Georgia in 2010: Afghanistan, Georgian foreign policy and trade and investment

As the Deputy Minister of Foreign Affairs of Georgia, a contributor to the NATO-led military campaign in war-torn Afghanistan, Alexander Nalbandov made a visit to Sydney in 2010. Georgia has deployed 900 troops as part of the international coalition fighting Taliban militants. On Monday 15 November 2010, Alexander Nalbandov addressed The Sydney Institute. In his presentation, arguing that Georgia belonged to Europe “geographically, historically and culturally”, Mr Nalbandov stressed that Georgia believed that “the occupation of Georgian territories by the Russian Federation should not be considered as an impediment to Georgia’s NATO integration”.

GEORGIA IN 2010: AFGHANISTAN, GEORGIAN FOREIGN POLICY AND TRADE AND INVESTMENT

ALEXANDER NALBANDOV

From the outset, I would like to introduce to you our main long-term foreign policy goal – integration into the European and Euro-Atlantic institutions, which are seen as staunch promoters of democratic values. We move steadily toward the European family of democratic nations – a natural habitat for Georgia. That is where we see ourselves, for we share with Europe common values and belong there geographically, historically and culturally.

But most importantly, we are Europeans by virtue. Our approach toward integration into the European community remains a framing tool for our democratic development and reform agenda.

The European Union

Georgia’s foreign policy more than ever is EU-oriented, and the government has the most ambitious European Integration related reforms agenda.

We are certainly not knocking on EU’s door yet. We understand that the pace of further enlargement is understandably slower. Nevertheless, the EU membership represents Georgia’s goal in a long-term perspective.

Given current dynamic of the EU-Georgia relations, we expect that within next 10-15 years Georgia should be able to fully enjoy the four freedoms of movement – free movement of people, goods, capital and services – which will enable us to achieve vis-a-v-s EU “everything, but institutions.”

As stated above, Georgia is part of Europe culturally, historically and politically through common values, principles and objectives. To ensure a successful integration process, we intend to deepen our relations with the EU across a wide range of areas, exploiting all the applicable frameworks of interaction. We are looking forward to cooperation that will open up our markets, foster free trade and economic growth benefitting all citizens of Europe.

In that sense, we have launched the negotiations on the Association Agreement with the EU, and are ready to commence official negotiations on the Deep and Comprehensive Free Trade Agreement, as we have had sufficient progress in both fulfilling all key recommendations of the European Commission and implementing the additional recommendations beyond the four key areas.

In terms of free movement of people the first very significant steps have been taken as we have signed the Visa Facilitation Agreement. In the years to come, Georgia aims at gradual establishment of the visa free regime with the EU. We also agreed upon the texts of the Agreements on Readmission as well as on Mutual Protection of Geographical Indications of Agricultural Products and Other Foodstuff, and on Common Aviation Area. Also we have initiated cooperation with the EU within the framework of the Mobility Partnership.

In the year 2009 EU launched the Eastern Partnership – the initiative that aims at bringing the eastern European countries of the former Soviet Union closer to the EU through bilateral and multilateral formats of cooperation. Georgia is actively involved in the EaP together with other five states.

The role of the EU is crucial in strengthening security and stability in our country. We are extremely grateful for EU’s endeavors since August 2008, which have emphasised its irreplaceable and significant role in building stability in Georgia and the region – EU took the international lead, brokered a cease-fire agreement, deployed a monitoring mission (EUMM), hosted a donors’ conference in a record time. At the present, the EU is part of the Geneva negotiations and strongly supports Georgia’s territorial integrity and non-recognition policy of the occupied territories. EU enhanced efforts are key to ensure full implementation of EU-brokered Six-point Cease-fire Agreement of August 12, 2008 and withdrawal of the Russian military forces from the occupied territories.  Keeping EUMM mission on the ground until all of its objectives are achieved, ensuring its full access to occupied territories and transformation of EUMM into an adequately equipped mission (or a policing and peacekeeping force) are of crucial importance.

