Monday, May 31, 2010

By Tatia Kobreshvili 

Fitch Ratings, an international rating company, has congratulated the government and people of Georgia upon the independence day in the most efficient way – by raising its bond rating.
The agency has upgraded the county's long-term issuer default rating to the level of B+ and improved the Georgia’s GDP growth rate forecast to 6 percent for 2010. According to the Fitch Ratings website, Georgia’s short-term issuer default rating is fixed at the level of B and the country ceiling rating shows the level of BB with the forecast of stable.
Fitch Ratings says the Georgian economy has been showing recovery signs since the 2008 war with Russia and this is greatly preconditioned by considerable international aid. Meanwhile, the private sector still runs risks and the country's macroeconomic stability could be achieved through tightening budgetary discipline. The agency notes negative risks in the Georgian banking sector has been reduced following the global financial crisis. The sector enjoys healthy capitalization and liquidity indicators. At the same time, the banking sector has a high rate of dollarization and that lowers the efficiency of currency policies. There are high political risks in the country and the fact makes influence on the sovereign rating of Georgia. Fitch Ratings points out it is unlikely that the Georgian-Russia hostilities be resumed and domestic stability deteriorate. Yet it is impossible to completely rule out a return of extreme volatility.
The Georgian government has welcomed the Fitch Ratings. It says it has improved Georgia’s GDP growth rate forecast to the level of 6 percent, but notes this may be achieved if there are respective domestic and foreign conditions. Therefore, the government maintains the 2010 forecast at 3 to 5 percent. This is the first case the government’s forecast is more modest compared to international finance and rating agencies.
Despite optimistic forecasts, the crisis tendencies remain in certain market segments. The Georgian government has extended investment liabilities to two investors. Jockey Club was to complete the construction of a new hippodrome at the end of 2010, while the government has extended the deadline for seven years. Investment liabilities have been revised for another company – RCI Georgia. The government has removed certain terms of the agreement, including the construction of a wine museum in Kvareli, the Kakheti Region, but obliged the company to submit a bank guarantee for the remaining liabilities.
The presentation of the Poti Free Industrial Zone (FIZ) has been also rescheduled for a month. RAK Georgia Holding, the Poti FIZ operator, says the introduction of completed construction works was scheduled for late May, but the ceremony has been postponed for late June. The company does not name the reasons behind the decision. At this stage, only Tbilcementi, Georgian company, has organized its plant in the Poti FIZ, while, according to the Georgian government, a total of 22 companies will construct new enterprises in the zone. Contract agreements have been already signed with these companies, including LG, one of the leading home appliances manufactures all over the world.
The construction of a hotel of Intercontinental, the global network of five-star hotels, remains also suspended since last fall because of a lack of financial resources. The construction of a hotel of another famous brand Hayat has been also frozen and the management is unable to name the project resumption date. The hotel construction was to end at the end of this year, but the project implementation was suspended because of financial crisis. Initially, the project was an estimated 150 million USD, but now the figure has shrunk to 70 million USD.
The Dezertir Market (the Fugitive Market) near the Tbilisi Railway Station  also remains dismantled for three years, while construction works have not been launched yet. No concrete time is named for the project implementation. It is unknown what will be constructed on the territory. The fate of Willbrook Platinum Tbilisi Plaza, commercial, entertaining and business center, which was presumed to be constructed on the territory of the former universal store of Tbilisi, remains also unclear. Thus, the sector does not seem to be able to leave the crisis period in the near future.
At the same time, the crisis has brought a number of innovations, among which the introduction of the Tbilisi International Commodity Exchange is the most interesting and remarkable fact. The exchange will be located at the shopping mall of Gldani 1. The exchange has been organized by the initiative of the chamber of commerce and industry of Tbilisi. Moreover, similar exchanges have not been organized in even Armenia, Azerbaijan, Turkey and Iran. Therefore, the exchange organizers note the exchange will cover the whole region and make contribution to national economic development, creation of modern wholesale market, rise in turnover efficiency, improvement of the pricing mechanisms and formation of competitive environment.
Moreover, the exchange will make considerable contribution to the development of the Kutaisi and Poti free industrial zones.
It should be noted Georgia lacks trained staff because of an absence of commodity exchanges in the country, Therefore, the chamber of commerce and industry of Tbilisi has proposed to retrain about 600 specialists to employ them at the new exchange at the end of the year. Fourth-year students of Tbilisi-based higher education institutions and graduates of economic schools are being retrained. Under the plan, the Tbilisi International Commodity Exchange will trade in sugar, fuel and other goods, besides domestically produced goods. It is supposed the fact will considerably lower prices of imported goods. As to the exchange efficiency, the organizers note, the exchange operation will take effect on the Georgian market this summer.