Verification of Bidzina Ivanishvili’s First Public Address after His Return to Politics
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On 11 May 2018, at the fifth convention of the Georgian Dream, Bidzina Ivanishvili, who entered politics for the second time, was elected as the Chairman of the Georgian Dream party. Mr Ivanishvili addressed the delegates of the convention and discussed a number of important topics.

FactCheck verified several of the facts voiced by Bidzina Ivanishvili. Taking into account the general context of the politician’s statements, we will limit ourselves to a situation analysis and leave the final verdict to our readers.

 

“An individual’s property right, which was extinct under the previous government, is fully protected today… Elite corruption no longer exists.”

One of the components of the Heritage Foundation’s Economic Freedom Index is the property rights indicator. In accordance with the 2018 report, Georgia’s indicator in this regard has improved from 55.2 points to 62.8 points as compared to 2017. As a result, the country moved upwards in the ranking to the 50th place. In 2012, Georgia was 71st in the ranking with 40 points.

Identical indicators are given in the World Economic Forum’s Global Competitiveness Indices. In accordance with these documents (2012-2013 accounting period), Georgia ranked 131st in 2012 with 3.1. points among 144 countries in terms of the protection of property rights. As of 2017 (2017-2018 accounting period), Georgia is in the 46th position with 4.7 points. Of note is that as compared to the 2016-2017 accounting period, Georgia lost three positions in terms of property rights whilst progress as compared to 2012 is visible.

In accordance with the World Justice Project data, the corruption absence index for Georgia in 2012-2013 was 0.77 whilst Georgia held the 21st position among 97 territorial entities. As of 2017, Georgia’s absolute points have worsened to 0.71 whilst it moved to the 23rd position among 113 countries. In accordance with Transparency International’s Corruption Perception Index (CPI), Georgia was ranked 51st with 52 points in 2012 whilst the country moved to the 44th place with 57 points in 2016 and then further down to the 46th place with 56 points in 2017.

 

“Today, more than ever, business is free and protected.”

Business freedom is one of the components of the Heritage Foundation’s Economic Freedom Index. Table 1 illustrates Georgia’s results in terms of business freedom. However, of note is that these indices mostly give information about institutional/declared freedom and the absence of constraining/discriminatory legislation.

 

Table 1: Economic Freedom Index

Period Economic Freedom Business Freedom
Points Ranking Position Points Ranking Position
2012 69.4 34 86.9 23
2013 72.2 21 90.6 16
2014 72.6 22 87.8 18
2015 73.0 22 88.6 16
2016 72.6 23 86.5 14
2017 76.0 13 87.2 16
2018 76.2 16 86.9 13

Source: Heritage Foundation

 

The table illustrates that there is substantial progress both in terms of ranking points and the ranking position. The absolute points in terms of business freedom have not increased although Georgia did move upwards by ten positions in the 2012-2018 rankings as a result of the worsened performance of other countries. Property rights can be used as an indirect indicator to assess business protection. As already mentioned, the situation in regard to property rights in Georgia did improve in the accounting period (see FactCheck’s research in this regard:  link 1; link 2).

 

“The amount of foreign direct investments to Georgia was at a record high last year.”

In accordance with the National Statistics Office of Georgia, foreign direct investments to Georgia amounted to USD 1,862 million in 2017 which is the highest figure in the 2006-2017 period.

However, of note is that historical figures of foreign direct investments in the National Statistics Office of Georgia’s database have been amended twice in the previous months. The corrections were made pursuant to the International Monetary Fund’s recommendation. As a result of the correction, the 2007 investment figures were cut significantly by USD 263 million. The 2007 investment figure was at a record high before the correction and amounted to USD 2,015 million. The correction, together with a lack of communication and the claims of government officials that foreign direct investments in 2017 were at a record high, raised a justified suspicion among the public in regard to the appropriateness of the correction methodology and motivation. Afterwards, the National Statistics Office of Georgia issued a detailed clarification.

At the same time, it is wrong to assess the investment volumes in absolute figures alone. The real measure would be the gross domestic product (GDP) to foreign direct investment (FDI) ratio. In this case, we will see that the GDP to FDI ratio in 2017 is not at a record high and is surpassed by both the 2006 and 2007 analogous figures. The highest figure at 17.2% is still registered in 2007.

 

“In accordance with the data of the last five years, Georgia is leading in the region in terms of economic growth rates and will continue to lead not only in the region but among European and Asian countries as well for the next six years according to estimates of the International Monetary Fund”.

Georgia’s average economic growth rate in 2013-2017 was 3.75% which is less than Turkey’s (6%) and exceeds Armenia’s economic growth rate by 0.17 of a percentage point from among the countries in the neighbourhood.

In the International Monetary Fund’s designated region (CIS countries, Ukraine, Georgia and Turkmenistan), Georgia is only in the 6th position with its economic growth figure from among the 12 countries of the region.

In regard to estimates for future periods, Georgia (4.96%) only lags behind Turkmenistan (5.69%) and Uzbekistan (5.58%) in accordance with the average forecasts for economic growth in 2018-2023. In addition, Georgia is sixth in 2018 and will be in the top five in 2019-2023. Of note is that the majority of European countries are more economically advanced as compared to Georgia. Therefore, it is natural for these countries to have a lower economic growth rate as compared to a developing country (Georgia). In developed countries, economic potential/resources are more fully utilised whilst non-utilised or less-utilised fields give more of an opportunity for economic growth in developing countries. At the same time, there is a technical reason – the low base effect (a small absolute change from a low initial amount to be translated into a large percentage change) that also contributes to the relatively high economic growth figure.

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