44%, as far as I remember. i.e. they still voted for Yanukovych. Can you imagine the attitude of Ukrainians towards them? Moreover, Ukrainians have told me that Tymoshenko for them was the symbol of elite corruption.

Today, this woman is out of jail as a heroine and declares right after leaving prison that she will fight and etc. Furthermore, when Yanukovych became the president, he appointed his son’s, Aleksandre’s brotherhood on key positions and the governance of “predatory”, as it is called inside or outside the Ukraine and the results of which is evidenthad started. Ukraine has foreign debt of $ 49 billion. The assets of Yanukovych and his family are estimated $ 12 billion. I do not make up the numbers, you can verify.

Azarov has fled to Paris, while he used to tell Ukrainians that they did not need Europe. He fled there, where number of companies is incorporated on his wife and the turnover of each company amounts maybe not to billions but millions – certainly. I have had the contact with Ukrainians these years, not tight but constant and with other experts as well.

This was seen entirely in eastern Ukraine and Kharkiv, where I worked for 3 years as a physicistin the world center; physical-technical Institute of Kharkiv, where the first cyclotron of Europe was made in 30-ies. Landau and other famous scientists worked there. I know Kharkiv and everything around it; it is an organic part of Russian military industrial complex.

In western Ukraine, they also saw that there is such a level of corruption and government. I agree with everybody and it has been written by experts for many times that a declaration made by Yanukovych last year, one week earlier signing the Association Agreement that he would not sign it, was just an excuse, a spark, similar to throwing a match in a gunpowder barrel. There were people for whom the symbol, Association Agreement, was valuable.

It is true that Syria has also signed it, but it did not reflect in it much, Turkey also signed it 50 years ago and 30 other countries and etc., there was a symbol in it.The factthat Yanukovych has openly stated: -Putin ordered me and that’s why I can’t sign,was a great challenge and started what should have started.

Ramaz Sakvarelidze: Neither Azerbaijansigns it, but it does not mention Russia, Yanukovych has peached on him.

Petre Mamradze: If Alyev leads this national line in Azerbaijan, we have our Azerbaijanian way. Yanukovych was telling Ukrainians for 2 years that he was going to sign it….. Why was he promising then, who was pulling him on the tongue?!

Nana Devdariani: If anyone has read the interview of Sergei Glaziev, he directly says- when asked Ukrainians if they are aware ofwhat they are signing, Ukrainians said that the agreement generally, was good. When they have thousand-page document translated and read, not only Yanukovych but members of economic team were surprised to have agreed on this.

Now I would like to draw a parallel with our current condition. When Premier Gharibashvili had a dinner with Jose Manuel Barrosso, after the end of the dinner he joked-we have broken all records, we have gone through everything regarding the agreement within one dinner. This means that Gharibashvili did not have any questions regarding thousand-page document. Gharibashvili made a statement on business conference, several days ago, that they would take protective measures and support local entrepreneurs that directly contradict the agreement.

This is impossible under the terms of the agreement; however the core countries have their own, multi-billion agriculture on subsidy. The agreement directly tells you that you can not do it, but you keep saying that you can, not because Gharibashvili opposed the EU, but he really believes that he can, i.e. our government does not have any questions regarding theagreement.

Petre Mamradze: No; as you are aware of my working experience, I would like to tell you that even Vaclac Klaus, the Czech Prime Minister and then President,one of the leading economists of Europe, who worked with the Monetary Fund very closely, was setting the terms and that the other party was grateful for it. You knowitsconsequencesin Czech Republic.

I witnessed, here in Georgia, our economists and officials told Monetary Fund and the World Bank that they would act correspondingly to what they would write or give them. However good people and specialist are working for the Ministry of Foreign Affairs, but actually there is no political will or view for this and don’t be surprised as Gharibashvili is 30 years old and he has beaten every record in terms of age and experience… The average age of Premier in Europe is 56 years, 2 times more than in Georgia – 30. I will get back to Yanukovych; he has been promoting the Agreement for 2 years, like Misha-Map and NATO.

Ramaz Sakvarelidze: this was flattery image of Yanukovych towards his pro-European population; we don’t have such attitude in the population. So this is flattery for National Movement. When you make political decision, you shall make it based on the reason, shall not you? There – in the Ukraine – the motive was to appease population while here-Nationals.

Petre Mamradze: Let’s get back to the Ukraine, position of Yanukovych and total corruption…

Nana Devdariani: 2 weeks ago, European Commission released rowdy report on the scales of corruption in the EU …..

Petre Mamradze: corruption is estimated € 12 billion.

Nana Devariani: this is catastrophic level of corruption; on this background, corruption of Yanukovych is not worth mentioning. It is easy to cause outrage in population. I remember foolish photos of Rustavi 2, when they posted them before the “Rose Revolution”, as if Shavardnazde bought a palace in Baden-Baden. It is obvious that it was fraudulent. It is a matter of technology, as corruption is in Europe and the US as well.

Now, I am looking for the real reason, what causedthe events on Maidan. Initially, when people cameout against government, it was understandable, neither people in modern history shall want government. I see when someone is furious because his /her kids are starving when governments have golden toilet seats.

I really don’t get another thing – bringing such examples – but actually we know that this was the response to the statement of Yanukovych-what will you do when my country is under the crises and Europe replied:nothing, do whatever you want. What I want to say is that we have lost the point, what all this started about and how did it end. And I have another question; we have been told repeatedly for a year about cohabitation and why don’t they ask for it there?

Petre Mamradze: It is completely clear why they did not ask for it. Cohabitation is requested for the following reason: many leaders of the West and US hadturned blind eye and had not made any public statement against Saakashvili and his regime, back then.

This was that time; I underline that, when the most influential organizations of the West, e.g Human Rights Commissioner of Europen Council, Thomas Hammarberg, Nobel Prize Laureate and others wrote about what was going on in Georgia.

Has anyone Rasmussen, or Hillary Clinton, or others come out and publicly said that they doubt? When it is written that acquittal in Georgian court is -0.01%, when in the Soviet Union during Brezhnev it was 23%.

Soso Tsintsadze: and what can we do with it? When Nixon handed the list of political prisoners to Soviet leaders during Soviet Union it was 25 men; and we have already released 200.

Petre Mamradze: why did Misha name Clinton a scary woman? Citing-don’t think that she is scary woman; because “the scary woman” told the Prime Minister Gilauri in Washington in 2008: this is your last elections. If you declare that you win, we will say that you have usurped the authority, as you can not win without using repressions and administrative resource.

I don’t justify it of course. After that, when Saakashvili was shouting out, that he was pro-western, he was offering free cannon fodder as much as they wanted. Developments took such a course that, when the US Deputy Ministerof Defense arrived here three years ago, Misha publicly announced that he is offering America, Georgia to be the transit route for NATO supplies to Afghanistan.As you know, Russia is the transit route and 90% of cargo passes through there.

When asked by the reposrters, what would be his answer to Misha’s offer, he said-I told your president that at first he shall appeal to Pentagon with similar suggestion and then talk.You can thus evaluate the quality of irritation.

I am saying that what Yanukovych did was the last spark. I want to add that, actually, as per the assessment of their best experts and political analysts, EU has made thecascade of grave errors towards Ukraine. On this background, Mr. Yanukovych bargains. The fact that Yanukovych is Putin’s man is a myth.

Soso Tsintsadze: he is a man of money.

Petre Mamradze: he is a man of money. Is Rinat Akhmetov now Putin’s man? Or group of Donetsk who took billions? Oligarchs could not allow Yanukovych flatter the oligarchs of Putin. It was excluded.

The former head of the US Central Intelligence Agency said the day before yesterday that what happened in Ukraine is “just internal crises of the Ukraine” and we should not claim in America that everything is in hands of Russia and etc. I am not stating that Russia has nothing to do with it, as it actually does, but this mansaid in terms of influence.

Ramaz Sakvarelidze: the author of the project is Russia….

Petre Mamradze: It is not indeed.

Nana Devdariani: however, I can directly tell you my personal evaluation is that I can barely recall such cynical, direct intervention as it was in Ukraine from the West, this was peak.

Soso Tsintsadze: we have gathered here now as people claiming to be political experts or the audience of noble woman gymnasium? This is politics. Is it not the direct interference in Syria? It is everywhere. The main thing is that this strategy of Russia succeeds in one of the largest countries of Europe, Ukraine with 46 million population, as in Georgia. Russia has not invented anything creative yet.

It is the same; it will probably adopt a law to simplify admittance to citizenship, start conffering passports, as in Abkhazia and South Ossetia. It is time to forget about Yanukovych, He will go somewhere, live and won’die of hunger. If within 1 week at most, the problem of Crimea won’t be resolved, Sevastopol is there. Petre was right when he said, not organically interrelated but it is same as to cut off upper part of the human body and leave lower part.

This is the military-industrial complex; firstly the advanced technologies- the overall Russia’s fifth generation helicopters are released with Ukrainian nodes and engines. The rocket constructor factory in Dnepropetrovsk was the largest in the Soviet Union; Kuchma, who was the hero of Socialist Labor, was its general director.

Interference in the affairs of other countries has always been taking place. Israel did the same and so did Napoleon and Georgian kings, whenever they could and were capable of. Let’s say frankly, Russia has been acting the same way, not that Russia won’t give in but can’t, it is ruled out.

Thus, some officials of Europe were still stating within last 3-4 days, that it can not be solved without Russia and we shall get used to it, but how can we accept it on the background of our stupid dimplomats, that neither problem is resolved in Post Soviet area without Russia.

Nana Devdariani: The latest information that comes from Europe:in Europethey have started to realize and speak loudly that their main mistake was when they made the Ukraine face the alternative-EU or Russia.

Soso Tsintsadze: were notwe made to face it? Let us draw our conclusion, domestic. There was a letter in “Guardian” recently, whereBrzezinski is talking about “Finlandization” of Ukraine.

You can either trample me or burn but I think that this issue is the most optimal for Georgia, but not ideal of course. Georgia won’t be able to accept better one.  We all have been to Finland, what was it like even during Soviet Union, classical capitalist country.  Freedom of speech, press, demonstrations, travelling to Europe, freedom in Parliament and etc…

But at large conventions-the oath of loyalty of Russia. This was the politics similar to what Nazarbayev is conducting today. Have you seen Nazarbayev’s project of Euroasian Union? I will also sign this project but Putin did not even want to discuss it. Thus we have to find something, think of something; the rest is lyrics, folklore- how much Yanukovych has stolen and so on. I call for being pragmatists.

I know very well what the Association agreement is. 17 pages out of 1000 pages are only allocated to prohibiting criticism of sexual minorities. If they have right, why don’t I have the right to say that I don’t like it?Well, if I come out on May, 17 and say that I don’t like it do I have to go to jail?

The 1000 page document will be published later this month. It was in English but the report of Tagliavini also was in English. Tell me, who has read it from the beginning to end? From where does the European values start? Here is the simple thing, let’s say traffic rules on the street.

You are driving on Rustaveli avenue and some old, young, girl, kid, woman will run across you….once we were in Brussel, the street was empty so we head for and crossed it. The red lightwas lit and the car was not coming everybody stood and waited but we looked around, as we are used to and only after that we crossed the street.

Our Prime Minister comes out and says terrible thing- what can we do, our law did not ban our officials to buy car for 200,000! If you state that you are going towards European values, laws do not forbid everything in Europe but values and morals do more.

So, while we have such attitude that everything is permitted unless law prohibits, we can not talk about any European values. How can it be written in law for instance that Paata Zakareishvili has larger car than house.

That’s the way how, we shall start with; by introducing the values in our life before we become EU members; you shall remember statement of Peter Semneby, after he got fed up, that nobody will let you near to Europe for 30 years and to NATO_never. Very thin stratum of officials is formed here, whose personal well-being is linked to the process.

Of course, Alasania and Petriashvili prefer to travel to Paris and Brussels than in Moscow. 70% of the income of our authorities is traveling allowances. They have enormous travel allowances approved by the parliament; every country of the whole Europe does not have such huge provisions for business travel like they have. They make € 2000-3000 from each business trip and will you be able to persuade them? This is that very thin stratum that will hang you on the tree and accuse you of Russian espionage.

Now I am telling you what will happen in Scotland at summit; they won’t give us any MAP and the Premier reassured us that we won’t be given MAP but something else; just like Gia Baramidze said when he arrived from Bucharets and told us that we were not given MAP but something better. I have spent half of my life in the country where I was told that the next generation will live in communism, now I am cheated that the next generation will live in NATO, but neither Alasania nor any other believe this and want to convince us.

Do you know what the way out is? When Ukraine confronted the west with alternative, they put their hands in their pocket. It did not give $ 3 billion to Belarus that time and gave to Russia.  Now it was not giving $ 15 billion to Ukraine and today offers € 20 billion adding that- it is a prepayment and more will come from America.

