| Private sector and human-resource development in Georgia
скачати
TBILISI, GEORGIA Private
Sector and Human-resource Development in Georgia
Author:
Lasha Martashvili
E-mail: lmg@bk.ru
(18.02.2004)
TABLE
OF CONTENTS
1. Government
Policies
1.1 Government
promotion policies of small and medium size enterprises
1.2 National
Investment Agency of Georgia
1.3 Georgian
Investment Center
1.2.1 Government’s
Export Promotion Policy
1.2.2 Georgian
Export Promotion Agency (GEPA)
1.4 Foreign
Investment Promotion
1.3.1 Government’s
Foreign Investment Promotion Policy
1.3.2 Foreign
Investment Advisory Council (FIAC)
1.5 Tax
Regime
1.3.3 Taxation
System and Tax Rates in Georgia
1.3.4 Existing
Taxation Practices
1.3.5 Tax
Reform Areas
1.6 Legislative
Basis for the Operation of the Private Companies
1.5.1 Law
of Georgia on Entredivneurs (LoE) (Corporate Law)
1.5.2 Law
of Georgia on Securities Market (SML)
1.5.3 Employment
Regulations in Georgia
1.5.4 Regulations
about Real Estate in Georgia
1.7 The
Business Environment in Georgia
1.8 Institutional
Arrangements
1.3.1 Securities
Industry
2. Society
2.1 Poverty
issues
3. Economics
3.1 Main
economic indicators
3.2 Agriculture
3.3 Trade
3.4 Construction
4. Business
4.1 Company
Registration and Licensing System
4.1.1 Company
Registration System
4.1.2 Company
Licensing System
4.2 Local
Enterprises
4.1.3 Joint
Stock Companies traded at Georgian Stock Exchange
4.1.4 Joint
Stock Companies not traded at Georgian Stock Exchange
4.3 Human-Resource
Development in the Private Sector
5. Other
Donors’ Activities
5.1 The
World Bank and IMF
5.1.1 List
of the Active World Bank Projects in Georgia
S
– Satisfactory
U
- Unsatisfactory
5.1.2 List
of the Closed World Bank Projects in Georgia
5.1.3 Description
of the Closed World Bank Projects in Georgia
5.1.4 The
World Bank and IMF Cooperation in Georgia
5.1.5 The
World Bank Country Assistance Strategy for Georgia
5.1.6 The
World Bank Partners in Georgia
5.2 USAID
5.3 EBRD
5.4 EU
5.5 GTZ
5.6 CIDA
5.7 DFID
5.8 The
Government of the Netherlands
5.9 IFAD
5.10 UNDP
5.11 UNICEF
Currency
(Exchange
rate as of 01 Feb. 2004)
Currency
Unit = Georgian Lari (GEL)
|
1
USD = 2.11 GEL
1.0
GEL = 0.47 USD
|
|
Abbreviations
and Acronyms
|
CAS
|
Country
Assistance Strategy of the World Bank
|
CFAA
|
Country
Financial Accountability Assessment
|
CIS
|
Commonwealth
of Independent States
|
CPIA
|
Country
Policy and Institutional Assessment
|
DFID
|
Department
for International Development, U.K.
|
EBRD
|
European
Bank for Reconstruction & Development
|
EDPRP
|
Economic
Dev’t & Poverty Reduction Program
|
EU
|
European
Union
|
FAO
|
Food
and Agriculture Organization
|
FDI
|
Foreign
Direct Investment
|
FIAS
|
Foreign
Investment Advisory Service
|
FSAP
|
Financial
Sector Assessment Program
|
FSU
|
Former
Soviet Union
|
FY
|
Fiscal
Year
|
GDP
|
Gross
Domestic Product
|
GEL
|
Georgian
Lari
|
GNP
|
Gross
National Product
|
GoG
|
Government
of Georgia
|
GSE
|
Georgian
Stock Exchange
|
GTZ
|
German
Technical Cooperation
|
IDA
|
International
Development Association
|
IDF
|
Institutional
Development Fund
|
IDP
|
Internally
Displaced Persons
|
IFC
|
International
Finance Corporation
|
IMF
|
International
Monetary Fund
|
IOSCO
|
The
International Organization of Securities Commissions
|
JSC
|
Joint
Stock Company
|
KfW
|
German
Financial Cooperation
|
|
|
|
|
|
|
|
|
LLC
|
Limited
Liability Company
|
MDGs
|
Millennium
Development Goals
|
MoF
|
Ministry
of Finance
|
NBG
|
National
Bank of Georgia
|
NGO
|
Non-Governmental
Organization
|
NBG
|
National
Bank of Georgia
|
NGO
|
Non-Governmental
Organization
|
OECD
|
Organization
For Economic Coop’n & Development
|
PER
|
Public
Expenditure Review
|
PPP
|
Purchasing
Power Parity
|
PRGF
|
Poverty
Reduction and Growth Facility
|
PRSP
|
Poverty
Reduction Strategy Paper
|
SAC
|
Structural
Adjustment Credit
|
SATAC
|
Structural
Adjustment Technical Assistance Credit
|
SEC
|
Security
and Exchange Commission
|
SIDA
|
Swedish
International Development Agency
|
SIF
|
Social
Investment Fund
|
SME
|
Small
and Medium Enterprises
|
SRS
|
Structural
Reform Support Project
|
TACIS
|
Technical
Assistance to the CIS (EU)
|
UNDP
|
United
Nations Development Program
|
UNHCR
|
United
Nations High Commissioner for Refugees
|
USAID
|
United
States Agency for International Development
|
VAT
|
Value
Added Tax
|
WTO
|
World
Trade Organization
|
|
|
|
|
|
|
|
|
|
|
Government
Policies
Government
promotion policies of small and medium size enterprises
[To be
described:] "Small and Medium Enterprise State Support
Program for 2002 - 2004 in Georgia"
[To be
described:] Law of Georgia "On Promotion
of Small and Medium Enterprises"
National
Investment Agency of Georgia
[To be
described:] Law of Georgia "On National
Investment Agency of Georgia"
[To be
described:] Activities of the National
Investment Agency of Georgia
Georgian
Investment Center
[To be
described:] Activities of the Georgian Investment Centre
Government’s
Export Promotion Policy
Foreign Trade
Regimes. Reforms carried out in recent years in Georgia,
including serious legal reforms, are working successfully to create a
favourable foreign trade regime in the country. Since 1995 the
following major reforms have taken place in Georgian legislation:
The system of
quotas has been eliminated.
Products included
in the nation's export embargo policy include only works of art and
antiques and items of national historical importance.
There is no customs
duty for exports in Georgia.
A fiscal policy
aimed at stimulating exports has been introduced whereby all export
goods are free of VAT and excise duty;
Export of goods
requiring an export license have been reduced to the following
classes:
Collections
and collectors' pieces of zoological, botanical, mineral, anatomical,
historical, archaeological, paleonthological, ethnographic or
numismatic interest (HS - 9705);
Wood and timber
(4401, 4403, 4404, 4406, 4407);
Seeds of Caucasus
Pine (120999100);
Ferrous and
non-ferrous metal scrap (7204, 7404, 7602).
The system of
compulsory registration of foreign trade
contracts was eliminated in November 1997.
The establishment of
favourable trade regimes with partner countries through bilateral and
multilateral agreements has commenced. During the period 1992 - 1998,
Georgia signed trade agreements with 22 countries. Agreements on free
trade have been signed with eight CIS countries and Georgia already
has working free trade agreements with Russia, Ukraine, Azerbaijan,
Armenia, Kazakhstan and Turkmenistan. Currently a multilateral
agreement on CIS free trade zone is being enforced. According to
these agreements signatories to the agreement need not use customs
duties and taxes for exports or imports of the goods originated in
the territory of one party and destined to the territory of the other
party.
Furthermore,
Georgia has become a part of several international conventions.
On October 6,
1999 Georgia became a member of the World Trade Organization (WTO)
which granted Georgia the status of the Most Favoured Nation with 135
WTO member countries. Through the mechanisms of this organisation,
Georgia will be protected from discrimination, unfair competition,
falsification and unjustified limitations.
In 1996 Georgia
signed an agreement on partnership and cooperation with the European
Union which deals with economic relations in almost every sector. In
fact the agreement covers all sectors of the economy.
In 1999 Georgia
became a member of the Council of Europe with full rights, which will
further facilitate trade-economic relations between Georgia and
member countries of the European Union.
Many countries
have granted to Georgia reductions in import customs taxes to their
countries, under the General System of Preferences. These include the
countries of the European Union, Switzerland, the Czech Republic,
Slovakia, Canada and Japan. This is one of the most important
influences on the successful growth of exports for Georgia. The
effective use of facilities such as GSP will substantially promote
Georgian export development.
Law of Georgia
"On Technical Barriers to Trade". The law "On
Technical Barriers to Trade" lays down the basis for eliminating
the technical barriers to trade during the process of the
divparation, adoption and application of the technical regulations,
standards and the procedures for the assessment of conformity.
The national
technical regulations and standards should not create unnecessary
obstacles to trade, which will put national products in favourable
conditions. Therefore, the development of the national technical
regulations and standards should be carried out on the basis of a
direct use of the international standards.
Georgian legislation
did not envisage the concept of technical regulations. The concept of
technical regulations was defined by Law of Georgia "On
Standardization" adopted in 1999. The technical regulations is a
legal act, which defines the technical specifications for products or
service, which is done directly or by means of referring to Georgian
standards and requiring that complying with these standards is
compulsory.
The principles of
the state standards that are effective in Georgia envisage the
application of the national standards on a compulsory basis from the
moments of its effectiveness. However, based on the principles that
define the standards as voluntary, the international practice
envisages two-stage approach to making a standard as mandatory
requirement: the standard that was adopted by national body is
optional and it may be used by any party, however it will become
mandatory, if it is defined by:
The legislation;
Such stipulation is
indicated in the technical regulations;
A producer or
supplier of services assumed such responsibility by the assessment of
conformity.
The first
chapter of the divsent draft law lays down the legal basis
for eliminating the technical barriers to trade during the process of
the divparation, adoption and application of the technical
regulations, standards and the procedures for the assessment of
conformity.
It defines the
terms, including "Technical barriers to trade", which in
fact is the discrepancy in requirements from those used at a national
level or in international practice with respect to the technical
regulations, standards and the procedures for the assessment of
conformity.
It defines the
different categories of technical regulations, which include:
Legislative acts,
the decrees of the President of Georgia, which consist of the product
requirements;
The national
standards, the application of which is mandatory;
The agency specific
normative acts issued by government bodies, the competency of which,
according to the legislation of Georgia, includes laying down the
mandatory product requirements.
The second
chapter defines the requirements to the content of technical
regulations, divparation of technical regulations and procedures for
the assessment of conformity, coordination of the activities related
to the development of technical regulations, and recognizing the
technical regulations of foreign countries as an equivalent to the
national technical regulations.
Chapter
three defines the procedure of
applying technical regulations and standards, which includes making
references to standards in technical regulations, fulfillment of
standards as a mandatory requirement, fulfillment of standards as a
voluntary requirement, and the national arrangements for applying the
technical regulations and standards with respect to the national and
imported products.
Chapter
four defines the principles of
providing information relating to technical barriers to trade. The
main emphasis is placed on the Central Information Center of
Standards, the main function of which is the relationship with the
World Trade Organization. The Central Information Center of Standards
provides information about the technical regulations, standards and
the procedures for the assessment of conformity that are already
developed or are in the process of development. It should carry out
the coordination of activities of the centers set up in this field by
other government bodies.
Chapter
five defines the authority and
responsibility of the National Standardizing Body and other
government bodies.
Chapter
six lays down the principles of the
state control and supervision on complying with the requirements of
technical regulations, as well as the responsibility for violating
the requirements of the law.
Chapter
seven states that the process of
developing technical regulations has to be financed by the state on a
mandatory basis.
Chapter
eight contains the provisional
clauses, which states that the government bodies should adopt and
publish those technical regulations, which envisage complying on a
mandatory basis with the standards that ensure the quality of
products, processes and service, security, protection of human life,
protection of the health, property and environment. With this respect
it will be significant to employ, whenever developing the technical
regulations, the directives issued by the countries that are members
of the European Union.
Chapter
nine defines the amendments that
have to be made into Georgian legislation after this law becomes
effective.
The Law of Georgia
"On Technical Barriers to Trade" should initiate the
practical efforts towards the divparation, adoption and application
of the technical regulations, which will be step forward towards
setting up voluntary standardization system that is one of the
attributes of modern market relationships.
Georgian
Export Promotion Agency (GEPA)
The
Georgian Export Promotion Agency was set up by the Georgian
Government and the European Union's Technical Assistance Programme
TACIS with the principal aim of assisting Georgian companies to
increase exports and thus to stimulate an improvement in the
country's trade balance. The GEPA was established in April 1999.
Since then, the German Government's Technical Assistance Programme
GTZ (Deutsche Gesellschaft
fur Technische
Zusammenarbeit
GmbH) has also invested in the agency both in its personnel and in
its activities.
GEPA supports
Georgian business interests in the global marketplace, assists in
forging business alliances, facilitates establishment of
international business relationships. GEPA provides comdivhensive
information on business opportunities both for Georgian and overseas
companies.
Export
Information Center. GEPA Export Information Centre (EIC)
promotes Georgian companies and their products on the global
marketplace. It offers the services of two Georgian business
information officers and a librarian who work in cooperation with
specialists from EU countries. The EIC holds a wide range trade
information resources including reference materials, manuals and
textbooks on exporting, sector related journals from overseas, CD-ROM
and online databases, information on local and foreign markets, trade
regulations and has wide access to trade leads databases.
The EIC services
include but are not limited to:
Providing market
information to Georgian exporters
Introducing Georgia
and Georgian products to companies around the world
Assisting foreign
companies in sourcing products in Georgia
Offering online
trade leads both for Georgian exporters and overseas importers
Assisting Georgian
companies in developing an export marketing strategy |
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Institutional
Arrangements
Securities
Industry
The
institutional structure of the securities industry includes the
following market participants: reporting companies (i.e. the private
companies whose shares are traded at Georgian Stock Exchange),
securities brokerage companies, share registrars, clearing banks,
Georgian Central Securities Depository (GCSD) and Georgian
Stock Exchange (GSE). The overall supervision is carried out by the
National Securities Commission of Georgia (NSCG).
The rights of the securities market participants
are protected by the Georgian Securities Industry Association
(GSIA). The structure of Georgian Stock Market is divsented in Fig.
1.3.1.1:
Fig. 1.3.1.1. The
Structure of Georgian Stock Market
Society
Poverty
issues
Poverty Trends.
The relatively slow rebound from the economic collapse after
independence has led to a severe decline in welfare. Georgia’s
annual income per capita is about 56 percent below the
div-independence level, unemployment rates are high (16 percent in
2001) and many Georgians are underemployed. In the circumstances,
poverty, vulnerability and inequality have all increased over the
period. Georgia clearly needs to achieve and sustain higher economic
growth rates to improve living conditions. Given the small size of
the domestic market, this can be achieved only through a stronger
expansion in export activities, especially of those in which Georgia
has a comparative advantage and the potential to generate new job
opportunities, such as agro-processing.
Poverty Profile.
Strengthened economic performance resulted in an reduction of
poverty in the mid 1990s. However, Georgia’s growth rate
slowed considerably between 1998 and 2000, and consequently
inequality and poverty increased as measured by any of several
methodologies increased (see Table 2.1.1). Growth was affected by a
number of shocks, including the 1998 Russian crisis, severe droughts
in 1998 and 2000, and the increase in the price of energy imports in
2000. These problems were compounded by internal and external
political instability. Growth recovered in 2001-02, leading to a
slight reduction in overall poverty.
Table 2.1.1.
Change in poverty in Georgia between 1997 and 2002
|
Poverty
Headcount (% of population) |
Poverty definitions (lines) |
1997 |
1998 |
1999 |
2000 |
2001 |
2002a/
|
Official minimum
|
46.6
|
50.5
|
53.0
|
52.5
|
52.0
|
51.3b/
|
Urban
|
46.7
|
53.3
|
60.4
|
56.6
|
54.3
|
53.7
|
Rural
|
46.4
|
47.1
|
44.6
|
48.0
|
49.6
|
48.8
|
US$4.30 per capita/day at PPPc/
|
13.6 |
19.8 |
23.2 |
23.0 |
22.8 |
21.7 |
Recommended poverty line (baseline)
|
13.6
|
19.8
|
23.2
|
23.0
|
22.8
|
21.7
|
Urban
|
13.8
|
22.2
|
27.4
|
24.6
|
24.1
|
22.6
|
Rural
|
13.4
|
16.8
|
18.4
|
21.4
|
21.3
|
20.7
|
US$2.15 per capita/day at PPP
c/
|
9.7 |
11.8 |
14.5 |
15.4 |
14.8 |
13.5 |
US$1.075 per capita/day at PPP
c/
|
1.7 |
3.0 |
3.2 |
3.3 |
3.4 |
2.7 |
Source:
SDS SGHH primary data and World Bank, see Georgia Poverty
Update, Report No. 22350-GE. Note: Theofficial poverty line uses a normative basket and CPI
price data to cost it and is around 100 GEL (about US$50 at
current exchange rate) per equivalent adult per month. The
recommended poverty line was developed jointly by the
World Bank and SDS in 1998; it uses actual consumption patterns
of the population and survey prices (its non-food component is
fixed in real terms to 1996 and deflated using the CPI for
non-food items); it is about 55 GEL (US$25) per month per
equivalent adult. The equivalence scale used in the official and
recommended methodology is the scale developed by SDS and used in
Georgia to determine the social assistance payments.
International poverty lines exdivssed in dollar terms (US$ in
PPP) are per capita and use the latest (1996) revision of the
World Bank, updated with the Georgia CPI. All figures are
averages of quarterly data. a/ Preliminary estimate; corrections
for changes in the Survey not made. b/ Bank estimates using
official methodology. c/ Using 0.33 as PPP conversion factor.
|
Differential
Impact of Rising Poverty. IDA, in close collaboration with the
State Department of Statistics, divpared a Poverty Update covering
the 1998-2000 period. The study found that the increase in poverty
affected various socioeconomic groups differently, with growing
differentiation among the poor, and signs that the poorest became
even poorer. Poverty depth and severity increased in the observed
period by 84 and 94 percent respectively. Driven by the volatile
economic environment and absence of an adequate safety net,
vulnerability to poverty for the average household rose
significantly, with female-headed households being the most
vulnerable. Although the extent of absolute poverty at any point in
time remained around 20-24 percent, 40 percent of the population
experienced poverty at least once during the year 1999-2000, and 60
percent of the population faced a real risk of experiencing poverty
in the medium term. The high degree of vulnerability of households
led them to apply strategies which may tend to increase chronic
(long-term) poverty (e.g., shifting to subsistence farming, or
pulling children out of school).
Urban and Rural
Poverty. The trend in overall poverty reflects somewhat
different developments in urban and rural poverty. In 1997, rural
and urban poverty incidence were almost the same. In 1999, the urban
poverty headcount doubled in comparison to 1997, whilst the rural
headcount increased by 37.3 percent. Then in 2000, responding to the
non-agricultural sector recovery after the Russian crisis, urban
poverty dropped by 10.2 percent, stabilized in 2001 and declined
further by 6.2 percent in 2002. Because of the drought, rural
poverty increased in 2000, remained unchanged in 2001 and only in
2002 decreased by 2.9 percent. As a result, the difference between
the urban and rural headcount has narrowed -- while in 1999, the
urban poverty headcount was almost 50 percent over that in the rural
population, in 2002 it was 9 percent higher.
Determinants
of Poverty. The Georgia Poverty Update identified that the
strongest determinants of poverty risk in Georgia in the period
between 1998 and 2000 were economic: employment status, sector of
employment, ownership of productive assets and education. It found
an elevated poverty risk among urban households, households with an
unemployed head and female headed households, as well as children
aged 7-15, the disabled, those with low levels of education, single
pensioners and orphans were experiencing. The working poor are
becoming the majority, often employed in the informal sector with
insecure, temporary and low productivity jobs.
Non-Income
Indicators of Poverty. Non-income indicators of poverty in
Georgia, inherited from Soviet times, still compare favorably with
those of countries with similar per capita income. The UNDP 2003
Human Development Report ranks Georgia 88th among 175
nations. However, Georgia faces a major challenge in sustaining
these relatively favorable indicators. Studies conducted by various
international organizations (UNICEF, USAID, EC, etc.), indicate that
there has been no improvement in the indicators during the 1990s. In
fact, maternal mortality rate, immunization rates, access to health
and education, access to safe water and sanitation and other living
conditions indicators have deteriorated and the quality of social
services has worsened substantially in comparison to the
div-transition situation.
Internally
Displaced People. IDPs vulnerability
to poverty is magnified by their lack of access to land. Thus IDPs
living in collective centers are 3Ѕ times less likely to have
access to land than the local population, and those living in private
accommodations half as likely. In addition, IDP’s rate
of unemployment is very high -- 40% among IDPs living in collective
centers. Government benefits do seem, however, to be reaching the
IDPs, with 80% to 90% receiving a government benefit.
Millennium
Development Goals. The estimates of Georgia’s prospects
for achieving the Millennium Development Goals (MDGs) show a mixed
picture based on Georgia’s current performance, as indicated in
Table 2.1.2.
Table 2.1.2: Millennium Development Goals
Millennium
Development Goal
|
Present
Situation
|
Prospects
for Achievement by 2015
|
Goal 1:
Eradicate extreme poverty and hunger.
Target 1:
Halve, between 1990 and 2015, the proportion of people whose
income is less than $2.15 a day.
NOTE:
While the MDG indicator and target include $1 a day, a higher
poverty line such as $2.15 is considered more appropriate in ECA
given the extra expenditure on heat, winter clothing and food.
(“The Millennium Development Goals in ECA”, World
Bank, forthcoming)
Target
2: Halve between 1990 and 2015, the
proportion of people who suffer from hunger.
|
In 2002, the
poverty incidence at the international poverty line of US$2.15
per capita/per month at PPP was 13.5 percent.
While
the exact percentage of people suffering from hunger in Georgia
is not known, there is no evidence that would indicate that
hunger is an issue in Georgia.
|
Likely.
The Economic Development and Poverty Reduction Program of Georgia
envisages economic performance that would allow Georgia to meet
the MDG.
|
Goal 2:
Achieve universal primary education.
Target 3:
Ensure that by 2015, children everywhere, boys and girls alike,
will be able to complete a full course of primary schooling.
|
Enrollment
rates in basic education (grades 1-9) are close to 100 percent.
|
Likely.
|
Goal 3:
Promote gender equality and empower women.
Target
4: Eliminate gender disparity in primary and secondary
education, divferably by 2005 and in all levels of education no
later than 2015.
|
Surveys
show no significant gender differences in access to primary and
secondary education.
|
Likely.
|
Goal 4: Reduce
child mortality.
Target 5:
Reduce by two-thirds, between 1990 and 2015, the under-five
mortality rate.
|
According to the
Human Development Report 2003, the under-five morality rate in
Georgia in 2001 was 29 per 1,000 live births. This was better
that the average for ECA (36/1,000); and much better than the
average for medium human development group of countries – 61
per 1,000 live births.
|
Due to current
efforts and actions planned under the EDPRP to keep immunization
rates at high level, improve breast-feeding rates, provide
appropriate case management and home and in community for acute
respiratory infection, pneumonia and diarrhea and improve access
to appropriate health care, reliable water and improved
sanitation, it is estimated that Georgia will make a significant
progress in reducing the U5MR. However, the MDG target (U5MR
of 9.7 per 1,000 live births, which is close to the current U5MR
level in developed countries) is estimated as unlikely to be
met, given Georgia’s very low public spending on health.
|
Goal 5:
Improve maternal health.
Target 6:
Reduce by three-quarters, between 1990 and 2015, the maternal
mortality ratio.
|
Available
data suggests the MMR doubled over the last 10 years to almost 59
per 100,000 live births in 2001. Only 59 percent of women
complete the mandatory 4 antenatal visits but 96% of births are
attended by skilled health personnel
|
Planned actions
aimed at improving antenatal care are expected to result in
decreased maternal mortality. However, given high maternal
mortality rate and its recent increase, the MDG target (15
per 100,000 live births) is estimated as unlikely to be met.
|
Millennium
Development Goal
|
Present
Situation
|
Prospects
for Achievement by 2015
|
Goal 6: Combat
HIV/AIDS, malaria and other diseases.
Target 7:
Have halted by 2015 and begun to reverse the sdivad of HIV/AIDS.
Target 8:
Have halted by 2015, and begun to reverse, the incidence of
malaria and other major diseases.
|
HIV/AID is
sdivading fast. The number of new HIV cases in 1997 increased
nearly threefold compared with the divvious year and accounted 21
cases; in 2001 93 cases were registered. From 1998 through 2001
more then a half of newly registered HIV cases have been
attributed to IDUs. The percentage of new cases attributed to
heterosexual contacts also increases, suggesting that the epidemic
is leaking into the general population. HIV/AIDS is divdominantly
divsent in young people (21-35 years old). In 2001 over 87 percent
of all new AIDS cases have been detected in 26-35 age group.
The divvalence of
TB has increased from 28.2 in 1991 to 85.8 in 2001, reflecting
the sdivad of disease, but also better recording of incidence.
|
While Georgia has
improved HIV recording and reporting, there is an urgent need to
introduce divvention & education on a broad basis, as well as
surveillance among high risk groups. The MDG target for
HIV/AIDS is unlikely to be met
Political
commitment and additional resources are required to keep the
sdivad of TB under control. An upcoming PHC Development program is
expected to further improve the effectiveness of control measures.
If measures are appropriately implemented, it is possible to
arrest and reverse the trend.
|
Goal 7: Ensure
environmental sustainability.
Target 9:
Integrate the principles of sustainable development into country
policies and programs and reverse the loss of environmental
resources.
Target 10:
Halve by 2015 the proportion of people without sustainable access
to safe drinking water.
|
The
National Environmental Action Plan and Biodiversity Strategy are a
framework for environment and sustainable use of natural
resources. The EDPRP highlights steps to mainstream environment
into development, but implementation is limited. An
environmental permitting system and other legislation are in
place, but institutional weaknesses (unclear responsibilities,
weak monitoring and enforcement, sometimes excessive and
non-transparent regulations) limit enforcement. With regard the
specific indicators, despite its unique ecosystems in Georgia
2.8% of the land area is protected to maintain biological
diversity compared with the world average of 6.5%. Forest cover is
40% but the quality of management is inadequate. Energy intensity
and carbon emissions indicators are not high, but there are severe
problems with delivery of energy services to the population.
In
1999, about 86% of urban population and 43% of rural population
had access to piped water supply. Reliability and quality of
services are serious problems. Water systems are largely in a
state of severe disrepair. Low capacity of people to pay for the
services together with limited government budgets redivsent real
constraints to mobilize resources into the sector. Involvement of
IFIs is critical to avoid total collapse of sector.
|
Political
will and strong commitment as well as human and financial
resources are needed to ensure environmental sustainability. If
the governance environment and institutional capacity improve, and
if resources for environment and natural resource management
could be increased, it would be possible to meet target 9.
About
US$ 8-10 million annually will be needed for the rehabilitation of
old deteriorated existing systems and expansion of access to piped
water supply to an additional 0.5 million people if the target 10
were to be met. Given current low level of investments in the
sector, it is unlikely that
Georgia will meet this target.
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Economics
Main
economic indicators
Sectoral
Growth. Agriculture, industry, trade and transport dominate the
structure of the Georgian economy. Agriculture is the largest
sector accounting for just under 20 percent of GDP and 50 percent
of employment, although its share in GDP has decreased steadily
(from over 30 percent of GDP in 1996). Industry contributes
about 14 percent of GDP and 6 percent of employment, with its share
changing little. The share of transport and
telecommunications has nearly tripled from 4.6 percent in
1996 to 12.1 percent by 2002. Transport has been the fastest growing
sector, growing at over 20 percent annually because of the rapid
expansion of oil transit from the Caspian Sea. Although transport
turnover has tripled, it is still at one third of the
div-independence level. Other fast growing sectors include
construction and financial services. Trade has grown slightly
faster than overall GDP. Sectoral growth index is divsented in Fig.
3.1.1.
According
to information from 2001 88.6% of the economically active population
was employed, thus the unemployment rate was 11.4%.
The
distribution of the employed work force by economic sectors is as
follows:
Sector
|
%
|
Agriculture
& forestry, fishery
|
53,4
|
Mining
Industry
|
0,3
|
Processing
Industry
|
6,5
|
Energy,
gas or water production and supply
|
1,2
|
Construction
|
1,6
|
Trade
& household goods technical service
|
8,6
|
Hotels
& Restaurants
|
0,9
|
Transport,
Warehouse economy and communications
|
4,0
|
Financial
mediation
|
0,7
|
Operations
with real estate, lease (rent) and business activity, research and
projecting works
|
2,1
|
State
management and self-defense, compulsory social insurance
|
5,8
|
Education
|
7,4
|
Health
care and social service
|
4,3
|
Other
communal, social and personal service, culture, entertainment,
rest
|
2,4
|
Hired
(engaged) service in private domestic economy
|
0,4
|
Ex-territorial
(International) organization
|
0,1
|
Unidentified
|
0,1
|
Total
|
100
|
According to 2001
data, the minimum subsistence level for a medium sized family (4
persons) at average prices was 205.2 GEL.
Agriculture
Introduction.
Only 44 percent of Georgia’s land is used for agriculture.
Twenty-six percent is arable land, 9 percent is used for perennials,
65 percent is pastureland, and 0.4 percent is fellow land. Sixty
percent of the arable land needs artificial irrigation. The soil is
mainly moderately fertile and easy to cultivate. Table 1 below shows
the distribution of the agricultural land by agricultural product.
Table 1
Distribution of Agricultural Land by Product
Product
|
Land occupied
(thousand ha)
|
Cereals
|
379,0
|
Citrus
|
10,9
|
Fruit
|
60,0
|
Potato
|
34,0
|
Sunflower
|
40,0
|
Tea
|
40,0
|
Vegetables
|
40,0
|
Vineyards
|
61,3
|
In the 20th century,
Georgia became a country of agro-industry, with well-developed
agriculture and food industry and with a good level of production.
More than half of its GDP came under the agro-industrial sector of
the country; 47 - 48% of the main funds were accumulated within the
sector and it employed 41 - 42% of the total population of Georgia.
Georgia used to be
an important exporter of food and one of the main suppliers of
vegetables, tea, citrus fruits, wine, mineral waters, brandy, canned
and fresh vegetables and fruits to the markets of the former Soviet
Union. In the second half of the 1980s, the Georgian share of the
food market of the former Soviet Republics was 10 percent. The total
amount of exported food products was 1.7 times more than imported
ones. The country is now undertaking actions to re-establish this
exporting.
Since independence
in 1991 the country experienced many years of civil war and ethnic
conflicts, with 260,000 people internally displaced.
However, Georgia's
economy is still strongly linked to the Russian Federation and the
Commonwealth of Independent States (CIS). Approximately 50 percent of
its trade is with the CIS.
Agriculture is a
main source of income and employment for the majority of the
population, accounting for more then 30 percent of GDP. Output in the
sector is only about 40 percent of its 1990 level, but employment in
the sector has doubled and it now accounts for over 50 percent of the
total employment.
Land privatisation
has focused on the small-scale (household/subsistence) sector with
little real progress in restructuring the former large state farms.
Land reform has resulted in the allotment of small parcels of land up
to 1.25 hectares to each rural family and the lease, through district
authorities, of state owned land to persons or legal entities, with
the aim of creating a subsistence sector for small farmers and a
market sector controlled by large leaseholders.
Private producers
account for the significant share of fruit, vegetable and livestock
production, when their share in wheat production is about two thirds
of the total wheat production in the country. The bulk of the
domestic wheat production is consumed on farms for food, seed or
feed. Indications are that only 20 percent of domestic production of
wheat is marketed.
Low yields, also as
a result of poor infrastructure, inadequate access to credit for
inputs and suitable machinery, and high costs associated with
transport and marketing have had a negative impact on food production
and the earning capacity of a significant proportion of the
population and thus on household food security.
The state of
irrigation and drainage systems is also a major constraint to
increasing crop yields and the competitiveness of domestic produce
with imports. More than 60 percent of grain, 60 percent of dairy
products and 33 percent of meat consumed in the country are imported.
Agricultural
production in Georgia dropped sharply in 2000 due to a serious
drought. WFP/FAO Crop and Food Supply Assessment mission carried out
in mid-August 2000 estimates that Georgia will face a severe food
crisis due to the drought. This situation is being exacerbated by
on-going serious economic problems.
After droughts,
agricultural production showed a slight increase of 5.6 percent in
2001, however the share of agricultural output in GDP dropped from 21
percent in 2000 to 19.2 percent in 2001.
During the divsent
year, USAID has launched a five year program, called Support Value
Added Enterprise (SAVE) that will promote economic growth through
expanded production and sales of added-value agricultural products on
international markets. Through this program the US government will
support agriculture development through market expansion, standards
on organic food production, distribution, improved credit and
whole-chain food distribution networks.
Key
Agriculture Indicators.
Agricultural output
per hectare of agricultural land and per capita (US $)
Year
|
Per 1 ha of
agricultural land
|
Per capita
|
1990
|
1195
|
725
|
1995
|
481
|
272
|
1996
|
539
|
302
|
1997
|
583
|
328
|
1998
|
531
|
301
|
1999
|
435
|
285
|
Source:
Georgian Agriculture 1999
Agriculture in GDP
1990
|
1991
|
1992
|
1993
|
1994
|
1995
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
29,7
|
|
|
|
|
41,7
|
31,0
|
28,2
|
24,8
|
25,0
|
21,5
|
19,2
|
31,9
|
28,8
|
55,5
|
70,4
|
34,2
|
39,5
|
32,6
|
|
|
|
|
|
Source:
State Department for Statistics of Georgia (1st
Row), GEPLAC , 1997(2nd
Row).
Trends in Share of
Total Agricultural Production, (%)
|
1985
|
1990
|
1995
|
1996
|
1997
|
1998
|
1999
|
2000
|
Crop production
|
68.1
|
68.7
|
58.4
|
49.8
|
59.3
|
56.4
|
56.8
|
45,8
|
Livestock
Production
|
31.9
|
31.3
|
41.6
|
50.2
|
40.7
|
43.6
|
43.2
|
54,2
|
Source:
SDS, Georgian Agriculture 2000, p.9.
