Georgia Counts Economic Cost

Before August’s devastating war, Geoconcentrates, a company producing fruit concentrates, had planned to open three new plants in the Gori region, which is famous for the abundance of its fruits.



But when company employees finally got back to Gorijvari village, where they had begun constructing a new factory, they found it looted and destroyed.



“As for the village of Pkhvenisi, where we have a plant, in which we have already invested 200 thousand laris (more than 140 thousand US dollars), we have been unable to enter it, as it's still not under the control of the Georgian side,” Ivane Goglidze of Geoconcentrates told IWPR.



As Russian troops finally pull back from most of Georgia, the country is assessing the damage caused by the war with Russia.



Under President Mikheil Saakashvili, the economy had boomed. Now Georgia faces a heavy repair bill and is not sure whether the international aid promised will be enough to cover it.



Nana Chachibaia owns a furniture shop in Tbilisi, which was not directly affected by the fighting, but is now struggling to keep it going.



“Trade was all but dead in August,” she said. “In the month after the war began, I only managed to sell a few beds and chairs. That month’s receipts were not enough for me to pay my monthly loan installment and even the rent, because of which the owner [of the shop] is now demanding that I leave the premises. I don’t know if I will find a way out of this.”



Delegations from the United States, World Bank and International Monetary Fund have visited Georgia to assess the extent of the damage inflicted by the fighting. A special group of donors, representing the Asian Development Bank, EBRD, European Commission, European Investment Bank and World Bank, is also working in the country.



Government officials say they are still assessing the cost, while experts are warning that official figures given so far are too low.



“I don’t have all the information, but what I do have appalls me,” said economic expert Niko Orvelashvili. “The damage is about ten times higher than what the state believes it is.”



Former prime minister Zurab Noghaideli says the government is not confronting the reality of a potentially devastating budget shortfall.



“According to some calculations, the budget of Georgia will have lost around half a billion laris by the end of the year, which is more than the assistance expected to come in from the USA this year – 250 million dollars,” he said. “What's also unavoidable is a loss of 60-70,000 jobs in the property sector. A lot of other sectors are linked to construction, which means the crisis is only going to deepen further. We need to take urgent measures, but the government does not even want to talk about the problems.”



As Noghaideli noted, the construction business has been badly hit. According to Arsi, a leading building company, its sales have dropped by nearly 90 per cent since the war.



“We offer purchase packages envisaging a pay-back period of two to three years, we also sell apartments currently under construction on the basis of 10-year bank loans,” Tornike Abuladze, director of Arsi, told IWPR. “But banks have stopped providing loans, and our offices have received an increasing number of calls from people, who want to know what prices of our flats are.”



The country’s banking sector has been hard hit at a time of global financial turmoil. Immediately after the war began, the central bank imposed restrictions on commercial banks, curbing their ability to give credit and requiring them to have special permission to release deposits worth more than 50,000 dollars.



The Bank of Georgia, one of the largest banks in the country, said that during the war account-holders removed around 10 per cent of its deposits.



Unconfirmed reports suggest other banks have experienced the same problems.



TBC-Bank’s public relations manager Maia Dzirkvelishvili said deposits had started returning to the bank, but they were only giving out small loans.



“Today, credit is being provided mostly to people who had their applications confirmed before the war and to our big regular clients,” said Dzirkvelishvili. “We haven't started considering any new applications.”



All this affects people like Teona and Irakli Tetelashvili, who got married in May and have stable jobs with good salaries.



“We sold our one-room apartment in the hope that we’d be able to buy a larger place to live with a bank loan,” said Irakli. “The price of flats go up every day, and the money we got for our one-room apartment may be devalued by the time banks start lending again.”



Georgia's transport network – railways, roads and ports – has also amassed a large repair bill.



Gocha Lemonjava, director of public relations for the main port of Poti, said that it was still operating at only 35 per cent of its capacity because of the destruction wrought by Russian air raids.



Earlier this year, Rakeen Investment, a company from the United Arab Emirates, bought 51 per cent and territory surrounding it for 90 million dollars, making it the biggest recent investment in the country. The company undertook to build a new port three times larger than the old one. Investment had begun to flow in and Rakeen Investment says it intends to sue Russia in the international courts.



Tamara Machavariani, spokesperson for the Georgian railways, said the rail network had sustained damages of 1.5 million laris (more than one million dollars) as a result of the conflict.



International assistance is beginning to flow in, with the US government having promised one billion dollars in aid to Georgia. The International Monetary Fund is promising a privileged loan worth 750 million dollars for Georgia’s financial institutions, with the first third to be made available this year. The European Union is said to be considering aid worth 500 million dollars.



However, little of the promised money has arrived yet. And there are fears that a sudden influx will boost inflation, which the National Bank of Georgia wants to limit to eight per cent.



“Until the correct figures come in, there needs to be a clear picture of how the finances are to be used so that developments do not get out of control,” said financial expert Soso Tsiskarishvili. “Otherwise, it will be impossible to rein in inflation.”



Tamara Khorbaladze is a journalist with 24 Saati newspaper in Tbilisi.