Believe me, finally people will say that 70% is in favor today, and thenafter another 2 summits in NATO 50% will remain and the number will keep going down, it won’t go up, that is the process; and another thing, if we are in difficulty and asked to tighten our belts, let government do the same. But today this people look at the photos that are spread everyday, Alasania sitting with “bow tie” as an English lord in fashionable hotel, where one 1 cup of coffee costs € 50 and for them looking at it this amount is a month pension.

More motives are required to why we are sending troops to Central Africa. Has Ban Ki-Moon asked all countries that there is a genocide and send them? I don’t understand, why American soldier in Afghanistangets $ 7-8 thousands and Georgian soldier $700? Why, life of our soldiers is so much cheaper? We are 3 million and they are 140 million, political correctness forbids this.

Besides, there are many problems in our country. Recently, I was in Guria; people forgot about famine and everything and all they worry about is mosques. This fact reminded me of deceased Bismarck, why he was in favor of uniting Austria and Prussia; Austria was catholic and Prussia- protestant, however both people were German.

Bismarck believed that religious difference is stronger than ethnic unity; add the fact that we are dealing with Islam, the only religion which is the architect of state. There is no let’s say Catholic Republic of Poland but there is Islamic Republic of Iran. These are the issues, challenges and threat that country face. The fact is that Russia can not concede Ukraine and yet should not lead the Ukraineto the point to promote separatism.

Petre Mamradze: I will say one thing, during the interview of Victoria Nuland with the ambassador, where he says, excuse me “Fuck You”, meaning more like ignore; however, the main thing is that everything is scheduled, how Klitschko shall act, Yatseniuk and etc. what is more important, George Pinman, that you all are familiar with, writes an excellent article that this is a brilliant move of American Diplomacy, absolutely necessary after that stagnating condition as the circumstances in which the plans of Putin are today and dynamic of its implementation, such involvement is essential, it will change balance.

I want to move on what is happening in Ukraine, since Yanukovych started brazen deal with Putin and EU, this caused both parties, primarilyEU, not to have a deal with Yanukovych. Meanwhile, default is expected in Ukraine in March.

As for eastern Ukraine, let’s take Donetsk, Donbas, vitally important modernization of local economy has not been launched yet. As an example, there are still open-hearth furnaces, which are no longer used even in Africa. They have not moved on oxygen convertible furnace yet, therefore labour productivity is 5-6 times lower than in the world. Energy consumption on per ton of molten steel is 3-4 times higher than in theworld. The entire pool, several million people, who has nothing else left to get by, even not vegetable gardens, exist only by the fact that they still work there, another thing is how they work. We have one symbolic mine in Georgia, Tkibuli, which is a drop in the ocean and since the collapse of the Soviet Union we have been thinking on how to help it for so many years and etc.. The same is true in Ukraine, nothing has evenstarted there. The point is that neither International Monetary Fund nor The World Bank will give such amount of “cash” to Ukraine, it is excluded.

American experts write that Putin can directly give the “cash” to eastern Ukraine and win time, but what then? Enormous region with its millions of population, which depends on those unprofitable enterprises; what do you want to do under the current conditions in 2014; here is the problem- after the dissolution of the Soviet Union modernization, actual-comprehensive reforms not only has not been conducted but even started, in Ukraine lik in Georgia. We are saved that we did not have heavy industry.

Nana Devdariani: we have destroyed what we had…

SosoTsintsadze: one perspective for us that can be advantageous is that Russia will be forced not to leave Ukraine alone on the money of West but pay despite its will. 2% economic growth of Russia has already been reduced to 1.8%; the Minister of Finance yesterday stated that they might need to reconsider it.

Russia simply won’t have money for Abkhazia and South Ossetia that will result in resentment.Let’s say 70% was spent in South Ossetia and half in Abkhazia were they stealing less here? This could work in our favor, as Russia won’t be able to buy loyalty.

Petre Mamradze: grave errors of the revolution are evident. You should be enemy of Ukraine and its people to abolish the status of Russian language. There is harsh reaction in the West and US.  Brzezinski is talking about “Finlandization” as necessary, that Ukraine shall forget about NATO and any other block, which might be irritating for Russia, as he knows what is going on.

In this respect, it is hard to expect that today’s Rada will summon its mind and wisdom and conduct the policy that Ukraine needs and won’t allow the split. No one says that eastern Ukraine will announce and enter Russia but 2 Ukraine and in addition seperate Crimea is complete reality, the threat is very high.

Soso Tsintsadze: why was it necessary to abolish this law?

Nana Devdariani: Do not forget that Nationals came into power…

Petre Mamradze: Bendery used to shoot even those who had a Jewish in the family in 1946-47.

Soso Tsintsadze: one retired KGB man told me that the last Bendery was destroyed in 1959. The Ukraine is actually split, now it is necessary not to finalise the process legally.

Petre Mamradze: rumours are spread in the West that the Ukraine is in need of elections, which may balance Rada. Actually, there is no such power in the world nor West or Russia or inside Ukraine that can unite Ukraine.

Vaka Gorgiladze: basically, I agree with you that recent developments in Ukraine are provoked by the West. The fact that one cultural nation does not exist is fiction. No matter, if we say that the Ukraine is one nation with its cultural traditions and self-conciousness, this is not so. Thus there are fights between symbols; there is Banderas and here is Lenin.

The irony is that the boundaries of modern Ukraine are drawn by Stalin and Lenin. On the one hand, the West Galicia destroys those who created it within modern borders. The interesting fact is not that the West intervened, but that Russia shunned publicly interfering with the internal affairs of Ukraine. Here is kind of complex and Russia was trying to clean up the situation behind the scenes.

I also agree with you that Russia won’t give in the position, as it will weaken Russia and the same will happen in regard with EU, but if Russia can not tolerate it, there are several options of resolving it: first of all it is passports. In case of Crimea, even passports are not required, as it is autonomy and this government and therefore any act published by ithas been illegitimate for 3 months.

There is one problem, Calicia is passionate, the west Ukraine with its ideology is energetic charge of Maidan, and nobody there asks anything to Yatseniuk or Klitschko. In this sense, the only country that maintains influence on them is the US. At that time when Berkuts were captured they addressesed opposition leaders with a request but in vain.

Afterwards, Ministry of Justice contacted the US Ambassy only after their efforts Berkuts were released.  That is key driving force which can create problems to Russia in Kharkiv where both Maidan and anti-Maidan stand. Ability of self-organization in east Ukraine is very low.

If they fail in self-organization, in terms of the same passportization to have the right to intervene legitimately, then there is a threat that Russia might be dragged into the war, on the continent. I actually can’t understand why it’s ok for Europeans.

It’s not Abkhazia or South Ossetia but nation of 46 million people, who is well organized and has army; neither theRussian speaking population are in good conditionin Crimea; for instance now Tatars run supporting actions in Kiev, this is 300 men and 10% of Crimean population. As you know, any revolution is created by energetic minority.

As usual one extremist feeds the other; such strange decisions are made; there was no need to abolish the Charter, Russian language is already there, you took away the language of Hungarians, Romanians, Belarus where many ethnic minorities live as it is multi-ethnic country. The second mistake was making decision on banning Russian federal channels.

They can not accomplish it. All this together with what happened in west Ukraine, I mean possible attack on Russians in Synagogue may become reason for Russia to enter the troops. Thus the circumstance is much tensed. Representatives of our government has to talk with them, Peskov makes a statement and Margvelashvili says that it is not serious and he can not answer him and his press secretary makes a statement, then Putin makes a statement and Alasania says that there is no point in negotiations.

One of the initiatives shall be specific, one of the blocks – political. This is Ukrainian lessons for us, Russia won’t tolerate it.Possible scenario might be on escalating confrontation and drawing Russia into war. Shot of Gavrilo Princip in Sarajevo will be just tale if anything erupts there. Any scenario is very bad for us. Thus they shall go and meet them and everything what Putin tells them shall be public.

Irakli Ubilava: the fact that they are abolishing Russian language in Ukraine, isn’t a kind of attempt to incorporate east in west?

Vaka Gorgiladze: Yesterday, Stepan Bandera Society released a statement that their obsession is not Russophobia but they are against Empire, they want Ukrainian people to return their native language, identity, culture and etc.At the same time, intellectuals of Lvov declared that this is not right when we bother Kharkiv and Dnepropetrovsk with the Galician way of life, but this does not change the situation.

I would compare it with Latvia; there are 2 communities – Russian speaking and Latvian; it is the same here though conflict in terms of symbols of culture is much harsh, as Bandera is completely unacceptable for east.

Nana Devdariani: Why is all these acceptable for Europe?

Vaka Gorgiladze: The Europe put up with somethings, as the saying goes “the end justifies the means”.  This is well organized and mobilized geopolitical struggle. They do not go to Maidan and say that they will participate in forming the government.

We don’t trust either Klitschko, or Tymoshenko or Yatseniuk, as Ukraine has always been corrupted and the system was designed by Tymoshenko and Lazarenko; yet there are still many obstacles inside and we will see how it is resolved.

Ramaz Sakvarelidze: there is another version; whether is it possible that if topic of redistribution is not developed enough for today, can it be developed for tomorrow?

Vaka Gorgiladze: yes it is possible. There might be an agreement between Russia and the US. We see that America is leaving Central Asia and moving to the basin of Pacific Ocean, so the main competitor is China and not Russia. By the way, the issue of South and North Korea has become more actual, they are setting commission of unification, and they have reconciled relatives; reportedly repressions that Kim Jong-Un is holding are addressed against Chinese lobby.

Japane asks for amendments in its constitution and strengthens the army, therefore if it leaves chaotic situation here, the same as Syria and Afghanistan,the latter is already a headache for Russia; Russia was proposing NATO a base in Ulianovsk as well as simplifying logistics.

So it shall not be excluded. There are revanchist statements in Romanian media that Ukraine is collapsing. Accession of Moldavia is resolved. Do you remember the statements of Lavrov and Putin that techtonic shifts and geopolitical wars are expected, thus what is happening is tricky.

We shall definitely find out some ways with Russia. It directly offers us to visit and negotiate. Nobody has called from here in Moscow even on wire entanglements, there is communication vacuum. Not talking in this situation is idiocyto put it midly. Our elite is corrupted and do not assume responsibility. Russia is offering to settle the matter now but if it is switched to hot phase and moves on the occupation, nobody will negotiate but enter directly.

Ramaz Sakvarelidze: there are two options: either Russia brings in the army and tell us-here is your Abkhazia and South Ossetia but stop moving towards the West; although Georgia is completely unprepared for this version, will population refuse to Europe? In this case the population can wash away the political elite. This scenario is suitable for Russia, if it fails to maintain some leverage in Ukraine in other ways and start war.

Then it will enter here too. With this proposal it will be the bird of peace and will no longer need to spend money on Abkhazia and South Ossetia. Russia has financial problems, there do not seem any better prospects; Abkhazia and South Ossetia are political and financial burden with no profit. Putin smiled, said compliments to our athletes there, invited for negotiations, i.e. he is more active than we. This passivity, which is the result of idiocy and not comlex consideration, might turn out to be useful as it may lead Russia to some versions of compromise.

As for interference with signature, it will put it before us and once again tell us to stop. We have been whipped so far and now it would be more difficult to refuse. He is inviting us for negotiations and had sent a message to Burjanadze back then that any topic can be discussed.

Nata Tsereteli: so Mr. Ramaz, you deem that this warm compliment from Putin was the signal that Abkhazia and Ossetia….

Giorgi Mdivani: Is it possible that cue of Putin largely conditioned the meeting of Obama and Gharibashvili, or attendance of Obama at the meeting?

Ramaz Sakvarelidze: it is not excluded.

Irakli Ubilava:on Putin’s cue Margvelashvili said that we would negotiate and consult with west community.

Ramaz Sakvarelidze: Margvelashvili’s statement does not have political wight. In my viewIvanishvili was not going to America; he did not want to offend Putin. Ukraine has helped the meeting of Obama and Gharibashvili; he is meeting with Moldova i.e. got involved in post Ukrainian process

Vaka Gorgiladze: in Ukrainewe have seen apparently active, well organized and mobilized minority and if we draw parallel which political force is capable of accomplishing such thing in 2-3 years time?

Irakli Ubilava: I was reading an article on American Sociological Research which was held in January, several days ago and as per the research 21% supported Yanukovych.

Ramaz Sakvarelidze: theperson but political policy is another thing.

Vaka Gorgiladze: it is not accidental that the same day Russian media reports that Saakashvili is guilty for the murder of Zhvania; thetopic is very urgent in Western media as well; however “Asaval-Dasavali” has been writing about it for so many years and today I just smiled at all this. However this became more topical after the speech of Saakashvili. As for Olympics, it was truly triumphant and even the western media notes it.It might be recognized as the best of Winter Olympics.

Another problem is Sevastopol, where Kiev directlyappointed the Mayor. There are problems in Dnepropetrovsk as well, where there is the whole military arsenal. If the conflict is be protracted, it won’t remain local; theoretically Romania might also express territorial claims, it is extensively circulated in media and elite. As for Turkey, it will intervene regarding Crimea at the level ofstatement.

