Cap prices for social care?
14 October, 2010

Georgian Parliament discusses amendment to the law on imposing cap prices on products making up the consumer basket so as to protect socially vulnerable people. Economic analysts assess the initiative as an economic nonsense and recommend working out proper anti-trust legislation instead.
Georgian Labor party submitted to the parliament a socially-oriented draft law aimed at protection of socially vulnerable people from eminent starvation. The draft law initiators’ understanding is that the social picture in the country is deteriorating and Georgian government

has to adopt price limits to prevent speculative price-hike in the country on substantial foods and also control monopolist enterprises. Adoption of cap prices for consumer basket products is one of the tools to protect socially vulnerable people, the bill stipulates.

It recommends the government to impose cap prices on products that make up a consumer basket including bread, cereals, butter, rice, flour, sugar, cheese, cottage cheese, oil and other products essential for health. The cap price will be calculated according to the market demand and supply proportion envisaging minimal profit of entrepreneurs. Ministry of Finances of Georgia is supposed to implement due calculations based on the official statistic data.

The draft law initiators assure that the bill was worked out due to extremely deteriorated social climate of the country, that a number of products making the consumer basket are not affordable to socially vulnerable stratum of Georgian citizens including pensioners,  people below poverty level unemployed, multi-children families,  whose income lags much behind the subsistence minimum. The figure of subsistence minimum is defined by GEL 118 per capita as of August of 2010. However price since August increased by at least 10-15% on milk and milk product, bread, cereals and other food products making the consumer basket. The point is that prices on bread and cereals, as well as on milk and milk product increased at the international market due to crop failure this year and this trend affected Georgia too. But the project initiators believe that besides economic reasons Georgian market monopolist enterprises cause artificial price hike and hope to curb their activities via the underway cap-price bill. They assure that similar practice is adopted worldwide and the draft bill in question is worked out based on the best world experience.
“Regulation of consumer prices imposed on product and pharmaceutical product and on other goods essential for human health is adopted in France, Germany, Japan, Austria and other countries,” the bill paper reads.
Georgian economic analysts find the project rather populist than reasonable. They dub the project on introduction of cap prices on food product as an economic nonsense for fixing limits on prices counters to principles of free market.  They find impossible to work out execution mechanism of this law if it is really adopted.
“It is return to the soviet economy, they were regulating prices, but it was a centralized economy and price regulation is impossible at free market, “Davit Narmania, an economic analyst believes. “Prices can be regulated in natural monopolist sector like gas, electricity, water and communication but the world does not know any limited prices on food and other products.”
He advises Georgian government to accomplish the anti-trust legislation instead of adoption unrealistic scheme of cap-prices. Almost all economic analysts bewildered over the cap-price initiative.
“This can be only temporary way-out,” Levan Surguladze, Head of Caucasus Financial Service (CFS), told Georgian Journal. “If we take into account that there are people who really cannot afford essential foods fixing cap prices can be understandable, but just in a short-term prospect during a crisis period. But at any rate it is not reasonable from economic point of view”

In quest of liberal reforms the post-Rose-Revolution Georgian government revoked the anti-trust legislation and agency in 2005 and established the Free Trade and Competition Agency (FTCA) [a sub-structure of the Ministry of Economic Development (MOED)] instead. However the agency was not the anti-trust body’s assignee. As a result trusts enjoyed cartel agreements and prices became completely uncontrolled. Governmental understanding was that monopolists’ activity should be restricted and regulated by market itself. However after strong EU recommendation stressing that the free trade agency is absolutely ineffective body Georgian government revoked the agency in spring of 2010 and created an independent anti-trust body. The detailed functions of the new anti-trust body and the legislation enabling effective regulation were supposed to come by fall. However the anti-trust still lacks proper legislation and remains on the paper actually.

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