Important appropriateness of development of modern economy is its cycled character. Puriny every structural crisis of the world economy new opportunities are formed. Capital of the countries, which were leaders during last cycle, is being devaluated. Qualification of lab our forces in field using old technologies are being ruined, while the countries, which managed to create innovational potential proved to be in the center of attracting capital which is independent from the old production. Consequently, the countries that implemented scientific-technical and industrial capital investment policy in prospective fields will be given a competitive advantage. The realization of this policy in the phase of structural crisis gives its authors the opportunity to achieve economic growth on the basis of competitive advantage.
Basic scientific and radical innovations are recognized as the main means of overcoming structural crisis, that are implement thought acquiring new achievements and rising the effectiveness of traditional development .
In order to move to the stable stage of economic develop it’s important to increase innovational-investment act vitas and to involve new technological directions and basic technologies at trajectory of firm economic development. The economic policy that is oriented at encouraging investment, in innovations provide modernization of economy, also gives rise to its competitiveness.
Innovative way of development in investment policy. Thus, the main importance is given to the innovative type of development, that implies the growth of government role in exercising investment policy. Highly development countries. Take the responsibility of financing fields like fundamental science and high-risk research, as well as the development of scientific research infrastructure. Spreading new ideas and educating population. The implementation of this functions takes place against the background of high-scale investments. that creates favorable conditions for production growth on the basis of scientific innovations.
Currently, the government tries to develop institutions that will support vestment in new technologies, stimulate innovative activities, encourage progressive technological changes, that unities financial tab our and informational recourses.
Currently government tries to create development institutions , which will support investments in new technologies, stimulate innovative activities, encourage progressive technological changes, that unites financial, lab our and informational resources. The state may avoid the responsibility of developing the production activities , where special markets and competitive relations are formed. At the same time it must encourage new, high-risk directions of investment activities, that pave the way to creating production on the basis introducing scientific and technical achievements.
For example the wave of economic regulations that spread from developing countries in the late 8 th lost century covered the traditional branches of economy but it had no connection with high-technological sector, conversely the importance of direct state support institutions for innovation activities were risen. At the same time, the importance of working out state strategy for scientist technical and social economic development grows. The state aims at creating enterprises , that will manage to gain com putative advantage over the companies of inner and foreign markets. They must consentrate their resourses on prospective fields of production.
The direct instruments of state influence are oriented at supporting private initiatives and innovative enterprises that will stimulate investment activities in certain fields and production initiatives.
The necessity of financing science and its current condition:
Active investment process, especially in scientific and technological fields, innovative and scientific-technical activities lays in the foundation for economic growth. Nowadays the decline in scientific technical potential is caused by the fact that there is no more unity between scientific researches and their usage former. scientific staff has been dismantled and number of intellectuals have left the country.
Consequently, the country becomes more dependent on foreign trader.
So, in order to create favorable conditions for economic growth capital renewal is essential, but it’s very complicated, because of the decrease in state financing and absence of ordering production, Science and education have no inner resources for development.
During the last few years there has been significant reduction of scientific and educational research expenditures. As a result, the share of expenditures in GWP spent on science in 1999 amounted to 0,97%, which is twice less than in 1990. In 2006, the expenses spent on educational field amounted to only 1,5% of the GWP, which is the lowest index among the transitional countries.
Significant reduction of company’s demand on innovations resulted in increase of financing Scientific field from the state budget. Budgetary expenditures on scientific-research and construction work have been absolutely reduced and they are tend to decline against the GWP as veil as the budgetary share of the expenses. The degradation of Scientific potential is proved by sharp decline in expenditures used in research and construction work pond it resulted in dropping behind highly developed countries. Expenditures on Scientific research in the USA (1998) amounted to 794% per person, in Japan – 715. in Germany 511 and 611in Russia, whilst in Georgia it only amounted to 2,8%.
