American Enterprise Institute

July 6, 2006

[Edited transcript from audio tapes]

12:45 p.m.	Registration and Lunch
1:00	Introduction:	Christopher DeMuth, AEI
	Address:	Mikhail Saakashvili, president of Georgia
2:00	Adjournment

Proceedings:

Christopher DeMuth:  I’m Christopher DeMuth, President of the American Enterprise Institute, and I’m delighted to welcome you here this afternoon for this address by the President of Georgia, Mikhail Saakashvili, who is in Washington this week for consultations with President Bush, Vice President Cheney, Secretary Rice, other officials and legislators, and to help us celebrate our Independence Day.

Here are two dramatic developments in current world politics.  Small nations are playing a larger role in international affairs, and a nation’s external policies are increasingly seen as a reflection of their domestic policies.  We tend to focus on the threatening examples of failed states and tyrannies whose domestic horrors are exploited in the form of terrorism and lesser international burdens and troublemaking, but there are many positive, important examples as well of small nations whose enlightened domestic policies are yielding not only inspiration, but large, practical contributions to regional and international security and state craft [phonetic].  And of these, none is brighter nor more promising than that of Georgia and Mikhail Saakashvili.

President Saakashvili is both a lifelong freedom fighter back home and an accomplished academic with several degrees from US and Western European institutions and many close friendships in Europe and the United States.  He began as an earnest reformer inside the government in the wake of the Soviet collapse in the mid-1990s and then underwent two transformations.  In the years 2001-04, he changed from an earnest reformer to a true democratic revolutionary and national hero. 

And then, even more remarkably, since his election as Georgia’s President in January 2004 he has become something that is very rare, a democratic revolutionary who, when all of the excitement was over and the hard work of governing began, became an effective and highly energetic government official and political leader who, through his energy, intelligence and enthusiasm, has produced stupendous changes in Georgia, in reducing corruption, in sounder economic policies, in investment and the beginnings of economic growth benefiting all Georgians, and, as I said, has produced many other benefits in regional security and has become an important figure in the fight for liberty on the international stage.  We’re honored to have him at AEI.  I ask you to please give a warm welcome to President Mikhail Saakashvili.  [audience applause]

President Saakashvili:  Well, thanks a lot for this very warm introduction.  I really regret I didn’t bring my mother and my grandparents here so they would hear how good I am, [laughter] but certainly I am very pleased to be here at American Enterprise Institute and to talk to all of you.  I had a very interesting almost two hours spent at the White House yesterday where we had good conversation with President Bush and a joint press conference.  This morning I had breakfast with Vice President Cheney and some Cabinet members, with the Chairman of the Joint Chiefs of Staff, and I’m meeting Secretary Rice immediately after our encounter here.

I think I’m coming to Washington at a very interesting time.  The world and my region are going through very interesting fundamental transformations that will affect the whole environment in my part of the world and maybe the world in its entirety for generations to come.  What Georgia’s example and the example of other countries - Ukraine and some others in our part of the world – proves, is that democracy and efficient government are incompatible or even impossible in this part of the world, was just a myth invented by some people who just wanted to avoid such developments.  Well, it is there, it works, and it is the most efficient system of government.

I want just to focus on the facts without – without broad generalizations, but just the facts.  Three years ago, Georgia was basically what amounted to a failed state.  After the elections, we got in, and we saw that police had not been paid for many months, pensionists had not gotten their meager pensions for more than a year in most parts of Georgia, nothing had been done in terms of building anything since independence.  People were very cynical about their institutions and the way government functions. 

There was strong pessimism about the future of our country.  There was this absence of faith that something could change, and still people took responsibility in their hands and said it should end, we should do something about it.  And people’s power – with only one window broken in Parliament – brought us to power, brought us to the government, brought us also to the world stage because it was the world’s first televised revolution.

But it surprised them.  We had this hard work ahead of us, and the figures are there.  Our state budget went up from $370 million US  to the income part, which is almost $3 billion this year.  You can see the change.  It’s almost eight times or maybe nine times increased.  The income from GDP increased.  That’s an index of corruption, and the main story for Georgia is that Georgia has been transformed these years from being one of the most corrupt countries in our part of the world into what the European Bank of Reconstruction and Development says is one of three most non-corrupt countries in Europe.  Not in Eastern Europe, in Europe. 

Georgia has been attracting hundreds of millions of dollars of investments. Last year we were begging people, “Please take over our energy system and run it!  For $1 US we’ll sell it to you.”, It’s so inefficient that I don’t believe government can run anything, including the energy system.  Nobody wanted it.  This time there was a bidding with many companies bidding for it, and part of it was sold for around $320 million with hundreds of dollars of committed investment only in this part of the economy.  We had other privatization schemes, and we have now hundreds of million dollars coming into the economy.