Agricultural output
(Current prices, mln. lari)
Agricultural
Production
|
1980
|
1985
|
1990
|
1995
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
Total production
|
3219
|
4167
|
5199
|
1851
|
2062
|
2299
|
2266
|
2650
|
2024
|
1860
|
Of
which: Plant-growing
|
2240
|
2838
|
3571
|
1081
|
1027
|
1363
|
1278
|
1506
|
927
|
|
Livestock
|
979
|
1329
|
1627
|
770
|
835
|
936
|
988
|
1144
|
1097
|
|
Of which by
households
|
1584
|
2087
|
2495
|
1407
|
1650
|
1863
|
2116
|
2490
|
1903
|
|
Of
which: Plant-growing
|
1102
|
1421
|
1714
|
816
|
805
|
1150
|
1163
|
1386
|
870
|
|
Livestock
|
481
|
666
|
781
|
591
|
845
|
713
|
953
|
1105
|
1033
|
|
Source:
Georgian Agriculture 2000, p. 6
Distribution of
Georgian Agricultural Territory by Inclination
0
– 2 gr.
|
2
- 10 gr.
|
10
– 20 gr.
|
20
gr.
over
|
Total
|
Sq. km
|
%
|
Sq. km
|
%
|
Sq. km
|
%
|
Sq. km
|
%
|
Sq. km
|
%
|
13545,9
|
42,3
|
9237,1
|
28,8
|
5146,7
|
16,0
|
4166,7
|
12,9
|
32096,4
|
100
|
Distribution of
Agricultural Land
|
1986
|
1991
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
Agricultural
lands, total
|
3267,1
|
3275,4
|
3048,0
|
3034,5
|
3037,0
|
3063,5*
|
3018,4*
|
3019,7*
|
Of
which: Arable
|
783,2
|
790,4
|
759,3
|
781,1
|
785,0
|
791,9
|
790,4
|
792,9
|
Of
which sown areas
|
730,1**
|
701,9**
|
452,8
|
597,5
|
616,1
|
594,7
|
610,8
|
|
Perennial
plants
|
357,0
|
336,9
|
307,0
|
284,6
|
277,5
|
269,8
|
270,1
|
269,3
|
Meadows
|
176,3
|
158,4
|
147,9
|
148,6
|
141,2
|
142,7
|
142,5
|
142,3
|
Pastures
|
1947,7
|
1983,7
|
1822,1
|
1820,2
|
1833,3
|
1839,7
|
1796,0
|
1795,8
|
Fallow
|
2,9
|
6,0
|
11,7
|
-
|
-
|
-
|
-
|
-
|
*Unlike
to other years, this data includes the areas of dwelling and economic
buildings and yards - 19,4 ths hectares** - accordingly 1985-1990
Source: Georgian
Agriculture-2000, Tbilisi 2001, p.18
Areas kept by some
plant-growing cultures (1000 hectares)
Culture
|
1988
|
1993
|
1997
|
1998
|
1999
|
2000
|
2001
|
Cereals and beans
|
272,0
|
256,0
|
437,2
|
415,8
|
378,8
|
386,4
|
|
Industrial crops
|
40,6
|
21,1
|
36,5
|
59,0
|
75,8
|
69,8
|
|
Potatoes,
vegetables and melons
|
77,0
|
48,8
|
62,4
|
84,7
|
85,7
|
93,1
|
|
Fodder crops
|
344,8
|
43,2
|
57,7
|
56,6
|
54,4
|
61,5
|
|
Fruit-berries
|
128,2
|
83,5
|
85,3
|
65,3
|
|
|
|
Vineyard
|
115,6
|
78,9
|
81,2
|
70,2
|
|
60,0?
|
61,0?
|
Citruses
|
26,7
|
16,7
|
11,4
|
15,9
|
|
|
|
Tea plantations
|
65,1
|
33,7
|
34,7
|
39,9
|
|
|
|
Source: State
Department for Statistics; ? Rezonansi, Interview, 04,04.2002
Agricultural
production
Name
|
Produced,
thousand tons
|
|
1998
|
1999
|
2000
|
2001
|
Wheat
|
144,7
|
226,1
|
89,4
|
306,5
|
Barley
|
20,2
|
50,8
|
30,0
|
|
Maize
|
420,2
|
490,5
|
295,9
|
300,0
|
Pulses
|
9,2
|
9,3
|
2,6
|
5,0
|
Sunflower
|
22,8
|
40,5
|
2,6
|
30,2
|
Tobacco
|
3,4
|
2,1
|
1,5
|
1,6
|
Potatoes
|
349,8
|
443,3
|
302,0
|
415,0
|
Vegetables
|
380,0
|
417,0
|
354,2
|
350,0
|
Melons
|
32,2
|
108,2
|
80,0
|
70,0
|
Annual and
perennial grass
|
108,3
|
127,3
|
50,0
|
|
Fruits
|
279,0
|
296,0
|
250,0
|
200,0
|
Grapes
|
238,5
|
220,0
|
210,0
|
150,0
|
Citrus’s
|
85,1
|
56,0
|
40,0
|
60,0
|
Tea leaves
|
47,2
|
60,0
|
24,0
|
23,0
|
Source: SDS;
Agricultural
production
Name
|
Produced,
thousand tons
|
|
1980
|
1985
|
1988
|
1990
|
Wheat
|
208,6
|
174,2
|
638,1
|
257,7
|
Barley
|
87,5
|
96,7
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
117,8
|
Maize
|
306,2
|
321,5
|
|
270,2
|
Beans (Pulses)
|
na
|
16,1
|
na
|
7,3
|
Soy-Bean
|
3,9
|
6,0
|
na
|
3,4
|
Sunflower
|
9,5
|
9,3
|
16,9
|
7,7
|
Sugar Beet
|
119,9
|
61,2
|
51,2
|
30,6
|
Tobacco
|
16,8
|
20,4
|
11,9
|
8,1
|
Potatoes
|
392,8
|
393,8
|
337,9
|
293,8
|
Vegetables
|
583,1
|
604,3
|
662,3
|
443,2
|
Melons
|
|
42,5
|
|
38,8
|
Annual and
perennial grass
|
na
|
796,9
|
na
|
624,3
|
Fruits
|
539,3
|
724,2
|
653,0
|
591,2
|
Grapes
|
995,6
|
914,9
|
619,7
|
691,0
|
Citrus’s
|
147,7
|
134,6
|
436,9
|
283,1
|
Tea leaves
|
501,8
|
581,2
|
458,7
|
501,7
|
Source: SDS;
Alexandre Didebulidze. Agriculture and Rural Development in Georgia.
UNDP, Tbilisi, 1997, p.63.
Agricultural
Production
Name
|
Produced, tons
|
1999-2001 as % of
1988-1990
|
|
1988-1990
|
1999-2001
|
|
Grain (after
cleaning)
|
621,9
|
640,2
|
102,9
|
Sunflower
|
10,8
|
24,4
|
225,9
|
Potatoes
|
321,4
|
386,8
|
120,3
|
Vegetables and
Melons
|
528,3
|
459,8
|
87,0
|
Tobacco
|
9,9
|
1,9
|
19,2
|
Fruits and
Berries (without Citruses)
|
616,3
|
248,7
|
40,4
|
Grapes
|
608,3
|
193,3
|
31,8
|
Citrus’s
|
271,4
|
52,0
|
19,2
|
Tea leaves
|
486,0
|
35,7
|
7,3
|
Meat
|
173,7
|
103,6
|
59,6
|
Milk
|
700,4
|
663,1
|
94,7
|
Eggs (mln.
pieces)
|
840,1
|
382,3
|
45,5
|
Wool
|
6,5
|
1,8
|
27,7
|
Number of livestock
(for January 01), x1000
|
1988
|
1993
|
1995
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
2002
|
Cattle
|
1584
|
1002
|
944
|
974
|
1008
|
1027
|
1051
|
1122
|
1177
|
1250
|
Of which:
Milk-cows
|
626
|
502
|
514
|
531
|
544
|
551
|
575
|
640
|
646
|
685
|
Horses
|
24
|
18
|
20
|
24
|
26
|
28
|
30
|
34
|
35
|
|
Pigs
|
1118
|
476
|
367
|
353
|
333
|
330
|
366
|
411
|
443
|
481
|
Sheep and goats
|
1921
|
1192
|
793
|
725
|
652
|
584
|
587
|
633
|
628
|
701
|
Poultry
|
23900
|
11200
|
12300
|
13847
|
14645
|
15541
|
8240
|
8473
|
7826
|
|
Bees (Families)
|
112
|
65
|
35
|
55
|
66
|
77
|
78
|
94
|
98
|
|
Source:
SDS
Data series for
livestock
Year
|
Cattle
|
Pigs
|
Sheep
and goat
|
Poultry
|
|
Total
|
Public
|
Private
|
Total
|
Public
|
Private
|
Total
|
Public
|
Private
|
Total
|
Public
|
Private
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
9
|
10
|
11
|
12
|
13
|
1941
|
1607,0
|
581,5
|
1025,5
|
615,6
|
53,3
|
562,3
|
2193,6
|
1085,7
|
1107,9
|
|
|
|
1942
|
1518,8
|
607,5
|
911,3
|
475,0
|
59,8
|
415,2
|
2051,5
|
1144,0
|
907,5
|
|
|
|
1943
|
1434,3
|
631,7
|
802,6
|
365,9
|
77,2
|
288,7
|
1891,7
|
1156,0
|
735,7
|
|
|
|
1944
|
1480,8
|
658,2
|
822,6
|
424,1
|
74,3
|
349,8
|
1997,5
|
1254,8
|
742,7
|
|
|
|
1945
|
1501,3
|
668,2
|
833,1
|
484,5
|
71,6
|
412,9
|
2170,2
|
1448,5
|
721,7
|
|
|
|
1950
|
1492,7
|
764,7
|
728,0
|
472,7
|
109,6
|
363,1
|
2509,2
|
1988,6
|
520,6
|
6651
|
|
5900
|
1955
|
1319,2
|
677,5
|
641,7
|
557,2
|
124,4
|
432,8
|
1625,8
|
1178,8
|
447,0
|
8173
|
|
7642
|
1960
|
1502,6
|
671,5
|
831,1
|
581,6
|
253,1
|
328,5
|
2125,0
|
1375,2
|
749,8
|
7471
|
|
6016
|
1965
|
1457,6
|
651,6
|
806,0
|
452,5
|
208,1
|
244,4
|
2183,0
|
1409,9
|
773,1
|
8664
|
|
6610
|
1970
|
1445,9
|
616,8
|
829,1
|
588,8
|
237,6
|
351,2
|
1826,8
|
1177,0
|
649,8
|
12046
|
|
8917
|
1975
|
1513,0
|
677,4
|
860,1
|
743,6
|
310,9
|
432,7
|
1982,4
|
1256,7
|
725,7
|
14161
|
|
8172
|
1980
|
1556,3
|
675,0
|
881,3
|
950,7
|
434,3
|
576,4
|
2041,2
|
1302,9
|
738,2
|
18376
|
|
9080
|
1981
|
1564,0
|
671,2
|
892,8
|
943,1
|
428,4
|
514,7
|
2043,8
|
1284,5
|
759,3
|
18781
|
9551
|
9230
|
1982
|
1588,9
|
668,2
|
920,7
|
980,9
|
393,5
|
527,4
|
2109,2
|
1285,1
|
824,1
|
19394
|
10372
|
9022
|
1983
|
1621,8
|
664,3
|
957,5
|
1011,1
|
464,4
|
546,7
|
1947,3
|
1125,1
|
822,2
|
19693
|
10739
|
8954
|
1984
|
1633,8
|
662,6
|
971,2
|
1082,1
|
492,0
|
590,1
|
1984,8
|
1136,9
|
847,9
|
20108
|
11341
|
8767
|
1985
|
1652,6
|
668,1
|
984,5
|
1133,4
|
509,3
|
624,1
|
1955,7
|
1103,5
|
852,2
|
22452
|
13803
|
8649
|
1986
|
1645,5
|
676,2
|
969,3
|
1173,4
|
537,3
|
636,1
|
1976,6
|
1099,3
|
880,3
|
24296
|
14639
|
9657
|
1987
|
1634,7
|
674,1
|
960,6
|
1150,4
|
528,4
|
622,0
|
1938,5
|
1082,5
|
856,0
|
24342
|
14789
|
9553
|
1988
|
1584,8
|
650,5
|
934,3
|
1117,8
|
517,9
|
599,9
|
1920,5
|
1059,9
|
860,6
|
23917
|
14538
|
9378
|
1989
|
1547,8
|
609,8
|
938,0
|
1099,2
|
491,9
|
607,3
|
1894,0
|
1012,9
|
881,1
|
25172
|
15612
|
9560
|
1990
|
1426,6
|
545,7
|
880,9
|
1027,8
|
444,9
|
582,9
|
1833,5
|
970,2
|
863,3
|
24002
|
14322
|
6980
|
1991
|
1298,3
|
468,9
|
829,4
|
880,2
|
357,0
|
523,2
|
1618,1
|
912,7
|
705,4
|
21760
|
10890
|
10870
|
1992
|
1207,9
|
390,5
|
817,4
|
732,5
|
263,7
|
468,8
|
1469,6
|
781,2
|
688,4
|
20167
|
8629
|
11538
|
1993
|
1002,6
|
198,7
|
803,9
|
476,2
|
90,3
|
385,9
|
1191,6
|
550,3
|
641,3
|
11211
|
1379
|
9832
|
1994
|
928,6
|
119,0
|
809,6
|
365,1
|
46,7
|
318,4
|
958,1
|
354,1
|
604,0
|
11858
|
1352
|
10505
|
1995
|
944,1
|
78,9
|
865,2
|
366,9
|
29,9
|
337,0
|
793,3
|
222,5
|
570,8
|
12290
|
462
|
11828
|
1996
|
973,6
|
56,7
|
916,9
|
352,6
|
24,3
|
328,4
|
724,8
|
148,4
|
576,1
|
13847
|
180
|
13667
|
1997
|
1008,0
|
41,9
|
966,1
|
332,5
|
9,1
|
323,4
|
652,0
|
98,1
|
553,9
|
14645
|
8
|
14637
|
1998
|
1027,2
|
24,8
|
1002,4
|
330,3
|
4,4
|
325,9
|
583,5
|
63,5
|
520,0
|
15542
|
115
|
15427
|
1999
|
1050,9
|
15,3
|
1035,6
|
365,9
|
3,0
|
362,9
|
586,7
|
44,5
|
542,2
|
8240
|
100
|
8140
|
2000
|
1122,1
|
11,0
|
1111,2
|
411,1
|
1,5
|
409,6
|
633,4
|
38,4
|
595,0
|
8473
|
84
|
8390
|
2001
|
1177,4
|
6,8
|
1170,6
|
443,4
|
0,8
|
442,6
|
627,6
|
27,4
|
599,8
|
7826
|
82
|
7744
|
2002
|
1250,1
|
|
|
480,5
|
|
|
701,2
|
|
|
|
|
|
Livestock output
(Ths.
tons)
|
Production
|
|
1988
|
1995
|
1999
|
2000
|
2001
|
Meat (in
slaughter weight)
|
172,1
|
115,4
|
100,5
|
107,9
|
102,4
|
Milk
|
730,5
|
475,4
|
660,3
|
618,9
|
710,0
|
Eggs, mln. units
|
890,2
|
269,4
|
390,1
|
361,4
|
395,4
|
Wool, in net
weight
|
6,3
|
3,1
|
1,7
|
1,9
|
1,9
|
Silk cocoon
|
1,9
|
0,05
|
0
|
0
|
|
Honey
|
|
0,7
|
1,5
|
1,4
|
|
Source:
Georgian Social-economic indexes, 2000y. Interfax, 04.02.2002
Data series for
livestock output
Year
|
Meat
|
Eggs
|
Milk
|
|
Public
|
Private
|
Public
|
Private
|
Public
|
Private
|
1913
|
49,4
|
49,4
|
119
|
119
|
222
|
222
|
1928
|
62,0
|
62,0
|
-
|
-
|
-
|
-
|
1940
|
75,0
|
66,6
|
251,1
|
250,1
|
357,8
|
317,8
|
1945
|
37,4
|
24,5
|
104,2
|
98,4
|
266,4
|
221,4
|
1950
|
51,1
|
33,0
|
156,3
|
148,2
|
292,5
|
210,0
|
1955
|
83,7
|
54,8
|
236,9
|
221,8
|
414,2
|
256,6
|
1960
|
90,4
|
53,5
|
221,3
|
180,8
|
487,1
|
271,0
|
1965
|
92,8
|
65,6
|
305,2
|
225,1
|
470,7
|
286,1
|
1970
|
104,2
|
75,2
|
397,3
|
250,6
|
518,1
|
310,3
|
1975
|
206,8
|
86,4
|
536,8
|
228,8
|
574,9
|
306,7
|
1980
|
143,1
|
82,3
|
654,9
|
330,0
|
642,2
|
340,9
|
1985
|
166,4
|
84,3
|
822,7
|
224,3
|
684,4
|
380,2
|
1986
|
172,2
|
89,7
|
879,8
|
237,9
|
721,7
|
395,1
|
1987
|
174,6
|
89,5
|
887,2
|
238,7
|
724,2
|
395,2
|
1988
|
172,1
|
88,0
|
890,2
|
243,7
|
730,5
|
407,8
|
1989
|
178,8
|
68,0
|
860,8
|
260,7
|
711,4
|
411,4
|
1990
|
170,3
|
81,9
|
769,2
|
263,4
|
659,4
|
402,5
|
1991
|
137,2
|
92,0
|
638,1
|
292,6
|
562,3
|
379,2
|
1992
|
113,4
|
88,6
|
297,3
|
184,2
|
469,5
|
380,2
|
1993
|
100,4
|
90,0
|
242,8
|
205,3
|
433,1
|
387,5
|
1994
|
108,3
|
102,8
|
250,6
|
239,5
|
429,3
|
403,6
|
1995
|
115,4
|
112,0
|
269,4
|
261,4
|
475,4
|
455,8
|
1996
|
117,8
|
116,0
|
350,2
|
348,5
|
530,3
|
514,3
|
1997
|
120,7
|
119,1
|
370,4
|
370,4
|
600,2
|
589,1
|
1998
|
104,1
|
103,5
|
380,4
|
377,0
|
634,7
|
627,7
|
1999
|
101,0
|
100,1
|
390,1
|
386,4
|
660,3
|
655,5
|
2000
|
107,9
|
107,3
|
361,4
|
357,2
|
618,9
|
615,7
|
2001
|
102,4
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Productivity of
Agricultural Cultures
|
1990
|
1995
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
Winter wheat
|
28,2
|
12,2
|
13,3
|
17,7
|
11,0
|
20,4
|
10,4
|
26,7
|
Maize
|
25,2
|
27,1
|
33,0
|
27,3
|
20,5
|
22,3
|
16,2
|
14,8
|
Tobacco
|
11,2
|
8,3
|
9,2
|
11,3
|
11,7
|
11,9
|
10,3
|
|
Sunflower
|
5,8
|
2,0
|
1,2
|
8,9
|
4,9
|
6,2
|
2,3
|
6,9
|
Potato
|
105,6
|
152,0
|
121,0
|
130,0
|
106,4
|
130,0
|
88,9
|
112,2
|
Vegetables
|
110,6
|
140,0
|
136,0
|
151,0
|
92,2
|
96,0
|
93,4
|
88,0
|
Melon
|
105,3
|
60,5
|
110,0
|
94,0
|
38,3
|
131,7
|
97,6
|
|
Perennial grass
|
27,6
|
16,4
|
14,7
|
27,6
|
26,3
|
23,9
|
11,4
|
|
Maize in silage
|
95,1
|
23,0
|
27,4
|
75,0
|
60,4
|
54,2
|
-
|
|
Fruit
|
58,0
|
41,8
|
40,3
|
40,4
|
49,2
|
52,0
|
|
|
Citruses
|
169,8
|
90,3
|
69,4
|
50,5
|
57,7
|
37,0
|
|
|
Grape
|
67,6
|
47,5
|
36,4
|
40,5
|
36,3
|
35,0
|
|
|
Tea leaves
|
90,0
|
12,6
|
10,4
|
10,5
|
19,5
|
25,0
|
|
|
Machine Park
(condition by the end of year) x1000
Technical means
|
1988
|
1994
|
1998
|
2000
|
Demand
|
Tractor
|
27,2
|
18,2
|
10,7
|
|
18,0
|
Combine
|
1,8
|
1,2
|
0,9
|
|
1,2
|
Loading machine
|
26,3
|
12,6
|
8,8
|
|
|
Pumping mounting
|
1,4
|
0,4
|
0,3
|
|
0,5
|
Sprayer
|
0,9
|
0,4
|
0,2
|
|
0,1
|
Source: SSD
Technical Dynamic in
Agrarian Sector of Georgia
Year
|
Tractor
|
Grain
combine
|
Plough
|
Cultivator
|
Seeding
machine
|
Tractor-drawn
implement
|
Mineral
fertilization thrower
|
Sprinkler
|
Loading
machine
|
1988
|
26.806
|
1.576
|
10.343
|
5.370
|
4.237
|
10.490
|
2.534
|
4.851
|
20.182
|
1990
|
26.000
|
1.343
|
8.339
|
4.370
|
3.852
|
8.589
|
2.373
|
4.027
|
17.800
|
1992
|
23.009
|
1.236
|
6.720
|
3.184
|
2.987
|
6.846
|
1.832
|
2.928
|
15.255
|
1993
|
20.800
|
1.140
|
5.491
|
2.626
|
2.737
|
5.251
|
1.635
|
2.262
|
13.823
|
1994
|
18.200
|
1.080
|
5.365
|
2.567
|
2.692
|
5.298
|
1.319
|
2.206
|
13.240
|
1995
|
15.160
|
949
|
5.216
|
2.307
|
2.018
|
5.265
|
1.084
|
1.905
|
12.860
|
1996
|
15.240
|
996
|
5.232
|
2.335
|
2.064
|
5.483
|
1.192
|
1.628
|
12.371
|
1997
|
17.583
|
1.018
|
5.367
|
2.340
|
1.910
|
5.617
|
1.230
|
1.498
|
12.110
|
1998
|
17.240
|
969
|
4.190
|
1.750
|
1.870
|
5.083
|
949
|
1.450
|
10.353
|
1999
|
18.147
|
1.064
|
4.434
|
2.346
|
1.912
|
5.610
|
1.030
|
1.428
|
10.240
|
2000
|
17.199
|
1.002
|
4.528
|
2.216
|
1.575
|
5.600
|
709
|
1.102
|
9.398
|
2001
|
|
|
|
|
|
|
|
|
|
Source:
The Ministry of Agriculture and Food
Food consumption in
Georgia (1999)
|
Kg per capita
|
Scientific
standard,
Kg
|
Consumption as
% Of standard
|
Bread, flour,
grouts, legumes
|
141,1
|
125
|
113
|
Meat & meat
products
|
19,8
|
78
|
25
|
Milk and milk
products
|
209
|
405
|
52
|
Eggs, pieces
|
124,6
|
232
|
54
|
Fish and canned
fish
|
1,3
|
10,2
|
13
|
Sugar
|
24,8
|
40
|
62
|
Margarine &
other fats
|
9,0
|
9
|
100
|
Potatoes
|
47,6
|
110
|
43
|
Vegetables,
melons
|
66,8
|
130
|
51
|
Fruit and grape
|
43,5
|
90
|
48
|
Source: State
Department for Statistics of Georgia
Consumption of
energy, fat and albumen by population in Georgia
Index
|
Measurement
|
Dwelling
minimum
|
In rational
nourishment conditions
|
Actual 2000 year
|
Energy
|
KW in day and
night
|
2.250
|
3.200
|
2630
|
Albumen
|
Gr. in day and
night
|
74
|
100
|
|
Fat
|
Gr. in day and
night
|
57
|
130
|
|
Source:
Gordeev A, MSXJ, 2-2000, food consumption condition-t.2
Privatisation in
Agriculture of Georgia (1998)
|
Total
Area
thsd. ha
|
Including
|
|
|
Private
|
Rent
|
State property,
%
|
|
|
thsd. ha
|
%
|
thsd. ha
|
%
|
|
Arable land
|
785,0
|
431,9
|
55,0
|
255,9
|
32,6
|
12,4
|
Perennial plants
|
277,5
|
185,7
|
66,9
|
31,0
|
11,2
|
21,9
|
Meadows
|
140,6
|
47,6
|
33,9
|
28,6
|
20,3
|
45,8
|
Pastures
|
1788,0
|
124,5
|
7,0
|
441,4
|
24,7
|
68,4
|
T o t a l
|
2991,1
|
789,7
|
26,4
|
756,9
|
25,3
|
48,3
|
Privatization in
Agriculture of Georgia (2001)
|
Total
Area
thsd. ha
|
Including
|
|
|
Private
|
Rent
|
State property,
%
|
|
|
thsd. ha
|
%
|
thsd. ha
|
%
|
|
Arable land
|
792,9
|
434,8
|
54,8
|
257,5
|
32,5
|
12,7
|
Perennial plants
|
269,3
|
181,8
|
67,5
|
31,6
|
11,7
|
20,8
|
Meadows
|
142,3
|
41,3
|
29,0
|
57,1
|
40,1
|
30,9
|
Pastures
|
1795,8
|
84,3
|
4,7
|
593,4
|
33,0
|
62,2
|
T o t a l
|
3019,7
|
762,1
|
25,2
|
939,6
|
31,1
|
43,6
|
Source: Source:
State Department of Land Management, Land Bal; ance for 04.2001
[GFA/KfW, 38]
Farm Structures
Farm type
|
Number of
entities
|
Total area in ha
|
Average farm size
in ha
|
Families with
private land
|
1 055 200
|
762 100
|
0,72
|
Families and
groups with rented land
|
31 900
|
352 000
|
11,03
|
Legal entities
with rented land
|
6 300
|
587 600
|
93,27
|
Source: State
Department of Land Management, Land Balance for 04.2001
Share of private
farms in agricultural output (per cent)
|
1990
|
1995
|
1996
|
1998
|
2000
|
Cereals and
bean crops
|
26
|
79
|
78
|
88
|
94
|
Of which:
|
|
|
|
|
|
Winter
wheat
|
0,1
|
26
|
20
|
73
|
89
|
Maize
|
62
|
95
|
94
|
94
|
96
|
Bean
crops – total
|
62
|
95
|
98
|
98
|
99
|
Sunflower
seeds
|
1
|
25
|
52
|
69
|
81
|
Soy beans
|
3
|
50
|
6
|
82
|
96
|
Potatoes
|
49
|
97
|
96
|
90
|
99
|
Vegetables
|
59
|
97
|
95
|
87
|
99
|
Melons
|
52
|
86
|
77
|
62
|
99
|
Fruit
|
80
|
99
|
99
|
99
|
99
|
Citruses
|
83
|
97
|
95
|
98
|
99
|
Grapes
|
45
|
94
|
97
|
97
|
99
|
Tea leaves
|
7
|
47
|
36
|
45
|
34
|
Total output
|
48
|
|
|
|
94
|
Source:
Georgian Agriculture 2000, p.36
Share of private
farms in agricultural output (per cent)
|
1988
|
2000
|
Grain
|
25
|
94
|
Sunflower seeds
|
1
|
81
|
Soya –beans
|
2
|
96
|
Tobacco
|
17
|
99
|
Potatoes
|
43
|
99
|
Vegetables
|
47
|
99
|
Melons
|
65
|
99
|
Fruits
|
78
|
99
|
Citruses
|
77
|
99
|
Grapes
|
50
|
99
|
Tea
|
7
|
34
|
Total output
|
50,1 (1985),
48,0(1990)
|
94,0
|
Source:
Georgian Agriculture 2000
Privatisation in
Georgian Agriculture
The least
|
In private
position, %
|
|
1986
|
2001
|
Agricultural
lands
|
5,6
|
25,2
|
Of which: Arable
|
12,3
|
54,7
|
Perennial
plants
|
23,7
|
63,8
|
Meadows
|
1,4
|
29,0
|
Pastures
|
0
|
4,7
|
Cattle
|
58,9
|
99,4
|
Of which milk
cows and she-buffalo
|
71,0
|
99,6
|
Pig
|
54,2
|
99,8
|
Sheep and goat
|
44,5
|
95,6
|
Horse
|
74,0
|
98,9
|
Bird and wing
|
39,7
|
99,0
|
Poultry
|
15,6
|
100
|
Bee family
|
45,5
|
100
|
Source:
Georgian Agrostatistic 2000, Tbilisi, 2001. – p
Agriculture in
Georgian Export (2001)
Export Position
|
Million US$
|
Percentage and
Place
|
General Export
|
320028,8
|
100,0
|
Incl.: Wine
|
32195,3
|
10,1 (3)
|
Mineral
Water
|
11663,4
|
3,6 (7)
|
Nuts
|
9843,5
|
3,1 (9)
|
Source:
SDS
Import of Main Food
Products (2001)
Import Position
|
Million US $
|
Percentage and
Place
|
General Import
|
684097,5
|
100,0
|
Incl.: Sugar
|
24105,1
|
3,5 (4)
|
Tobacco
Wares
|
24065,2
|
3,5 (5)
|
Meal
|
14792,9
|
2,2 (8)
|
Wheat
|
11186,1
|
1,6
(10)
|
Source:
SDS; * - estimate
Agricultural Export
and Import
Year
|
Export
|
Import
|
Turnover
|
1995
|
9536,4
|
11652,1
|
21188,5
|
1996
|
14977,3
|
72917,9
|
87895,2
|
1997
|
12388,0
|
68032,4
|
80420,4
|
1998
|
40918,2
|
268955,5
|
309873,7
|
1999
|
102171,0
|
436740,9
|
538911,9
|
2000
|
139554,5
|
529371,8
|
668926,3
|
Dynamic of Agrarian
Export, 1997-2001 (mln US$)
|
1997
|
1998
|
1999
|
2000
|
2001
|
Tea
|
18,5
|
8,9
|
11,4
|
6,1
|
5,8
|
Citruses
|
9,1
|
9,5
|
1,9
|
2,5
|
1,6
|
Alcoholic drinks
(instead wine)
|
5,2
|
5,5
|
5,5
|
4,0
|
5,9
|
Nuts
|
5,3
|
9,4
|
15,4
|
19,3
|
9,8
|
Wine
|
12,5
|
15,4
|
14,6
|
29,1
|
32,2
|
Mineral waters
|
18,5
|
7,2
|
2,6
|
9,5
|
15,2
|
Total export
|
239,8
|
192,3
|
238,2
|
329,9
|
320,0
|
Source: IMF (account
No.211, 11.2001, pg.123;) in red State Statistic Department
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dynamic
of Agrarian Import, 1997-2001 (mln US$)
|
1997
|
1998
|
1999
|
2000
|
2001
|
Sugar
|
39,1
|
16,2
|
16,2
|
24,6
|
24,1
|
Tobacco wares
|
107,8
|
120,0
|
35,2
|
29,4
|
28,8
|
Wheat and flour
|
37,1
|
26,5
|
14,8
|
20,3
|
28,2
|
Beer
|
3,1
|
0,8
|
0,1
|
0,1
|
0,1
|
Bread products
|
57,2
|
31,8
|
15,5
|
21,9
|
17,3
|
Vegetable oil
|
2,2
|
4,7
|
1,1
|
1,0
|
3,4
|
Poultry meat,
eggs
|
10,2
|
12,3
|
14,5
|
11,0
|
10,3
|
Coffee
|
9,0
|
5,4
|
5,0
|
4,3
|
2,0
|
Total import
|
941,7
|
884,3
|
601,9
|
650,7
|
684,1
|
Source:
State Department of Statistic s; IMF(account No. 211, 11.2001,
pg.124);
Investments in Fixed
Capital
Year
|
Investments in
Fixed Capital, total,Mln GEL
|
Of which Foreign
Investments
|
Share of
Agriculture, %
|
|
|
Mln GEL
|
% of Total
|
|
1995
|
127
|
42
|
33,9
|
0
|
1996
|
170
|
86
|
50,6
|
0
|
1997
|
266
|
180
|
67,7
|
0
|
1998
|
512
|
401
|
78,3
|
0,04
|
1999
|
364
|
169
|
46,4
|
1,7
|
2000
|
349
|
119
|
34,1
|
0,4
|
Source: SDS,
25.01.2001
Foreign investments
in fixed capital by fields and years
(in actual prices,
mln Lari)
|
1995
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
Foreign
investments
|
42,9
|
86,4
|
179,9
|
401,0
|
168,6
|
119,0
|
128,2
|
The same in
US$
|
33,2
|
68,5
|
138,6
|
271,2
|
83,1
|
60,2
|
62,2
|
Of which:
Agriculture
|
-
|
-
|
-
|
0,2
|
6,0
|
1,3
|
|
Food
industry
|
2,6
|
3,2
|
4,4
|
19,9
|
14,8
|
17,6
|
|
The same Gagua
(EK 3/4/00
|
|
3,455
|
4,902
|
21,714
|
|
|
|
Sum
|
2,6
|
3,2
|
4,4
|
20,1
|
20,8
|
18,9
|
|
% of Foreign
Investments
|
6,1
|
3,7
|
2,4
|
5,3
|
12,3
|
15,9
|
|
Source:
Investment activities in Georgia, State Statistic Department, 1999
Most
Exportable Agricultural Products.
Georgian
Wines. Georgia is known as the birthplace of viticulture and
winemaking and has 5000 years of wine culture. The rich land, hot sun
and hard work have developed about 500 varieties of wine in Georgia.
According to the
State Department of Statistics exports of different types of Georgian
wine during first nine month of the 2001 made up 18186,5
thousand USD which is 7,8 percent of the total Georgian exports.
At
the end of the 20th century, the collapse of the Soviet
Union has caused an economic decline in Georgia, which negatively
affected the Georgian wine sector. To be more divcise – the
overall territory of vineyards has decreased by 50%, (1990 –
112,6 thousand hectares, 2000y – 60,5 thousand hectares). This
tendency was mainly caused by the following reasons: lack of enough
funds among farmers to purchase chemicals, technical devices and
machines for vine cultivation, also huge numbers of farmers had to
convert their vineyards into land to grow edible products such as
corn, vegetables, and grain.
In
addition, from the mid 1990s the tendency of vineyard rehabilitation
has been quite dynamic, still the total area of vineyards is far less
than it was even 20 years ago.
Table
# 1 Tendency of wine sector development for the last ten years
Sector
|
Measure
|
1981-85
average per year
|
1986-90
average per year
|
1990
|
1995
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
Total
area of vineyards
|
(1000)
Hectares
|
137,4
|
116,1
|
112,6
|
94,2
|
94,0
|
72,0
|
70,0
|
60,1
|
60,5
|
61,5
|
Production
of grape
|
(1000)
Tones
|
768,0
|
712,0
|
691,0
|
160,0
|
342,0
|
370,0
|
370,0
|
219,0
|
210,0
|
170,0
|
Grape
Processing
|
(1000)
Tones
|
564,3
|
422,5
|
433,5
|
38,0
|
60,0
|
46,0
|
23,5
|
29,5
|
34,4
|
19,1
|
Production
of wine materials
|
(1000)
decaliters
|
21969,0
|
14997,0
|
16283
|
3670
|
2223
|
3121,6
|
2303,8
|
1859,2
|
1816
|
1900
|
Production
of champagne and sparkling wines
|
(1000)
decalitres
|
1375,7
|
1526
|
1451
|
49,2
|
94,6
|
75,6
|
40,3
|
64,7
|
87,9
|
88,35
|
Production
of Brandy
|
(10000
decaliters
|
1563
|
1865
|
2165
|
158
|
135
|
82.,3
|
37,8
|
30,4
|
70,6
|
71,0
|
Production
of the liqueur
|
(10000decaliters)
|
937.0
|
523,0
|
822
|
103
|
132
|
251
|
112,7
|
473,0
|
430,0
|
569,0
|
Source:
Samtrest, Ministry of Agriculture.2002
Even
though the Georgian wine sector is famous for its 500 traditional
grape varieties, the vast majority is currently grown and available
only in limited areas and numbers. Traditionally in accordance with
climate and soil characteristics – Georgia is divided into 5
main wine producing regions. Kakheti, Kartli, Imereti,
Racha-lechkhumi and the Black Sea Subtropical zone.
In
accordance with the development and strength of the wine sector
Kakheti could be easily considered as the leader. The region is
characterized by huge variety of grapes and assortment of wine.