Due to the sharp decline in financing the Scientific field, renovation of scientific facilities detoriorated. The salaries in Scientific field were decreased, The coefficient of renewing main foundations in Scientific technical field significantly dicreased. According to the latest statistical data, 311 ml. Gel was invested in renewing main capital, that amounted to 60% of all the capital invested, in Georgia Instead of renewing Countrys technical market, most of the capital was invested in activities connected to local market. 29% of this capital was invested in real estate and construction worth.24% in transportation and communications The problem of heeping, supporting and developing fundamental and research centers of science aggravated. During the Soviet era 20% of production was created in the USSR, but now Georgia’s shave in the World scientific production in only 0,3%.Implementation of innovations require a wide range of activities, from doing research to producing new output. Priorities of innobative activities change at every stage of economic development.
In order to achieve economic growth in current conditions in the country. it is necessary to develop scientific innovations that create new and don’t take into consideration current directions of technological development This lays the foundation for putting so-called innobative multiplication into motion. which is connected to investments and results in production increase. that creates improved scientific innovations. They exchange old technologies. Introduction of this innovations is exercised by new investments, that encourage the further growth in production. Thus, innovative multiplication makes good influence on production growth and takes the economy out of depression and leads it to a long-term development stage.
Distribution of investments on Scientific – technical works.
It’s relatively typical for developed countries to distribute private and state capital investments even on scientific and technical works. For example, The USA’s private investment share in innovative market amounts to 50%. Similarly, according to the figures of state Expertise, 10% of innovations is given a strategically important status and accordingly they are financed from government sources. Japan finances 33% of all scientific research, 73% of scientific-research and constructive works is implemented on the basis of self – financing in the USA, in Germany this index amounts to 70%, in Japan and UK 62%, France and Italy 57%, So the only possible mechanism for promoting social and economic development is it’s technical modernization and move to innovative type of development.
Technical modernization of equipments and their reconstruction requires attracting important investments in innovative field. Here it is important to activate state policy on scientific and technical branches and to work out important directions for scientific-industrial development of economy. AT the same time, the state, that takes important part on technical modernization of the economic sector must take the responsibility of financing fundamental sector of science and high-risk researches, restore activity of science financing from the state budget and develop scientific infrastructure. In order to define the proportions of sharing investments its essential to focus on cyclical development of economy and, on Intensive types of re-production, that is reflected on the statistical law of dividing expenditures, for example, spending on fundamental research, applied work, capital investment amounts to 1:3:9:27.
Statistical law of resource division in accordance with scientific-technical potential is used at the production development stage where scientific and technical progress is achieved by practical laws, which help to solve the problems of production stabilization and development.
The reason of decrease in scientific potential the decrease in scientific potential in post communist countries is caused by lack of restructuring scientific organizations privatization of research centers has not brought any desirable results. The reason for this is that enterprises don’t order them to do research. Simultaneously, scientific staff has got older, the last tend years science suffered from loosing its intellectual potential. In this case, it will be reasonable to merge different scientific organizations and some research institutions must be transferred to enterprises to manage , in this way scientific technical potential will become much stronger.
The sources and ways of funding science restructuring research institutions and dividing it into firms with developed financial, economic marketing and commercial infrastructures will increase the practical use of research work results. Contract based applied science makes the realization of scientific technical projects they will be implemented at the expense of the state budget, non state expenses attracted by Ventura, sharing other financial mechanisms. The question of mobilizing these sources can be solved on the basis of aimed, scientific and technical programs on regional and federal levels in accordance with the market demand.
They can be implemented in the form of portfolio investments using stock marked tools. Providing the state with grants and sale guarding institutions by investment agency and trust management has practical us eye. For forming non budgetary recourses for financial innovations it is necessary to use amortization funds on renovation in the part, where production expenses, especially those. spent on research and innovations. are taken into consideration as well as the expenses of wearing out financial expenses , that is included in the production cost and is reflected on the production prize. In addition to that revenues that came from selling scientific-technical production, or having the right to own intellectual and industrial units as well as the revenues from scientific and technical units and selling the right to own them must be considered, too.
The role of innovation foundations .
