New State Export Company Poses Anti-Trust Risks
06 September, 2012
New State Export Company Poses Anti-Trust Risks

A new state-run export company created to solve the agriculture export-related problems, is believed to be ineffective and can transform into a monopolist ultimately, hampering the commercial sector development. 

To boost Georgian agriculture export, Georgian government set up a new Fruit and Vegetables State Company LLC, a public law entrepreneur owned by the state in this August after Vano Merabishvili, a former Interior Minister took over the post of Prime Minister. The Premier has been personally promoting and explaining the benefits

of an export-oriented company with farmers during his regional tours.

According to Merabishvili, the new state export company will guarantee to accept the surplus harvest from the regional population and then export it to Ukraine whence the product will be re-exported to the European countries. Premier promised farmers that the said company would accept entire harvest for competitive price. It also will be responsible for marketing and logistic sides of export and will pay back the compensations in case of losses.

Merabishvili accentuated that instable markets are the key challenge to Georgian farmers that caused significant financial losses and now the state will stand as a guarantor to sell the harvest out that will be big stimulus to farmers.

According to Giorgi Jakhutashvili, Head of Fruit and Vegetables State Company, the state export company has already started operation and it will act as a mediator and key counselor to export-oriented companies and farmers. It will get the harvest producers in touch with the reprocessing enterprises and exporters.

“The export company will set up fruit-and-vegetable collecting units in regions and handle with their marketing and logistics completely,” Jakhutashvili said in the interview to Georgian Journal. “We have already worked out a data-base of producers and potential export companies and when an interested entrepreneur asks to be provided by certain product we would get them in touch with the  producer, also provide with due consulting and logistics service to insure the smooth operation.”

Jakhutashvili cannot name at the moment how many collecting units will be set up. All he can say now is the state rehabilitate old units and equip with the state-of-the-art technologies for fruit-and-vegetable sorting, packing and storing for construction of the brand new infrastructure may require big investments.

The new company plans to construct a new refrigerator warehouse in Ukraine where Georgian agriculture product will be stored and sent on re-export to Europe.

The export company will be financed from the profit it will enjoy that includes the service fee too.  Jakhutashvili cannot name even average tariffs as of yet as far as it depends on the service package, besides the company is not completely shaped out.

The commercialization of the state run export-oriented venture makes some economic and agriculture sector analysts alert that it will be ineffective and monopolistic. Badri Ramishvili, an agriculture marketing expert, predicts that the state company involved in a commercial activity will be ineffective as almost all state enterprises are and is supposed to become a market monopolist hampering to commercial sector development ultimately.

“If the new company will be mediating [between producers and reprocessing or logistic enterprises] it will be good but as soon as the state export company will be payable, it sends a signal that this company may become a market monopolist eventually. When a big, united structure is created under aegis of the state, structure that has no alternative at the market it is a monopoly,” Ramishvili elaborated to GJ.

Such state monopoly is supposed to press on its privileged keys to win competition with the private sector that kills competition and private business.

He doubts that such a structure can be privatized in future thus becoming a private monopoly that is worse than the state one.

“As a rule state enterprises are non-profitable and ineffective for they include corruption risks, demand big administration resources and are less controlled while private business is always better controlled/managed as far as founders are interested in profit and efficiency. The efficiency is lost with the state. Any state interference in commercial business if it does not include strategic importance [like railway, roads, ports, forest fund] is ineffective. And the agriculture is of no strategic importance.  I wonder that government with libertarian ideas does this.  It would be better for the state to be involved in streamlining legislative base with other states to make simpler taxation and the business will do the rest,” Ramishvili said.

Shota Murghulia, an economic analyst with the Center for Strategic Research and Development, also questions effectiveness of the new state venture that looks like a pre-election project. He does not see monopolization risks at the moment but does not rule out such risk in future.

“The state always tries to use its privileged levers that private business cannot afford,” Murghulia explains.

What he questions is the profit and reasonability of the venture.

“I do not see any monopoly risks at the moment for the state undertook the activity that private business cannot do and it will be good if they really help the export. But I wonder why private business could not do that? There were number of small businesses operating in export of Georgian agriculture product but they quit that makes me inclined to presume this business is not profitable perhaps the quality of Georgian product is low,” Murghulia presumes.

He cannot understand how a new export company can re-export Georgian product from Ukraine to European countries with stronger safety and quality requirements if Georgian product do not meet these standard requirements. If the quality problem does exist with Georgian export in Georgia it is scarcely supposed to be removed in Ukraine.

“May be this export company will do a good job but it should clearly stipulate how it is going to have profit that private business could not get,” Murghulia said. “Otherwise it very much resembles pre-election vote-oriented enterprises that end bad as a rule.”