From
the structural point of view, 80% of Georgian vineyards is allocated
to white grapes: Rkaciteli amounts to almost 75% of all white wines
and the remaining 25% is allocated to Cicka, Colikauri, Mcvane, and
Tetra. The dominant type in red grapes is divsented by Saperavi which
holds 70%. The remaining 30% is allocated to the following red
grapes: Aleksandriuli, Mijuretuli, Ojaleshi, and Vaios Saperavi.
Table
# 2 below indicates the total area by regions (1000 hectares) as of
year 2001.
Region
|
State
Vineyards
|
Private
Vineyards
|
Total
|
Kakheti
|
1,35
|
43,73
|
45,08
(~ 75%)
|
Kartli
|
0,18
|
5,83
|
6,01
(~10%)
|
West
Georgia
|
0,27
|
8,74
|
9,01
(~15%)
|
Total
|
1,8
|
58,3
|
60,1
(100%)
|
Source:
Ministry of Agriculture, 2002
Table
#3 below indicates the information on main types of Georgian grape,
as of 2001
Species
of grapes
|
Colour
|
Regions
of divvalent
|
Sugar
content (%)
|
General
acidity (%)
|
Yield
of Grapewine (kg)
|
Aladasturi
|
Red
|
Chokhatauri,
Vani, Bagdadi
|
19,5-20,0
|
8,8-9,2
|
2,0-2,5
|
Aleksandreuli
|
Red
|
Ambrolauri,
Tsageri, Oni
|
22.0-23,0
|
7,0-7,5
|
1,5-2,0
|
Chkaveri
|
Red
|
Chokhatauri,
Ozurgeti
|
19,5-21,0
|
8,1-9,6
|
1,8-2,0
|
Mtsvane
|
White
|
Telavi,Sagarejo,
Akhmeta
|
21,5-22,0
|
9,5-10,0
|
1,5-2,0
|
Ojaleshi
|
Red
|
Martvili,
Tsageri
|
21.0-22,0
|
9,0-9,5
|
1,4-1,6
|
Rkatsiteli
|
White
|
Kakheti
|
19,0-20,-
|
6,0-6,5
|
1,4-1,5
|
Saperavi
|
Red
|
Kakheti
|
20,0-22,0
|
7,0-8,5
|
1,5-1,7
|
Tetra
|
White
|
Ambrolauri
|
20,0-22,0
|
7,5-8,5
|
1,5-1,7
|
Tsitska
|
White
|
Imereti,
Lanchkhuti
|
18,5-20,5
|
8,5-10,0
|
1,5-2,0
|
Tsolikauri
|
White
|
Imereti
|
19,0-21,5
|
9,0-10,5
|
1,5-2,0
|
Usakhelauri
|
White
|
Tsageri
|
19,0-21,0
|
7,5-9,0
|
1,4-1,8
|
Vaios
Saperavi
|
Red
|
Keda
|
20,0-20,5
|
8,5-9,0
|
2,4-2,8
|
Source:
Samtrest, Ministry of Agriculture, 2002
Today
the production of two main types of grapes per hectare of land is the
Rkaciteli – 7.0-8.0 tons, and the Saperavi – 5.0-6.0.
These numbers are can increase by 25-35 % under normal working
conditions and with all necessary tools and machinery readily
available.
By
taking into consideration the fact that during the grape processing
period the market price for one kilogram of white grape ranges from
$0,10 to $0,20, which is slightly above of its base price, then
accordingly it could be forecasted that in the case of an increase in
the volume of grapes the price per kilo will drop and the farmer’s
revenue will increase, thus creating the ability for the farmer to
procure some necessary tools, chemicals and machinery and increase
the volume of his grapes for the next season. This could lead to the
rehabilitation and positive redevelopment of the whole Georgian wine
sector, though it should be mentioned that this positive tendency
will not be implemented without sophisticated grape processing
factories and new export markets.
In
Table #1 it is clearly indicated that during the first part of last
decade of the 20th century there was a huge drop in the
volume of processed grape. This was mainly caused by the following
reasons: Weak economic condition of the country, loss of traditional
Russian market and huge amount of fake vintage Georgian wines, both
in the Georgian and Russian markets. It should be mentioned that
during the same period both farmers and wine factories had huge
amounts of grapes in their warehouses, which did not find its path
towards wine, simply because of the aspects mentioned above. And this
is happening in Georgia – a country, which during the Soviet
period was producing 55% of the total vintage wines and more than 25%
of brandy in the USSR.
Despite
all the negative factors mentioned above, in the second part of last
decade of the 20th century developmental steps ahead were
made in the Georgian wine sector, which on its behalf has led to the
participation of foreign investors in the sector. The positive
aspects were mainly caused by the fact that a new generation
businessmen have acquired western knowledge of management and
marketing, the consumer’s nostalgia for Georgian wines, and the
government’s support. Lately, the participation of foreign
companies is getting clearly noticeable – both in the fields of
wine-making and in establishing new vineyards.
As a result, the
number of local Georgian wine-making companies could be easily
outlined in accordance with their financial strength, good marketing
campaign, progressive management and export volume. These companies
are: GWS (Georgian wines and spirits), “Telavi wine cellar”,
“Akhasheni”, “Tbilwine” “Vaziani”,
“Kinzmarauli”, “David Sarajishvili and Eniseli”,
“Okami”, “Teliani Veli”, “Rachuli
Gvino” and “Zmebi askaneli”.
Mineral and
Spring Waters. According to the State Department of
Statistics exports of different types of Georgian mineral waters
during the first nine months of 2001 made up 6646,9 thousand USD
which is 2.8 percent of the total Georgian exports.
One of the biggest
assets – essential for the resort development in the country is
redivsented by mineral waters. In Georgia almost all kinds of mineral
water can be found, with more than 2,000 mineral springs, out of
which 1700 are natural phenomena and 300 are boreholes. Their
estimated total yield per day is 120 million liters. The most common
kind is a carbonic acid mineral water, the daily yield of which
amounts to approximately 60 million liters.
19[1]Structural
geologic and hydrochemical properties of the so-called geotechtonic
zones account for the distribution of various kinds of mineral waters
in Georgia. For instance, within the limits of the Main Range and the
Southern slope of the Greater Caucasus – cold, mostly carbonic
and hydrocarbonated waters divdominate. On Georgian Block the typical
water includes cold as well as thermal sulphide-methane and
nitric-methane, chloride and sulphate. Within the Adjara –Trialeti
system and the adjoining Somkhiti Block the following kinds of water
divdominate: carbonic acid hydrocarbonated or
chloride-hydrocarbonated as well as weak sulphide nitric,
sulphate-chloride or carbonate-bicarbonate.
Georgia has large
reserves of thermal water of various chemical compositions. The
territory occupied by Georgian Block and Adjara Trialeti System is
especially rich in them. Thermal radioactive (Radonic) mineral waters
are the main natural curative factors of the Tskaltubo and Tkvarcheli
Resorts. So-called hyperthermal waters, forming a class by themselves
are extracted from the earth’s deep levels by boring. The main
pools of these waters are: Tsaishi (Temp 81-82 C), Kvaloni (Temp 94
C), Kindghi (103 C), Khorga (Temp 110 C). Hyperthermal waters are
mostly used for heating purposes.
Drinkable mineral
waters are used for health-restoration not only at resorts, but also
outside them in the form of bottled mineral waters. Such as Borjomi,
Nabeglavi, Sairme, Ucera, Djava, and Zvare.
Borjomi
Mineral Water. The Borjomi resort is considered as one of the
most spectacular locations in Georgia. It is located at 950 meters
above sea level between the evergreen slopes of the Meskheti and
Trialeti Ridges.
Besides its
beautiful nature and climate, the Borjomi region is famous for its
mineral waters, which redivsent the other major natural curative
factor of this place. Instead of natural springs known since older
times, gusher-boreholes are being used at divsent.
In terms of chemical
composition the mineral waters are of acidulous, hydrocarbonate,
sodium variety, containing 0.5 to 1.5 g/l of free carbon dioxide.
They also contain ions of chlorine and small amounts of bromine,
lithium, barium and some other substances. Temperature of the water
in various springs ranges from +17 to 38 C. There are ten capped
boreholes at the resort wit a total yield of 700-800 thousand liters.
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mineral waters are
mainly used as a curative drink, for medical baths, inhalation, and
levage of stomach and intestine. They are used as a curative and
table drink outside the resort.
Borjomi mineral
water is the most popular mineral water available in the CIS. In the
1980s exports reached over 420 million bottles per year. However
Borjomi production and sales declined significantly between 1990-1995
due to the economic collapse in the former Soviet Union
In September of 1995
the Georgian Glass and Mineral Water company. N.V. (GG&MW) began
to produce Borjomi mineral water at two Soviet – era bottling
plants in Borjomi. A short period later the bottling plants,
pipelines and quality control systems were brought up to world
standards.
The Khashuri Glass
plant, located 30 km from Borjomi, has also been reconstructed. After
being purchased by GG&MW, the production process was modernized
and a new automated bottle-packaging system was installed.
In 1997, GG&MW
obtained the license and exclusive right to use the Borjomi name
until 2007. In order to restore Borjomi mineral water and make it
compatible with international standards, GG&MW found it essential
to cooperate with international financial institutions, such as: IFC,
EBRD, ING Barings, and TBC Group of Georgia.
GG&MW mainly
orients its exports towards the Russian Federation, Ukraine, Baltic
States, USA, and Israel, and it is considered as the biggest,
financially strongest and most progressive Borjomi bottling company.
Sairme Mineral
Waters. The Sairme resort is situated in the valley of the
Tsalabris tskali river 950 m above sea level and 55 km south of the
second biggest town in Georgia – Kutaisi. The nearby
mountainsides are overgrown with leaf bearing (oak, beech, etc.) and
also coniferous woods. The resort has been operating since 1930.
Climate of the region is moderately humid, subtropical, average
temperature of the air totals 8.8 C, the annual amount of
divcipitation makes up on average 1100mm, average humidity of the air
is 80%.
The word “Sairme”
in Georgian means “a place of deer”. In winter many deer
and roes used to come down to the mineral watering places from the
nearby woods, therefore the hunters called the place “Sairme.”
As it was mentioned
above, the Sairme resort is rich with mineral water springs –
the major natural curative factor of the resort. Sairme mineral
waters are known since the end of the 19th century. In
terms of their chemical composition, they are of acidulous
hydrocarbonate calcium-sodium kind of acidulous hydrocarbonate sodium
Borjomi – like variety. It has been established that “Sairme”
acidulos waters have a curative action against diseases of kidneys,
urinary tracts, and liver.
The only company
that bottles Sairme is the CARTU group. The company uses a German
bottling line and produces water in 1 liter PET and 0.33 and
0.5-liter green glass bottles. The only raw materials the company
imports are capsules for its bottles from Turkey, bottle caps from
Bulgaria and Turkey, and clay from Turkey. The company mainly orients
its export towards the FSU republics.
A new foreign
company with better experience in promotion and distribution could
easily enter the Sairme bottling market. This takes into
consideration the fact that CARTU has a normal license and is not the
exclusive company to bottle Sairme water.
Mitarbi
Mineral Water. The Mitarbi source is located near the Borjomi
resort and is surrounded by picturesque mountains in an unspoilt and
unpolluted environment. The debit of the water constitutes 40.000 M
per year.
Mitarbi was bottled
and very successfully marketed during Soviet times throughout the
USSR and in some foreign countries. Success to the waters came due to
their taste and curative features. These are colorless, odorless,
fully transparent waters with a mild taste.
Mitarbi is
divscribed in cases of chronic gastric diseases, stomach and duodena
ulcer in remission, chronic hepatitis, chronic cholecystitis, chronic
pancreatic disease, and diabetes.
Production and sales
of Mitarbi reached its peak in the late eighties, particularly annual
sales volume of Mitarbi then totaled 19 million bottles. After the
collapse of the USSR, due to severe political and economic
circumstances bottling of water was temporarily seized.
At divsent the CARTU
Group is the only company which has the ordinary type of bottling
license (which is not exclusive). The volume of output is low due to
promotional and sale problems. Accordingly, a newcomer with better
experience and knowledge of the potential markets for mineral waters
might find itself in a more advantageous position than CARTU.
Nabeglavi
Mineral Water. The Nabeglavi resort is located in the
Chokhatauri district, 35 km south of the district center and 50 km
from the railway station of Samtredia, in the valley of the Gubazeuli
river (a tributary of the Supsa river) at the foothills of the
Meskheti ridge and 470-490 m above sea level. The resort is protected
on the south by mountains covered with mixed woods (oak, beech,
hornbeam, fir, and pine).
The major natural
curative factors are mineral waters, which in terms of their chemical
composition fall into the category of acidulous hydrocarbonated
sodium waters with a salination of 7.5-8.0 g/l. They also contain
solicic acid, bromine and other biologically active substances.
Mineral waters are used for medicinal drinking and balneologic
procedures.
The company “Ckali
Margebeli” (Healthy Water) obtained a license for use of the
above mentioned water.
The company uses PET
type plastic bottles (1 L, 1.5-L capacity) and green colored glass
bottles (1 L). Presently the company is having problems with the
promotion and sale of the product, accordingly it is not working at
its full capacity and is looking for a foreign partner with
professional knowledge and expertise in the field of mineral waters.
Zvare Mineral
Water. The Zvare resort is located in the Orjonikidze
district, on the western slope of the Likhi Ridge (connecting the
lesser and great Caucasus mountains), 600-700 m above sea level, in
the valley of the Zvarula-River, 4 km away from the railway station
of Moliti. The nearby mountainsides are mainly covered with
leaf-bearing woods (oak, beech, hornbeam and other species).
Mineral water from
Zvare belongs to the class of acidulous, chloridehydrocarbonate,
calcium-sodium waters with a mineralization of 5-6 g/l. The daily
yield of springs is up to 20,000 litres.
Water is considered
beneficial for its health properties, it was traditionally used as a
refreshing beverage and, at the same time recommended for
prophylactics of intestine diseases and healing of metabolism
disorders.
The company ZVARE
Ltd. obtained an exclusive license on Zvare water production (its
license for abstraction and use is valid until 2009).
Presently the
company does not operate. It is looking for a foreign partner, who
would help it to update the available facilities, conduct
hydro-geological and other professional studies, construction works,
and purchase of transport facilities.
The Georgian law
dealing with all aspects of abstraction, development, exploitation of
natural reserves (water) is enacted. Water regulations are Western
oriented and cover the labeling, packaging and content of bottled
water. The only possible change in regulations could be connected to
inevitable transition towards international standards (ISO). In the
first place, changes are expected in the field of assessment and
quality control of water where the former Soviet State Standards
(GOST) are still binding.
The divsent
situation of the water market in Georgia and possibilities for
development of the water business (due to its unique properties;
significant intangible assets, experience of water production,
infrastructure and low cost base), and the general situation of the
international water market and other significant aspects leads one to
divdict the possibility of the successful operation of a newcomer in
the form of a strong foreign company.
Nuts.
The hazelnuts of Mediterranean origin have been well known in Georgia
since ancient times. Scientists conclude that this species of thick
hazelnuts originates from the Caucasus. Since the mid-1990s farmers
started a mass planting of hazelnuts in Western Georgia, particularly
in the Black Sea coastal region and in Eastern Georgia in the region
of Kakheti. It should be mentioned that since 1998 Georgian nuts have
become one of the country’s major export products.
One of the
advantages of Georgia’s agricultural sector is the high
percentage of produce that is organic in nature. The country has not
been using fertilizers and pesticides for some 10 years. Now the
country is divparing a certification process whereby all farmers
producing organic food will have their farms approved and certified
as organic. This is expected to generate new interest in Georgia’s
agricultural sector, particularly from markets in the West where
demand for organic food is increasing far beyond supply.
Georgian Tea.
Georgia is a northerly tea growing country with a relatively shorter
growing season than other tea producing nations. Tea is grown in West
Georgia in Guria, Samegrelo, Ajara, and Imereti Regions. According
to official statistics for 200120[2],
these regions possess slightly more than one-quarter of the country’s
total 564,518 hectares of agricultural land.
At independence in
1991, the country had 64,500 hectares of state-owned tea plantations.
Civil war, decline in demand from former markets in the FSU and the
loss of state financing have caused much of the area formerly planted
to tea to be abandoned. As of January 2002, 37,296 hectares of
agriculture land were planted to tea. Tea plantations now occupy 65
percent of Guria’s total agricultural land, 27 percent of
Samegrelo’s total agricultural land, 58 percent of Ajara’s
total agricultural land and 6 percent of Imereti’s total
agricultural land (Table 1). Following the abolition of collective
agriculture, land under tea plantations has mostly been privatized in
Guria, while in Samegrelo, Ajara, and Imereti most of the tea
plantations have been leased out.
Tea leaf production
data in the early 1990s is extremely unreliable and so not reported
here. It is clear that production levels have fallen greatly from
those of the late 1980s. Production has generally continued to drift
downward since the mid-1990s (Tables 2-3, Figures 1-2).
According to the
Ministry of Agriculture and Food, as of January 1, 2001 there were
146 tea processing enterprises in Georgia (including Abkhazeti) with
a total annual capacity of 722,800 tons. There were 50 tea factories
in Samegrelo, 30 in Guria, 16 in Imereti, and 18 in Ajara. Forty-six
of the 50 enterprises in Samegrelo had been privatized, while 30, 11
and 1 enterprises had been privatized in Guria, Imereti, and Ajara,
respectively. These enterprises mostly use worn-out, obsolete
equipment and are in poor financial condition. Some of these
enterprises are reported to have vertically integrated operations,
while others operate on a contractual basis with tea growers. As
might be expected, almost all tea grown appears to be sold to the
factories so that the processing trends follow those of production
(Table 4, Figure 3). The nature of tea also means that the producers
are much more dependent on the processors than are, say, owners of
vineyards. Homemade wine is a reasonable and widely practiced option
for primary producers; homemade tea is not.
During 1994-2001
Georgia was a net exporter of tea, although it also was a substantial
importer and the balance of trade appears to be turning against
Georgia (Table 5, Figure 4). In the early and mid 1990s the major
importers of Georgian tea were in the FSU, but since 1997 geographic
coverage has widened as processors developed new markets. Exports of
Georgia tea to US, Germany, and Poland show an increase (Table 6).
Tea remains an
important cash crop among rural households in most of West Georgia.
The share of households in total tealeaf production in 1999 was 43
percent, in 2000, 34 percent, and 93 percent in 2001 (Table 7).
Table 1. Land
under Tea Plantations, 2001
Region
|
District
|
Total Agricultural
Land, ha
|
Total
Area under Tea Plantations,
ha
|
Area
of Tea Plantations Damaged, ha
|
Area
of Usable Plantations,
ha
|
Percent
of Plantations Damaged, %
|
Share
of the Region in total agricultural land of Georgia
|
Area
of Land under Tea as Percent of Total Agricultural Land in
Region
|
Ajara
|
Regional
Total
|
9590
|
5,518
|
1,674
|
3,844
|
30%
|
1.70
|
58
|
|
|
|
|
|
|
|
|
|
Samegrelo
|
Zugdidi
|
10,169
|
5,061
|
654
|
4,407
|
13%
|
1.80
|
50
|
|
Martvili
|
9,334
|
2,721
|
330
|
2,391
|
12%
|
1.65
|
29
|
|
Senaki
|
9,699
|
1,202
|
324
|
878
|
27%
|
1.72
|
12
|
|
Chkhorotsku
|
4,830
|
2,492
|
463
|
2,029
|
19%
|
0.86
|
52
|
|
Tsalenjikha
|
3,886
|
2,993
|
0
|
2,993
|
0%
|
0.69
|
77
|
|
Abasha
|
9,654
|
67
|
67
|
0
|
100%
|
1.71
|
1
|
|
Khobi
|
10,340
|
1,438
|
0
|
1,438
|
0%
|
1.83
|
14
|
|
Regional
Total
|
58524
|
15974
|
1838
|
14136
|
12
|
10.37
|
27
|
|
|
|
|
|
|
|
|
|
Guria
|
Ozurgeti
|
5,501
|
7,358
|
890
|
6,468
|
12%
|
0.97
|
|
|
Lanchkhuti
|
7,864
|
1,988
|
445
|
1,543
|
22%
|
1.39
|
25
|
|
Chokhatauri
|
3,720
|
1,786
|
518
|
1,268
|
29%
|
0.66
|
48
|
|
Regional
Total
|
17085
|
15,974
|
1,838
|
14,136
|
12%
|
3.03
|
65
|
|
|
|
|
|
|
|
|
|
Imereti
|
Tskaltubo
|
12,025
|
1,141
|
385
|
756
|
34%
|
2.13
|
9
|
|
Tkibuli
|
3,811
|
1,073
|
200
|
873
|
19%
|
0.68
|
28
|
|
Chiatura
|
7,323
|
246
|
38
|
208
|
15%
|
1.30
|
3
|
|
Vani
|
5,335
|
130
|
70
|
60
|
54%
|
0.95
|
2
|
|
Zestafoni
|
6,127
|
38
|
0
|
38
|
0%
|
1.09
|
1
|
|
Terjola
|
7,741
|
120
|
39
|
81
|
33%
|
1.37
|
2
|
|
Samtredia
|
8,103
|
380
|
0
|
380
|
0%
|
1.44
|
5
|
|
Khoni
|
6,971
|
1,544
|
790
|
754
|
51%
|
1.23
|
22
|
|
Regional
Total
|
73065
|
11,132
|
1,853
|
9,279
|
17%
|
12.94
|
6
|
|
|
|
|
|
|
|
|
|
Georgia,
Excluding Abkhazeti
|
TOTAL
|
564,518
|
37,296
|
6,887
|
30,409
|
18%
|
28%
|
7
|
Source: State
Department of Statistics of Georgia, author's estimates. The data
for Ozurgeti clearly contain an error.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Table 2. Annual
Tea Leaf Production in Georgia, 1985-2001
(tons)
-
1985
|
581,200
|
1990
|
501,700
|
1994
|
60,700
|
1995
|
38,500
|
1996
|
34,000
|
1997
|
33,200
|
1998
|
47,200
|
1999
|
60,330
|
2000
|
23,999
|
2001
|
23,000
|
Source: State
Department of Statistics of Georgia
Table 3. Tea Leaf
Production by Regions, tons
|
Ajara
|
Imereti
|
Samegrelo
|
Guria
|
Georgia
|
1999
|
7,326
|
6,693
|
28,791
|
17,520
|
60,330
|
2000
|
2,914
|
2,662
|
11,453
|
6,970
|
23,999
|
2001
|
1,924
|
1,050
|
12,518
|
7,508
|
23,000
|
Source: State
Department of Statistics of Georgia, author's estimates
Table
4. Tea Processing, 1994-2001
(tons)
|
1994
|
1995
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
First Stage
Processing,
Including
|
13,424.3
|
7,992.0
|
8,895.7
|
9,158.5
|
9,988.9
|
12,897.8
|
4,793.1
|
4,478.6
|
Black Baikhi
|
|
6,732.0
|
5,804.7
|
6,152.6
|
8,360.7
|
11,789.8
|
4,361.9
|
4,219.4
|
Green Baikhi
|
|
1,260.0
|
3,091.0
|
3,005.9
|
1,628.2
|
1,108.0
|
431.2
|
259.2
|
Natural Tea,
Including
|
4,473.3
|
4,230.0
|
3,747.4
|
7,759.2
|
4,871.0
|
4,509.0
|
3,014.7
|
3,765.1
|
Packed
|
4,003.9
|
1,997.2
|
2,796.2
|
6,420.0
|
2,955.7
|
2,648.4
|
1,904.8
|
2,695.5
|
Green Break
|
469.4
|
2,232.8
|
951.2
|
1,339.2
|
1,915.3
|
1,860.6
|
1,109.9
|
1,069.6
|
Granulated Tea
|
|
|
|
144.0
|
890.1
|
605.3
|
474.1
|
658.7
|
Liquid Tea
|
|
|
|
|
|
|
39.0
|
58.0
|
Total
|
17,897.6
|
12,222.0
|
12,643.1
|
17,061.7
|
15,750.0
|
18,012.1
|
8,320.9
|
8,960.4
|
Source: State
Department of Statistics
Table 5.
Georgia’s Tea Trade
|
Imports, USD
|
Exports, USD
|
Coverage Ratio,
%
|
1994
|
12439
|
11555495
|
929.0
|
1995
|
157876
|
8380262
|
53.1
|
1996
|
151898
|
16814164
|
110.7
|
1997
|
292190
|
13872490
|
47.5
|
1998
|
434761
|
8918643
|
20.5
|
1999
|
380428
|
11394714
|
30.0
|
2000
|
536702
|
6084280
|
11.3
|
2001
|
544454
|
5792750
|
10.6
|
Source: State
Department of Statistics, author’s estimates
Table 6. Top 10
Export Destinations of Georgian Tea, 1994-2001
|
1994
|
1995
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
1
|
RUS
|
TKM
|
TKM
|
RUS
|
RUS
|
RUS
|
RUS
|
RUS
|
2
|
UKR
|
RUS
|
RUS
|
UZB
|
UZB
|
UKR
|
UKR
|
POL
|
3
|
BLR
|
UKR
|
UZB
|
TKM
|
DEU
|
DEU
|
DEU
|
USA
|
4
|
TKM
|
KGZ
|
TJK
|
TJK
|
TJK
|
TKM
|
USA
|
DEU
|
5
|
UZB
|
KAZ
|
UKR
|
MNG
|
SYR
|
USA
|
MNG
|
UKR
|
6
|
TJK
|
UZB
|
KAZ
|
UKR
|
NLD
|
UZB
|
UZB
|
MNG
|
7
|
KAZ
|
TJK
|
MNG
|
POL
|
MNG
|
MNG
|
POL
|
UZB
|
8
|
TUR
|
MNG
|
AZE
|
KAZ
|
BLR
|
TJK
|
UKR
|
TKM
|
9
|
MDA
|
BLR
|
BLR
|
BLR
|
UKR
|
BLR
|
KAZ
|
IDN
|
10
|
POL
|
MDA
|
KGZ
|
KEN
|
KAZ
|
POL
|
TKM
|
TJK
|
Source: State
Department of Statistics, author’s estimates
Table7. Household
Contribution to Total Production
All of Georgia
excluding Abkhazia
|
1999
|
2000
|
2001
|
Production by
Households, tons
|
25,942
|
8,160
|
21,390
|
Total Production,
tons
|
60,330
|
23,999
|
23,000
|
Household Share
in Total Production, percent
|
0.43%
|
0.34%
|
0.93%
|
Source: State
Department of Statistics, author's estimates
Trade
Georgian
Foreign Trade Statistics. In 2002 Georgian foreign
trade turnover (registered) totalled US$1045,0 million, that is
104,6 % of divvious year's data for the appropriate period. From
this export is US$325,0 million (101,5% accordingly) and import
-US $720,0 million (106,1%). Negative trade balance of Georgian
trade for 2002 stood at US$395,0 million.
The
following table shows the trends in Georgia's trade balance:
|
Number
of Countries
Foreign
Trade Balance - US$ million
Negative
trade balance
Year
2001
88
378,8
Year
2002
89
454,2
Positive
trade balance
Year
2001
30
20,1
Year
2002
40
59,2
All
trade partners
Year
2001
118
358,7
Year
2002
129
395,0
|
In
2002 Georgia had a negative trade balance with 89 partner
countries, with whom the trade gap amounted 454,2 million US
Dollars in comparison with the last year when the same figure was
indicated by 378,8 million US $ with 88 partner countries. Georgia
had a positive trade balance of US $ 59,2 million with 40
countries, and in 2001 with 30 countries (positive balance of US $
59,2 million).
In
2002 the foreign trade with CIS countries have increased. The
30.6% of the trade gap covers these countries (29.7% for the same
period of the last year). The foreign trade with CIS countries
amounted US $ 4337.4 million in 2002 (the amount increased by
10.6% in comparison with the same period of the year 2001). CIS
countries share 41,9% of Georgia's foreign trade turnover, among
them exports share 48,7% and imports 38,8% (accordingly 39.6%;
45.1% and 37.0% - in the year 2001).
Trade
turnover with Russia reflected US $ 162.8 million and has declined
by 1.2% in comparison with the same period of the year 2001, and
Georgian foreign trade turnover with Russia have decreased by 0.9
per cent points from 16.5% to 15.6%.
Georgian
Foreign Trade: 2001-2002 (in US$ millions)
Georgia's
Top Ten Export Destinations in 2002 (in US$ millions)
Major
export products in 2002 (in US$ millions)
|
Construction
Overview of
Georgian Construction Sector. Georgian construction sector
mainly consists of civil, industrial, hydro-technical, transport, and
communication construction projects.
The construction
sector was established long before the formation of the country as a
legal state and has passed from primitive buildings to complicated
and sophisticated complexes. Throughout various stages of the
country’s development, buildings and other construction
projects reflect the period in which they were built. For nearly the
last two centuries Georgia was part of the Russian empire and the
Soviet Union, thus, the development of the construction sector was in
accordance with the laws and conditions accepted by Russia and the
FSU, i.e. massive construction of industrial facilities. During that
period the construction sector employed almost 250,000 people and
produced construction materials worth approximately US$1.5 million
annually.
After the collapse
of the Soviet Union, the Georgian construction sector ceased
development, which was mainly caused by the political, social and
economic conditions of the country (i.e. a coup, civil war, and armed
conflicts in Abkhazia and South Osetia), and also by non-efficient,
highly energy consuming technologies and outdated equipment and
machinery. As a result, almost one hundred percent of the
construction factories and facilities ceased functioning.
During the early
‘90s, when Georgia became independent and positioned itself
towards democracy and integration into the world economy, the
Georgian construction sector realized that it was totally undivpared
to meet the demands and standards of country’s development
phase. The main negative aspects characterizing such non-divparedness
were:
Non-efficient and
partially destroyed equipment and machinery.
Lack of investment
in majority spheres of construction (except private construction).
Weak management of
the sector from the government’s side.
Lack of
professional managers and specialists with knowledge of
international principles.
Great need of
specialized trainings for the staff.
Harsh economic
condition of scientific, projecting and architecture institutions.
Import of foreign
construction materials and workforce.
Among other
important factors, considering the importance and crucial character
of the construction industry for the country’s economic
development, the Georgian government made several positive steps
towards rehabilitation of the construction industry to create a
favourable investment environment including passing the law on
promotion and guarantee of foreign investment activities, and
instituting a process of restructuring and privatisation. A few
years ago the government of Georgia launched a process of
restructuring and privatisation of large Soviet era construction
enterprises. As a result, various non-efficient, illiquid and monster
enterprises have changed their organizational structure and been
converted into small cost and energy efficient, liquid plants.
Derived from the privatisation process the majority of state
construction companies have become private joint stock and limited
liability companies. In addition, a huge number of uncompleted
construction sites have been privatised and completed.
Main
Indicators of Development in the Construction Sector. The
slight revival and positive trends in the construction sector have
been noticed since 1995 – the period when the Georgian national
currency the Lari (GEL) was introduced.
The
table below indicates the main financial flow in the construction
sector during 1995-2002 (first nine months).
Year
|
Monetary
unit
|
Investment
in main capital
|
Government
investment
|
Construction
and engineering work
|
Personal
funds of population*
|
Foreign
investment
|
1990
|
Million
Rubles
|
2545
|
2233
|
1313
|
93
|
-
|
1991
|
|
2698
|
2435
|
1882
|
140
|
-
|
1992
|
|
12368
|
11521
|
8636
|
532
|
-
|
1993
|
Billion
Coupon
|
311
|
142
|
270
|
168
|
-
|
1994
|
|
55821
|
30769
|
41758
|
25000
|
-
|
1995
|
Million
Lari
|
127
|
65
|
90
|
19
|
43
|
1996
|
|
170
|
60
|
91
|
24
|
86
|
1997
|
|
266
|
67
|
114
|
19
|
180
|
1998
|
|
512
|
915
|
244
|
16
|
401
|
1999
|
|
364
|
119
|
248
|
76
|
169
|
2000
|
|
349
|
141
|
181
|
89
|
119
|
2001
|
|
362
|
201
|
101
|
33
|
128
|
2002
|
|
246
|
158
|
86
|
59
|
29
|
Source:
Ministry of Construction and Urbanization
*
The construction of dwellings in Georgia is mainly based on up-front
deposits made by people who will live there after the construction is
completed.
According
to the table investments in main capital from 1995-2002 constitutes
2396 million Georgian Lari (1109 million USD) which includes:
Government investment – 906 million GEL (419 million USD) –
37.8%, personal funds of the population – 335 million GEL (155
million USD) – 14.0%, foreign investment – 1155 million
GEL (534 million USD) – (48.2%). Derived from this data we can
state that investment in main capital shows a trend toward a positive
increase (+2.7) from 1995-2001 compared to 1995. In addition, the
increase in foreign investment is quite noticeable. This was mainly
due to the construction of the oil pipeline and Supsa oil terminal in
1998.
In
2002 the positive developments in the construction sector continue to
accelerate, resulting in construction of 545 buildings, among theses
are the construction of a new Marriott hotel, 62 stores, 38 gas
stations, and 12 food outlets (all in Tbilisi).
Market demand
(Construction Materials). Even
though several local construction material manufacturing plants have
been restructured and rehabilitated, the goods manufactured by them
do not have a high demand among Georgian customers. Mainly this is
due to low quality and narrow assortment. The only Georgian made
product of comparatively good quality is cement, produced by the
Rustavcement and Kaspicement companies. This situation redivsents a
good opportunity for U.S. firms to invest in and/or upgrade local
building materials manufacturing plants. Presently, product imported
from Turkey, Dubai, Iran and Russia occupies almost 95% of the
Georgian building materials market. Even though they are perceived to
be of a lower quality, the majority of people still buy them because
of the low price. Nevertheless, another Georgian customer segment,
the high income family, still divfers building materials made in the
U.S. or Europe, due to the high quality and regardless of the higher
price.
The
following imported materials are in the highest demand on the
Georgian market:
Ceramic
Products (tile, mats)
Insulated
American style windows, doors.
Various
colored wood and flooring materials.
Heat,
ventilation, air conditioning systems.
Roofing
materials
Varnish
paints
Plastic
tubes for water communication
Wallpapers
Lights
and bulbs
Vinyl
sidings
Due to the growing
wave of construction, a large market share still remains unoccupied
and is ready for new companies and potential investors. The
construction sector will play an essential and important role in
Georgia’s further economic development and integration into the
world economy.
Business
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Company
Registration and Licensing System
Company
Registration System
Enterprise
register. Registration of an enterprise is to be carried out
by the Court by making due records in the Enterprise Register. The
information concerning the registration is to be recorded into the
Register Card. The Register Card specimens are divsented below:
Registration card
(sample) for Limited Liability Companies (LLC)
Ser.
No.
|
Date
|
Subject
of activity and aggregate capital of the society
|
Name,
date and place of birth, occupation, address of partners
|
Name,
date and place of birth, occupation, address of directors
|
Name,
date and place of birth, occupation of members of the supervisory
council (if any)
|
Redivsentation
of directors
|
Trade
redivsentatives (procurators)
|
|
|
|
|
|
|
|
|
Registration card
(sample) for Joint Stock Companies (JSC)
Ser.
No.
|
Date
|
Subject
of activity and capital
|
Tapes
of shares; sharing
|
Name,
date and place of birth, occupation, address of directors
|
Name,
date and place of birth, occupation address of members of the
supervisory council
|
Redivsentation
of directors
|
Trade
redivsentatives (procurators)
|
|
|
|
|
|
|
|
|
The Law on
Entredivneurs provides that data on newly registered companies should
be published in the official newspaper. The Law also guarantees
information on any company entered into the enterprise register held
by courts be available to the public. Any person should be able to
view the records and obtain extracts from the registration file.
