INVESTMENT VOLUME HAS NOT CHANGED FOR SEVERAL YEARS

By Ambrosi Grishkashvili

One of Sulkhan Saba Orbeliani’s (Georgian thinker and writer in XVIII) fables says: crane and frog fraternized and settled in one and the same lake.

They lived happily together. Soon the lake started to dry. The crone said to the frog: “My dear brother, let us leave the lake and go somewhere else; there will soon be no water in the lake”. ” I can not go, – said the frog. “I can not leave the lake”. The crane left the frog and the lake, and went away in search of better place. Time passed. The crane wondered at the fate of the frog and decided to go back to the lake. He flew over the lake and, what does he see? The lifeless frog lies on the earth. The crane said to himself: If you but believed and followed me, nothing of the kind would befall you.
Under the law of 1995, foreign investors were granted tax exemption or preferences. Soon after this, amendments were made in the investment law. According to this law, both foreign and local investors were liable to the same taxes. The mentioned amendments were made. Under this law, foreign investors and local entrepreneurs were liable to the same taxes. The mentioned amendments were made due to the requirements of the latter as well as by support of monetary fund. These stood in the way of attracting investments to the country.
In 1995, the volume of foreign investments made up 42.2 million GEL, in 1996 this index doubled and equalled 86.0 million GEL. In the subsequent years the number of investments was as follows: 180 million, 378 million; in 1998 investments reduced to 189 million. In 2000, the volume of investments was 365.4 million GEL up from 360.2 million GEL in 1999.
As for 2001, 383.4 million GEL investments were implemented, among them 329.8 investments in basic capital, 39.5 million GEL in rebuilding, 4.2 million GEL in non-tangible assets, 9.9 million GEL in other non-financial assets.
If we convert investment index into dollars, we will find out that volume of investments has hardly even grown for the last years. Moreover, compared with previous years, investments have a bit reduced. In 1996, the volume of investment made up 66.4 million dollars in Georgia, up from 34.4 million dollars in 1995. In subsequent years the volume of investments was as follows: 118.76, 94.5, 180,0, and 182.7 million dollars. In 1995-2001, investments in the economy of the country totalled 861.36 million dollars (1808 million GEL). What do investments look like in the countries of transition economy as well as in Georgia in accordance with such an important index as investments calculated per head.
This index equals 191 US dollars in Georgia, but in Uzbekistan it is comparatively lower totalling 119 US dollars (in 2001, the volume of investments in Uzbekistan increased by 7.6% compared with previous years, and in this year it made up 349.7 millions; the total sum of investments in Uzbekistan is 1.194 billion US dollars), but in Azerbaijan the volume of investment per head has significantly exceeded that of our country running into 933 US dollars.
Distribution of investments in accordance with countries, European bank and World Bank looks as follows (Table n.1)
As we see, a great share of investments in 2001 falls upon Turkey and USA.
Restructuring of national economy
During the socialistic period, economy has been politicised. Unprofitable and losing branches and enterprises often functioned at the expense of national budget funds. Maintenance of these enterprises (branches) by means of donating budgetary resources was justified in that period. For instance, employment of labour resources, release of production export of which cost the country much, etc.
Heavy metallurgy, coal mining and some branches of national economy belonged to these branches in Georgia.
Restructuring of national economy will be performed in view of country’s transition to market economy, i.e. abolishment of branches that were a heavy burden for the state budget. Instead of it, the pace of development of branches that are profitable from the economic point of view will be accelerated.
We will learn about the perspective branches of Georgian economy from the number of investments in particular branches as well as from direction of the same investments.
For instance, in 2001 the volume of non-financial investments in Georgia made up 297.0 million GEL. Distribution of mentioned investments in accordance with kinds of economic activity looked as follows (Table n.2).
As we see, a great number of investments or half of all nonfinancial investments totalling 142.2 million GEL (48.0% of all investments) were made in transport branch, warehousing business and communications.
The second place in branches of investment economy is occupied by energy processing and distribution branches. Investment in these branches made up 63.7 million GEL or fifth part of all nonfinancial investments (21.5%).
The third place is occupied by energy producing industry and quarry processing in accordance with non-financial investments and national economy. Investment number in this branch made up 34.0 million GEL or 11.4% of all investments.
As for branches of real sector of economy as for example process industry, agriculture, etc., no positive changes are observed there yet. As far as we see from the table, last year there was minimal number of investments in this sphere.
It is noteworthy that restructuring processes are taking place in other countries of transition economy. For instance, in 1995-2001, 7 million dollars’ investments were implemented in Azerbaijan of which 3 billions or 42.9% of all investments were meant for the extraction and processing of oil and gas, transport branches and its service sub-branches.