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Last Updated: Wednesday, 2 June, 2004, 11:44 GMT 12:44 UK
Russian tycoon to reform Georgia
Georgia street scene
Years of unrest have left Georgia in poverty
Georgia's Government has handed control of the economy to a Russian tycoon, in an attempt to kickstart radical reform.

Kakha Bendukidze, a millionaire who owns the United Heavy Machinery (OMZ) group, becomes economy minister with a brief for "ultra-liberalisation".

Mr Bendukidze, who was born in Tbilisi, has long argued for reform in Russia and has sided with liberal tycoons such as the imprisoned Mikhail Khodorkovsky.

Georgian President Mikheil Saakashvili wants to see economic growth take off.

Mr Saakashvili replaced Georgia's long-time leader, Eduard Shevardnadze, in what has become known as the "rose revolution", last November.

Shock therapy

Much of the discontentment with Mr Shevardnadze arose from the catastrophic condition of the Georgian economy.

After years of unrest and civil war, average wages are less than $50 (27) per month, investment is negligible, and recovery is hampered by some of the worst corruption in the former Soviet Union.

Kakha Bendukidze
Anything goes, Mr Bendukidze insists
Mr Bendukidze plans to mend matters by a radical programme of shock therapy.

"The first thing we agreed with Saakashvili was to remove all obstacles that are holding back investment," he said.

The whole economy - including utilities and infrastructure - would be open to privatisation, he said.

"We need a wide tax reform, which will simplify administration and move the main tax burden on to citizens. This would make people more responsible."

Vested interests

Over the past few years, Georgia has periodically pledged to mend its economy; Mr Shevardnadze brought in a series of experts with radical-sounding reform plans.

But attempts at grass-roots reform have always been hampered by vested interests and the feeble powers of central government.

Two regions of Georgia claim autonomy from Tbilisi, and much of the rest pays little heed to state control.

Under the Soviet regime, Georgia was relatively prosperous: it was a major supplier of consumer goods - especially food, wine and mineral water - to Russia and beyond, and its fine climate made it a popular holiday-spot.

Mr Bendukidze's appointment was welcomed by commentators in Georgia, who have been pinning their hopes on genuine reform under the Saakashvili government.

But there are concerns that his arrival could herald a deeper penetration of Russian influence in Georgia, which is keen to emphasise its independence from Moscow.


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