საქართველოს მთავრობა|Government of Georgia

On November 10, 2010, the Prime Minister of Georgia, Nika Gilauri, met with the workers of clothes factory "Miller and the Company".

The Prime Minister of Georgia talked about some achievements and problems as of 2010. We suggest the Prime Minister's speech:

"I want to talk briefly about some problems and achievements as of 2010. I would like to hear your questions, notes and opinions as well in connection with further activities.

Our main goal was to eliminate unemployment and it remains unchanged. Unemployment is the main problem, which can not be easily solved. During the last period, price increase problem was actual as well, food prices rose, which is substantive issue for the population.

First, I want to explain the reasons of price increase. The society is to be aware of this matter. The wheat was the main topic. During this year, wheat harvest was poor in the whole region. The largest wheat importers of the region are Kazakhstan, Russia and Ukraine. Besides the poor harvest, Russian fire destroyed its wheat crop. Generally poor harvest conditions, Ukraine and Russia declared "wheat" borders block. Wheat export was reduced from the countries thereof.

Wheat supply was reduced in Georgia. Consequently, wheat price increased considerably in the whole region included not only Georgia, but also Central Asia countries, Eastern Europe and Turkey.

Many People ask to me why rising in wheat and oil prices have effects on other domestic prices.

There is significant correlation among the products thereof. Wheat is the primary grain product. Rising wheat prices lead people to substitute for rice or buckwheat or any other groats for residential consumption, consequently demand for these products increases, as well in poultry and livestock farming sector, the farmer prefers to buy more oil-cakes or feed corn, instead of feed wheat at a higher price. Therefore, the rising in wheat price directly causes an increase of other products consumption.

The price increase of various products is caused by the process thereof and we witnessed the process during this year.

What can the government do? Is it possible that the government set the maximum prices and says that wheat or bread prices shall not exceed the prices thereof?

They attempted to do the same during the period of Soviet Union but in vain. As a result, the products just disappeared from the shelves and stores, and were sold on the black market. The dealers sold the products at a higher price in the underhand way.

If we fix the prices on the products at an agreed level, it will be irrational. As a result of it, the bakery products and buckwheat will disappear from the stores. They will be sold on the black market at higher prices. International experience, as well our experience and economic theories have proved that this is the best way out.

What is the way out? What can the government do in the situation?

The first is to overcome the political barriers. When wheat price increased in Ukraine, they limited the wheat export, then opened the borders, and imposed export quotas. There is certain amount of wheat to be exported monthly from Ukraine.

I'd like to thank the Prime Minister of Ukraine, I had the correspondence with him, we had negotiations through the ambassador, and they informed yesterday that they would make the exception for Georgia. Georgia will enjoy quota free entry to export additional amount of wheat from Ukraine. This is the first way out by which the Georgian government can simplify the situation with regard to prices.

The second, what we are able to do, is to find the new markets. The private importers imported wheat only from Kazakhstan, Russia and Ukraine so far, when Russia banned wheat export, the as well Ukraine stopped its export of wheat during this period of time, and tense negotiations were being conducted with Kazakhstan. Then we made contact to USA, Canada, France, and Hungary. We politically opened the borders of the countries thereof as importers and informed our private companies, that there is the real political will to import the products from Hungary, France, and other countries, from new markets to Georgia. Consequently, wheat is imported from Hungary and France to Georgia and at this stage the most part of imported wheat and flour are from the countries thereof.

This is the second part what we can do in order to create diversification in wheat supply and try our best to reduce or anyway maintain prices.

The third what we are going to do is to combat price speculation. Sometimes, there is a high moment of price increase artificially by private companies. For instance, several weeks ago, because of the toughening the supervision of meat quality, the companies tried to artificially increase the meat price.

But competition regulated the situation and meat price decreased. Of course, the government can somehow govern the process with this regard, but the most important the government can do is to create working places.

If the population is employed under good-salary situation, 10-15 % even 100 % increases in prices can not affect on it.

I'll say a few words that we created the long-term programme for agricultural sector in order to avoid an unwelcome precedent for the future. This is so-called "Local Manufacturing Development Programme", by which we exported new wheat and corn seeds.

Georgia exported 2000 tons of new wheat seeds from USA, which is expected to yield the rich harvest per hectare. We gave wheat seeds to peasants and told them to pay the fee after a year. Meanwhile you can sow the material and next year, we expect to get 22 000 ton seed grain. According to our long-term plan, we are going to produce the local rich wheat harvest, in order prices fluctuation in the region won't affect to prices with regard to stability in Georgia. If any, income generated from increased prices shall remain in the country.

We don't face huge problem with regard to vegetables, because most of the vegetables consumed are locally produced; only 10-15 % are imported. We also have long-term plan concerning the corn harvest. Crop productivity is to be increased in Georgia, which will simplify the problems with this regard in future.

