Georgian Stock Exchanges on the Silk Road

2025-04-15

The first stock exchange existed in Antwerp, Belgium, as early as 1531. Brokers and moneylenders met there to deal with business, government, and even individual debt issues. The Dutch were also pioneers in the development of the stock exchange, which was established in Amsterdam in 1602.

Today, there are about 43,000 public companies worldwide, with a combined market capitalization, or value, of more than $100 trillion. Companies listed on stock exchanges (admitting their securities to trading) make up a large part of the global economy because by selling shares publicly, a company can raise additional capital, which means increasing wealth. There are about 60 stock exchanges operating in the modern world, with a total market capitalization of $100 trillion.

One of the effective ways for governments and companies to raise financial resources is through the issuance of securities. Governments may need to mobilize funds through the issuance of securities to finance various projects (for example, infrastructure projects - construction of roads, bridges, hydroelectric power plants), to fill the budget deficit. Companies - to develop their own activities. The issuance of securities is called an issue, and the issuer of securities is called an issuer.

The stock exchange and its smooth functioning are one of the most important prerequisites for the stability and development of the economy. Like Georgia, developing countries experience a lack of local investment resources, so it is necessary to attract foreign investment resources to the country's economy, and one of the best ways to attract them is the sustainable functioning of the stock exchange.

A stock exchange is a financial institution that ensures the regular functioning of organized trading in securities in accordance with established rules and, at the same time, disseminates information about transactions and prices concluded on the exchange. A stock exchange is an intermediary institution, which means that it only creates fair conditions for concluding transactions, connects buyers and sellers of securities with each other and provides them with all the services that facilitate the conclusion of a transaction.

An entrepreneur can raise money for his/her business by issuing securities - shares or bonds - on the capital market. A share confirms the share of its owner (shareholder) in the company and can only be issued by a joint-stock company. A bond is a debt security that confirms the company's obligation to pay the bondholder the nominal value and the interest accrued on the bond, in accordance with the terms of the issue. A bond is considered an alternative to bank credit. The advantage of a bond, compared to a share, is that its issuer does not give up a share in the company.

There is commodity, currency, stock and technology exchanges, where goods, currencies, securities and know-how are exchanged, bought and sold. The fairest prices are formed on such exchanges and contracts are also accepted. The National Securities Commission, which will be accountable only to the Parliament, should be the supervisory and regulatory body for the activities of the exchanges. The Securities Commission should be independent in its decisions, just as the National Bank should be independent and regulatory for the banking system. Independent banks and independent exchanges together create the order of the market economy.

Georgia, as a gateway country to the Silk Road, is crossed by ten transit routes of regional and international importance. These are:

1. TRACECA - Transport Corridor Europe - Caucasus - Asia;

2. Middle Corridor, also known as the Trans-Caspian Corridor;

3. Lapis Lazuli Corridor;

4. CASCA Route - Central Asia, South Caucasus and Anatolia;

5. CAREC - Central Asia Regional Economic Cooperation Program;

6. Viking Route - Baltic-Black Sea transit axis.

7. CAMCA (Central Asia - Mongolia - Caucasus - Afghanistan) regional forum, created to facilitate discussions on economic development tools in 10 countries of the region.

8. South-West Corridor;

9. GUAM Free Trade Zone;

10. Caspian Sea - Black Sea Transport Corridor.

The development of the Silk Road between Asia and Europe directly depends on the functioning of Georgia's banking, insurance and stock exchange systems. The World Bank's report on Georgia, presented in November 2023, indicates three cities - Tbilisi, Rustavi and Gori, as the main economic centers of the middle corridor. Economic centers should include the places of capital movement - the stock exchanges.

It is also noteworthy that the European Commission has set 9 points (terms) as a prerequisite for Georgia's accession to the European Union from 2023, including de-oligarchization, which means the country's transition from a distributive economy to a liberal or market economy, i.e. the opening of stock exchanges. The process of Georgia's implementation of the 9 European points will create an inevitable opportunity for both the restoration of the Silk Road and the growth of wealth in the country.

 

Zurab Maghradze, Doctor of Business Administration