PAPAVA WARNS AGAINST FREE ECONOMIC ZONES
By M. Alkhazashvili
(Translated by Diana Dundua)

The Messenger, Georgia
May 18 2007

Deputy Chairman of the Parliamentary Budget and Finance Committee
Lado Papava does not support the creation of free economic zones (FEZ)
in the country, saying it will be dangerous for Georgia, reports the
newspaper Rezonansi.

He says his main concern is that Georgia will lose control over
certain territories.

The law on FEZ allows any currency to be used in financial
interactions, and this will damage the GEL and will strengthen the
dollar, Papava warns.

"Not only will one of the attributes of state sovereignty be under
threat, but also the Georgian administration will lose one of the
tools for macro economic regulation," explains Papava, reports the
newspaper Akhali Taoba.

The idea of creating a FEZ in the country has the full support of
State Minister for Reforms Coordination Kakha Bendukidze.

Papava mentions that the weakening of the GEL is one of Bendukidze’s
old ideas. In 2004, Bendukidze proposed having a multi-currency
system in Georgia. This means Georgia could lose its own tools for
macroeconomic stability.

Papava warns this could return Georgia into the rouble zone.

"Fortunately, Bendukidze’s idea was not implemented and the country’s
currency system was saved. But now he wants to implement this on
limited territories," says Papava.

If the main currencies in a FEZ aroung the port of Poti are USD and
EUR, a FEZ in Javakheti or Marneuli could encourage the Russian rouble
and the Armenian dram.

It is obvious that Russia and other ‘friendly’ neighbours will try
to use this to their advantage, he says.

Georgia has problems restoring its territorial integrity. Papava
says the government believes that the creation of FEZ is supposed
to assist in this process but the economist warns that the results
could be highly controversial.

"Are we ready or not to create FEZ in Georgia and to have less
control over those territories? Such danger is real and this needs
to be mentioned," the newspaper Akhali Taoba quotes Papava as saying.