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Georgia’s Finance Minister Candidate Says Priorities will Remain Same, Resources will be Different Though

Published: October 22, 2012 | 9:00 am
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The COMMERCIAL TIMES

Nodar Khaduri, candidate for the Minister of Finance of Georgia, declares his top priority will be a transparent budget. Khaduri, once rejected professor from the Ivane Javakhishvili Tbilisi State University (TSU) on political terms, is again participating in the contest.

- How would you assess the state budget condition? Reportedly, Georgian Dream coalition and United National Movement members name different figures.

- At the moment, there is approximately GEL 500 million in the state budget, that the Ministry of Finance is allowed to manage and not GEL 2 billion.

Out of the stated GEL 2 billion, GEL 270 million is sent to the budget of municipalities, which cannot be managed by the central government as it’s an independent budget. GEL 300 million belongs to public judicial persons and is not managed by the Ministry of Finance. State enterprise deposits make GEL 600 million, which is a solid volume, again not manageable by us. All that means, that the Ministry of Finance cannot use any of the three above-mentioned finances for pensions.

Thus, only GEL 500 million can be spent. In addition, there is also GEL 356 million that the Ministry of Finance is saving for covering foreign debt next year.

Those who were talking about the GEL 2 billion budget said nothing about the fact that the real volume of money that can be spent is only GEL 500 million.

One more issue, exactly 75% of the tax plan has been received during the nine months, which means that no extra tetra is in the budget.

- Georgian Dream coalition claimed no detailed information was public about the Other Expenditures in the state budget. What are the changes expected in this respect?

- In this case we face several systemic problems. First, it is the classifier that is an obstacle to be handled. We must do our best to make the budget as transparent as possible so that to provide the society with the correct information on state expenditures. Indeed, it will take time.

- Do you plan changes in the top management of the Ministry of Finance of Georgia?

- I cannot talk about concrete plans. The only thing I can say is that in near future Mr.David Narmania, current candidate for Minister of Infrastructure and Regional Development, will be the Deputy Minister of Finance as the above mentioned ministry will be abolished. Consultations are ongoing around other issues. I dare say sincerely that no staff changes are expected in the middle and lower circles of the Ministry. Professional, honest and patriot people will continue working at the Ministry of Finance, regardless the fact who the minister will be.

- Before being presented as the candidate for the Finance Minister, you were saying that the current labor code is useless. What did you mean?

- I can confirm this statement again. Reporter asked me whether I would change labor code and my answer was that it should be thrown away and a brand new one has to be written. The current code makes slavery work legal. Employed person has no rights; employer is not obliged to create working conditions for employees. Moreover, in our country it’s very easy to lay off people. We must write the code that will equally consider the rights of the employer and the employee.

- You’re saying that Georgia must avoid taking big credits and if there is such necessity, the money borrowed has to be spent in economic development of the country. As you mentioned next year the volume of the foreign debt to be covered makes USD 60 million. Could you please explain it more concretely?

- We’ll have to pay USD 60 million for Eurobonds, the part of which is paid but another, quite big part, still remains to be covered. In addition, the country has to pay for lots of other foreign debts, which makes up to GEL 400 million. In total, Georgia’s state foreign debt is USD 4.5 billion and the entire country’s foreign debt is- USD 11.5 billion. Ministry of Finance is responsible for USD 4.5 billion and the rest is the responsibility of some banks, commercial structures, firms and people.

- As Bidzina Ivanishvili stated, public servants had no growth perspective so far and now is the time when their salaries can be increased. What is your view on this subject?

- Public servants have suffered a big political pressure. Every decision was made based on political views and there was no single guarantee that the person, who, for instance, would call a friend Nodar Khaduri, would continue working the other day. Nobody would dare appearing nearby the office of Georgian Dream coalition. For us, what matters most is professionalism. We value our staff, despite their political views.

As for increase of salaries, yes, there is a potential, but first we’ll have to calculate everything thoroughly. Some Ministries offer high salaries, among them is the Ministry of Finance. However, in general, salary system must be improved in our country. This cannot be settled in one day, indeed.

- Don’t you think tax policy has been strict while saying that it will be strict when you are appointed the Minister of Finance?

- Tax policy, carried out by the Ministry of Finance of Georgia will be objective and just. For instance, deliberate complications won’t be a case with certain companies at customs like it was happening in the past, with Channel 9, for instance. I can give this promise.

- As for decreasing income tax, what’s been the reason why Georgian Dream opposes this initiative raised by the United National Movement?

- Current opposition had a chance to decrease this tax before. Thus, today I cannot take a responsibility on this issue. Our program did not envision income tax reduction. What we promised was the untaxed minimum and we’ll keep that promise. Actually, this way people will get more benefit, especially those who have small and medium income. For instance, if the salary is GEL 300 and the person would get GEL 6 decrease with 18% income tax, with our offer this person will get GEL 30 preference. It’s true that this is not much, but for some people even this small improvement could be significant. We believe in what we’re doing.

- Do you think changes are necessary to be conducted in the Audit Service?