When we look at how the situation changed, we will cite the fact that the portfolio of BBRD for Georgia already for this year is bigger than that for Romania, which is a much bigger economy in the Black Sea Region, to which we belong.  And this also shows how far this would go.  This year, Georgia is constructing two new international airports in Tbilisi and Batumi on the Black Sea Coast.  Now it’s also a big change in a short period of time, and we are already finishing this construction.  This year we are building more roads, more hospitals, more schools than have been built in Georgia in the last 15-25 years.  It depends how we count exactly, estimate it, but that’s the reality.  This year there’s big construction going on, and it will only increase.

We had enormous change in terms of the structure of investments.  We are getting many new sectors of economy that have emerged as a result of this transformation. The most spectacular development is the emergence of a new class of entrepreneurs in Georgia.  When I first met Georgian entrepreneurs, as one of my first deeds as President, I told them very bluntly – and I was at that time even more outspoken and radical than now, much more outspoken and radical than now.  I got wiser since then, and I know that I should watch my tongue and not say things that might cause problems.  But then I was very much more straightforward, and I told them, you know, I look at you now, and my biggest achievement will be that in two years’ time most of you will be gone from this room, that will be it.  I’ll be happy. 

And I told them, I’m not going to destroy you.  I’m not going to go after you.  No, you have all the conditions.  Actually, you will have whole freedom.  Nobody is going to bother you.  Nobody is going to extort money from you.  Nobody is going to harass you.  Nobody is going to impose export taxes on you.  We are going to decrease taxes. 

But I think when there is really a free competition, new guys will come in and fill your shoes and make the economy move because the only way money was earned before was through shadow dealings and government contracts and all kinds of things because – when I met them, the first thing they were telling me, look, please remove my competitor from the markets, raise tariffs, give us monopoly because that’s the only way our company can survive, et cetera.

And that happened because now I’m meeting the businesses, and they’re telling us, look, when I ask what do you want me to do for you, there’s nothing.  Nothing, just keep the rules of the game.  These are young people, self made, self efficient.  They are telling us, look, we don’t have problems with the government.  We still have problems.  We don’t have enough qualified people.  We don’t have enough information.  We still have to improve our own work culture and ethics.  But for you, from you, just leave us alone and keep the rules of the game.  And this is a big change.

Another big change which emerged, people are talking about democracy and saying, well, elections and media and things – and we have very vigorous media.  We have several sets of regional by-elections, which were then free and fair.  But the biggest change for me, which got unnoticed even by Georgian media, was the election of school boards a few days ago in Georgia.  You know, in the Soviet system nobody asked people what kind of education system they wanted to have.  Nobody had a say in that.  This was out of the question. 

And I was thinking, let’s experiment with that, but when I was thinking about it first as Chairman of the Tbilisi City Council when I first tried to introduce the reform together with my friends, were saying one thing is to have really assertive, efficient top government.  The other thing to entice people, join us, do things for yourself, don’t wait for the government to run things, take over the educational institutions.  And this is what I was saying - and some of my friends were disagreeing: people have so many other problems, why would they ever show up?  And we had these elections.  They weren’t really advertised or publicized widely, and in the country of less than five million people, more than 600,000 people showed up on one Sunday morning to elect school boards and to be really part of the education process of their children.  And not only they did it, in some situations they had quite a fight - who should be on the board, how should we organize, and how should it be done. 

This is the real change.  This is the real change that tells me things are irreversible.  Things are going to move because those people who already tasted that sense of freedom, you cannot take it away from them no matter what comes for us tomorrow.  And that’s my vision of how societies can develop in our part of the world.

Now, the reforms are a never ending process.  The main institutional legacy which we should be leaving behind us is trusting institutions.  Not poll figures of the politician because they change, and over time people get tired of politicians.  That’s a normal process.  But the fact that police in Georgia enjoyed only five or six percent competence rating, and now we have more than 70, this is quite something.  And if we can keep it this way for a couple of years, that would become totally irreversible.  The fact that in Georgia we have introduced this culture without corruption, it’s an amazing thing.  I just received a group of Central Asian businesses in Georgia, and they were telling me, look, we are in residence here not only because it is profitable – and it is profitable – but because it’s such an amazing thing to have a country in our part of the world where nobody is asking for a bribe. 