Nana Devdariani: there are talks that Ukraine refused on nuclear armament after the collapse of the Soviet Union and called upon that the guarantors of the territorial integrity of Ukraine are Britain, the USA and Russia. The Europe also stresses that the problem can not be solved without Russia. Merkel and Putin agreed that it is inadmissible to split the territorial integrity of Ukraine.

Vaka Gorgiladze: it is too late, as when Russia and Yanukovych were offering Europe to let Russa be observer too, 5 months ago, Barosso declared that Russia had nothing to do with it.This will be reflected very badly; the share of Ukraine in European economy is nothing, but the scale….

Ramaz Sakvarelidze: one more issue; such denunciations are not made without reason; is it possible such plane to be real; Russia was “pressing” EU to unite the European and Euroasian Union; it goes with Russia. When Yanukovych said that Russia was disturbing him, he demanded EU and Russia to talk,apparently creating the field to Putin for conducting this policy. The Europe still refuses; will the same issue be raised this time?

Vaka Gorgiladze: then this will be geopolitical failure of America. What Bzezhinski was saying was that reintegration of Ukraine within Russian space would cause unification of European and Euroasian space and this is the greatest threat that America faces; and minimal threat would be close partnership between Russia and Germany.

If you don’t accept this type of agreement, the space won’t have competitor considering that the Europe with its united economic or human resources exceeds American and yet next year there are referendums of Scotland, Catalonia and Basque.

Ramaz Sakvarelidze: Europeans feel that they can not cope with Russia without America, so American factor is remarkable.

Zaza Firalashvili: there is one thing, not only shallwe learn from the events in Ukraine. I think, Ukrainians also have to consider some things from our recent past, as they are in nationalism-revolutionary phase, in which we were and it brought nothing good to us.

They also might have to go through the same history, as they are facing problem of elaborating moderate, golden mean and political filigree technic. It is doubtful that they have such leader, thus I expect further escalation of the situation. It is not just the problem of Ukraine and geopolitical space; I think we are entering the state of Cold War.

America still has a lot of tools to work on Russia, so these processes won’t end in 2-3 months or even 2 years time; we are entering another phase. The issues, which were forgotten are put forward, the same predictions about the collapse of Russia. As for the situation we are in, unfortunately I have to say that we don’t have such leader eitherin opposition or in government, who could maintain golden mean and let God send him to us.

Unfortunately, government in our country isstill determined by Saakashvili; he is the balance factor as well as the one setting agenda to such an extent that they have almost assigned the initiatives of attitude towards the development of Ukraine to national movement. In this regard, the speech of President in Parliament was carrying some significance and it became clear that there is a certain position in the government and their approach to the noted issue is not determined just by taking, let’s say, apple to the Russian market.

As for the messages of Putin, you shall talk to him without any hope. Russia is the post-Byzantine world, why was Byzantium destroyed? For the same reasons why Russia may collapse.

Irakli Ubilava: I will also touch the problem of Ukraine and consider it in geopolitical context, as I deem that this is the main problem, even though there might have been internal problems as well. Let us recall “the Grand Chessboard” of Bzezinski, which directly prescribes that if we take Ukraine from Russia, it will become only Asian Empire and might be collapsed due to war against Muslim World. Broadcasting companies and experts in ourcountry are stating that everything is Russia’s fault.

What Russians do in Ukraine and in any other country is pure counter strategy. The same situation was in our country in the ‘90s: toppling down the statues of Lenin, civil wars in Abkhazia and South Ossetia. The same is taking place in Crimea today. I think that collapse of Ukraine will be very bad for us too, as its current boundaries and are legally recognized are the ones existed within the Soviet Union.

When the latter was collapsed, we were legallyrecognized within these borders. Suppose that Ukraine is split in two parts, which is likely to happen, if it is also legally finalized then will we eventually lose Abkhazia and South Ossetia?

Ramaz Sakvarelidze: there will be a serious precedent. Taking eastern Ukraine will be very beneficial for Russian economy; it does not need to take Abkhazia and South Ossetia, apart from the fact that it has weapon there and will leave them to the bases there, in other ways it is just burden. Will Russian economy withstand so many burdens? Consequently, it is not unilateral that the Ukraine will be split.

Irakli Ubilava: in Anglo-Saxon geopolitics control of sea is considered to be the most profitable. Therefore, I think that the main target of America in terms of geopolitics is Crimea, in order to shut the pass of Russia to Black and Mediterranean Sea. The reaction of Russia will be similar in terms of promoting separatism in Crimea.

Ramaz Sakvarelidze: if Russia promotes separatism, then it shall support it financially as well and how can it manage?

Irakli Ubilava: continental Empire is a bit different from Anglo-Saxon Empire, for them military strategy is primary and economic factor has always been secondary.

Ramaz Sakvarelidze: we say that what was happening in past will always happen. We were not expecting that Putin would built the Empire on economy and one more thing, Ukraine is not Putin’s ambition, however its loss will be bad for Russia.  Putin is targeting its economic empire to the Europe andthe case is about seizing it.

Irakli Ubilava: the last speech of Putin was clear ideological construction against nationalism-postmodernism.He tried to create some kind of alternative, with the words of Berdiaev, formulate what the conservatism is and etc. it made serious impact on certain circles of intelectuals in the US. It has serious affects onright-wing thinkers of France and Italy. Therefore, there are some ideological moments as well.

Nana Devdariani: there are circles of society in Europe who explicitly does not approve and won’t approve Putin but he is quite popular with some political class. Today, ideological moment is ahead than military strategy, including those that are considered unacceptable to Western values. This is already the counter-thesis; this is an alternative. If you pay attention and talk only through geopolitical categories, in terms of strategy, nothing will come, as it is already determinant?

Zaza Firalishvili: Russia has left a few ways to maintain the unity of the body; permanent territorial expansion or some kind of an idea around which the body will be tied. Economics do not have blood vessels. Abkhazia and South Ossetia has a symbolic meaning for it, energetic and not so much of territorial. This symbolic expansion has rouse the empire, brought energy. When did the communist revolution take place in Russia? When Russia was the fastest developing country in Europe, economic factor did not lead to regrouping the interests in other direction.

ირაკლი უბილავა: უნიპოლარულობისკენ სწრაფვა აქვთ ანგლოსაქსებს და ამერიკელებს ამ შემთხვევაში. იქაც ორად იყოფა აზრი, იზოლაციონიზმი და მხოლოდ საკუთარი ინტერსებიდან ბრძოლა. თუ ამერიკელებმა მონროს დოქტრინაზე დაიწყეს მუშაობა, იმის გათვალისწინებით, თუ  რამდენი ჯარისკაცი იღუპება ერაყსა და ავღანეთში, ადგილობრივმა ამომრჩევლებმა, შესაძლოა, მოუწოდოს ხელისუფლებას იზოლაციონალიზმისკენ.  თუ უკრაინის მეზობლად ევროპაა, ჩვენს შემთხვევაში  უკან თურქეთი დგას. აქ როგორ წავა შემდეგ უკვე ურთიერთობა? მათ სტამბოლში უნდათ დედაქალაქის გადატანა, იქ ხვდება ელჩებს პრემიერი. ამ მიმართულებით, მგონი, სამუშაო გვაქვს საქართველოში, რა პრობლემის წინაშე შეიძლება დავდგეთ  10-15 წლის შემდეგ.

Irakli Ubilava: in this case Americans and Anglo-Saxons have aspiration towards unipolarity. Opinionsare split into 2; isolationism and fight only for their own interests. If Americans begin to work on the Monroe Doctrine, considering how many soldiers die in Iraq and Afghanistan,local voters may urge the authority for isolationism.  If Europe is the neighbor of Ukraine, in our case Turkey stands behind us. How the relationships go afterwards in such case? They want to move the capital in Istanbul, the Premier meets with the ambassadors there. I think we also have a work in this respect: what problem might we face after 10-15 years.

Soso Archvadze: when we talk about lessons, it means not only to receive information but what we confront and what shall we do to minimize any negative result of exogenous effect. Consider 2 ways: first, Ukraine remains whole and the second- it falls apart. Before talking about collapse, there are 2 options in case of unity as well: ambitions of Russia are satisfied or completely ignored; if satisfied then it gains more energy, if not – the risk is increased.

If the ambitions are not met than it can be used against Georgia as the weak point. Therefore the risks in both cases are high. Obligation of our government is to talk about it; this refers to the maintenance and development of the nation’s identity, its survival. Population shall not be morally degraded along with taking care of the statehood.

As for the collapse of Ukraine, after Russia announced embargo in 2006, the Ukraine became the second-place partner for Georgia and the annual turnover amounts to $ 800-900 million. More than half of import is agricultural products and the other half military-industrial, as reported. Imagine the threat that Georgia faces from the military aspect, in case ofsplitting theUkraine.

The market will lose the same food product which accounts for 55% and trigger the inflation. Large part of export from Georgia also comes on Ukraine. If the situation messes up where will we export our products? The volume of export from Georgia is more than total amount of 28 EU countries, thus the market of Ukraine is very important for us and its loss therefore will be very unprofitable.

Not to mention the fact that Ukraine’s break-up will set a very bad precedent, Russia will unbind the hands and foot in other directions as well and international law will turn into empty piece of paper.

If there are any deterrent factors of behavior everybody acts the way they want. Laws of Jungles will come to the front line; the argument of power and not the power of argument.The government is obliged to completely eliminate the increased risks or at least ensure its minimisation.

Giorgi Mdivani: I shall touch upon the economic aspect. We depend on Post-Soviet market in terms of export and the Ukraine dramatically relies on Russian market, which accounts for 80%. I had a meeting with the supporters of Maidan and asked them if they paid attention to economic issues, because if a country is economically strong it seizes the political power.

They told me that they don’t care about anything except for the freedom of Ukraine. In my view, it is the reckless attitude from their part. I think that both Georgia and Ukraine need protectionism. Any developed country, which has good indices and is in favor of diverse alliances, use them. This alliance is established with the purpose of limiting development potential of other countries.

Let’s take “Toyota” for example: in the beginning of 20th century “Toyota” was going bankrupt over 30 years, with such horrific pace that even the State did not have a chance of subsidizing and the last wave was when Japan still granted the subsidy; after that Japan passed a law according to which the tariff was higher on foreign cars in order to support locals.

We actually need protectionism. We have very poor trade balance with EU countries, when export accounts for 20% and import-60% this signals economic occupation of the country, therefore local business will turn out in unequal terms. We will be in the same situation as Romania and Bulgaria, stretching our handsbegging.

In addition, Switzerland has held the referendum as per which, work places for EU citizens are restricted. Bulgarians were not allowed to grant work visas in Britain for 7 years, after it became the EU member country; however EU does not state such thing.

The fact that standards will be introduced after the Association in EU and vague membership is clear, but who prevents sovereign state from introducing the same production standards or etc. This service exists even today, formally though and does not perform its job.

It is not necessary to become EU member in order the government to assign specific institute to do its job properly and therefore, abide by the standards of food industry. Similar control mechanisms were set even during the Soviet-Union. Today many ofthe meat product companies won’t pass this control.

This can be done without integration processes. My viewpoint is that both Georgia and Ukraine necessitate protectionism. As for the Eurasian Union, the survey shall be held on the expectations in case of European integration,mathematical prediction and the theory of probability shall be engaged. Nobody has done such thing neither in Ukraine or here. Take the example of Belarus, its rate of economic growth is so high that 50% of European countries would envy.

First and foremost I would like to thank Ms. Nino as I think that these types of discussions are very fruitful as we are reviewing crucial topics.

I will try to formulate basic theses shortly. In the first place, when talking about strategic option, we have to separate what we want and what we can from each other. These are two different things.
In the first place, the question is: what we want or what we wanted while making this strategic choice. It happened so that when this unrest started in Georgia back then in the ‘90s about the strategic choice that Georgia had to make, I was related to this issue in a certain way as I was working at the State Apparatus. I recall contradiction of opinions, various views that were expressed back then.

I cannot say that we had a variety of choices. One of the versions was that a new political space, CIS had been established, where Russia had had hegemony and our option was to join that space. I can clearly remember the rallies on Rustaveli Avenue even before the dissolution of the Soviet Union, protesting the rumors as if NATO troops were about to enter the country.

The issue of declaring neutrality was also considered. We soon arrived to the conclusion that declaring neutrality was unrealistic, not only based on the historic experience, but also because of the fact that neutrality cannot be unilateral. It should be a big international treaty; however, there were not even theoretical preconditions for it nor back then neither now. There were two geopolitical centers, either to the East or to the West.
I would like to point out one more thing – when the Soviet Union dissolved even the West did not clearly know as to what happened on this territory. They knew that there was a territory with a large number of troops stationed on that territory as well as nuclear arms; there were certain countries, nations already having conflict between one another and several hot points.