Procedure for
registering (establishing) an enterprise. Figure
4.1.1.1 provides an outline of the sequence of the procedures to
register and establish a business in Georgia.
Figure 4.1.1.1
Business Registration Procedures
*
Statistical Department
registration and stamp approval. Although the law no longer requires
these procedures, they are still being followed by some entities and
required by certain authorities due to uncertainty, lack of
information, and corruption.
In practice, the
entire registration process reportedly takes 2 to 3 weeks. However,
it is possible to register a company within few days by means of
unofficial payments.
Registration
with the Local Court. In accordance with the procedures set
forth in the Law on Entredivneurs, all legal businesses are required
to register at the local court that has jurisdiction over the legal
address of the enterprise. Further, all registered companies are
required to officially record any changes in their registration data.
In order to register
an LLC, the following documents must be submitted to a local court:
(1) Application form
signed by the founders. Application form must include:
Firm name (firm);
Organizational and
legal form;
Location (legal
address);
Subject of the
activity;
Information on the
start and end of the fiscal year;
For each founder -
the family name, first name, date and place of birth, occupation and
place of residence of the entredivneur;
Redivsentative
authorities.
(2) Charter (five
copies)
(3) Minutes of the
foundation meeting
(4) Founder’s
decision to set up the company
(5) Director’s
sample of signature
(6) Document
confirming the legal address of the company (this may be a lease
agreement, a certificate issued by manager of the company that
subleases the office space, or notarised consent of the owner of a
flat)
(7) Copy of the
company founder’s passport, if the founder is an individual
person; or a registration certificate (e.g., extract from the
register of enterprises), if the founder is a legal entity. If the
founder is a Georgian company, the certificate of the local court
should be less than 1 week old.
(8) The amount of
the authorized equity capital and the documents confirming payment of
at least 50 percent of the equity capital (a certificate from the
bank or, for in-kind contributions, an auditor’s assessment of
its value)
(9) A document
confirming payment of the registration fee.
To register a JSC,
the decision of the supervisory board to appoint directors is
required in addition to the above-listed documents.
The following
supporting documents are required to register a branch or a
redivsentative office:
(1) Charter of the
foreign company
(2) Decision of the
foreign company to set up the redivsentative office
(3) Document
certifying the solvency of the foreign investor (e.g., a letter from
a foreign bank or a foreign tax service)
(4) Bylaws of the
redivsentative office.
All registration
documents must be submitted in the Georgian language and must be
notarized. Foreign documents must be certified by an apostille21
or undergo a procedure of legalization and be translated by a
certified translator.
According to the
law, the courts are required to process registration applications
within 7 days. Registration of amendments to a charter or any other
changes to entries are to be processed within 7 days. No official
expedited service is available, but reportedly registration can be
performed in 1 day if the court registrar has the time and if an
additional unofficial payment is made (roughly 100–400 GEL).
Box II.2 provides a summary of the official registration fees.
A company receives a
court resolution when the company is registered. The law on
entredivneurs provides automatic registration by default if the court
fails to respond within 7 days.
If a company changes
its legal address to an address that falls within the jurisdiction of
another local court, the company is not required to change its court
registration and its registration file stays at the initial court of
registration. However, the company must re-register with the local
tax office that has jurisdiction over the new legal address.
Registration
Fees. Registration fees are determined by the company’s
legal form. The court stamp duty is currently $180 to register a JSC,
$80 to register a LLC, $90 to register a branch of a JSC, and $40 to
register a branch of a LLC. Fees for registering changes to entries
are half of the fee for registering the respective type of company
(i.e. $40 to register changes for an LLC and $90 for a JSC).
All the payments
charged for notarization of an enterprise’s charter are
different in each case and depend on the amount of the authorized
capital. The percentage of the amount to be paid is reduced with the
increase of the authorized capital and ranges from 3 to 0.05 per cent
of the authorized capital. The charge must not be less than GEL 25
and must not be more than GEL 50. It should be noted that a 20% VAT
is added to the sum charged for the notarization.
Peripheral services
can be provided by private lawyers and related professionals at
additional cost. Lawyer charge in the range of $300-600 to draft a
company’s charter and to provide advice. A notary public
typically charges about $30 to certify the documents and about $2 per
page to certify copies of the documents.
Taxation
Department Registration. In accordance with the Cabinet of
Ministers Decree 899 (December 31, 1994), within 10 days of
completing the company registration process, an investor must
register with the local office of the taxation department that has
jurisdiction over the legal company address. This registration
requirement applies to all tax types except the value-added tax
(VAT). VAT registration is required for all firms with total taxable
transactions greater than GEL 24,000.
A taxpayer
registration application package should contain the following
documents:
(1) Taxpayer
registration form (4 copies)
(2) Court resolution
showing company registration (notarised copy)
(3) Charter
(original or notarised copy)
(4) Minutes of the
foundation meeting (original or notarised copy)
(5) Decision to set
up the company (original or notarised copy)
(6) Director’s
sample of signature (notarised)
(7) Document
confirming the legal address of the company (original or notarised
copy).
In accordance with
Decree 899, the Taxation Department is required to issue a taxpayer
registration certificate within 10 working days. The compliance with
the 10-day limit depends on whether or not operations at local
taxation offices are computerized. There is no fee for taxpayer
registration.
Taxpayers are
assigned a 9-digit taxpayer identification number (TIN). The first
digit specifies the taxpayer type (1 is for an individual person, 2
is for a legal entity), the next 7 digits are sequential numbers
(each local tax office has its own block of 7-digit sequential
numbers), and the last digit is a control digit. There is no relation
between a court registration number and a TIN.
If a company
changes its legal address, opens a branch, changes bank accounts, or
makes any other changes that require registration at the enterprise
register, then the investor is required to notify the tax department
within 10 days of the change.
As of June 2001,
sole proprietorships are no longer required to register with the
courts. They need only to register with the relevant local taxation
office.
If a company’s
total taxable transactions over the divvious 12 months equal or
exceed 24,000 GEL, the company is required to register for VAT within
1 month of the change in tax liability status. A separate VAT
registration certificate is issued.
Stamp
Approval. In accordance with the amendments to the Law on
Entredivneurs (effective June 1, 2001), company stamps are no longer
required, and state institutions have been explicitly prohibited from
requiring a company to divsent a stamp for any purpose. Information
regarding this change in the law apparently has not been widely
disseminated because in July 2001, many companies and lawyers still
complied with the old requirements for company stamps. Further, it
appears that the police department continues to issue stamp approvals
(at a fee of 10 GEL) despite the change in the law.
Department for
Statistics Registration. Amendments to the Law on
Entredivneurs and the Administrative Code have eliminated the
requirement that a business must register with the Department of
Statistics. Under the new regulations, this requirement has been
replaced by a notification process between the courts and the
Department of Statistics. The new regulations may be summarized as
follows:
In accordance with
the Law on Entredivneurs,22
the courts are required to send copies of the court business
registration resolutions to the Statistical Department on a monthly
basis. This information should be submitted by the 5th day of every
month.
On June 19, 2001,
parliament amended the Law on Entredivneurs and abolished the
provision that the courts must assign tax and statistics codes when a
company has registered with the relevant bodies.
Amendments23
to the Administrative Code in July 2001 have removed the provision
that companies must provide a statistical code in order to open a
commercial bank account.
However, in
practice, companies throughout Georgia still go to the central bureau
of the statistical department in Tbilisi to register in order to
comply with the divvious provisions of the law.
Public
Availability of Information. Company registration data are
recorded in the registration card as approved under the law (see in
the above). The same format is used to respond to requests for
company registration information. The following information is
required to complete a registration card:
Name of the local
court
Court registration
number
Company name
Address
Activities
Equity capital
Names of
partner(s), their occupations, and addresses
Names of
director(s), their occupations, and addresses
Members of the
supervisory board, their occupations, and addresses (if a
supervisory board was established)
Redivsentation
powers of director(s)
Trade
redivsentative (procurator)
Legal status
Date of
registration
Remarks
As mentioned above,
a company may be registered in any one of 66 local courts throughout
Georgia.
Company
Licensing System
General.
The law of Georgia on "Licensing of Entredivneurial Activity"
adopted on 14 May, 1999 defines those business activities which can
be carried out only by licenses issued by the corresponding state
agencies.
The
law lists those types of business activities about which
corresponding state bodies must be notified. The law does not cover
export-import relations, environmental control and utilization of
natural resources, electric power, oil and natural gas, communication
and post services, where licensing procedures are regulated by
special legal acts.
Activities to
be Licensed and Licensing Agencies.
The types of business activities that require obtaining a license and
the respective state licensing agencies are as follows:
Insurance
activities and intermediary (agency) services in the field of
insurance – Insurance State Supervision Service of Georgia;
Banking activities,
activities of foreign currency exchange points – National Bank
of Georgia;
Production, repair
of and trading with arms and ammunition – Ministry of Justice
of Georgia (within the limits defined by National Security Council
of Georgia);
Air transportation
of passengers and goods or/and carrying out aviation related work at
the territory of Georgia, maritime transportation and hauling –
Ministry of Transport and Communications of Georgia;
Activities of the
regulated participants of the securities market (brokerage
companies, brokers, stock exchanges, central securities depositary
and securities registrars) – Ministry of Finance of Georgia;
Organizing
lotteries and other money-making games – Ministry of Finance
of Georgia;
Production of
medicines and substances that are subject to special control,
medicines used in veterinary, activities of health care
organizations – Ministry of Labor, Health and Social
Protection;
Activities of
diagnostic centers for technical examination of motor vehicles
–Ministry of Internal Affairs of Georgia;
Design -
construction works – Ministry of Urbanization and Construction
of Georgia (in the cases defined by the law);
Activities of
auditing firms – Parliamentary Council on Audit Activity of
Georgia;
Activities of
private educational institutions – Ministry of Education of
Georgia;
Production and
repair of metrological and measurement equipment – Department
of Standardization, Metrology and Certification of Georgia;
Production of food
products (including child's food products) and tobacco - Ministry of
Agriculture and Food of Georgia.
Notification
about Carrying Out Activities. The
following fields of activities are subject for compulsory
notification of the relevant state
agencies as defined in this paragraph:
Activities related
to divcious metals, divcious stones and their products –
Testing Supervisory Inspection of Ministry of Finance of Georgia;
Aero photographing
of the country's territory, creating state geodesic network, works
related to the publication of maps and plans – State
Department of Geodesy and Cartography;
Activities related
to job finding services (including abroad) - Ministry of Labor,
Health and Social Protection;
Geologic activities
- State Department of Geology;
Transportation of
passengers by a minicab – Relevant Department of local
government (self-government) authorities;
Activities of
public dining halls, which can simultaneously accommodate 25 persons
or more - Relevant Department of local government (self-government)
authorities.
The notification is
made as a statement, which includes:
For an individual –
data about the identification card of a citizen of Georgia,
registration into enterprise register, occupation, home address);
For a legal entity
- the company's name, legal status, location (legal address), name
of authorized redivsentative;
Indication about
the type of activity and the place, where the person carries out
this activity.
Within 15 days from
starting the activity, a person is required to notify about starting
this activity the relevant agency, which is obliged to issue a
document certifying the receipt of such notification within 3 days
after receiving the notification.
The
Documentation that has to be Submitted for Obtaining a License.
A license seeker submits a written application about obtaining
the license to a licensing agency. The application about obtaining
the license should include:
|
|
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For an
individual:
First name, last
name, date and place of birth
Registration data
from the registry
Registration number
Occupation
Work and home
addresses
Type of license
requested
Document proving
the payment of license fee
For a legal
entity:
Company name
Organizational-legal
status
Legal address
First and last
names of company redivsentative
Type of license
requested
Proof of payment
for license fee
Licensing
Fee.
A
license seeker pays a licensing fee for issuing a license
certificate. The amount of a licensing fee, the procedure of its
payment into the budget and claiming back is defined in "Law of
Georgia on Licensing Fees". For issuing a copy of a license, the
license holder covers the cost of making a copy of the license.
Duration
of a License.
A license is issued for an indefinite period of time. A license
holder carries out the activity defined by the license since the date
of making decision by the licensing agency about issuing the license.
The transfer of a license to another person is prohibited.
License
Register and its Maintenance. There
are two types of license register: a) Departmental license register;
and b) The state license register. A licensing agency enters the data
related to a license into a departmental license register within 3
days after making the decision about issuing a license. The following
data is recorded into a departmental license register:
For an
individual:
Data about the
holder of a license (first name, last name)
Home address
The type (types) of
licensed activities
The number of a
license and the date of issue
Data about
suspending, resuming, revoking a license or issuing a copy of the
license
For a legal
entity:
Data about the
holder of a license (the company's name)
The company's legal
status
The data of the
state registration
Location (legal
address)
The data about
making amendments into the company's name, legal status and location
(legal address), as well as about the reorganization of the company
The type (types) of
licensed activities
The number of a
license and the date of issue
Data about
suspending, resuming, revoking a license or issuing a copy of the
license
Local
Enterprises
Joint Stock
Companies traded at Georgian Stock Exchange
First, we will analyse the
aggregate figures concerning all Joint Stock Companies (JSC) traded
at Georgian Stock Exchange (GSE) and then will divsent the data on
individual enterprises.
Market Capitalization.
The figures describing the market capitalization of all Joint Stock
Companies traded at GSE are divsented in Table 4.1.1.1:
Table 4.1.1.1Market Capitalization of all JSCs
Year
|
2000
|
2001
|
2002
|
Market
Capitalization (GEL)
|
66,799,785
|
184,017,886
|
218,402,008
|
Source:
GSE
|
The more useful benchmark for judging the market performance
of the private companies usually is the ratio of the market
capitalization over the Gross Domestic Product (GDP) of that country.
Figure 4.1.1.1 shows the values of this ratio for Georgia and also
for other Eastern European (mainly former Soviet Block) countries,
whose economies are in transition mode from the command economy to a
market driven system likewise Georgia. It can be seen from this
Figure that Georgian stock market is rather underdeveloped in
comparison to other Eastern European countries, not to speak about
the Western European Countries and the USA, which have much higher
values of this ratio.
Fig. 4.1.1.1. Market
Capitalization as % of GDP for Eastern European Countries, including
Georgia
It is interesting to note that
about 82.8% of the total market capitalization is formed by only 10
companies. The remaining 278 companies that are admitted for trading
at the GSE constitute to only about 17.2% of the total market
capitalization. This is shown in Fig. 4.1.1.2:
Fig. 4.1.1.2 Market
Capitalization of 10 Leading Georgian Joint Stock Companies
Volume and Value of Trades.
The figures given in Table 4.1.1.2 reflect the combined volume and
value of trades of all Joint Stock Companies conducted at GSE since
its inception to date.
Table 4.1.1.2 Volume & Value
of Trades at GSE
Year
|
2000*
|
2001
|
2002
|
2003**
|
Volume of
Trades (Shares)
|
4,354,640
|
10,862,784
|
11,418,196
|
5,103,555
|
Value of
Trades (GEL)
|
5,892,326
|
13,077,244
|
8,401,206
|
1,398,781
|
* Apr. –
Dec. 2000; ** Jan. – Oct. 2003.
Source:
GSE
|
Value
Turnover. The value turnover is calculated by dividing the
annual value of trades over the total market capitalization in that
year. This is shown in Table 4.1.1.3 for years 2001 and 2002:
Year
|
2001
|
2002
|
Value of
Trades (GEL)
|
13,077,244
|
8,401,206
|
Market
Capitalization (GEL)
|
184,017,886
|
218,402,008
|
Value
Turnover
|
7.11%
|
3.85%
|
Source: GSE
|
Table 4.1.1.3 Value Turnover at GSE
The large part of
the total value of trades comes on the trading of the securities of
10 leading companies mentioned in the above. This is shown in Fig.
4.1.1.3:
Fig. 4.1.1.3 Value of Trades of
10 Leading Georgian Companies
Liquidity.
All the factors considered in the divvious paragraphs, i.e.
Low Market Capitalization, low Volume and Value of Trades, and low
Value Turnover, all indicate that there is little (or even no)
liquidity at the GSE. Indeed, out of 282
companies, whose shares are currently admitted for trading at the
GSE, the shares of only 93 companies (i.e. 33%) were traded in 2002.
The shares of the remaining companies were not traded during the year
at all. This is shown in Figure 4.1.1.4:
Fig. 4.1.1.4 Number of
Admitted Companies Actually Traded in 2002
Even
those companies, whose shares have been traded in the past, do not
satisfy the requirements for getting listed at the GSE. The main
listing criteria are: a) Company should be functioning for more than
3 years; b) Equity Capital of a company should be greater than
100,000 USD; and c) Company should be profitable for 2 years during
the last 3-year period (GSE, 2003). Out of 282 companies, only 2
companies were listed at the GSE in 2001, while only 1 company has
been left listed in 2002, after the GSE removed 1 company from the
list. Furthermore, the total number of trades and therefore an
average number of trades per trading session are also extremely low,
as shown in Tab. 4.1.1.4:
Table 4.1.1.4 Average Number of
Trades per Trading Session
Year
|
2000
|
2001
|
2002
|
Total Number
of Trades
|
601
|
1,591
|
1,343
|
Number of
Trading Sessions
|
80
|
102
|
102
|
Average Number
of Trades per Session*
|
8
|
16
|
13
|
* Figures are
Rounded to the Nearest Integer
Source:
GSE
|
In
total, 309 trading sessions have been held during 2000 – 2003
and 3780 trades have been executed during this period. It then
follows, that average number of trades per trading session (i.e. per
day) is equal to 12. This figure gives some idea about the number of
buyers and sellers participating in
trades each day. Also note that the total
number of the securities admitted for trading at the GSE is equal to
282. All these means that there are virtually no liquid shares at the
GSE.
Composite
Index. The poor performance of the GSE in terms of all
the above-mentioned market indicators indicate that the nature of the
composite index would be rather unreliable and would not reflect the
true picture of market performance. One solution to the problem is to
select only the leading companies (blue-chip companies) and construct
the index for these companies. Indeed, such approach is employed by
Georgian Investment Bank Galt & Taggart (G&T) Securities LLC,
which publishes so-called G&T Blue-Chip Index. This is shown in
Fig. 4.1.1.5:
Fig. 4.1.1.5 G&T
Blue-Chip Index (GEL), 2002
The
problems facing GSE. Below is the problem tree
describing the set of problems currently facing GSE:
General
recommendations for improving the performance of GSE. The
fact that at divsent there is no sound and liquid
capital market in Georgia can be attributed to two fundamental
problems: (I) A low potential of the
capital market in Georgia; and (II) A
high unrealized potential of Georgian capital market.
The government of Georgia (GoG) should undertake both, long-term and
short-to-medium term measures in order to improve the performance of
Georgian Stock Exchange (GSE).
(I)
It is suggested that the potential of
the capital market in Georgia could be
increased by means of:
Long-term
goals:
Increasing the rate
of country's economic growth;
Reducing the size of
the shadow economy;
Attracting higher
Foreign Direct Investments (FDI).
short-to-medium term
goals:
Conducting
the 2nd
round of the privatization through GSE by involving investment funds
into the privatization process;
Including the
majority of leading Georgian companies into the listing of the
securities traded at GSE.
(II)
A high unrealized potential of Georgian
capital market can be explained
by low confidence (trust) amongst the investors towards the stock
market, which in turn is the result of the problems existing in terms
of protecting the shareholders' rights. In order to solve the latter
problem, there is a need: (i) to improve the corporate governance
practice, and (ii) to ensure the fairness of the market.
These mainly are the goals that can be achieved in short-to-medium
term.
The measures needed
to improve the corporate governance practice in Georgia include:
To simplify the tax
system;
To
adopt the International Standards on
Auditing (ISA) into law;
To enforce the
International Accounting Standards (IAS).
These
measures are designed to remove the incentives to pay bribes for
the purposes of hiding profits and avoiding paying taxes,
which would result in lower levels of corruption in tax
administrations and increased transparency of
corporate disclosure.
Another
measure to improve the corporate governance practice in
Georgia is:
To
conduct an educational campaign amongst shareholders, company
directors and the members of supervisory boards.
The objective of the
educational campaign is to lessen the
entrenched culture of abusive self-dealing and to give to
shareholders sufficient knowledge about their rights. The entrenched
culture of abusive self-dealing can also be alleviated by means of
putting in place effective regulations and institutions for
controlling the self-dealing. All these should lead to regular
shareholder meetings and increase the role of the supervisory boards
in giving the strategic direction to companies.
Another important
factor for improving the corporate governance practice in Georgia
is to have an active market for corporate control. Namely, there is a
need:
To put in place an
adequate legislation for investor protection. More specifically, to
introduce the investment compensation schemes, strengthen the
bankruptcy system and adopt the rules for takeovers;
To adopt the
legislation regulating the financial intermediaries (such as private
pension funds and mutual funds), which at divsent are absent
in Georgia.
Properly functioning
financial intermediaries would act as large domestic institutional
investors and ensure that large volumes of capital resources are
directed to the market. This, in turn, would facilitate the
competition in the financial market and lead to an active market for
corporate control.
The measures needed
to ensure the fairness of the market include:
To Enforce a trading
transparency;
To deter an unfair
trading.
The last two
objectives can be reached by means of ensuring an effective
functioning of the National Securities Commission of Georgia (NSCG),
which should be capable of ensuring an effective enforcement of the
securities regulations. More specifically:
The NSCG should have
an adequate Inspection, Investigation and Enforcement power,
including the criminal prosecution authority;
The Government of
Georgia (GoG) should increase the budgetary support of the NSCG to
ensure a proper functioning of the agency;
The NSCG should be
more accountable to GoG for its activities regarding the regulation
of Georgian capital market;
The NSCG should
develop a program to supervise the activities of Self Regulatory
Organizations (SROs); and
The NSCG has to
develop a code of ethics for its staff.
Another measure
needed to ensure the fairness of the market is:
To enforce
adequately the rights of the shareholders, which should be done
through the improved court system.
In order to improve
Georgian court system, it is important to conduct training of judges
in the topics concerning the corporate law and operation of the
securities market
All the
above-described measures are designed to achieve in
future a sound and liquid capital market in
Georgia.
Specific
recommendations for improving the performance of GSE. More
specific recommendations, together with the
objectives to be achieved, performance indicators, responsible
agencies, duration, etc., are divsented in the next page. Objectives
given in parenthesis correspond to the Problem Tree given in the
above:
Recommendations
|
Objectives to
be Achieved
|
Performance
Indicators
|
Responsible
Agencies
|
Duration
|
Comment
|
|
|
|
DSPM
NSCG
GSE
|
|
|
About 80% of
the leading Georgian companies, which currently are not traded
at GSE, have to be included into the list of the securities
traded at GSE;
Government of
Georgia (GoG) must introduce some incentives (e.g. simplified
tax regime) for those corporations that decide to be listed at
GSE.
|
|
|
PoG
MoF
NSCG
GSE
|
|
|
|
The tax system
is simplified (Objective 7);
There is an
adequate tax code (Objective 6);
Incentives for
paying bribes/Hiding profits are reduced (Objective 11);
The level of
corruption is reduced (Objective 10);
Transparency of
corporate disclosure is increased (Objective 12);
Reliability of
financial disclosure is increased (Objective 28);
Corporate
governance practice is improved (Objective 17).
|
Business-friendly
tax code is in place;
Simplified tax
regime for securities and corporations are established;
No frequent
changes into the tax code are made;
Collection of
taxes is increased;
Companies file
more reliable information about their profits;
Companies
increase the transparency and quality of corporate disclosure.
|
PoG
MoF
STD
|
|
|
Make amendments
into Law on Audit Activity (LAA) to adopt International
Standards on Auditing (ISA);
Ministry of
Finances (MoF), together with Parliamentary Council on Audit
Activity (PCAA), requires audit companies to conduct audits in
compliance with the International Standards on Auditing (ISA).
| |
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ISA
is adopted into the law (Objective 34);
There are
adequate auditing standards (Objective 33);
Incentives for
paying bribes/Hiding profits are reduced (Objective 11);
The level of
corruption is reduced (Objective 10);
Transparency of
corporate disclosure is increased (Objective 12);
Reliability of
financial disclosure is increased (Objective 28);
Corporate
governance practice is improved (Objective 17).
|
International
Standards on Auditing is adopted into law;
Audits are
conducted in compliance with International Standards on
Auditing;
Companies file
more reliable information about their profits;
Companies
increase the transparency and quality of corporate disclosure.
|
PoG
PCAA
MoF
|
|
|
|
IAS is enforced
(Objective 9);
There are
adequate accounting standards (Objective 8);
Incentives for
paying bribes/Hiding profits are reduced (Objective 11);
The level of
corruption is reduced (Objective 10);
Transparency of
corporate disclosure is increased (Objective 12);
Reliability of
financial disclosure is increased (Objective 28);
Corporate
governance practice is improved (Objective 17).
|
Reporting
companies divpare their financial accounts in compliance with
the International Accounting Standards;
Companies file
more reliable information about their profits;
Companies
increase the transparency and quality of corporate disclosure.
|
NSCG
MoF
|
|
|
|
The level of
corruption is reduced (Objective 10);
Transparency of
corporate disclosure is increased (Objective 12);
Reliability of
financial disclosure is increased (Objective 28);
Corporate
governance practice is improved (Objective 17).
|
Index of
corruption is lowered;
Companies file
more reliable information about their profits;
Companies
increase the transparency and quality of corporate disclosure.
|
NACB
|
|
|
Georgian
Securities Industry Association (GSIA) should conduct training
courses, seminars, workshops, etc. amongst shareholders, company
directors and members of supervisory boards on the best
practices of corporate governance;
NSCG enforces
the corporate governance standards.
|
Educational
campaign is conducted (Objective 27);
Shareholders
have sufficient knowledge about their rights (Objective 26);
Entrenched
culture of abusive self-dealing is lessened (Objective 16);
Shareholders'
meetings are held regularly (Objective 29);
The role of
supervisory boards is increased (Objective 35);
Corporate
governance practice is improved (Objective 17).
|
Majority
of company directors and members of supervisory boards,
as well as interested shareholders take part in training
courses;
NSCG conduct
quarterly/annual audits of JSCs;
Shareholders'
meetings are held annually;
Supervisory
boards' meetings are held on a quarterly basis.
|
NSCG
GSIA
|
|
|
|
Legislation for
financial intermediaries is adopted (Objective 23);
Financial
intermediaries are well-developed (Objective 21);
Large domestic
institutional investors are divsent at GSE (Objective 20);
Larger volumes
of capital resources are directed to GSE (Objective 18);
There is a
competition at GSE (Objective 22);
There is a
strong market for corporate control (Objective 30).
|
Private Pension
Funds start functioning in the country;
Mutual Funds
start functioning in the country;
Large
domestic institutional investors take part in trading at GSE;
Volume of
trades at GSE is increased substantially;
Number of
participants in trading at GSE is increased;
Investment
funds take active role in the work of supervisory
boards/shareholders meetings.
|
PoG
MoF
NSCG
GSE
|
|
|
Adopt the
investment compensation schemes;
Strengthen the
bankruptcy system;
Adopt the rules
for takeovers.
|
Adequate
legislation for investor protection is adopted (Objective 24);
Financial
intermediaries are well-developed (Objective 21);
Large domestic
institutional investors are divsent at GSE (Objective 20);
Larger volumes
of capital resources are directed to GSE (Objective 18);
There is a
competition at GSE (Objective 22);
There is a
strong market for corporate control (Objective 30).
|
Investment
compensation schemes are in place;
Regulations
for the bankruptcy system are in place;
Rules for
takeovers are in place;
Large
domestic institutional investors take part in trading at GSE;
Volume of
trades at GSE is increased substantially;
Number of
participants in trading at GSE is increased;
Investment
funds take active role in the work of supervisory
boards/shareholders meetings.
|
MoF
NSCG
GSE
|
|
|
Assign an
adequate Inspection, Investigation and Enforcement power,
including the criminal prosecution authority to the National
Securities Commission of Georgia (NSCG);
Increase the
budgetary support of the NSCG;
Make the NSCG
accountable to the President of Georgia;
Develop the
code of ethics for NSCG;
Develop the
program to supervise Self Regulatory Organizations (SROs);
NSCG installs
the market surveillance and stock watch system.
|
Power of the
NSCG is increased (Objective 40);
Budgetary
support of the NSCG is increased (Objective 37);
Accountability
of the NSCG is increased (Objective 36);
Code of ethics
for the NSCG staff is developed (Objective 38);
Program to
supervise Self Regulatory Organizations (SROs) is
developed (Objective 39);
The NSCG does
function in an effective manner (Objective 39);
Regulations are
enforced in an effective manner (Objective 42);
Trading
transparency is enforced (Objective 43);
Unfair trading
is deterred (Objective 44);
Fairness of
Market is ensured (Objective 45).
|
NSCG has the
criminal prosecution authority;
Budget
allocations to NSCG is increased;
Rules are in
place that make the NSCG accountable to the President of
Georgia;
The code of
ethics for NSCG is in place;
The program to
supervise SROs is in place;
Trades are
conducted in a transparent manner/information is easily
available;
Facts of unfair
trading are detected and/or deterred.
|
PoG
NSCG
GSE
|
|
|
|
Georgian court
system is improved (Objective 32);
Shareholders
rights are enforced adequately (Objective 31);
Fairness of
Market is ensured (Objective 45).
|
|
MoJ
NSCG
GSIA
|
|
|
Joint Stock
Companies not traded at Georgian Stock Exchange
Kazbegi JSC
|
Sector:
|
Consumer Goods
|
GSE Ticker:
|
KAZB
|
Summary
Information:
Kazbegi
JSC is the leading Georgian brewery and producer of non-alcoholic
drinks, coffee, cigarettes, etc.;
Last
year the company reported an imdivssive 75% increase in annual
sales to GEL 9.4 mln., although the sales figure fell somewhat
behind the management's ambitious estimate of GEL 12 mln.;
Net
profit of the company increased by 18% to GEL 1.4 mln.,
translating into EPS of GEL 0.51;
Capital
expenditures amounted to GEL 1.7 mln. that were mainly used for
modernizing the existing facilities;
The
company's assets grew by 21% over the year to reach GEL 7.7 mln.;
The
company's equity increased by 25% and amounted to GEL 5.6 mln.;
The
company continues to pay dividends, which amounted to GEL 240
thousand or GEL 0.086 per share. At current prices dividend yield
amounts to 3%.
|
Source:
Galt & Taggart
|
Kazbegi JSC
- Summary
|
Current Price
(GEL)
|
2.50
|
Year High
(GEL)
|
2.50
|
Year Low (GEL)
|
2.50
|
Market
Capitalization (GEL mln.)
|
7.0
|
Shares
Outstanding (mln.)
|
2.8
|
Free Float (%)
|
42.7
|
Free Float
(GEL mln.)
|
3.0
|
Source:
Galt & Taggart
|
Kazbegi JSC
– Key Figures (IAS)
|
Year Ending
December 31
|
2001
|
2002
|
Net Sales (GEL
mln.)
|
5.4
|
9.4
|
Net Income
(GEL mln.)
|
1.2
|
1.4
|
EPS (GEL)
|
0.43
|
0.51
|
Total Assets
(GEL mln.)
|
6.3
|
7.7
|
Equity/Assets
(%)
|
70.8
|
73.2
|
ROA (%)
|
19.0
|
18.2
|
ROE (%)
|
26.8
|
24.9
|
Book Value per
Share (GEL)
|
1.60
|
2.00
|
P/E
|
5.77
|
4.91
|
P/BV
|
1.57
|
1.25
|
Sources:
Kazbegi, Galt & Taggart
|
Kazbegi JSC
– Valuation (Refer to Annex 1)
|
Valuation
Limits
|
True Value
(GEL mln.)
|
True
Value/Market Cap.
|
Low
|
15.0
|
2
|
High
|
22.5
|
3
|
BANK OF
GEORGIA JSC
|
Sector:
|
Financial
Services
|
GSE Ticker:
|
GEB
|
Summary
Information:
Bank
of Georgia JSC is the country's leading commercial bank;
Last
year the company reported about 6% increase in annual sales to
GEL 36.6 mln.;
Net
profit of the company has decreased by about 7% in 2002 mainly
due to higher administrative expenses;
The
Earning Per Share (EPS) in 2002 was GEL 0.72;
The
company's assets grew by remarkable 30% over the year to reach
GEL 176.7 mln.;
The
company's equity increased by 13% over the last year and amounted
to GEL 46.6 mln.;
The
company continues to pay dividends, which amounted to GEL 2
mln.or GEL 0.20 per share.
|
Source:
Galt & Taggart
|
BANK OF
GEORGIA JSC - Summary
|
Current Price
(GEL)
|
1.55
|
Year High
(GEL)
|
1.90
|
Year Low (GEL)
|
1.00
|
Market
Capitalization (GEL mln.)
|
15.5
|
Shares
Outstanding (mln.)
|
10.0
|
Free Float (%)
|
47.6
|
Free Float
(GEL mln.)
|
7.4
|
Source:
Galt & Taggart
|
BANK OF
GEORGIA JSC – Key Figures (IAS)
|
Year Ending
December 31
|
2001
|
2002
|
Net Sales (GEL
mln.)
|
34.4
|
36.6
|
Net Income
(GEL mln.)
|
7.7
|
7.1
|
EPS (GEL)
|
0.78
|
0.72
|
Total Assets
(GEL mln.)
|
135.6
|
176.7
|
Equity/Assets
(%)
|
30.5
|
35.8
|
ROA (%)
|
5.7
|
4.0
|
ROE (%)
|
18.6
|
16.5
|
Book Value per
Share (GEL)
|
4.13
|
5.14
|
P/E
|
2.02
|
2.15
|
P/BV
|
0.38
|
0.30
|
Sources:
Bank of Georgia, Galt & Taggart
|
BANK OF
GEORGIA JSC – Valuation (Refer to
Annex 1)
|
Valuation
Limits
|
True Value
(GEL mln.)
|
True
Value/Market Cap.
|
Low
|
50.8
|
3.3
|
High
|
68.6
|
4.4
|
Human-Resource
Development in the Private Sector
Business
Schools/Universities
European
School of Management (ESM).
Data Sheet.
European
School of Management ESM-Tbilisi
40,
Vazha Pshavela Ave. 1077, Tbilisi, Republic of Georgia Tel.:
(995-32) 39 68 64 Fax: (995-32) 37 55 16 e-mail:
esmtbs@gol.ge Internet:
esm-tbilisi.ge
Simon
Kadagidze
Mission
of European School of Management in Tbilisi (ESM-Tbilisi) is to
create a new Georgian management elite - professionally thinking and
professionally acting under market economy managers –
providing high quality management education using modern and
innovative teaching technologies and highly qualified faculty.
LTD,
Nonprofit
Self
financed through students tuition fees
1992
20
87
4
- Undergraduate Program, Graduate Program, Base Certificate Program,
Foundation Program
224+46+58+50
Look
the attached sheets
Undergraduate
– 4 years Graduate – 2 years Base
Certificate Program – 7 months Foundation Program –
1 year
Undergraduate -
224 Graduate - 46 Base Certificate Program - 58 Foundation
Program - 50
School
leavers and young professionals
Undergraduate
Program - secondary school leavers with certificate Graduate
Program - young people with min bachelor
diplomas and min 2 years
experience Base certificate program - any person with high
education Foundation Program - secondary school leavers or
students in
their last school year
Undergraduate -
$ 2200/ year Graduate - $ 3500 Base Certificate Program - $
1200 Foundation Program - $ 1000
Entrance
examinations, visiting schools with divsentation, visiting
educational fairs, marketing campaign through an advertising agency
Georgian
with good command of either English or German languages.