We had a real estate investor coming from one of the CIS countries who was investing several hundred million dollars in real estate development in downtown capital of Georgia. My Prime Minister met him, and then Georgian partners took him to all the ministers to get sure because it’s still a big investment.  And then in the end, he says, everything looks fine, everything is great, I’m going to invest, we are starting the building, and how much shall I give to these ministers for their percentage rate?  And his Georgian partners said, well, we don’t do such things here.  We don’t do anything.  And the investor asked “But how do they live?  How do they survive?  How do they earn their living?”  They said, they have high salaries, and plus they enjoy what they’re doing for their own country.  He said, I heard about it before, but I couldn’t believe it until I saw it and experienced it myself.

And that that system changed, that is – because when I got into my office, I first got this envelope after one month of work, and I opened it, and the sum I found there was roughly $40 US in our currency.  And I asked what it was, and they told me it’s your presidential salary, your wage you’re getting, $40 a month.  And the same evening I was traveling through the roads, and they give me an envelope with $20, and they said it’s your per diem for five days. 

I said in Switzerland you cannot even drink coffee for that, please.  But my predecessor was never interested, and all his ministers were getting even lower salaries because – and they were still the wealthiest people in the country, very wealthy basically, and some of them still are.  And we said, no, we’re not going to settle for this and immediately raised my salary [laughter], but the point is I went first to UNDP and I told them, look, give me some money to pay public officials because we have nothing.  The budget was empty when I came in, and they paid me – they gave me enough to pay several dozen anti-corruption officials, a few hundred customs officials and government members.  And within 3 months we increased the tax collection budget by 40 percent, and then we could start to broaden the circle.

And now, not a single official in Georgia gets a salary on which they can’t survive.  They’re all at about minimum acceptable wage, but they can live on it, and most of the people are getting one of the highest rates in Eastern Europe even if our GDP is still by far inferior to most of the Eastern European countries. We are heavily investing in buildings and offices for these officials – to make them look good and to instill decency and respect for their offices and institutions. It’s also a matter of transparency.  You know, with our police we have this show equivalent to Cops where our policemen are themselves heroes.  People know them because they are on television.  They like it.  They like it, but they certainly also respect the office because they also respect them.  They would like to be able to respect them even more.

So it’s a very complex issue, and, of course, lots of people got prosecuted for corruption from the previous government, and some of them had to pay back the damages they inflicted upon the country, like the head of the railway paid enough money to build nine new railway stations in Georgia.  The head of the road department paid back enough money to build tens or maybe hundreds of kilometers of roads.  But there are some new officials whom we appointed who were also prosecuted, but there we changed the law and this kind of bargain is no longer possible because we are not that poor anymore.  We can afford to get by without their funds, and somebody should know that they will always be held responsible if we think they’re wrong.  And that’s our approach, and that’s our system.

Of course, it’s still a long way to go, and, of course, when everything was bad people were desperate even for small signs of improvement.  And right now I know for all these years they would say we have too many problems in life, an absence of a constant supply of electricity and corruption.  This was the first winter where nobody in Georgia had problems with electricity, and people don’t care anymore.  They don’t appreciate it, it’s as simple as that.  They have it, and that’s it, period.  They have more time to watch television that’s criticizing us.

And the same thing with other issues.  97 percent, 96 percent of Georgians said in a Gallup IRI poll that they haven’t paid bribes for the last year.  Before it would be 20 percent.  So what?  We are used to being living in a non-corrupt society.  When we first started to change things, building in downtown Tbilisi, the whole country was happy things are moving finally.  Now we are building all over the country.  We are making hotels, and everybody is so used to it that nobody notices anything anymore.  That’s what government is all about.  They should fix things, of course.  And we are here to criticize them.

I recently was watching the television, and somebody said, what the hell is this new road in front of my house?  I don’t like it because cars sit outside, and it’s not safe.  I really wanted to go and shout at him, but that’s the main thing in democracy.  The better things get, the more people want.  And that’s a good thing because that’s what moves society forward.  Our government still has a high degree of support, but it’s not about those figures.  It’s about the sense that we are on the right track, and it’s about the sense in the end to rise above the occasion that it’s part of history, after all, the final consolation of every politician to appreciate it.

Of course, Georgia is not only a small country in the Black Sea Region, but it’s also larger than that, fortunately or unfortunately for us.  Because some of the successes – you we had double digit, almost 10 percent growth last year.  We’ll have double digit growth this year.  Some of those successes have attracted unwanted attention.  We also like that it serves as inspiration to Ukrainian democrats who are all our friends, to Belarusian oppositionists whose leader I met recently on the way here to Washington, but also people who want us to fail.  And that’s also there, but we know it, they know it, and it’s just like you find it inevitable, but that’s why the challenge is even more exciting.  And of course, Georgia is also key to new emerging energy systems that would enable Europe to have alternative supply of gas and oil.