Thus the West was not ready for making special decisions and formation of CIS space was on the background of, so to say, silent consent of the West. Actually, Russia had a certain type of carte blanche to establish its own rules of game
Baltic states can be considered as an exception; though in the ‘90s, when the Baltic states started talking about their wish to become members of the NATO the first reaction in Washington was – “are you nuts?” It’s not a rumor. I have this information from the officials of the Baltic foreign bodies. These people proved that they are not nuts and their choice is absolutely realistic. A deal as if the Baltic states were supposed to enter the NATO and we were supposed to remain outside it, did not exist.
Another thing is why we chose exactly this route. First of all, Russia itself played a crucial part as the politics in regard with the Caucasus and approach towards the Caucasus states, was not well established within the Russian specter, having in mind the former Soviet countries. To take a look at the relationship with the countries neighboring Russia you cannot name a country with which Russia does not have serious problems.

It was characteristic not only for the Yeltsin’s Russia but for the Putin’s Russia as well. There are several centreswhere decisions are made, for example: in 1994, Ramaz remembers this visit of Yeltsin to Georgia, when Yeltsin apologized Georgian people for what the Russians did in Abkhazia; however this apology did not affect anything as when Yeltsin departed to Russian the same things continued to happen in Abkhazia. The same thing is happening today, right? On the one hand we are conducting a certain type of dialogue, Abashidze-Karasini but before the meeting within this dialogue format the occupation line is shifted. There are a lot of such examples.

Thus Russia’s policy is characterized by this incoherence, which entailed serious fears in Georgia and I can say that – the fact that Russia did not make any kind of interesting proposal to us largely determined Georgia’s strategic choice.

What was the determiner of this choice. When you are choosing and ideal, you are trying to reach that ideal. For example, if you have a hero either from literature or a movie, you try to become like your hero. The question is very simple: who do we want to be like? What kind of a country do we want to be? The country like Russia was in the ‘90s or the West as it was in our imagination and stereotypes in the movies or in Hollywood. We thought that the West is good and choce it as our ideal. However neither then nor now have we the comprehensive idea on the Western values but generally this is what we have been arguing about – Democracy, Free economy, Private Property and etc.

All the above mentioned values are highly protected in the West and that’s why we made the West our ideal. Besides, it was the the West, not Russia, which provided serious assistance either in terms of food or social security or educational and etc. Credits flew from the West which determined logical linkage.

Now, let’s review the issue of our capacities and abilities. This is a bottleneck situation. If we take a look at our aspirations, I think that the strategic choice was absolutely correct and nothing has changed in this direction in the Russian Federation. I completely agree with Mr. Soso in the part that the essence of the Eurasian Union, Customs Union and even the Organization of Collective Security and etc. shall be thoroughly explored.

For example, everybody knows that issues related to the above-mentioned unions are studied in the USA, Britain, France, Germany, Italy; however neither of the above listed states are planning to join any of these unions. Still this issue needs to be examined and studied.

Now let’s shortly review what the Russian Federation was and is offering. I worked on this topic during the time when I lived in Georgia as well as during my stay in Moscow for quite a long time, until 2008 and I had a very close relationship with the research centres operating there.

There are three basic schools determining these approaches. As for theories, they are quite a lot. But the reason I started talking about these three schools is that their approaches are used in the real policy-making by Russia. Actual politics took its various parts from these three schools and they are being implemented.

Geopolitical school, representative of which is Mr. Dugin, is not widely famous. It talks about a certain type of a Russian island and one of its rising point is that Mr. Dugin considers peter the First as the destroyer of Russia as, according to him, Peter mad Russia divert its course of natural development. He is talking about creating a certain type of an island, an imaginary one. Russia considers its surrounding states, including the Ukraine, Georgia and etc. not as independent states or nations and societies but as territories – which is capable of what.
For example, according to this school the Ukraine is a barn of bread; it is its function; South Caucasus is a bridgehead, Georgia is a key for example, for establishing relations with Turkey. Thus this school considers only geographical territories: it is not interested in the needs of the local society or interests of that particular country and etc. The most interesting thing, that this school states, is that these peripheries (territories) should have relationship only with the Centre, which is Moscow and only after receving permission from the Centre they may have interaction with the World beyond this island. In addition basic idea of this concept is that these peripheries are supposed to be feeding the Centre.

The second school is more related to the so-called “Soft Power” concept, the concept the most vivid representative of which is Mr. PyotrShenderovski. Basic formula of this school is that Russia should have influence on these territories. We encounter centre and peripheries in all three schools. According to the concept of the second school it should implement its power in the elites – referring to political and business elites, to integrate them with the Russina world, not Russia – with them. Formula of this school, related with the “Soft Power,” is “speak as Russians say” equals to “think as Russians think” and to “act as Russians act,” this is where the concept “Russian World” is derived from.

The third school is a cultural paradigm which Mr. Putin refers to when talking about the system of common values, space of common values and in such case we have to make use of migrational flows for some purposes. For example, people from Tajikistan are good at construction, plus they construct at low price; Armenians are good at trade; Georgians are good at medicine, music and dancing… we need to divide people this way. The most important determinative in this case is that we should not allow taking hold of any sector by representatives of any nation, or monopolise the sector as it becomes hazardous for the centre.

To sum up, all the three schools have the approach according to which the centre wants to take more than deliver and cares less about giving opportunity of development to these states. From it start the fields of exclusive influence as functioning of the thecentre without the fields of exclusive influence is impossible. It is not my personal opinion; there are a lot of researches about the topic that Russia constantly needs something new as it is institutionally undeveloped country.

If we take, for example the surveys by the World Bank, we will see that gas extraction by “GasProm” on the territory of Russia is decreasing; however “GasProm” assets increase at the expense of gas extraction on other territories. it is because that gas mine is characterized by getting old as a living organism after some time. Getting old implies that gas becomes full of impurities. Purifying from these impurities require new technologies. The company prefers using new territories, other mines to purchasing new technologies due to the current situation in Russia.
It can be explaind by the fact that investments are made for the long-time prospective, with the goal to have gain returns from it within. let’s say, 10 years but when you are not guaranteed whether you will stay on the same position for 10 years, then making a long-term investment is irrational; thus this company prefares to work in Turkmenistan, Kazakhistan and so on than to develop and improve its own.

In a nutshell,  relationship with Russia is a vast topic and the ongoing processes within Russia should be explores, as Mr. Soso noted it. However, these approaches determined that when you are not offered anything and you still accept it – I don’t know whether it is because of Holly Wood, you have it in your sub-conscious and you are striving to achieve the Western standards. Plus, you receive a serious financial aid from the West. If we look back at those relationships that we had with NATO, European Union, the first treaties that we signed, aids that we received in the beginning we may conclude that it was the opportunity for use for building a state. Another issue, to go back to where I started from, is what are our capacities for it.

This is the point where problems start. The number one problem, in my opinion is, that Georgian society gives too much confidence to friendship. However we forget that friendship needs to be bilateral. There is no unilateral friendship. A true friend shall come and help me whenever I am in need. In most cases we understand ”help” as a friend coming and doing whatever one shall be doing himself. This is the approach that the West will never understand and always tells us: – I cannot do whatever you are supposed to be doing. I can give you advice, give you money, render, for example, methodical assistance, train specialists for you and etc.
Another problem that we are facing is in the educational field. In this particular case I am not referring only to knowledge of some particular subjects. I imply general civil education and perception of the general situation existing in the country. When we are talking about civil society, can we define it? Does the civil society itself understand the essence of civil society? Currently we have the reality when one particular political power, I don’t want to name it, proclaims that accession to NATO is a request from the society; then another political power states that they do not want to be accepted at NATO as it is the request of the society.

Third political may appear who would declare that their position is neutrality as it is the request of the society and it seems that every political power has its own supporting society, each of them is fulfilling their request and we are living in parallel worlds where we do not understand each other. This is the basic problem. Look at our politicians.Forexample, let’s take their meeting with voters. Every political power has its supporters. This is our basic problem…

Mr. SosoTsintsadze: A politician has its own team with high qualification.

Mr. TengizPkhaladze: That’s why we need to take reality when we are living in an imaginary parallel world, where everybody speaks on behalf of  the name of people. When we are talking about a strategic choice, the problem is not what strategic choice we made, the problem is how much we used this strategic choice. Was it possible to do more through the opportunities we had by means of relationship with NATO or EU and etc? It is the most important issue. I think we need to look back to our past actions and find out where we made a mistake.

Now, let’s discuss the most important problem for us, a traditional question – how can we have be accepted at NATO and at the same time, maintain good neighbourly relationships with Russia, resolve conflicts and etc. I would like to review several examples: For a small country, it is important to pursue its ideals and strive for creating a state that the country considers ideal.

The rest, however depends on the fact that the developments in the world at some point opens a so-called “window of opportunities.” For example, Mrs. Nino must remember 1999 when a “window of very important opportunities” was open for Georgia, referring to OSCE Summit in Istanbul. I think Georgia has not achieved such diplomatic success yet, as we managed and resolved some important issues back then.

We managed and reached an agreement on strategic energo-projects and the most important – on which a lot of people then skeptically said that it would never happen – Russia signed a document on withdrawal of troops from Georgia. I understand that it was Yeltsin’s Russia, it was the period when default had newly happened and etc. but suchcataclizms regularly take place across the world. During the Putin’s Russia, we finalized these negotiations. A wave of NATO’s enlargement took place during Putin’s Russia when Baltic states were accepted to NATO. It was the period when neither of the states, Lithuania, Latvia or Estonia, had negotiations with Russia on border issues. It was only in 2007 when Latvia managed and signed an agreement with Russia on border issue. Lithuania had the same problem.

A friend of mine who is a Minister of Foreign Affairs of Lithuania, was telling me that when in 2002, during his period as a Minister of Defense of Lithuania, Russian military forces were withdrawn from the territory of Baltic states, there were a lot of mined territories. There were some other contentional issues as well related to property. My friend was telling me that Mr. Sergey Ivanov did not arrive in Lithuania for discussing these issues. But a decision in 2002 on the accession of Baltic states to NATO, in 2004 Mr. Ivanov called himself to my friend and told him: -“You are becoming members of NATO and let’s close this issue.” However difference in this case is that this issue can be resolved in a manner beneficial for us, while on the other hand, it actions for resolving this issue can be reckless.

If Baltic states managed to explain to Russia that their Western orientation does not threaten Russia, why cannot we explain it? In this case a lot of things are dependent on diplomacy, reasonability and other factors. But the most important is that we shall not miss a moment of the above mentioned “window of opportunities” and if at that very point the country is not ready to make a right decision and choos a right direction, then it has to wait for the next change as a small country does not have an opportunity to create and establish geopolitical reality.

And the last, conclusive issue: the most important issue for a state like Georgia, foreign and internaly policy, building of the state and all the rest depends on education. I am charmed with what the Estonians did. I remember, when in the second half of the ‘90s Estonians focused on the field of education. A lot of other states, including its neighbouring ones, ridiculed it, saying: It is better to start developing other things than institutes. However, Estonians proved that raising the intellectual elite able of creating sciencecapable products.

We do not have natural resources that we can live on, meaning oil, gas and etc. We do not have the territory where we can start large-scale industry. We are in a reality, where we have conflict zones and are in a volatile field. There is a saying: when yourrivel is stronger than you, the scope of your actions should pass the borders of its imagination. I also agree with the opinion that was mentioned here that a small country has the least right of making a mistake. I agree with the opinion that China might not be interested what is going on somewhere but we have the reality, when China knows the developments in Georgia very well while Georgia does not have knowledge of the situation in China. Thank you.

Nana Devdariani: Generally it is unusual a Presidential Candidate making a report at a workshop and thus, I would like to thank Mrs. Nino Burjanadze that she found time during this pre-election campaign period.

Nino Burjanadze: Thank you very much. In consideration of the audience attending this workshop, I would like to say very shortly, in the form of a thesis, what I regard important. In the first place, I want to underline that I mostly agree with what Mr. Tengo said. in this case I listened it as a lecturer to a student. As he concluded his speech with the importance of the field of education, I consider making comment on it necessary.

One of the most important that shall be included not only in a program of a presidential candidate but also in his/her priorities, what shall be most important is the educational field.

Frankly speaking, I do not think that this issue can be resolved only through distributing free textbooks. The most important priority for us should be the content of those textbooks. We all agree that distributing these textbooks free is important but I would still say that free textbooks should be given only to those children who are in need of this.

Level of education is important, including during implementation of foreign priorities as long as playing on patriotic feelings is easy. The emotion what Tengo mentioned in his speech: becoming bold with the hope to enter NATO, this emotion is easier to be triggered in sincere, patriot. though less educated people. However, it is more difficult with educated people, who will have many questions.