Undergraduate -
Bachelor of Business Administration
(General Management) Graduate - Master
of Business Administration
(General Management, Finance, Marketing) Base
Certificate Program - Certificate
$
2000/year
The
ESM Evening & Weekend MBA Program, A Curriculum
2003-2005
|
|
|
|
|
|
|
|
Overseas
Exhibitions and Trade Missions. GEPA is actively involved in
divparing overseas business visits for Georgian business groups to
meet with new trading partners; we also divpare and part finance
Georgian sectors' participation at international exhibitions. Many
foreign delegations, commercial and governmental, pay a visit to our
agency during their visits to Tbilisi. Study tours for sectors with
potential have been organized to Canada, UK and Germany.
With financial
assistance from the German government's technical assistance
programme, GTZ, GEPA part-finance participation of Georgian exporters
in overseas trade shows/exhibitions. GEPA/GTZ have already assisted
companies to take part in exhibitions in Germany, France, Italy and
the Middle East.
Conditions for
participation are that export products must be of export quality,
prices examined by German specialists and a group of a minimum of
three producers from one sector participates in each exhibition.
Training
Center. GEPA offers a wide range of
export training courses to Georgian businessmen, civil servants, and
commercial banks, on subjects ranging from export pricing to
utilizing e-commerce in exporting. All courses are taught by
international and Georgian specialists in their given fields of
specialization.
A new Training
Programme that Georgian Export Promotion Agency offers to Georgian
companies differs considerably from the Programme already conducted
by GEPA within the framework of divvious TACIS project. It includes
an In-Company Training that is designed to meet the training needs of
companies participating in GEPA's Export Development Program.
Customized
programs have been developed for specific companies to increase the
professional skills of company managers and staff and thereby help
them improve their export activities. In-company training is
considered as part of the consultancy service provided by GEPA to
existing exporters and to companies with the potential to export.
Format and content of training depends on business features of
individual companies. Mostly practical exercises and case studies
have been used to achieve the best results. Alongside
in-company training, GEPA continues to offer general training in
Export Marketing, Export Promotion, Strategic Business Planning etc.
GEPA
hopes that new arrangements run in the field of training, will be of
real assistance to Georgian companies in enhancing their export
marketing activities and in achieving increased export orders.
Publications.
GEPA staff divpares a variety of publications for both Georgian
exporters and overseas companies. These publications include Export
Newsletter, Market Briefs, Fact Sheets and the Directory of Georgian
Exporters. Recently a brochure on Georgian viticulture and winemaking
was divpared in corporation with the Institute of Viticulture.
Export
Newsletter. Export Newsletter is
available both in print and electronic formats on our website. It is
circulated to Georgian companies and international organizations. It
includes information on opportunities outside Georgia for exporters,
case studies on successful Georgian and foreign companies and an
update on any changes in Georgian, and foreign legislation, which may
affect exporters. It also advises of forthcoming exhibitions and
incoming buying missions from overseas.
Market
Briefs. Market Briefs are divpared
in Georgian and are available for Georgian companies interested in
specific industries and markets. Market briefs divpared to date are
as follows:
UK Wine Market
Pipes' Market in
Italy
Organic Food market
in Germany
UK Nuts Market
Timber Market in
Germany
UK Tea market
Intellectual
Property - overview
EU Fertilizer
Market
USA and EU Markets
for Essential Oils
Wine Market in
Japan
Mineral Waters in
Japan
Sample Market
Brief: Wine Market in Japan
Wine
Market in Japan
1.
Market
Overview
1.1
Market
conditions
1.2
Trends
in local production
1.3
Wine
imports
1.4
Consumption
trends
2.
Import
regulations
2.1
Import
restrictions and application procedures
2.2
Labelling
requirements
2.3
Tariff
rates
3.
Distribution
Channels
4.
Consumption
trends
4.1
Prices
4.2
Wine
categories
4.3
Japanese
consumption traditions
5.
Market
Entry
5.1
Entering
Japanese market
5.2
Wine
sales promotion strategies
6.
Annexes
|
Sample Market
Briefs: Mineral Waters in Japan
Mineral
Waters in Japan
1.
Market
Overview
1.1
Supply
Trend
1.2
Import
Trend
2.
Import
System and Regulations
2.1
Imports
Regulated by Food Sanitation Law
2.2
Tariff
rates
2.3
Classification
of Mineral Water
2.4
Labelling
requirement and a labelling sample
2.5
Outline
of Container/Packing Recycling Law
2.6
International
Standards for Mineral Waters
3.
Distribution
3.1
Distribution
Routes
3.2
The
Function of Wholesalers
3.3
Distribution
Expenses
3.4
Sales
Promotions
4.
Consumption
trends as shown by survey of retailers and consumers
4.1
Consumption
trends seen in retailers
4.2
Trends
revealed by consumer research
5.
Current
Sales and consumption and future prospects
5.1
Current
sales and consumption
5.2
Future
prospects
6.
Advise
on Accessing the Japanese Market
Appendix
1
Outline
of provisions on mineral water provided for under the Foods
Sanitation Law
2
Example
Retail Price of Mineral Water
3
Selected
domestic Suppliers and Importers
4
Wholesalers,
Distribution Agents
5
Relevant
Organization
6
Exhibitions
and Trade Fair
|
Foreign
Investment Promotion
Government’s
Foreign Investment Promotion Policy
Removing
Administrative Barriers to Investment in Georgia.
FIAS (Foreign Investment Advisory Service, a joint service
of the International Finance Corporation (IFC) and the World Bank)
conducted a study of administrative barriers to investment in
Georgia. The principal counterpart for this project was the
Presidential Commission on Support of the Private Businesses in
Georgia. The Presidential Commission on Support of Private Businesses
is the lead counterpart for this project (for more details refer to
Paragraph 1.3.1 describing the activities of Foreign
Investment Advisory Council - FIAC). The main
objective of this study was to identify the major administrative
impediments to investment and to recommend the steps for
streamlining, simplifying and increasing transparency in order to
help improve the environment for business in Georgia. Although the
primary focus of the study was foreign investment, the administrative
procedures and regulatory framework affect domestic investors as
well. Therefore, applying the principle of national treatment (i.e.
no divferential treatment for foreign investors), this study is
intended to help strengthen the business environment for all
investors—domestic and foreign alike.
The study covers the
core administrative processes for:
Establishing a
business - including investor entry (visa and residency requirements
for expatriates) and business registration.
Locating a business
- including land acquisition, site development, construction and
operation.
Operating a
business - including taxation, trade regime and customs, licensing,
permits, inspections, intellectual property issues, and product
standardization.
Establishing a
Business—Investor Entry and Business Registration. The
procedures for obtaining entry visas are relatively transparent and
divsent no significant administrative impediments. Most notably,
foreign investors and expatriate employees do not require special
work or residence permits to live and work in Georgia.
The court
registration procedures have been simplified in the past 2 years.
However, because of the lack of technical and human capacity, court
registrars are unable to fulfill the provisions of the Law on
Entredivneurs aimed at guaranteeing timely service, ensuring public
availability of information on companies, publishing data on newly
registered companies, and protecting company names. The most divssing
issues relate to length of time required to register (2 to 3 weeks)
and to retrieve information on companies.
The principal
recommendations for improving the business registration process and
the access to company records include:
Modernization of
the registration and data filing systems by taking advantage of new
technologies (including the internet) to speed up processing and to
improve the access to information, as provided under the law.
Centralization of
the court registration system.
Publication and
dissemination of information on business registration procedures,
requirements and fees.
Resolution of the
legal provisions for information disclosure under the Law on
Entredivneurs and the Tax Code.
Locating a
Business. Locating, acquiring and constructing or
rehabilitating real estate for business activities are not perceived
as significant problems by either foreign or domestic investors in
Georgia. The current system may not pose an overwhelming difficulty
for investors because of the low volume of transactions and the
institutionalized system of unofficial payments and influence
peddling to facilitate the process. However, there are a number of
specific areas where regulations, requirements, and procedures need
to be clarified, simplified and streamlined. The report includes a
number of detailed short and long-term recommendations
for strengthening the laws related to the privatization of
agricultural land and improving the quality of service provided by
the various bureaus responsible for processing the permits necessary
for property development and construction in Georgia.
One of the principal
recommendations relates to the Law On Privatization of
Agricultural Land. The set of laws on privatization of real
estate exclude a legal basis for privatization of large agricultural
holdings, all of which are divsently held under government leases. To
the extent that investment in commercial scale agriculture is viewed
as having significant potential in Georgia, privatization of larger
agricultural holdings is an appropriate next step. A law on
privatization of large agricultural holdings is being developed and
is an element of the government’s longer-term plan for further
development of property relationships.1
Enactment of this law should be a priority.
Operating a
Business - Tax Administration. On the basis of interviews
with redivsentatives of the private sector, government officials, and
technical assistance experts, it appears that the tax administration
system is fraught with problems that seriously constrain the
activities of private enterprises. The recurring themes voiced by the
private sector as being burdensome for business included the
complexity of the tax system, the lack of clarity in some aspects of
the Tax Code and the sheer number of taxes itself. Foreign-owned
enterprises seem to be particularly affected under the existing
system. In keeping with the scope of this study, the discussion is
focused on taxation administration. Recommendations on tax policy are
confined to those issues that directly affect administrative
procedures and impede business activity. It should be noted that the
International Monetary Fund, the World Bank and USAID are currently
providing assistance to the Government of Georgia on taxation policy
issues.
The main
recommendations include the following (for more detailed discussion
of tax issues please refer to the next paragraph - "1.4 Tax
Regime"):
Adopt and
implement the proposed amendments to the Tax Code. These
proposed amendments cover a number of policy and tax administration
issues. They are broadly in line with IMF recommendations, except
the Government proposal for the fixed tax and the elimination of the
payroll tax.
Simplify the
procedures for filing VAT. The proposed measures include
allowing quarterly, rather than monthly filings for small
businesses.
Establish an
effective tax-refund system. The International Monetary Fund has
outlined a refund strategy that includes limiting entitlement to
immediate refunds, distinguishing claimants with a history of
compliance, and using div-refund audits for high-risk refund claims
and post-refund audits for claims of lesser risk.
Review the micro
level target-based system for tax collection. It is important to
distinguish between the fiscal macro targets which are an important
aspect of revenue administration and micro or firm-level targets
which are often arbitrarily established within tax jurisdictions.
These targets must be realistic and they should be part of a number
of efficiency and effectiveness indicators.
Improve
information compilation and dissemination. Taxpayers must be
informed of changes in the Tax Code and related regulations, legal
interdivtations, and instructions in a timely manner. Also, a
credible resource must be established to respond to queries offer
binding interdivtations of the Tax Code.
Operating a
Business – Customs. The State Customs Department (SCD)
operates an inland clearance system that requires considerable
resources and logistical support for effective control of cargo. In
practice, the current system is largely ineffective and prone to
fraud and corruption. There is no compendium of the legislation on
customs available to the customs service employees or the public. In
the absence of common information and an official interdivtation of
the rules and regulations, the discretionary authority of individual
customs officers and offices is strong thereby facilitating
corruption. There is significant leakage of cargo transported for
inland clearance. Some sources estimate that as much as 50 percent of
fuel and cigarette imports are diverted.
Management of the
SCD has suffered as a result of frequent changes in the management.
Efforts to reform the SCD have been impeded by the lack of political
will, competing political agendas, and the frequent changes in
leadership. Under these circumstances, the inputs of external
advisers have been marginalized and the reforms implemented by
divvious chairmen have been reversed in many instances. The detailed
action plan divpared under the ITS contract and endorsed by the
government has been stalled with only marginal progress. The customs
reform committee established by the President to lead the reform
effort has met irregularly.
The principal
recommendations for strengthening and improving the customs service
include:
Implementation of
the already approved customs reform program. This is a well
developed and comdivhensive program that can be implemented over
time. It encompasses a number of the IMF and FIAS recommendations.
One of the immediate tasks would be to assign priorities for
implementation.
In light of the
decision not to renew the ITS contract, it is necessary to
immediately develop and implement a framework for carrying out
efficient div-shipment inspection services if it is to be continued
after December 30, 2001. The SCD clearly lacks the capacity or the
expertise to carry out this function independently.
Review of the
existing regulations for the valuation of cargo and implementation
of guidelines that are consistent with the provisions of GATT.
Revision of the
declaration processing procedures to eliminate contact between the
import (or broker or freight forwarder) and the customs officer.
Expansion of the
ASYCUDA system to all major customs clearance offices.
Implementation of
risk-based criteria for selecting goods and documents to be examined
at all locations where imported goods are cleared.
Implementation of
an information publication and dissemination program.
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Government
Sponsored Training Programs
GEPA's
In-Company Export Marketing Programme.
|
The objective
of GEPA's new programme is to increase the export capabilities of
Georgian companies. An integrated programme has been designed to
assist Georgian companies to systematically plan and divpare for
export marketing. The programme includes in-company export market
development, training, the organisation of inward and outward
missions and a cost sharing grant scheme.
The
in-company programme involves GEPA's Export Advisers working
closely with individual companies to establish an export marketing
function. Participating companies will be assisted and guided
through the process of defining their objectives and capabilities,
the first step in the process. They will be shown how to identify
suitable markets and have access to all the information sources in
the Export Information Centre. They will then be in a position to
draw up a realistic export marketing strategy. GEPA staff will
help them to divpare for exporting and to implement their defined
strategy.
In working
through the programme, training needs will be identified and
addressed and some financial assistance may be available to assist
companies in financing eligible actions they need to take to
divpare for exporting. Participating companies will have in place
a system for reviewing and redefining their export marketing
strategies on an on-going basis. This will enable Georgian
companies to anticipate and to be divpared for the ever changing
marketing environment, rather than just reacting to it.
During recent
weeks GEPA staff has been visiting companies to explain the
programme in detail. Four companies have already begun the first
stage of the programme and another four will be added over the
next few weeks. Companies committed to developing an achievable
export marketing strategy and willing to devote time and effort to
the process are invited to contact GEPA.
|
Other
Donors’ Activities
The
World Bank and IMF
List of the
Active World Bank Projects in Georgia
Projects
under implementation
|
Commitment (US$
million)
|
Develp’t.
Objective
|
Impl.
Progress.
|
Approval
Date
|
Signing
Date
|
Closing
Date
|
Social
Investment Fund
|
25.0
|
S
|
S
|
12/11/97
|
06/05/98
|
12/31/03
|
Primary Health
Care Dev.
|
20.3
|
S
|
S
|
08/01/02
|
05/06/03
|
12/31/07
|
Education 1
(APL)
|
25.9
|
S
|
S
|
03/20/01
|
12/03/01
|
06/30/05
|
Social
Investment Fund 2
|
15.0
|
S
|
S
|
05/15/03
|
08/29/03
|
09/30/07
|
Roads Project
|
40.0
|
S
|
S
|
05/25/00
|
01/31/01
|
12/31/04
|
Electricity
Market Supp.
|
27.4
|
S
|
S
|
05/03/01
|
09/26/02
|
12/31/05
|
Energy Transit
Institution
|
9.6
|
S
|
S
|
03/13/01
|
11/19/01
|
07/31/05
|
Municipal
Development 2
|
19.4
|
S
|
S
|
08/01/02
|
02/19/03
|
06/30/06
|
SAC3
|
40.0
|
S
|
S
|
06/29/99
|
08/02/99
|
10/30/02
|
Structural Ref.
Support
|
16.5
|
S
|
S
|
06/29/99
|
09/22/99
|
03/31/04
|
Judicial Reform
|
13.4
|
S
|
S
|
06/29/99
|
09/22/99
|
12/31/04
|
Enterprise
Rehabilitation
|
15.0
|
S
|
S
|
12/17/98
|
09/08/99
|
12/31/04
|
Agriculture
Development
|
15.0
|
U
|
U
|
03/25/97
|
08/21/97
|
04/30/04
|
Forestry
Development
|
15.7
|
S
|
S
|
08/01/02
|
04/22/03
|
06/30/09
|
Protected
Areas Dev (GEF)
|
8.7
|
|
S
|
05/24/01
|
04/26/02
|
12/31/06
|
Integrated
Coastal Mngmt
|
4.4
|
S
|
S
|
12/17/98
|
05/21/99
|
12/31/04
|
Irrig/Drainage
Dev.
|
27.0
|
S
|
S
|
06/28/01
|
02/20/02
|
04/30/07
|
Cultural
Heritage
|
4.5
|
S
|
S
|
02/13/98
|
05/18/98
|
12/31/03
|
Integrated
Coastal Mngmt (GEF)
|
1.3
|
|
U
|
12/17/98
|
05/21/99
|
12/31/04
|
Agriculture
Research Ext (GEF)
|
2.5
|
S
|
S
|
05/11/00
|
02/05/01
|
12/31/05
|
Agriculture
Research Ext
|
7.6
|
S
|
S
|
05/11/00
|
02/05/01
|
12/31/05
|
Total
|
354.2
|
|
|
|
|
|
S –
Satisfactory
U -
Unsatisfactory
List of the
Closed World Bank Projects in Georgia
PROJECT
|
AMOUNT
(millions)
|
|
Rehabilitation
Credit
|
US$ 75.0
|
Closed June 1996.
Fully disbursed.
|
SAC
|
US$ 60.0
|
Closed December
1997. Fully disbursed.
|
SATAC
|
US$ 4.8
|
Closed December
1998. Fully disbursed.
|
Institution
Building Credit
|
US$ 10.1
|
Closed June 1998.
Fully disbursed
|
SAC II
|
US$ 60.0
|
Closed December
1998. Fully disbursed
|
Transport
|
US$ 12.0
|
Closed June 30,
1999. Fully disbursed.
|
SATAC II
|
US$ 5.0
|
Closed December
31, 1999. Fully disbursed.
|
Municipal
Infrastructure Rehabilitation
|
US$ 18.0
|
Closed June 30,
2000. Fully disbursed.
|
Power
Rehabilitation
|
US$ 52.3
|
Closed June 30,
2000.
|
Oil Institution
Building
|
US$ 1.4
|
Closed December
31, 2000. Fully disbursed.
|
Energy
Sector Adjustment Credit (ESAC)
|
US$ 25.0
|
Closed March 1,
2002. Fully disbursed.
|
Third
Structural Adjustment Credit (SACIII)
|
US$ 60.0
|
Closed October
30, 2002. Fully disbursed
|
Total:
|
US$ 383.6
|
|
Description of
the Closed World Bank Projects in Georgia
REHABILITATION
CREDIT
Implementing
Agency Temuri
Basilia, Chief Economic Advisor to the President of Georgia; State
Chancellery, 7 Ingorokva str.
(99532)989953,
(99532) 999757
Fax: (99532)995797
Task
Manager Michaelle
Riboud, EC4C2
Phone: (202)
4738743
Fax:
(202)4773387
Project
Objective The
main objective is to support the government’s economic reform
program aimed at restoring macroeconomic stability and at promoting
resumption of growth and improvement in living standards. The other
objectives are to:
1. Provide
budgetary support to maintain the level of basic public expenditures,
in particular for wages and the social safety net;
2. Provide foreign
exchange for the purchase of critical imports;
3. Improve the
functioning of the foreign exchange market;
4. Provide a
framework for assistance from other donor agencies.
Project
Description
The reform program to be supported by the credit comprises three
sets of policies:
a) those aimed at
reducing and redefining the role of the public sector in the economy
b) those theta
foster the development and increase efficiency of markets;
c) those that
maintain a minimum social safety net through improved targeting of
benefits.
Disbursement Fully
disbursed
INSTITUTION
BUILDING
Project
Objective Assist the Georgian government in its efforts to move
to a private market economy through strengthening public institutions
on three functional areas: (a) financial sector, (b) economic
management , (c) privatization and enterprise reform
Project
Description1. Financial Sector Reform (US$ 2.325 million)
(a) Financial
Sector Infrastructure:
Consulting service
and equipment:
-- to introduce and
implement Broadly Adapted Financial Statement (BASF), and
internationally acceptable accounting and auditing system;
-- to conduct
diagnostic studies in five state-owned banks and make recommendation
for steps to streamline the system;
-- review existing
payment system and make recommendations for steps to streamline the
system
2. Economic
management (US$ 5.660 million)
(b) Economic
Policy Formulation
Support will be
provided to the Office of the Deputy Prime Minister (now Chief
Economic Advisor to the President) to design a strategy for the
restructuring and the reform of the government’s economic
management agencies, particularly the Ministries of Finance and
Economy, and to strengthen economic policy formulation and analyses.
(c) Statistical
Services:
Consulting
services, training, and equipment to assist the Committee for Social
and Economic Information in
-- reviewing the
methodology used for generating and maintaining national accounts and
initiating steps to introduce the internationally acceptable System
of National Accounts (SNA);
-- designing and
conducting an improved household survey in the city Tbilisi
(d) Tax
Administration:
-- computerization
of tax offices; IDA pilot project for the modernization and
computerization of the central State Tax Inspectorate (STI) and the
Tbilisi City Inspectorate;
-- training of the
STI staff.
(e) Treasure:
-- first phase: a
central treasury function will be established in the Ministry of
Finance and regional branch in Tbilisi;
-- second phase:
regional Treasuries will be established throughout of Georgia:
-- IDA will finance
computers for the establishment of the Treasury offices.
(g)
Strengthening of Customs Administration:
Support will be
provided to the Customs Committee in
(i) simplifying and
reforming the organization and procedures of customs operations: (ii)
modernizing customs management ;
(iii) training the
customs staff in the customs management and the computerization;
(iv) computerizing
customs clearance procedures, accounts, and statistics at Tbilisi
headquarters and at the Tbilisi airport as the first pilot site.
(h) Aid
Coordination:
-- Project will
finance long-term external advisor and equipment to assist and train
the staff of Aid Management Unit (AMU) in maintaining donor
procedures, coordinating country’s external aid priorities
consistent with the national development objectives, and
communicating those with the external aid agencies.
-- Project will
finance experts to assist the government staff in analyzing Sectoral
information with the objective to design and develop project that
will be acceptable to the donor community.
(i) Project
Implementation: The project will finance:
-- an external
procurement consulting firm to assist the PIU with the divparation of
procurement an disbursement documents under this project, and to
ensure that all procurement under the project follow the World Bank’s
procurement guidelines
3. Privatization
and Enterprise Reform (US$ 2.27 million)
(j) Support
for Privatization:
-- one short-term
senior level adviser to assist the Ministry of the state Property
Management and the Office of the Chief Economic adviser to the
President in reviewing the current privatization plan;
-- experts and
equipment to assist in:
a) formulation the
mass privatization program and the voucher scheme
b) the design and
implementation of a public information campaign to support the mass
privatization campaign;
c) provide training
aimed at strengthening the institutional capabilities of SPM;
d) review and
further development of a legislative framework for privatization.
Implementing
Agency Alex Sikharulidze, Head of PIU, 42, Kazbegi ave.,
Phone:
(99532)950865
Fax:
(99532)950865
STRUCTURAL
ADJUSTMENT TECHNICAL ASSISTANCE CREDIT (SATAC)
Project
Objective To support the Government’s reform program to
stabilize the economy and create the conditions for a resumption of
growth and an improvement in living standards.
Project
Description 1. Privatization and post-privatization (US$ 0.95
million)
(i)
Continued support for the implementations of the privatization
program and on support for the establishment of the share registries.
(ii) Introduction
of cash auctions and an international tender program;
(iii) Strengthening
of institutional capacities, elaboration of standard procedures,
advise on structuring of transactions and bid evaluation, as well as
legal assistance and licensing of private share registries.
(iv) Elaboration of
operational guidelines, training of officials in securities market
and in the starting-up of pilot registries.
2. Financial
Sector ( US$ 0.78 million )
(i) Advisory
services on supervisory issues as well as the development of training
programs.
(ii) Audits if the
three former state banks will be financed to dacilitate a realistic
assessment of the financial position of each bank.
3. Energy sector
reform ( US$ 0.86 million )
(i) Assistance in
creating the capacity to monitor and manage payment performance, and
in reviewing structural and tariff issues.
(ii) Assistance in
reviewing the scope of the regulatory authority and its tariff policy
functions.
4. Social
Protection ( US$ 0.56 million)
(i) Assistance in
the design of a program of social assistance which meets the needs of
poor families that do not qualify under any existing program;
(ii) Facilitating
the establishment of private pension schemes.
5. Resource
mobilization and public information
( US$ 1.43
million)
(i) A program aimed
at improving the revenue collection performance of the Customs
Department through training, revision of procedures and controls, and
anti-fraud measures;
(ii) A public
information/education program on economic reforms, including mass
media campaigns, round-tables/seminars on key issues, and the design
of an education program focusing on skills in high demand in market
economics
Implementing
Agency Zaal Japaridze, Head of PIU, 12 Kazbegi Ave.
Phone: (99532)
950865
Ministry of
Trade and Foreign Economic Relations
42, Kazbegi
Ave.
Phone: (99532)
225186 / (99532) 389652
TRANSPORT
REHABILITATION
Project
Objective 1. To support policy reform in the transport sectoral
and restructure its institutions to operate in a market economy.
2. To repair and
maintain some of the most critical elements of the transport system.
Project
Description (1) Institution Building Component (US$ 4.9 million):
(i) advice and
support to teams divparing sector reforms;
(ii) technical
assistance for the formulation of technical and legal framework
necessary to the restructuring,
commercialization
and privatization of sector entities;
(iii) managerial
assistance for public and private transport enterprises;
(iv) a training
program to update transport technical staff of the private and public
sectors;
(v) project
management.
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(2) Investment
Component ( US$ 13.2million )
(i) road
maintenance program, including selected equipment and spares for road
maintenance as well as emergency repairs and the necessary imported
road building materials;
(ii) a railway
sub-component, including bridge repairs and the required structural
steel, track materials (ties, rails and fastenings), spares for
locomotives, and communications and selected signaling equipment
Implementing
Agency Gia Tsagareli, Head of PIU, 12 Kazbegi Ave.
Phone: (99532)
986385
Fax:
(99532) 990461
STRUCTURAL
ADJUSTMENT CREDIT (SAC)
Project
Objective: The main objective is to consolidate stabilization,
foster a strong and sustained growth recovery and reduce poverty.
The reform
program aims at:
maintaining a tight
monetary program supported by an improving fiscal position;
streamlining the
Government sector and improving efficiency of public spending;
inducing a rapid
adjustment of the productive sector to new market
signals.
The other objectives
are;
provide budgetary
support to maintain the level of critical public expenditures;
provide foreign
exchange for the purchase of critical imports;
provide a framework
for financial assistance from other donor agencies.
Project
Description: 1.
Maintaining a Tight Monetary Policy:
reduce inflation to
20-25 percent in 1996 and strengthen the international position of
NBG;
increase the range
of monetary instruments and enhance the capacity of the NBG to
achieve monetary objectives.
2. Improving the
Fiscal System:
ensure
sustainability of stabilization;
increase tax
revenue to 6.7 percent of GDP in 1996;
reach a revenue to
expenditure ration of 70 percent in 1996 and maintain budget deficit
at 3-4 percent of GDP in 1996.
3. Streamlining
of the Government Sector and Improving the Efficiency of Public
Spending:
to maintain
critical public function within the framework of a tight expenditure
program (expenditure maintained at about 13 percent of GDP in 1996);
reforming
government pay and employment;
reforming the
provision and financing of social services reforming social
insurance and social protection;
eliminating energy
subsidies;
4. Fostering
Adjustment of the Productive Sector:
Disbursement: US$
29.88 million
The disbursement of
the loan is linked to agreed targets specified for each tranche
release – to be met by the Georgian Government in implementing
its structural reform program.
SECOND
STRUCRUTAL ADJUSTMENT TECHNICAL ASSISTANCE CREDIT (SATAC II)
Project
Description: The Government’s structural reform program
outline in the Letter of development Policy was divsented with the
Second Adjustment Credit (SACII), $60 million (which closed in
December 1998). To facilitate the timely implementation of structural
reforms, the Government requested a program of technical assistance
to support the design and implementation of reform measures in the
key areas. The institutional capacity of the Government to implement
structural reform measures has been successfully strengthened under
the Institutional Building Credit (IBC) and the Structural Adjustment
Technical Assistance Credit (SATAC). Lessons learned from these two
technical assistance projects were incorporated in the design of
SATAC II.
The Core objective
of SATAC II is to enhance the capacity of the Georgian Government to
implement the structural reform program supported by SAC II.
The technical
assistance is divided into seven broad categories:
The World Bank
and IMF Cooperation in Georgia
The
World Bank and IMF Partnership in Georgia’s Development
Strategy
The
IMF has taken the lead in assisting Georgia in enhancing
macroeconomic stability. In this regard, the Fund has encouraged
the authorities to pursue a prudent fiscal policy, including by
increasing tax revenues and reducing domestic expenditure arrears.
The IMF Board approved a new three-year program under the Fund’s
Poverty Reduction and Growth Facility (PRGF) in January 2001. The
first and the second reviews under the PRGF were completed in
October 2001 and July 2002, respectively. Implementation of the
2002 macroeconomic program was broadly on track. Quantitative
criteria and indicative targets were met, except for those on
domestic arrears, fuel and excise tax collection and reserve money.
At 2 percent of GDP, the fiscal deficit was
slightly higher than programmed because of shortfalls in external
financing, and revenue collection improved only slightly from 14.3
percent of GDP to 14.4 percent over the period. An IMF mission
which visited Georgia in July 2003 to discuss completion of the
postponed third review found that the fiscal divssures that emerged
in early 2003 had continued, with tax revenue falling short of
budget targets, and an accumulation of substantial new budget
arrears. The IMF thus saw the need inter
alia to introduce some tax reform
measures, adjust electricity tariffs and revise the 2003 budget to
close the fiscal gap. The authorities achieved the first two but
were unable to secure parliamentary approval of a revised budget.
The current PRGF will expire in the next several months and the IMF
will soon be initiating discussions to assess prospects for a
possible new three-year program to support Georgia’s EDPRP.
The
World Bank has taken the lead in the policy dialogue on structural
issues, focusing on: (i) strengthening public expenditure
management; (ii) deepening and diversifying sources of growth,
(iii) protecting the environment; and (iv) reducing poverty. The
table on page 53 summarizes the division of responsibility between
the two institutions. In a number of areas – for example
the social sectors, rural development, environment, and
infrastructure – the Bank takes the lead in the dialogue and
there is no cross conditionality with the IMF-supported program.
The Bank is also leading the dialogue on private sector reform, and
Bank analysis serves as inputs into the Fund program. In other
areas – energy, the financial sector, public expenditure
management, and revenue and customs – both institutions work
together. Finally, in areas like monetary policy the IMF takes the
lead with little Bank involvement.
Areas
in which the World Bank leads and there is no direct IMF involvement
Areas
in which the Bank leads and there is no direct IMF involvement
include the social sectors, infrastructure and environment.
In
the social sectors the Bank conducts annual updates of
Georgia’s Poverty Assessment based on household data collected
on a quarterly basis. The Bank’s focus has been to improve
the budget execution of expenditures for health, education and
poverty benefits and to raise the efficiency in the use of scarce
public resources. Through the Social Investment Fund Credits IDA is
focusing in particular on areas with high poverty levels to provide
basic infrastructure to the poorest communities. A recently
approved Self-reliance Fund Grant will help authorities address the
complex issues related to internally displaced people. IDA is also
supporting a dialogue with the Government on social protection
reform that may lead to an IDA-supported project.
In
education the Education Adaptable Program Credit aims at
improving the learning outcomes of primary and secondary
students, through curriculum reform, development of an examination
system, training of teachers, provision of learning materials,
and development of capacity to make better use of Georgia’s
physical, financial and human resources. While the investment needs
of school buildings are substantially higher than is currently
affordable for Georgia, the Social Investment Fund projects continue
to assist in financing urgent repairs to school facilities in many
communities.
In
health IDA Credits to support the Government in improving the
health care financing system, exploring risk-pooling options,
introducing a new system of primary health care and improving the
focus of services funded through public funds on the poor and on
priority public health interventions. In addition hospital
restructuring has been supported by SAC 3 and the Structural Reform
Support Credit.
In
infrastructure support is being provided through the
Municipal Development and Decentralization Credit and the
Social Investment Fund Credit. These projects are providing
financing at the community level for critical infrastructure needs,
primarily for school and health facilities heating and
repair, small hydropower schemes to provide electricity, drinking
water and sanitation rehabilitation, as well as transportation
infrastructure rehabilitation.
In
rural development IDA credits have supported the development
of private sector farming and agro-processing improvements,
agricultural credit, irrigation and drainage, and agriculture
research and extension. IDA has also been supporting
the creation of local institutions such as rural credit unions and
water users associations through its Credits.
Areas
in which the World Bank leads and its analysis serves as input into
the IMF program
The
Bank has been leading the dialogue on structural reforms through
SAC 3, approved by the Bank’s Board of Executive Directors in
June, 1999, and closed in October, 2002. Despite considerable
delays, the core conditions of SAC 3 were met, but their impact was
reduced by poor governance. Institution building and technical
assistance has been supported through the Structural Reform Support
Credit, also approved by the Bank’s Board of Executive
Directors on June 29, 1999. The Bank also leads in the areas of:
Private
sector development. SAC 3 supported improvements in the
environment for private sector development, focusing on: (i) simpler
licensing regulations; (ii) more transparent government procurement;
(iii) reduced cost of entry for businesses; and (iv) privatization
of state-owned commercial assets. IDA has also been supporting
private sector participation in other areas such as energy,
telecommunications, urban services and agriculture. The IMF has
worked with the authorities to initiate audits of the 2002 accounts
of three major state owned enterprises.
Energy. The
energy system is in poor condition, with unreliable supply, massive
non-payment and mounting debts. IDA has been working with
other donors, including the IMF, to encourage more private
management and ownership, and to implement a series of short-term
action plans to improve the overall functioning of the sector. The
IMF has also been focusing on improved payments for
electricity.
Public Sector
Management. The Bank is supporting the development of a civil
service reform program, while the Fund is providing technical
assistance in support of tax and customs administration reform.
Areas of
shared responsibility of the World Bank and IMF
The
Bank and the Fund have been working jointly in the following main
areas (supported by the Bank’s SAC 3 and Structural Reform
Support Credit, several investment operations and the Fund’s
PRGF):
Poverty
Reduction Strategy. Both institutions have been working closely
with the Government to provide support to the development of
the PRSP, through seminars and workshops, direct staff input, and a
multi-donor Trust Fund to support the work of the PRSP secretariat..
Budget
Planning and Execution. The annual process-based Public Expenditure
Reviews will provide the underpinnings for systemic changes in
expenditure management, with the immediate aim being improved budget
formulation in 2004. The IMF is focusing on Treasury reform
within the Ministry of Finance.
Financial
Sector Reforms. The joint Financial Sector Assessment Program has
supported: (i) strengthened banking and non-banking supervision;
(ii) introduction of international accounting standards; (iii) and
consolidation of banks through higher capital requirement ratios;
and (iv) anti money-laundering legislation. The IMF has focused in
particular on banking supervision.
Debt Sustainability
Analysis (DSA). Given Georgia’s heavy external debt burden,
the Bank and the Fund conduct joint Debt Sustainability Analysis on
a regular basis.
Areas in which
the IMF leads and its analysis serves as input into the World Bank
program
Areas
in which the IMF leads and there is no direct World Bank involvement
Monetary
Framework. The IMF closely collaborates with the NBG in the design
and implementation of a monetary program that aims at remonetization
of the economy, while keeping inflation low and the exchange rate of
the Lari stable
Economic
Statistics. IMF technical assistance has been conducive to
improvements in national accounts, price, monetary and government
financial statistics.
