Economy does not believe in tears

Half a year after the parliament of Georgia approved the government of Bidzina Ivanishvili, experts have the possibility of analysing the strategy of the new authorities in the economic and social spheres. Previously, too much attention was paid to “cohabitation”, the struggle between the prime-minister and the president and institutional reorganization.

Now experts have started looking at the results of the last NDI survey, in which most of the respondents stated that their material situation has become worse after Georgian Dream took power. Maybe this is a syndrome of high expectations, but the negative indexes in all spheres are so great(for example, 81% unemployment), that some other factors have to be considered. The main among them is that the government has no unified program of action.

Even before the October elections, observers said that the attempt to create an opposition alternative on the principle of a “popular front” that would bring together liberals and socialists can be a bad joke. This is how it worked out. On the one hand, Minister of Education Georgy Magrelashvili makes a “socialist” decision to give out school textbooks for free, despite protests from publishers and bookstore owners. Minister of Energy Kakhi Kaladze reduces energy tariffs due to the annulment of investment responsibilities. On the other hand, Minister of Public Health David Sergienko decided to prolong licenses to the insurance companies that have their own clinics, proceeding from the liberal concept of free competition in the medical services market.

This has already caused a split in the coalition: a left-wing deputy, the leader of the People’s Party, Koba Davitashvili, noted that the government has no unified philosophy, and different ministers pull the state in different directions. This was never said about the government of Mikhail Saakashvili, despite the frequent change of prime ministers, because that team had a clear concept of the socio-economic sphere, and despite some variations in the pre-election period, "libertarian ears" were always observed, even in the populist campaigns to give each peasant family a $15 voucher. But, on principle, matters of discourse between the left and right ideologies of Saakashvili's team never came to a compromise. The president often mentioned the "Singapore model", referring to the strict policy (up to arrest on charges of sabotage) towards strikers and the complete lack of rights of employees in relation to employers.

The government of Ivanishvili softened this stance. It adopted quite a "European" Labor Code that does not allow businessmen to fire workers whenever they want, which has already led to a sharp decline of small and medium-sized investments - a businessman, as a rule, is cynical and goes where it is comfortable.

Protests also came from another leader of the ruling coalition, the "Beer King" and founder of the party "Industry Will Save Georgia", Gogi Topadze. But he is still considered the most loyal to Ivanishvili as a political leader.

The weakening of the administrative burden and easing of fiscal policy under the pretext of "too rigid control by the previous government" determined a reduction in revenue. For the first time since the "Rose Revolution", in the first quarter of 2013 the government failed to fulfil the plan of tax revenues, and the deficit amounted to more than $51 million. It seemed that this figure is not very big, but the precedent is important, because it did not happen in the 9 years of the "Singapore libertarians". That could lead to the notorious budget curtailments that occurred under Shevardnadze almost three times a year.

According to statistics, from January to March 2013, foreign trade turnover amounted to 2.144 billion dollars, compared to 2.260 billion in the same period last year. This figure fell for the first time since the crisis of 2008. And then the reasons were more objective, less depended then on the specific decisions of the government in the economic sphere. The situation could have been corrected by the restoration of trade and economic relations with Russia and the opening of the Russian market, but it is clear that there will hardly be any "gifts" from Moscow to the administration of Ivanishvili, because the foreign policy of Tbilisi has not changed since the change of power.

 Even those government projects whose implementation the billionaire Ivanishvili wants to finance with his own funds are not particularly successful. For example, he created a fund (about $600 million for loans to agricultural producers. It is a big sum, considering that the country's budget does not exceed 4 billion. The fund is ready to give soft loans with a fantastic interest rate of 2-3% per year. The only condition for businessmen and farmers is a minimum 10 percent co-financing. The motive of this precondition is not difficult to understand: it is a modicum of responsibility on the part of the borrower. But, as it turned out, nobody is ready to risk even a little and invest their money, which will have to be returned through hard work and not just relying on the lottery market, bringing all the "freebies" and someone else's responsibility. Therefore, the project almost failed, even though it had barely begun.

The other projects of the "billion-dollar funds" to invest in other sectors of the economy, including energy, construction etc, are likely to fail due to the same reasons. One can sympathize with Ivanishvili, who is willing to invest almost all his capital in the development of the country, but the prevailing tragicomic situation shows that the economy does not believe in tears.