Creating more working places is my personal objective. It was the core issue and as well problem for our society and still remains unchanged.

What is the key priority of the government? To say that the government hires the whole population and solve this matter by this way, of course it will not be proper approach. To tackle the problems by this way will always fail.

What can we do? We can create the environment to foster the local businesses.

In order to create one-working-place in Georgia it requires the investment including approximately from 20000 to 30000 US dollars. The large investment has been made for creating your working places as well.

Georgia's economy and society are not strong enough to put investment in creating jobs. What is the way out from the situation? There is only the way- to attract international companies and make their investments in Georgia.

When we are pleased to growing number of investments made in Georgia, we know that it implies creating new jobs in our country, it means that more and more our citizens will be provided by jobs and will have the opportunity to live his family in a better conditions."

What can we do in order foreign companies to arrive in Georgia? Let's face reality. The Georgian market is not big enough to attract large-scale manufacturers, but we are to make simple tax system for businesspersons in Georgia, the government intervention in the economy shall be controlled as well, zero corruption level is one of the main factors; otherwise foreign businessmen will not arrive to Georgia.

If a foreign investor has 100 (one hundred dollars), and he thinks where to put the money-in Bulgaria, in Georgia, or in Turkey? Why does he make the choice beneficial to Georgia? We are to think a lot of this issue. It was our goal during the last years. We reviewed all laws and regulations with this regard. If you are a foreign investor and have 100 dollars, where will you put money- in Bulgaria, in turkey, in Azerbaijan or in Georgia? We made all the efforts to simplify everything in order the investor to make his/her choice beneficial to our country and say that he has desire to put money here, because his business will be more profitable in Georgia.

Why his profitable activity is good for our country? - Because the successful investor develops more and more his business and promotes to create more jobs.

The World Bank appreciated our reforms implemented during last five years. The World Bank made the important survey; it assessed about 175 countries under the reforms enacted during five years in connection with easier business environment.
Georgia was nominated as the number first reforms-making country in the world. We are the country which carried out the most reforms in order to simplify the business climate.

This is the huge achievement for our country. We have rating along the countries like Singapore,
Hong Kong, USA, The Great Britain, Ireland, Norway, etc;

Some of the countries have less rating than Georgia, namely: Western Europe countries like Italy, France, and Spain. This means that Georgia has stronger e

conomy than Spain, France or Italy. This means that the life of businesspersons in the same conditions is easier in Georgia than in Spain. As well, payment of taxes, products producing, import of additional products, or export of the products produced by his business activities from Georgia to abroad are easier than from any other country.

Private sector shall take a more active role in working with international investors to arrive in the country and create more work places.
If we analyze the past period of time, we had 21 tax types, and now we have just 6, the number of licenses was more than 1000, now we have about 150-180, the corruption is on the minimum level. I can not say whether it is completely rooted out but if any, it is on the low level and anyway it is not problem of private sector. Import and Export are simple procedures for the private sector.

This is the foundation we have made for the private sector and foreign investors.

We've focused on the infrastructure as well. It's important factor because the companies conduct export and import in an easier manner. It' is important in order to be the connection between village and the city and establish the enterprise.

Without the uninterrupted supply of electricity of course your enterprises can't continue its working; some enterprises depend on consistent gas supply, for some enterprises good roads are important because they depend on logistics and vehicle traffic

Consequently, the first step to develop the economy was infrastructure. And with this regard this step has already been taken. We have improved and one of the best infrastructures of gas, electricity, road, railway, port and airport.

The efficient workers are the second core factor. A foreign investor is often interested whether we have engineering potential and efficient workers being able to work at large enterprises not only factories, or not.

We focus on education and training programs to enhance the development potential of the country for the future, to create efficient workers in order to earn more salary and become our country more attractive for foreign investors the result of which is in create jobs.

This is our strategy and viewpoint, what we have fulfilled in 2010.

Of course, we can not say that everything is all right, we have problems as well. We know how the price increase has affected the society and we are making all our efforts to facilitate the situation. But it's worth noting that this is the problem for the whole region, not for Georgia.

We do our best to pull the economy out of recession as of hard year, 2009. And we can say that, economy has recovered. We expect to be the growth by 5, 5-6 % this year.

The first place granted by the World Bank serves to promote the international popularity of Georgia in order to attract foreign investments and create additional work places.

I'd like to stress once again, that 2009 was worse than 2010. We encountered many problems during this period of time; we set many new tasks; we can't promise to solve all the problems, however, maximum efforts were made in creating working places within the current terms.

We believe to achieve this goal in the nearest future in an easier way, as we‘ve tackled many big problems in short period. It's not so easy for economy of any country to overcome such problems we had with political and social points of view. Domestic political altercations, Russian aggression and international world crisis, all these factors directly impacted on our country in a short time period.

However, we are strong enough economically. We believe that our activities will have results in the nearest future.

Prime Minister's Press Service