I think, the ruling political power in our country transformed the educational system so that not to be raised educated generation as they did it in regard with elimination of social stratum with average income. Let’s take a Law on Plea Bargain as an example, which literally destroyed half of the population of Georgia. However, frankly speaking, I was one of the happiest persons when we were approving this law as it is one of the civilized, human laws that the Parliament may approve but use of this law is another issue. I could not really imagine that this law would be used for terrorizing hundreds and thousands of families. My opinion in regard with this law was that we had to approve it. I could not understand why should we send a person who does not endanger society to prison. On the other hand – it is a sense of responsibility in a person when he/she gives financial commitment to his/her family because of his/her incorrect/illegal action.

If the person thinks soundly, he/she will not commit the same crime or illegal action. How can a state use a noble law for cruel intentions.

As for foreign priorities, I think that asserting that we are not a pro-Russian power and are not planning to make Georgia province of Russia, is unserious….. I can assure you that this will be one of our mottos. We are true pro-Georgian power the main objective of which is implementation of interests of Georgia and considering interests of Georgia in the first place.

It is also understandable that we cannot imagine ourselves on a, let’s say, separate island, which nobody touches. Georgia is not a state out of geopolitical and geostrategic space and we shall consider the reality around us.

We are asked: Do you think that Russia will concede Abkhazia and Ossetia and its interests in Georgia, our answer is that we do not have expected it from Russia and we all understand that Russia is one of the super-states and big players, especially in this region. It will always remain a state that has serious political interests not only in its surrounding region but further regions as well and it will always try to accomplish its interests. It is normal. We don’t need to look at it with history. However, we need to try to make such rational steps that will disable Russia to make such actions that benefit only its interests.

It is, definitely, is not simple though a 1999 OSCE Istanbul summit was mentioned here as an example. I was participating in the negotiation process and attended signing of the Istanbul Declaration. I would never have imagined even one week before that such document would be signed. We thought until the very last moment that it would not be signed, but it did not happen. Georgian diplomacy did a great job then though we don’t think that it’s only our merit. We made wise use of that political moment then. Such approach shall become main rising point of our politics. We should not hit the wall that we know, will destroy us; we need to either find a roundabout or another way.

I reckon that we have quite serious prospectives of relationship with Russia. There are a number of directions where Russian and Georgia interests differ. It is, in the first place, peace in the Caucasus region. I disagree with the people who say that we have to wait a bit longer, Russia will dissolve and and everything will be in its order. When I was in the power Iused to tell them that dissolution of Russia with the form they were dreaming of, would cause such cataclisms throughout the World that may ignite such fire that we will never be able to escape. Thus dissolution of Russia is not in our interest. Russia being stabile and controlling its own territory is in our interest. Chaotic situation is not in our interest.

Chaotic situation and volatility on the Russian border is completely unacceptable in the North Caucasus. One of the important factors, on which negotiation with Russia may be based on, in my opinion, is our common interest of stability in the Caucasus region. In this regard we have quite serious mechanisms of cooperation; I also don’t think that either they will give us or we should give them something as a gift. Diplomacy and negotiations is the process from which we may benefit with serious positive results.

I also differ with the opinion that Russia is interested in opening its market for us; however it is a very important issues and we need to take rational steps in this direction as well. One of the serious issues will be so-called “Eurasian Union” as well. I can tell you that Georgia’s joining this union is not obligatory, while discussing this issue some very interesting details, denoting how economically profitable joining this Union might be for the member states. However, making decision about joining is only up to us.

I would like to point out one thing: We should not equivocally reject either NATO, or Eurasian Union. We need to analyze the situation and consider which organization with and which direction to cooperate and make a decision only after it. You might pay attention to the TV show with Mr. David Paichadze, when he posed a question of neutrality in an intriguing manner. Neutrality is an ideal position for the country like Georgia, if we can achieve neutrality at all. By the way, I had the same position in regard with neutrality when I was a Chairperson of the Parliament of Georgia. Another issue is how much it is possible. Neutrality cannot be a negative postion.

Even in the middle of Europe, let’s take Switzerland and Austria, neutrality was an achievement for them.

I think my position is quite clearin regard with NATO. I would be fine if we were NATO member country and used the chance that the Baltic States used back then. However we lost that chance. This is the fact that we have to accept. We lost this chance several times. First in 1995,  then in 2000 in 2005 and in 2008 as well. I think that it is actually unachievable. We should call everything its name. Today we are facing a choice: either NATO or our lost territories.

NATO is not going to accept us. My major is international law and I am well aware of regulations, documents, international practice and internal negotiations. Nobody is going to accept us in NATO when there is a Russian military base on the territory on 40 min drive from Tbilisi. We have to either refuse it or we do not have the prospective to be accepted to NATO. Besides, Mr. Tengiz Pkhaladze mentioned the issue of borders. The actual circumstance is that we have resolved the border issue only with Turkey. It is a Soviet period border. We have unresolved border issue with Azerbaijan, Armenia, Russia and if a process of serious negotiations does not start and political will to direct this process correctly, we will be in a very disadvantageous position.

As for participation in ISAF type of operations, in my opinion we should be participating but I think we should be receiving not only support but serious dividends for the country as well. In particular, starting from salary: if a US soldier receives $ 10 000, Gerogian soldier should not be receiving $ 700. It should be giving us serious political dividends not only mere statements supporting territorial integrity of Georgia. It is a negotiation process which should be used properly.

I agree with Mr. Ramaz Sakvarelidze on the issue that we have neither internal nor foreign policy. Foreign policy does not exist. The ruling party is repeating the statements of National Movements and. I beg apology, they are doing it in quite untalented manner. I don’t really understand why visits to Brazil, Argentina and Japan are priority. These are not priorities of our country’s foreign policy. Diminishing the number of staff in Ukraine, unresolved fate of negotiations with Kazakstan, Moldova, Azerbaijan and Armenia…. it all means that we do not have foreign policy at all.

Irakli Ubilava: I cannot recall any country where the US Ambassador attends the Security Council sittings.

Nino Burjanadze: When I was in the ruling party it did not happen.

Rusa Mumladze-Avaliani: You are saying that you cannot recall non of the cases?

Nino Burjanadze: When Mr. John Bass was appointed as an Ambassador I was not in power any more. Such things did not happen neither in the period of Mr. Richard Miles or during Shevardnadze’s period.

Irakli Ubilava:In regard with amendments in the Constitution… I remember that these amendments were finally decided when Mr. Norland went to the Parliament….. Can we still talke about independence after such example?

Nino Burjanadze: In my opinion, in the best case this is a restricted sogvreignity, which is quite well-known status in the international law. I canot recall not a single case US Ambassador attending the Security Council sittings when I was in the government. I cannot either remember what was said about May 26 as if FBI representatives were sitting and watching and assessing whether the punitive action was well or badly planned. I want to tell you that the Government was far more independnent during Saakashvili’s period than it is today.

I remember when in many cases Giga Bokeria, Saakashvili objected to the position of the US President when their opinions did not coincide. In regard with “Imedi” TV Mrs. Condolisa Rise called three times and said that it would be better if we opened the TV. I was acting President then. I talked to her twice and tolde her that if would be better if she called Saakashvili personally as my orders were not fulfilled. Neither the Prosecutor’s Office nor the Governors.

Now the representatives of the former government members make statements that the acting government shall not be making legislative amendments without first receiving the Venice Commission conclusion. I remember that in 2010, when the Government made amendments to the Constitution, Mr. Gilauri was in the US in an official visit. He and Mrs. Hillary Clinton were on TV where Mrs. Clinton recommended not to adopt the amendments without prior conclusion from the Venice Commission as there were serious problems in the draft.

Despite this they voted the amendments the next day and adopted it. We had the situation when the Minister of Foreign Affairs during the Russia-Georgia war was the citizen of Russia and he was calling me a Russia’s spy…. Well, he did not dare it then; he started it later.

Question: Shall Georgia resinstate diplomatic relationships with Russia?

Nino Burjanadze: We have to take that course. We cannot and should not restart diplomatic relations. Our steps should be responded with the relevant steps from them. We should not accept anything unconditionally.

Georgia needs modern comprehensive doctrine on national security.

Condition that we inherited from the previous government is alarming for the internal as well as foreign threats of the state.

Revealing the threats the the country is facing, sharply denoting the goals of the country and defining actual mechanisms for achieving these goals is necessary.
In order to ensure the country’s security policy preparation of relevant conceptual base, covering priority strategic interest of the country, principles of international law, relevant transparency of security policy in consideration of legitimit interests of partner and neighbouring countries, coherent implementation of the state policy and provision of relevant staff is necessary. Georgia’s independence and sovereignity is significantly weak currently. The country cannot plan and implement its sovereign policy.

Prestige of the Government of Georgia and the positions of the state as a whole on the international arena have deteriorated. Russia is shifting the conflict zone borders within the territory of Georgia. There is a military presence of a foreign state and quasi-states on the territory of Georgia. Demarcation and delimitation of state frontiers with three neighbouring states have not been implemented yet.
Instead of being formed as an object of international relations system Georgia should be formed as its subject. Our basic principle iun the field of security should become preventive diplomacy. With the purpose of improving the country’s security avanturism in international relations should be inadmissible. Georgia should become a space of generalizing interests of big states instead of becoming a shooting ground for their interests. Deepening relationship with NATO should not be directed towards legitimate interests of a third country; it should be serving to improving to strengthening security in the region. Normalization of relations with Russia is necessary.

Georgia should not encourage threats to Russia’s national security. Georgia should make the existing relationships closer with neighbouring states. Georgia’s actions should be directed towards establishing peace and stability in the region.

Current state of relations with Russia is absolutely unclear; there is no strategy and an “action plan” for normalizing relations. Unresolved steps from the Government in this direction make the fake-impression of warming relationships with Russia while at the same time, a new “border” appears in the middle of our territory.

Initiating a large-scale negotiations with Russia is necessary (including not only about opening their market for Georgia product but on acute issues as well). Seps towards abolishing visa regime with Russia for Georgian citizens should be made. Russian market should be open broadly and in a stabile manner for Georgian product. On its part, optimal usage of Russian market will give significant incentive to the economy of Georgia and development of Business enterprise within the country.

We need to start large-scale negotiations with Russia about restoration our country’s territorial integrity. We need to manage that Russia played positive role in regulation of the conflict with Abkhazia and Ossetia.  It should result in honourable return of IDPs to Abkhazeti and Samachablo. Through carrying out coherent policy we will return Abkhazia and Ossetia; Russia should be assured that Georgia is not the enemy and peace and stability in the Caucasus is the number one priority for Georgia as well.

For new paradigm issue of Georgia’s economic development

1.Introduction

Our society has become unused to talk about economy in general and in particular on economic policy. Phantom of extreme economic liberalism emerged since 2004 has gradually turned into bureaucratic-administrative regime of disciplined society, which necessarily replaced institutional economic recommendations to libertarian approach and all this gained completed forms in concepts postulated by theorists of open society. Therefore, we were dealing with impulsive changes ongoing in economy that we could not call economic policy as it was not derived from complex economic regularities taking place in the country. The situation significantly changed in 2012 when new political force “Georgian Dream” offered the public its own political visions for the development of the country. After winning parliamentary elections hope arose that tradition of preliminary determination of purposeful economy will still revive in Georgia.

In January 2013 new political force offered society main indices forecasts of economic development, growth of GDP by 6 % and inflation not higher than 7 %. In addition, expenditure vector of budgetary resources has changed as well. It became more explicitly oriented on domestic market needs and social protection problems of population. Investment environment has also changed; ties have been established with large international financial corporations, that stipulates integration of our national economy with international market centers, in exchange for integration with peripheral part of globalized economy. Besides, the government considers that due to the inactivity of economy, substantial changes in terms of improving living conditions of the population are not expected in the current year, considerable changes in economic growth parameters should be expected from 2015. Unfortunately, the mentioned declaration is not born out by any calculations or ongoing institutional changes in the country.

Due to aforementioned, we have nothing left but to remain calm. Country’s economy is in reliable hands and there is an optimistic expectation in Georgia. However, at the same time there is the necessity of participation in the processes that stipulates different views in several issues of specific importance and comes from those alternatives, which are created as a result of uniting existing peculiarities of economic factors. It should also be taken into account that the team responsible on economic policy, nowadays in Georgia actually represents kind of inclusive unity, where people of diverse vision and oriented on solving various target problems are working. There is not enough coordination and concerted activity is nearly impossible in a number of issues among them. National Bank, Chamber of Control, Regulatory institutions of different sectors of economy, regional and municipal administrations, entirely remain in the President vertical and continue vicious tradition of impulsive interference. Accordingly, new political force has to overcome complex administrative and legislative obstacles that substantially reduce effectiveness of their endeavors. Society feels temporary nature of this condition and treats many problems with understanding. At the same time, some positive criticism can be heard, resulting from common interests and is imbued with sense of essential involvement within existing transformations.

Transition ongoing in country, from institutionalized determination, characteristics for disciplined society, into real economic processes, does not occur smoothly. This transition is related to the transformations of market processes and thus is a painful process. It reveals itself in the format of unhealthy, temporary but acute processes. For instance everybody sees:

• The intensity of changes in media, especially advertising market and capabilities of press and TV-Radio broadcasting.
• What has been done at the book market in regard with publishing school-books also bears essential character.
• Similar problems have emerged in football.

