After 15-year pause, international commodity exchange has been founded in Georgia by the initiative of Tbilisi Chamber of Commerce and Industry.
What might be the benefits of new exchange for Georgian economy and how far does Georgia comply with these criteria? Representatives of Tbilisi Chamber of Commerce and Industry spoke about these issues.
Exchange was registered in Oct-06-2009. Exchange starts operating in Feb-2010. Management of exchange plans to prepare brokers on the base of legal and economic faculties existing at higher educational institutions. At present, exchange is registered as LLC, but founders of are planning to establish it as a JS Company. Exchange is located at Tsereteli Avenue, in Tbilisi.
Aleksandre Gorgikanidze, the president of Tbilisi Chamber of Commerce and Industry: we reckon that the ground for commodity exchange is already prepared. The decision about establishment of an exchange has been made about a year ago. It took a year to implement this idea, as Tbilisi Chamber of Commerce and Industry does not hold funds necessary for handling such a big project without facing any difficulties. When we addressed major structures, nobody managed to find funds for this business. Nobody was willing to participate in the project as big original capital was required. There are many people with money who do not know where to invest it. In spite of all the challenges will have founded an exchange. We knew that the main problem after the foundation of exchange, the main problem would have been the people who would work there. Unfortunately, a concept and profession, such as commodity exchange broker has not existed in Georgia during last fifteen years. Therefore, we’ve decided to address students of higher institutions.
What is the main idea of our cooperation – we reckon that it would be correct to carry out a presentation at legal and economic faculties of higher institutions and explain to students the meaning of commodity broker, its functions and possible achievements. We give an opportunity to students to pass two-year course, receive a certificate and start doing their job in practice. These certificates will play big role in their future employment issues. We have visited Ivane Kavakhishvili State University, UAI (United American Institute), Black Sea University and we found huge interest from their side.
G.E – You have mentioned that ground for establishing of commodity exchange are already ready. What conditions have you meant under this?
A.G. – Exchange might work only in a stable country. State policy is playing significant role in this. Together with many negative developments, one should look at the bright side of the situation. e.g. one might register a company in fifteen minutes and this is very important. Another positive aspect is that Poti free trade zone will become operative in the nearest future. This will be encouraging factor for working of exchange.
One of the factors defining success of this venture is that there are not commodity exchanges in our neighbouring countries such as Turkey, Azerbaijan, Armenia and Iran. They have stock exchanges, but they are bearing completely different purposes. Commodity exchange is a civil market, where buy-sell operations are made with civil methods, only after proper testing of products. It is not a novelty that huge amounts of low quality products are entering Georgian market. There are frequent occurrences, when outdated products are sold at the market and unfortunately there is no system to control such cases. There is no official institution responsible for control of product quality in the country. Rules established at exchange ensure that broker not to sell a commodity that does not comply with quality standards or spoiled goods. Experts are controlling this process with assignation of a broker. In other words those who import low quality goods in Georgia will never become our clients. He will have to sell goods secretly from warehouses. Nobody will be able to trade with counterfeited goods as the experts are checking every necessary document.
G.E. – will Swap operations and trading with futures take place at the exchange?
A.G. – Of course, by all means.
Griorgi Kapanadze, member of Tbilisi Chamber of Commerce and Industry presidium, coordinator of foreign affairs: this project is taking big regional importance as there is not such type of exchange in Caucasus. Exchange will encourage development of local industry; production of local commodities will rise. At the same time, commodities sold at the exchange will be ecologically and biologically clean.
We have established strong laboratory at the system of exchange that will fulfill quality control. Quality of commodity will be checked not only at local level, those products testing of which will be impossible in Georgia will be sent abroad to various laboratories.
Aziko Sivsivadze, professor, scientific consultant at Tbilisi Chamber of Commerce and Industry: Commodity exchange requires big scales of economy around it and in many cases there is only one commodity exchange in a country. Or, several developed countries have only one commodity exchange. Our country is very small with its scales for a commodity exchange. However, we should take into account that our country is located at crossroad of caravan roads and this exchange will serve both southern-northern and eastern-western countries. We will become some kind of gateway and exchange has big prospects from this point of view. Bilateral connection exists between exchange and economy. In order to found an exchange it is necessary to have developed economy, but on its part exchange support country’s economic development. We should take western experience into consideration; implement any type of novelties and innovations considering local specifics and conditions.
Attracting of investments is rather difficult, as commodity exchange is a new fruitcake; people are conservators by their nature; they cannot realize currency and importance of a problem. We believe that the time must come when we will attract investments by biddings.
As the founders of exchange declare they are not selling broker process at the moment, brokerage places will be leased. Cost of lease is $5,000 in a year. Founders are planning to cooperate with big and famous commodity exchanges throughout the world, such as New York, Chicago, and Great Britain commodity exchanges.