Of hot politics and a chilled economy
13 November, 2014
Of hot politics and a chilled economy
The intense political week that shuffled the cabinet of ministers of Georgia and sent alarming claims that Georgia’s western political vector is under threat is in the past already. But the Georgian economy may very likely will pay the real cost for wrongly or fairly made political decisions.

While political analysts judge whether or not there is real political crisis in Georgia and whether the country is shifting its focus to Russia, economic analysts fear the political uncertainty will have
its impact on the economy. After political passions fade away it is always economy that suffers or fares well both in the short and long-term. Opinions are divided whether this very hectic week is a real threat to the national economy or just a storm in a cup.
Dietrich Muller, a co-founder of Georgian Investment Group+, worries that the past week was a crown to the immature economic course of the new government, which entered office in the fall of 2012.
“The past week just crowned the process that has been going on since 2012 to this day,” Muller said in the interview with Georgian Journal.
“This government did not fulfill any of its pre-election promises like restoring violated property rights, putting competitive laws in place and improving quality of products. All these three issues are crucial for business and investors, and especially for Western ones. Protected property rights, healthy competition and high quality of products all are key features of European and Western markets, while it is an open secret that Russia does not care much for these values. So once we have none of these three features in place in Georgia, then where are we heading? To Russia, I guess. Because no Western investor will come to a country where competition and property rights are not protected and quality is not guaranteed. Plus the recent statements on the change of Georgia’s Western political course will set western investors on edge.”
According to Muller, the government did not apply much effort to give proper impetus to agriculture and production via cheap credits. On the other hand it creates state monopolies in the post and cargo shipping. Muller believes that government is artificially dragging Georgia into an economic crisis in order to prepare a situation for jumping into the Russian-led Eurasian Union.
“The state budget has a surplus because it cannot manage to spend money on infrastructure projects that should create jobs and build up roads, electricity lines or other infrastructure that are an essential for attraction investments. Who will invest in the country like this?” Muller wonders.
His company managed to attract around five to seven investors per month before the power shift of 2012 while currently this figure has dropped to zero.
“Yes, property rights were not protected during the ex-power and the competition was unfair but President Saakashvili himself acted like a guarantor and this lured some investors. The new power offers neither personal nor legal guarantees,” Muller said.
As a matter of fact, investments dwindled in Georgia since 2011 when the country managed to bottom up after the financial crisis and attract more than a billion of US dollars. In 2012 and 2013 Georgia hardly scraped 911.6 billion and 941.9 billion US dollars respectively. This year the figure looks like it will be decreasing. According to preliminary data, the Foreign Direct Investments (FDIs) totaled 415.8 million US dollars in the two quarters of this year that is below the similar data of 2013 [460.2 million US Dollars] and 478.9 million attracted in 2012.
Demur Giorkhelidze, an economic analyst, does not see any signs of a crisis. He expects no significant aftermath impacting the economy either.
“The retirement of the Defense Minister cannot change the political course of Georgia, for it is the choice of Georgian people not certain officials,” he told GJ. However, he acknowledges that the incumbent authority of Georgia is incompetent. He thinks situation was no better during the ex-power that scared many investors off.
“The wealth of oligarchs increased by 4.5 billion Lari lately while Georgian people do not feel any improvement. This is a result of the low professional skills of the new government. But investors did not rush in here during the ex-power either. The biggest inflow of FDIs was in 2007, which exceeded 2 billion US dollars. Yet Georgia needs at least 40-50 billion a year if we really want to grow. And this figure is quite realistic. Georgian businessmen who made their fortunes abroad have around 80 billion US dollars worth of assets and are just waiting for the chance to invest it in Georgia. But the investment climate is not ideal,” Giorkhelidze said.

Other Stories
Korter: Reliable housing property data in Georgia
It's not a simple job to find fresh homes. But when you use the estate choice service Korter, everything becomes distinct.
Rent a car in Tbilisi – Parent.ge
Are you thinking of booking the best vehicles for your next trip at a very reasonable price? If yes, then this is one of the best decisions you can ever make for yourself.
Pleasant Sunday for the whole family – Renewed Sunday’s brunch at The Biltmore Tbilisi Hotel
Summer, the season of endless fun and vacations, has ended and Tbilisi has become a usually crowded city.