Other Stories
Inovative and reliable online shop in Georgia -
Status of Georgia as a business and tourism interesting country is growing from year to year.
Tbilisi TV Broadcasting Tower – Better than the Eiffel Tower?
It is planned to renovate the Tbilisi TV Broadcasting Tower, one of the landmarks in the capital.
Georgian Fusion Menu by The Biltmore Hotel Tbilisi
5,895,914 international visitors have visited Georgia between January and August of 2018. Compared to the previous year the number has increased by 12.2 per cent.
Advertising of gambling and lucrative games may become banned in Georgia
Advertising of gambling and lucrative games may become banned in Georgia. Those who violate the new rule would be fined GEL 10 000.
Lebanese café-lounge Beirut opens in Tbilisi
What is necessary to organize an unforgettable event? – Fun, emotions, lots of surprises, good music and delicious menu.
Georgia second among the fastest growing tourist destinations in Europe
Georgia is among the fastest growing tourist destinations in Europe. The data is published by the UN World Tourism Organization.
Bitmain launches world digital mining summit in Tbilisi, Georgia
Bitmain CEO Jihan Wu and Roger Ver, CEO of Head Speaker List featuring Circle, and Genesis Mining when Digital Mining Leaders Convene In Tbilisi on September 21-23
TBC Bank and Gazelle Finance have teamed-up to support Medical City, a leading healthcare provider in the western region of Georgia to launch the Western Regional Center Of Modern Medical Technologies.
Equiavlent to buried treasure – resources that are underused in Georgia
For 2018 the IMF Commission has forecast an annual economic growth for the Georgian economy of about 5,5%.
Does the quality of Georgian wine increase and how the export affects it
If we look at the data collected about modern Georgian wine, we will find out that the Georgian wines produced between 2015-2017 are much better in terms of their quality and Oenologic features rather than the wines produced between 2009-2011.
Japan simplifies the visa requirements for Georgian citizens
Diplomatic and economic relations between Georgia and Japan are now moving to a new phase. Recently Japan has decided to simplify the visa requirements for Georgian citizens.
M&S (Marks and Spencer) and H&M collections to be produced in Georgia
Garments manufacturer MGMTEX will start production of the M&S and H&M trendy collections from this September.
The World Digital Mining Summit to be held in Georgia
The summit is scheduled to take place between 21st-23rd September in the Hualing Hotel, Tbilisi, Georgia.
Galt and Taggart - Tourism Boom Continues in Georgia
Tourism has become one of the key drivers for the Georgian economy. Galt and Taggart has recently published research about the Georgian tourism sector in the first half of 2018.
"The worst dream for Putin is that Russians want to live in Georgia"
This year, visitors to the Adjara region would notice that there is a boom in construction in and around Batumi.
Underground gas storage facility to be built in Georgia
KfW, a German government-owned development bank signed a EUR 150 million promotional loan with the state-owned Georgian Oil and Gas Corporation (GOGC) for the construction of the first underground gas storage facility in Georgia.
New gambling rules for Georgia
Georgian lawmakers are preparing a new draft law relating to online-casinos and gambling that will seek to curb gambling addiction in Georgia.
How expensive is it to visit Georgia?
The Georgian Lari (GEL) is the official currency of Georgia and is the only legal means of payment in the entire territory of Georgia.
Trade with the EU and the Commonwealth of Independent States (CIS) has grown significantly
Trade with the EU and the CIS has grown by 26% and 33.5 % respectively, says GeoStat, the Georgian National Statistics Office.
The unemployment rate decreases in Georgia
The unemployment rate decreased in Georgia by 1,9% and amounted to 12.1% in the 2nd quarter of 2018 compared with the previous quarter,
Memorandum of Understanding to be signed between Georgia and Malaysia
According to the Georgian Ambassador to Malaysia Nikoloz Apkhazava, Georgia plans to sign a Memorandum of Understanding (MoU) with Malaysia.
“Blauenstein Georgia” due to expand in Georgia
“Blauenstein Georgia” is planning to open more shops in Georgia. It is an agriculture company that sells meat products, meat and convenience food.
The amount of Direct Foreign Investment rises in Georgia
According to the information of the National Statistics Office of Georgia, the amount of direct foreign investment in Georgia has risen
It’s going to get  harder for foreigners to get residence permit in Georgia
It’s going to get harder for foreigners to get permit of residence in Georgia.
Mziuri Park in Tbilisi to be renovated soon
It was the dream of prominent Georgian writer Nodar Dumbadze that when the original Mziuri park was constructed and opened in 1892 that it should be a park for children,
Exchange Rates
GEL Exchange Rate
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
Georgia is in the midst of an economic maelstrom, Euronews reports.
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
GEL Exchange
November 2018
Mon Tue Wed Thu Fri Sat Sun
1 2 3 4
5 6 7 8 9 10 11
12 13 14 15 16 17 18
19 20 21 22 23 24 25
26 27 28 29 30