Similar events are expected to arise in other areas of social life. All this suggests that current transformations are based on inadequate purpose. It’s true that although we do right things in bad way we still arrive at good result, however it’s better to do it well and the outcome will be even better.

Efforts for returning such competitive market have made those problems evident, which took place in railway, ports, Chiatura-Zestafoni industrial enterprise and etc. So many new tasks have emerged in our economy that as you can see has appeared due to the necessity of restoring competitive environment on domestic market, some of them existed in latent form even earlier, as its reveal was linked to functioning of repressive mechanisms of disciplined society. Hence, it is necessary to conduct clear and coherent economic policy in Georgia. Calls of authoritative politicians that they understand existing situation and they demand trust from people can not deal with the case. Economic policy document is needed and our society feels it.

What kind of economic policy should we have? I agree with Mrs. Nana Devdariani when she defines policy of small countries, as directed towards the purpose to maintain its own independent interests, flexibility, inherent and dynamic efforts, within international community, that is often manifested by apparent hostility and calls it “Cane Policy”. What kind Georgia’s’ economic policy in terms of adaptation and integration within global economic field is. Brief excursion shows that unfortunately we had:

• complete disregard of global trends;
• “attempt and error” and
• “Indiscriminate pursuance” policy;

We neither have time nor opportunity to describe each of them, but to note in a nutshell neither has brought anything substantial but only complicated our common social conditions. In spite of this, it should be mentioned that in the period of “attempt and error” when we were learning cooperation in world global environment and deciding problems of strategic importance due to our geopolitical condition, they had brought us many significant outcomes. New stage of our economic development launches since 2013. The year 2013 is the year of changes of economic development paradigm and entire society counts on it. “Not everybody can create history but we are obliged to take part in the history”, the words of Albert Camius are actual in Georgia and it seems that won’t lose its actuality in future either. Thus, I feel appropriate to express some of my opinions on further transformation directions of our economy and formation of mechanisms ensuring these transformations.

2. In search of new economic paradigms

In the 20-ise of previous century, during big economic discussions, John Kane expressed his opinion that government of the countries are obliged to seek economic development model for their own countries, constantly improve existing economic leading system. In his view, sense of economic policy stipulates searching appropriate model for country’s development.

This fundamental importance concept of Kane’s is confirmed by long term cycle theory of Kontradiev and Juglar. According to Kondratiev cycle, the world at present is in (fourth cycle) recession (downswing) phase, economic expansion (the fifth cycle) will begin from 2018 years and it is essential to start preparation for this period.  The  only way to get ready for upswing is technological innovations and to put them into economic practice. Considerable fact is that diffusion of these novelties occurs exactly in the period of economic recession, which expresses their vitality in the upswing period. Comparison of South Korean and Japanese economies showed that South Korea could not respond in time to such cycle and in comparison with Japan it managed to orient economy on new technologies 40 years later. The same is confirmed by Juglar statistical regularity analysis. Thus, those who try to regulate own national economic processes in the right way and care for people’s welfare shall be ready for it from the beginning.

Economy is crucial sphere throughout the whole areal of human cohabitation, but when we consider it in the view of one country, as Jan Tinberger teaches us, it clearly faces task ensuring other, non economic social-cultural regularity existing in society. Thereby economy should be comprehended in the unity of national social development and in often cases it will be a method of determining usefulness of social trends.

Proceeding from the above mentioned, we came upon the necessity of elaborating new economic paradigm. We need it in order to create such economic model of country’s development that provides formation of material basis for citizen development. Of course, we won’t be able to clarify the whole variety of theoretic-methodological basis of Georgia’s economic development within the frames of one article, but we will try to express our views on conceptual origins of Georgia’s economic development. I think I will contribute formation of new economic paradigm. Herewith, I will remark that we understand the term conception as system of views, based on which transformations in economy should be carried out and mechanisms of its transformation be created. And, any of them, including Georgia’s economic development conception should be directed to creating:

• economic individuals free intention ethical, current practice oriented on specific- historic study and
• on the basis of natural conditions, development level of technics and technology, nature of social institution and legislation
• Coming out from targets of economic entities, use of limited alternative resources, rational creating the best conditions

In this respect, the main target task of political guarantee for economic progress in the state is to improve qualitative indices of development of the society and its each member (person), which is constantly alterable within the existing conditions and thus when determining strategic direction of development the question is posed not “why” but “what for”, which is in this case devoid of theological sense and defines, what should society expect in case of upcoming changes, its historic-cultural traditions and the people.

While defining overall nation-wide tasks of economic growth, its efficiency criterion is presented, on the basis of country’s cultural-historic development regularities and overall conditions of the whole society existence, establishing right proportions between economic and other non economic relation systems, for the economy to be able to create material conditions to ensure all essential needs of social cohabitation.

Within the entrepreneurship process, choice of alternative usage of resources creates stimulus of economic activity and danger of wrong exploitation of these resources, thus economic development conception should be based on sustainable development principles that should be perceived on the grounds of Brundtland Commission definition i.e. “economy system is sustainable which takes interests of future generation into account, while satisfying its demands”, therefore we should prioritize those versions of resource potential usage of our country, which in case of engaging in economic turnover (joining economic factors) gives maximum effect in terms of country’s sustainable development.

While formulating specific conditions of country’s resource potential usage, defining upcoming efficiency criterion, we shall come out of the overall dynamism of the world market, in this view, special study of global economic cycle action regularities and its possible impact features on current economic processes in Georgia is required. This is principal as long as Georgia’s macro economy, as open system, might be endangered due to the impact of external factors.  We have a lot of such examples from not so distant past. Thus for maintaining existing dynamic balance of the society (for homeostasis) specific mechanisms should be worked out (negative feedback), in order to avoid the danger. For this purpose, we shall seek (find) within the current process of our country’s economic development, simple and tiny elements of its functioning, institutional forms of which enable us to explain features of economic system action on given stage, and also elaborate mechanisms, coordinated system of which will give us opportunity to maintain internal dynamism of our society as an open system. i.e. in order to be able to embody our resources within the bounds of our interest.

For the fact that state represents subject of economic development conception, which is the legitimate power, that ensures efficient activity of economic process participants and promotes their development so that it won’t limit entrepreneur’s free choice by own power (power won’t supersede freedom), consequently legal norms (legislation) elaborated on the basis of state’s economic policy shall be construed as condition for entrepreneurship and entrepreneur activity.

Resulting from the essentiality of working out economic policy that authority faces, the principal task of economic development, by utilizing global trends and own limited resources, is to achieve:

• improvement of environmental conditions of human development
• Efficient usage of material resources (foreseeing demands of future generations)
• organizing spatial arrangement and communication facilities throughout the country

Therefore, such growth of economic aggregates (indicators), wealth accumulation and formation of distribution mechanisms, which, within the equal conditions of social capital provides:

• development of essential non economic directions for operating in modern global environment,
• Maintain its internal condition, namely will reach dynamic balance, between the trends of efficient exploitation of material resources and cultural-historic development

Economy shall create general conditions of free democratic development of population:

• Exploitation of resources, technology advancement and human capital improvement,  social capital development , with the assumption that not less than 70 % of GDP shall be spent on development and creation of human capital and social capital, such determination is characteristic for developed economies and guarantees further proper dynamic development of country.

• At the same time, economic development shall be reviewed as ground of historic-cultural development of society that stipulates wide utilization of economic criteria and mechanisms within social relation system. As per to this, we shall widely use economic criteria in other areas of social functioning.  So it shall be considered as effective usage methodology of already accumulated wealth.

As a result of afore mentioned, elaboration of effective and goal-oriented economic policy is feasible in case if society is well aware of general social mission, that country faces, in the form of economic growth. For there might occur such circumstances that economic growth might turn into self-aimed phenomenon and not reflect on people’s living conditions, growth does not always mean development.

3. In search of synergy

In his speeches, good shepherd Ilia the second Catholic-Patriarch calls us towards synergy. Seeking synergy is one of the main directions for our development. It is true that from the standpoint of our Christian belief and economic development position, synergy is the term of different essence but, call of Ilia the second for synergy is so timely and actual that it becomes the cornerstone of new economic paradigm. Within the frames of national economy, when discussing economic processes synergy (was more than sum of integral elements) is a macro economic characteristic. Reaching synergy in modern global setting means, to be correctly and efficiently integrated in the world market and simultaneously possess mechanisms that ensures own economic originality, by the means of which economic activity outcome will be directed towards country’s historic-cultural development.Therefore, synergy implies such systematism, when optimal development version is reached, which employs surrounding conditions on the phylogenetic basis of its society. For clarification of this notion, let’s consider national economy in correlation with its settings.

Any country’s economy is an open developing system. When it is closed (when countries, for political reasons try to minimize economic ties with outside world and implement strict state control, or other partner countries are unwilling to cooperate with them for political reasons as well)  even at that time it is open, as the world market dictates regularities of fundamental importance of country’s economic development. Accordingly, in the light of systematize, degree of free movement of money, capital and work force appears as the main characteristic of macro economic development. Free movement of capital functional forms in the given economy, stipulates uniting market criteria of alternatively usable resources. Thus, national economy is construed as formation of spatial area of joining existing resources within the whole macro economy, including entered and already operating foreign origin capital (branches and representations of transnational and other foreign companies, as inflow of work force, is considered as national economic subjects), for what, due to the competitive conditions existing on global market, economic efficiency of joining resources existing at country’s disposal is defined. Consequently, while studying economic development, given macro economic setting gains high importance.

Any environment of macro economy represents complex notion. It refers to its external as well as internal area of  the existence. Thus internal and external setting of economic functioning are differentiated. Internal environment is that has no concern with outside world and represents the essential condition, which ensures system homeostasis.

In material form, if economic environment includes entire state property potential (mineral resources + existing entrepreneurial and social capital), internal setting is its integral part that does not directly involve in global affairs such as: roads, surface and underground communications, mineral reserves, water pipe supply, those institutional attitudes in the form of economic relations, that is formed for the purpose of effective usage of economic resources. At the level of economic relations this is the whole system of internal market activity, which is organized on the basis of legislative as well as traditional local relations, including, proprietary relations and institutional form of enterprise, which undergo indirect impact of globalization. For example, goods produced from public ownership pastures, qualitative index of human development, social capital, where international trends of defining economic value system do not apply, where assistance plays determinant role, as well as historic-cultural traditions and industrial relations based on them, which are considered in the aspect of cultural diversity that gives specific tint to national economy.

External environment is the area of functioning of national economic (macro economic system of given state) which is conditioned by its foreign obligations and economic activity as a result of global regularities implemented according to the efficiency criteria.  Work force, money and capital migrated from Georgia as well as capital entered in Georgia, of any industrial function, represents elements of balanced relations with economic environment (with world market).

Internal and external environment of national economy in unified systematic create country’s macro economic setting, that represents material and non material factors of economic functioning and  unity of industrial processes accomplished on the basis of their joining. That’s why when we say “macro economic environment” we refer to unity of industrial union, separated from entire system of economic functioning via abstraction force and spatial area of its implementation.  Georgia’s economy is developed within the bounds of the world market and its active influence. Conditions of our involvement in the world market is defined by organizations responsible for general economic trends, advanced capital of foreign origin,  together with internal environment of economy creates united structure of public industry, united national economy.

Therefore, development of national economy falls in the conditions of country’s resource potential, technologies existing here and world market demand. Impact of these conditions on economy is very high, that comes from, industrial factor’s specific joining and criterion system dictated by world market and is stipulated by influence of global competitive environment. Therefore, competition as an adequate form of enterprise development shall be reviewed resulting from global market dynamism and not only from the view of conjuncture conditions arisen on local market, which is also attached great importance. When defining investment policy, we shall also come out of financial market regularities and widely use approved market mechanisms in developed market systems.

As part of the world’s global industrial field, open system takes new important opportunities from world economic trends. However, threats occurs as well, which is directed towards wrong transformation of economy, accordingly, for their neutralization purposes, it is necessary to build such industrial mechanism, that will strengthen macro economy, create basics of  internal market development and form systemic growth of internal permanence skill, for development of dynamic balance existing between economic and non economic segments. In this respect, concrete objectives of institutions responsible for development of national economy, represents choosing such way of economic development that will specify its originality and high development level of non economic social area.

When we consider economic activity, as a choice, main attention should be drawn to what effect will it have when using separate resource on the world market. Important fact is how we enter in the global economic environment. In the process of problem analysis its important to understand that it does not matter whether we review the issue from the point of export-import position or from the capabilities of local market. Thus we develop export-replaceable product or create conditions for sales on site.

