The President of Georgia Mikheil Saakashvili presented economic package to the Parliament of Georgia


Very good traditions have been adopted - according to our constitution, if the President used to come to the legislative body once a year and presented a formal speech and practically it wasn't even followed by debates - now it is different, now we work more dynamically and effectively.

My accountability has personal character towards you.

It is a commitment of the Government only, the President's responsibility is different.

I would like to greet our deputies' initiative, a very active interaction with our Georgian people - with our multiethnic population.

Of course the opposition started to criticize governmental group more, we listen to it very carefully.

After the statements made by opposition sometimes there are some serious debates within the government.

This is why I am very grateful to our opposition, because political debates were shifted into the Parliament.

There are some very severe misunderstandings inside the Parliament, but at the same time I am very glad that we have one and the same course regarding the foreign policy.

I had a chance to listen to Jondi Bagaturia's speech from early morning - it was strict but it was very interesting at the same time.

Sometimes there are some severe disputes within the Parliament, but everything comes to one end - the joint Georgian delegation achieved success in Strasburg.

Today I want to present an Act on Economic Freedom.

I think you all will agree if I say that we have a number of challenges ahead on this first stage of the modern life.

We overcame many of those challenges starting from 90ies, but many of them had negative impact on us.

All these problems and challenges, no matter how difficult they were hit our economy like a tornado since the day of our independence.

For the independence of our country we have experienced political collapses and chaos, very difficult years, wars between brothers and fratricide.

Periods when criminals had no limits in their actions and when thieves-in-law used to be legislators.

When the only formula of thinking was corruption and any law existed only for one reason - to put a price on it when it was broken.

I am not going to list all of those misfortunes, but all other tragic results used to damage our economy more and more, used to empty pockets of our people and harm Georgia's infrastructure.

Plus economic policy that never existed, total corruption and chaos within the state system.

So all this caused very bad results - our people got poorer. More and more jobs were lost.

Our last hope always was a foreign assistance and international finance organizations, we thought they would show us ways out or do some miracles for us.

Our very strict legislation got stricter and stricter, but no one used to adhere to it.

Our tax code got harder and harder, but everybody tried to avoid it through corruption.

More and more state regulating committees were created. These committees were regulating only one thing - the amounts of the bribes.

The government used to appoint controllers to these regulators, they made corruption systems more difficult and more expensive.

The regulations and norms used to get more and more difficult and vague.

And the result was more corruption, totally destroyed businesses, collapsed economy and infrastructure.

The waves of inflation and devaluation changed each other.

State treasury was empty.

No salaries and pensions were given out.

The country was left without gas, electricity and hopes.

Our economic language consisted of several words - "sequester", "deficit", "stagnation", "devaluation", "stag-flation" etc.

None of the economic receipts, none of the anti-crisis plans, none of the foreign recommendations worked that time.

Then it was Rose Revolution and together with it the state economic policy's revolution started as well.

What was revolutionary then? We said that instead of regulated economy we would choose the way of liberal economy.

We said that the way out wouldn't be increasing of taxes, but decreasing of them.

We shouldn't make the tax code more difficult instead we should simplify it.

We said that we would save our economy not be creating new regulating committees but by abolishing the existing ones.

Not by closing the economy, but by giving it maximum transparency and by implementing free market principles.

The Monetary Fund used to criticize us a lot for such utopist decisions. They forecasted total economic and budget catastrophe in one year.

After increasing the budget twice, finance stabilization was reached. The State started to issue salaries and pensions on time, for the first time for years. And what's most important - for the first time we all had a chance to observe the first signs of life in business and economy sector.

After a year and a half indicators tripled and the International Monetary Fund officially stated that they were not right, Georgian government's course of economic liberalization was right.

6 years passed since then and I will not start telling you how much our economy changed in this period.

It is not my aim to burst in front of you and say how much progress of economic growth was observed in Georgia, how much the foreign investments and internal products increased.

I can say that if we speak due to the results we can see that none of economic recipes were as effective as course of liberal economy.

Besides economic growth we also experienced very difficult challenges for our economy. We experienced Russian intervention and world economic crises.

Both of these events were enough to destroy our economy totally. It happened so in many countries around the world. We all can imagine how big these both challenges were for our young economy.

But the experience showed that liberal and free economy is not only the progress guarantor but also the only respond to any economic crises or political disorder.

Liberal atmosphere, minimal involvement of government in economy and decreased taxes brought very positive results - Georgia became one of the most attractive countries.