But if Georgia fails, then you have a bottleneck for all this energy product, and then there is monopoly and there is no alternative.  And if we succeed there is alternative, so this is also a natural function to keep stability, safety, peace, prosperity and development.  And that’s why I’m here.  That’s why I will discuss all those things with President Bush and the White House.  And I can tell you, in a way he is somebody who has this strong sense of history as well.  I have to make it clear, we have support as a country on both sides of the aisle. 

We have lots of democratic senators that are very enthusiastic about Georgia whom I respect greatly and who I think understand the region very well.  On the other hand, there is the President and the White House who have this sense of history who is not afraid to go against the tide and in a way has some kind of rebel style in order to make things happen.  Because after all, values are something that matters.

We should never sacrifice anything for – whatever pragmatic ends are there, these values are to be sacrificed, we should never allow that because, if you just make pragmatic deals at the expense of values, you are treating the symptoms of a disease, but not the roots.  When you go down to the values, you are going to the roots.  You are starting from the very beginning, and that’s so important.

That’s why whenever somebody talks about freedom agenda, I believe freedom agenda is alive, well and has future.  I believe when you approach things like nuclear proliferation or, indeed, missile tests –to take those things more seriously.  This is not about particular incidents, issues, that should be handled.  This is all about the fundamentals and how it should be handled.

When I came here, I delivered to President Bush a present.  It wasn’t a present.  It was some symbolic thing for me to do.  70 years ago a group of freedom fighters from a mountainous region of Georgia sent a letter to the US government telling them, look, Bolsheviks are harassing us.  They forbid us to practice our religion.  They impose taxes.    And we want freedom, and we’ll fight for our freedom whatever it takes.  We don’t have weapons, but we have swords and daggers, and we’ll resist with swords and daggers until the last one of us is alive.  But you are the strongest government of the world, and everybody abandoned us, and please come and help.  And if you don’t help us, then nobody can, nobody will. 

And this letter was sent to the US government.  It was, of course, intercepted by KGB, and 42 people that had something to do with this letter were arrested and killed by the Soviet regime.  We then discovered this letter in KGB archives - it was in the old KGB archives – and we put it in the Museum of Soviet Occupation of Georgia.  And I delivered a copy of this letter to President Bush yesterday, and I told him, look, Mr. President, if people who killed authors of this letter had imagined that one day this letter would make it to the White House and not only could be read by the American President, but it would be delivered by a President of independent Georgia, they would have thought that the world is upside down.  Well, I think that’s exactly opposite. 

The world is in the right position.  And when I told yesterday President Bush as well is, look, I’m sure Korean missiles are not going to reach the United States.  We all hope they won’t.  But there are lots of people out there in North Korea that are writing these kinds of letters, and these letters will reach you eventually, sooner or later, because this is an irreversible process and irreversible pride of freedom and liberty all around the world.  And that’s what matters more than any other political event and pragmatic considerations of today.

And that’s also my message for the upcoming G-8 Summit in St. Petersburg, and we want this message to be heard.  That’s why I’m here.  That’s why I’m talking to you.  And let’s make it heard, all of us together.  Thank you.  [audience applause]  I’m willing to take any questions you want to ask.

Christopher DeMuth:  If you could wait until the microphone comes around and introduce yourself and ask a brief question.

Nate Young:  Hello, my name is Nate Young, and I just quickly wanted to mention that, like you, I was once an intern at the International League for Human Rights with Scott Harkin [phonetic] and [indiscernible].

Mikhail Saakashvili:  Good.

Nate Young:  I wanted to hear you speak.  I was wondering if you could elaborate a bit about Georgia’s relationship with Russia right now, as there are topics that you didn’t mention in your speech.  And in light of the upcoming G-8 Summit, what steps do you think Georgia could take to provide an alternative for engagement on the decreasing or worsening relationships between the US and Russia right now?

Mikhail Saakashvili:  Well, Nate, first of all, I’m glad to meet a colleague.  Scott Harkin [phonetic] was one of the persons who taught me how to move away from very pragmatic thinking in the world, even if you are working for a rigid New York law firm and get more idealistic.  And you can keep still your idealism for the sixth floor and the 42nd state and still believe that there is a better world out there besides all the litigation and all this corporate stuff there. 

