Madam Speaker, Your Holiness, esteemed chairman of the Constitutional Court, chairman of the Supreme Court, esteemed members of Parliament and the public. Before I commence my speech, I would like to say that much has been said about the late Zurab Zhvania in recent days and I do not want to repeat anything. I simply want to mention that the late Zurab Zhvania's mother Rema and wife Nino are attending this session today. I want us all to greet them as well as little Liza, Busa and Anna.

Please, take your seats.

More than a year has passed since Georgia made its choice for freedom and since the Georgian nation decided on the country's new orientation and embarked on a new, complex and ambitious road towards regaining the motherland that had been lost and taken away from us. A little more than a year has passed since I was sworn in as Georgia's president. Shortly afterwards this Parliament was elected. I, as a member of several previous Parliaments, can say with confidence that this is the best Parliament to meet in this hall. Before we begin discussing our present and future and before we talk about our achievements and plans, I suggest we recall what Georgia was like a year ago.

Georgia was a failed state - disintegrated, demoralized and humiliated. It was a country that had lost all attributes of statehood; a country where corruption, lawlessness and injustice reigned supreme; a country where ordinary citizens were routinely cheated by the state; a country where the state and its representatives were constantly extorting money from ordinary citizens; a country that had no budget and that never fulfilled social pledges to its citizens; a country where human rights were blatantly violated; a country that had no defence capabilities, not a single working tank or enough ammunition to last for just an hour in battle. The army had been starving for months. It was a country that had already disintegrated and fallen into the hands of clans, feudal lords and fiefs.

We are now used to seeing in this hall the chairman of Ajara's government and Ajara's other leaders. However, a year ago Ajara was ruled by a separatist feudal lord who, as a matter of principle, refused to come to Tbilisi and the Georgian president had to pay him visits and beg him to comply in a most humiliating way. It was a country that had lost its international reputation and no-one anywhere respected it; a country which was devoid of national ideals and which had lost its direction and sense of purpose; a country that was losing its most respectable sons and daughters every day and whose people had completely lost a sense of unity; a country where citizens mainly dreamt of escaping as quickly as possible and finding refuge abroad.

That is how we see it now and what the Georgian people has achieved in a year, which is a negligible period in history.

This is certainly not the right time for self-congratulation. We have no right to discuss or to be content with our achievements. Last year was only a beginning. However, it is important to ask this question: how much ground have we covered this year? Today Georgia is a proper state. When people ask us about our main achievement, we say that our main achievement is that for the first time in modern history, Georgia has become a proper state.

The past year has witnessed budgetary successes, a tripling of the budget, better revenue collection, the curbing of contraband, introduction of a new tax code, successful work with all international organizations. In that respect, Georgia is a model country where every programme is working in a model way. Financial amnesty. These success stories are important, however what they mean to our daily lives is even more important. It means that we have managed to clear pension and wage arrears accumulated over a decade. It means that we have kept our promise and doubled pensions. Wages and pensions are being paid without delay and we are all used to it now. It means that for the first time in our country's history government employees manage to live on their salaries. That has become possible, so the main motive for taking bribes has disappeared. It means social pledges that have been fulfilled and increased wages in various sectors.

All of this is because of certain heroes, those people who make this happen.

I would like to name these people and talk about a new organization, the financial police.

When everybody was berating them, saying that it was wrong to fight smugglers, suggesting that people should be able to make a living at the expense of pensioners and the poor. They did not retreat when they came under fire, nor when the smugglers attacked. They did not retreat when dozens of cars were blown up, when dozens of employees were wounded. These people still perform their duties.

I would like to welcome the head of the Kvemo Kartli operational department of the financial police, Davit Karseladze, who is here now. He and his friend collected about 3 million lari within a week. This money went to pensioners, poor people and for the development of the country. Batono Davit, I would like to thank you for your work.

We have also talked about our main achievement, the restoration of control over Ajara. One official in the previous government used to tell me that this was inconceivable and it also seemed inconceivable to us. But it was done neither by a single politician nor by all the politicians - it was the achievement of the ordinary citizens of Ajara who would never let anybody blow up bridges linking the rest of Georgia.