GEL devalues, officials show optimism though
Devaluation of the national currency has sent shockwaves among citizens in Georgia. Officials think that the trend will return to its normal frame, though.
ProCredit Bank’s 20 years of challenges and successes in Georgia and what it means to be a responsible bank
“The bank’s 20-year long presence in Georgia was marked by many challenges and success stories.
Comments on alarming GEL devaluation
The National Bank of Georgia set a new exchange rate, according to which, dollar price became GEL 2.9507 on Tuesday.
Euronews and Silknet sign an MOU to launch “Euronews Georgia”
Euronews and Silknet, Georgia’s leading telecommunications company, are announcing the signing of an MOU in view of launching Euronews Georgia, a news channel and digital platform aimed at a Georgian-speaking audience.
Green Diamond starts to hand over flats to owners as second stage of construction finishes
Second stage of construction of Green Diamond living apartments by MAQRO Construction has finished and process of hand over of flats to owners has started.
Georgian wine tasting in the US came off excellently
Georgian wine tasting in the main cities of the US, New York, Chicago, and Boston went off excellently.
The most wanted fruits from Georgia
The fruit exportation has decreased in Georgia. According to Geostat (National Statistics Office of Georgia), this year, up until May Georgia exported 25 939 300 USD worth of fruit – 6 771 300 USD less than in 2018.
Investment Plan for Europe – Additional EUR 800 million for SMEs as EIF and ProCredit double support for innovative companies
The European Investment Fund (EIF) and ProCredit Group are providing an additional EUR 800 million to innovative small and medium-sized companies (SMEs),
Everything of comfortable life in one space – Second part of construction of one of the largest apartment complexes finished in Tbilisi
Apartment in ecologically clean environment, thousands of square meters of green yard, swimming pools, places for various sports activities, treks for walking and running, commercial spaces – all these available in one space is not a fantasy.
Batumi awarded Europe's Leading Emerging Tourism Destination 2019
World Travel Awards Europe Gala Ceremony 2019 took place on the 8th of June in Madeira, Portugal.
Coca Cola to open new factory in Georgia, will hire female drivers
Coca Cola is opening new factory in Georgia in December.
World's best party supply company now on the Georgian market
The largest party supply store in Georgia - MyDay is launching as the official distributor of AMSCAN from 2019.
Live as a marketing tool and an unprecedented live stream launched by Livetag
Sharing information has become smoother and more versatile in today’s technological world. Recently, live streaming, an online streaming media has become especially popular.
Theme and program of Caspian Energy Forum Tbilisi – 2019 changed
“The 8th International Caspian Energy Forum Tbilisi – 2019, scheduled for June 21, will focus on the development of the Azerbaijan-Georgia relations in the field of economy and energy”,
Misunderstanding over Poti deep sea ports
There was misunderstanding around deep sea ports in Georgia – in Poti.
High demand for dollars or the investment decline – Why Georgian Lari depreciates
$1 equals GEL 2,7470 in the official rate set by the National Bank of Georgia (NBG).
PSP Group confirms negotiations regarding purchasing of GEO Hospitals
PSP Group confirms negotiations regarding purchasing of GEO Hospitals.
New life to be given to Dashbashi Canyon
Georgia’s Agency of Protected Areas is planning to give new life to Dashbashi Canyon in Tsalka (southeastern Georgia).
Who is constructing “Khadori 3” Hydropower Plant in Pankisi Gorge?
Clashes broke out in Pankisi Gorge, Georgia’s northeastern region between special forces and residents
Business Positive – Successful radio program from Radio Positive
Starting point of radio program Business Positive is to meet interesting people, communicate with them and deliver information that is interesting for the audience.
A factory of electric vehicles to be built in Kutaisi
Prime Minister Mamuka Bakhtadze stated that a factory of electric vehicles will be built in Kutaisi at the presentation of the Aigroup business group.
Qvevri-shaped hotel complex to be built in Telavi
A Qvevri-shaped hotel complex is scheduled to be built in the village of Shalauri in Telavi, Kakheti (east part of Georgia).
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 2019
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