Even today, besides internal political difficulties, besides world economic crises that still exists all around the globe, investors still continue to put money in Georgia and of course these indicators grow more and more.

We achieved the main success with liberalism - there exists a trust towards Georgia today, today Georgia is among those countries where it is possible to achieve success.

Some people say that liberalism represents a strange word for us, we are getting criticized; they say that this government brought into the country everything that is not Georgian; they say that we are not implementing traditional economic values in the country.

Maybe we really use experiences from some other cultures for success and enrich our culture and knowledge more and more.

But when we are speaking about economic liberalism, this is something different - we do not refer to other cultures to implement economic liberalism in our country. Of course the ideology of economic liberalism comes from Milton Friedman and Murray Rothbard, Hayek and Von Mises, but for me an aspirator of this all is a great Georgian think-tank and one of the founders of our Georgian statehood Ilia Chavchavadze.

We all were raised on the values and works of Ilia Chavchavadze, exactly he was first Georgian libertarian with his economic philosophy.

Ilia was the first Georgian, who was preaching on free trade, open economy, on minimal involvement of government into the economy and on low, liberal taxes. He called economic liberalist "free trading" and explained what it meant using simple words.

Ilia once said: the theory of science that teaches the freedom of "taking and giving" means that the goods - local or foreign must be free from taxes and must not be under the pressure of the laws... such goods that are not taxed or aren't pressed by any formalities are easy to reach and get".

This is why when we choose liberalism we choose Ilia's way, which was impossible to reach even in the dreams earlier.

Six years ago we chose exactly this way - the way of Ilia Chavchavadze, and now in six years Georgia is on 11th place in doing business according to World Bank's information.

Exactly this way and the devotion to all liberal principles gave us a chance to make an incredible step forward in the simplicity of doing business in Georgia, and if Georgia was on 137th place in 2003 now we are on 11th place.

Today, according to Forbes information Georgia is on 4th place around the world in existing taxes on entrepreneurs.

Yes, it is true - on 4th place, after Catarrh, Emirates and Hong Kong.

It means that only in this 3 countries the taxes are lower than in Georgia.

It is not me who says this - it is World Bank and Forbes.

According to these ratings Georgia is on the first place among all Eastern Europe and Post Soviet Countries, we are higher than Japan, Finland, Switzerland, Germany, Netherlands and Sweden.

Best ten countries are Singapore, New Zeeland, Hong Kong, great Britain, US, Denmark, Australia, Canada, Ireland and Norway.

This is a league where Georgia is represented. Please look carefully, what this league is - all the best ten countries that represent Anglo-Saxon economic traditions. Besides Norway and Denmark Georgia is the only country that doesn't have Anglo-Saxon economic traditions in this league. This of course is a big success for us, but everybody must understand what it means for us.

What does these ratings mean for us? Of course it doesn't mean that we live analogically well like people in these countries.

Of course the life is much better in Japan and we still have a long way to go until we reach something similar.

Of course there is a huge hardship and unemployment rate that is affecting the living conditions of many our citizens.

Cynics often tease me - look what he is talking about, he is comparing Georgia to such countries. But this is the World Bank that says that there are simpler regulations and it is easier to do business in our country than in those countries.

But this is only the opportunity that we obtained. This is only one part of our achievement, when we become a country like those countries, in the highest league, we will be playing together with them and have a chance to use and develop our country like they did.

For years Estonia was higher than Georgia in this rating. It was on the first place among post soviet countries. Now we are ahead, Georgia is on 11th place, Estonia is on 24th. But it of course doesn't mean that our economic development is higher than Estonia's. It of course doesn't mean that we will reach the finish first.

According to Forbes only Catarrh, Emirates and Hong Kong have lower income taxes than us and of course it doesn't mean that our economy is successful like theirs. But it means that our entrepreneurs can make more money than the entrepreneurs in any other country. And if they develop their businesses, they can reach success easier.

It is our big victory today, but we must turn today's victory into tomorrow's success and treasure.

We must turn today's egg into tomorrow's chicken.

These ratings give our people a chance to turn these ratings into a treasure for our people and into new jobs.

Creation of opportunities is the main value of liberalism. The way of Ilia and liberal economy lead us to the conception of opportunities.

While I am speaking about opportunities I want to bring one example of a Georgian young man.

You know that all Georgian students who will be listed in best twenty Universities around the world the State is sponsoring them. Our State has never done anything like this before.