Resulting from the competitive environment of the world market, we shall be aware that countries are not rivalries on the world market, firms come out in the form of enterprise subject and state, if it’s really interested in bearing responsibility on welfare of its population, should actively be involved in this field in two directions:

• Consider internal market as unity of existing and potential consumers, on this basis, creating conditions to firms for adjusting to internal markets and at the same time creating antimonopoly mechanisms of any market segment,
• Promoting firms (aiding) in searching foreign market and earning respected place on site.

Consequently, improving competitive environment should be reviewed widely and not as state antimonopoly activity.

Based on international experience (as developed as well as developing countries) in battle against international competition, at the first place, labour-consuming fields such as: agriculture, manufacture of agricultural products and light industry receives aid from state. States are trying to use international trade mechanisms (quotas, tariffs. For instance Japan has 1000% custom duties on rice production that significantly raises its price on world market). Also create supporting mechanisms for farmers.  In this term, the world’s most ancient and popular agrarian policy went through certain stages:

• Intensive (Formation of cattle breeding and plant growing as united system)
• Competitive (improvement of soil fertility, cultures, species and growth of productivity on its basis)
• Locational (support farmers in forming as cattle breeders. E.g. the main problem of stolypim reform was land “razviorstka”, allotting so much land to peasants that would ensure his formation as cattle-breeder. The kingdom of England acted with the same methodology from the end of 18^th century, under the recommendation of Francis Bacon (here the criteria of attaching rural land to owners represented creation of opportunities for farmers enabling them to bring up their children within certain prosperity and freedom, otherwise people grown up in a different environment were not suitable to serve in infantry; cavalry was formed by feudals).  This model is very actual for us, as agricultural plots are divided into 2.4 million land parcels, out of which more than 600 thousand is in the ownership and 95 % of land proprietors will not become farmers.
• Diffusion model, (supporting high agricultural achievements, test of species, providing new selective material and etc.)
• High reimbursement models, (in favor of farmers)
• Model of stimulating novelty (related to genetic engineering and modern scientific achievements)

Location model is especially important for us, which will be adjusted with novelty stimulating model. i.e. state should take care and promote farmers, in order to enable them to earn place on local market (mainly) as specialized cattle-breeders, help them in mastering modern agricultural achievements, resulting from their capabilities and economic efficiency. This is substantial as long as, labor-consuming fields such as: agriculture (manufacture of agricultural products) and food industry provide employment opportunities. (from 100 tones of barley we can get 700 000 liters of beer and by refining remains with other compositions such as grass, stubble and soy we get 500 tones of food for cow, or enough to feed 100 cows. If we follow from barley reprocessing to cattle breeding, we can see that it is quite labour-consuming direction and provides creation of many jobs. Particularly, in order to produce 100 tones of barley, one employed, qualified manpower is enough, but for further processing and delivering obtained product to consumer, around 7-9 fully employed person is essential). Thus, for the purpose of increasing number of employees and local market competitiveness, state should assist producers of agriculture products, in creating and mastering modern industrial mechanisms. It should be taken into account that modern market requires many small enterprises, producing goods for distribution network (packaging, sterilization, sorting and etc). Such type of enterprises create possibilities to process product on further stages (for instance: farmer delivers apple to packager, who sorts product and provide distribution with commodity fruit, and supply food industry with other products, where from nonstandard fruit you can get: juice, vinegar, calvados, dried fruit, fruit porridge and animal food. Thus, important reserves appear for providing work places.) Therefore, enhancing competitiveness of producers (firms) operating in country should be analyzed as characteristic coming out of world market demand. Development of local market is promotion of such producers of specialized goods and services under national economy, which will offer their product to consumers, instead of foreign high quality goods through competitive conditions. The second important factor to contribute in increasing economic competitiveness represents  firm’s support on the world market, where state should act as a guide and main support for national enterprises. From this point, it’s extremely important to participate in bilateral and multilateral international and interstate agreements, implement own economic initiatives  and conduct right surveillance of enterprises, existing in the country, dislocated on the basis of foreign capital.

Boosting country’s competitiveness is foremost directed to developing local market and participation intensity growth of national markets on international markets. Therefore, coming out of this point, country’s investment activity should be reviewed from conjunctive criteria formed on the world market.  The metric (amount) basis of this should be economic efficiency of each advanced monetary unit on the world market; it is inadmissible to use national monetary unit, GEL with much lesser efficiency than other currency unit efficiency on the world market. Overcoming this difficult problem is qualitative characteristic of state’s honorable economic regulation program. Solving of the noted problem conditions enhancement of large enterprise competitiveness, engaged in the world market, deriving from historically formed and its geopolitical importance in Georgia and what’s more their transformation into organizing leading structural element of internal market. (This problem bears crucial importance for Georgian national economy, as long as it includes large industrial units: Chiatura-Zestafoni industrial and metallurgical enterprises of ore extraction, cement plants of Kaspi and Rustavi, chemical-metallurgical plants of Rustavi, ports of Batumi and Poti, railway and large enterprises of energy generation are not properly appraised by our economic policy; besides we don’t use transport highways that go through Georgia by transnational enterprises appropriately). At the same time, large enterprise units can not respectively participate in country’s cultural life and their attitude towards Georgia’s traditions and social environment organization is so to say, not distinguished by high responsibility that represents violation of UN and other international convention existing on this issue. (Relation system formed over the years in Chiatura Manganum enterprise is classical example of violation of labour conditions of employees, approved in international and civilized countries. Labour norms, holidays, traumas and other relation system is so “Draconic” that it raises associations with early capitalistic labour relations). From this view, competitiveness, the principal feature of country’s economic environment, shall maximally be used in order to represent national economic structure of Georgia as one whole, not just on the basis of criteria defined by the world’s integrating organizations (world bank, WTO, ILO Commodity – material values etc), which is extremely important, but contribute inspite of ownership and technologic particularities, create such systematism which strives towards synergy and allows to effectively implement resource-joining existing at its disposal.

Therefore, economic synergy can be reached, just in global environment within right adaptation and integration conditions, if we maintain phylogenetic basis of country’s development.

4. Real sector development tasks

Real sector represents the basis of Georgia’s national economy. Real sector is unity of technological processing of sectoral diversity of natural resources by a human. Development level of real sector defines country’s development. In addition, country’s real sector is the basis of its sustainable development. Economy of society oriented on sustainable development is based on efficient exploitation of natural resources and advanced ecological technologies. The system should be based on cluster formations and proceeding from its existing structure, large formations participating on international market and participants of local market. Foreign capital participation in form of transnational corporation is principal as well.

Real sector of Georgia’s economy represents, complex, highly different conglomerate of development level. For instance, if we compare: industrial complex of Chiatura-Zestafoni, Isotope plant, chemical-ore factory, Rustavi and Kaspi cement plants to each other we see that, their functioning derives not only from industrial technology development level and features, but also from non-existence of  entire industrial policy in the country.  Hundreds of small enterprises do not fit within united industrial policy, which is created by owners.

In order to better employ Georgia’s current industrial potential, enhance capacity of its real sector and grant synergy effect to the whole economy, differentiated approaches should be implemented towards enterprises, acting on the world market and within internal market. Such attitudes should result from country’s entire industrial policy, in the basis of which will be problems of employment, inflation and economic growth.

Energetics represents ground of real sector. Without developed energetic system it’s impossible to talk about utilization of modern technology achievements and complete satisfaction of population demands. Energetics demands of industry condition steadiness of any macro economic structure basis. From the point of natural resources, Georgia has exceptional energetic base. Oil, gas, charcoal, thermal waters are found here and there is an opportunity to use water, wind, sun and bioenergy. The fact that exploitation of our energy resources is related to the efficiency criteria set in global environment, utilization of hydro resources developed mainly here.  As the World Bank asserts, share of hydro resources in used energy resources (electro energy) here is 92 %.  It can be assumed that Georgia is the only country where hydro power creates electro energy production base.  This results from our geographic and other features and it represents our competitive preference that we should strengthen. Utilization of our river resources enables us to solve other systemic problems:

• As most of hydro resources are located in mountains and rivers here have other meaning, their usage will cause stimulation of mountain’s vital mastering, population retention, development of roads and other infrastructure that will finally contribute in holding population in mountainous and hilly regions and improvement of demographic processes.
• Construction of hydro electric power stations will promote fruitful usage of water resources, regulating system of their utilization will be created and this will enable us to use capacity of the rivers more effectively.
• In terms of power consumption, in case of correctly calculated energetic balance (if our country’s system will be paralleled with neighbor country energy system), we will appear in good conditions, exchange cheap energy on expensive. Peak on basic and thereby improve export import balance. Obtain differentiated income (rent).
• Create criteria of economic efficiency on local market for using sun and wind energy, as well as for employing thermal and hydro energetic resources, geological excavation works and own oil, gas and charcoal resources.
• Creation of opportunities for the use of energy-consuming technologies.
• In addition to direct economic effect, utilizing mountain region creates feasibilities of maintaining cultural-historic diversity and involvement in its entire industrial processes.

From the point of sustainable macro economic development, for efficient functioning of country’s national industrial complex, construction represents extremely important field. Construction, in its essence is multi-profile and technologically non-typical field. It consists of building material industry, construction technology, architecture and etc. thus for denoting the unity of this field term “construction complex” is used frequently. It is tightly linked to country’s natural resource usage issue.  Starting from withdrawal of land parcels from agricultural circulation including, obtaining building materials, construction complex is related to the problems of exploiting natural resources. Construction of roads, road bearing facilities, dams, underground engineering communications, pipeline and other infrastructure objects, military-strategic buildings, industrial and civil, including residential buildings.

Although, large constructions of international and regional significance have ended, by the means of which Georgia earned its geopolitical function in south Caucasus, still there are such projects that require big investments in order to accomplish them. Nowadays material-technical conditions for development of construction complexes exists in Georgia that make us think, country is ready for large constructions. Besides, if large scale construction works do not continue in the country, driving force of this complex, material-technical base will loose its significance and it will take decades for its further restoration. Unfortunately, we have experienced such fact in 90-ies, when construction capacities left country at very low price (In Russia, Turkey) and its further renewal took 10-12 years. Simultaneously we will loose qualified work force that we already lack.

In order to enhance construction complex efficiency it is necessary to elaborate adequate, rational, financial system. Everybody, who is in touch with residential building issues feels (has experienced on oneself), drawbacks existing in this field, which are linked to legislation and financial mechanisms for ensuring effective construction. Therefore, energetic as well as construction bears vital importance for the country’s economic development and this field of real sector together with agriculture and extractive industry defines dynamism of the country’s sustainable development.

Agriculture, forestry and fishing are those fields of industry, where jobs are created, rational organization of the country’s territory takes place, essential food and raw material for the population is created for production processing fields. From this view this field of industry is extremely important, thus we shall immediately start working on agrarian policy document of the country. Not only is the content of the document important but even its creation mechanisms, as participation of interested people (whole Georgia) should be ensured as well. This kind of attitude is conditioned by old-fashioned ideas that still exist in Georgia, as per to it we won’t be able to satisfy our demands with our own food:

• Efforts are needed to address problem solution providing country with products and cast away, harmful prejudice dominating for years that “Georgia can not produce food by its own resources”. Referring to this, we shall overcome the idea that we have abilities to produce just 75% of cereals.
• By the help of international experience and assistance of responsible institutes, by the means of world ongoing inflation and modern financial tools, reach to weaken the reasons causing it in Georgia.
• Create such economic mechanisms, that will enable us to direct country’s financial and other resources allotted in other fields,  in favor of agriculture as agriculture will not flourish without creating synergy effect in entire economy.
• To foresee our historic experience and agricultural and ethnical traits existing in each region. All these shall be based on the newest agricultural achievements, in particular, outcomes of Georgian sciences.

While discussing these general matters, we shall focus on the following problems:

• The climate changes due to the world global warming. Agriculture faces new issues: a) agriculture crop spreading (region, new culture adaptation, establishing agro-technical and technical features) taking into account new land cadastral data; b) revision of agro terms, problems of existing culture cultivation.
• Studying technological conditions of productivity optimization of planting culture and cattle breeding fields and propaganda; in this terms: a) organizing schools; b) creation of demonstrative farm industry; c) using television and other media means.
• Arising from agro-technological conditions in farming and cattle breeding fields, establishing measures of specialized farmer industry and stimulating its spread. This issue is crucial, producing and realization of wealth (production and service market) created by market turnover (property market) of land and other resources in agrarian field, for inter balanced and proportional development.
• Elaboration of new technological conditions for agricultural resources (land parcels, forest ponds, pastures, lakes, and rivers etc ). It is important to develop not only intensification factors but foresee realities resulting from natural climate changes.
• Propaganda of modern means of financing (crediting) farming industries. Consulting with banks and elaboration of new financial tools (insurance, debt obligations and etc) and recommending.
• Legislation revision within the frameworks of new agrarian policy formation and elabouration of essential amendment package (especially to land, forest, marine, construction related laws). Additionally, reflect business features of those employed in rural sites, in labor legislation.
• Revise rules and norms of setting tax on agricultural products during state budget draft discussion (excise on alcohol beverages, meat and tax on imported products). Besides, reserves for local budget formation shall be sought, as the latter indirectly creates social conditions and infrastructure for agriculture development.
• Foreseeing current market conjunction, elaboration of basic parameters of several (minimum two) agro-industrial clusters, projecting mechanisms for realization, coming out of its macro economic importance.
• Promotion of modern agrarian science advances, in particular testing domestic achievements and implementing inculcation mechanisms in practice.

