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Georgias Ivanishvili begins talks on forming all new cabinet

Georgias Ivanishvili begins talks on forming all new cabinet

4 October 2012

Bidzina Ivanishvili, who leads the Georgian Dream party that won Monday’s parliamentary election, began talks on the formation of a new Cabinet of Ministers that he said would not include any current ministers. Ivanishvili made it clear he plans to be prime minister, but all of the other posts appear up for grabs. He admitted that his party could actually break up into three factions in parliament; Georgian Dream is comprised of six different political parties with diverse ideologies. The deadline to form the new government is October 20. Meanwhile, president Mikheil Saakashvili has said he will accept the composition of the cabinet proposed by Ivanishvili and forward it to parliament for approval.

Brad Wells: Though Ivanishvili’s election platform is largely similar to that run by Saakashvili’s United National Movement, his lack of a political track record and promise to bring in an entirely new team clearly raise the level of political risk in Georgia. The abrupt change has the market spooked; Bank of Georgia Holdings (BGEO LN) dropped another 1.6% yesterday, after falling 6.6% on Tuesday. We expect continued short-term volatility ahead as investors digest Ivanishvili’s first actions as prime minister, including his cabinet picks and how he settles into cohabitation with Saakashvili, whose term as president lasts one more year. We are optimistic that Ivanishvili will live up to his campaign pledges to continue the current government’s pro-Western, pro-democratic and pro-market reforms. For those willing to stomach the current uncertainty, the election pullback presents an attractive entry point into the fundamentally strong Bank of Georgia. We stand by our 12-month target of USD 23.7/share, which implies 25% upside from yesterday’s close.

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