All sales final! Everything must go!

by Nathan Hamm on 9/26/2004

The Scotsman reports that, if you’ve got cash, the Georgian government has assets to sell you.

Something remarkable seems to happen. It is close to alchemy. Liabilities on the public books are transformed into assets in the marketplace. All that is needed is the application of proper pricing and quality … or abandoning unwanted services into those valued in exchange.

[Kakha] Bendukide has sold off the international airport, the oil terminals, the state’s vineyards, film studios, and phone company. He did not pause to urge the civil servants in the department of industrial policy or the National Investment Agency to improve their acts. He closed them down. Next to go will be the Monopolies Authority and the National Innovation Agency.

Bendukide perhaps has an advantage in trying his hand at applied economics. He trained as a biologist. Born in 1956 in Tbilisi, the capital, he made a fortune from biotech companies and heavy engineering plants after the collapse of the Soviet Union. He is not in the league of the true oligarchs, but he had enough to retire in relative opulence until the new regime asked him to apply his evident Midas touch to the entire economy of Georgia.

Bendukide says he has two heroes – Charles Darwin and Adam Smith. He suggests they offer insights into how life represents a vast end-independent flux. The economy is not analogous to the great sweep of evolution, but it does show how spontaneous forces achieve more diversity and complexity than any plan or directed efforts.

Georgia has been a lavish recipient of overseas aid from the International Monetary Fund, the World Bank and other donors. It is a measure of his determination that he says he wants to renounce all such aid programmes within two years. “They only make you dependent of further subsidies.”

That is certainly a view one rarely finds in the developing world, and his ideas on taxes would be considered radical just about anywhere.

I commend the new tax policies of the Republic – income tax is slashed from 20 per cent to 12 per cent. Payroll taxes (the same as our NI) cut from 33 per cent to 20 per cent. VAT is sliced from 20 per cent to 18 per cent. He has abolished 12 other taxes altogether.

It may be too early to assess the results of this bold reform, but the Georgian tax authorities were finding it very difficult to collect much. Everyone evaded or traded only in cash. The Bendukide belief is that, contrary to every Scottish politico’s views, lower taxes will yield higher revenues. “This is plain Adam Smith wisdom. If I’m wrong about this, I’ll be wrong about everything. I’m not making a budget; I’m making a nation.

Certainly a fascinating character this one is. Even if he doesn’t have it all correct–something I’ll reserve my judgment on–it is this young, passionate leadership that gives me so much faith in Georgia.

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– author of 2991 posts on 17_PersonNotFound.

Nathan is the founder and Principal Analyst for Registan, which he launched in 2003. He was a Peace Corps Volunteer in Uzbekistan 2000-2001 and received his MA in Central Asian Studies from the University of Washington in 2007. Since 2007, he has worked full-time as an analyst, consulting with private and government clients on Central Asian affairs, specializing in how socio-cultural and political factors shape risks and opportunities and how organizations can adjust their strategic and operational plans to account for these variables. More information on Registan's services can be found here, and Nathan can be contacted via Twitter or email.

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