And this is important because – you reminded me of my time in New York when I started [indiscernible] historic Queens in a basement.  Within a few years, less than three years of hard work, studies, I had together with my wife nice apartment in Central Park West, nice job, good prospects, unlimited opportunities.  That is something in a sense you get in America and nowhere else in the world, and this is amazing.  And that’s something that I kept until now, and I know what freedom really – what is real freedom and a real welcome society, real opportunity.  Remember, this is the only country in the world where it forgets what it is to be a foreigner.  After a while in New York, I forgot that I was a foreigner.  I would go and argue with police just like – so this is – he just reminded me of that.

Going back to the subject of Russia, well, we wish Russia well.  I think Russia is a great nation.  I just had a meeting with President Putin in St. Petersburg.  It was on our initiative.  Didn’t produce much results yet, but the whole thing that dialogue exists there is already positive.  And so, it’s very clear.  On the one hand, Russia is going through difficult transformation.  They are defining themselves.  They want to be great again.  They have all this money, and they want to get notion of what being great again means.  And sometimes it’s misplaced.  We know sometimes it’s misplaced. 

Defining where Russian borders are, what should be their relations with their neighbors?  Can something like independent Georgia really exist?  President Putin made a good thing when he went to the memorial of people killed in 1968 uprising in Prague and honored them, and we accept it, and we like it.  But the same thing happened in Georgia in the last century.  Bolsheviks came and took over, and I would be really glad when he comes into Georgia and also attends the Museum of Soviet Occupation of Georgia because this was our shared grief.  Hundreds of thousands of Georgians died in Gulach [phonetic].

I told yesterday President Bush I was really – I was sitting next to him on Freedom Square in Belize, and he was speaking to more than a hundred thousand people there.  I remembered my family members who died in Gulach [phonetic] or who perished in Gulach [phonetic] or [indiscernible] in Siberia.  I remember hundreds of thousands of Georgians, and I saw this is an indication for them.  [indiscernible] at that time, they would have been happy.  The President of independent Georgia [indiscernible] of the four countries next to the President of the United States.  And so, it’s a difficult transformation.  Russia already accepts that Prague was wrong in 1968.  Budapest was wrong in 1956.  It still has debate about Baltic [indiscernible] takeover, about Georgia’s takeover.  They still have doubts about it because it’s [indiscernible] process.

On the other side, you see that Russian middle class is emerging which is stronger, which is Internet savvy, [indiscernible] and other kind of people.  They have lots of information.  They want to have say in their society.  So pretty optimistic [indiscernible].  They will have short-term problems, that’s definite, but we should never despair and give up on Russia, and that’s why I think what President Bush said, well, it’s one thing not to be confrontational. 

The other thing is to uphold the principles, to stick to them, because, as I told you, this cooperation should be based on principles.  You cannot do something that would go beyond those principles.  That’s what needs to be measured.  I think Russia does want to be a [indiscernible].  Of course they are not.  They don’t want to be a pariah and [indiscernible].  They can never accept this, and they should not.  They should not be like this.  Of course not.  This is a great nation, but this nation wants to be respected, they want to be respected by President Bush.  Remember that.  And by the people of the United States and by the next President of the United States. 

So this is the moment to use while engaging them, but engaging based on principles.  That’s my only recipe, engaging based on principles.  And when it works, as it can work, I’m sure all of us will be much better off.  Thanks.

Male Voice:  Thank you.  I’m [indiscernible] with RTVI Television, and, Mr. President, when you talked to President Bush yesterday, did you discuss the conflicts in [indiscernible] and do you feel that you have President Bush’s support for whatever actions you might be taking?  And secondly, you mentioned that you have contacts with the Ukrainian and Belarusian democrats.  Do you also have contacts with Russian opposition?  I know [indiscernible] himself came to Belize and [indiscernible] the Orange Revolution.

Mikhail Saakashvili:  Well, I don’t know how active is he in politics.  [indiscernible] probably business.  He was in [indiscernible], and I took him out for tea.  But I’m certainly looking at political processes in Russia, and there are lots of smart people.  And maybe they are not that visible, but there are lots of smart people in Russia, and they should keep track of them.  But with regards to conflict of Soviets, we are talking about conflict in [indiscernible] that was kind of Soviet attempt to keep at least part of the territory, [indiscernible] part of the territory. 

This was the case with [indiscernible].  [indiscernible] is a very small place.  It’s beyond my understanding why it’s so well known because we are talking about less than 10,000 [indiscernible] that have no actual conflict with the rest of the population except that it’s now a military base taken by peacekeepers.  And the same thing in Khazia [phonetic], we’re talking about around 40,000 ethnic [indiscernible].  But we are talking about a situation where there was a widespread ethnic cleansing.  They threw out the absolute majority of the population there in a very brutal way.  They were mass executions, and there are still sites of mass burials.  And when I hear from some Russian officials that, you know, this isn’t the same as Kosovo, we should give them independence, [indiscernible].  Well, this is just immoral because we are talking about attempts to [indiscernible] results or ethnic cleansing.