The World Bank
Country Assistance Strategy for Georgia
Activities
(as
identified in the EDPRP)
|
Responsible
Agencies
|
Focus
of Bank
Actions
|
Expected
Results FY04-06
|
Bank
Group Program
|
Part-ners
|
WB
Performance
Indicators
for End FY06
|
Improvement
of Governance
|
|
|
|
|
|
|
Development
of a comdivhensive, long-term concept and action plan of
executive government reforms, and of a program to improve
structure and number of employees in organizations under
budgetary financing
|
State
Chancellery, Ministry of Justice, Ministry of Finance
relevant
executive government bodies
|
Assistance
to the State Chancellery in carrying out a functional
analysis of the central government agencies and
assessment of budgetary employment,
remuneration, and training policy; on the basis of
the above studies, develop recommendations
|
Widely
owned program to improve functioning of government
administration and agencies; remuneration and retrenchment
policy for core civil service introduced, and plans for civil
service training developed
|
Public
Sector Management Project
|
DFID,
USAID, UNDP
|
Initiation
of reform and restructuring of civil service
|
|
State
Chancellery of Georgia, Ministry of Justice
|
Review
of the existing legal framework
|
Initiation
of legislative change and amendments
|
Public
Sector Management Project; Public Expenditure Reviews
|
DFID
EU
USAID UNDP
|
Duplications
and overlap among the central state agencies reduced, mandates
more clearly defined
|
|
State
Chancellery, Ministry of Economy, Industry and Trade, Agency
of State
Property
Management, Ministry of Justice, Ministry of Finance
|
Advice
on financing mechanism for transfer of road and transport
properties and legal mechanisms for owning and managing very low
volume farm access roads
|
Revised
functional/administration classification of roads; sound
allocation formula for dividing Road Fund revenues between
road owners
|
Secondary
Roads Project; Trade and Transport Facilitation Project;
Rural Infrastructure Study
|
Kuwait
Fund for Economic Development
|
New
road classification; new procedures for managing the road
fund, including allocation of funds between road owners
|
Macroeconomic
Stability
|
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|
|
|
|
|
|
Ministry
of Economy, Industry and Trade
|
Improvement
of linkage between policy, resource constraints and
budgets
|
Develop
a more realistic medium-term budget framework
|
Public
Expenditure Reviews, PRSC in High Case
|
IMF
DFID
|
Budget
execution closer to planned
|
|
National
Bank
|
Assistance
to the MoF develop long-term debt instruments, e.g.
government bond market
|
MoF
starts to use medium to long-term government bonds to replace the
rolling of short-term debt instruments
|
Financial
Sector Advisory Program
|
IMF
|
1-10
year government bond market in place
|
|
National
Bank
|
Advise
to National Bank on management of reserves
|
Increased
import coverage
|
Financial
Sector Advisory Program
|
IMF
|
Gross
foreign reserves to reach over 2 months of imports
|
|
Ministry
of Finance, State Tax and Customs Departments
|
Development
of a business-friendly tax environment
|
Increased
collection of excise taxes and improved VAT administration
|
Public
Expenditure Reviews, Business Environment
Study, PRSC in High Case
|
IMF
USAID EU
|
Collection
of excise taxes to reach over 2 percent of GDP
|
|
Ministry
of Finance
|
Assistance to
the MOF to improve its cash and debt management capacity
and skills
|
Consolidation
of effective control system, and adoption of a single treasury
account
|
CPAR
Updates, Public Expenditure Reviews, PRSC in High Case
|
IMF
|
Improved
cash management and debt management capacity
|
|
State
Procurement Department, Ministry of Economy, Industry
and Trade
|
Establishment
of a transparent state procurement system; decentralization
of State procurement functions to line agencies
|
Greater
efficiency and competition within the system; reduced
delays and corruption in procurement process
|
CPAR,
Public Expenditure Reviews, PRSC, project lending (e.g. Secondary
Roads and Trade and Transport Facilitation)
|
|
Recommendations
of Country Portfolio Assessment Report implemented
|
|
Ministry
of Finance, Ministry of Economy, Industry and Trade
|
Develop
program-based budgeting
|
Improve
consistency between medium-term indicative plan and the budget
|
Public
Expenditure Reviews, Public Sector Management
Credit, PRSC in High Case
|
DFID
|
Public
Expenditure Reviews assessment of better targeting of
programs in the budget
|
|
Ministry
of Finance
|
Establish
accurate estimates of past government liabilities
|
Better
information on, and reduction in, arrears
|
CFAA
Updates, Public Expenditure Reviews
|
IMF
|
Reduced
arrears
|
|
Ministry
of Finance, National Bank, National Commission
of Securities
|
More
competitive and efficient T-bill market
|
Short
term: more participants for competitive bidding, and for
non-competitive quota; medium term: cash management,
coordination between MOF & NBG on T-bills/open market
operations; long term: independent debt management office
|
Financial
Sector Advisory Program, PRSC in High Case
|
USAID
FIRST
|
Lower
T-bill yield
|
|
Ministry
of Finance, National Commission of Securities
|
Help
build legal environment for investment funds; provide
information/advice
|
Establishment
of legal environment for investment funds
|
Financial
Sector Advisory Program
|
|
Regulation
of investment funds in place; NCS has capacity to supervise those
funds
|
|
Ministry
of Labor, Health and Social Protection
|
Support
to Ministry of Labor, Health and Social Protection on legal
reforms and their implementation
|
Law
adopted successfully
|
Social
Protection Reform Project
|
|
Regularization
of 1st pillar of pension system; better links between pensions
and contributions
|
|
National
Securities Commission, Ministry of Labor, Health
and Social Protection
|
Support
to National Securities Commission and Ministry of
Labor, Health and Social Protection on legal reforms and
their implementation
|
Normative
acts developed and adopted
|
Social
Protection Reform Project
|
|
Improved
regulatory environment in the area of private pensions
|
|
Ministry
of Finance, State Service of Insurance Supervision,
National Commission of Securities
|
Support
to relevant agencies on amendments to tax code and
investment rules
|
Improved
functioning of non-banking financial sector, including insurance
companies/private pension funds
|
Social
Protection Reform Project
|
|
Greater
and more effective role for non-banking financial sector,
including insurance companies and private pension funds
|
Structural
Reforms
|
|
|
|
|
|
|
|
Ministry
of Economy, Industry and Trade; State Department of
Statistics
|
Support
for initiatives to reduce smuggling and the shadow economy
|
Reduction
in smuggling and in the shadow economy
|
Trade
Facilitation Project; Private Sector Development Project;
Public Sector Reform Project; PRSC in High Case
|
USAID
|
Increase
in tax revenues, including increase in revenues from
petroleum products and cigarettes to over 2.5% of GDP
|
|
Ministry
of Economy, Industry and Trade; Ministry of Finance;
Ministry of Justice
|
Intensified
dialogue with Government on reform of the banking system as a
means of improving the investment climate
|
Increase
in banks’ capitalization; better corporate governance
principles and internal control systems; expansion of banking
networks; real time banking settlement; anti-money-laundering
legislation; deposit insurance introduced
|
Private
Sector Development Project; Financial Sector Advisory
Program; Business Environment Study
|
USAID
IMF
FIRST
|
Minimum
capital raised to €3.5m; improved confidence in banking
system; better access to finance; anti money laundering
regulations in compliance with FATF requirements
|
|
Ministry
of Economy, Industry and Trade; Ministry of Finance
|
Support
for removal of institutional (governance) obstacles to
fulfilling Georgia’s Export Potential
|
Progress
in implementing recommendations of Trade Study/Workshop
|
Trade
and Transport Facilitation Project; Private Sector
Development Project; Business Environment Study; Rural Development
Project
|
USAID
|
Improved
perception of environment for exporters in business surveys
|
Human
Capital Development
|
|
|
|
|
|
|
Improvement
of Health
|
|
|
|
|
|
|
|
Ministry
of Labor, Healthcare and Social Protection; Ministry of
finance
|
Assist
government to define health financing strategy focusing on
improvements in mobilization, allocation and management of
public and private resources, help build government capacity in
evidence based policy-making, planning, monitoring and evaluation,
as well as regulation
|
Definition
of basic benefit package, financing methodology and
co-payments, as well as recurrent costs; improved resource
mobilization and allocation, including introduction of
incentive-compatible provider payment systems
|
Health
Sector Note, JSDF Grant on community health insurance
|
JSDF
SIDA
DFID WHO
|
Definition
of basic benefit package, financing methodology, co-payments, and
recurrent costs; better resource mobilization and allocation,
including introduction of incentive-compatible provider payment
systems
|
Improvement
of Education
|
|
|
|
|
|
|
|
Ministry
of Education, Ministry of Culture
|
Improving
quality of education and access of the poor
|
Stakeholders
actively engaged in improving education quality and outcomes
|
Education
Project
|
SOROS
|
97
percent enrollment in basic education for the poorest quintile;
60% of consolidated education expenditures continue to be
allocated to primary/secondary education
|
Improvement
of Social Risks Management
|
|
|
|
|
|
|
|
Ministry
of Labor, Healthcare and Social Protection; State Social
Security Fund; Ministry of Finance
|
Timely
execution of Government obligations in the social sectors; fiscal
affordability and sustainability
|
No-arrears
in social transfers, increased poverty alleviation impact
|
Public
Expenditure Reviews, PRSC in High Case
|
|
No
new arrears; poverty incidence decreased by 6 percentage points
|
|
Ministry
of Labor, Healthcare and Social Protection, State Social
Security Fund
|
Support
to implementation of social insurance system
|
Better
performance of the pension system
|
Social
Protection Reform Project
|
|
No
pension arrears; financing of social insurance/assistance
benefits separated
|
|
Ministry
of Labor, Healthcare and Social Protection, State Social
Security Fund
|
Dialogue
on pension policies
|
Increase
in pensions
|
Public
Expenditure Reviews; Social Protection Reform Project
|
|
Average
real pension increased by 20%; extreme poverty among elderly
reduced
|
|
Ministry
of Labor, Healthcare and Social Protection, State Social
Security Fund
|
Dialogue
on pension policies
|
Satisfactory
performance of the pension system
|
Public
Expenditure Reviews; Social Protection Reform Project
|
|
Improved
fiscal sustainability of pension system
|
Development
of Priority Branches of the Economy
|
|
|
|
|
|
|
Energy
and Infrastructure
|
|
|
|
|
|
|
|
Ministry
of Fuel and Energy
|
Support
for direct contracts between generators and large end
consumers, subject to transparent terms and implementation
|
Direct
contracts between generators and large end consumers
|
EMSP
|
EBRD
KfW
USAID
|
Electricity
market successfully reorganized
|
|
Ministry
of Fuel and Energy; Energy Regulatory Commission;
Ministry of Economy
|
Tariff
policy; adequate appropriations to energy in state budgets
|
Lower
commercial losses; state budgets fully cover energy costs;
higher collections by state energy companies in distribution,
transmission; improved financial viability
|
EMSP
|
EBRD
IMF
KfW
USAID
|
Cash
payment collections at the wholesale electricity market above 65%;
dissemination to public of detailed sector performance
indicators
|
|
Ministry
of Fuel and Energy, Ministry of Finance
|
Establishment
of a professional Debt Restructuring Agency for the
power sector
|
Legacy
debt no longer a threat to the financial viability of the power
sector
|
EMSP
|
EBRD
IMF
KfW
USAID
|
Debt
Restructuring Agency led by international experts in full
operation; legacy debt issue resolved
|
|
Ministry
of Fuel and Energy
|
Georgian
Unified Distribution Company (GUDC) under long-term
management contract
|
GUDC
under long-term management contract
|
EMSP
|
EBRD
KfW
USAID
|
GUDC
under long-term management contract; other management contracts
fully operational
|
|
Ministry
of Transport and Communication
|
MOTC
restructuring
|
Improved
functioning of restructured MOTC
|
Secondary
Roads Project; Transport Facilitation Project
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
SDRG
restructured and road financing arranged to provide stable
source for road funding to maintain and improve roads
|
Technical
monitoring of emergency conditions, restore status of
divmises and constructions of strategic importance and special
complexity of the energy, transportation, communication and
construction infrastructure as well as those damaged from
earthquakes
|
Ministry
of Economy, Industry and Trade, Ministry of Fuel-Energy,
Ministry of Transportation and Communication, State
Department of Highways
|
Development
of road data bank for SDRG to take prompt, cost-effective
action in emergencies
|
The
data bank is used to prioritize annual road program
|
Secondary
Roads Project; Transport Facilitation Project
|
|
Road
data bank in use and SDRG expanded to cover local rural roads
|
|
State
Department of Highways
|
Road
construction plan, equipping SDRG with tools to develop and manage
the plan
|
5
year rolling plan a standard procedure in SDRG
|
Secondary
Roads Project; Transport Facilitation Project
|
EU,
Kuwait Development Fund
|
Performance
indicators to be developed in Secondary Roads project
|
|
State
Department of Information
|
Improving
rural access to telecommunications services
|
Better
and more affordable access by the rural population to
telecommunications
|
Rural
Telecommunications Project
|
|
Higher
proportion of the rural population having affordable access
to telecommunications
|
Tourism
|
|
|
|
|
|
|
|
State
Department of Tourism and Resorts
|
Development
of community-based tourism
|
Realistic
development strategy for tourism -- especially community-based
tourism -- that promotes broad-based local development, reduces
administrative barriers to tourism, and supports divservation
|
Community-based
tourism
|
|
Realistic
development strategy for community-based tourism, including
reduced administrative barriers and more focus on divservation
|
Agriculture
and Food
|
|
|
|
|
|
|
|
Ministry
of Agriculture, Melioration System Management
Department
|
Support
to establishing new, and strengthening existing, water users
associations to manage irrigation facilities
|
More
and better functioning water user associations
|
Irrigation
and Drainage Rehabilitation Project
|
EU
TACIS
|
Legal
framework for WUAs established; number of water user
associations registered increased
|
|
Ministry
of Agriculture and Food, State Department of Land
Management
|
Support
to strengthening capacity of State Department of Land
Management to carry out land registration based on cadastre
survey
|
Increased
capacity of State Department of Land Management
|
Agriculture
Development Project
|
IFAD,
USAID KfW
|
Eleven
land registration centers established; satellite imagery used for
titling in mountainous regions
|
|
Ministry
of Agriculture and Food, Veterinary Department
|
Dialogue
with Government on Veterinary reforms
|
Law
to establish private veterinarians passed
|
ARET
|
USAID
|
Government
starts veterinary reform process
|
|
Ministry
of Agriculture and Food, Plant Protection Service
|
Discussion
with MAF on reform of plant protection services
|
Follow-up
to merging of three agencies into a single plant protection agency
|
ADP
|
USAID
|
Reduced
illegal trade of agro-chemicals; relevant laws passed
|
The World Bank
Partners in Georgia
SECTOR
|
LEAD
NATIONAL AGENCY
|
PARTNERS
|
Agriculture
|
Ministry of
Agriculture and Food
|
IFAD, FAO, DFID, UNDP,
KFW
|
Culture
|
Ministry
of Culture Fund
for Cultural Heritage Protection
|
EU
|
Education
|
Ministry of Education
|
SOROS
|
Energy
|
Ministry
of Fuel and Energy Georgian
National Energy Regulatory Commission
|
USAID, KFW, EBRD
|
Financial Sector
|
Ministry
of Finance and Tax Revenues National Bank of Georgia National
Securities Commission Foreign
Investment Advisory Council
|
IMF
|
Forestry
|
State Department of
Forestry
|
FAO, WWF, CIDA
|
Governance
|
State Chancellery,
Anti-corruption Policy Coordination Council
|
Netherlands, IMF,
DFID, USAID, UNDP,
|
Health
|
Ministry of Labor,
Health and Social Affairs
|
SIDA, DFID, WHO
|
Judicial
|
Ministry
of Justice Sudivme
Court ALPE
(Association of Legal Public Education)
|
EU, USAID, SOROS, ABA,
DOJ
|
Municipal Development
and Decentralization
|
Georgian Municipal
Development Fund (MDF)
|
|
Poverty Reduction
|
Secretariat of
Governmental Commission on PREGP (Poverty reduction and Economic
Growth Program)
|
IMF, UNDP, DFID, USAID
|
Private Sector
|
Ministry of Economy,
Industry and Trade
|
USAID, EBRD, BP
|
Protected Areas
|
State Department of
Protected Territories, Preserves and Hunting Grounds
|
UNDP
|
Roads
|
Ministry
of Transport, Telecommunications and Post State
Department of Roads
|
Kuwait
Fund for Economic Development
|
Social Infrastructure
|
Georgian Social
Investment Fund (GSIF)
|
KFW
|
Transport and
Communications
|
Ministry
of Transport, Telecommunications and Post National
Commission of Telecommunications and Transport
|
|
USAID
USAID
assistance in the economic growth area focuses on strengthening
agriculture sector, assisting the NBG to improve its supervision,
inspection, and enforcement capacity, and furthering land market
reform. The Georgian Enterprise Growth Initiative (GEGI) is a major
new private sector development activity to be implemented in close
coordination with the CAS programs. USAID has been actively involved
in the energy and environmental sectors providing TA to regulatory
bodies, supporting privatization of the energy sector and improvement
of the international investment climate, assisting in elaboration of
environmentally sound laws in the energy sector as well as policies
in the sector oriented towards energy efficiency, conservation and
water management. Through democracy and governance oriented projects
USAID supports increased awareness of legal rights, judicial and BAR
reform initiatives, strengthening local governments, building
professionalism of independent mass media as well as capacity of
civil society and NGOs. USAID initiatives in the social sectors
include programs in the regions to support income generation and
economic self-reliance activities among internally displaced persons,
crisis assistance to the most vulnerable, health care partnership
programs and reproductive health programs which promote improved
maternal and perinatal services, safe motherhood, family planning,
health information systems, and STI/HIV awareness and divvention.
EBRD
EBRD main
objective in Georgia is to expand private sector development
activities in the country. During years 2002 and 2003 it has been
engaged in the active political dialogue with the Government to
support the substantial reduction of administrative barriers to
investments, redivsentation on the board of companies and banks,
support of the initiatives of local business associations. EBRD aims
at further strengthening of the Georgian banking sector through
ongoing support to the regulator, management training, and further
consolidation. EBRD’s interventions include financing to
business start-ups and existing micro, small and medium-sized
enterprises as well as selectively supporting critical investments in
infrastructure with specific focus on those projects that promote the
commercialization of infrastructure, particularly of the energy
sector.
EU
EU’s
Partnership and Cooperation Agreement (PCA) provides for cooperation
in a wide range of areas including Food Security Program (in amount
of € 25 million for the period 2002-2003), rehabilitation in
conflict zones (Engury Power Plan in Abkhazia), macro-financial
assistance (establishment of an agricultural credit institutions,
reforms in accountancy and audit, assistance to the insurance sector
and securities market regulation), support to trade liberalization,
customs, and development of transport infrastructure networks, advice
on economic legislation and country legislature harmonization with
the EU standards, investments in primary health care reconstruction
program and development of the Georgian National Health Program and
training of medical and administrative personnel as well as provision
of the technical assistance for the development of the model of
Regional Health financing. TACIS is the main financial instrument
supporting the implementation of the PCA.
GTZ
GTZ, working
on behalf of German Government, provides support in the health sector
primarily focusing on structural improvements and training for
medical technicians, promotes vocational training sector to improve
commercial and agricultural training and upgrading, implements
projects to privatize agriculture and build up effective land- and
debt-management systems, promotes export and investment, and has been
assisting in judicial and legal training as well as practical
application of civil law in Georgia. German assistance is also
channelled through KfW supporting credit line to agriculture sector
enterprises, participating with an equity stake in Procredit Bank, is
conducting cadastral works almost all over the country, and
contributing to social infrastructure in the districts bordering
Borjomi-Kharagauli National Park as well as supporting the Government
to rehabilitate schools and health facilities damaged during the
recent earthquake.
CIDA
Bilateral assistance
also comes from Canada (CIDA) mostly through the regional
projects supporting trade policy capacity, expanding the micro credit
programs, promoting NGO capacity development program that supports
the principles of good governance, strengthening health reform
through the appropriate application of health information technology
and information management strategies, and contributing drought
victims relief operations.
DFID
DFID has
recently approved a new Primary Health Care (PHC) Development project
through which technical assistance will be provided to the Government
in the areas of human resource development for the PHC system, health
care financing, health management information systems, capacity
building for the health policy development. DFID has been supporting
the SDS in the multi-sector household and labor market surveys. The
ongoing program also has a component aiming at development of good
governance and civil society in two regions of Georgia as well as
conflict reduction and confidence-building component.
The
Government of the Netherlands
The Netherlands
has provided support for a wide range of activities, focusing on good
governance, human rights and peace building, as well as substantial
budget support in conjunction with SAC III. Dutch support in the
three focus areas will continue, including for . election
divparation, divvention of trafficking in human beings, confidence
building measures in Abkhazia and support for NGOs involved in
poverty alleviation and human rights
IFAD
In the agriculture
sector IFAD supports rural development program for mountainous
and highland areas and credit-union development and rural credit
activities for small farmers, while FAO provides financial support to
hazelnut sector rehabilitation project.
UNDP
UNDP in
Georgia focuses its program activities in three areas: (a) democratic
governance; (b) poverty reduction; and (c) environmental protection,
as outlined in the second Country Cooperation Framework for Georgia
(2001-2005). In the sphere of Governance, major ongoing initiatives
include support to Foreign Investment Advisory Council, strengthening
the Anti-corruption Promotion Group, and assistance to the
Constitutional Court and Public Defender’s Office. UNDP has
been active in capacity building of the Georgian International Oil
Corporation and of the National Security Policy Management. UNDP is
contributing to land market development through creation of a
computerized program of registration. Technical and financial inputs
have been provided to strengthen the capacity of Georgian
institutions responsible for national statistics, notably the State
Department of Statistics. Environmental challenges are being
addressed through the projects supporting recovery, conversation and
sustainable use of Georgia’s agro-biodiversity, removal of
barriers to small hydro power sector development, and capacity
building of the Ministry of Environment.
UNICEF
UNICEF
priorities in Georgia include: education, integrated childhood
development, immunization, fighting HIV/AIDS, and protecting children
from violence, exploitation, abuse and discrimination. It has been
assisting the Government in national training of health workers and
professionals and in providing universal access to basic health
services for women and children. UNICEF has been helping the
Government in promoting the implementation of the Convention on the
Rights of the Child. Support also includes ensuring inclusive
education for children with disabilities and providing psychosocial
support to children in need of special protection as well as
introducing alternative, non-institutional methods of childcare.
Child de-institutionalization has been also supported by SIDA through
provision of technical assistance during social protection reform
project divparation and implementation phases.
Operating a
Business - Licensing and Permits. The existing regime for
licenses has benefited from extensive efforts to streamline and
simplify the legal framework for licenses. As a result, the current
licensing procedures do not appear to divsent significant barriers to
investment and business activity in Georgia, particularly compared
with other former Soviet Union countries. However, some of the
sectoral licensing laws and regulations do not conform to the
provisions of the framework Law on Licensing.
The Law on Local
Charges and related normative acts (including municipal regulations)
are not entirely clear in defining the purpose and scope of permits.
The criteria and conditions for authorizing and terminating permits
(similar to licensing conditions) are not clearly specified in the
laws and regulations. In effect, the enforcement of the permit system
is arbitrary and subject to abuse of the compliance provisions and
the assessment of violations. While this permit regime does not
generally impede business in Georgia, it does create unequal
conditions for newcomers and arbitrary enforcement can cause
significant problems for individual companies.
The main
recommendations for strengthening the framework for the system of
licensing and permits and facilitating the streamlining and
simplification of the current system in Georgia include:
Passage and
adoption of a strong and clear framework law and implementing
regulations on the licensing and permit regimes.
Review and
rationalization of the number and level of legally permissible
permits to avoid the proliferation of permits for revenue
generation.
Development of a
basic set of guidelines on the procedures for processing and
enforcing permits (similar to those in place for licenses).
Development of a
monitoring mechanism within the Ministry of Justice that will ensure
consistent enforcement of provisions for permits.
Publication and
dissemination of information on the legally sanctioned licenses and
permits (e.g., regulations, procedures, documentation requirements,
fees and appeals mechanisms).
Operating a
Business - Inspections. The passage of the Law on
Supervising Entredivneurial Activity redivsented the most recent of a
series of attempts to streamline the business inspection process by
state and local governments. It is, however, too early to assess the
effect of this new law. At the time of the FIAS mission, the
implementing regulations had not been completed and the law had not
been fully implemented.
The main
recommendations to strengthen the implementation of the new regime
for inspections include:
Articulate and
publish the mandate of each inspectorate as well as information on
definitions of violations, criteria for selecting businesses for
inspection, the penalties that may be assessed under specific
conditions, and the rights and responsibilities of inspectors and
businesses.
Halt extralegal
inspectorate activity pending the registration of all sanctioned
inspection activities.
Establish and
enforce procedures for conducting on-site inspections.
Regulate the
payment of penalties and fines resulting from inspections to a
central cashier in order to avoid on-site payments and minimize
opportunities for corruption.
Coordinate and
rationalize the activities of inspection agencies; implement
initiatives for joint training and information sharing among
inspection agencies; introduce a code of conduct for inspectors; and
train inspectors to understand that their primary function is to
ensure public health and safety.
Conclusions
and Next Steps.
There
is a general agreement within Georgia that the existing environment
for investment needs to improve if the country wishes to attract new
FDI flows and secure the expansion of existing investments. This
report has focused on the principal administrative barriers that
increase the cost and risk of doing business in Georgia.
Pervasive corruption
and the apparent lack of political will to implement reforms have
emerged as two fundamental issues affecting the business environment
in Georgia. While the degree of corruption may not be the worst in
the region, it has a negative effect on business activity and
increases the risks and costs of doing business in Georgia. The
process of streamlining and simplifying administrative procedures
must go hand-in-hand with anti-corruption programs. In a similar
vein, it should be noted that number of reforms (e.g. Customs reform)
have been stalled as a result of resistance to change and the
apparent lack of political will effect change.
In addition to
making recommendations for solving some of the regulatory,
administrative, and institutional issues that need to be addressed in
order to improve the business environment in Georgia, the report
points out the areas where further review is necessary and where
significant technical assistance is already being channeled, albeit
with limited impact.
The experience of
other countries clearly demonstrates that sustainable change cannot
be achieved without government commitment at the highest political
levels. Successful and sustained change requires leadership, strong
champions, and shared goals among all stakeholders within the
government and the private sector. On the basis of shared goals, the
process of rationalizing, streamlining, and simplifying bureaucratic
procedures can develop, gain momentum, and improve the values of
government agencies and transform them into service-oriented
organizations. A comdivhensive approach to change is necessary, and
commitment and time are essential ingredients. Procedural and
institutional reforms will require the support of public servants at
all levels of government, plus their support for changes in the
systems of performance monitoring, evaluation, and rewards.
The Presidential
Commission on Support of Private Business already exists as a
champion of this initiative. However, the framework for the change
agenda must include the participation and inputs of stakeholders at
all levels. Stakeholders must be drawn from the public and private
sectors. In addition, there is a role for the international donor
community in this framework since the incorporation of related
donor-sponsored initiatives must be integrated into the change
agenda. Chapter V of the report proposes a framework for the
development and implementation of the change agenda.
The institutional
structure to support the change agenda should include:
The Presidential
Commission. The Commission should serve as the focal point of
the change agenda and it should be given the mandate to promote and
advocate reforms in collaboration with other parts of the
Government.
An implementation
team. The staff of the commission’s secretariat should
constitute the core group of the implementation team. The
responsibilities of the team would include the development of the
Action Plan, coordination of implementation activities, solicitation
of donor funds and resources to support reform, coordination of
related initiatives, and regular reporting on progress to the
Commission.
A consultative
committee. The committee should provide a mechanism for regular
consultation with a broad group of stakeholders on various reform
initiatives.
The above -
mentioned Action Plan should be utilized to document the agreed-upon
changes, establish priorities and timeline, provide a basis for
accountability, and keep an ongoing record of progress. Therefore, it
must be emphasized that the Action Plan is not a static document but
one that must evolve over time.
Law of Georgia
"On Investment Activity Promotion and Guarantees".
On 12 November 1996 the Parliament of Georgia adopted the law of
Georgia "On Investment Activity Promotion and Guarantees",
which replaced the Law of the Republic of Georgia "On Investment
Activity" adopted on 10 August 1991 and the Law of the Republic
of Georgia "On Foreign Investments" adopted on 30 June
1995.
The Law defines the
legal bases for realizing both foreign and local investments and
their protection guarantees on the territory of Georgia. The purpose
of the Law is to establish the investment-promotional regime in
Georgia.
Investments.
Investments shall be deemed to be all types of property and
intellectual valuables or rights invested and applied for
gaining possible profit in the investment activity carried out in the
territory of Georgia, such as:
Monetary assets, a
share, stocks and other securities;
Movable and
immovable property (real estate) - land, buildings, structures,
equipment and other material valuables;
Lease rights to
land and the use of natural resources (including concession),
patents, licenses, know-how, experience and other intellectual
valuables;
Other property or
intellectual valuables or rights provided for by the law.
Investor.
An investor shall be deemed to be a physical (individual) or legal
person, as well as an international organization investing in
Georgia. A foreign investor shall be deemed to be:
A foreign citizen;
A stateless person
temporarily residing on the territory of Georgia;
A Georgian citizen
permanently residing abroad;
A legal person
registered beyond Georgia.
An enterprise with a
foreign investment of not less than 25% shall enjoy the same
rights as the foreign investor.
Foreign
Investment Advisory Council (FIAC)
In order to assist
foreign investment inflow into Georgia, improve investment climate in
the country and support private sector development, it became
necessary to create a special government agency, which would serve
the above-mentioned goals. Therefore, on March 30, 1997, according to
the divsidential decree N87, Foreign Investment Advisory Council
(FIAC) was created under the supervision of the President of Georgia,
intended to assist the development of the private sector and improve
the investment environment in the country, to coordinate donors and
donor financed projects, to monitor these projects and to ensure a
transparency and accounting of foreign aid inflow into Georgia.
The Investment
Council operates through its secretariat, which is responsible for
the fulfilment of the responsibilities assigned to the Foreign
Investment Advisory Council. The Secretariat of the Investment
Council works in three directions:
Prepares the
Council's meetings;
Cooperates with the
donors and coordinates the donor financed projects;
Assists the private
sector.
Preparation
of the council's meetings. The secretariat of the council
plans, divpares meeting and monitors their procession. The meetings
are divceded by a divparatory phase, during which the Secretariat
identifies priority issues, gathers relevant information, processes,
analysis it and identifies a range of possible conclusions. One of
the responsibilities of the Secretariat is to control the fulfilment
of assigned works and appraise their compliance and produce relevant
recommendations.
Cooperation
with the donors and coordination of the donor financed projects.
Activities related to the cooperation with donors and coordination of
the donor-financed projects are a part of the Secretariat's daily
job. The Secretariat of FIAC conducts permanent monitoring and
control of the projects. Among the donor related activities, a
notable obligation of the FIAC Secretariat is to identify the
strategy of cooperation with the donors and direct flow of further
assistance to relevant channels and to target further projects. Daily
work of the FIAC Secretariat includes collection of information on
problems related with investment projects and identification of ways
of their solution. The council cooperates with short term missions of
donors, organizes meetings, drafts agendas and divpares background
information for topics of discussion for the Government members as
well as for the President of Georgia. The FIAC Secretariat actively
works on elaboration of financial-economic, and particularly
international relations related legislation of Georgia.
Private
sector related activities. To fulfil this obligation the
council works in few directions. According to the divsidential decree
N1324, a Presidential Commission on Support of the Private Businesses
in Georgia was formed in the year 2000. By means of close cooperation
of the Commission and FIAS, it became possible to study all
administrative barriers to investment (see above). As a result, the
problems impeding the development of business in Georgia were
identified. On the basis of the results of this study, the
recommendations were drafted and action plan was compiled, which was
approved by the divsident of Georgia. The commission of cooperation
with investors conducts permanent monitoring of fulfilment of the
action plan, appraises its fulfilment and divpares relevant
recommendations. The Secretariat of Foreign Investment Advisory
Council actively cooperates with other donor organizations in terms
of the private sector development projects.
Tax Regime
Taxation
System and Tax Rates in Georgia
Legal
Framework. The Tax Code of Georgia, adopted on June 13,
1997,2
is the principal law on taxation policy and administration. Other
legislation that regulate taxation include the Administrative
Offences Code, the Criminal Code, bankruptcy legislation, customs
legislation, the Law on the Road Fund of Georgia, and the Law on the
Medical Insurance Fund of Georgia.
The taxation system
in Georgia includes both national and local taxes; the latter are set
by local authorities following guidelines and limits set forth in the
Tax Code. Every taxpayer must register with their regional tax
inspectorate and is given a tax identification number, which must be
indicated on all tax documents.
Taxes Paid by
Individuals, Individual Enterprises.
Income Tax.
Income tax must be paid on wages and income earned from economic
activity, including income received in non-monetary form. Physical
persons, both resident and non-resident, individual enterprises, and
entredivneurs are subject to this tax. Under Georgian law, residents
are physical persons in the territory of Georgia for more than 182
days during any 12-month period ending in a given tax year.
An individual
enterprise is defined as an entity owned and managed by a single
person, an enterprise run solely by family members, or a farm solely
owned by an individual or members of that individual’s family.
Physical person entredivneurs are individuals who engage in
entredivneurial activity without first establishing themselves as
legal persons (and in accordance with the entredivneurs law).
Physical person entredivneurs and individual enterprises with annual
gross income equal to or less than 24,000 GEL are subject to a
divsumptive tax in lieu of an income tax. The divsumptive tax is
described in the next section.
Georgian residents
must pay income tax on gross income from all sources (Georgian and
non-Georgian) received during the tax year, regardless of where the
income was earned or paid, less allowable deductions.
Non-residents must
pay income tax, but only on income received from Georgian sources.
Non-residents who engage in economic activities through a permanent
establishment are subject to profit tax on gross income received
during the tax year from Georgian sources connected with the
permanent establishment, less allowable deductions.
Taxable income is
composed of the following:
Salaries and wages
Dividend, interest, and royalty payments
Income from the lease or rental of property
Income from the write-off of debts
Income received from the supply of goods or performance of services
Gains from the sale of assets
Income received as a result of the restriction or closing of an
entredivneurial activity
Income from the sale of shares in an enterprise
Income in the form of insurance payments paid under agreements for
the insurance or reinsurance risk in Georgia.
In addition to
monetary wages, benefits are considered wage income and are taxable
as part of gross income. Generally, benefits are included in income
at the market price at the moment of receipt, reduced by any portion
of the benefit paid by the employee. These include: use of an
automobile for private service; gifts of goods or gratuitous
performance of services; educational assistance to the employee or
dependents; and employee expenses reimbursed by the employer.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Table 1.4.1.1 shows
income tax rates. Income tax on dividends, interest payments, and
payments to non-residents are withheld at the source of payment and
are subject to different rates. Dividends and interest payments are
taxed at the rate of 10 percent. Dividends and interest payments
received by physical persons, taxed at the source of payment, are not
subject to additional taxation. Further, taxes paid on the first
3,000 GEL of combined interest and dividends may be applied to reduce
the taxpayer’s tax liability, assuming adequate documentation
of the tax payment is provided.
