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FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT APRIL 2011 GEORGIAN STOCK EXCHANGE ECONOMIC AND POLITICAL DEVELOPMENTS Despite existing concerns that political process in Georgia may develop in unpredictable manner, fortunately, clear signs of increased stability and inevitability of elections process are in place. Today, after quite peaceful and constructive atmosphere local government elections in 2010, practically there is no doubt that for political parties the next three years will be period of preparation to elections (parliamentary - 2012 and presidential - 2013), election campaigns and the related processes. This will definitely put grounds for stable political and economic development of the country. No doubt, there still remain many political and social problems, first of all related with occupation of 20% of the country (Abkhazia and Tskhinvali region) by Russian military forces and the heaviest burden of about half million refugees from the mentioned regions. However, the likeliness of worsening of the situation is very low, though chances for restoring territorial integrity of the country in 2011 are also very low. As for the economic situation, Georgia’s economy is showing tentative signs of turning around, but a full-fledged recovery will depend on a more upbeat global environment and the easing of credit conditions in the country. Until mid-2008, the Georgian economy was growing rapidly, fueled by high levels of foreign direct investment and strong credit growth. But in August of that year, the armed conflict with Russia over the disputed Tskhinvali region proved a devastating setback for Georgia’s economy, prompting the authorities to request a $750 million Stand-By Arrangement (SBA) from the IMF and to secure emergency financing from donors totaling $4.5 billion for next three years. In the months that followed, Georgia’s difficulties were compounded by the impact of the global economic crisis. However, the country authorities’ economic program has been successful in putting a floor on the contraction of economic activity in 2009 and in restoring confidence. On the back of these achievements, the economic recovery that started in the second half of 2009 continued in 2010. Real GDP is projected to grow by 4.5 percent in 2011, based on the expectation that private sector demand will strengthen as the fiscal stimulus is withdrawn. Inflation is projected to decline (to around 6 percent) by end-2011, with risks mostly on the upside. According to Mr. Murilo Portugal, Deputy Managing Director and Acting Chair of the IMF Executive Board's,: “…Georgia’s economic recovery has strengthened, as evidenced by better-thanexpected growth and the stabilization of the exchange rate. The authorities’ economic policies, focused on tighter monetary and fiscal policies and exchange rate flexibility, will lay the groundwork for achieving macroeconomic stability and growth based on private sector financing and investment. While short-term risks to growth appear balanced, significant downside medium-term external risks remain, related in particular to the uncertainty surrounding the recovery in private capital inflows, including FDI. “The budget for 2011, which provides for a further reduction of the deficit of about 2½ percent of GDP, is consistent with the authorities’ objective of reestablishing fiscal sustainability. The authorities’ commitment to cap expenditure in 2011 is commendable, “While the recent increase in the policy rate and the decision to tighten reserve requirements will help to bring down inflation in 2011, the authorities should stand ready to tighten monetary policy further should inflationary pressures persist. Consistent with the need to rebuild net international reserves, exchange rate flexibility should remain an anchor of the authorities’ economic strategy. “The banking sector’s high levels of capital and provisioning continue to provide adequate buffers against adverse shocks, but continued close supervision of banks remains critical. In this regard, capacity building toward riskbased supervision is welcome. As announced by the authorities, it is also important to continue tightening the regulatory framework as financial sector stability solidifies.” As for the business climate in the country – it was hurt by the political uncertainty that followed the conflict with Russia and the domestic unrest that followed. That unrest has now subsided, and the fact that foreign direct investment has been growing in the course of 2010 attests to that improvement. When it comes to the legal and institutional business environment, Georgia is very well placed. The country has made remarkable strides over the last few years—the World Bank’s Doing Business Index ranks Georgia first in Eastern Europe and Central Asia and first among lower middle-income countries. Georgia has also moved up quickly through the ranks of Transparency International’s Corruption Perception Index, and there’s a general perception that interactions between the public and the government are now free of corruption. The authorities’ structural reform program is now focusing on improving government efficiency and transparency, while continuing the privatization of public sector assets. Information obtained from the Exchange. Key Information Contacts National Bank of Georgia www.nbg.gov.ge Ministry of Finance of Georgia www.mof.ge Georgian Central Securities Depository www.gcsd.ge Georgian Corporate Directors Association www.gcda.ge PAGE 66
FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT APRIL 2011 IRAQ STOCK EXCHANGE ISX introduced a new index in June 2010 after the Automation go life. Taha Ahmed Abdul Salam CEO Iraq Stock Exchange (ISX) had established under the Law (74), April 18th,2004 and start operations in June 2004. The ISX operates under the oversight of the Iraq Securities Commission (ISC). The exchange is a self-regulated organization. Independent financially and administratively from the Iraqi government, It is organized as a non-profit entity that is owned by its members, namely licensed brokerage firms. It is regulated by the Iraq Securities Commission and follows the operational procedures outlined in its By-laws that are fully compliant with the Iraqi Securities Law. ISX Start Operations in 2004 with manual trading till April 2009. Since April 18th, 2009 till now ISX Using Automation trading, holding five sessions weekly from Sunday to Thursday. ISX introduced a new index in June 2010 after the Automation go life. ISX has organized a number of training courses for Brokerage firms and training courses for the IT staff and other ISX employees. These training courses include Automation Trading in ISX and run TWS for the brokers, (Equator & Horizon SYSTEMS). The ISX publishes a monthly newsletter called the Capital Market. Published in Arabic, the Capital Market covers all financial events which happen within the ISX and the listed companies. ISX also update its information throw the website: www.isx-iq.net. The ISX has successfully joined <strong>FEAS</strong> (Federation of Euro- Asia Stock Exchanges) on September 21st, 2005. And the Federation of Arab Stock Exchange in June 2006. HISTORY AND DEVELOPMENT 1. For the period of 1992-2003 the Baghdad Stock Exchange was operating and was well known. The previous Baghdad Stock Exchange was established by the law No. 24 in 1991. The market was related to the government and it listed (113) different companies, some private and others from the mixed sector. During that period, especially in 2003, the market had gained an annual trading volume exceeding, US$17.5 million. However, this market was closed by a decision of its Governing Council in March 19, 2003. 2. Establishment of Iraq Stock Exchange On 18 of April 2004, the temporary law No. 74 was issued. It gave the authority to establish two important capital development bodies concerning financial sectors, they are: A. Iraq Stock Exchange (ISX). B. Iraq Security Commission (ISC). 3. Meaning of Iraq Stock Exchange The ISX is an entity capital market not related or powered by the government. It is directed by a Board of Governors (BOG) and consists of nine members, representing different economic sectors of investment. The market is where the investments, exchange stocks, purchasing and selling takes place. It is considered one of the channels in which funds can flow between persons and commissions through different sectors that may help to mobilize and develop financing and financial channels in order to give readiness for different investments. FUTURE OUTLOOK Iraq Stock Exchange has the following goals for 2011: 1- Continue the ISX trading operations. 2- Signing a cooperation agreement with Erbil Stock Exchange. Which it allow that market trading through using the electronic trading system and the Depository. 3- working with the ISC to issued the Custodian Banks agreement. 4- Authorize five new brokerage firms accordance ISC instructions. 5- Organizing the first conference of the ISX in April 16-17, 2011 in Baghdad. 6- Continue to Accept New companies to be list in ISX regarding the listing requirements. 7- Participate in conferences under <strong>FEAS</strong> and Arabic Federations. 8- Assist in the eventual privatization after issued the privatization low. 9- Hold meetings with investors. 10- Publish trading data and information about the ISX to encourage investment in ISX. 11- issued Companies Guide which will present information and financials data. PAGE 67
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