The Transformation of Georgia from 2004 to 2012: State Building, Reforms, Growth and Investments

193 Pages·2022·3.358 MB·English

by  Dimitri Gvindadze

The Transformation
of Georgia from
2004 to 2012
State Building,
Reforms, Growth
and Investments
Second Edition
Dimitri Gvindadze
The Transformation of Georgia from 2004 to 2012
Dimitri Gvindadze
The Transformation
of Georgia from 2004
to 2012
State Building, Reforms, Growth and Investments
Second Edition
Dimitri Gvindadze
London, UK
The book reflects personal views of Author and not those of any of the author’s
employers
ISBN 978-3-031-18263-1 ISBN 978-3-031-18264-8 (eBook)
https://doi.org/10.1007/978-3-031-18264-8
© The Editor(s) (if applicable) and The Author(s) 2017, 2023
This work is subject to copyright. All rights are solely and exclusively licensed by the
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Cover illustration: © Harvey Loake
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To Ukraine’s fight for freedom
Contents
1 Reforms, State Building and the Legacy 1
2 The Soviet Union—The Twilight 15
3 1991–2003: Early Post-soviet Transition
and the Revolution of Roses 25
4 Georgia’s J-Curve. How to Rebound? 33
5 Russia 43
6 Public Leadership 49
7 The Ten Commandments of State Building 53
8 National Governance 61
9 Size and Effectiveness of a Government 69
10 Structure of a Public Expenditure 73
11 Market-Based Approach in Agriculture and Healthcare 83
12 Pensions and Public Sector Salaries 91
13 Public Debt, Capital Markets and International
Assistance 103
14 Wealth Generation, Taxes, Customs, Trade
and Logistics 117
vii
viii CONTENTS
15 De-regulation, Privatization, Public Services
and Competition 129
16 Banking 135
17 Territorial Development and Urbanization 145
18 Dollarization: A Thought Framework 161
19 Parliamentary Elections in 2012 171
20 The Margin of Error 177
Bibliography 183
Index 187
List of Figures
Fig. 1.1 CAGR, real GDP growth in 2004–2012 (constant prices,
national currency) 9
Fig. 1.2 CAGR, GDP growth in 2004–2012 (US$, current prices) 9
Fig. 1.3 CAGR, GDP growth in 2004–2012 (current prices, PPP,
international dollars) 10
Fig. 1.4 Annual and cumulative FDI to Georgia in 2003–2012 11
Fig. 1.5 Average inbound net and gross FDI/GDP ratios
in 2004–2012 (listed by net FDI/GDP ratio, largest
to smallest) 12
Fig. 1.6 Georgia—the highest improvement in the “control
of corruption” * and in the “rule of law” ** estimates
in 2004–2012 (global dataset, higher figure means
improvement) 13
Fig. 4.1 Real output (GDP at constant prices) in 1995 compared
to 1990 34
Fig. 4.2 Georgia’s real GDP in 1990–2018: level and pattern 35
Fig. 9.1 Total general government expenditure as percent of GDP
in 2003, 2009 and 2012 (ranked by 2012 ratios, largest
to smallest) 70
Fig. 9.2 Government size and real GDP growth (average
for 2003–2012, all countries) 72
Fig. 10.1 Capital spending in percent of GDP (general government
operations, 2004–2012) 74
Fig. 10.2 Capital spending in percent of total government
expenditure (general government operations, 2004–2012) 75
ix
x LISTOFFIGURES
Fig. 10.3 Georgia in 2004–2012: high capital spending and positive
operating balances 76
Fig. 10.4 Economic growth and fiscal balance in Singapore
in 1990–2018 81
Fig. 11.1 Georgia—labor productivity at constant 1996 prices, GEL 84
Fig. 11.2 Georgia—employment, in thousand persons 84
Fig. 12.1 GDP per capita and public pension spending as percent
of GDP in 2012 92
Fig. 12.2 State old-age pensions and subsistence minimum
in Georgia, 2004–2013 94
Fig. 12.3 Nominal and real monthly earnings in Georgia’s public
administration in 2003–2012 100
Fig. 12.4 Compensation of employees*, percent of expense
in 2012, regional perspective 101
Fig. 13.1 Georgia’s public debt stock and flow ratios, 2003–2012 108
Fig. 13.2 General government gross debt, percent of GDP in 2003
and 2012 109
Fig. 13.3 Georgia’s 2011 Eurobond, secondary market performance
from issuance till end- September 2012 112
Fig. 14.1 Impact of the tax liberalization on the government
revenues in Georgia, 2003–2012 122
Fig. 14.2 Singapore’s GDP per capita and size of the government
in 1990–2019 124
Fig. 14.3 Georgia’s tariff liberalization path (2003–2012) 125
Fig. 14.4 Increase in Georgia’s trade turnover, 2003 and 2012 127
Fig. 16.1 Domestic credit to private sector by banks (percent
of GDP) in 2003 and 2012* 136
Fig. 16.2 Georgia’s banking sector in 2004–2012 138
Fig. 16.3 Bank capital to assets ratio in 2012, percent* 139
Fig. 18.1 Intra-EU exports divided by extra-EU exports of goods,
× 100 (the EU, 2002) 163
Fig. 18.2 Personal remittances received, percent of GDP, ranked
by 2012 ratios 164
Fig. 18.3 GDP per capita and economic complexity in 2018
(the EU, Georgia) 165
Fig. 18.4 Fluctuation of regional currencies against EUR
in 2007–2018 (normalized, August 2007 exchange rate
= 1) 167
LISTOFFIGURES xi
Fig. 18.5 Long-term interest rates in the EU countries—2007–2022
(Long-term interest rates refer to government bonds
maturing in ten years) 169
Fig. 20.1 GDP per capita, current prices, US$, 2012 178
Fig. 20.2 Georgia’s economic convergence scenarios 179