The idea here is that, once there is ethnic cleansing, the world should act.  If there was already an ethnic cleansing, the world should not forget.  And the problem there is that I see articles appear in the press, oh, there is this nice place of [indiscernible], it looks beautiful, these people are there, they’re miserable, nobody wants to recognize them, they should recognize them fast. 

If Kosovo can be recognized, why can’t it be recognized?  They should be respected, but respect in a situation when people who belong there, who had houses there, and who cannot go there back to their houses, we are talking about more than 450,000 people, maybe 500,000 people, they can’t go back to the houses.  Most of them are Georgian, but also other ethnicities.  I don’t diversify.  For me, Georgia is all about diversity, all about multi-ethnicity.  Those people cannot go back to their houses because of fright of being killed on the spot even today.  Is that fair?  It’s not fair.

You know, there is an old [indiscernible] the boundary between [indiscernible] and the rest of Georgia, and there are some ethnic Georgian populations living there.  They are not officially allowed to study in their own language, but they do study their own language illegally.  And we had talks recently there under the auspices of the UN with some of the Georgian television crews present that are also here with me.  And a kid looked out from school and shouted, when he saw a Georgian flag, he shouted Lovely Georgia and ran back, and in front of the peacekeepers.  [indiscernible] militia came in, arrested every single teacher in that school and took them to prison. 

I cannot accept this, and if somebody in the world wants to accept and legitimize this, well I will certainly do my best that this doesn’t materialize because the main principle here is not efficiency or pragmatic, oh, let’s finish with the job, and let’s just do it.  If you’re legitimize justice, you’ll produce and generate new justice.  That’s what we should never [indiscernible].

Analise Chante [phonetic]:  Thank you, Mr. President.  My name is Analise Chante [phonetic].  I was in Georgia for some time a few years ago.  It’s a privilege to hear you speak today.  You’re quite passioned – you speaker very passionately about the situation in Abkhazia, and earlier you noted that working with Russia requires a lot of engagement.  From my understanding, the Russians have been involved in some degree in the wars with Abkhazia, and today it seems like they’ve been provoking the Georgians a little bit with the ban on wine and the Borjomi mineral water as well. 

So how do you reconcile these two things?  Like I said, you’re quite passionate about the situation in Abkhazia and finding a peaceful resolution, but how do you do that when –

Mikhail Saakashvili:  Look, what they did on the mineral water and wine is that they deprived 70 percent of Russia, because it’s almost 20 percent of Russian mineral water market, of their favorite water.  Taste the Bojormi.  It’s very different from taste of Korea.  And Russians have been drinking Bojormi for the last 150, 200 years.  Now, old habits die hard.  Overnight, their government told them we don’t care what you like.  It’s just not allowed. 

And the same thing with the wine.  It’s not a real big production, but still it was the favorite wine of the Russian elite.  They can import good European wines, but still they’re almost addicted to the Georgian wines.  And the most interesting indication for me was that, when I went to [indiscernible] some members of our delegation [indiscernible] with the Russian colleagues to a restaurant near the hotel, and the waiter, without knowing that they are Georgian, told them, look, we have all this French and Italian and Spanish and Chilean wines, but we have really good smuggled Georgian wine under the counter.  And if you want to – but Georgia [indiscernible].  As a matter of fact, [indiscernible].  Georgia has many brands like from [indiscernible] in Georgia, unlike the Soviet [indiscernible] and we can no longer [indiscernible] its location.  The Golden Fleece came from Georgia.  And one of the things is wine.  Wine is like part of culture.  It’s part of culture relations.  These things should not be sacrificed for political expediency.

The good news is that we are selling more and more to other markets, and when I was discussing this with President Putin [indiscernible] press conference [indiscernible] reporters asked questions about Georgia wines, and President Putin was explaining that this was [indiscernible] regions.  And of course, maybe there is hope that it won’t be reversed.  It’s hard because we don’t have much wine, and we will sell it all to the west, to Europe.  And we are worried about you.  Essentially, we [indiscernible] and we want to get [indiscernible]. 

But one thing it provided, it’s more efficient because these things happened before.  These things happened to Baltic countries.  Estonia had 90 percent of its trade in destination of Russia.  Now it has less than six percent, and they are the fastest growing economy in Europe.  And you know what?  This year, after all this [indiscernible] gas prices, the Georgian economy will grow in double digit figures.  And in September, the World Bank will integrate us and Singapore as the world’s fastest reforming country.  They have this special qualification that they give, and that’s it.