Practical usage of abovementioned sources is implemented according to the special rules and amounting , on the basis of used methods. The expenses received from these sources are transferred to a separate sub account `innovation foundation” Greeting. State funds for innovations which is aimed at realizing prospective directions of science and technical development enables to work out modern competitive production and organize its production. besides using state budgets expenses, other market mechanisms for attracting investments are used as well .
Nowadays mechanism for investing in innovations are used only in case banking structure , which mobilizes recourses and regulates this use in science is taken into consideration banking structures directed at investments, accumulate vast sums through creating consortiums and other financial and investment institutions, in order to attract own funds for innovative programs of investment. On condition of Budgetary deficit banks au the phases of innovative cycle and provide insurance service. Participation of banks in the field creates extra stimulus for different firms. No other structure manages and controls innovative recourses as the banks.
Effective use of stock market instruments provide opportunities to attract investments in innovative field. Its main aim is to divide investment recourses among fields and provide inner and foreign investment flows in more prospective sectors of national economy. Transitional economy doesn’t provide the conditions for populations to transform their savings into innovative investments and provide economic growth. Monetary potential saved in the country is practically unused. According the same data the amount of savings is much more higher than in the USA and west European countries. In order to invest funds existing in the country in essential sectors of economy it is necessary to make the forms of collective investment perfect, it includes. investment share funds, credit contacts joint stack and commercial funds . After that government should control their activity and they must draw their . attention to new forms of scientific-innovative and investment forms.
Main stages of innovative development.
Innovative development of economy as any process must be oriented at its stages, levels and phases. First of all the technological basis of the field whose production has more demand on the market must be renovated. At the same time the market is expanding with importing goods, introducing innovations that is oriented at modernizing recourse-saving technologies and improving consuming qualities. So at this stage our main aim is to create infrastructural and institutional grounds for firming scientific technological potential. than we have to organize the enterprises that produce and sell new technological range-that enables the country to restore its positions on the world market of scientific technologies. Simultaneously the role of the country in production and investment activities that is directed at commercializing innovations must be strengthened. Little by little of will move from supporting quantity aspects of scientific technical field to quality aspects and to new forms of engineering, that use modern informational technologies.
Main directions of state investment innovative policy of the state in future main directions of state innovative investment policy are: 1. choosing national priorities of innovative field development for realizing innovative projects, choosing the projects of technologies that influence production growth and rise in country’s competitiveness. 2. Coordination of activities of legislative and executive bodies to work out complex approach to solve this question concerning country’s innovative development, effective functioning of innovative systems and implementation of state’s innovative investment strategy.
3. maintaining and developing scientific and industrial-technological potential of fundamental science, working out employee’s training system for maintaining and developing modern scientific and technological level and developing science to a higher level.
4. Providing favorable economic and financial conditions for activating innovative works, developing ventral, engineering and investment-industrial activities and for rising competitiveness creating favorable conditions for investing in innovation field enables modernization of scientific and technical basis of national industry as well as rising the competitions of the country.
New directions of innovative activities and priorities of innovation policy consists of three stages. At on initial stage the main goals are reproduction of the technical basis of the field whose production has stable demand on the market than market expands by producing the goods that replace the imported ones innovations are oriented at modernizing the enterprises, that use the recourse-saving technologies and improve consuming qualities. So at first it’s necessary to create economic infrastructural and institutional basis for moving to investment stages of state development. At the second stage the enterprises that realize the technological order are created. After that the production is introduced on inner and foreign markets that makes production competitive in the sector where national product were not presented before, and it creates new scopes for demand, where national products dominates to must the demands. At this stage country’s activities are directed at attracting high-scale private investments, creating necessary infrastructure for investment-development their support and perfection.
At the third stage the following important questions must be solved. Country’s support for innovative infrastructure, creating conditions for demand on national products, informational support to enterprises making stable contact with science and industry.
New ways of implementing scientific-innovative and engineering activities.
A State focuses on new forms of scientific innovation and engineering, that use modern informational technologies and little by little they move from quantity aspects to quality ones, that are implemented in the following way:
1. Maintaining and developing scientific and industrial potential and using them in achieving modern technological level.