You probably remember the those two men who were standing in front of the "Baboons", who were armed to teeth and who were beating them, shooting at them several times, threatening them that they would not take pity on anyone, for the sake of the government and their own incomes. These two men, with Georgian flags in their hands, did not retreat a single step even when they turned the hoses on them.

I would like to greet Aleksandre Iakovenko and Omar Jijavadze who have come to Tbilisi to attend this session. They are Georgia's real heroes.

I would like to talk about law-enforcers. People have fallen fell in love with them. In Georgia and the former Soviet Union nobody thought that people could trust and love a police force. We thought it was true only in the US and other county's films. We could never imagine that one day it could happen here.

I would like to welcome these people, every patrol policeman. Davit Tabutsadze is among us today. He bravely chased and detained five bandits who were armed to the teeth and attacked an Iranian. A few days ago he saved a twenty-one-year-old girl who jumped into the river Mtkvari to commit suicide. Without hesitating he jumped into the river and by putting his life in danger he dragged the girl out of the cold water.

I would like to greet Shamil Kartoshadze who was a real hero in leading the operation against the Aprasidze gang in Svaneti. For years the police said it was impossible to destroy this gang, which was kidnapping people, killed dozens of men and robbed people of thousands.

Mr.Kokoshadze deployed special troops there. One engine of his helicopter was damaged by a grenade launcher. With one engine a helicopter is not expected to fly. He made several flights from Kutaisi to Svaneti and with a new force completely destroyed this gang. He did not retreat a single step.

I would like to say a few words again about the Patrol Police. This whole system is a matter of pride for us. One of their chiefs told me a story, which is probably not exaggerated.

In order to prevent policemen taking bribe, we often use undercover officers who try to incite them to break the rules. It's very interesting how the public in several regions of Georgia react to this. For example, in Imereti, when a person who violated the traffic rules offered a patrolman a bribe, he politely refused and gave him a fine. In Khashuri, in a similar situation, a man who violated the traffic rules was detained and the car was taken away from him.

In Gori a man was taken out of his car and given a good beating. Of course we would not condone similar behavior even if it is done with the most noble of aims.

I would like to talk about employees in the educational system. The teachers Ivlita Lobzhanidze and Gela Tavadze are here now. Ivlita is a post-graduate at the Sulkhan-Saba Orbeliani Pedagogical University. Both of them are teaching Georgian language and literature in one of the villages on the Georgian-Armenian border populated by Azerbaijanis. Ivlita gives them lots of interesting information. For example he talked about the Trialeti Cup to children in the second and third forms and showed them photos.

Children immediately expressed a desire to visit the national museum. We have already talked about it to Davit Lortkipanidze. Ivlita brought me the children's greeting card, which was written with such warmth and candor that I was extremely charmed. Now we have hundreds and thousands of such enthusiasts, volunteers and the genuine heroes of new Georgia. I would like to thank them for everything they are doing.

For the first time in recent history we are beginning to have a moderately sized but modernized armed forces. It is very important for the nation to be a proud nation and for its unification.

These armed forces are trained not only in Georgia. They participate in international operations and there should no question as to why they are there. The reason for this participation is that Georgia has to restore its territorial integrity. We are not a country in an ordinary situation.

Georgia is a country that needs international support and respectability as never before for stability.

For a country to regain peace it is very important to be strong. The army is integral to this.

In summer during an anti-smuggling operation 16 of our best soldiers died. Here at this session is Kalbatoni Ia who is the first female instructor trained by the American program at Krtsanisi firing range.

Here are the soldiers who served in Iraq. I would like you to stand and honour them. There are reservists among you and all over Georgia. It's a completely special phenomenon. These are the people who have a sense of responsibility towards Georgia and its future. These people are the best of our society.

For the first time in Georgian history MPS are serving in the army. And this has happened in a country where the system used to be that not only MPs but also their cousins and distant relatives got out of serving in the army.

