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Tuesday, 25 October 2016


Sakartvelo’s economy in eternal hibernation

2011-01-31 12:13

12881.jpegGeorgian government is shocked: in three quarters of 2010 the country received only USD 443 million in foreign investment out of USD 1 bn as expected. For the time being local economists explain failure of their plans for the global financial crisis. Now the national investment agency waits for the end of winter hoping that capitals, like bears in springtime, will return from hibernation back to Georgia's blessed land. However, winter is not the cause of the slump on Georgia's investment market. There are more serious reasons.


Optimistic forecasts of experts from Georgian government are not meant to come true. The investment slump in 2010 is not connected with the consequences of the global financial crisis. Most probably it's Georgia's economic collapse at home.

During Mikheil Saakashvili's TV address a few days ago his suggestion to pull in belts was not incidental. This process has already begun for certain categories of people that live in Georgia. For instance, for teachers that have recently been made redundant, pensioners whose allowances won't ever reach USD 100, and war veterans who, as the president claims, "urinate on monuments". That is why, apparently, they don't deserve state support. A black stripe begins for "Georgia's economic miracle" that was described enthusiastically by many journalists and experts. But let's be consistent.

Before the war in 2008 the country really made dizzying economic progress with 9-12% as GDP average annual growth in 2004-2008. Accordingly, incomes of the state budget increased during this period. Starting from 2003 they grew six-fold. An average salary grew from 30 to 300 US dollars. While rusty plants and shabby multi-storied blocks of factories and institutes were sold out and buyers invested in rehabilitation, it seemed the country was resurrecting by leaps and bounds.

But magic does not exist, and the sources of this growth were evident: a most colossal privatization campaign in post-Soviet space and entry of foreign capital on extremely favorable conditions. But the main reform of that time was minimization of bureaucratic procedures: an enterprise could be registered within minutes; the tax system was equal to offshore regimes. However, all that has its drawbacks - but let's discuss them later.

Georgia does have wonderful business opportunities for foreigners. However, they enjoy support of the authorities in prejudice to the interests of local population.

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