One of the conditions for revival of Georgia’s agriculture is substantial changes of current world agrarian and food conjunctions that is provoked by creation of united distribution network of northern and southern hemispheres. Accordingly, efficiency of existing specializations changes, new market conditions are created and what’s important essentiality of using new knowledge and experience. In this respect, when we consider innovations and future-oriented problems, we shall consider resource potential existing at our disposal in a new manner. For instance, grass cover in our alpine zone is infinite source of food for cattle breeding.  Plenty of hay can be made and sold in natural lawns existing here, however this resource has not drawn proper attention of state till now. It is also worth noting that grass in Georgia was considered as one of the important public industrial resources and attitude to its institutional system bore one substantial importance; (community pastures, transfer paths, common pastures and etc).

5.Monetary Sector

From the view of the world monetary system, each country shall possess one centrally emitted monetary unit, which will be converted to any other currency units, without any restraints and freely transferred within the world monetary system.

Monetary-credit system represents central and integrating unit of functioning within global economic setting of separate national economy in the modern world. On the one hand, monetary credit system of national economy is independent integral structural element of country’s macro economy, and on the other hand, it is the part of the world monetary system, together with other sovereign countries and transnational institutes, it creates world financial architecture. Monetary credit system of the country, as reciprocity resulting from legal independence and peculiarities of industrial ties existing in the country, gains its own systemic features and thus represents one of the main structural parts of the country’s macro economic development. Thus, as father God Holy Spirit lays out his son, as savior of the world, world monetary system, by the help of country’s financial architecture, forms country’s monetary credit system within the heart of economy. Consequently, monetary-credit system of any country is a result of uniqueness characteristic for global economic regularities as well as local national economy and systemic element of interconnection implementation.

1. Importance of National Bank in market economy is extremely important. It is responsible for price stabilization, inflation processes and etc. Georgia is integrated in the monetary system of the world. Satisfies demands of Commodity – material values: one currency unit, free conversion and money transfers, Commodity – material values covers negative (possible) balance of taxation raised from its basis.

1. Commodity – material values requires that all banks shall work with Mundell Fleming model. i.e. take into account the fact that it is impossible at the same time to determine:

• independent monetary-credit policy;
• free money transaction and;
• own independent exchange rate of money;

Accordingly, as long as each member of Commodity – material values is obliged to implement free money transaction, country as it is Georgia has no feasibility to violate it or interpret freely, National Bank faces  option, wether to carry out independent monetary credit policy or independently determine money exchange rate as it can not accomplish both of them simultaneously.

3. National Bank of Georgia refused of its own monetary credit system and became regulating body of Country’s money exchange rate. In fact, it is a big exchange organization of state importance, determining exchange rate itself. Performing this function in a country where dollarization level in money turnover exceeds 60 % and export-import balance is constantly low, is not so simple.

4. Formally, world monetary system is based on market correlation of US Dollars and Euros. Central bank of Europe and Central reserve system of the US do not come out on an open market, therefore their exchange rate is not regulated as per to conjunctive situation ongoing towards other currency units, thus correlation formed between them is maximally objective. General proportion created by interrelation of dollars and Euros on world money market becomes guidance for central banks of all countries. Central banks come out on an open market and regulate national monetary unit exchange rate dynamics, from conjunctive points.

5. Central banks in whole world, especially in developing and other high dollarization countries, while determining money exchange rate widely use targeting (direct target identification) method. This method is considered to be firstly used in New Zealand, but as per to the opinion spread in economic literature we used it in Georgia in 1995-1997 years, earlier than New Zealander would grant any importance. This had its reasons, at that time GEL was strictly linked to US Dollars and any change was controlled by Commodity – material values. Thus, Georgian financiers were trying to consider factually existed goods turnover volume when determining exchange rate e.g. GEL with Turkmenistan Manat parity, to other currency units. Therefore, if we look at GEL exchange rate issued by Georgia’s national bank, towards other country’s currency units, they don’t always correspond to their cross rate. For instance: Azerbaijanian Manat, Russian Rouble, Turkish Lira and so on. It’s noteworthy that in 1995-1997 Georgian know-how was lost and utilization of targeting method has restarted by 2000 year. It is unfortunate that our financiers use noted method on the grounds of technical and not fundamental analysis.

6. Apart from the flaws existing in targeting, National Bank can not properly control money circulation process. Two aspects are especially important in this direction:

• Money being in circulation is not completely aggregated. National Bank does (can) neither allot independently nor control remittances and their impact on GEL exchange rate. Money in transaction state and other money deposits of non credit institutions are united in M3 aggregate and its expecting impact on GEL exchange rate is not properly foreseen.
• Almost 80 % of Bank’s deposit base consists of one month deposits, or salaries of population and money income equivalent to them that banks use as short term credit resource.

7. Due to the fact that National Bank can not independently accomplish monetary-credit policy (can not regulate credit interest rate), its influence on banks bears limited character. It does not study bank activity on the basis of CAMEL ratio and use its contracted version CAEL. This implies that efficiency of bank management is not under its surveillance and is embodied just by control of separate norms. (Capital volume, asset quality, profitability and liquidity).

8. Due to such weak control, banks work with clients as credit institutions and enjoy state privileges existing for depository institutions. There are cases when they use their own resources by the help of mediatory institutions (micro financial organizations).  Because of this and reasons set forth in article 6, real credit market does not exist in Georgia and comes out on the scene usury relations with suitable social consequences.

9. Analysis of fixed capital of acting bank in Georgia shows that majority of them presents KVZ (კვზი) mediatory financial institutions. For this reason, efficiency criteria of its activity is not formed on our domestic market, bank management is isolated from interests of real owners, and exposes interests of mediatory organizations, consequently liquidity trap is created that negatively impacts on the country’s real sector.

Hence, we can conclude that transformation of Georgia’s banking sector is inevitable task, earlier we start the process sooner we get desirable result. Transformation shall start from national bank.

The main feature that finances differ from money is its attitude towards owner. When money starts action without owners will it represents finances. People’s pecuniary liability, performance of which is not related to their concrete decisions is financial system. Financial system is the form of development of economic processes, by the means of financial system the entire industrial cycle of monetary relations, between participants are formed. It produces Gross Domestic Product, distribution and redistribution. As per to their origin centralized and decentralized finances are differed. Besides, there is much more flexible classification, according to which finances of: industrial, household farms, state and municipal are differentiated.

Development level of macro economy relies on efficiency of financial system in the country. Modern global world turns national financial system into one integral element of entire world architecture. Proceeding from this, national monetary-credit system, as well as national financial system shall be considered within the world monetary dynamism (evolution). From this point, national financial system is the main regulating unit, which maintains originality of economy within free market conditions and in case of necessity neutralizes undesired affects of global regularities on macro economic system.

State budget presents central unit of country’s financial system. Thus it is considered that state budget is country’s “main financial document” (book). Problem issues related to budget can not stand any critics in Georgia:

• State budget definition is vulgarized
• local budget formation resources factually do not exist
• there are no coordinated budgetary and tax codes
• organic law on budget represents integral part of punitive system of disciplined society
• Pension provision resources and social security problems of people are not separated and are linked to state budget
• In separate cases it is direct source of creating market monopoly formations

Such organization of state budget and negligent attitude towards budgeting process in the country is the result of non efficient expenditure of local investment resources and undeveloped capital market. Transformations in this field are rather simply accomplishable, but unfortunately new government losses time and energy and is not able to achieve visible results.

6. Labour and Social Protection

Necessary condition for transformation of labour and social protection system, is its reformation. But reform, which implies creation-formation of new social relations; it is important to transform these systems that means changes of their target. Therefore, it is crucial to replace existing ruling forms by modern adequate forms (reform) suitable for situation, but more importantly is to set right targets before these systems and selection of personnel, who will themselves, be bearer of this new targets.

Open economic system is characterized by free movement of capital, money and workforce within today’s world, that’s why discussion of labour and social protection issues shall be taking place on the basis of global regularities. From this view, it is important to guide with regulations elaborated by international labor organization. Also we will depend on rich international experience in social protection field.

Human and social capital dynamism, in any country, counts on local peculiarities and capabilities of development. In this case we deal with limited amount of resources that can be used alternatively. Thus, choice we make directed to work force development, labour insurance and social protection shall entirely be based on capabilities and development regularities of the country. As long as this field is not approbation place for untested logical constructions, political decisions shall be made as per to local market development capabilities.

Arriving from, the aforementioned methodological conditions, undeniable moral principles that, on the one hand, labor organization and insurance, on the other hand social protection issues of people, is based on completely diverse moral imperatives, labour pension- on justice, social-on the public charity, it is essential, to institutionally sharply separate each other, problems of labor protection and social services, practice of their study, realization forms and making political decisions in these fields.

Such transformations imply preparatory period that is possible to accomplish on existing institutional base, assuming to prepare for the next year, whole legislative and normative package, select personnel and elaborate new mechanisms for functioning of new institutes.

Necessity of arranging labour relations on modern level requires sharply distinguished and understandable policy in this field.  It is important to expose country’s existing cultural-historical characteristics within labour relation issues, which shall be brought in correspondence with recommendations of UN and International Labour Organization. We shall also have practical use of such fundamental importance norms of ILO as: 1700 hours work in a year, normal working day (the latter is especially important in case of recording employed people and determining work place), minimum labor salary, public holiday quantity and etc. From this point, functional representative of government (Ministry of labour, health and social affairs) together with other structural divisions of authority, shall elaborate employment support system ( workforce training, retraining, qualification  improvement, protection from labor trauma and so on.). State policy of workforce labour insurance and its implementation mechanisms shall be one of the defining integral parts.

Pension fund (s) represent one of the most important and universally approved form of labour insurance. As we have noted above, time has come that pension funds shall be created in Georgia (separate from social service system). Herewith, based on historic experience we consider reasonable to create united non budgetary state pension fund (hereinafter: pension fund).

State Pension Fund of Georgia shall represent strong financial mediator among state, employees and industrial field. It shall have legal right to:

• record other assets (budgetary transfers and voluntary deposits of employees) in its accountancy as liabilities;

• Keep accounts of each client independently (Giro accounts) and manage as per to its view;

• Charge accumulated funds with interest rate, which will be more than bank’s average deposit interest rate and less than credit interest rate

Pension fund, will act within macroeconomic setting of labour money and capital market. Financial system of the country (bank and budgetary), where acting financial tools (state debt obligations, banking system of money circulation) and institutes (tax service, money transfer system) represent functioning conditions of the mentioned fund. As per to it,fund will become one of the strong integrators of united market and as domestic market mechanism, ensures proper (negative) feedback, in order to grant desirable direction to global market impact on development of our economic processes.

We have already reviewed general methodological reasons of separation of pension fund, from united social service of state, but following circumstances appear as direct causes of their creation:

• Necessity of Independent state institute (financial mechanism) of labour insurance, as country’s principal value;

• Reciprocal incompatibility of financial systems and mechanisms, providing insurance of labour activity and social protection;

• Resulting from the demands of insurance market development, in complicated actual situation of global setting, necessity to improve labor normative base acting in the country and inevitability of vocational trainings acting in the mentioned field.

Pension fund source shall include mandatory pension payments calculated in proportion to remuneration of employees, amount of rate and mobilization rules of which shall be established by the parliament of the country and voluntary systematic deposits of employees, the amount of which will be defined as per to the relations between insurance object and fund.

Pension fund shall function by three column system;

• According to expenditure system (first column), implement provision of retiree-age population with universal pension source of which will be mandatory pension payment.

• Carry-out efficient service of pension deposits on the basis of  voluntary, accumulation system (second column), the source of which will be voluntary pension payments.

• Mixed system (accumulating and expenditure system together) the source of which will be pension and voluntary payment.

Pension fund, orginized in such way will be the main improvement factor of country’s investment setting. Its operation on capital market (market of defensive securities, reserve stock of budget deficiency, hastening money circulation) will stipulate activation of investment activity.

Pension fund, its organization on the basis of expenditure and accumulation systems, will become guarantor of accountancy regulation and exposes in a number of fields(construction, hotels and restaurants business and etc) and bring existing shadow incomes into budgetary turnover. i.e. will promote increasing salary and labor market transparency.

Mandatory pension payments shall be the source of pension fund expenditure system.  Funds gained via accumulation of payments shall cover the amount of pension that shall be disbursed. Pension payment in Georgia nowadays is revoked, accordingly GEL 1.146700 is allotted for 682 900 retirees from the state budget. This amount is not the margin, as the government plans to raise pensions; but nevertheless, pension payment shall neither enhance tax