Guest speech by Lado Gurgenidze at the Conservative Party Conference September 2008

1. Text for Release: Georgian Prime Minister Lado Gurgenidze’s speech at the
Conservative Party Conference – 1 October 2008
Seven weeks ago, Russian tanks rolled into my country. It’s in times of crisis
that you really discover who your friends are. In Georgia’s hour of need, David
Cameron stood up for us and spoke up for us.
So it’s a pleasure – and a privilege – to address you here today, and I’d like to
thank David Cameron for the invitation.
David’s early visit of solidarity to Tbilisi and his firm, principled statements of
support meant a great deal to us. Today, in the aftermath of the Russian
invasion, we feel we are not alone.
Europe and the United States have offered their support and condemned the
Russian aggression. Some of the loudest voices of support have come from
London.
Great Britain has a long history of standing up for democracy when it is in
peril. This summer, in the Caucasus, you showed you have not forgotten your
history.
This is as it should be, for several reasons.
First, to frame the issue in realpolitik terms, Georgia plays a crucial role in
ensuring the diversity of oil & gas supplies for Europe. 36 million tons of
Caspian oil are delivered annually to the Mediterranean and Black Sea through
the Baku‐Tbilisi‐Ceyhan pipeline, operated by a consortium
led by BP, and our railway and ports. The Baku‐Tbilisi‐Erzerum gas pipeline
is the sole operational delivery route for the Azeri gas to Europe, bypassing
Russia, and Georgia is ready – and willing – to play an important role as a
transit country for the planned Nabucco pipeline. So, let’s hope that the price
we have recently paid will not be in vain, and Europe finds the unity of purpose
in enhancing its long‐term energy security.
Second, what happens in Georgia, and how the free world responds, has
repercussions far beyond our borders. By invading a sovereign nation and
recognising unilaterally the so‐called independence of two Georgian provinces,
by allowing the ethnic cleansing by separatist militias to
take place in the areas of Georgia it currently illegally controls, Russia has
presented a challenge to the international community. I submit to you that if
these violations of international law remain unanswered, the status quo of the
world order as we have known it for decades may be lost irretrievably. The
world would be a far uglier place and Europe itself far less stable if this
precedent‐setting case of unilaterally redrawing international borders were
allowed to stand.
Third, supporting Georgia is a cause the moral clarity of which is undisputed.
Today, in the aftermath of the Russian invasion, we find ourselves at the

2. crossroads: will Georgia continue making steady progress on its chosen path as
a young, liberal democracy, or will it evolve – or, rather, 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 brute
force? And if the free world allows this to happen, will it continue to occupy the
moral high ground it has deservedly held for so long?
Fourth, there is another reason why Britain should – and does – care. London,
in line with its status as the leading global financial centre, has become a
crucial source of capital to the growing Georgian economy. UK is the number
one source of foreign direct investment in Georgia. Dozens of London‐based
financial investors and private equity funds account for 2/3, or £1 bn, of total
portfolio investment in Georgia. London‐based banks account for 3/4 of the £1
bn our banks and companies have borrowed worldwide. All
internationally‐traded Georgian debt and equity securities are listed on the
LSE. Three of the top 10 largest Georgian companies – the largest bank, port
and mobile operator – are run by British CEOs.
Finally, there is another, often‐overlooked dimension. Since the Rose
Revolution, Georgia, once a failing state, has built the foundations of a vibrant
economy with the level of economic liberties rarely seen anywhere in the world.
The World Bank ranks Georgia as the 15th freest economy in the world, with
the level of economic liberties exceeding that of all our post‐communist peers,
virtually all emerging markets, and most EU countries.
We have proven that the supply‐side fiscal approach works, even in poor
countries. In the last five years, we have cut tax rates dramatically and
introduced low, flat taxes – and have been rewarded by GDP growth rates of
10% or higher and a four‐fold increase in fiscal revenue. We remain committed
to further tax cuts, reducing the flat personal income tax further to 15% within
the next five years, and eliminating altogether the taxation of dividends, interest
income and capital gains.
Consider that there is no stamp duty, inheritance tax or any other taxes or
levies. With budget expenditure accounting for 30% of GDP, we are committed
to reducing our fiscal footprint to 25% of GDP over the next three years. Our
enthusiasm for cutting taxes is matched by our prudence in debt management
and monetary policy. Our public debt stands at 20% of GDP, down from 56% of
GDP five years ago. Our inflation is among the lowest in the region and our
currency has appreciated strongly against the major currencies. We have
eliminated hundreds of licenses, permits and unnecessary regulations. This
reduction in red tape has resulted in the virtual elimination of corruption.
Georgia is currently one of the least corrupt countries in Central and Eastern
Europe. We are committed to free trade, having unilaterally abolished all import
tariffs and other trade barriers.
We have no currency or capital controls, no foreign ownership restrictions, and
have privatized aggressively over the last five years. We have been rewarded by
off‐the‐charts high foreign capital inflows, equal to 23% of GDP in 2007 alone

3. We have one of the most flexible labour codes in the world, and starting a
business is easier – and cheaper – in Georgia than it is in virtually any
developed economy. These policies, combined with the rapid growth of the
availability of bank credit, have resulted in an entrepreneurial revolution, with
over 50,000 new businesses being registered every year.
Our policies have empowered our people to harness the opportunities a
functioning free market economy has to offer. However, we are no slaves of the
libertarian dogma. We work to build a modern, just, and responsible society
with strong families at its nucleus. Our education system is fully based on the
principle of school choice. While we have privatised virtually all healthcare
facilities, we have ensured the poorest 18% of families receive basic medical
coverage. We have done so by embracing the principle of free choice – they are
given health insurance vouchers which they are free to use at any insurance
company.
We combine our free market ideology with our commitment to the environment.
Georgia is a green country, with the volume of standing forest per capita three
times the European average. National parks and protected areas cover 8% of
our territory. 80% of our electricity is produced by hydro power plants, and the
liberalised energy market has resulted in Georgia being the most
energy‐efficient post‐Soviet state.
So the fate of Georgia matters. It matters for the people of my country above all.
But it matters for Europe, and it matters for the world.
My generation of reformers draws inspiration from the radical reforms and
democratic, European choice of Estonia and other Baltic states. And we draw
inspiration above all from the pioneering reforms of Margaret Thatcher.
We dare to hope that in 10, 20 years’ time the new generation of policy‐makers
in the world’s developing economies may be able to draw inspiration from our
own efforts to build, against the odds, a functioning, stable, prosperous
democracy.
That is our hope for tomorrow. But for today, at this difficult moment in our
history, we are proud to have the support of Britain, one of the oldest
democracies in the world, standing by one of the youngest. And we thank you
for it.
ENDS