2 Choosing rational strategy and priorities for developing innovative field. Implementation of critical technology and innovative projects in the fields that influence the effectivness of production and their competitiveness.
3. Creating favorable economic and financial condition for activating innovative works, legal industry and competitiveness.
– To implement this measures following practical activities must be exercised:
The process of providing information must be radically improved and commercial structures must be involved in developing scientific educational and innovative activities.
– reconstructing the part of research and project institutions and closing the places working ineffectively.
– Creating the system at venture investment. state support of venture business in scientific technical field is necessary until the industry get interested in them.
– Developing the system of noon. state innovative risk and private supplly, creating insurance groups within the framework of financial-industrial groups, that will undertake high-risk insurance, that is linked with creating innovative production. insurance companies, together will share the risk.
– Using modern methods for prognosing engineering and scientific production marketing.
– Developing small innovative business by creating favorable conditions and infrastructure for setting up small enterprises and their functioning.
– Creating suitable legislation, that will regulate relations in intellectual property field, work out normative acts that are directed at exercising state policy. It foresees involving the results of scientific-technical results in industrial circulation, that is implemented at the expence of the state budget.
– making typical state contracts in order to balance legal interests of the participants in the process from the point of using scientific-technical results.
Thus, following the innovative way of development, must not be the only factor white working out investment policy. In connection to that, the role of country is defined by creating the mechanisms, which forms national innovative system and develops innovative production.
Creating favorable conditions for developing innovations provides modernization of technological basis of the economy and grows the competitive of national production.
– Preparing typical state contract for balancing legal interests of those who participate in the process of using the results of scientific-technical work.
So the main factor while working out investment policy is to move economy to the innovative way of development. In this regard a country’s main role is to create the mechanisms, that will provide the formation of national innovative system and development of innovative business, that will make the modernization of economy’s technological market of the economy possible and will give risk to competitiveness of national production.
The formation of adequate investment activity model in the market system of economy provides replacement of investment recourse division with new forms of investments. For its part it has to work out the investment policy, that will accord with changed economic conditions.
Official concept of reforming Georgia’s market economy is based on simple monitory principles. Their realization was expressed in size minimizing the country’s role, robotizing foreign economic activities, privatizing state property and forming market structures.
The principles, boundaries and forms of state participation in investment activity
Analysis of Georgian-economic conditions shows that solving important problems in country’s investment development is impossible only on the basis of self regulation, that is distinguished with its low quality. A state needs to strengthen its role in the field of investments, correct economic policy. At the same time state participation boundaries in the investment process must be defined by taking the way of economic development, that is characteristic to the period of moving to market economy, into consideration conditions of strengthening the state role in the investment process.
Analyzing the possibilities of strengthening state role in investment process, we must take into consideration the fait, that counting’s participation in the process has same boundaries, these boundaries are defined by real financial possibilities, on the other hand the country must encourage the process of attracting investment rather than blocking them. State participation in investment process is not the same as turning economy to administration process. It implies the increase of a long-term policy of the state, effectiveness of particular activities in the conditions of encouraging investments.
The topic of state participation pineapples in the investment activities is closely linked with limiting necessary financial potential for investment promotion Approximate calculations show that in order to restore the amount of investment to the pre-reform level, foreign investment growth is possible. According to 2002-2012state program in the next five years 10 $ are expected.
As we have at ready mentioned the role of the country as the investor in the market economy is maintained for the fields that are vital and important. More importance is given to regulating the investment process in the way, that creates favorable regime for private investors activities.
The conditions existing in Georgian economic investment strategy is oriented at moving from stable investments to creating necessary investment environment for private investors. These two parts that are essential for the state investment policy must support prosperous fields of production and the policy must have systematic character.
Defining strategic priorities of investments.
On defining strategic priorities we must take into consideration competitive advantage exiting on the world market, that is reflected on high-technologies. The brunches which maintain potential advantages are: energy sector, turism, agricultural machines and technologies, food etc .
Investing in innovative production will encourage new directions for investment flow, rising production level and encouraging economic growth. This approach is well known in the world products. Our priority must be effective programs that meet inner needs in economy, in this regard we have to support national enterprises, and the development of vital brunches of economy.