NATO

Allow me to stress from the beginning that our NATO integration path is not just a policy of the government, but the firm will of the Georgian people. Vast majority of our population supports the NATO integration policy.

Both the unwavering determination of Georgia to follow the path leading to NATO and its commitment to necessary though painful qualifying reforms for the membership have enabled the Allies to declare at historic Bucharest Summit in 2008 that Georgia will become a member.

The new mechanisms such as the NATO-Georgia Commission and the Annual National Program launched after 2008 War, have already proved effective in advancing our NATO integration goal. We believe that they will eventually help us to meet the membership requirements.

With that in mind, allow me tell you that while pursuing its NATO agenda Georgia does not aim to import its problems into the Alliance. Rather it remains a dedicated security provider willing and able to share the burden of the NATO membership.

We want to contribute to international peace and security and address new challenges – especially those that transcend the European borders – in concert with all members of the Alliance.

This is the reason why we want to grow closer to NATO. This is about shared principles, values, beliefs.

Today, terrorists pose threat to the free world and our ways of life. We therefore stand next to NATO helping to make international security more resilient to adverse developments.

Georgia’s contribution to ISAF is yet another proof of our determination to enhance stability and security not only in the Euro-Atlantic area but also beyond its borders.

We understand that NATO’s success in Afghanistan is crucial for our common Security. That’s why, despite fragile security environment in and around Georgia, we dispatched up to 960 Georgian militaries to ISAF. They fulfill their duty without any national caveats and with deep sorrow I have to note that we already suffered the first casualties.

We know that the Allies appreciate Georgia’s contribution to the global security. We hope that each Ally fully comprehends the significance of Georgia’s Euro-Atlantic quest.

We believe that the occupation of Georgian territories by the Russian Federation should not be considered as an impediment to Georgia’s NATO integration. We strongly believe that the results of the ongoing reforms in Georgia, its progress in the democratic transition are creating a solid ground for the Alliance to take concrete steps to implement Bucharest Decisions. We will spare no effort to further advance our reform agenda in order to meet all the requirements for NATO membership.

This year has indeed been remarkable for NATO as at the Lisbon Summit the new Strategic Concept will be adopted that will guide the Alliance for the next decade. Undoubtedly, the Document will also have an effect over the policies of NATO partner and aspirant countries. We hope that the new Concept will reiterate the Bucharest Summit decision recognizing Georgia’s membership aspirations. Adherence to NATO’s open door policy is very important, but reconfirmation of Bucharest decision, which is more specific and has been taken explicitly with regard to Georgia’s membership aspirations, is of great importance for us.

The same is also true for the Lisbon Summit communiqué. We expect from the NATO Heads of State to reiterate in the separate paragraph of the Communiqué allied commitment to the Bucharest decision, explicitly stressing that Georgia will become a NATO member. I think we all understand full well how it is important that the decision taken at Bucharest is endorsed by all subsequent NATO summits.

Of course we expect that the Lisbon communiqué will underline support to Georgia’s territorial integrity and sovereignty, condemn the ongoing occupation of Georgian territories and ensuing massive human rights violations there, denounce Russian military build-up on the those territories urging Russia to withdraw its military forces as well as express the Alliance’s unwavering commitment to the policy of non-recognition of the so called independence of those regions.

And the last, but not least – we do believe that in order to address the problem effectively we need first to name the things properly. We need to call Russian actions in Georgia as an occupation if we want this country to take seriously our calls for de-occupation. We already have some allies that started to call the Russian policy vis-à-vis those Georgian regions an occupation and even passed relevant resolutions in their parliaments. Respectively, we consider it would be expedient to establish the legally and politically proper wording regarding Georgia’s occupied regions in NATO official documents as well.

Other foreign policy priorities

As far as Georgia’s other foreign policy priorities are concerned, I would like to mention that recently we have made considerable steps to diversify our foreign policy and establish or develop diplomatic relations and cooperation with states outside European continent.

