.jpg "Prime Minister Nika Gilauri")
On August 21, 2009 at the briefing held at the Government Chancellery Prime Minister Nika Gilauri presented the economic results for the past six months.
As the Prime Minister stated, after his approval as a prime minister he promised to the society to present the government report for every past six months.
"During the last some weeks, the Prime Minister office has collected information from various ministries, based on the analysis of which I would like to present the government report.
The first six months of 2009 were rather difficult. Today I will speak about the economic aspects. The world financial crisis and, to some extent, the home political confrontation had certain negative effect on the national economy. However, during the last 2.5-3 months we have seen the growth of economic activity in all directions: in the banking sector, deposits, National Bank reserves - the course is stable, the number of transactions in the real estate market is growing.
In addition, the sales of cars, import and export are growing. The level of economical trust is rather high in business, society and from the side of foreign investors. We see how foreign investors are coming back to Georgia gradually.
At first I will speak about innovations and then about those important projects, which are in progress now. And finally, I will touch these problems which the Georgian economy is facing.
The first innovation is the package of economic incentives in amount of 2.2 billion lari, which we offered to the society at the beginning of the year. This package is being realized now. Noteworthy also is that we reduced the income tax rate from 25% to 20% that has been reflected in the economy in kind of withheld money.
The second innovation is a new financial package, which we have offered to the society and which will be actually realized in September-October. This package was developed by us together with the National Bank. On the one hand we will mitigate the strict regulation of the banking sector in order to increase the crediting of the economy by the banking sector. In addition, we have offered to the construction sector the unique project, the first results of which will be available in September. As you know this is the project of rehabilitation of Old Tbilisi district.
The construction sector is enabled to continue the frozen building under the state guarantee. The first auction will be ended in September. If even one project will be successful, I will consider that the direction is right.
In addition, this year for the first time we have offered the treasury bonds to the public and this step is very successful. We have had no such practice in last years. I would like to say that some countries have introduced this practice but they have had great problems in this line. However, we have succeeded to issue the treasury bonds with the interest from 5 to 6%. This fact evidences that the trust in the economy and economical projects of the government is high.
This year we have one more new project - the low-premium insurance. Such unique program existed neither in Georgia nor in any other country. At the outset we have insured 120000 people under this program. The state appears as the co-financer of some 66-67% of the insurance package. With this program we have introduced the insurance culture in the public.
I would like to mention one more successful program. This is the program implemented by the Ministry of Education in frames of which we are sending 130 students to study abroad under the full financing by the state. This program will bring greater results in future. Every citizen of Georgia who will be admitted in one of the fifty first-class universities will be able to study and will have no problems from the financial aspect.
I will also highlight the program related to villages and provinces. We allocated from 5000 to 40000 lari to each village and the villagers have decided by themselves where they will spend this money. In my opinion this is a very promising program which will be prolonged in future as well. The population have been actively involved in this program. This is very important and will have a good output.
We have other very significant issues and projects implemented in the period after the conference of our donors. Of course this conference was not simple but more difficult is to attract the investments and to put them in real projects. This project is in progress and the contracts amounted to form 3.6 billions from 4.5 billions will be executed until the year-end. This is a very positive factor.
In previous years many countries were able to attract donor money but they failed to implement real projects. We can say that we are implementing them.
As to the energy sector, I would like to say that for the first time in the history of Georgia we are exporting electricity to all four neighboring countries: to Russia, Azerbaijan, Armenia and Turkey.
Noteworthy is that all five power units are operated at Inguri HPP. Also noteworthy is the 500kV power transmission line the construction of which will begin in September. All agreements are ready both with EBRD and KFW and European Investments Bank.
As to road construction, I would like to mention that the total length of Georgian roads amounts to 7000 kilometers, 1/7 of them will be rebuilt or rehabilitated this year. The construction of dual-dual highway Tbilisi-Gori will be finished this year and construction of Gombori highway will start this year as well.
We have also progress in sports. I am pleased with the work of Ministry of Sports. We have success in boxing, judo, rugby, water polo. We hope for results in basketball. We succeeded to host the first European Wrestling Cup.
Now let's pass to problems. Here we can touch sports again. The state of Georgian football is rather poor. I want to entrust on the sports minister personally the responsibility for solution of this problem. I will also do my best efforts aimed at the success of our football.
The theme of problems continues with the energy sector. We have progress in this sphere but many problems as well. For example, this is the problem of supply and installation of individual electricity meters which is not still solved. This problem was arisen during the period of my being the energy minister. I would like to commission the energy minister once more to have the problem of individual meters as the top priority.
I would like the Ministry of Finance to rehabilitate tax centers and complete rehabilitation as quick as possible. The Ministry of Finance shall also improve the service of companies.
The main problem of the Ministry of Agriculture is rtveli. We are ready for vintage but we apply to the Ministry of Agriculture to pay maximum attention to this problem.
I will say that I am satisfied with the work of the Ministry of Health Care to some extent. However, the main problem of this ministry is the project "100 hospitals" which has been dragging for some years already. This project still is not implemented and has had no result. I would like to strictly warn the Ministry of Health in connection with this problem. This project shall be implemented to the end and the public shall be informed about the failures (if any). Secondly, the Ministry of Health shall submit a new plan of development of Tbilisi hospital network in next months. The project "100 hospitals" applies to regions but it does not include Tbilisi hospitals plan. This shall be executed as soon as possible.
From the aspect of problems the worst situation is at the Ministry of Economy.
I'd like to underline that this Ministry is lacking coordination with other ministries, namely, with the Energy Ministry in connection with construction of HPPs, the Ministry of Health Care in connection with "100 hospitals" project. In the part of program there is a rather big lot of Block Georgia which should be financed by Czech Export Bank with which the contract has been executed. Because of a failure to sign an investment protection agreement with the Czech Republic two Czech companies had failed so far to implement additional investments - one EUR 125 million by Block-Georgia for the rehabilitation and construction of hospitals project. For the same reason, PM Gilauri said, the Czech company, Energo Pro, the largest electricity distributor in Georgia, had failed to invest additional USD 80 million to be received from Czech Proto Bank.
Also, for some reasons is stopped the privatization and sale of farming land. All projects listed by me above are very important for attraction of investments. I am not saying that the economic situation is very simple and that I am dissatisfied about the Economy Ministry for not attracting new foreign investors - although there are problems in this regards as well. The Economy Ministry has failed to create favorable conditions for already existing foreign investors to fully implement their projects.
I have reviewed the inflow of foreign investments and discovered many problems in this line too. The privatization figures evidence the unsatisfactory work of the Ministry of Economy.
Only GEL 15 million has been received from privatization in the first seven months of this year, instead of 77 million lari. Of course, this figure does not include income from issuing licenses for the use of natural resources.
I will provide such report to the public once in 6 months, - PM Gilauri concluded - I will consequently apply to the ministers to work as effective as possible.