I would like to talk about our economic plans. We have begun the privatization process and we must understand what it is for. It does not mean, as is often presented, that we used to have property and now we have none left. On the contrary, we have property that needs investing in. This is not like the privatization that took place before, like the so-called privatization programmes where people would get facilities for free in return for investing 20m 20 years later. No way, invest now so that you have a return on this investment, so that you create jobs, so that enterprises start working and so that we get some money out of this.

This is a favourable position to be in, especially for four major sectors. This includes the energy sector. We have to improve power supply by next winter, which at present is the biggest failure of our government. Tbilisi and Batumi are supplied with electricity 24 hours a day, but in the rest of Georgia there are problems almost everywhere. This is where investments have to be made and this is what we need the money for.

In health care, we urgently need money to build new hospitals, because we are losing our medicine, which is effectively is on the verge of ruin. In education, we are building new schools. There will be a new school of administration in Kutaisi where representatives of national minorities will also study. It is very important that this school is properly funded and that the funding of our universities and scholars is also increased.

As regards defence capabilities, the country should no longer be a pushover. All of this costs money and this money is not going to come easily. Georgia has no oil, Georgia's main asset is its people and this asset should start working, people should start working in enterprises and these enterprises should have real owners. This is what privatization is about.

Georgia is proud of these people but they are not the only ones. The new Georgia, which has regained it national sense of self-respect, faith in victory and feeling of unity, now has a common aim - a strong united Georgia. We have created an ideology in which it is not the president, parliamentary speaker, MPs or ministers but rather each and every citizen that is building Georgia, which its own faith and conscience.

Georgia is being built by proud patriotic Georgians. We are regaining Georgia and Georgia is regaining its citizens. This year was the first since independence when the number of people leaving was less than the number arriving. This is the beginning of a great homecoming. This means that thousands of Georgians living abroad are buying flats in Tbilisi. Dual citizenship means that not only those who left in recent years, but those who left centuries ago, can return. These people are going to our consulates and asking to regain their citizenship. Kalbatoni Nino (Ananiashvili) is just one example.

With us is sitting three times Olympic champion Kakhi Kakhiashvili, who did not left Georgia because he did not love his country, but rather because his country did not need him.

I want to say, with the power vested in me by the article 12 of the constitution, I am returning to Kakhi Kakhiashvili, who is currently a Greek citizen, Georgian citizenship and I am signing it here now. He will receive his passport now.

Those were our achievements in the past year, and I am sure that this is only a beginning. But I am asking this question: is it enough? Of course not, we should not be content with it. Of course our main goals are yet to be achieved. We are still facing major challenges.

We have managed to double pensions and establish order in the payment of salaries. However - I know this very well and I always remember this - we have not been able to increase salaries for teachers and other education professionals, but we will certainly do it this year. We have eradicated corruption and lawlessness in the energy sector, but, as you know and as I have told you, this still remains a very serious problem in some regions, especially in Samegrelo and Imereti. We have carried out structural reorganization of the public sector, we have reduced bureaucracy and streamlined the public sector. But we also had to make job cuts, which was inevitable. No-one should have illusions about it.

Unfortunately, we have been unable to create a sufficient number of new jobs in the private sector, and that is a very painful issue for us. Georgia has managed to overcome a crisis when it seemed that we were doomed to fail, but we have not been able to transform our country into a European-type economy.

So what are our tasks now? Above all, it is new jobs. This cannot be achieved through mechanical growth. We should develop spheres which can create more jobs: tourism, tourism infrastructure, service industries, processing of agricultural produce and penetration of new markets. We should facilitate business initiatives not only in Tbilisi but, especially, in other parts of Georgia. We should develop infrastructure in order to develop business. But only the state can invest in infrastructure projects like roads, bridges and water supply systems. We should tackle the energy crisis. No matter how much more electricity we produce, demand will continue to rise as the economy grows.

We should complete education reforms. That is very important, we cannot retreat here, and we will not give in to any blackmail, because that is something our children, grandchildren and their grandchildren will benefit from. That is something which will, in the long term, transform Georgia into a truly developed country.

