Op-Ed by Lado Gurgenidze

1. W
Georgia can be a guiding light to other states
By Lado Gurgenidze
Published: 12:01AM BST 05 Oct 2008
Comments 15 (#comments) | Comment on this article (#postComment)
In autumn 2004 I departed London, uprooting my young family and leaving a comfortable City job, to rebuild a
chronically under-managed, former state-owned bank in Georgia with a market value of £14 million and a sizeable hole
in its balance sheet.
Many thought I was being more rash than bold. But uncertainty spells opportunity.
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Georgia, which a year before had been an obscure, failing state in the Caucasus, with a GDP of £2.2 billion and
widespread poverty, had been dragged out of a decade of corruption-induced slumber by the Rose Revolution, and a
new sense of dynamism and hope was stirring.
Within three years, and with a talented team of veterans from Western banks, Bank of Georgia was a London Stock
Exchange-listed financial institution with a market value of £460 million.
At the time of my departure - I am now prime minister in President Saakashvili's government - it had a reputation for
prudence and innovation and ambitious designs for expansion into neighbouring countries. Georgia is a country
transformed by sustained liberal reforms, thorough modernisation of the state and civil service, introduction of low, flat
taxes, radical deregulation of the economy and a zero-tolerance approach to corruption.
In early August, when Russia invaded our territory, Georgia's GDP exceeded £6.3 billion and its growth was close to 10
per cent. This was bolstered by an appreciating currency, the lowest inflation in the region, and a strong commitment to
cut taxes further and reduce the fiscal footprint.
Far from remaining obscure, Georgia has put itself firmly on the map, with foreign direct investment accumulated since
2003 equal to roughly 40 per cent of GDP.
The UK has become our most important economic and financial partner. Aside from BP's leading role as the operator of
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2. the pipelines transporting Caspian oil and gas to Europe and HSBC's presence in Georgia, dozens of London-based
portfolio investors account for up to £700 million (roughly two-thirds) of total portfolio investment in Georgia. London-
based private equity funds have invested £400 million in our telecommunications and real estate sectors.
London-based banks account for no less than 75 per cent of the £1 billion that Georgian banks and corporations have
borrowed internationally. All internationally-traded Georgian debt and equity securities are listed on the London Stock
Exchange, and the largest Georgian bank, sea port and mobile operator are managed by British CEOs.
London has become the principal source of debt and equity capital to the growing Georgian economy.
Today, in the aftermath of the Russian invasion, we find ourselves at the crossroads: will Georgia continue on its
chosen path as a young liberal democracy with a vibrant, business-friendly economy, or will it evolve - or degenerate -
into a very different country, weighed down by its Soviet past, its democratic values corrupted and its Euro-Atlantic
aspirations frustrated and crushed by a brutal external force?
Fortunately, we are not alone. Europe and the US have condemned the Russian aggression; last week EU monitors
arrived in Georgia to oversee the agreed withdrawal of Russian troops, and some of the loudest voices of support have
come from London.
We are grateful for this help; it is a reflection of the seriousness with which political leaders in Britain have responded
that support has come from across the political spectrum.
Preserving Georgia's democracy and territorial integrity is increasingly seen as "not about just Georgia any more", but
about the inviolability of sovereign borders and the supremacy of the rule of international law over the rule of force.
I would argue that there is another, often-overlooked dimension. The World Bank ranks Georgia as the 15th freest
economy in the world, with the level of economic liberty exceeding our Central and Eastern European peers and most
EU countries (the United Kingdom is ranked 6th).
The world has a vested interest in promoting Georgia's success on its chosen path. Just as my generation of reformers
draws inspiration from the remarkable transformation of Singapore or the radical economic reforms and democratic,
European choice of Estonia and other Baltic states, it is entirely conceivable that in 10 or 20 years' time a new
generation of policy-makers in emerging markets around the world may draw inspiration from our efforts to build, against
high odds, a functioning democracy with the highest-possible level of economic liberties.
Our opponents seek to undermine what is our greatest achievement - the realisation of a market economy and an open
political system.
Georgia, again, has the opportunity to recover, with the help of our friends, from the damage we have sustained and to
integrate more tightly with Europe and Nato, extending the march of freedom to the eastern shores of the Black Sea.
Great Britain has an important role to play in guiding the integration of Georgia into the free world. As a responsible
partner, we will not disappoint our friends.
Lado Gurgenidze is prime minister of Georgia. He is a Georgian and British citizen
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