From superinvestor

( What happened and what has been done )

Учительница спрашивает:

- Что произойдет, если всеразрушающее ядро врежется в неразрушаемую стенку?
Вовочка:
- Водка подорожает, Марь Ивановна!
- Это почему?
- А у меня отец говорит: «У нас в России всегда так, сначала какая-нибудь непонятная хрень произойдет, а потом водка дорожает».

К сожалению, народ, как всегда прав. Накачка экономики деньгами однозначно приводит к росту цен. Почувствуется это примерно к концу года, к новогодним праздникам. А если учесть, что в январе традиционно цены растут ещё сильнее, то декабрь-январь могут стать рекордными в этом плане за много лет. Вполне возможно, что в результате опять же по русской традиции произойдёт награждение непричастных и наказание невиновных. Те, кто сегодня спасает банковскую систему, окажутся виновными в росте цен. А те, кто начал «маленькую победоносную войну» и крыл матом НАТО и весь остальной Запад, из-за чего во многом и рухнули рынки, будут рассказывать по телевизору о кучке вредителей-экономистов, окопавшихся в правительстве. В общем, всё как обычно.

The finance ministers of the G7 industrial countries issued a joint statement Wednesday calling for international institutions to work together for the speedy reconstruction of the damaged infrastructure of Georgia.

"We, the G7, stand ready to support Georgia in order to promote the continued health of the Georgian economy, maintain confidence in Georgia's financial system and support economic reconstruction," the statement said.

The statement shows the G7 has closed ranks, leaving Russia on the outside, in the wake of Russia's military move into Georgia." - marketwatch

Тем временем, Fitch подтвердило снижение долгосрочного рейтинга, указав, что "несмотра на соглашение о прекращении огня, общую выносливость экономики и обещанную международную помощь", агентсво продолжает видеть созданные конфликтом риски.

Прогноз лишён оптимизма, но я и этого не ожидал от грузинской экономики. Премьер-министр у нас - просто молодец.

Galt & Taggart Securities (does this ring a bell?), Bank of Georgia's (group of companies I used to work for) investment arm and one of the leading investment banks in Georgia last week circulated to it's analytics subscribers a presentation on current state and immediate prospects of the Georgian economy.

It's a short, but rich in numbers report in answer to recent enquiries from bank's "clients, friends and well-wishers".  Such reports are very rare as financial information about Georgia is very hard to find.  More I was delighted to discover that G&T's view on the economy agrees with mine (here and here).

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The only Russian-made products I still use in my daily life are gas in my kitchen and matches I light it with. While I cannot yet expect the disappearance of matches - as they apparently aren’t a product strategic enough for Russia to cut it’s supply to Georgia - soon I won’t be able to tell for sure that the gas I’m using is Russian.

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Johan  Norberg in his Liberalism-Capitalism-Globalization Blog

I mentioned that Georgia is reforming. More than anyone else, actually.  According to the Doing Business index 2007, Georgia has moved from place 112 to 37 in just one year – unprecedented in the history of the report.

Georgia has reduced the minimum capital required to start a new business by 90 percent, and the number of days to meet bureaucratic requirements to export from 54 to 13 days. The labour market has been deregulated and social security contributions have been reduced from 31 percent of wages to 20 percent.

At the same time, the number of new businesses has increased by 20 percent and unemployment has fallen by 2 percentage points.

The problem is implementation. The new laws are not always upheld by the local civil servant and policeman. So the priority is improved governance and anti-corruption reform. And, naturally, deregulation that strips the bureaucracy of powers entirely.

For example, the Georgian government recently decided to abolish all tariffs until 2008. Way to go.

A couple of days ago I've been to talking to a friend of mine who's starting a consumer electronics import business.  He is a specialist in the trade and has worked in the industry in Russia for years.  Due to a recent changes to the customs laws he will have nothing to pay when importing his goods.  It took him and his partners a couple of months to transform the idea to an actual start-up, financed by a bank loan and ready for the first import in coming 4 weeks.  As of now he has not have pay a single bribe.  He agrees that was he in Moscow things would have been very different.

Kaxa Bendukidze is actually the one who is to be thanked for the liberalism in the economy.

Cross-posted to georgia_ge

The Kommersant Daily speculates that Andrei Illarionov, ex senior advisor and an outspoken critic of Putin's economic policies (which include arrest of Mikhail Khodorkovsky), might become the next economics advisor for the president of Georgia.

Illarionov, who recently has been hired by Cato Institute, a US libertarian economics think-tank, visited Tbilisi a few days ago to participate in "Freedom, Commerce & Peace: A Regional Agenda" international conference and, according to Kommersant, was invited for a dinner with president Saakashvili.

Not Illarionov, nor Kakha Bendukidze, his host and State Minister on Reforms Coordination of Georgia, would comment on speculations. However the position of Saakashvili's advisor is about to become vacant as it's current holder Mart Laar, a prominent Estonian politician, is likely to quit the job in Georgia to concentrate on PM elections in Estonia.

In his interview early this year Laar compared current situation in Georgia to the one in Estonia in 1993-1995 when faced with an aggressive campaign from Moscow to prevent it from embracing the West, the Estonian government undertook bold economic reforms that raised living standards for the whole society – which took much of the steam out of the grievances Russian speakers initially had.

"Where there's a problem perhaps, is that in a sense Georgia is in an even worse situation than Estonia in 1993-1994. In other words, the lost 15 years have caused a singularly difficult set of circumstances to emerge -- which was not the case in such an extreme form in Estonia. The extent to which Georgia's economic infrastructure has collapsed is an entire order of magnitude worse than what Estonia was faced with in its time.

"Another factor is that Russia has become significantly stronger. Russia's capacity to pursue its intentions is incomparably greater now than with regard to Estonia in 1993-1995.

"These two factors, when combined, create a very difficult situation. Looking at predictions made by various international analysts about developments in Georgia over the coming years, what stands out is that they are extremely contradictory. The optimists say Georgia will do very well while the pessimists say Georgia will do very badly. One of the two camps has got it right, I think there'll be no halfway house. A lot of course will depend on Georgia itself."

Illarionov agrees that Russian sanctions will do nothing more than making the Georgian economy stronger.

"Estonia has had a similar [to Georgia] experience when Russia imposed trade sanctions against her.  This allowed Estonia to reorientate to the West.  Now Georgia will gain the same experience which will allow her to become another economic tiger.  Or a leopard.  Georgia can actually thank Russian authorities for such a specific assistance."