Table 1.4.1.1:
Income Tax Rates
Amount of
taxable income during the tax year
|
Tax rate
|
Up to 200 GEL
|
12% of the
taxable income
|
201 to 350 GEL
|
24
GEL + 15% of the amount in excess of 200 GEL
|
351 to 600 GEL
|
46.5 GEL + 17% of
the amount in excess of 350 GEL
|
More than 600 GEL
|
89 GEL + 20% of
the amount in excess of 600 GEL
|
Source:
Tax Code.
Tax agents who
withhold tax at the source of payment are required to:
Transfer the tax to the budget when making payments to physical
persons;
When paying wages, issue to the physical person receiving the income
(at his or her request) a statement with the person’s name,
amount and type of income paid, and amount of tax withheld; and
Within 30 days of the end of the tax year, divsent to the tax
agencies and, if requested, to the person paid, a statement
containing the person’s registration number, total income, and
total amount of tax withheld during the year.
Physical person
entredivneurs and individual enterprises are required to submit
income tax payments in three instalments, based on their income tax
liability for the divvious year. Instalments are applied against the
taxpayer’s actual liability. Payments may be reduced if income
in the current year is expected to be at least 30 percent less than
income in the divvious year. Taxpayers with no income from the
divvious year must make payments based on actual income during the
divvious quarter.
Tax payers3
are required to submit returns before April 1st of the year following
the reporting year. Before the income tax return due date, taxpayers
may apply to the tax authorities for an extension of time to submit
their returns. Taxpayers who cease entredivneurial activity must
submit a tax return within 30 days of the cessation of activities.
Taxes Paid by
Enterprises.
Profit Tax.
Profit taxes must be paid by Georgian entities and foreign entities
with permanent establishments in Georgia. Foreign entities that do
not have permanent establishment divsence in Georgia are taxed via a
withholding tax at the source of payment, as stated above.
Enterprises are defined as:
Legal persons established according to the legislation of Georgia
Corporations, companies, firms, and other entities established
pursuant to the legislation of foreign states
Branches and other separate units that are structural units of the
entities indicated in the first bullet and that have their own
balance sheet and a separate settlement or other account.
Georgian and foreign
enterprises are distinguished by place of activity and management. A
Georgian enterprise has its place of activity or management within
the territory of Georgia, whereas a foreign enterprise has its place
of activity or management outside the territory of Georgia. If there
is more than one place of management or activity, or the place of
management and activity do not coincide, then the divdominant
location should be used to determine the place of activity or
management.
Individual
enterprises and physical person entredivneurs are subject to income
tax (or divsumptive tax), not profit tax. Branches and other units of
an enterprise do not pay profit tax separately, but aggregate profit
with the main enterprise, which pays the full profit tax.
Georgian enterprises
are taxed on gross income, which includes all income regardless of
its source or place of payment, less allowable deductions. The profit
tax is a flat rate of 20 percent. Foreign enterprises are also
subject to profit tax, the extent to which depends on whether the
foreign enterprise is connected to a permanent establishment.
Foreign enterprises
that conduct economic activity through a permanent establishment are
subject to profit tax on gross income, less deductions, from Georgian
sources connected to the permanent establishment. Foreign enterprises
that do not conduct economic activities through a permanent
establishment must pay profit tax on gross income from Georgian
sources (no deductions are allowed), and the tax is withheld at the
source of payment. However, non-resident taxpayers (including foreign
enterprises) who receive certain types of income (e.g., insurance
payments, royalties, management fees, income from works or services)
may file a return and claim deductions as if this income was
connected to a permanent establishment. The withholding rates for
certain types of income are as follows:
Dividend and interest payments—10 percent
Insurance proceeds—4 percent
Telecommunication and transportation services, shipments, and oil
and gas transactions—4 percent
Royalties, management fees, income from performing work or rendering
services (except income earned as wages), income from leasing
movable property, income from management, financial, and insurance
services—10 percent
Certain oil and gas profits—10 percent.
Foreign enterprises
receiving profits from the sale of some stocks, assets, and property
not connected to their permanent establishment must pay profit tax,
with allowable deductions, on the income from these sales. Annex D
provides a listing of profit tax exemptions as well as allowable
deductions from gross income.
Table 1.4.1.2
summarizes the asset categories into which fixed assets subject to
dedivciation are grouped.
Table 1.4.1.2:
Summary of Asset Categories
-
Group
|
Types of
Fixed Assets
|
Percentage
Dedivciation
|
1
|
Passenger
automobiles, automobile and tractor equipment for use on roads,
special instruments, miscellaneous accessories, computers,
peripherals and equipment for data processing and storage.
|
20
|
2
|
Automotive
transport, trucks, buses, special automobiles and trailers,
machines and equipment for all sectors of industry and the
foundry industry, forging and divssing equipment, electronic
equipment, construction equipment, agricultural machines and
equipment, office furniture.
|
15
|
3
|
Railway, sea,
and river transport vehicles; power machines and equipment;
turbine equipment; electric motors and diesel generators;
electricity transmission and communication facilities; pipelines.
|
8
|
4
|
Buildings and
structures
|
7
|
5
|
Assets subject
to dedivciation not included in other groups.
|
10
|
Source:
Tax Code.
Buildings and
structures are each dedivciated separately, whereas the other asset
groups are dedivciated using the balance of the asset group at the
end of the tax year. The balance of the asset group is adjusted for
purchases, sales, and repairs. The maximum deduction for repair
expenses is 5 percent of the balance of each asset group. Any repairs
that exceed 5 percent are added to the balance of the asset group and
dedivciated as such.
Physical persons who
incur a loss in a tax year (i.e., deductions exceed gross income) and
who are not connected to employment may not deduct such losses from
employment income, but may carry forward and deduct the loss from
non-wage income for a period up to 5 years after the tax year in
which the net loss occurred. Legal persons who incur a loss in a tax
year may carry forward and deduct losses from profit for a period of
up to 5 years after the tax year in which the net loss occurred.
Tax credits are
subtracted directly from the tax liability. There is a tax credit
against Georgian taxes for income and profit taxes paid outside of
Georgia, as long as the credit does not exceed the amount of tax
charged in Georgia.
A taxpayer may
record income and expenses under either the cash basis method or
accrual basis method of accounting, but must use the same method for
both accounting and tax purposes, and must use the same method
throughout the tax year. A physical person must keep records using
the accrual basis method for income from entredivneurial activity.
Profit taxes must be
paid in three installments based on the profit tax liability of the
divvious year. These are:
Before May 15th: 30 percent of the divvious year’s tax
liability
Before August 15th: 30 percent of the divvious year’s tax
liability
Before November 15th: 40 percent of the divvious year’s tax
liability.
Taxpayers who have
no taxable income in the divvious year make payments according to the
actual income of the divvious quarter.
Installment payments
may be reduced if current year income is expected to be at least 30
percent less than income of the divvious year. Permission of the head
of the tax agency, requested 1 month before the date of payment is
required to do so. Resident legal persons and nonresident legal
persons who have income from a Georgian source that is not taxed at
the source of payment must submit a tax return before April 1st of
the year following the year of the reporting year to the tax agency
at the place of registration. Before the due date of a profit tax
return, the taxpayer may apply to a tax body for an extension of time
to submit the return.
Profit taxpayers who
cease their entredivneurial activity in Georgia must submit an income
tax return to the tax agency within 30 days of ceasing activities.
Legal persons who decide to liquidate must immediately notify the tax
service in writing of their plans to liquidate and must file a profit
tax return within 15 days of the decision to liquidate.
Value Added
Tax. Value added tax (VAT) is collected at every stage of
production and distribution. Persons or enterprises with annual
taxable turnover less than 24,000 GEL per year are not required to
register with the tax authority and pay VAT, although they may.
An enterprise
charges VAT on its sales and pays VAT to the suppliers of materials
and providers of services it receives. The enterprise then accounts
to the tax department for the difference between the tax that it
charged on its sales and the tax that it paid on the goods and
services supplied to it. This difference usually results in a net
payment to the budget, but in some circumstances it can result in a
credit to the enterprise.
An enterprise
registered for VAT that carries out a taxable transaction is required
to divpare and issue a tax invoice to the person who receives goods
or services. VAT invoices are purchased from respective regional tax
offices at a cost of 0.18 GEL per invoice. The purchaser is given two
copies of the invoice and both the seller and the purchaser must
submit one copy to their local tax agencies for control purposes.
Buyers and sellers are required to submit VAT declarations every
month, no later than the 15th of the month following the reporting
period. The total VAT an enterprise pays to the budget each month is
the total VAT charged on its outputs (sales) less the total
(allowable) VAT paid on its inputs (purchases) during that month. VAT
paid on inputs can be credited against VAT paid on outputs if inputs
are used for economic activities (offset for charities,
entertainment, redivsentative expenses are not allowed) and the
enterprise has an invoice of paid VAT. VAT paid on exempt goods or on
automobiles cannot be offset. If the input tax exceeds the output
tax, the enterprise receives a credit for the excess. VAT on taxable
imports is levied and collected by customs agencies.
The VAT rate in
Georgia is 20 percent. A zero percent rate applies to exports and the
categories of goods and services identified below. Annex D provides a
list of VAT exemptions.
Exemption means that
producers or suppliers of exempt goods and services do not charge VAT
on their output, but cannot claim a credit on the VAT paid on inputs
used to produce the exempt output.
Social Taxes.
Social taxes include both social and employment taxes and are imposed
on monetary and non-monetary wages and other forms of compensation
paid to employees, as well as on income earned by physical person
entredivneurs from their economic activities. The social tax rates
are summarized in Table 1.4.1.3.
Table 1.4.1.3:
Social Tax Rates
-
Taxpayers
|
Taxes Paid by
Employers and Entredivneurs
|
Taxes Paid by
Employees
|
|
Social Tax
|
Employment
Tax
|
Social
security Tax
|
Physical person
entredivneurs and legal persons who pay wages to employees.
Physical person
entredivneurs and legal persons who pay physical persons for
services.
|
27%; not less
than 16 GEL per month
|
1%
|
|
Physical persons
who receive remuneration as employees or on a contract basis.
|
|
|
1%
|
Physical
person entredivneurs.
|
27%, not less
than 16 GEL per month
|
1%
|
|
Physical persons
who carry out non-entredivneurial economic activities in Georgia.
|
27%,
not less than 16 GEL per month
|
1%
|
|
Source:
Tax Code.
Social taxes must be
paid by:
Physical person entredivneurs and legal persons who make wage
payments to employees working in Georgia or who make payments to
physical person who render services in Georgia
Physical persons receiving remuneration from employment or the
performance of services
Physical person entredivneurs who conduct entredivneurial activity
in Georgia
Physical persons who perform non-entredivneurial activity in
Georgia, including lawyers, doctors, notaries, and other
professions.
For public
organizations of disabled persons as well as enterprises that have a
workforce of 70 percent or more disabled persons and pensioners, the
27 percent tax rate is reduced to 10 percent.
Employers who pay
wages to employees or to individuals performing services must remit
social taxes to the tax administration at the time that wages are
paid. Employees’ social taxes are withheld and remitted along
with the employer’s social tax payment. Employers are required
to submit their social tax returns before the 15th day following the
reporting month.
Physical person
entredivneurs and physical persons who carry out economic activities
classified as non-entredivneurial (under the Law on Entredivneurs)
must remit social taxes along with their income taxes. The social tax
return must be submitted along with the income tax return.
Excise
Taxes. Excise taxes are levied on specific excisable
goods produced in Georgia or imported into Georgia. Unless exempted,
all physical and legal persons who produce excisable goods on the
territory of Georgia or who import excisable goods must pay excise
taxes. Exports of excisable goods are taxed at a zero rate.
Several products are
exempt from excise taxes, including:
Alcoholic beverages produced by a physical person for personal
consumption
The import of 2 litres of alcoholic beverages and 200 cigarettes by
a physical person for personal consumption
The transit and temporary import of excisable goods into the customs
territory of Georgia
The re-export of excisable goods
The import of automobiles and tires for humanitarian aid during a
natural disaster
Aviation fuel to be supplied on board for international flights
Import or supply of oil products necessary to carry out oil and gas
transactions (specified by the oil and gas law of Georgia).
Excise taxes must be
paid up to the 10th of the next month after carrying out the taxable
transaction. The taxable transaction for products produced in Georgia
is considered to occur at the earlier of 90 days from the delivery
(transfer) of goods or the moment of payment. In the case of imports,
the taxable transaction is considered to occur at the time the goods
are imported, and the excise tax is collected by customs agencies.
For excisable products subject to excise stamping, the taxable
transaction is considered to occur at the time the goods are
delivered, and the total amount of excise must be paid upon
purchasing the stamps. Excise stamps are required for most imported
and domestically produced alcohol products and tobacco products,
except for pipe tobacco.
|
|
|
For goods produced
on the territory of Georgia, the amount of the taxable transaction is
the payment received or to be received by the taxpayer from the
customer, excluding the amount of the excise tax and VAT. This amount
cannot be less than the wholesale market price excluding the excise
tax and VAT. For goods sold at the retail level, the amount of the
taxable transaction is the market price of the goods at the wholesale
level not including the amount of the excise tax and VAT. For alcohol
products, the amount of the taxable transaction is based on the
volume of alcoholic beverages. For imported goods, the amount of the
taxable transaction is the customs value of the goods determined in
accordance with the customs legislation of Georgia (but not less than
the wholesale market price, excluding the excise tax and VAT) plus
the amount of duties and taxes payable on the import of the goods
(except for the excise tax and VAT).
Property
Taxes. Georgian enterprises, branch offices, and other
similar subsidiary enterprises that have an independent balance sheet
and settlement account, foreign enterprises operating through a
permanent establishment, and organizations whose property or part of
property is used for economic activity must pay property tax.
Property subject to
this tax includes fixed assets, installed equipment, uncompleted
capital investment, intangible assets that are listed on the balance
sheet of an enterprise, as well as such property listed on the
balance sheet of an organization and used for economic activity. For
foreign enterprises, only property connected with the permanent
establishment of the enterprise is subject to property tax.
The property tax
rate is 1 percent of the value of the property. The tax is due in
four equal payments, before February 15th, May 15th, August 15th, and
November 15th.
Tax
on the Use of Land. Physical and legal persons who are
owners or users of land plots, including land used for agricultural
and non-agricultural purposes, are subject to tax on the use of land.
The base rate of the
tax for the use of nonagricultural land is 0.24 GEL per square meter
of land. This tax is due in equal parts before August 15th and before
November 15th of the reporting year.
The base rates for
agricultural land are set on a per hectare basis and vary depending
on location and use. This tax is due on or before November 1st of the
reporting year.
Tax on
Economic Activity. This local tax is paid by all physical and
legal persons engaged in any economic activity on the territory of a
corresponding city (region).
This tax rate is set
by local governments, but cannot exceed 1 percent of income (less
material expenditures and VAT). For port services (loading and
unloading ships) the maximum rate is 2 percent of income (less VAT).
Other Taxes.
Tax
on the Transfer of Property. This tax is imposed on the
transfer of real estate located in Georgia, inheritances and gifts,
and the transfer of motor vehicles. The transferee is subject to the
tax. Transfers of title, as well as certain leases of real estate are
taxable.
The taxable amount
is the amount of compensation transferred (but not less than the
market price), including assumed indebtedness. In the case of a lease
or tenancy, the taxable amount is determined by discounting the
amount payable under the lease or tenancy agreement.
The tax rate on the
transfer of real estate is 2 percent of the taxable amount. The tax
is due prior to the registration of the documents transferring the
property. If the property is not registered, the tax is due at the
time the property is transferred.
For property
received as inheritance, the tax is due no later than 6 months from
the receipt of documents transferring title. For property received as
gifts, the tax is due within 1 month of the transfer.
Tax
on the Use of Natural Resources. Physical and legal
persons engaged in any activity that requires a license for the use
of natural resources (with the exception of land) owned by the state
must pay this tax. The tax is imposed on the volume of natural
resources extracted.
The tax rates vary
by natural resource. For minerals, the rate is between 1 and 15
percent (of the price of the mineral resources extracted), timber
2–34 percent, water 3–10 percent, animals 2–55
percent.
The tax for the use
of natural resources is due before the 15th of the month following
the reporting month. However, the tax for timber and flora resources
should be paid at the time of their transportation from the forest;
the tax for water resources should be paid before December 1st of the
relevant year; and the tax on hunting birds in migration should be
paid on receipt of the license.
The tax on natural
resources must be paid within 3 months after receiving the license
for using the natural resources.
Exempt from this tax
are the mineral resources gained in the course of underground
construction. In addition, the tax rate is reduced by 70 percent for
use of natural resources in connection with scientific and cultural
activities and for users of natural resources that have carried out
restoration or replacement of natural resources from their own funds,
within the limits of the volume of restored resources.
Environmental
Taxes. This tax must be paid by physical and legal
persons engaged in any activity listed in categories 1–4 of the
Law of Georgia on Environmental Permits (October 15, 1996), who
pollute the environment from fixed sources or who import or produce
gasoline, diesel fuel, kerosene, natural gas (except as used as a raw
material for production of goods), or liquid gas.
Tax rates are based
on the pollutant emitted, whether it is emitted into the atmosphere
or water (either directly or through sewers and storm drains), and
geographic region. For other items the tax is based on the amount
imported or produced. Imported goods that are later exported are
exempt from this tax.
Tax rates apply to
pollutants emitted within limits set by environmental laws.
Pollutants emitted in excess of established limits are subject to a
fine equal to five times the tax rate for pollution within the limit
(see the section on fines and penalties below).
Taxpayers who
pollute the environment from fixed sources must submit a tax return
certified by the Ministry of Environment and Natural Resource
Protection to the tax agency and pay the tax by the 15th of the month
following the reporting quarter. Taxpayers who produce or supply
gasoline, diesel, kerosene, natural gas, or liquid gas must submit a
tax return by the 15th day of the month following the reporting
month.
Taxpayers who import
any products subject to the pollution tax must pay the tax before the
customs agency clears the products. Customs may clear the products
only after the tax agency issues a receipt indicating that the tax
has been paid.
Existing
Taxation Practices
Background.
Georgia was one of the first CIS countries to codify its tax
legislation in a comdivhensive Code. However, since its adoption in
1997, there have been numerous amendments, which have considerably
reduced the consistency of the Code. Some of the mayor changes in
recent amendments include: i) changes in the tax rates for
tobacco products and the tax rates of the motor vehicles ownership
tax; ii) repealing provisions in the Code allowing the tax
administration to seize and sell delinquent taxpayers’
property; iii) introduction of exemptions from property taxation for
enterprises and physical persons in mountainous regions. The IMF
carried out a review of tax policy in 2000 and a number of the
recommendations from this review were actually included in a tax
reform package divpared by the Ministry of Finance in September 2001.
However, this package has not been divsented to Parliament so far.
Key issues remaining on the tax policy side are:
Unstable tax
policy framework. The history of tax policy changes in
Georgia since adoption of the tax code demonstrates a lack of
long-term policy planning and a focus on short-term policy measures,
disregarding the general consistency of the Code. Such approach has
led to constant changes to Article 273 (on transitional provisions).
Even fundamental policy changes are not introduced as permanent
features of the tax system, but as temporary ones. A typical example
is the cigarette taxation, which has been modified six times (!)
since the Code entered into force. New taxation schemes are often
introduced late in the year, for short periods of time and without
clarification as to their duration. The current taxation scheme for
tobacco products was introduced for the year 2001 only on December
2000 and was extended for another year through another amendment to
the Code on December 2001. An even worse case is the excise tax on
the importation of pyrolysis liquid products which was set at a rate
of 400 GEL per ton on December 2000 and reduced to 50 GEL per ton
less then four month later. There are numerous similar examples of
short-term tax policy measures and frequent changes of tax
legislation Such an approach neither allows the business community to
calculate its tax burden over a longer period of time, nor does it
permit the revenue authorities to design appropriate taxation
strategies and develop a long-term planning of resource mobilization.
The strong influence of lobbies in Parliament and the obvious
tendency of parliamentarians to further narrow the tax base by
granting sector and specific exemptions and rate reductions also
contributes significantly to the low quality of tax policy making in
Georgia.
VAT Threshold.
Currently, VAT registration is mandatory for businesses with an
annual taxable turnover of 24,000 GEL or more (and voluntary for a
businesses below this threshold).4
As a result of the low registration threshold, the tax administration
has to deal with a large number of small businesses as VAT taxpayers
who contribute little to total VAT revenues. For example, an increase
of the threshold from 24,000 to 100,000 GEL would reduce the number
of mandatory taxpayers from around 13,000 to 3,200. It would at the
same time reduce the total VAT collection by around 23 percent. A
reduction in the number of taxpayers could substantially facilitate
the administration of the tax and help combat VAT evasion by
permitting a more comdivhensive cross-checking of VAT invoices and
making it more difficult to establish shell companies for evasion
purposes. 5However,
this result can only be achieved if the scope for voluntary
registration is reduced. The Ministry of Finance therefore should
consider to limit voluntary registration, e.g. by excluding
businesses with a turnover below 50,000 GEL.
VAT
Distortions. There is increasing frustration with the
performance of VAT and the distortions its creates because the tax
net is narrow and businesses are often unable to deduct VAT payments
on their inputs. First, despite the low threshold, the number of 17,
000 businesses registered is quite low by international
standards. Second, a true VAT, which is supposed to avoid tax
cascading and economic distortions, requires a prompt and full refund
of the part of the tax on inputs which exceeds the tax due on
outputs. This is especially important for exporters. In Georgia the
amount of unpaid VAT refunds is large (about 29 million
GEL at the end of 2001). Tax inspectors should eliminate the practice
of treating VAT as advanced payments against future tax liabilities
in order to meet their monthly revenue targets (see section on tax
administration below). Third, while many countries have introduced
limited exemptions or reduced rates in their VAT laws to reduce
regressive elements of the tax, the scope of tax privileges in the
Georgian VAT continues to increase, and the country has embarked on
the dangerous path to use tax privileges as a way to compensate for
administrative or legal deficiencies.
Frustration with the
distortion effects of the VAT has caused some policy makers to
consider whether to replace the VAT with a sales tax. The objective
would be to reduce compliance risks by applying the tax to one stage
of the business cycle only. There are serious concerns regarding this
idea. VAT despite its relatively low efficiency has become the main
revenue source, contributing 45 percent to total gross tax revenues
in 2001. Experience in other countries shows that sales taxes have a
far lower revenue potential than the VAT, because it does not capture
the total value added in the production and distribution phases and
their rates normally are not higher than 5 percent--because
of administrative difficulties. In addition, compliance risks
and compliance management challenges would not be reduced because
collection would have to rely on the retail sector which is more
difficult to administer. Rather than replacing the VAT with a sales
tax, the focus should be to improve VAT administration and actually
implement the key principles of the tax, such as an effective refund
system for exporters. A performance of the tax improves;
consideration could then be given later to lowering the standard VAT
rate.
Proposed
simplified tax. To compensate for the revenue loss caused by
increasing the VAT threshold, MoF plans to introduce a simplified tax
for taxpayers who are not registered for VAT, and to modify the
current divsumptive tax for individual enterprises, which raises
relatively little revenues (in 2000 actual divsumptive tax collection
was only 5 million GEL or 0.7 percent of total tax revenues), by
changing it to a fixed tax with a broader tax base. The MoF proposal
is to levy the simplified tax rate of 7 percent on gross income,
which will require some basic accounting. The fixed tax will,
similar to the current divsumptive tax, be based on the nature of the
business activity, the size of the business and the business
location; it will include more types of small businesses than the
divsumptive tax. Although some (Foreign Investor Advisory Service
(FIAS) December 2001 report6)
consider a fixed tax to be extremely complicated, it need not be so.
The fixed tax, if well designed, can be transparent and easy to
administer tax. It offers no scope for negotiation to taxpayers,
does not require detailed bookkeeping, and could reduce the
opportunity for corruption and the compliance costs for taxpayers.
There are some issues regarding this divsumptive taxation scheme:
The combined fixed
tax and simplified tax is supposed to compensate for the increase of
the VAT threshold. However, estimated revenues from the fixed and the
simplified tax are 27 million GEL, which is far less than the
expected decrease in VAT revenues. While the increase of the VAT
threshold and the introduction of the fixed tax are laudable reforms,
the revenue impact of the reform will need to be studied further.
Parliament has
rejected the proposed simplified tax because it considers the rate (7
percent) too high and the coverage too narrow. According to some
parliamentarians, the scope of the tax should extend to some larger
businesses, which clearly reflects the interest of certain business
sectors to simplify and reduce taxation. Presumptive taxation based
on gross figures should be limited to Small & Medium-Sized
Enterprises (SMEs) with no sufficient bookkeeping, while all larger
businesses are required to keep books and records and are taxed on a
net basis. There is no good reason to extend the scope of the
simplified tax to larger tax payers.
Excise
Taxation. Due to its open borders and weak administrative
capacity Georgia faces major problems collecting excise taxes.
Reduction in excise tax rates has been the divferred method to
improve compliance, but with no positive results so far. Despite this
experience the trend to reduce excises continues, which is worrisome.
Georgian excise taxes are actually very low by international
standards already, and the focus should more be on efficiently
enforcing the excise tax regime. Compared to the CIS country average,
excise tax revenues in Georgia are low; in 2000 excises in Georgia
contributed 1.5 percent to GDP, while the CIS average was 2.1
percent. Looking at neighbouring countries, excise revenue
performance is much higher in Armenia with 2.5 percent of GDP and
somewhat higher in Russia with 1.9 percent of GDP; it is much lower,
however, in Azerbaijan with only 0.5 percent of GDP (which is
together with Tajikistan the lowest figure in the CIS region). The
fact that Georgia has managed to accumulate a surprisingly high level
of tax arrears in an area where arrears normally should not build up
– according to IMF data the amount of tax arrears on excises
was equivalent to 2.7 percent of GDP by beginning of 2000 –
shows, however, that excise revenue increases will also depend on the
ability and support of the tax administration to collect revenues
from major businesses in the oil and cigarette industry.
Income and
social tax. The high tax burden of the personal income tax
(PIT) and the social security tax provides a strong incentive to
evade the payment of these taxes. Although the personal income tax
has reasonably progressive rates (from 12 percent to a maximum of 20
percent), the marginal cost of taxes for both employees and employers
creates strong incentives not to formalize the labor contract:
employees divfer current to future consumption, while employers seek
to reduce costs and increase competitiveness. Overall, the taxation
rate of the PIT and the social security tax over the net wage is 68
percent. This implies that for each additional GEL paid to worker in
net wage, there is 0.68 GEL to be paid in taxes if the contract is
formalized. Financing of the pension system continues to suffer from
low compliance in the area of social taxes. (for more details see
Social Protection Chapter).
Corporate and
income tax exemptions. The Tax Code currently includes a
number of exemptions from corporate and personal income tax, which
narrow the tax base, increase the discretion of tax inspectors and
the potential for corruption. The IMF has recommended to review and
abolish many of these exemptions. The Ministry of Finance has
started divparing an amendment to the Code eliminating most of the
current exemptions from personal and corporate income tax. This
includes in particular the exemptions from CIT for enterprises in
mountainous regions, the exemption of profit generated by energy
renewable sources, consumer appliances and energy saving equipment.
However, this proposal to amend the Code will still have to be
finally divsented to the Parliament, after it was withdrawn in
September 2001.
Administrative
provisions for tax enforcement. An essential feature of a
good tax code is a clear definition of tax administration procedures
and rights and obligations of taxpayers and tax officials. A
reasonable balance needs to be defined between the interests of the
taxpayer to simplify taxation procedures and reduce administrative
burden and the interest of the tax administration to effectively
enforce taxation. In Georgia, the possibility to enforce tax
collection has been unduly restricted by reducing the powers given to
the tax administration in chapter 42 of the tax code to seize and
sell delinquent taxpayer property. As a consequence the only
remaining enforcement measure, which does not require a court ruling,
is the freezing of a taxpayer’s bank account. Considering the
absence of specialized tax courts and the weakness of the court
system in Georgia, this does not provide the tax administration with
sufficient means to improve its compliance management. Enforcement
powers of the tax administration should be harmonized with current
practice in Organization for Economic Co-operation and Development
(OECD) countries.
Abolishing
nuisance taxes. Earlier the World Bank and IMF reports have
recommended the elimination of nuisance taxes because they typically
have extremely low revenue yield and are a burden for small
businesses. The tax package divpared Ministry of Finance included the
elimination of some of these nuisance taxes, (e.g., the tax on
economic activities, the resort tax, the hotel tax, the advertisement
tax, and the tax on the use of local symbols), but no progress has
been made partly because these taxes are assigned to local
governments. However, due to their very limited revenue potential,
they contribute less than 10 percent of total local revenues.
Considering the administrative and compliance costs of these taxes
the actual revenue gains might even be negative, efforts to eliminate
these taxes will need to continue.
Tax Reform
Areas
General.
The public perception of the quality and fairness of tax and customs
administration in Georgia is generally very negative.7
Substantial and visible improvements on the ground will be needed to
begin dispelling this perception. This also requires a political
commitment to abolish practices which protect and support special
interests of taxpayer groups by introducing special exemptions in the
tax legislation, thus eroding the tax base, or/and executing divssure
on the revenue authorities to grant favourable treatment to specific
taxpayers. It will also be necessary to reduce the incentives for
revenue officials to participate in corrupt practices and to develop
the necessary control mechanisms to detect and punish such behaviour.
Efforts to reduce
capture and corruption are to be complemented by long-term strategies
to improve the tax policy design and build revenue administration
capacity. Tax policy reforms should focus on overall policy design
issues instead of exclusively discussing the level of tax rates.
Eventual tax rate reductions will only be feasible if accompanied by
broadening of the tax base and administrative improvements. Key to
improving administration is the effective implementation of
self-assessment and the fair and equitable treatment of all
taxpayers. Two areas that require special attention are (a) customs
administration, and (b) enforcement of personal income tax and social
security contributions.
Short-term
Reform Priorities. While substantial capacity
building in tax and customs requires long-term strategies, there are
a number of essential short-term reform initiatives, which should be
launched immediately, to improve revenue performance and reduce
tax-related distortions.
Tax policy.
The main challenge is to stabilize the tax policy framework, and
avoid ad-hoc short-term policy measures. In general, the revenue
impact of tax exemptions should be properly analyzed, and no further
exemptions/tax reductions should be introduced without such analysis
is explicitly divsented in Parliament. Any tax policy changes should
be taken in the context of the annual budget. It also recommended
that the 2001 tax package divpared by MoF be re-submitted to
Parliament, including key elements such as: reducing the scope of
exemptions, raising the VAT threshold to GEL 100,000 (or US$50,000)
and introducing complementary simplified tax.
Tax
administration. A number of actions could be take to
support long-term reform efforts:
Discontinue the
practice of soliciting advanced payments to meet revenue targets and
Design a new performance measurement system with appropriate
indicators, supplemented by special incentives to improve revenue
administration practices;
Centralize revenue
accounts in the Treasury and make payments on “a first come
first served basis”;
Begin implementation
of special program to control imports through the railway system,
especially of petroleum products;
Increase coverage of
LTI and focus on improving LTI performance.
A
Longer-term Agenda. A
more comdivhensive reform program for the medium and long-term reform
of the Georgian revenue system will then need to consider the
following issues:
Broadening the
base and lowering tax rates. While
some taxes may be relatively high and may promote non-compliance –
especially the general VAT rate of 20 percent and the combined tax
burden on labor – taxes from
excisable products are not fully exploited. A longer term tax policy
reform objective for a poor economy like Georgia should be to reduce
the tax burden on consumption and labor. However, this can only be
achieved by (a) broadening the tax base of VAT and profit/income
taxes; (b) increasing collection by improving the efficiency and
effectiveness of tax and customs administration.
Past
experience with tax policy reform in Georgia has shown that mere tax
rate reductions without corresponding improvements in enforcement and
compliance management will not contribute to increasing tax
compliance. Rate reductions therefore do seem not feasible as long as
revenue losses from the rate reduction
cannot be compensated by a broader tax base and a better enforcement.
Tax policy reform in Georgia therefore will need to mirror experience
with tax reform in OECD countries in the last two decades, where rate
reductions (mainly in the area of direct taxation) were achieved
through base broadening and improving tax administration.
VAT Reform.
The VAT should not be replaced by a sales tax. Rather, the VAT as
the mainstay of the revenue system in Georgia should be strengthened.
The VAT design appears buoyant, albeit if its base has been eroded by
exemptions, privileges, and fraudulent practices involving both tax
inspectors and tax payers. Increasing the threshold and reducing the
number of taxpayers will help improve its administration and
implement the true spirit of the VAT. Corresponding decreases in
revenues can be compensated by introducing a simplified tax, as
proposed by Government, and reducing exemptions to broaden the tax
base. The implementation of a true VAT necessarily has to ensure
refunds for exporters and zero rated goods. On the administrative
side, it is important to advance existing initiatives to improve
cross-checking, monitor registration, and regulate invoices.
Tax
Simplification. The elimination of nuisance taxes will
facilitate administration and reduce the administrative burden on
small businesses. In Georgia, nuisance taxes are local taxes
generating little revenue. The best would be to eliminate these taxes
and find alternative (more solid) own revenue sources for local
governments, such as the land and property tax, which are not
currently collected centrally (see Chapter IV on Inter-governmental
Fiscal Relations). In some cases, these are complemented by a small
turnover tax, as is already the case in Georgia.
Addressing
corruption. The creation of an Inspector General
Office (IGO) within the MoR has been a step in the right direction.
The work of the IGO should be provided with the appropriate legal and
technical instruments to carry out its function. Technically, it is
important to develop accurate assessments of where the opportunities
for corruption arise, through an analysis of the business process and
the use of indirect statistical methods. Legally, the IGO must have
the powers to access relevant information from tax-offices and
taxpayers. It should also be clear to the agencies and to the public
how the recommendations of the IGO would be implemented. The role of
the Chamber of Control in evaluating tax performance will no doubt be
helped as the IGO builds up strength. The government needs to
consider if the current profile of corruption requires development of
legal instruments, other than those dealing with corrupt practices in
the public sector, to address corruption in the revenue agencies.
Making
effective a functional organization. The centrepiece
of a modern approach to tax administration is self-assessment. To
properly implement self-assessment requires changing the culture,
both in government and society, of how taxes are calculated and
collected. The direct contact between officials and taxpayers should
be reduced, with emphasis shifted to taxpayer services, quick
attention to arrears enforcement and selective but effective
auditing. Internal control and anti-corruption services should help
keep taxpayers and officials honest. Appeals mechanisms should serve
to protect taxpayers rights. The extensive advise provided by donors
has already acquainted the authorities with the principles of
self-assessment. However, the reform agenda continues to be broad and
will take time to implement. Te following issues would seem to
require special attention:
Registration.
It is necessary to review the current registry with emphasis on
taxpayers that are not active and looking for quality taxpayers that
may be hiding as small or not even registered.
Arrears
enforcement. The current stock of arrears plus fines and
penalties is large but a large portion of it might not be
collectable. It is necessary to make a realistic assessment of what
can be collected from the stock and develop timely methods to divvent
new arrears from aging, setting clear priorities.
Auditing.
There should be a sustained effort to build the quality of
auditing. Special attention initially could be placed on critical
aspects of the VAT such as VAT refunds, cross-checking of credits and
fake invoices. Important to good auditing is the development of risks
profiles to guide selection and improve effectiveness. Greater
information management capacities available now have to be used to
develop such profiles.
