On air on Rustavi 2, former President of the National Bank of Georgia, Giorgi Kadagidze, stated: "The government made mistakes which resulted in the loss of USD 250 million for the economy and this is 25% of the monetary loss. First – visa regulations. Tightening visa regulations with Iran and China alone resulted in the loss of approximately USD 100 million. Second – restrictions on land privatisation. Hazelnut export in Georgia is approximately USD 170 million. We achieved our success when the Italian company, Ferrero, entered Georgia and purchased land in the Samegrelo region, cultivated hazelnut plantations, brought in technology... Third – it has been more than a year since we last signed the completion of the International Monetary Fund Review. The only reason which hinders the completion of the Review is the withdrawal of the Supervisory Agency from the National Bank. That is why Georgia cannot receive EUR 46 million from the European Union, half of which is a grant and the second half is a loan. In addition to this, during the last three years, the judiciary has been actively using seizure as a provisional measure. For this reason, only in the case of Liberty Bank, USD 100 million in investment has been lost."


sought to gain a further understanding of the statement.

Since 1 September 2014, new regulations came into force in Georgia which complicated the inflow of foreigners to the country and the procedures which are necessary for obtaining a resident permit. It is noteworthy that after a certain period following these changes, the government had to admit the mistake and began to improve the situation through facilitating these regulations anew. It is difficult to assess the amount that Georgia lost due to the stricter visa regulations. Statistical data on the number of visitors from the countries named by Giorgi Kadagidze are given in Table 1.

Table 1: 

Number of Visitors from China and Iran

Country 2009 2010 2011 2012 2013 2014 2015
Change China 14% 35% 139% 53% -12% -2% 11%
Iran -2% 116% 182% 49% -5% -44% -47%
Quantity China 2,013 2,725 6,522 9,995 8,830 8,632 9,552
Iran 9,848 21,313 60,191 89,697 85,598 47,929 25,264
Source: Ministry of Internal Affairs of Georgia

As we can see from the table, the number of visitors from Iran decreased in 2013. In 2014, as compared to the previous year, the number of visitors decreased by almost half. This downward trend also continued in 2015. In the case of China, the decrease in the number of visitors was observed in 2013 before the implementation of the amendments. A relatively small drop was also observed in 2014. However, in 2015, the number of visitors increased and reached 9,554. According to the three-month data of 2016, 2,506 visitors have come from China thus far this year which exceeds the same period of 2015 by 67%. During this period, the number of visitors from Iran increased by 446%, from 3,020 to 16,498. Stricter regulations with these countries had a negative impact upon other types of economic relations, too.

Another legislative initiative which had a certain negative impact upon the development of economic processes was an amendment to the Law on Ownership of Agricultural Land. Trends in Georgia related to land privatisation are given in Graph 1. As we can see, the value of the state-owned land which was transferred to the private sector was steadily growing in the overall index in 2008-2012 and, since 2013, a downward trend has been observed. It is important to mention that a moratorium on selling land to foreigners came into force in June 2014. In 2014, the Constitutional Court of Georgia found the amendments unconstitutional. In September, the government approved the amendment package according to which an absolute restriction on land purchase by foreigners was substituted by a conditional restriction (see FactCheck’s research).

Restrictions imposed upon foreigners decreased the land acquisition incentive for residents, too, as the ownership risk increased due to the new restrictions.

Graph 1: 

Revenues from Land Privatisation, 2008-2015

image001 Source: Ministry of Finance of Georgia

The part of the total value which was purchased by foreigners could not be identified because such statistics are not produced by the National Agency of Public Registry or the National Statistics Office of Georgia.

Within the mechanism of reserve funding, speaking about the issue of funding delays to be allocated for Georgia, it is noteworthy that Davit Onoprishvili, MP, named the withdrawal of the Financial Supervisory Agency from the National Bank as the main cause for the process delay already in 2015. It should be noted that the World Bank (WB), International Monetary Fund (IMF), European Bank for Reconstruction and Development (EBRD) and the Asian Development Bank (ADB) sent a joint letter to the Prime Minister and the Chairman of the Parliament of Georgia regarding the separation of the Financial Supervisory Agency from the National Bank. These organisations expressed their concerns about this issue and indicated that this reform would damage the financial sector in Georgia. In the statement of the International Monetary Fund Mission, issued on 8 December 2015, it is noted that the completion of the letter of intent requires the agreement to be achieved on the independence maintenance strategy of bank supervision. The statement also says that this function is to remain independent from political and sectoral interventions.


The amendments made in June 2013 that implied the imposition of a restriction on land purchase by foreigners had negative impacts upon land privatisation revenues. However, due to the non-existence of respective statistics, we are unable to specify the changes in monetary flows caused by these amendments. Obviously, in addition to the monetary flows, imposed restrictions have a negative impact upon the sector and the whole economy because additional restrictions decrease investment and re-investment incentives. Moreover, in parallel with the stricter resident permit obtaining procedures and visa regulations, this decision was an indirect message to citizens of foreign countries about state attitudes towards them. Such a policy results in the worsening of not only a certain sector but the attractiveness of the whole investment environment.

Sufficient information could not be retrieved to confirm or deny that the delay in the completion of the International Monetary Fund (IMF) review process was due to the separation of the Financial Supervisory Agency from the National Bank. However, a separate paragraph is dedicated to this issue in the statement of the IMF mission. The document mentions that the agreement on the Bank Supervision Independence Strategy is one of the preconditions for completion of the letter of intent.

FactCheck was unable to find information on interim measures; particularly, statistical data about the seizure of a defendant’s property. None of the agencies produces such statistics. However, FactCheck intends to study the issue thoroughly and introduce the results to our readership in the future.