At the same time it must be taken into account that in the world integrated economy, development of investment cannot be stable and increasing source of profit in producing rival products only in the inner market.
Significant condition of effectiveness in the state investment policy is to work out the conception of structural alteration in industrial sector. It’s especially concerns about such prioritative approaches according which must be defined the reform strategy and mechanism of industries from different groups, supporting forms and methods from the state, organization models of industrial structures in accordance with real, amongst them institutional conditions in the world economy.
The basis of economic growth and quick development can be large corporations, that have scientific – technical potentials in mobilizing resources and effective integration possibilities in the world industrial unions. Small business industries, that have really important meaning for the function of market economy, nowadays are singled out with extremely low technical level and lack of investment resources, that make it necessary to quest their place in industrial chains of the large structures. The formation of stable and effectively developing, diversificational, corporative unions and financial-industrial groups demand state supporting reinforcement of corporative circle from the state, amongst them even by means of participation of corporations in the capital. Development of corporative forms will help the realization of long term industrial programs, and create conditions for the stable economic growth.
Stirring to activity of stake investment politics. At a modern stage, stirring to activity of stake investment about the stable economic growth in the basic condition of Georgian economy. Essential approaches of stake investment politics are: the reinforcement of supporting in prroritative tendencies of economic development formation of justifiable and economic conditions of stimulating the interest of investments in the real sector of economy and the agreement between central and regional investment politics.
State investments and supporting in prioritative tendencies of economic development. The realization of up-to-date tasks of economic development demands more active state backing of investment field. Simultaneously, the importance of state investment must be growing up not as mush from the standpoint of size of centralized sources, but from the positions of state guarantees, insurance and orient list of private investors.
The problems of investment budgetary financing. Budgetary financing of investment activities has still been happening on the basis of these approaches that essentially limit the state influence on the course market alterations and structural changings in economy.
Herewith, these shortcomings are not as mush conditioned by restricted possibilities of budgetary system, as by complicated and wrong strategies of sharing centralized investments and the lack of effective control of their usage.
Failures in the state investment politics make it necessary to solve this problem, as afterwards not having orientation or having defective one becoming the problem investors. Analysis confirms the existence of distinct dependence between state priorities and investment motivations of private investors. that must surely be taken into account while working out on perspective tendencies of investment politics. Otherwise it will be impossible to make ground for stake investment politics and for the agreement of investors’ interests of different levels. Reserved dimensions will again have more passive character and will not guarantee planned results. It must also be mentioned that insufficient or unsystematic backing of separate manufacturers or regions, falls down stimuli of accumulation and afterwards self-financing process and it prevents the formation of business executives market behavior.
While analyzing the problem about the possibilities of manufacturers’ investment support it is impossible not to take into consideration the extreme restriction of budget/ At the same time, modern conditions, the increase of levels in the realization clearness and confirmation of investment politics and consideration of budget planning reality are not less important.
In Georgian economy. where unreliable forms of calculation dominate. it is difficult to male real prognoses about the mass index of money. Budgetary politic is being worked out in the conditions of complicated factors, that aggravates the difficulty of real budget formation and fulfillment of the received one.
State investments, as in the realization of economic growth of prioritative factor; usage of international experience will not be perspective without mentioning up-to-date conditions of Georgian state finances and the inevitability of budget system alternation. e.g. one of the successful example of economic reforms is the experience of Germany. Its budget system is well formed and it is manifested clearly in the distinction of current and investment expenses in the control of pure usage of budget sources in establishment and protection of maximum size of budget deficit financing at the expense of credits with the sum of for seen investments expenses. This method is called “golden rule” and is established the 115th article of the basic law of Germany.
In Georgian economy, as it is clear from the results of reforms, the compensation of the growth of state non-productive expenses was not happening, correspondingly with the growth of budget investment expenses. On the contrary, it was one of the factors, that conditioned the reduction of state centralized investments and weakening of state investment function. In accordance with, the usage of state investments as the factor of economic growth, requires essential changing’s in the organizations of budget politic and budget system.
