Gov’t-led group suggests ways to develop Georgia’s capital market

The Georgian Government, the National Bank of Georgia (NBG) and the country’s private sector should team up to develop Georgia’s capital market.

This was one recommendation offered in a draft report by the Georgian Capital Market Diagnostic Study, which aimed to investigate how the country can better develop its capital market.

The Study was prepared by the Capital Markets Working Group, appointed by the Government of Georgia. The Working Group was chaired by Vice Prime Minister and Minister of Economy and Sustainable Development, Giorgi Kvirikashvili.

Georgia has all the conditions to have a healthy capital market and it is not necessary to create new institutions for achieving this goal. However, it is possible to add certain functions to existing institutions,” – this was the main conclusion of the Georgian Capital Market Diagnostic Study.

Other of the Working Group’s main conclusions from this Study included reversal of several policy missteps made in 2007. The experts said this should be done to revive the corporate securities market. However they noted amendments to the law should be done very rarely. Also, it should be decided who will regulate the securities – NBG or a Commission that will be specifically created for this purpose.

At the same time, certain aspects of the Tax Code should be adjusted to create a "level playing field” between treasury securities, bank deposits and corporate securities as investment instruments, said the Study.

One of the recommendations was to revise the legal and regulatory system in order to provide a more supportive environment and also to migrate it towards EU (European Union) approaches.

There must be a strong focus on building viable content (issued securities) for the system and issuer transparency must be improved, said the Study.

The Working Group said there were steps the private sector could take to promote centrality of trading, obtain better price discovery and streamlined trading. And there were steps the Georgian Stock Exchange (GSE), Georgian Securities Central Depository (GSCD) and NBG could take to integrate existing infrastructure and link it to cross-border systems.

The Study stressed it was necessary to issue corporate obligations for developing Georgia’s capital market. This process started last year when several donor organisations issued bonds in the Georgian national currency, the Lari. Since 2014 Asian Development Bank, European Bank for Reconstruction and Development (EBRD) and International Finance Corporation issued Georgia Lari bonds equivalent to 205 million GEL. However, none of them were placed on the Stock Exchange.

In total, the Study offered 43 specific recommendations to achieve certain goals, stated which parties were responsible for implementation of action and set deadlines.

The terms of implementing the recommendations will be determined after private and public consultations are held and both sides agree on the tasks and deadlines.