So, Irakli Rogava from Zugdidi got this scholarship. He tried his best and only with his knowledge was listed in Oxford University. Of course for him It was impossible to go there, because one year there costs 25 thousand GBP. Of course this is a great victory. This is probably the biggest success in his entire life and the happiest event for his family.

You know that Oxford graduates are getting minimum 150 thousand dollar annual income automatically after graduation.

Irakli is the student of this University. But do you think that it means that his life is easy and he is reach already? Of course it is not. He has to study a lot in order to reach success. He has to be a regular student. He has to maintain his slot in this University and not get dismissed. He must get best diploma and only after these he can finally find a job he had dreamt about.

Only after these he will be reach and successful. But he is already a winner, because he already has a chance, he is a student of Oxford University and he is on his way to big success.

This simple example is very adequate to Georgia's situation today.

According to these ratings, that are very prestigious for us, Georgia is listed in a very high level university. It is our big success, because before we looked like a University enrollee that was raised in darkness and illegality.

We were able to achieve almost something unachievable. It doesn't mean that we are reach already, but it means that we are on our way to wealthy life.

It means that we are given a chance to succeed.

Now it is very important to try our best, to continue this way and use this chance. We are still in hardship but we have a hope that not many people have. If we look at other countries among post soviet union, in our regions, in the whole East Europe we will see that we have obtained the biggest chance of success because we were able to simplify doing business, to decrease taxes and decrease corruption at most.

The Rose Revolution was not only flags waving and standing in the street. We worked very hard for many years to make sure our country is in this highest league.

Rose Revolution was a start of Ilia's way. This way is an economic liberalism way. It envisages minimal involvement of government in the economy and the highest possible openness in the business environment.

We mustn't turn back from this way.

And in order to make the liberal course irreversible in order not to turn back from this course, it concerns both our government and future government, in order to defend obtainment and create constitutional basis for economic liberalism I offer you to defend those brave economic steps that we have been taking for several years and that we wish to continue in future.

That is why today I present an Act of Economic Freedom - a constitutional project on the opportunities of economic freedom and dignity.

As it speaks from the headline the major valuable basis are freedom equality of opportunities and dignity.

  • Freedom - expressed in minimal number of the government body, low taxes, in the minimal involvement of the state and in the maximal freedom of an entrepreneur and citizen from beaurocratic ties.
  • Opportunities for everyone - supported by free economic and transparent management, also by increased social mobility and availability of education, hard work and playing according to rules as the major basis for development and success.
  • Dignity - fare state support on them, who cannot utilize existing abilities. To make sure that these people have dignified life conditions.

The three values are what is most needed for our citizens and entrepreneurs. This is a milestone of our liberal economic vision and despite all ratings we all agree on this.

Active political debates is a part of our life and none of my opponents, who criticize me never had asked me this question, question about this main idea, that there is only way to democracy and successful future - it is a way of free economy, transparent and responsible management. We have to defend our citizens from beurocratic pressure and support their freedom.

Deriving from these principles, an Act of Freedom envisages following initiatives:

The governments of developing countries suffer a lot of financial deficit, because investors have a fear that major economic policy may change very soon.

The Act of Freedom will first of all defend constitutionally strict and transparent regulations that will restrict executive branch of government to turn away from the course of liberal economy.

In the modern history one can hardly find examples, when government tries to decrease the size of it, to monitor and control itself.

The Act of Freedom package involves setting in the constitution the maximum ratio of budgetary expenditures to GDP at 30%.

It is our principle that the only way out is tightening of belts by the government, instead of choking off people and businessmen through introducing additional controllers and regulators.

We believe that financial responsibility is the basic obligation of democracy.

This is why an Act of Economic freedom offers budget deficit - at maximum 3% of GDP; and maximum of 60% of debt-to-GDP ratio.

From 1995 our currency is convertible and it is impossible to restrict it's convertibility.

For 12 years already we have unlimited right on incomes and capital repatriation.

A lot of citizens and businesses benefit from this. It also supports employment development.

Georgia will turn into a country, where the irreversibility of the liberal economic course is protected by the superior law.

After Rose Revolution many things have been done in order to liberate entrepreneurs from extra regulations and unjustifiable beurocratic involvement. This is how were able to abolish corruption and liberated business.

Act of Freedom offers restriction on increasing already existing licenses and permissions.

According to the package, setting up of additional new regulatory agencies - apart of already existing in the spheres of financial services, communications and energy - would be banned by the law.

Starting from 1995 State Banks doesn't exist any more in Georgia and there is no price control from early 90ies.