We are striving to establish diplomatic presence in the countries of Central and Latin America and Africa, at the level of full-fledges embassies or institutions of special representatives (so-called one-man embassies); we introduced the mechanism of periodic bilateral (political) consultations with many states throughout the world that allows us to discuss specific issues of cooperation in a detailed manner and pave the way for initializing or developing relations in the spheres of mutual interests.

In this context, needless to say, Georgia considers the regional cooperation as one of its foreign priorities. In this regard particular importance is given to the development of cooperation with Asia-Pacific region.

It is of utmost importance for us to strengthen Australian-Georgian ties in political, economic and cultural fields. We would like to emphasise our desire to establish mutually beneficial relations based on common strategic interests and values and work together to contribute to peace and stability in the world.

We are discussing with the Australian side the possibility of signing the Protocol of Cooperation between the Ministry of Foreign Affairs of Georgia and the Department of Foreign affairs and Trade of Australia, which was suggested by the Georgian side, during my visit to Australia. We are confident that this document will be a good start for further intensification of our bilateral relations.

And last but not least – I am pleased to inform you that in the near future we plan to open our embassy in Australia as well, most probably in 2012; there is no doubt that it will give a strong impetus to even more active cooperation between two our countries, both at bilateral and multilateral formats.

Perhaps, you have been wondering all along why I have not spoken yet of the tragic events of August 2008, the Russia-Georgia War, when the Russian Federation invaded and occupied Georgia’s inalienable territories of Abkhazia and South Ossetia. Indeed, why didn’t I speak of the fact that 20 per cent of our country is occupied? Why did not I mention that 10 per cent of our population is ethnically cleansed making them refugees in their own country?

Why did not I speak of the Russian tanks, troops and artillery, which are placed 32 kilometers away from our capital in blatant violation of the international law and the six-point Ceasefire Agreement of August 12, 2008? Perhaps, I have done so to bring you today a simple and straightforward message: Russia is irrelevant for Georgia’s democratic development agenda.

When I say this, I mean that Georgia will not dwell on the August War, or use the Russian occupation as an excuse to linger on our agenda. It is true that Russia is an occupying power. It is true that Russia is hindering, by all means possible, the progress of Georgia toward the aim of becoming a truly European state. They know in Moscow that many may follow Georgia’s lead, and they need to do something to preempt such development of events. Russia’s actions against Georgia have served and continue to serve as a demonstration of the fact that the Kremlin leadership will not tolerate democracy, rule of law, respect for human rights, and the Euro-Atlantic aspirations in the neighborhood.

Georgia will never live up with the fact of occupation of its sovereign territories and the ethnic cleansing of hundreds of thousands of its citizens. Nevertheless, even under the condition of occupation, Georgia is ready for comprehensive talks with Russia without any preconditions on normalization of relations at any time and any place.  Georgian side has no interest in having confrontation with Russia. Georgia only needs civilised relations and cooperation based on universal principles of international law, which requires Russia to start working towards de-occupation process of the territories of Georgia.

Unfortunately, what Russia really wants from Georgia is the “master-servant relationship,” disguised not so delicately under the notion of “the zone of influence.” For this purpose, Russia is determined to use all its energy, money and influence in order to defeat democratic transformation of Georgia punishing it for its policy course made in favor of universal western values.

This is why now, more than ever, the international community must stay alert in not letting Russia get out of hand and artificially create threats that affect international peace and security. It is crucial that international community constantly demands that Russia withdraw from Georgia, reminding Moscow of its obligations under the international law and the six-point agreement. Pursuing firmly the non-recognition policy of the occupied territories is key to make Russia understand that the civilised world will never accept the so called “new realities” in Georgia created through the military aggression, occupation and brutal ethnic cleansing of up to 500,000 native population.

The result of such a pressure was withdrawal of Russia from the small village Perevi. But this was just a small success in the ocean of unjustness. We need to step up the efforts aimed at de-occupation. In this respect, it is absolutely necessary to name things their proper name – we need to call Russian actions in Georgia as an occupation if we want this country to take seriously our calls for respecting the international law. The US has introduced this wording on the highest levels. The Lithuanian Parliament has adopted the resolution on occupation of the Georgian territories, and the Romanians follow the suit. It is necessary that the whole international community recognises Russia as an occupied power to make Russia understand that it bears responsibilities for what it has done and continues to do in its neighborhood and on the international scene in general.

