Briton held hostage in a country where lawlessness rules

In Georgia, where police corruption is endemic and the law is widely viewed as the imposition of an alien power, the search for the Briton kidnapped by gunmen on Tuesday has been stepped up. But the fact that the Georgian police are leading the search for Peter Shaw, 57, may compound the Welsh banker's problems.

Mr Shaw, who worked for Agro-Business Bank in Georgia, was abducted near his home in the capital, Tbilisi, less than 24 hours before his contract for work in the country was to have ended.

A car carrying men dressed in fake police uniforms had approached Mr Shaw and demanded that he follow them in his car. As he resisted, a car with genuine police pulled up to investigate, but a second car carrying men in camouflage clothing pulled up and opened fire on the police with automatic weapons. The gunmen then fled with Mr Shaw.

Agro-Business Bank is in the process of being privatised. It is thought that Mr Shaw's abduction may be linked to this, and that a ransom – the going rate is about $500,000 (£330,000) – may be demanded. The fear is that he may suffer the same fate as two Spanish businessmen who were kidnapped on their way to the airport last year and endured eight months of captivity, chained to the wall of a damp cell measuring 2.5 metres by 1.5 metres (8ft by 5ft).

Mr Shaw's former wife Mair, 57, said the family were "shocked and concerned" at his kidnap. Ms Shaw, from Cowbridge, south Wales, said she was told of his abduction by the Foreign Office on Thursday evening. She said her former husband had gone to work in Georgia six years ago but returned for regular visits. "The last time we spoke to him was at the weekend and he was looking forward to coming home," she said. "It is very distressing."

The kidnapping will reinforce post-Soviet Georgia's unruly reputation, as well as highlighting the dubious role of the police. They are most in evidence at roundabouts, compelling drivers to show their papers, and routinely milking them of five lari (£1.50) for speeding, ignoring traffic lights, crossing central markings or any other offence they choose to dream up. But, as a Council of Europe report observes, that is just the tip of the iceberg.

"The conduct of the police is probably the major human rights problem in Georgia," the report said. Phone-tapping, arbitrary arrests and torture of detainees have all been alleged. A separate charge-sheet laid before the US Senate six weeks ago accused Georgia's police of unwillingness to protect minority two religious groups – Baptists and Jehovah's Witnesses – from repeated violence by a mob led by a defrocked Orthodox priest.

While America has supplied 150 military advisers to beef up Georgia's demoralised army, the British Council is focusing on the judiciary and the police. As its spokesman, Kote Vardzelashvili, explains, in the temporary offices which the council rents at Tbilisi State University: "Torture is how the police often gather evidence when investigating crimes, and they exploit the fact that police detainees have no legal rights. They invite you to come to the police station as a 'witness', and you have no option but to go, and no option but to talk when you get there."

The council is encouraging Georgia to consider adopting aspects of the Scottish criminal code, which is more suited to Georgia's needs than English-style case law.

Part of the problem, says Mr Vardzelashvili, is that from their past within the USSR Georgians are used to regarding the law as being imposed from outside: "They must learn that it exists to protect them," he says.

The demonstrations which erupted last November – after the government raided an independent television station on a trumped-up charge – were in his view a welcome sign, as were the cabinet resignations which followed. "We need a new generation in government: not ex-Communists who've learnt a new political language but who still think in the Soviet way," he says. "Trouble is, the old generation won't give up without a fight."

Last week, ballot boxes were stolen at municipal elections in Rustavi, with suspicion firmly laying on the city's ruling clique. But the often-muzzled newspapers protested so loudly that a second election was held and the old clique has been ousted.

Corruption is endemic. A friend of mine called Giya, with a US education, used to have a job, but when I met him this week his youthful cheerfulness had evaporated. "I was called in by the boss this morning, and told that someone had bought my job for US$1,000 (£670). There's nothing I can do about it. I'm out." The job was in a government department, and he had got it through ability, but ability was no match for graft.

A shocking little story, but par for the course in Georgia, as President Eduard Shevardnadze himself concedes. Corruption, he says, is a "national disaster, a poisoning malady which will, if unchecked, deprive us of our future as a civilised democratic state".

Meanwhile, with the economy dormant, life is hard for ordinary Georgians. One of my friends – a widow in her fifties – manages an internet café seven days a week for a monthly salary of about £50. Another is a hospital consultant with twice the hours of her London counterparts on a monthly wage of £67. Given the rate for kidnappings, you can see the crazy economics governing life in this struggling young state.