The "Rose Revolution" of 2003 in Georgia led to the resignation of president Eduard Shevardnadze and to high expectations for the country's future. In the streets, the people of Tbilisi demanded the end of corruption in politics and economics.
People expected more democracy and market reforms when Mikheil Saakashvili took office in January 2004. Almost five years after the Rose Revolution the question arises as to what level of reform actually took place. Did Georgia manage to fight corruption and become a prosperous economy?
Recently Paata Sheshelidze, the president of the New Economics School in Tbilisi, gave a presentation at the Institute for Free Enterprise in Berlin. His talk "Economic Successes, Problems and Opportunities in Modern Georgia" gave a good overview of political and economic developments in Georgia since the Rose Revolution.
He reported that in January 2005 a tax reform came into effect which cut the number of taxes from 22 to 8 and introduced a flat tax of 12%. The post-Soviet bureaucracy was cut down and many state owned enterprises were transferred into private hands. Market forces were strengthened by abolishing a large part of the licensing requirements and other market barriers. At the same time visa requirements and travel restrictions were lifted.
While the picture of the modern Georgia looks quite positive, Sheshelidze emphasized the need for further reform. Reforms are still needed in the areas of financial services and foreign exchange. He also emphasized the need to improve the system of private retirement funds and the establishment of a proper private health sector. "In every direction Georgia is under Construction" was his comment regarding the present situation.
Among the many challenges for Georgia are the issues of unemployment and inflation, which is currently over 10%. Many of Georgia's current problems are the lingering results of Georgia's Soviet past. Even today Georgia's bureaucracy is still characterized by centralization and control. Often property rights are ignored instead of granting the much-needed protection through the legal system.
A vital question for a small country like Georgia is its relations with neighbouring states. Since the Rose Revolution relations with Russia are fraught. Russia still attempts to retain its hegemonic position rather aggressively. Current Russian foreign policy is the main danger to Georgia's liberty. Russia tries to discredit the new Georgian government, for instances by "adjusting" the gas supplies to Georgia or enforcing an import ban to Georgian products. With such measures Russia weakens the liberal forces in Georgia. So Paata Sheshelidze appealed for support for Georgia's desire to move toward liberty and independence.