Review of the Government’s Meeting. July 25, 2001

Top subject of the agenda of July 25th Government’s Meeting were the amendments to the Forest Code, elaborated by the Ministry of Economy, Industry and Trade, in order to improve forest consumption in Georgia.

An illegal cut and export of timber still remains as a main problem of the country in this regard. Georgian Parliament has prohibited and then permitted again timber export for several times already. Due to absence of proper mechanisms, the country is losing significant incomes from timber export. According to the calculations of the Ministry of Finances, last year the central budget earned mere 1,8 million Georgian Laris, when these earnings might have been even 18 million. Many officials and bureaucrats make good use out of significant difference between the state price on timber, which is very low and its high export price.

The Ministry of Economy, Industry and Trade suggests to cancel present rules of licensing on forest resources and introduce commodity exchange for such resources, where the state should set a starting price on timber. The draft of amendments to the Forest Code also considers certification of those companies, which posses the assets matching with ecological requirements.

Minister of Economy, Industry and Trade Vano Chkhartishvili stated, that it is necessary that the exchange would function independently from the state structures. He mentioned, that the representatives of the World Bank agree with this idea as well and are ready to financially support the functioning of the exchange during the starting period. Minister also does not exclude the possibility, that the commodity exchange might become a private structure through tender.

President Shevardnadze and other Government members have agreed to suggested amendments to the Forest Code, however President concluded, that the issue need to be elaborated further and requested additional two weeks long period. President thinks, that there are numerous arguments for complete prohibition of timber export. These considerations should be taken into account as well. But this does not necessarily mean that President would suggest prohibition of the export.

Some interesting statements have been made during the discussions. Economy Minister Vano Chkhartishvili objected to the statement by the Chairman of the Committee for Economic Reforms Vano Merabishvili (“Citizens’ Union”, the ruling party), who blamed the Ministry for not having defined position regarding the problem of timber. Minister said, “this is a statement without any concrete argument and far away from the reality. The Ministry supports liberalization of timber export and is in process of creation of proper mechanism, that will bring to the state significant profits from the timber business”. President Shevardnadze supported (as usual) the Minister and stated, “everyone should refrain from such statements. It is inadmissible when the committee chairman allows himself to rise and demand liquidation of a ministry”.

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Department of Statistics made a report on macroeconomic indicators of the functioning of country’s economy before the Government’s members on July 25th.

It has become a tradition for the Government members to hear optimistic reports on positive developments of Georgian economy. According to the data of the Department of Statistics, Georgia’s GDP for the first 6 months in current prices is 3080,9 million Laris. “Its real growth rate is 105,2 % compared to the previous year”, says report of the Department.

The Department gives optimistic figures on the budget as well. Tax incomes into the budget for the first half of the year make 15,1% of the GDP (13,7% for year 2000). Budget deficit has been reduced to three times less level, which speaks for the stable fiscal system.