We should carry out reforms of the judiciary. When we started these reforms, they were based on correct principles, but a dry place cannot exist in the middle of a swamp. That reform was not followed by reforms in the police and prosecutor's office and, in reality, courts have been discredited. I support the efforts by the Parliament's legal committee. We will be unable to work miracles here, but we should achieve real independence for the courts. This independence is not what some judges think it is. This is not independence from conscience, law and justice. This is independence from pressure, but it also means an enormous responsibility to the public, rather than to the authorities. Unfortunately, currently there is no such feeling of responsibility in 90 per cent of the judiciary. This problem needs serious attention if we want to achieve anything. I am grateful to Mr Kote Kemularia who has started serious processes. He will probably do more in his new position. He will also be chairman of the Council of Justice.

As regards local government reform, unlike my predecessor, I admit that I am not good enough - and nobody is, not even some reincarnated genius - to fill all local government jobs from the centre. That is impossible, and whoever tried it has failed. Of course, at local government level, district administrators and all mayors in Georgia should be elected through an appropriate voting system. This should be implemented next year, and we should pass appropriate legislation this year.

I am grateful to Mr Vano Khukhunaishvili's committee which has done a lot in this regard. I am grateful to Mr Ivliane Khaindrava who has submitted very interesting proposals about creating regional legislative bodies that would keep tabs on the activities of appointed governors. We should implement the subsidiarity principle in Georgia by taking into account all these proposals and initiatives.

As regards the reduction of the number of Parliament deputies to 150, I discussed this issue with various Parliamentary groups yesterday and I am very grateful to all groups who supported this idea. This is a test for Georgian Parliamentarianism and the Georgian political spectrum. Some 2.3m people said that the number of Parliament deputies should not exceed 150. Anyone who rejects this will be simply spitting in the face of 2.3m people. We must understand this. In a normal, democratic country people would never forgive that. Of course, this should be a balanced reduction, of course there should remain at least 50 deputies from single-seat constituencies, and of course the system of proportional representation should also be retained.

We should also think about establishing an upper house as it is in other democratic countries. Work on this model is under way. Parliament is based on the principle of checks and balances. Of course, we should do it. This will be our main test which will reveal if this Parliament has again become a corporate Parliament or it has developed into a truly popular body which always listens to voters, a Parliament which always thinks how to interact with voters, rather than thinks that, once elected, it can rest assured for four years.

I really admire our Parliament. This is the first Parliament which has set a major record - for a year deputies have not beaten each other up. That is an amazing achievement of Georgian democracy.

Security guard Dzebisashvili and MP Davit Kirkitadze are both here today. These two are folk heroes of our times. This lad managed to get into an argument with a very head-strong MP and stopped him, something that others would not have dared to do. But Dato, who is one of my close friends, unlike old-style MPs, admitted that this guy was right and apologized to him. Everybody is equal in the eyes of the law and I will always retreat in the face of the truth, he said. This is a new type of politics. Thank you, both of you.

Now, as regards our foreign policy, you will have noticed that Georgia has become a completely different country, a country that is particularly attractive to the rest of the world. I know of few countries in the world that attract such interest. I do not think that what I have just said is an exaggeration.

This interest is justified not because Georgia's leader has destroyed something somewhere. That is not a good advertisement for Georgia, even if you have destroyed something that was worth destroying.

This interest does not arise solely because we are some kind of corridor. However good the corridor, it is still not nice when you are merely a corridor.

The reason for this interest is not that we have performed some miracle here and that strange things keep happening here, so the entire world is ready to support us as long as we calm down.

No, we are indeed an interesting country. Heads of several leading committees in the Russian Duma, when asked about last year's highlights, named Georgian reforms. That is despite the fact that throughout the year they were being shown films such as "Misha" and others portraying Georgia in the most terrible light. Nevertheless, they have said that Georgia is a most successful country.

You have seen what happened in friendly Ukraine. Another country has emerged on former Soviet territory which has a similar government based on similar principles. Therefore, being a genuinely democratic country, it is Georgia's true friend. That is the elected government of our friend Viktor Yushchenko and Yuliya Tymoshenko.

With our closest neighbours, Armenia, Azerbaijan and Turkey, we have idyllic relations, ideal and idyllic. We should cherish these relations.