We should hurry up.  We should be more efficient.  They are no longer allowing us in our fresh vegetables, so now we have available the European Union to freeze them and sell them frozen for high prices to Europe.  Good thing.  We also started to produce broccoli.  We had all the other vegetables, but we never had broccoli.  Now we’re producing lots of broccoli and freezing it and selling to Europe.  And before we couldn’t sell our other fruits because we didn’t have enough processing facilities to put in proper shape to fit the requirements of the European and other markets. 

Now we can.  We have new processing facilities.  So now we are learning hard.  It’s like dropping us in the middle of the sea and telling us to learn to swim.  We are learning to swim because we absolutely need to reach the shore, and I certainly want to get there, and we will get there eventually.

Miles Pompard [phonetic]:  Hi, Mr. President.  Miles Pompard [phonetic] from Arms Control Today magazine.

Mikhail Saakashvili:  Sure.

Miles Pompard [phonetic]:  I have a question, two questions actually.  One is about Gudalta [phonetic].  The two governments have been trying to agree on what will happen, some sort of outside inspections for peacekeepers at the base.  Has there been any progress on that, and what do you think will happen?  And also, the discussion about a joint terrorism center with Russia somewhere in Georgia.

Mikhail Saakashvili:  Well, we support the Russians.  We are willing to discuss the joint fight against terrorism, and we still are.  Whatever is beneficial.  We don’t have an interest in having terrorists in our territory in proximity of our borders.  While this cooperation has not always been as good as we would wish to, we are looking for several people that are in Russia that are indicted or accused of terrorism, and they’re at-large.  Not at-large, they are free, and they have Russian passports, and nobody ever investigates them.  And this is a pity, but whatever we can do to fix it we will do and know the options are open there.

With regards to the [indiscernible] base, it’s in Abkhazia, and it’s reason they’ve been getting a new weapons system, which is not a good development.  And the place [indiscernible], and we’re working out within the CFE Treaty framework to get it closed, to shut it down, together with Europeans hopefully who are – [indiscernible; off microphone].

Male Voice:  Thank you very much, Mr. President.  It’s been a pleasure to hear you speak.  It’s very heartening to hear about all the reforms and changes that are going on in Georgia, but it’s still in a very unstable neighborhood.  And I was wondering if you could talk about Georgia’s relations with Armenia and Azerbaijan and particularly the issue of such as Nevona Karabach [phonetic] has come up.  How is Georgia handling its relationship with both of those countries?

Mikhail Saakashvili:  Well, we have excellent relations with both of them.  And by the way, despite the problem that you mentioned, Azerbaijan is growing at an amazing pace partly because of [indiscernible] and partly because they are pulling things together and making things very truly more efficient.  With Armenia, they have spectacular economic growth and successful modernization of economy, and they are really doing well in many things.  Now, we have excellent relations with both of them, and we have [indiscernible] with Turkey.  We now have visa regime with Turkey, and we are working on free trade agreement with that country.  So other neighbors, as well as some Central Asian countries.

Now, this whole thing is that – the whole issue there is that these conflicts are frozen because of a lot of external meddling and manipulations is why, and we need to finish first with – understand that these countries have to deal with these others directly without extra adverse involvement.  Of course, we should always inform the international communities, of course, but kind of hostile involvement always destroys things there.  Whenever we tell that we are close to solution on Nevona Karabach [phonetic], it turned out to be futile.  And it’s a pity because these are like changes [indiscernible] countries, including my own country.  But they will not last forever, I’m sure.  I’m sure.  People in this region are [indiscernible] and lots of old prejudices are collapsing, and economic development and prosperity will bring more wisdom and more pragmatic approaches.

And also, I believe that NATO enter into decision more tightly.  You maybe heard yesterday that President Bush openly encouraged Georgia’s members from NATO very, very openly without any reservations.  This is the first time ever American President or any other major western leader expressed himself that openly and brought that closer.  And NATO, being already involved in Black Sea with Bulgaria and Romania, wasn’t getting involved in Georgia, and this keeps the promise of prosperity to everybody, security to everybody.  [indiscernible] it creates conditions for inclusive society which is key to settling those conflicts.  Then they will just melt like the snow in the spring, I’m sure.  But that will take some time and patience.

