Dual Administration Threat Eclipses Economic Renaissance Prospects
11 October, 2012
Dual Administration Threat Eclipses Economic Renaissance Prospects

The threat that the dual authority may prevail in Georgia if the President of the country goes into opposition, eclipses prospects of Georgian economy that is looking forward to the renaissance as a result of the power shift. 

“Business should be free of political crackdown,” this was the key and most expected message sent by Bidzina Ivanishvili, a candidate for the post of Prime Minister of Georgia and leader of Georgian Dream political coalition [that won the parliamentary elections on October

1, 2012], to business community on October 5.

Ivanishvili having around USD 6 billion at his disposal is acknowledged as a successful businessman worldwide and both foreign and Georgian businessmen hope he will handle with the full plate of problems of Georgian private sector such as rampant oligopolies and monopolies, lack of competition, expensive credits, violation of property rights and the state crackdown on business couched in fine terms as of “friendship” and “cooperation” between the state and the private sector.

Ivanishvili believes the only relationship between the state and private sector must be in frames of law and as soon as the state would ask for “friendship” business must cry for help like “I’m raped!”

“I personally guarantee the business that not a single official [of new government] will ever dare to interfere in private business and private ownership,” Ivanishvili stated after the meeting. “This should lay ground to economic development in the country and combating the big injustice called unemployment.”

He recommended the business presumably involved in cartel agreements to give up this malpractice as far as the new government plans to restore effective anti-trust service to discharge the market of monopolists once and for all.

“We will restore the court of arbitrage revoked by the previous authority and will create the system where the prosecutor’s office and the court will be in the service of people and business,” Ivanishvili elaborated.

The new candidate of Prime Minister’s office also stressed that the government-manipulated banking sector must be de-politicized and focused on cheap credits fixing at around 5-7% of yield [unlike the currently active yields starting from at least 12% and going as high as 40%]. No entrepreneurship can be developed through credits demanding 15% of yield, Ivanishvili accentuated.

He also promised to improve the labor code, think of making the profit tax void and expressed hopes to restore the trade and cultural relationship with Russia perhaps by the end-year.

“I am expecting the renaissance,” Lasha Papashvili, founder and shareholder of Bank Republic [a part of Societe Generalle Group] currently involved in real estate, agriculture, winemaking and tourist businesses, said on October 5 when Ivanishvili met business community.

Levan Vasadze, a Georgian millionaire with major assets in Russia and founder of Bagrationi 1882 winery in Georgia, thinks “Ivanishvili as nobody else is well aware of this sphere [business] and he really is able to develop business [in Georgia].”

Georgian economic experts share the optimism of Georgian businessmen and expect the new government to make Georgian business climate healthier and attractive.

“I agree with Papashvili that there may be a renaissance in Georgian business but only really smart and skilful entrepreneurs are able to compete at the market. I believe many businessmen who ranked among top businessmen of the country thanks to governmental lobby may be out of the renaissance prospect. This prospect unfolds to only really dexterous entrepreneurs who were discriminated by the previous authorities but now can reveal their skills as business climate becomes fairer  and healthier that enables smart businessmen to compete  the ones who enjoyed artificial preferences starting even Shevardnadze regime,” Ditrikh Muller, a founder of Georgian Investment Group, said in the interview to Georgian Journal.

Demur Giorkhelidze, an economic analyst, believes Georgian business may really flourish only by focusing on social responsibilities neglected so far.

“Big business should understand that they must shift their standpoints if they want to partake in the economic renaissance. The thing is the big business was the one enjoying the benediction of previous government so far and bore not the least of social responsibility. Now they should realize that there are only two ways: either they undertake social responsibility and share reasonable profits with people, or they may still enjoy big profits and be a subject of national contempt,” Giorkhelidze explained to GJ.

The only blemish on the landscape of optimistic forecasts is inadequate behavior of Mikheil Saakashvili, President of Georgia and leader of the ex-ruling political party of National Movement. Saakashvili declared that he goes in the opposition since Georgian Dream won the parliamentary elections. His office term expires in October of 2013 and during this period Saakashvili has sufficient power to baffle the new government’s activity and create a kind of dual authority in the country leading to stagnation and economic crisis.

“The dual authority brought Ukraine to the deadlock couple of years ago making it most vulnerable to the economic crisis and it may affect Georgia in the face of the second tide of economic crisis upsurge. Dual authority is the worst thing that can happen in the country as all investment projects are suspended until the situation clears. No reasonable investor [local or foreigner] undertakes any venture in the country where the president is at odds with the government. Investors need guarantees for smooth business operation and it cannot be achieved when the president declares himself to be an opposition like Saakashvili did,” Muller worries.

There are plenty of changes made by the ex-government to the law affecting investment climate that the new government needs to retrieve and Saakashvili has full power to stopple the legislative activity of Georgian parliament: the parliament-approved bill becomes a law only after the Presidential signature that Saakashvili can easily withhold for three times and protract procedures. Moreover, His Excellency is empowered to dismiss parliament in six months, issue presidential regulations with the power of law and cause a lot of mess in the country in fact. The only way-out is to send Saakashvili on retirement, Muller believes.

“If Saakashvili is a real patriot he must step down now when the second tide of economic crisis hovers in the air to escape dual authority and economic stagnation in Georgia. I believe investments will influx in Georgia immediately and the country makes a real economic breakthrough in this case. Otherwise we may face stagnation not a renaissance,” Muller said.

Giorkhelidze believes Saakashvili will be pretty negotiable.

“He is already well aware of power of Georgian people now [who got back to its national responsibility since the elections day] and understands that everyone who goes against the national will is doomed to failure,” he said.

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