Naturally, with our other neighbour, Russia, there were problems but we should certainly overcome these problems. However, compromise is a two-way street, rather than Chiaberashvili's triangle in the centre of Tbilisi. When we take steps, so should the other party. When we compromise, so should the other party. On these terms, we are ready to reach agreement.

I am ready to go to Moscow again. I am ready to meet President Putin again. I am ready to extend our hand of friendship again, which, despite the fact that Georgian society welcomed this a year ago, has remained in the air.

We should also understand and we should agree... By the way, I really liked Koba Davitashvili's statement two days ago. There are many things Koba does that I do not like at all. However, this was the right thing to do. He said that there are certain principles which all political parties should accept. No political party or person can overstep this mark.

We should all decide and agree on what these principles are. They are Georgia's European orientation, the principle that there should be no foreign bases on Georgian territory, the principle that any party announcing that Georgia does not need a European orientation, will not integrate into international organizations we are trying to join, that we need foreign bases and foreigners should interfere in Georgia's development by military or some other illegal means - any such party should automatically be declared outside the law.

This kind of party won Parliamentary elections in Lithuania. It was almost certain to form a Parliamentary majority. However, all other parties, which had always been fighting each other, decided to unite and say: let us put everything aside because Lithuanian independence is the most important thing now. They managed to form a Parliamentary majority and stopped that party coming to power, a party which had spent hundreds of millions of dollars that had come from abroad to seize power in that country by democratic means. We should learn to operate in this way if we want our independence to survive.

At the same time, we should learn to cooperate in a different way with the various ethnic groups. Not only should they respect the Georgian state, Azerbaijanis who are being taught Georgian should not question the benefits of learning Georgian. They should know that, once they have become part of the Georgian state, they will be appointed to senior posts, they will have proper salaries, and their rights will be exactly the same as those of all other citizens of Georgia. In that case, not only will they learn the language and not only will they not run away anywhere, but they will also serve in the Georgian army, be ready to spill blood to defend Georgia and be an inalienable and incorruptible part of the Georgian state organism.

We have destroyed many myths. For example, I have visited Akhalkalaki. For many years there was talk that it was dangerous even to go to Akhalkalaki, let alone walk in the streets and speak to local people. In fact, it is a part of Georgia like any other, a place where people love our flag, anthem and statehood, just as they do in the rest of Georgia. They were offended by claims to the contrary that had been made for so many years.

When we talk about our Azerbaijanis, we must understand that they are our people. When there was some trouble there in 1991, villagers did not bring their produce to our markets for two days, so a famine started in Tbilisi. These people have successfully worked in the fields of culture and science for decades and centuries and they are an inalienable part of Georgian society.

That is why we are setting up a school of administration to train these people and select the best among them. They will then serve in customs and tax services and in Parliament as both officials and MPs. Some of them are already MPs but there should be more of them. They should work at ministries.

There are very many interesting people. There is one person I wanted to be here today. His name is Alik Kozaev. He is a young man, an NGO activist from Tskhinvali. Last summer he helped more than 800 children from Tskhinvali, Java, Kvaisa, Znauri District and other places in the Tskhinvali region to come here. He was taking risks and he was doing it without receiving any remuneration. He was doing it in order to destroy the wall of mistrust and hatred that exists between Georgia and the Ossetians living there and replace it with a bridge of friendship and brotherhood.

The price this man had to pay is that for many months now he has been in prison in Tskhinvali, on the territory of Georgia. We should be ashamed of the fact that this is still possible today. The international community should also be ashamed that it is keeping quiet about it and pretends that these are merely small aspects of an ordinary conflict. If we turn a blind a eye to this, then we will certainly turn a blind eye to an even bigger tragedy in the future. I would like to ask you to stand up, applaud Alik Kozaev and demand his release.

