Why is the capital market in Georgia not developing

The number of transactions on the Georgian Stock Exchange in 2025 decreased by 5 times compared to the same period last year - last year, only 9 transactions were concluded on the exchange, and all of them were related to Liberty Bank.

Teimuraz Zakradze, a representative of the Institute of Harmonious Globalization and Management, spoke on Radio Commersant about the state of the Georgian Stock Exchange, in general, whether the country has this institution, and what needs to be done to develop this direction:

- We have seen a lot of policies so far that were supposedly focused on the development of the stock exchange, there were private initiatives, involvement, various types of programs, guidelines, but in the end, we are witnessing such a picture. Why is our stock exchange in this state?

- It is a simple and at the same time, a difficult topic. In fact, the operation of the stock exchange is the foundation of the political system that we have. If the stock exchange is not independent of the state, nothing good happens there. When the stock exchange works independently and freely, the country, the economy develops.

The capitalization of our stock exchange is a little more than 2 billion GEL. I will give you a simple example - the country with the smallest population, Iceland, which is equal to the settlement of one Gldani (Tbilisi sub-urban), has a stock exchange capitalization of 22 billion dollars. The point is not that we have a small economy, or we cannot, we do not have the strength, it is simply that there is no freedom of trade in the country. Stock regulations are issued by the National Bank, which is the same as appointing wolves as shepherds of the sheep flock.

- Are these regulations a problem for companies?

- Yes, as a result of these regulations, the banking system is in no way interested in the development of the stock market.

- What regulations do you mean?

- Any regulation. The main croupier in the market is the bank. The bank is not interested in you becoming rich. There are only a few companies registered there, they do the exchange and exchange in private, and no sane person will enter such a market. In addition, we have very little experience with this - a high material censure is imposed to enter the stock exchange, the rules are dictated by the banking system. Therefore, in any case, in this situation, when there is no independent regulator - the Securities and Exchange Commission, which has been abolished and which should be an independent regulator of the stock market, does not exist, does not exist. If we compare it to the human body, the stock market performs the function of the liver, the banking system - the system of blood vessels. If the liver does not work and is clogged, the blood becomes poisoned, and ultimately, the economy is dead.

- Commersant is actively working on this topic, and I remember the idea that we may not have a stock exchange at all, and our companies may start “listing” in neighboring countries, in other countries. How acceptable is this idea to you?

- This is harmful. This is an oligarchic system that fiercely cannot stand market freedom, and we don’t have one either. Zviad Gamsakhurdia was the first to open a stock exchange, and they destroyed it. Shevardnadze was imitating Baltserovich, claiming that he intended to develop the stock market, but Baltserovich is the father of the Polish market economy, and the capitalization of the Warsaw Stock Exchange today is 250 billion dollars, while Poland’s GDP is a trillion. Imagine how Poland developed after the stock exchange opened 2 months after the death of the Soviet Union? That is, we have a political situation that contradicts the freedom of the stock market, the market economy, and accordingly, no matter how much we shout, what can be done, nothing will help until the system changes and de-oligarchization occurs. There is no other option.

- If the stock exchange were free, according to your observations, would our companies have the opportunity and resources to activate the stock exchange?

- Companies do not have the opportunity and resources to activate the stock exchange, this should be a decision made at the legislative level: the Securities Commission should be restored, banks should be prohibited from commercial activities and the right to own companies, they should be prohibited from participating in the establishment of exchanges, and when the regulator is restored, Georgian companies should establish a stock exchange, a commodity exchange, a foreign exchange exchange. In general, Georgia should have a top-level wine exchange. We should have freedom of capital, independence from state influence. The National Bank, as the regulator of the banking sector, and the Securities Commission, as the regulator of exchanges, should be independent of each other and of the state.

- And the Securities Commission should be created by the companies themselves?

- No, the Securities Commission is created by the state, the parliament, which first approves the law, the status of the chairman of the commission, and then the chairman of the commission acts independently. You can't stop the circulation of blood, it should move naturally, and that's how a market economy is. The banking system should be free, and the stock market should be free, only then will development occur. People will learn all this very quickly. I remember such data, Georgians spend about 2 billion on betting every year. Let's imagine a very simple situation, where half of it will go to investing in stocks on the stock exchanges, people will instantly learn what a market economy means, they will get rich, they will receive dividends. Businesses will have a chance not only to take a loan from a bank, but also to sell part of their shares on the stock market and receive the capital they need for business development. All farms should be participants in the exchanges and they will no longer have any problems with where to sell their crops. But now, when there is no freedom of the market, trade, there is no chance to sell the crop, someone has to “growl”, “Krishna” has to pay money, and so on. In short, we have such a vicious economic system that I do not call an economy at all.

The economy is measured by stock exchange indices: the oldest Dow Jones index is an indicator of the American economy, a thermometer, it measures how the economy is developing. If indices do not operate in a country, if the exchange system does not operate, if there are no topics of liquidity and capitalization, then there is no need to talk about development there at all. If a company registered yesterday participates in tenders, such a thing does not happen in a market economy. To participate in a million-dollar tender, the company must have 8-10 million in reserves, so that if something happens, it can respond with its capital. A company registered yesterday, which has no resources, wins a multi-million tender, distributes it to someone who is needed, then disappears and that's it - no one is held accountable. This does not happen in a market economy, in a market economy everything is strictly regulated, the chances of speculation on the stock exchange are minimized, so that no one is harmed. In short, there are many rules at the international level, but if the stock exchange is not independent, all this does not work and will never work.

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