A COMPARATIVE NOTE OF THE NATIONAL ECONOMIES OF THE SOUTH CAUCASUS
By M. Alkhazashvili
Translated by Tiko Giorgadze and Diana Dundua

The Messenger, Georgia
May 18 2006

The countries of the South Caucasus countries can be distinguished
by their high rate of economy growth. In 2005 the Azerbaijani economy
grew 26.4 percent – the highest rate of all CIS countries, although it
should also be considered that in Azerbaijan the oil sector accounts
for 41.3 percent of the country’s GDP.

According to Azerbaijan’s Prime Minister Artur Rasizade without the
oil sector then the per capita GDP, which is currently estimated at
USD 4,700, would drop to USD 900. Furthermore, an important part of
the country’s oil revenues are in the hands of foreign investors.

In Georgia, economic growth was 9.3 percent last year, with an
inflation rate of 6.2 percent. Georgia’s economic growth was primarily
a result of the service and construction spheres. The construction of
the Baku-Tbilisi-Ceyhan and Baku-Erzurum gas pipelines were important
factors in the country’s economic growth.

In 2005 Armenian economic growth, with the help of a negative inflation
rate of – 0.2 percent, totaled 13.9 percent. The Armenian economy is
not dominated by any single sector and therefore its economic growth
comes from several areas – industry, construction, agriculture and
the service industry.

The situation in the taxation-budgetary spheres is practically the
same in all three South Caucasus countries and all three countries
are working to increase their tax accumulation levels.

In 2005 Georgia introduced its new Tax Code which contained
liberal taxation tariffs. As a result of this reform the taxation
administration has been significantly improved.

Azerbaijan’s state budget is mainly filled by the revenues received
from selling oil and oil products. But in Georgia almost half of
the state budget revenues (47 percent) came from the collection of
transport taxes.

In 2004-2005 the character of both Azerbaijan’s and Georgia’s state
budget policies was similar in that the increase of budgetary sources
was targeted at defense and the state capital investment field.

In 2005 Georgia significantly increased the financing of its defense
sphere. Georgia has allotted almost USD 325 million for staffing its
military and modernizing its army’s equipment. This sum totaled 0.6
percent of the GPD.

Azerbaijan’s defense expenses in 2006 are set to total USD 650
million – four times more than the sum allotted by Armenia for its
own state defense.

The top two imports and exports for the three South Caucasian countries
are as follows:

Imports Exports

Armenia Diamonds, precious stones 19.7%, Gas 14.6% Jewels,
semi-precious stones, precious metals 35.4%, Metals 33.2%

Georgia Oil & oil products 13.5 %, Vehicles 7.2% Scrap metal 19.1%,
Wine 9.2%

Azerbaijan Machinery and technical equipment 18.7%, Iron 17.4% Oil
86.5%, Iron 1.01%.