Amid a cabinet shakeup, Georgia's President Mikheil Saakashvili is promoting an ambitious new "action plan" to stimulate economic growth and promote security.
The plan features a significant boost in military spending, taking this year's defense budget to about $767 million. In addition Saakashvili's new program pledges to create 100 new agricultural processing companies and 100 new hospitals, to build roads to 200 villages, to increase teacher salaries and introduce "niche" specialty training programs for students. The plan also contains a bold promise to deliver annual growth of up to 15 percent, while helping to attract some $2 billion in foreign investment "to put Georgia on the list of the [World Bank's] top 20 business-friendly countries." (The country ranked 37th last year.)
To finance the program, the government has proposed amending the 2007 budget to allow for a 430 million-lari (about $259.6 million) increase in state spending. Most of that hike will go to military spending, which would amount to up to 4.5 percent of the Gross National Product, Prime Minister Zurab Noghaideli stated.
At a September 8 appearance before the parliament's Defense and Security Committee, Deputy Defense Minister Vera Dzeneladze stated that the additional defense funds will be devoted to the construction of a new military base in the western region of Imereti, as well as for procurement of weapons, equipment and new communication systems, according to local media reports.
While many pro-government MPs have lauded the government's drive and vision, one legislator has expressed concern that the plan could push inflation to dangerous levels. Parliamentarian Vladimer Papava, a senior fellow at the Georgian Foundation for Strategic and International Studies in Tbilisi, fears that a large inflow of foreign currency into Georgia from privatization and foreign investment, in particular could hamper the country's price competitiveness for exports, which are declining, while encouraging an already rampant reliance on imports. The phenomenon, known as Dutch Disease, is usually associated with countries undergoing energy-production booms.
"We are seriously under the Dutch Disease, and the government is doing nothing about it," Papava asserted. "This is our number one problem."
Prime Minister Zurab Noghaideli has forecast inflation for 2007 at less than 8 percent, down from an earlier projection of 10 percent.
Both Papava and Niko Orvelashvili, the senior expert at the Georgian Economic Development Institute, however, question the estimate. In July 2006, Georgia's annual rate of inflation was put at 14.5 percent, a figure that sparked strong criticism from the International Monetary Fund. By December, that figure had decreased to 8.8 percent. As of May 2007, it stood at 7.3 percent.
Orvelashvili maintains that the Ministry of Economic Development, which contains the State Department of Statistics, "adjusted the methodology of measuring inflation to suit their needs." The department is answerable to the executive branch of government.
"When the government goes on record, nobody believes these numbers," Papava charged.
A senior Department of Statistics official roundly denounced the charge, insisting that the data is not driven by political considerations. "Nobody sees [the data] first. That's one of our golden rules," said Lea Mdinradze, who is responsible for price statistics.
Papava and Orvelashvili also take issue with the government's foreign investment target of $2 billion. A lack of transparency about outside investments to date drives those concerns, said Orvelashvili who claims that state officials say that it is "a secret" how a reported $700 million in service sector investment for 2006 was spent. "They can't even indicate which countries invested that money," he said.
An official for the State Statistics Department stated that Georgian law prohibits the department from publishing such information. "That information is confidential," said the official, who asked not to be named.
Orvelashvili's complaint also extends to defense spending. "Nobody in parliament knows about [the] defense budget. It's another big secret," he said. "We now have military TV [a channel controlled by the Ministry of Defense]. Can you tell me another country in the world that has a military TV?"
Analyst Alexander Rondeli, president of the Georgian Foundation for Strategic and International Studies, believes Georgia's ongoing military buildup is justified, though adds that the money could have been spent on other things. "Personally, I'd like to see the money spent on education, but I'm not running the country," he said.
The action plan came along with a shake-up in the Georgian cabinet, the first in nine months. Energy Minister Nika Gelauri, in office since 2004, has been named minister of finance, with the former holder of the finance portfolio, Alexo Alexishvili, moving over to head of the National Bank of Georgia. Eka Tkeshelashvili, former head of the Court of Appeals, has been named minister of justice. Environment Minister David Tkeshelashvili is replacing Health, Labor and Social Welfare Minister Lado Chipashvili, who was recently embroiled in a scandal over government payment of private medical expenses. Chipashvili has been named ambassador to the Czech Republic. Both Gelauri and Tkeshelashvili will be replaced by their deputies.
Rondeli likens Saakashvili's latest reshuffle to a football coach who switches players to best suit the team. "More and more government people are becoming better trained and educated, increasing their capability of being team players," he commented. "There are no perfect technocrats, especially in a post-Soviet environment."
Paul Rimple is a freelance reporter based in Tbilisi.
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