According to the package the state will be banned from having an ownership in bank shares - the government holds no shares in any bank - and prohibit any government involvement with the purpose to control prices.

Despite all of this one fourth of our population is below the edge of poverty. Living conditions of these part of our population is what the government should care the most. I cannot be satisfied with any economic success until we have such a large scale of people living below the edge of poverty.

We now spend on 30% of social support and pensions, health and education. But I still know that all these funds are not allocated yet in the fairest way.

We are proud of success of the policy we carried out. as the result of this policy the health vouchers are given to pore people. These vouchers allow them to use service of any private insurance companies. The parents can use education vouchers for public and private schools as well. Act of Freedom will strengthen idea that budget funds must be allocated according to people's needs, people should be free in their choice. It means that we should finance not only institutions and organizations, where the patient is obliged to go, but to finance people directly, in order to finance a choice of individual persons according to their needs. So the institutions will be financed according to their choice.

When we simplified our tax code, we decreased taxes significantly and brought new taxes in, which are not progressive and so our tax incomes raised this way significantly.

Low and simple taxes are our greatest achievement that attracts investments to the country, creates new jobs and gives more money to people and business. Therefore, it is our obligation to provide that this policy is secured no matter of political changes.

The government should not be able to use the right of increasing a tax or introducing a new one without public consent.

The package also involves stipulating holding of a referendum if some day the government decides to increase taxes or to introduce new taxes.

The proposed package would not have an immediate effect on wellbeing of the population, these proposals will turn Georgia into a country, where the irreversibility of the liberal economic course is protected by the superior law.

At the same time, this Act is very ambitious, because after its adoption Georgia will become the world's leading country in terms of observance of economic liberalism.

This Act gives us ability to make Georgia more attractive for investors. Accordingly it gives us long-term ability to attract and create new jobs.

We have to understand that because of very exceptional specifics we have luxury to be an ordinary Eastern-European country.

In order to attract investors from all over the world we have to turn Georgia into one of the most attractive countries in the world concerning doing business and capital contribution.

Our ambition should be to turn Georgia into a real flagship of the world's liberal economic ideology, to create a comparable advantage referring to other countries.

This Act of Freedom serves this aim and this great mission.

Achieving of this goal is of special importance and also possible and needed now, when the ambiguous, disorientated and populist socialist trends are waving around the world shaken by the global economic crisis.

Our belief is that long-term and firm response to economic crises is more liberalism and not regulation of economy by the government.

Georgia is part of global economy and our attempts should be directed not to be locked in but open the economy and try to become more competitive on the global market.

Lets learn global economic thinking and get adopted to the idea that a winemaker in Kakhetia can compete with a winemaker in Chile or Bordeaux, that a nuts processor in Guria can compete with a nuts processor in Turkey.

Except economy, an Act of Freedom and common liberal economic course has a great political importance, specially in our struggle for our country's independence and freedom.

One of the major reasons that explains our aspiration towards independence from Russia is not only physical independence... but also freedom from the uncivilized way of living and way of thinking on which Russian empire is based.

The principle of our existence is different. This is freedom from bribery and freedom from "my-your" principle, according to Ilia Chavchavadze. Freedom from a controlled by government economy and tyranny of beaurocracy.

Our natural condition is liberalism and this is what makes us different from Russia. Our major difference is our aspiration to human and enterpriser's freedom.

Besides, an Act of Freedom is a guarantee to realize euroepan economic ideals in Georgia.

This is a chance to turn our fight for liberal and developed economy that started 6 years ago not into a fragmental shining, but into permanent light that our country will follow and that will bring us to family welfare and dignified employment.

The world history shows that revolutions that were based on their leader's enthusiasm and discretion, soon sank and turned into misfortune.

Only those revolutions ended with historical success that managed to transform revolutionary ideals into institutional and economic systems in the conditions of democracy and freedom.

Freedom, first of all, means responsibility.

The success of liberal economy is based on an individual's responsibility, wish and diligence.

We can cut the branch that we are sitting on with our own hands, destroy our country, build cells, repeat our enemy's propaganda - or stand together around our values, get united like one whole body, small but very strong and brave, as one company and take one common responsibility to strengthen and defend our own country.

Building of liberal economy is our way and a major dignity on this way should be our responsibility before our country.

We have many different parties, but Georgians make one party; we have many companies - but Georgia is one company and their success depends on common success in equal conditions", stated the President of Georgia Mikheil Saakashvili.

Communications Office
of the President of Georgia

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