And meanwhile, we need lots of education, lots of contest, lots of civil society kind of interaction, and things will start to move.  Talking from a country where we – in my country, conflicts are not ethnic really.  They are a result of civil war, and the last thing Georgia ever would allocate or have is the ethnicated or, indeed, ethnic differentiation.  We introduced positive affirmative action programs for minorities and educating them, special quarters in public service, because we believe that we are a small country.  We have so few people anyway. 

The good thing about Georgia is in the last year [indiscernible] revolution we had positive balance, but slightly positive.  More people came than last, but it was maybe a difference in thousands.  This time, in 2005, 70,000 to 80,000 people came back to Georgia, and more people came back than less.  So people are voting with their feet.  The good news is that, among that almost 80,000 people, there are many ethnically diverse people.  It’s not only ethnic Georgians.  Ethnic Armenians, Ethnic Azarians [phonetic], ethnic Jews.  I was very pleased when the Chief Rabbi’s office phoned me, maybe regretting it, saying he lost 700 huge families this year when we came back to Georgia.  Of course, he said also that it’s going to lose population, and I totally understand and share that, but I was very, very pleased and told him about it.

So the idea is that our society is based on these values.  It’s all about multi-culture, and those of you who visit with us, and I invite all of you to come, this is an amazing old, beautiful city, the whole country is, amazingly beautiful.  But in [indiscernible], you find a small square, [indiscernible] mosque and several denominations of Christian churches together, and you not only find all those religious sites. 

You find people - and this is the most amazing thing - who speak Armenian, Azari [phonetic], Yiddish, Georgian and who don’t know what’s their [indiscernible], who tell you we are just from this place.  We are [indiscernible] inhabitants, but who don’t know what’s their ethnic origin.  And that’s the most special thing about Georgia.  Jews would tell you it’s one of 32 countries of the world that has no anti-Semitism ever in history, and we are very proud of that.  And that also Muslims are always welcome, and also Greeks have always lived there because Greeks founded Georgia.  Georgia was part of Greek civilization and culture for many, many thousand years, and I’m always appalled by the fact that sometimes when European delegations come in for the first time they always say, oh, this place looks just like Europe.  Oh, it’s funny it’s just like Europe.  It is Europe, and it has been Europe for the last 3,000 or 4,000 years or whatever in case you didn’t know.

Female Voice:  [indiscernible], Russian-American Daily, [indiscernible].  Mr. President, what would you like to say to Georgians who read in the United States with our newspaper?

Mikhail Saakashvili:  Well, come back.  I’ll tell you, I’ll tell you.  We have this brilliant New York doctor who has brilliant practice, has a cardiovascular clinic, lots of operations, lots of – he is pretty rich.  He’s not [indiscernible].  He came back and started to rebuild the main republic hospital.  Not only he came back, but he’s bringing back a group of very gifted Georgian doctors practicing in the US, and this is the real thing.  This is happening.  [indiscernible] top ballet dancer, Bolshevik Theatre, coming back and setting up her ballet school in Georgia.  We had [indiscernible] who looks like Sumo wrestler, but was one of the leading – not only he come back, he was this rare combination of being an Oligarchic liberal the same time in Russia, and now he came back.  He is not much of an Oligarch anymore, but he’s really a liberal and committed economic reformer. 

And so, we are attracting all these people back, and this is important because, on the one hand, Georgia has now an employment problem which is still pretty acute.  But on the other hand, we have deficit of knowledgeable people because nothing has been going on for 15 years, over 20.  So the period, it was very – you cannot compare it with – the Soviet Union left us.  It was the need.  Soviets were at least building something.  [indiscernible] anything.

90 percent of our cities don’t have any normal water or sewage systems.  That’s the point.  We have to build it all now, and we need lots of qualified people, lots of professionals.  We have construction going on in [indiscernible] the best construction companies.  The main problem we have is people.  We don’t have enough people who know how to do modern construction business.  The same thing in food processing.  The same thing in textile industry.  The same thing in tourism industry.  We have now tourist boom starting, not enough people to know how to do it in really modern way. 

We need to modernize our agriculture.  We need new professionals.  We need doctors.  We have lots of doctors, but very few of those who know how to run modern medical practice.  And so, that’s exactly what we need from you, and that’s why maybe, if I can take with me a couple of people from this audience, I’ll be more than happy. 

Okay, time is up they are telling me.  [indiscernible] waiting until [indiscernible].

Christopher DeMuth:  If I could say a word, sir?

Mikhail Saakashvili:  Sure.

Christopher DeMuth:  President Saakashvili, I want to thank you for your marvelous and very moving presentation, and, on behalf of AEI, extend to you not just our gratitude, but our great appreciation and fervent best wishes.  Thank you.

Mikhail Saakashvili:  Thank you.

[end of session]