At the same time, with a view to improving the living conditions of Georgian citizens currently residing on the occupied territories, building confidence between divided communities, and limiting the lawlessness of the occupying forces and proxy regimes, the Georgian government adopted the “State Strategy on Occupied Territories: Engagement through Cooperation”. In other words it is a comprehensive set of CSBMs, implementation of which will immensely contribute to government’s strive to extend to the populations of Abkhazia and the Tskhinvali region the benefits of its continual progress in national reforms, and its closer integration into European and Euro-Atlantic structures.

Achievement of the goals listed above will make it possible to substantially improve the quality of life of the population residing in the occupied territories and also in the areas adjacent to the Occupation Lines, to establish mutually favorable trade or social relationships that will facilitate the reintegration of the population residing on the occupied territories within the Georgian State.

The government of Georgia has presented the strategy in international organizations and various capitals of Europe. The practical implementation and monitoring of the areas of interests set out in the State Strategy are reflected in the Action Plan, which had been elaborated and adopted on 3 July 2010, by the government of Georgia, through consultations with local and international experts and think-tanks and stakeholders.  The Action Plan is comprised by concrete measures, in the form of different joint projects, aiming at implementing the goals and objectives defined in the State Strategy. We are very grateful for Australia remaining steadfast in its support to the sovereignty and territorial integrity of Georgia.

Economic reforms

Now allow me to turn to the subject of Georgia’s economy. It has experienced an immense blow both due to the external political challenges and the Global Financial Crisis. However, the initial gloomy prospects did not stand, as the Georgian economy not only survived, but showed exceptional resilience and potential for growth.

In the backdrop of the global financial and economic crisis, our national currency is stable and the level of investments has been growing steadily. This has been facilitated by the reform policy of the government, diversified economy, resilient banking sector and, of course, strong international financial support and assistance. As a result, We are having  6.6% average of GDP growth in January-June 2010 expecting to finish up this year within the same range; In real figures, our GDP increased by $337 mln in comparison with the same period of the last year; For January-June GDP accounted for $5.229 bln, setting the GDP per capita at $1,179.

Our reform policy aims at attracting investments, freeing our businesses from bureaucratic burden and creating a business-friendly economic environment to generate growth. We have cut the number of the business-related licenses and permits by 85 per cent. Now it is cheap, quick and easy to obtain a licence in Georgia. We have dramatically changed taxation system to be in line with our economic policy – the new tax code introduced in 2005 reduced the number of taxes, simplified administrative tax collection mechanisms, and laid a foundation for stable legal base in tax collection. The most important step was reducing the number of taxes from twenty one to only six:

1. Income Tax (personal income tax);

2. Profit Tax (corporate tax);

3. Value Added Tax;

4. Excise;

5. Property Tax;

6. Customs Tax.

Direct taxes were significantly liberalised. Personal income and social tax were combined into one aggregate tax after abolishing social tax and a single personal income tax rate of 25% was established. Profit tax (corporate tax) rate was reduced from 20 per cent to 15 per cent. Income tax will be reduced annually until 2013 when it will go to 15 per cent; in 2008 the personal income tax rate was 25 per cent, in 2009 – 20 per cent; VAT was reduced from 20 to 18 per cent.

The number of customs tariffs has been reduced to three bands (0 per cent, 5 per cent and 12 per cent) with a maximum tariff of 12 per cent. Currently 86 per cent of tariff lines are duty free compared to 26 per cent in 2005.  Dividend and Interest Income Tax reduced from 10 per cent to 5 per cent); Property Tax is 1 per cent.

We have concluded investment promotion and protection treaties with 32 countries and treaties to avoid double taxation with 33 countries (CIS – 6[i]; EU – 19[ii]; +8[iii] other),  negotiations are under way with 6 more countries.

