Created: 8/22/1998

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I Intelligence Weekly


(he ecejoomic near ceJlepee of rhe. Tho three nevertheless ratnain weak and economically vulnerable to the fortunes of the regionhole as (hey grappleange of reform issues.

Tbe GDPs of the three cccrvotnies are still only about halfofccording lo officialGeorgia's GDP was less than one-lhird ofndustrial outputs arc even more depressed.

Nevertheless, (he economies are growing; inflation is underhad0 peatera per year in Georgia andindustriallowly increasing, according to official statistics

A survey of international institutionpress accounts md icates that

Armenia leads marry of its former Soviet peers on tha core eooooone reform tasks that include privatisation of former stataevelopmentegal regime, bankmg-sector reform, and liberalization of foreign trade. Georgia's progress is accelerating, and Azarbaijan. although slower to embark on significant changes, noweform program under way.| "|

Official siamiia overstate th* decline because much economic activity moved to Ihe gray and blockmark-els. The unofficialAzerbaijani and Georgian economies5 equaledercent ojtheir official GTiFt, accordingrivate study, higher than In any other former Soviet

I .'ragceiu>KortsbaMh could induceil-driven export

Long Hoad Ahead

Azerbaijan is among the roost corruptthe world, according Io various sources, andm charge of privatization have beenmost corrupt men in ihe

of (ho Georgian cabinet

recently was dismissed, ustt'isilily on corrupt,nn charges, but corrupt Georgian officials have been dismissed in die past only io receive new jobs.

Large parts of all Ihree stain' economies still escape taxation despite efforts to improve collection. Georgia's tax collection9 percent of GDP. aceordirgss

; among rhein the world

Russia is still the number-one trading partner of Georgia and Armenia but without lha dominant position it had when the Soviet Union bnpfodtd. Azerbaijan's number-one trading partner is Iran. Armenia seeks to accede to the World Trade Organization this year, Georgia by early next year. Azerbaijan is still years iway.j

All three will need Western financial assistance and technical advice for at least another decade toevel ll* mote advanced transitioning slates bavc already attained. The current mix of less humanitarian aid and more technical advice is precisely what these countries need Io advance economic reform.I

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