By Georgy Kalatozishvili, Tbilisi. Exclusively for Vestnik Kavkaza
Any Georgian entrepreneur may be granted a long-term loan of up to $2 million at an annual interest rate of 3%. The loans will be available for both existing companies and startups. This type of loan is not popular among commercial banks because financing startups is very risky, especially in Georgia, where repayment of “toxic loans” after the financial crisis of 2008-2010 is very problematic.
According to Georgian Minister for Economic Development Georgy Kvirikashvili, the government will take the risk and finance 10% of a bank loan, which means about 13% of all loans. The sum may reach up to $2 million. The government program is called “Produce in Georgia.” Businessmen willing to start a business, engage new enterprises and produce Georgian products will be offered state assistance. The minister for economic development clarified that the government will give consultations, in addition to loans. In a similar fashion, the program will be implemented in rural areas.
Experts are skeptical about the new program. Mamuka Pagava, the founder of the "Marketing" non-commercial organization, shared his doubts with Vestnik Kavkaza.
- Do you consider the “Produce in Georgia” program pointless?
- It is not the first time we hear about the need to help startup businessmen. Mikheil Saakashvili boasted similar projects several times, granted beneficial loans, including startup loans, spent enormous sums of money received from the West after the “five-day war.” He has not spared budget money used for different schemes, including the scheme to co-finance free transfer of property, conveyance of property under guarantees etc. But all these initiatives have been a fiasco and only caused budget losses. It will most likely turn out the same way this time.
- Why?
Because the bicycle has already been invented and recognized in all countries. The loans will be taken with great enthusiasm, but the budget funds will simply “go down the drain”. In other words, they will be lost without the personal responsibility of the businessman. Especially considering our public mentality, weak culture and traditions of business.
Why should the state budget finance others’ risks at the expense of taxpayers? A human is inclined to low risks (or risks at the expense of others) and little work. This is why all programs of “beneficial loans” have failed and were of no use to anyone who received a non-payable loan with zero personal responsibility.
Capitalism was built over 500 years. It was built based on personal responsibility. This is the point of market relations. All financial crises of the world, including the one that started in 2008, are a result of state interference in market problems and readiness to put others’ risks on taxpayers. Chancers have a good sense of this readiness. The same will happen in Georgia. The next question is why should the state budget specifically be used to finance the program when Bidzina Ivanishvili has recently boasted of the formation of a 10-billion dollar co-investment fund? It turns out that he and his colleagues do not want to risk their money, and taxpayers should risk instead?
Finally, we have heard a lot from the new government about “elite corruption” during the rule of Saakashvili and the need to eradicate such practice. And the program announced by the government is simply a godsend for elite corruption and nepotism, financing of tamed businessmen by the state budget.