While working on the budget, it is necessary to define the prioritative tendencies and use the forming principle of the normative that define the levels of budget, according to the singled out tendencies; division of current and investment budget on the normative basis, denial the possibility of exceeding expenses over incomes while planning the budget; strict definition of sources, how to cover the investment budget deficits. It is also necessary of budget on the usage of sources in control realization technology, in order to reinforce the frscal role of budget fulfillment.
An important problem, connected to the usage of state investments is their low effectiveness compared with the private ones. While sharing the state Financial resources, used tendencies do not help to increase the effectiveness of investment and restructure national economy.
In the organization of investment process, lack of systematic ground and insufficient quality of budget planning caused permanent failures in financing the state investment programmers.
This fact approves that, it is necessary to reinforce the role of selective approach, gather state investments towards the strictly defined prioritative approaches, keep strict control and select competitive projecting during state investment.
Selecting mechanism of investment projects on the basis of competition/ In market economy, where basic criterion of investment is the effectiveness of investment, it is impossible to use the old technologies of sharing unpaidly, among enterprises in centralized capital investments, which don’t stimulate industries to improve their effectiveness, as direct state investments are less effective compared with the private ones. Thus, the most acceptable approach is the state supporting to private investments.
State supporting to private investments is realized in these investment projects by means of the partial participation of the state, which have passed the competitive casting. The goal of centralized investment resources on the competitive basis is the reinforcement of investment assets, mobilization of private national and foreign investor’s capital towards the prioritative approach in economic development, and the growth of effectiveness in all forms of property such as commercial, budgetary and national-economic investments.
A new rule of financing investment projects in the financial ensuring of investment competent project, gives the right to investors to choose the participation forms. These forms can be as follows:
State investment revocable two year-term credit; its payment percent for the usage, compiles ¼ of central banks refunding rate;
to strengthen the port of these shares of an oncoming enterprise in the state property, that is sold in the market from the income of investment project during two years and the income obtained in this way goes to the state budget.
While taking decision about giving funds from central budget, a leading criterion is to insure the setting of object (industrial powers) into action in the given term, in the conditions of decreasing funds, attracted from the state budget and to increase the effectiveness of the usage of centralized resources.
The obligatory conditions, to present investment projects for the competition are:
In the total amount of money, spent on project realization, the share of centralized investment resources must not be exceeded more than 20%, it must be ensured at the expense of private investor’s own, attracted and borrowed funds.
In total amount of common expenses, investor’s own share mustn’t be less than 20%.
In the field of investors’ supporting, new approaches such as connection to the certification of investment projects, giving state guarantees, creating the budget for development are used.
Certification of investment projects, defines the possibility of increasing state supporting share up to 50%, while such analogies are not producing industrial products for exportation about 30% – for importation, with less price.
In the conditions of budget funds restriction, many investors consider the state guarantees of certified projects, as the most desirable form of state supporting. Guarantees secure about refunding not the total amount of money of risk, but part of it, in case of failure the effective investment project realization, due to the reasons that are not in investor’s compensation; On its side, investor must present counter-guarantees, amongst-mortgage.
Development budget can be formed as the special instrument, that collects investment resources of state budget in order to finance investment projects and attract the funds of private investors.
Development budget resources can be used for partial financing of investment projects, at the initial – competitive, valuable and refundable stages, also the borrowed funds for giving state guarantees on the competitive basis. (When upper limit of guarantees compiles 40% of borrowed funds).
In the competition of procuring the funds for development budget, such investment projects should be taken, that satisfy the following conditions:
Correspondence of development budget to the goals;
Security of positive meanings of pure discounting income;
In the total amount of money for project realization, investor’s own share mustn’t be less than 20%, but for large projects (more than 50 million $ – less than 30%.)
In the countries of developed economy, as a rule, examination of investment projects is made by experts, invited by investors themselves or by the participant financial institutes of project financing.
