GEORGIA

THE SHADOW: Like much of the rest of the former Soviet Union, Georgia broke loose of oscow in 1991, ending almost 70 years of communism, but immediately found itself embroiled in civil war as South Ossetia and Abkhazia (both with large Russian minorities) sought to break away from the new independent state. An uneasy calm has prevailed since the mid 1990s, during which Georgia sought to rebuild its economy, something that gathered pace with the 2003 Rose Revolution and the accession of President Mikheil Saakashvili in January 2004. However Russia's imposition of a total trade and travel embargo in 2006 – reflecting worsening relations – put a further question mark over the economic future.

THE SOLUTION: The IMF describes the Rose Revolution as a corporate governance revolution aimed at boosting economic revival through zero tolerance of corruption, fast-track economic reform, privatisation and the prioritisation of foreign direct investment(FDI). Results have been impressive. GDP over the past three years has grown well in excess of 10% a year, FDI has jumped dramatically to around €1.4bn (in an economy worth €4.48bn) corruption declined dramatically and the tax base was massively simplified. Saakashvili's first act was to fire the notoriously corrupt and ineffective traffic police; the judiciary, health service and education system are all being overhauled. The former breakaway region of Adjara has formally rejoined Georgia, albeit as an autonomous region.

THE REBRAND: Aware of Georgia's natural advantages and the appetite of western tourists for 'new' destinations, Tbilisi has identified tourism as one of the priority sectors. The capital and the Black Sea coast resort of Batumi are undergoing a massive facelift, with Sheraton, Radisson, Hilton and Kempinski all due to open properties with the next two years. The aim is to brand Georgia as an ultra-progressive, pro-Western country – the US is Saakashvili's most vocal ally – open to large-scale foreign investment. In tourism terms, Georgia would like to imitate the Pure New Zealand campaign, emphasising natural beauty but also culture, wine and cuisine.

THE CHALLENGES: Not to allow progress to be destabilised by Russia's embargo or growing domestic political unease – which recently saw a disgruntled former minister level serious charges of corruption against the government, in a crisis which commentators say reflects rising discontent at the often abrasive manner of Saakashvili. The president must not secure Georgia's territorial reintegration by force: Abkhazia, in particular, really does not want to become part of an independent Georgia and Russia has declared its willingness to stand behind it and South Ossetia. The focus must remain economic in the hope that rising prosperity encourages rapprochement with the break away regions.

THE FUTURE: Kakha Bendukidze, father of Georgia's economic reforms – who famously declared that 'everything is for sale except conscience' – hopes Georgia can catch up with the developed world within 20 years, with per capita GDP (at PPP) rising from the current €2,359 to €14,000. Georgia, which has two major pipelines running through it, is also keen to bolster its position as an energy transport hub and as an investment hub for companies also seeking to access the mutually antagonistic Caucasian countries Armenia and Azerbaijan.

Provided reforms stay on track, there are no major political upsets and relations with Russia at least stabilise, there is no reason why Georgia – with just four million people – cannot achieve these admittedly ambitious objectives.