What have we learnt in the past year? We have learnt that Georgia can be a functioning state with powerful institutions. We have learnt that our nation draws its strength from its unique historical experience and the fact that it consists of many ethnic groups. There are so many different people here, which is our strength. We draw our strength from our great culture of tolerance and from our unity. We have learnt that unity is our strength. By the way, we were taught this best by Davit Aghmashenebeli. The main lesson we have learnt about when Georgia was strong is that it happened when Georgia belonged to all its sons and daughters at the same time, when the authorities recognized everyone, considered everyone's interests and respected every religion.

Naturally, I confirm that the Orthodox religion has always played a special role in Georgia. Any attempts - I do not want to beat about the bush here - to undermine the unity of the Georgian Orthodox Church, any attacks on the Georgian patriarch, are in fact totally unacceptable political steps. There are certain rules of the game in politics. We should not overstep this mark. It is wrong to score political points by starting intrigues within the church. The unity of our church and its special role at the most crucial times in our history, when on 22 November 2003 the chair in which His Holiness is sitting now was empty... This was not participation in politics. It was an act of civil heroism through nonparticipation.

We have learnt to respect Georgian national symbols. There used not to be a single child in Georgia who knew the national anthem. Now there is not a single child who does not know the anthem. When children see me, they want to sing the national anthem, it is the participation of children in the building of the state. Zurab Zhvania used to tell me proudly how happily his children sang the anthem. They can't join the reserves or vote in Parliament but they can study hard and sing the anthem.

We have learnt that the country can be both democratic and stable. We have learnt that we can have an honest, decent government that is trusted by the people. We may not like the government - there are many aspects of its work I am unhappy about - however, everyone acknowledges that this is a clean government, the cleanest government on the territory of the former Soviet Union.

This government has replaced real dinosaurs. The majority of them have now spent some time in appropriate places and, just as we promised the people, have paid back some of the money they stole. However, there are still some people who have again become candidates and we are building separate facilities for them.

Completely different people have arrived, which is something that should be especially appreciated. We have nominated Zurab Noghaideli as prime minister. There is just one reason why I have nominated Zurab Noghaideli. If there is one area in which we can claim success, it would be the timely payment of salaries and pensions and increased revenues. This has been achieved by the Finance Ministry. When a person works so well, he should be promoted. This is a simple principle in proper politics and a matter of fairness.

The government is also getting stronger because the chairman of the Supreme Court is now becoming deputy prime minister and minister of justice. The Ministry of Justice is very important. Almost all the ministers will remain in their posts. Naturally, there are some changes. Naturally, there will be frequent reshuffles. All the past reshuffles have proved successful. Okruashvili is the best defence minister we have ever had. Baramidze was a better interior minister than his predecessors. Then, an even better interior minister, Okruashvili, replaced him. Then, Okruashvili was replaced by an even better interior minister, Merabishvili. Okruashvili was a good prosecutor-general but he was replaced by an even better one, Adeishvili. Every reshuffle has resulted in an improvement. That is why we should not be afraid of this.

It is also true that our best professionals are in Parliament. On the one hand, it would be risky to drain Parliament of its human resources, but, on the other hand, there is a feeling that many of them - this is linked to the down-sizing of Parliament - should be in the executive because that is where everyday problems are decided. Having said that, I would like to express my gratitude to you for the work you have carried out here.

We have created a genuinely effective government. It is thanks to the effectiveness of the government, as demonstrated by the latest events, that we can deal with any unexpected changes, tragedies and terrorist acts and remain strong, so that we still stand firm on our own two feet, so that we are not disorientated, so that we respond quickly and appropriately. A country in our position has no other choice. We are a country which has to reclaim the most attractive part of its territory and which faces the strongest and most aggressive - perhaps not the strongest but certainly the most aggressive - forces in the world. They are resisting us. We are a country that has to carry out titanic work, a country that, out of nowhere, has to find the strength to solve a task that is almost impossible to solve. Without it, we will be unable to continue with large-scale development.

Our main achievement is that Georgia has learnt to be successful. We have learnt to protect this success and we have learnt to fight to ensure a better future for our children. A better future will be impossible without each of us working, looking after the country and having a sense of responsibility for the future of our country.

God bless our motherland. Long live Georgia

Parts of this translation are published with permission from BBC Monitoring, Reading, UK