Selective, restricted supporting of prioritative approaches in industrial development by governments and the competitive selection of effective projects gives distinct results. Foreign experience proves that, such measures, as a rule is an efficacious stimulus of investment attraction and helps to realize projects.
Governance of state property in the state economic sector.
Governance of state property, as the factor of investment effectiveness in the state economic sector. Activation of the state role in the investment field, implies the development of state governance, reaching quantitatively higher level, restructurization of state sector and development for investment providence.
In must be said that, in the countries even under developed market economy, the governance of state sector is fulfilled under strict state governance control, from the interests of national economic development. State sector fulfillers the supporting function only for vitally important and unprofitable industries, but also stimulates local industries.
State sector, must distinctly occupy the leading positions in achieving priorities of economic development and form the potential of economic growth. Simultaneously, investment projects of state industries must be drawn up according to the demands of competition and effectiveness. It is essential that, invested funds to be used purposefully and the movement of financial flows be controlled strictly by the state.
Herewith, while realizing state activities in the real field (amongst in the field of investments), stimulation in the activities of analogical faces in non-state sector and not their restriction must surely be taken into account, as enterprises under the state support are stable on the one hand, but less effective on the other side.
Activation of the state investment role must not be manifested only in effective investment projects of science-capacious industries, high technologies and vitally important fuelds by direct participation. More important constituent part of investment supporting of society in the conditions of market relation development is the encouragement of economic subjects’ investment activities and it must be oriented on progressive structural alteration. This implies the working out of optimum methods of economic regulation, development of accumulation mechanisms and active assistance to turn them into industrial investments.
Formation of institutional-legal and economic surroundings for the stimulation of investments in the real sector of economy.
Greating the available conditions for increasing investment actives by the state, requires purposeful influence on reproductive processes at macro and micro-economic levels. This. most important sphere, where the activation of the state investment role must be manifested effectively and in a new manner, at a new stage of economic reforms is – monetary-credit field.
Monetary-credit methods for investment stimulating. Insuring the growth of stable investments, first of all implies the augmentation of economic monetarism, era diction of money disproportions, reduction of interest rate, renewal of taxation system, depolarization of national currency and its role augmentation.
The increase of economic monetarism is possible by means of restriction of monetary-credit emission. While defining the level of danger of its inflation results, it must be mentioned, that inflation can also be caused by the other factors, besides emission. Thus, struggle against it, cannot be defined only at the basis of emission restriction. First of al it is necessary to provide the functioning of manufacture solidly. The growth of monetarism level in the real sector of Georgian economy is the most indispensable condition, that on its side is the leading, deflationary factor.
Essential condition to protect against the inflated results of monetary-credit emission is to create and put in motion such mechanisms, that change macroeconomic conditions and direct money-flows for supporting manufacture. During the process of using such approach, the size of emission defines the objective demand of industrial sector of economy, expert the funds moved to financial markets.
While defining the parameters of purposeful growth of money, calculation of the structure of money delivery is vitally important. Different channels of money emission have heterogeneous sensibility towards the inflation. Therefore, expansion of money delivery is possible by payment of promissory notes of non financial industries, by means of banks refinancing and under the purposeful direction of emitted sources to finance the industrial investments. Less inflation channel of emission is financing industrial investments by the state institutes of development.
Basic instrument for the regulation of money flows, is purposefully the state influence on the dynamic of interest rates. e.g Project supporting of the most importantly acknowledged industries for the purpose of investment activation is possible with preferential rates and by credits. Movement of preferential credits, this time must be realized by state banks system of development and the strict control establishment must expel the usage of funds aimlessly and financial speculations.
Experience of the countries under market economy shows that, regulation of interest rates is generally effective method to reinforce business activity in the period of crisis, when disbalance of economic systems situation is deepening. After achieving balanced progress in economic balance and financial sectors, generally the necessity of state interference in economy is lessening and accordingly the role of state influence on the dynamics of interest rates, formed on money markets is also decreasing.
