Privatizing Georgian Natural Resources by Letting the People “Invest”

Last week, the Economic Policy Experts Center of Georgia presented an innovative vision of developmental changes, advocating for transition of state-owned property, including natural resources, to private ownership.

Despite the privatization process in the 1990s, and following the Rose Revolution, a significant number of assets are still under state ownership. As studies show more than 65-70% of assets are owned by the State; the remainder are privatized. A significant portion of land parcels (65%), mining sites (100%), buildings, and state companies are not privatized. The Center is proposing to change that, to “do it the other way around,” and soon.

According to the new strategy, every person residing in Georgia (including people living in breakaway regions of Abkhazia and South Ossetia) will be given unrestricted access to becoming an owner/shareholder of various state-owned natural resources. “The shares we are talking about here might be of miniscule size,” the experts announced, “but with that, people can become active or passive agricultural agents of economic activity and, as a result, reap the generated economic benefits.

Another peculiar characteristic of the plan is that people will not be buying anything with actual money. According to the strategy, they will receive special “money”- from the government, and the only thing that they can do with this “money” is to purchase (part of) an asset at auction.

The primary goal is for parked assets (natural resources) to become active, which results in public benefits. The Center believes it is possible through the shares to attract finances from the financial markets and to bring the economy out of its stagnation. To back their vision, the Center wiill be presenting a pilot program, centered around a privatized mining site. “And as this site will be privately owned, they will have much more interest in making more long term investment. This will assist development of a capital market, attraction to venture capital and investment in the real economy,” said Ketevan Krialashvili, an expert from the Center.

Whether the strategy will ever be put into actual implementation remains to be seen, but it certainly shows things from a new angle.

Vazha Tavberidze