Georgia diversified its foreign trade, which not so long ago was heavily dependent on trade with Russia. Now our major trade partners are Turkey, Azerbaijan, Ukraine, US, Germany, China, Armenia, Bulgaria, UAE. The trade turnover in January-August 2010 was $4,051 bln, which is a 17 per cent increase compared with same period of last year (whole turnover in 2009 was $5,500 bln). Out of these, exports amounted to $0,977 bln (35%-increase) and imports amounted to $3,074 bln (12 per cent increase); The trade turnover with the EU was $1,058 bln (exports – $0,177 bln; imports – $0,881 bln)

We have to take into account that in fact Georgia is a gateway to more than 180 mln market. We enjoy the free trade regime with the CIS states, Turkey; preferential trade with Norway, EU, US, Japan, Switzerland, Canada. We are having Consultations on the free trade with the US and are working to start negotiations on DCFTA with the EU, which is a good stimulus for foreign investors.

Our Free Industrial Zones in Poti and Kutaisi offer most favorable conditions for starting and operating business. We are further Improving Investment Climate by developing investment insurance systems similar to US, considering OPIC application model for private corporate investment. And let me quote some reputable international sources which attest to Georgia’s economic track-record:

• International Ratings Agency “Moody” – sovereign rating to improve a step forward to reach Ba3 (Long Term Local and Foreign Currency Ratings);
• Doing Business 2010 – 12^th position in Ease of Doing Business;
• Heritage Foundation Index of Economic Freedom 2010 – moved up 6 positions, currently – 26^th position among 183 nations.
• Annual Report by Fraser Institute on Economic Freedom of the World, 2010 – moved up 22 positions in comparison with 2009, currently holds 23rd position among 141 nations.

Recently, the President of Georgia introduced a legislative initiative to the parliament on Economic Liberty, Opportunity and Dignity. In addition, the Economic Liberty Act is designed to enshrine the liberal economic principles in the legislation in a way that will make this process irreversible.

So far, I have provided you with an account of our extraordinary track-record in reforming the state institutions and economy. Naturally, none of the reforms in any sphere would be possible without effective fight against corruption. Throughout these years we have reached an extraordinary progress in eradicating corruption. Transparency International named Georgia top corruption fighter in the post-Soviet space.

To finalise, allow me to tell you that the most important conclusion we drew out of the tragic and painful experience of the Russian invasion and occupation is that our unwavering commitment to democracy is the most potent weapon in our arsenal.

We are not using Russian aggression as an excuse to derail from Georgia’s path of reforms and democratisation, or our Euro-Atlantic aspirations.

To paraphrase the famous quote of General De Gaulle: “we have lost the battle, but have not lost the war.” We have emerged from this crisis even stronger. And we shall continue to fend off the specter of aggression and authoritarianism. We shall be unyielding in redoubling our efforts to expand freedoms within our borders, build a stronger democracy, and further strengthen state institution and a fiercely independent judiciary. We shall continue to strive even more rigorously to become part of the European and Euro-Atlantic community. And, as we embark on our quest, at this crucial moment, we need international support and cooperation.

So let me conclude that the stakes are enormously high, as we live through the crucial stage of democratic development. For this reason, Georgia’s success has international importance in many respects. Our failure would signify a heavy blow to the idea of expansion of the democratic transformation.

Those who support Georgia’s cause are the proponents of liberty and freedom, while those who are engaged in undermining our statehood are desperately trying to turn back the clock of history, restoring an outworn imperial order.

So, addressing you from this rostrum, I can say that by throwing your support behind Georgia today, you are creating a staunch ally and friend in your noble cause of promoting freedom.

Endnotes

[i] Armenia, Azerbaijan, Kazakhstan, Turkmenistan, Ukraine, Uzbekistan.

[ii] Austria, Belgium, Bulgaria, Czech Rep., Denmark, Estonia, Finland, France, Germany, Greece, Italy, Latvia, Lithuania, Netherlands, Romania, Poland, Spain, Malta, UK.

[iii] China, Iran, Japan, Switzerland, Kuwait, Singapore, Israel, Egypt.