US embassy cable - 05TBILISI2889

UNCLAS SECTION 01 OF 02 TBILISI 002889 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV, ECON, GG, Reform 
SUBJECT: GEORGIA IN RECENT SURVEYS: GOOD NEWS ON PACE OF 
REFORMS, MIXED REVIEWS ON MEDIA FREEDOM 
 
1.   Summary: Annual surveys on media freedom, anti- 
corruption, poverty reduction, and the general pace of 
reforms show Georgia doing well compared to other post-Soviet 
nations but behind former Warsaw-Pact and Baltic nations 
whose reform experiences the GOG is eager to emulate. 
Georgia is a top performer in the region on the general pace 
of reforms but still struggles with poverty and corruption. 
Although Georgia scores higher on media freedom than most 
other post-Soviet countries, it has been on a downward trend 
since the Rose Revolution.  End summary. 
 
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Media Freedom 
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2.   According to the 2005 worldwide Media Freedom Index 
released by the media-freedom watchdog Reporters Without 
Borders, Georgia ranks 99 out of 167 countries in terms of 
media freedom.  This ranking is part of a downward trend in 
which Georgia has dropped 26 spaces from being ranked 73 in 
2003, in the era of former President Shevardnadze.  Although 
Georgia is the second highest ranked CIS country behind 
Moldova (74), Georgia is very far behind former Warsaw-Pact 
nations such as Poland (53) and Slovakia (8), and the Baltic 
Nations of Estonia (11), Latvia (16), and Lithuania (21), 
whose reform experiences the GOG is eager to emulate. 
 
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Corruption 
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3.   Georgia is ranked as 130 out of 159 countries in 
Transparency International's 2005 Corruption Perception Index 
(CPI). Georgia is tied with Kyrgyzstan.  In comparison, 
Turkey is ranked at 65; Armenia, Moldova, Iran are tied for 
88; Belarus, Kazakhstan, and Ukraine are tied for 107; Russia 
is ranked 126; Azerbaijan and Uzbekistan are tied for 137; 
Tajikistan is ranked 144 and Turkmenistan is 155.  Although 
Georgia performs well in the CIS, it is still behind Poland 
(70), Latvia (51), and Lithuania (44). 
 
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Poverty 
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4.   The World Bank recently released its report on Growth, 
Poverty, and Inequality in Eastern Europe and the Former 
Soviet Union, analyzing the impact of economic growth from 
1998-2003.   The report is based on household consumption 
surveys and builds comparable indicators of living standards 
across the 27 countries of Eastern Europe and the former 
Soviet Union.  The report indicates that poverty has been 
reduced overall in the region from 20 percent to 12 percent, 
however, experts say Georgia has lagged behind due to 
"jobless growth." Georgia had a poverty level of 50% in 
2003.  Russia and Kazakhstan witnessed shifts in the 
distribution of income towards the poor, thus decreasing 
poverty levels.  In Georgia, poverty actually rose.  Most 
economic activity during the given period was related to 
investment in the BTC pipeline, which did not trigger 
significant job-creating growth. 
 
5.   The authors of the World Bank report indicated that in 
Georgia fiscal income was not distributed in favor of the 
poor population.  They called for an increase of pensions 
and social assistance, stimulation of the investments and 
support for the private sector.  Investments were 
implemented only on the account of privatization, while new 
owners have consistently reduced jobs. 
 
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Pace of Reforms 
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6.   In September 2005, the International Financial 
Corporation (IFC) published its annual report, which 
provides a global ranking of 155 economies on key business 
regulations and reforms.  The report tracks a set of 
regulatory indicators related to business startup, 
operation, trade, payment of taxes, and closure by measuring 
the time and cost associated with various government 
requirements.  Georgia was the top reformer in the region 
and the number 2 reformer globally--making it easier to 
start a business, cutting the number of activities licensed 
from 909 to 159, easing the cost of firing redundant 
workers, cutting the time and cost to register property, and 
introducing a new tax law with fewer and simplified taxes. 
 
7.   Although Georgia was a top reformer, by economic 
indicators its current rank at 100 of 155 countries suggests 
that it is has room for further improvement.  Looking at 
Georgia's ranking in particular areas, IFC finds several 
obstacles to obtaining licenses, as the new legislation has 
just been passed and not yet implemented.   Another 
indicator where Georgia falls short is in credit 
information, leading to less access to affordable credit. 
Georgia scores particularly badly in indicators tracking 
trading across borders, with relatively more time needed to 
export or import goods than its neighbors and three times 
the regional average for signatures needed to import and 
export.  Finally, Georgia scores relatively poorly on the 
Corporate Governance indicator which includes the 
accountability of directors, the disclosure of information, 
and the ease of shareholder suits. 
TEFFT