The usage of state regulation is distinctly cyclic. In the conditions of sharp structural disproportions, when the working of market mechanism can’t provide the keeping, on the one hand, development of surplus production and devaluation of main capital off, but on the other hand augmentation of investment activity, the role of state influence on economy, amongst in the field of purposeful control on money flow is expanding, but while moving to the stable growth of economy-decreasing . It is proved by the practical analysis about getting over the structural depressants (post war) in Western European countries and in the USA, and by the restoration of economy in France and Germany.
State regulation of interest rates was applied in the countries, under developed market economy (post war-in Japan, during along period –in France and in the USA during the period of so called `Roosevelt’s new policy, as well as the range of those developing countries , that showed the solid high tempers of economic growth (India, China, South – Eastern Asian countries etc). Important scales of accumulation here was reached for the purpose of national manufacture development, as a result of active influence on interest rates ( on its side, accumulation made it possible to hasten the speeds of economic development) also, for this purpose, direct and indirect methods for the purposeful regulation of money flow and inner accumulations convert into investment were used, namely for the formation of development state banks, loan-saving association and other specialized credit institutes, through founding district normative of credit politics for non-state banks and rates of preferential taxation.
For example, in Japan, investment financing and production growth conditions were formed through the state control strengthening on using the population savings and interest rates, which were gathered in postal-saving institutions and banks, afterwards their remittance to the state institutes, long-term crediting banks and truste savings banks took place.
Savings transt formation mechanism into investments in the USA was based on the wide development of loan-savings associations, that attracted the savings of private sector for giving purposeful credits to the range of housing construction and industrial branches.
In many developing countries, stable growth of economy was conditioned by localization of the greater share of money flow in the state banks, that locate mobilized savings in industrial investments and crediting resources, in accordance with the installed priorities of social-economic development.
Improving the structure of mass of money is also connected to the cutting down the share of cash, that is in circulation, for what it is necessary to set up strict restrictions about the cash payment in all the field of economy, to continue calculation through computers and widen barren forms of payment circulation. Taking these measures will expense the business economic field of banking sector and will be propitious for investment potential growth of the banks.
One of the basic task of payment system, at modern stage is its complete renewal, restriction of barter transaction, driving a great part of taxation means out of circulation, as they don’t play a part of complete recourse in the formation of saving potential. Main ways to solve this problem are following: realization of inter imputation for financing fixed and circulating capitals, reduction the price of credit resources and security of plural debts.
For increasing the regulation effectiveness of money circulation and expel the activation possibilities of such emissive mechanisms, which are not accompanied with the expansion of goods delivery, it is necessary to strengthen the control and currency regulation.
Formation of effective infrastructure of financial market.
A) The influence on the investments activity of banks.
Looking through the previous system of regulation (in accordance with the selective priorities of economic politics) requires changings of the forms and methods in the banking sector and restructurization of banking system in economy, by meant realization of investment functions of the banks. Restructurized banking system must comply the requirements of armful investing through high trustworthiness and guidance. It must also ensure the appropriate level of credit delivery resources by means of available interest rates for manufacturing fields.
In the growth of investment activity of banking system, it is essentially important to create the system of investment encouragement and insurance. State guarantees existence is one of the condition just for this. Cutting down the normatives of reserve assignments and preferential taxation are also belonged to these activities.
B) Creation of the system of deposit guarantees.
World experience shows that, the establishment of deposit guarantees is the inevitable component for vast mobilization of the population savings. It potentially increases separate institutes as well as the liquidity of the whole system and is the reliable means against taking deposits unexpectedly and frequently out of the banks.
One of the first systems for deposit insurance was formed in the USA in 1933-34, as a result of additional stabilizers investigation in marketing economy. Nowadays, these systems operate in the range of developing countries (Argentina, Colombia and so on). Herewith in Great Britain, in the USA and in Canada, they are performed with independent state corporations, but in France and Sweden and private banking links. In Austria, Great Britain and the Netherlands in the case of broken credit organizations, private deposits are given; In Germany deposit delivery of credit institutes are addressed to, while in Canada – deposit delivery, managing the property of bank and giving crediting guarantees are addressed to.
Economic Dr of Science,
professor Lamara Qoqiauri