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MPs Debate on Economy
Civil Georgia, Tbilisi / 1 Oct.'13 / 23:47

During a parliamentary debate on economic situation, several lawmakers from the UNM parliamentary minority group said newly launched USD 6 billion private equity fund in which PM Ivanishvili is one of the investors, is “complete lie” and “bluff.”

“That fund, which was presented yesterday, is complete lie. What 6 billion are you talking about? Are you deluding yourselves or are you trying to deceive the people?” UNM MP Zurab Japaridze said.

“Presentation, which was showed yesterday, was prepared by [former PM Nika] Gilauri, even the slides of presentation are the same… Who is investing 6 billion like this? Dhabi Group, RAKIA and some others are listed there – if they are to invest billions, there should be specific projects. Give us the list of those projects? Where are those projects? What’s the timeframe? Shows us specifics, instead of empty talk,” MP Japaridze added.
  
According to the Georgian Co-Investment Fund (GCF), PM Ivanishvili has committed about USD 1 billion of his own money to the fund and other investors are: Dhabi Group and Ras Al Khaimah Investment Authority (RAKIA) from the United Arab Emirates; Turkey’s Çalik Holding; Milestone International Holdings from China; State Oil Fund of Azerbaijan; Kazakh KazTransOil’s subsidiary Batumi Industrial Holdings, which manages Black Sea port of Batumi; as well as billionaire and founding shareholder of mining giant ENRC, Alexander Mashkevich, and the family of late tycoon Badri Patarkatsishvili.

“This is a bluff with a codename ‘saving Margvelashvili’,” UNM MP Akaki Bobokhidze said, referring to the Georgian Dream presidential candidate Giorgi Margvelashvili.

“In last year’s parliamentary elections voters were misled by Ivanishvili’s billions and this year [Georgian Dream] wants to mislead voters with this 6 billion fund,” he added. 
 
“There are no problems with attracting investments in energy sector – the problem is having small and medium-scale enterprises, including in the agriculture,” MP Bobokhidze said; according to GCF energy sector, along with agriculture, manufacturing and tourism, will be the fund’s major areas of interest.

Vice Speaker of Parliament from UNM Giorgi Baramidze said: “What are the projects in which this fund is going to invest? Or economic backsliding and devaluing everything was just a prelude to pave the way for certain individuals from abroad with very dubious reputation to grab and buy all the assets in Georgia?”

GCF was mentioned only for few times by both UNM and GD lawmakers during the lengthy parliamentary debates on October 1, which, not surprising, turned into a blame game, with ruling and opposition parties accusing each other for having a slow pace of economic growth.

Georgia’s real GDP grew 1.1% year-on-year in August after 0.8% y/y growth in July and growth for the first eight months of 2013 was 1.6%, according to preliminary figures released by the state statistics office on September 30.

UNM lawmakers, upon whose request the debate was held, were accusing GD of pursuing “inconsistent policies”, creating sense of unpredictability and GD lawmakers were often evoking past “crimes” of the previous government and “pressure” on businesses, which, they were saying, was no longer the case under the current government.

“The legacy was so grave that addressing it was much more difficult than many of us could have imagined,” GD MP Davit Onoprishvili, who chairs parliamentary committee for finance, said. 

UNM MP Pavle Kublashvili said that Georgia’s “economy is stalled”, adding that decisions like suspending sale of agriculture land to foreigners and rejecting to lower income tax, and instead introducing nontaxable minimum income, were damaging the economy.

UNM MP Zurab Melikishvili said that businesses moved into a wait-and-see mode from the second half of last year, ahead of the parliamentary elections. “But they still continue to be in this mode,” he said. 

Vice Speaker of Parliament from GD, Manana Kobakhidze, told UNM lawmakers that businesses are in the wait-and-see mode and hesitant about expanding operations because “they are afraid of your return” back into power. “But no, you won’t be able to return and [political] cohabitation will be over on October 27” when Georgia elects new president, she added.

UNM MP Melikishvili said that tax revenues already fall at least GEL 207 million short of the target.

“This trend will unfortunately force the government to ask the Parliament by the end of this year to cut down targeted tax revenues,” MP Melikishvili said.

GD MP Zurab Tkemaladze of the Industrialists party said that Georgia has a “stable trend of economic growth”. He said that although the pace of growth is slower than in recent years, it’s because the current government, unlike its predecessor, is not pursuing implementation of “imprudent” infrastructure projects.

GD lawmakers were arguing that slowdown was mainly due to contraction in construction sector, particularly in state-funded construction projects. He said that for example about GEL 360 million was spent on construction of a new building for the parliament in Kutaisi and this project added to GDP growth, but it’s failing to deliver any long-term benefit to the economy. 
 
UNM MP Mikheil Machavariani said the only growth which the country now has is in tourism “and that’s thanks to the policies of the previous authorities”.

Agriculture was the issue which many GD lawmakers were citing as a success of current government’s policies. GD MP Gigla Agulashvili, who chairs parliamentary committee for agriculture, said that “a record high” amount of grape harvest, 80,000 ton, was bought only in Kakheti region by factories and wine producer companies; he said that only 15% of this amount was bought by the two state-owned companies. He said that last year 75% of grape harvest in Kakheti, which stood at 52,000 ton, was bought by the state.

Reopening of the Russian market for the Georgian products was also raised during the debates. UNM MP Giorgi Gabashvili said that by allowing Georgian products back into its market, Russia obtained additional “lever”, which Moscow can anytime use against Georgia.

“Of course, lifting of embargo will bring additional income [in Georgia], but does this income serve as a counterbalance to freedom of the country, the European and NATO course? Of course, it cannot,” MP Gabashvili said.

On foreign trade in general, GD lawmakers were stressing on upward trend in exports and explaining declining imports with increase in locally produced commodities, which they argued were replacing on the local market products imported from abroad.

Georgia’s foreign trade declined 3% year-to-year in the first half of 2013 to USD 4.71 billion with the trade gap also declining 13.3% y/y to USD 2.24 billion. Imports were down by 7% y/y to USD 3.47 billion in the first six months of 2013 and exports amounted to USD 1.23 billion, up by 9% y/y, according to Geostat. 

MP Davit Bakradze, who is UNM’s presidential candidate, said that “all the statistical data show there are problems in the economy” and blamed it on “confrontational political climate” and “inconsistent policies” of the government.

He called on the government to lower income tax, to introduce regulatory impact assessment mechanism, to carry out economic amnesty and de-criminalize economic offenses. Bakradze, who was speaker of parliament when UNM was in power, said that the previous authorities failed to protect businesses from excessive meddling of the law enforcement agencies.

GD MP Manana Kobakhidze rebuffed Bakradze’s speech as a “political coquetry” of the presidential candidate.

At times debates were moving far off-topic from economy; at one point GD MP Gogi Topadze of the Industrialist party, touched upon Georgia’s Afghan contribution and said that NATO “is not anyway” accepting Georgia as a member, suggesting that there is no reason for the country to continue ISAF contribution – position, which is in stark contrast from the one of other GD coalition member parties. MP Topadze lambasted at UNM, telling parliamentary minority members that they should be held responsible for “crimes committed" while being in government.

MP Kakha Okriashvili, co-founder of Georgia’s one of the largest pharmaceutical chains PSP, who quit UNM after the parliamentary elections, said that the current authorities are “inexperienced” and the UNM – “unconstructive opposition”. He called on the authorities to introduce economic amnesty and “partial decriminalization” of economy-related crimes.

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