Audit is not a prerogative of the government any longer, now the parliament is in charge of it. Corrections will be made in the legislation, especially in regards to political parties. There are some issues that are more political than economic.

- Do you plan changes in the Council for Dispute Resolution?

- I don’t exclude staff changes. It should be noted, that such disputes will be in future as well and the council must be maximally objective.

There are some disputes that are taken to the court. In this case, what matters most is an independent judicial system, impartial and free from political pressure. This would be one of main achievements for Georgia.

- Will the ongoing inspection of the companies be terminated?

- Certainly no. We will not allow tax discipline ruin in the country. Everything will be continued in order. However, there will not be inspection-freed companies, or so called “covered” companies any longer. Everyone will be inspected and only in legal frames.

- There’s a special risk-management based program, which chooses companies for inspection. Will the system be used in future or is there some alternative method considered?

- We’ll do our best to avoid subjective decisions. It’s obvious that all the companies cannot be inspected at the same time. We’ll use the already existing and experienced method. Everyone must be aware that one fine day they might get the notice, but this will by no means convey the threat of closure. They will also have an option to choose an alternative audit.

- How efficient do you think alternative audit is?

- It’s difficult to learn every detail in several days. There are some opinions and suggestions regarding the further perfection of this system. We’re taking about three types of audit, each of them are more or less successful. We’ll continue working on creating a fair environment in the country.

- How would you assess the recent initiative by the Georgian government, according which, all the local TV broadcasters, on the basis of a related appeal, will get sanctions on overdue tax debts decreased? Do you think this initiative could be activated for other representatives of media as well?

- This decision will be revised. The fact that one concrete company- Kavkasia TV’s account was seizured because of exactly GEL 2 and 50 tetri issue, while the other TV company was allowed to accumulate millions of Laries of overdue tax debts, is an ample example of what I was saying before, not everyone was treated equally. The law must work same way for all.

As for other media representatives, I’m not going to talk about preferences. Let’s say that, in general, the main priority must be an equal treatment of businesses.

- In 2003-2004 you were the Deputy Minister of Finance of Georgia. Like today, it was the time, when new government was formed. What was the main priority for the Ministry of Finance by then and what is the situation like today? Could you please compare financial-economic environment in the country during the two periods?

- Indeed, the current situation is far different from the period when I was the Deputy Minister of Finance. Today we have bigger budget, the Ministry of Finance has moved to a different building, better automobiles serve ministers and deputy ministers, cabinets are more luxuries. In the past, there were not enough resources for financing such priorities. Back then, it was the time when the wave of business harassment was starting and it’s over now. This is the major factor that makes the difference.

- As you claimed, your rejection from TSU had a political background. Now, as you’re a Finance Minister Candidate, what are your plans about the university?

- TSU Academic Council announced on August 10 that I didn’t deserve to be a professor. However, my contract was valid till September 26. Then, the council together with the rector made a decision to prolong my and several other contracts till the next contest. The deadline for submitting related documents was expired on October 5. On Monday (October 22), I have an interview with TSU commission. Along with me, there are also three other candidates for the professor position.

There’s no sense to deny the fact that my rejection from TSU had political motives. I’d been holding this position twice before: from 2006 to 2009 and from 2009 to 2012. This experience was my advantage as the university, students and the society had my work experience at disposal to consider, in addition to the documentation submitted for the position that I’d been volunteering for the third time already.

Apparently, in such turbulent conditions, the commission and the council made a decision that could be dictated only by one tool and can have only one excuse-politics. I might be mistaken and there may be some other explanation as well, but I see only politics beyond this decision as my documentation was more than good enough to result in such a negative response. I’m not bragging, but my citation index is very high, my works have been published in the U.S.A, Switzerland, Bulgaria, Romania, Russia and Azerbaijan. By the way, my article is used during tuition in Hopkins University. Not many Georgian eco-ministers have this privilege, unfortunately.

In my opinion, this decision is also a reflection of the university’s weakness. Four candidates were competing for one position, which in the end remained vacant. This is why I have to participate in the re-announced contest. This time I hope the commission will not be political-minded and the fact that I might be a minister or my being the member of the winner team won’t influence on their decision.

I’m very proud to see how different the reaction of my students was. I posted on facebook that the negative decision made by the commission was worth happening only to see the warmth and love my students and colleagues expressed to me.

Everything has a good side. During the past two months I’ve gained more than I’ve lost. Actually, I’ve lost nothing. I have lectures at TSU every Saturday and I’m not planning to leave the university, even when appointed the Minister.

As for changes, I feel more responsibility now than ever before. The winning of Georgian Dream Coalition belongs to the people of Georgia. It’s victory not over the United National Movement, but- over fear. On Sunday, I’m becoming MP for several days and it’s also very interesting. Initially, I was offered a position of the head of any of the parliamentary committees. However, after the consultations the situation changed. It’s been a week already that I’m visiting the Ministry of Finance of Georgia to meet the employees. I hardly find time to spend with my family and play with my children. However, I think what I’m doing now will work best for them in future when they will live in a prosperous country.

 

 

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