Georgian cabinet and new Prime Minister, Lado Gurgenidze, won confidence vote in the Parliament with 155 votes to 0 on November 22.
The opposition lawmakers have refused to participate in the voting as they said that all key ministers had retained their posts, which was inadmissible for them.
Along with Gurgenidze, who replaced Zurab Nogaideli, the new cabinet features only two new ministers. Maia Miminoshvili, head of the National Assessment and Examination Center, has replaced Alexander Lomaia on the position of Education Minister. Koba Subeliani, chief of Tbilisi Municipality's Public Maintenance Department, has replaced Gia Kheviashvili on the position of Minister for Refugees and Accommodation.
Nino Burjanadze, the Parliamentary Chairperson, said she hoped the cabinet would “seriously be refreshed” after the January 5 early presidential elections.
“I am sure we will have to carry out serious changes not only in the cabinet after the elections, but also in many other spheres. We should not be afraid of these changes,” she added.
Before the voting Lado Gurgenidze told lawmakers on November 22 that he was happy with the current economic team within the cabinet. He did not, however, rule out making some changes following the January 5 early presidential elections.
In one of his first interviews as the nominee for Prime Minister, Gurgenidze said that he didn't really see himself as a politician. “It's more about using my managerial skills and experience... [and] technocratic background to give our reforms new momentum,” he said.
Speaking in Parliament ahead of a confidence vote, Gurgenidze reiterated that his and the cabinet’s immediate goal was to focus more on social issues, while maintaining reform efforts and current economic policy in general.
He said that foreign investment in Georgia had temporarily dried up, describing it as a “pause” in FDI flows. "Any type of destabilization, even an illusory one, hinders investment,” he said. “We should make the current investment pause as short as possible with an emphasis on stability and the continuity of reforms.”
He said that Georgia had made huge gains in terms of foreign investment and economic growth in the last four years. “It was something like a miracle,” he said. He added that “this success should now be distributed among our citizens; it has not yet happened.”
“In previous years, the budget was more focused on building state institutions and infrastructural rehabilitation, both of which have almost been achieved. Now we have an opportunity to make the budget more socially-oriented,” he said.
Parliament was due to discuss the draft 2008 state budget on November 22, but, on Gurgenidze's request, it postponed its deliberations for two weeks. The Prime Minister said that the budget needed “some corrections.”
Gurgenidze said that 2008 state budget deficit “will be minimized as much as possible” and it will happen at the expense of “optimization of infrastructure and social expenses.”
“But I promise a budget surplus in 2009,” he said. “Georgia has no alternative to a surplus. Stable development would be unimaginable without it.”
Such a surplus, he said, would enable the establishment of a fund for future generations.
Meanwhile, he said, strict monetary policy would be inevitable in 2008. “This in turn will have a temporary negative effect on the growth rate. But without this strict monetary policy we won’t be able to control already high inflation,” Gurgenidze said.
He pointed out that it would be impossible to use “fiscal levers” to control inflation next year, “because of our planned social policy,” involving increased pensions and a new state funded employment program worth GEL 45 million.
“So we will work closely with the National Bank of Georgia to use monetary levers to control inflation in 2008,” Gurgenidze said.
Twelve-month inflation was 11.2% as of the end of October, according to the IMF, which makes its calculations based on information from the Georgian Department of Statistics.
Gurgenidze acknowledged that “the level of trust” in the DoS, which is under the subordination of the Ministry of Economy, “is not high.”
He said that his cabinet planned to submit a proposal on reform of the department in spring 2008.
“There are three possible options regarding the reform of this body,” he said. “It will either remain under the Ministry of Economy, with a strong civil monitoring system overseeing it; or it will come under presidential control. And the third option is to make it an independent body.”
Increasing exports, Gurgenidze said, was another top priority for the new cabinet.
“Currently Georgia’s exports amount to only 31% of the country's GNP, which is the same as it was in 2004. This is a problem. Stable development will be impossible if that figure doesn't exceed 40%. It will be even impossible to talk about serious success if in the medium term it doesn't hit the 50% mark,” he said.
He listed five sectors with the potential to increase exports: agriculture and the relating food processing industry; hydro-electricity; transportation sector, which he said would gain a huge boost from the planned free economic zone in Poti; tourism and financial institutions.
He said that in spring 2008, his cabinet planned to unveil a proposal for the establishment of a financial center to foster the country’s fledging financial sector.
“I do not mean to compete at this stage with Singapore or Switzerland,” Gurgenidze said. “Although, according to our estimates, with political stability in the country, there is a huge probability that financial assets worth USD 10 billion will be attracted to this financial center.”
Currently, the Georgian banking sector has assets worth GEL 6 billion, which is about USD 3.7 billion.
Gurgenidze also promised a draft law this December aimed at increasing the efficiency and flexibility of the Georgian stock exchange. “I promise that next year more foreign financial investors will become involved in our financial processes through this stock exchange,” he said.
He also pledged to “at least slightly” decrease some taxes in 2009 and “we promise a significant decrease in taxes from 2010.”