Issue 4, 2013. August-September



The Georgian Stock Market has failed to ignite investor' interests in the past, but Finance Minister Nodar Khaduri is betting that new reforms could bolster investor confidence and create new opportunities for portfolio investors.

Nino Patsuria

For Finance Minister Nodar Khaduri, the Georgian Stock Exchange is something akin to a flashlight for investors: when it works, it shines a light on all the country's opportunities. When it doesn't, potential interest in the country's enterprises and joint stock companies fades into darkness.

"[It is like the] difference when a person goes groping in the darkness, and when a person enters a lighted room where they see where investment opportunities are, what is the value of this or that enterprise," he said.

"The price of and demand for a company's shares provides opportunities to analyze the market and invest in this country. We might attract many more investments..."

Khaduri, appointed to the Ministry of Finance (MOF) last October, is not the first member of the cabinet to see potential in the country's sluggish securities market. Trade skidded to a near standstill after a 2006 effort to reform the Georgian Stock Exchange; today just state entities and the Bank of Georgia are listed.

But mere reform, noted the minister, is not enough: the new law has to encourage private companies to look locally for the opportunities they are currently finding abroad. To date, the Bank of Georgia has already been listed on the London Stock Exchange and TBC Bank is eyeing an initial public offering on the Warsaw Stock Exchange in 2014.

Georgian companies who tried to raise capital on the Georgian Stock Market were met with silence in the past. Now, stressed Khaduri, the government needs to create a law that will attract investment and bring portfolio investment.

"We face a serious problem at the moment: our enterprises go to the European market to trade," he said.

"We must create conditions here to develop the securities market ... We should encourage our neighbors, Armenian and Azeri entrepreneurs, to trade on our stock exchange. The most important thing is to create proper institutions that we lack at the moment."

Khaduri added that creating a pension market will play an important role in the process. The Ministry, together with parliament, the Economy Ministry, and the National Bank of Georgia are already working on creating the new legislation to support their efforts.

He stressed that creating better institutions for the securities market and more effective legislation - as well as learning from stock market success stories like Poland and the Baltic States - will be crucial to rebooting the country's securities market.

"[Over the past 20 years] we lost an important institution that might attract very important investments and lay the groundwork for economic development of the country," he said.

"There are a lot of joint stock companies ... operating in Georgia but nobody trades on the GSE ... therefore, we should properly create institutions to keep this mechanism going permanently."