LTI. The
LTI in not a centre of excellence. Efforts to update the roaster of
large taxpayers and to reach coverage of at least 50 percent of the
revenues collected by the tax agency are worthwhile, but they have to
be sustained. The LTI has to take a more proactive attitude to
performance and reform and it is good place to begin developing new
incentive mechanisms away from simple revenue targeting.
IDA Support to
the Private Sector in Georgia
IDA's Policy.
To support private sector development and attract needed foreign
investment, the World Bank (namely IDA) has developed the Country
Assistance Strategy (CAS), which focuses on removing key policy and
institutional (including governance) constraints, as well as
financial, energy and infrastructure bottlenecks. On the basis of
the FY03 Integrated Trade Development Strategy IDA will
provide reform support and progress monitoring through the ongoing
Enterprise Rehabilitation Project, an FY06 Private Sector
Development Project, and the ongoing Business Environment Surveys
and Studies. IDA will also provide support (in conjunction with
USAID) for improving access to affordable finance through further
financial sector reform, and will help reduce trade, transit and
marketing costs through the FY05 Trade and Transport Facilitation
Project, building on the FY03 South Caucasus Trade and
Transport Facilitation Study. IFC will complement these
activities through investments in small and medium-sized businesses
and, in coordination with USAID, through technical assistance for
business development. Support for alleviating energy bottlenecks
will be provided by IDA’s ongoing energy portfolio and
dialogue.
Support to SMEs.
The Small and Medium Scale Enterprise (SME) sector is a crucial area
for potential private sector growth, and IDA has been supporting the
sector through its ongoing Enterprise Rehabilitation Project. IDA
plans, through the FY06 Private Sector Development Project to
provide expanded support for management training, creation of
export-oriented clusters of SMEs, advice to business associations and
government, and monitoring of the business environment.
Additionally, IFC will conduct a targeted study of the SME sector in
Georgia to identify key obstacles to its development, and then
recommend specific improvements in the regulatory and administrative
environment.
IFC Financial
Support to the Private Sector in Georgia
IFC's Policy.
IFC’s lending and investments in Georgia have been tailored to
the country’s special circumstances: limited foreign
investments, the non-existence of large local companies, limited
access to financing for a nascent SME sector, and the lack of advice
for private companies on business related issues such as corporate
governance and leasing. IFC would also provide support directly to
the private sector through the Georgia Business Development Project,
a five-year technical assistance program implemented by the Private
Enterprise Partnership with the support of the Canadian International
Development Agency (CIDA). The main components of the project, as
already stated in the above, include development of the leasing
sector and improvement of corporate governance practices. The
corporate governance initiative is helping Georgian businesses
improve their practices to build investor confidence and increase
their access to financing. This component of the program also
includes advice to the Government on improving corporate governance
policies and regulations.
Assistance to SME
Sector. To reach small and medium enterprises, IFC provided
equity and long-term credit lines to TBC Bank and helped establish
Georgia Microfinance Bank – the ProCredit Bank - the country’s
first bank specializing in lending to micro and small enterprises. In
June 2000, IFC purchased a 10 percent stake in TBC
Bank. IFC’s support
helped TBC to grow from a “pocket” bank into the largest
and one of the best performing commercial banking institutions in
Georgia. In 1999, IFC helped establish the ProCredit Bank
- the first bank dedicated to lending to micro and small
enterprises in the country, and now the fastest growing banking
institution in Georgia. IFC has also supported other Local
Companies, for example, GG&MW, a mineral water
production company, where IFC’s loans supported the company’s
acquisition of key strategic assets and strengthened control over its
key brand, Borjomi mineral water. IFC’s equity investment
helped the company rehabilitate two mineral water bottling
facilities, diversify its product mix and develop the distribution
network. IFC sold its stake in the company in 2002.
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Development of
Mortgage Lending. In the financial sector, IFC has focused on
supporting the development of the housing finance market. The
introduction of mortgage financing has allowed individuals for the
first time to leverage their residences to increase their standard of
living. In 2000, IFC extended a $3 million credit line to the Bank
of Georgia, and together with re-flows, this credit line
financed over 500 projects totalling $4.5 million. In June 2003, IFC
provided a second $5 million credit line to the Bank of Georgia for
housing finance and for on-lending to small and medium enterprises.
In August 2001, IFC provided a second $3 million loan to TBC Bank
to support the development of its mortgage lending.
Facilitation
of Foreign Investments: IFC
invested in equity and provided loans to Ksani Glass Factory, a
producer of high-quality glass bottles and packaging. IFC’s The
$2.5 million equity investment and $6.3 million loan supported
Ksani’s expansion and modernization. At project completion,
the facility will be producing 40,000 tons of high quality glass
bottles annually with a high level of product flexibility. In
the power sector IFC provided a $30 million loan to AES Corporation
to support the newly privatized Tbilisi area power distribution
company. The loan was div-paid in August 2003, when the AES
Corporation sold Tbilisi electricity distribution system to UES.
Legislative
Basis for the Operation of the Private Companies
General.
The operation of the private companies in Georgia is mainly regulated
by the following two laws: a) Law on Entredivneurs (LoE) (Corporate
Law), which sets the corporate governance principles for the private
companies (i.e. Limited Liability Companies and Joint Stock
Companies); and b) Securities Market Law (SML), which regulates the
activities of the private companies permitted to issue and trade the
shares on the securities market (i.e. Joint Stock Companies). Both
laws are reviewed below.
Law of Georgia
on Entredivneurs (LoE) (Corporate Law)
Under the Law of
Georgia on Entredivneurs the following forms of
commercial entities may be established in Georgia:
Sole
proprietorship—An enterprise operated by a
physical person with unlimited liability and no minimum capital
requirement. A sole proprietorship is not considered a legal entity
under the commercial code of Georgia.
Joint
Liability Company—A legal entity with unlimited
liability established on the basis of a partnership of several
individuals or companies.
Limited
Partnership—A legal entity consisting of
general and limited partners. The limited partners have limited
liability and general partners bear full and direct liability for
the obligations of the company.
Limited
Liability Company—A legal entity that is
separate and distinct from its shareholders (one or more legal or
physical persons). The company’s liability is limited to its
authorized capital. Founders and shareholders are not liable for the
obligations of the company.
Joint Stock
Company—A legal entity characterized by the
limited liability of the partners. The company’s liability is
limited to its authorized capital.
Cooperative—A
legal entity characterized by the limited liability of the
shareholders. In Georgia, this is a common form of organization for
agricultural enterprises.
Sole
proprietorships, joint liability, limited partnerships and
cooperatives are rarely established by foreign investors in Georgia.
Therefore, the following focuses on the legal requirements for
Limited Liability Companies (LLCs) and Joint Stock Companies (JSCs),
which are the most popular forms of incorporation used by foreign
investors in Georgia.
The Law on
Entredivneurs does not set limitations on the
domicile of partners. A partner in a legal enterprise can be a
citizen or resident of any country. Foreign companies can be
established as fully foreign-owned enterprises or in partnership with
Georgian companies or physical persons. In accordance with the Law on
the Promotion and Guarantees of Investment Activities of November 12,
1996, companies with foreign investments enjoy national treatment and
the same rights as Georgian companies.
Provisions
of the Law on Entredivneurs for Limited
Liability Companies (LLC):
An LLC can have a maximum of 50 shareholders. The minimum equity
capital requirement is 2,000 GEL. The share of the equity capital to
be covered by each of the partners may be determined freely, but it
must be divisible by 10;
At least 50 percent of the equity capital must be paid up at the
time of incorporation, with the remaining 50 percent due within one
year;
The Law stipulates that a partners’ meeting be held at least
annually. Special meetings may be called at the request of partners
or directors of the firm;
Partners’ meetings are required to consider issues such as
amendments to regulations, reorganization or liquidation of the
company, appointment of directors, and so on;
Day-to-day management of the company is carried out by one or more
directors who are appointed and dismissed by the general meeting or
the supervisory board, when such a board is established at the
discretion of the general partners meeting;
A partner may sell his shares without seeking consent of other
partners, unless otherwise stated in the charter of the company;
Partners who posses 5 percent and more of the equity capital are
authorized to call a general meeting.
Provisions
of the Law on Entredivneurs for Joint Stock
Companies (JSC):
An entity with more than 50 partners is required to have a legal
form of a Joint Stock Company (JSC);
Minimum equity capital for JSC is 15,000 GEL;
A JSC with more than 100 shareholders is required to maintain its
share registry through an independent registrar (In 2003 amendments
were adopted into the law requiring that a JSC with more than 50
shareholders is required to maintain its share registry through an
independent registrar);
A general shareholders' meeting must be held in two months time form
publishing annual financial accounts;
A general shareholders' meeting is entitled to elect the supervisory
board members, make amendments into the charter of the company,
approve the annual report divsented by the company directors, elect
auditors and so on;
Creation of a supervisory board is mandatory for a JSC. Supervisory
boards must have between 3 and 21 members, but the number must be
divisible by 3. The Law provides for redivsentation of company staff
on the supervisory board (up to 1/3 of the members);
Supervisory board is elected for the period of 4 years. The company
directors may not be the members of the supervisory board;
Supervisory board meeting must be held al least once in a quarter;
Day-to-day management of the company is carried out by one or more
directors who are appointed and dismissed by the supervisory board;
Supervisory board oversees the activities carried out by the company
directors, checks the annual financial accounts, appoints and
dismisses the company directors, etc.;
The consent of the supervisory board is needed to conduct the
following activities: purchasing or selling more than 50% share of
entities, purchasing or selling the assets of the company, setting
up or liquidating the branches of the company, etc.;
The law envisages a
cumulative voting for electing the members of a supervisory board to
protect minority shareholders, but this is not a mandatory
requirement.
Redivsentative
Offices and Branches. A foreign company may operate a branch
or a redivsentative office in Georgia. A branch is not a separate
legal entity and it is allowed to engage in commercial activities
that would constitute all or part of the activities of foreign head
office. For purposes of registration, redivsentative offices are
treated as branches and are obliged to fulfil the same requirements.
All actions on
behalf of a company can be performed by the head of the company
(executive body) or by any person authorized to perform such actions
by a power of attorney of the relevant body of the company. Foreign
legal entities bear full liability for the activities of branches or
redivsentative offices.
Analysis - Law
on Entredivneurs (LoE). As the main company law for
Georgia, the Law on Entredivneurs provides a good basis for corporate
governance for all the private companies including those with traded
securities. However, based on the experience of other central and
eastern European countries, there are several provisions in the Law
on Entredivneurs that could be amended to further strengthen the
corporate governance provisions. They are: (1) although the
LoE envisages a cumulative voting for electing the members of
a supervisory board to protect minority shareholders, it should be
made a mandatory requirement. As a result, there will be a mandatory
cumulative voting for members of supervisory boards as a means of
allowing shareholders with small shareholdings to vote at least one
member of the supervisory board; (2) requirement that the
shareholders’ meeting approve the auditing company’s
contract (covering the scope of work and annual auditing fees) so
that shareholders interested in a highly quality audit, requiring
more time from the auditing company, can obtain such an audit, and
(3) There is a need to establish a minimum quorum below which no
shareholders’ meeting may be considered valid; (4) although the
LoE requires the financial statements of JSCs to be divpared on the
basis of the International Accounting Standards (IAS), it does not
specifically require that audits are conducted in accordance with the
International Standards on Auditing (ISA), which needs to be amended;
and (5) the LoE does not provide takeover rules to protect the
interests of minority shareholders.
More specifically,
the World Bank (WB) and the International Monetary Fund (IMF)
conducted the Assessment of the Implementation of the Corporate
Governance Principles of the Organisation of Economic Co-operation
and Development (OECD) in Georgia. It is interesting to note that the
assessment identified a number of the shortcomings in the corporate
governance practice existing in Georgia. Namely, according to the
study: (i) There are uncertainties in knowing if shareholders are
sharing in company’s profits; (ii) It is not uncommon practice
of failing to hold the required shareholders’ meetings; (iii)
Markets for corporate control are limited; (iv) Court system has not
yet made any decisions on the cases concerning corporate disputes;
(v) Minor role is played by supervisory boards
in the strategic guidance of companies; (vi) There is a less than
complete disclosure by most reporting companies, particularly of
financial and operating results; (vii) There are weak auditing
practices;
More
detailed results of the assessment are summarised in Table 1.2.1.1
below:
Table 1.2.1.1.
Georgia: Assessment of the Implementation of the OECD Principles
of Corporate
Governance
OECD
Principles of Corporate Governance
|
O8
|
LO9
|
MNO10
|
NO11
|
NA12
|
Comments
|
Principle
1 - Basic shareholder rights. The corporate governance
framework should protect shareholders’ rights. Basic
shareholder rights include the right to: (i) secure methods of
ownership registration; (ii) convey or transfer shares; (iii)
obtain relevant information on the corporation on a timely and
regular basis; (iv) participate and vote in general shareholder
meetings; (v) elect members of the (supervisory) board; and (vi)
share in the profits of the corporation.
|
|
|
X
|
|
|
Difficult
to access the records of the court enterprise registers and
uncertainties in knowing if shareholders are sharing in company’s
profits
|
Principle
2 - Fundamental corporate changes. Shareholders have the
right to participate in, and to be sufficiently informed on,
decisions concerning fundamental corporate changes, such as: (i)
amendments to the governing documents of the company; (ii) the
authorization of additional shares; and (iii) extraordinary
transactions that in effect result in the sale of the company.
|
|
X
|
|
|
|
|
Principle
3 - Shareholder meetings. Shareholders should have the
opportunity to participate effectively and vote in general
shareholder meetings and should be informed of the rules,
including voting procedures that govern shareholder meetings.
|
|
|
X
|
|
|
Not
uncommon practice of failing to hold the required shareholders’
meetings
|
Principle
4 - Proportionate control. Capital structures and
arrangements that enable certain shareholders to obtain a degree
of control disproportionate to their equity ownership should be
disclosed.
|
X
|
|
|
|
|
|
Principle
5 - Markets for corporate control. Markets for corporate
control should be allowed to function in an efficient and
transparent manner. The rules and procedures governing the
acquisition of corporate control in the capital markets, and
extraordinary transactions such as mergers and sales of
substantial portions of corporate assets, should be clearly
articulated and disclosed so that investors understand their
rights and recourse. Transactions should occur at transparent
prices and under fair conditions that protect the rights of all
shareholders according to their class. Anti-takeover devices
should not be used to shield management from accountability.
|
|
|
X
|
|
|
Limited
by low liquidity in stock market
|
Principle
6 - Equal treatment of shareholders. The corporate governance
framework should ensure the equitable treatment of all
shareholders, including minority and foreign shareholders. All
shareholders should have the opportunity to obtain effective
redress for violation of their rights.
All
shareholders of the same class should be treated equally. Within
any class, all shareholders should have the same voting rights.
All investors should be able to obtain information about the
voting rights attached to all classes of shares before they
purchase. Any changes in voting rights should be subject to
shareholder vote.
|
|
|
X
|
|
|
Effective
redress requires review under a court system that is heavily
overburdened and has not yet made any decisions on similar cases
|
Principle
7 - Procedures for shareholder meetings. Processes and
procedures for general shareholder meetings should allow for
equitable treatment of all shareholders. Company procedures
should not make it unduly difficult or expensive to cast votes.
|
|
X
|
|
|
|
|
Principle
8 - Insider trading. Insider trading and abusive self-dealing
should be prohibited.
|
|
|
X
|
|
|
Effectiveness
of legal restrictions limited by low liquidity of the stock
exchange and small size of the business community
|
Principle
9 - Insider disclosure. Members of the (supervisory) board
and management board should be required to disclose any material
interests they have in transactions or matters affecting the
corporation.
|
|
|
X
|
|
|
Minor
role played by supervisory boards in the strategic guidance of
companies
|
Principle
10 - Rights of stakeholders. The corporate governance
framework should recognize the rights of the stakeholders as
established by law and encourage active cooperation between
corporations and stakeholders in creating wealth, jobs, and the
sustainability of financially sound enterprises.
|
|
X
|
|
|
|
|
Principle
11 - Corporate disclosure. The corporate governance framework
should ensure that timely and accurate disclosure is made on all
material matters regarding the corporation, including the
financial situation, performance, ownership and governance of the
company. Channels for disseminating information should provide
for fair, timely and cost-efficient access to relevant
information by users.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Disclosure
should include, but not be limited to, material information on:
(i) the financial and operating results of the company; (ii)
major share ownership and voting rights; (iii) members of the
board and key executives, and their remuneration; (iv) material
foreseeable risk factors; (v) material issues regarding employees
and other stakeholders; (vi) governance structures and policies.
|
|
X
|
|
|
Less
than complete disclosure by most reporting companies,
particularly of financial and operating results
|
Principle
12 - Accounting and auditing. Information should be divpared,
audited and disclosed in accordance with high quality standards
of accounting, financial and non-financial disclosure, and audit.
An annual audit should be conducted by an independent auditor in
order to provide an external and objective assurance on the way
in which financial statements have been divpared and divsented.
|
|
|
X
|
|
|
Weak
auditing practices and an audit law that allows liability to be
capped in the contract between the company and the auditor
|
Principle
13 - (Supervisory) Board responsibilities. The corporate
governance framework should ensure the strategic guidance of the
company, the effective monitoring of management by the
(supervisory) board, and the (supervisory) board’s
accountability to the company and the shareholders.
(Supervisory)
Board members should act on a fully informed basis, in good
faith, with due diligence and care, and in the best interests of
the company and the shareholders.
|
|
|
X
|
|
|
Absence
of detailed guidelines for supervisory boards
|
Law of Georgia
on Securities Market (SML)
The Securities
Market Law (SML) regulates the Joint Stock Companies whose shares are
traded at Georgian Stock Exchange.
The main principles
of the Securities Market Law (SML) are the following:
The purpose of the
Law is to develop securities market in Georgia, to protect the
investors' interests on securities market, as well as to establish
fair and transparent public trading in securities and free
competition;
The Georgian
Securities Market is regulated by the National Securities Commission
of Georgia (NSCG);
The public offering
of securities is an offer to sell securities directly or indirectly
on behalf of the issuer to at least 100 persons or to unspecified
numbers of persons;
A company, which has
a class of Publicly Held Securities, shall be deemed to be a
reporting company;
All reporting
companies shall divpare and submit to the National Securities
Commission of Georgia (NSCG) and publish or distribute to registered
owners:
Annual reports;
(b)
Semi-annual reports; and
(c) Current reports.
Every person who is
a member of a managing body of a reporting company shall file with
the National Securities Commission of Georgia (NSCG) a report
regarding the percentage of this company's securities of which he is
the beneficial owner;
A person, acting
independently or together with other persons (a "group"),
shall inform the National Securities Commission of Georgia (NSCG)
about the substantial acquisition of securities;
Substantial
acquisition of securities means beneficial ownership of securities,
which provide 5% or more of the voting rights in a reporting company
and also when level of beneficial ownership changes by more than 5%
from that originally reported;
Members of the
managing body of a reporting company shall exercise their rights and
perform their duties: a) in good faith, b) with the care that an
ordinary prudent person in a similar position would exercise under
similar circumstances, and c) in a manner that they believe to be in
the best interest of the company and its security holders;
A Stock Exchange
shall be the exclusive organizer of secondary public trading in
securities;
All purchases and
sales of Publicly Held Securities shall be concluded through a
licensed Brokerage Company;
A licensed Central
Depository shall perform the following functions:
a) open, operate
and close securities accounts of participants in accordance with its
rules;
b) facilitate the settlement of securities transactions
without physical delivery of securities certificates and, in
furtherance thereof, provide facilities for comparison of data
respecting the terms of settlement of securities transactions.
Licensed Stock
Exchanges and a Licensed Central Depository shall be designated
Self Regulatory Organizations (SROs) under this law;
The main objective
of such an organization, as an SRO, shall be to:
Pdivpare
rules for its members and supervise compliance with such
rules;
Apply sanctions provided for in its inner regulations and
rules or charter against members for non-compliance with its rules.
Insider means any
person who, by virtue of his membership in the managing body of a
reporting company, his holdings in the capital of such company, or
based upon his access to such information by virtue of the exercise
of his employment, profession or duties, possesses inside
information. Other persons obtaining inside information that
evidently originated with an insider shall be likewise considered
insiders.
It shall be unlawful
for any insider, and any person who knowingly receives inside
information from an insider, to:
a) Acquire or
dispose of, for his own account, or the account of a third party,
either directly or indirectly, Publicly Held Securities of the
reporting company or companies to which that inside information
relates;
b) Disclose inside
information to any third party unless such disclosure is made in the
normal course of the exercise of his employment, profession or
duties;
c) Recommend to or
procure a third party, on the basis of inside information, to acquire
or dispose of Publicly Held Securities.
Analysis - The
Securities Market Law (SML). The SML is drawn on
German model and mostly reflects the international best practice in
the field described in "The Objectives and Principles of
Securities Regulation" adopted by the International
Organization of Securities Commissions (IOSCO), but it has the
following weaknesses: (i) It does not cover collective investment
schemes (CIS), such as investment funds, and therefore there is
currently no legal basis for the operation of CISs in Georgia13.
Meanwhile, the experience obtained from the Central and Eastern
Europe indicates on crucial importance of CIS, such as investment
funds, in increasing the corporate governance standards and
facilitating the trust amongst investors towards stock markets; and
(ii) The NSCG does not have an authority to supervise private
placements.
More specifically,
the World Bank (WB) and the International Monetary Fund (IMF), also
conducted the Assessment of the Implementation of the Objectives and
Principles of Securities Regulation of The International Organization
of Securities Commissions (IOSCO) in Georgia. The assessment
identified quite a lot of problems in the operation of the securities
regulator, the functions of which is assumed by the National
Securities Commission of Georgia (NSCG). Namely, the report lists the
following problems: (i) NSCG has a seriously insufficient budget;
(ii) Code of ethics for NSCG staff is awaited; (iii) No specific
oversight program to supervise self-regulatory organizations (SROs)
has been established; (iv) Inspection and investigation powers of the
NSCG over Reporting Companies and their major shareholders are not
adequate; (v) Enforcement power of the NSCG on the basis of criminal
legislation is limited; (vi) International Accounting Standards (IAS)
are recognized but are not fully adopted in practice; (vii) There in
no legislation on Collective Investment Schemes (CIS) in Georgia;
(viii) There is no market surveillance and stock watch system to
detect abnormal movements and unfair trading practices.
More
detailed results of the assessment are summarised in Table 1.2.2.1
below:
Table 1.2.2.1
Georgia: Assessment of the Implementation of the IOSCO Principles
for Securities
Regulation
IOSCO
Principles for Securities Regulation
|
C14
|
PC15
|
MNC16
|
NC17
|
NA18
|
Comments
|
Principle
1 - Clear responsibilities. The responsibilities of
the regulator should be clearly and objectively stated.
|
X
|
|
|
|
|
|
Principle
2 - Independence and accountability. The regulator should be
operationally independent and accountable in the exercise of its
functions and powers.
|
|
X
|
|
|
|
|
Principle
3 - Adequate power, resources and capacity. The regulator
should have adequate powers, proper resources and the capacity to
perform its functions and to exercise its powers.
|
|
X
|
|
|
|
Seriously
insufficient budget. As the market develops, more revenue from
fees can be expected.
|
Principle
4 - Clear and consistent regulatory process. The regulator
should adopt clear and consistent regulatory processes.
|
X
|
|
|
|
|
|
Principle
5 - Professional standards. The staff of the regulator should
observe the highest professional standards, including appropriate
standards of confidentiality.
|
|
X
|
|
|
|
Code of ethics
awaited, and introduction of a system of independent assessment
may be considered.
|
Principle
6 - Use of Self Regulatory Organizations (SROs). The
regulatory regime should make appropriate use of SROs that
exercise some direct oversight responsibility for their
respective areas of competence, to the extent appropriate to the
size and complexity of the markets.
|
X
|
|
|
|
|
|
Principle
7 - Supervision of Self Regulatory Organizations (SROs).
SROs should be subject to the oversight of the regulator and
should observe standards of fairness and confidentiality when
exercising powers and delegated responsibilities.
|
|
X
|
|
|
|
No
specific oversight program to supervise SROs has been
established.
|
Principle
8 - Adequate inspection, investigation and surveillance powers.
The regulator should have comdivhensive inspection,
investigation and surveillance powers.
|
|
X
|
|
|
|
|
Principle
9 - Adequate enforcement power.
The regulator should have comdivhensive enforcement
powers.
|
|
X
|
|
|
|
Enforcement
power on the basis of criminal legislation limited.
|
Principle
10 - Effective use of the powers.
The regulatory system should ensure an effective and
credible use of inspection, investigation, surveillance and
enforcement powers and the implementation of an effective
compliance program.
|
|
X
|
|
|
|
Limited
power was well used. Faced with a severe resource constraint.
|
Principle
11 - Authority to share information.
The regulator should have the authority to share both
public and non public information with domestic and foreign
counterparts.
|
X
|
|
|
|
|
|
Principle
12 - Information sharing mechanisms.
Regulators should establish information sharing
mechanisms that set out when and how they will share both public
and non-public information with their domestic and foreign
counterparts.
|
|
|
X
|
|
|
No
specific MOU or other agreement / procedure has been established.
|
Principle
13 - Assistance to foreign regulators.
The regulatory system should allow for assistance to
be provided to foreign regulators who need to make inquiries in
the discharge of their functions and the exercise of their
powers.
|
|
X
|
|
|
|
Lack
of legal immunity of NSCG staff in handling sensitive information
in good faith.
|
Principle
14 - Full, timely and accurate disclosure.
There should be full, timely and accurate disclosure
of financial results and other information that is material to
investors’ decisions.
|
|
X
|
|
|
|
Sound
rule but compliance needed (due to the lack of enforcement power
of NSCG over Reporting Companies?)
|
Principle
15 - Fair and equitable treatment of securities
holders. Holders of
securities in a company should be treated in a fair and equitable
manner.
|
|
X
|
|
|
|
Compliance
needed. (Private rights of action including class action are not
established while the NSCG’s enforcement power over
Reporting Companies is limited.)
|
Principle
16 - Accounting standards.
Accounting and auditing standards should be of a high
and internationally acceptable quality.
|
|
X
|
|
|
|
IAS
recognized but not fully adopted in practice.
|
Principle
17 - Eligibility standards.
The regulatory system should set standards for the
eligibility and the regulation of those who wish to market or
operate a collective investment scheme.
|
|
|
|
|
X
|
No
law, no CISs.
|
Principle
18 - Legal form and structure.
The regulatory system should provide for rules
governing the legal form and structure of collective investment
schemes and the segregation and protection of client assets.
|
|
|
|
|
X
|
No law, no CISs.
|
Principle
19 - Disclosure for suitability and valuation.
The regulations should require disclosure, as set
forth under the principles for issuers, which is necessary to
evaluate the suitability of a collective investment scheme for a
particular investor and the value of the investor’s
interest in the scheme.
|
|
|
|
|
X
|
No law, no CISs.
|
Principle
20 - Basis for valuation and pricing for
redemption. The
regulations should ensure that there is a proper and disclosed
basis for asset valuation and the pricing and the redemption of
units in a collective investment scheme.
|
|
|
|
|
X
|
No law, no CISs.
|
Principle
21 - Entry standards.
The regulations should provide for minimum entry
standards for market intermediaries.
|
X
|
|
|
|
|
|
Principle
22 - Initial and on-going prudential requirements.
There should be initial and ongoing capital and other
prudential requirements for market intermediaries that
reflect the risks that the intermediaries undertake.
|
|
X
|
|
|
|
Monthly capital.
adequacy report not audited. NSCG does not have power to reject
an auditor.
|
Principle
23 - Internal organization and operational conduct
and risk management. Market
intermediaries should be required to comply with standards for
internal organization and operational conduct that aim to protect
the interests of clients, ensure proper management of risk, and
under which management of the intermediary accepts primary
responsibility for these matters.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
X
|
|
|
|
No specific
requirement of compliance officer / dept. with specific
responsibilities.
|
Principle
24 - Procedures for failure.
There should be procedures for dealing with the
failure of a market intermediary in order to minimize damage and
loss to investors and to contain systemic risk.
|
|
X
|
|
|
|
No procedures to
manage winding down of a failed broker although other investor
protection legislation, and regulations have been divpared.
|
Principle
25 - Authorization and oversight of exchanges.
The establishment of trading systems including
securities exchanges should be subject to regulatory
authorization and oversight.
|
X
|
|
|
|
|
|
Principle
26 - On-going supervision of exchanges and trading
systems. There should be
ongoing regulatory supervision of exchanges and trading systems
which should aim to ensure that the integrity of trading is
maintained through fair and equitable rules that strike an
appropriate balance between the demands of different market
participants.
|
|
X
|
|
|
|
SML does not
exdivssly require fair trading rules for different members.
|
Principle
27 - Trading transparency.
The regulations should promote transparency of
trading.
|
|
X
|
|
|
|
SML does not
exdivssly require real time transparency of div-trade information
for direct market participants.
|
Principle
28 - Detection and deterrence of unfair trading
practices. The
regulations should be designed to detect and deter manipulation
and other unfair trading practices.
|
|
X
|
|
|
|
No requirement
of market surveillance / stock watch system to detect abnormal
movements.
|
Principle
29 - Management of exposures, default risk and
market disruption. The
regulations should aim to ensure the proper management of large
exposures, default risk and market disruption.
|
X
|
|
|
|
|
|
Principle30
- Oversight of clearance and settlement systems and
management of systemic risks.
Systems for clearing and settlement of securities
transactions should be subject to regulatory oversight, and
designed to ensure that they are fair, effective and efficient
and that they reduce systemic risk.
|
|
X
|
|
|
|
|
Employment
Regulations in Georgia
Labor Code.
The Labor Code of Georgia regulates labor relations between workers
and employees living in Georgia and enterprise, institution and
organization (regardless their ownership and organizational legal
form), supports to realization of human rights and freedoms through
labor fair reimbursement (legal payment), creation of safe and
healthy working conditions for all employees and workers including
the working conditions for minors and women. On the basis of
international agreements regulating labor relationships, the state
protects the labor rights of Georgian citizens abroad. Foreign
citizens and stateless persons living in Georgia have the rights and
obligations equal to the rights and obligations of citizens of
Georgia with some exceptions envisaged by the Constitution and law.
Nondiscrimination.
Under the constitution labor is free. Each person has right to choose
its field of activity and profession. Discrimination in obtaining a
job, or in the workplace, based on race, skin color, language, sex,
religion, political and other beliefs, national, ethnic and social
origin, property and title of nobility or place of residence is
prohibited.
Minimum and
Maximum Age of Employment. According to the legislation of
Georgia minimum working age is 16 years. Maximum working age is not
determined, but pension can be given to a man in the age of 65 years
and a woman in the age of 60 years.
Working
Hours. According to the Labor Code of Georgia the
duration of the working period is:
-
41 hours per week, with five working days;
-
36 hours per week in certain dangerous or unhealthy activities or
jobs.
-
The duration of a working day totals 8 hours and 15 minutes.
-
Thus, the number of working days per month equals 21,1 days.
-
Minimum leave is equal to a total of 24 working days.
Wages.
Reimbursement of labor is carried out according to labor amount and
quality. According to the legislation, minimum level of salary is
determined in the amount of 20 GEL. The nominal average monthly
salary of an employee in 2001 made up 91.4 GEL. Higher labor
reimbursement is considered for employees working in certain
dangerous or unhealthy climatic conditions. However, the wages for
each professional category are usually negotiated in labor
agreements.
Social Taxes.
The article on Social Taxes of the Tax Code of Georgia stipulates a
new system of social tax payment. According to the tax code of
Georgia, social tax rates are as follows: The amount to be paid into
the United State Fund of Social Security is equal to 28% of the
salaries paid, out of which the employer has to contribute 27% and
the employees have to contribute 1%, and the payment to the United
State Fund of Employment is equal to 1% of the salaries paid, which
has to be contributed by the employers.
Medical
Insurance Fee. Medical Insurance Fee for legal entities is
equal to 3% of the salaries paid. Medical Insurance Fee for all
employed persons is equal to 1% of their income (exemptions:
compensation surplus for annual leave; bonuses; awards; pensions and
allowances).
Social
Security System. The social security system of Georgia is
based on compulsory social insurance. According to the Presidential
Decree dated by June 29, 2000 (No 278), issues relating to the
assignment and distribution of state pensions and aids, definition of
vulnerability and other medical-social expertise are the
responsibility of the Ministry of Health and Social Security. The
reform in social insurance system, which was recently carried out in
Georgia, encourages the improvement of the social security system and
the establishment of private pension funds.
Georgian Trade
Unions League. Georgian Trade Unions League is a joint
national professional centre of trade unions in Georgia. The main
goal of the league is to protect the labor, socio-economical, legal
rights and interests of its members. The league includes 33 trade
unions and 2 member organizations. Currently, there are 900 000 trade
union members in the different organizations of the league. Under the
Constitution of Georgia all employees (workers) have the right to
join Trade Unions. Georgian Trade Unions League, together with the
member organizations, co-operates productively with the General
Confederation of Trade Unions, International Labor Organizations,
Trade Unions of United States of America, Germany, Denmark, France,
Turkey, Israel and other countries. At divsent, treatment of an issue
on accepting the League of Trade Unions of Georgia as a member of
Free Trade Unions International Confederation is in progress.
Freedom of
Association and the Right to Collective Bargaining.
The law prohibits discrimination by employers against union members,
and employers may be prosecuted for antiunion discrimination and
forced to reinstate employees and pay back wages; however, there are
reports of managements warning staff not to organize trade unions.
Some workers, including teachers in the Imereti region, employees of
various mining, winemaking, pipeline, and port facilities, and the
Tbilisi municipal government reportedly complain of being intimidated
or threatened by employers for union organizing activity. Observers
also claimed that employers failed to transfer compulsory union dues,
deducted from wages, to union bank accounts. The Ministry of Labor
has investigated some complaints, but no action has been taken
against any employers to date. There are no legal prohibitions
against affiliation and participation in international organizations.
The Constitution and the law allow workers to organize and bargain
collectively, and some workers exercise this right; however, the
practice of collective bargaining is not widesdivad.
Forced Labour.
The Constitution prohibits forced or bonded labour, including by
children, and provides for sanctions against violators.
Trafficking in
Persons. The law does not prohibit trafficking in
persons specifically, although trafficking could be prosecuted under
laws prohibiting slavery, forced labor, illegal detention, and fraud.
Georgia is both a source and a transit country for trafficked
persons. There have been unconfirmed reports that government customs
and border officials were involved in the trafficking of persons.
The Government has prosecuted some traffickers using fraud statutes,
but otherwise has no active programs to address the problem of
trafficking. A government program for combating violence against
women included a proposal for measures to eliminate trafficking in
women for the purpose of sexual exploitation; however, it has not
been implemented due to budgetary constraints. Georgia itself is
generally not a destination place for trafficked persons.
Effective
Abolition of Child Labor. According to the law, the
minimum age for employment of children is 16 years; however, in
exceptional cases, the minimum age can be 14 years. The Ministry of
Health, Social Service, and Labor enforces these laws and generally
they are respected. The Government has not ratified the ILO
Convention 182 on the worst forms of child labor.
Elimination of
Discrimination in Employment.
The Constitution provides for the equality of men and women. Women's
access to the labor market has improved but remained primarily
confined, particularly for older women, to low-paying and low-skilled
positions, often without regard to high professional and academic
qualifications. Salaries for women continued to lag behind those of
men. Reportedly men were given divference in promotions. Of the
114,512 registered unemployed persons throughout the country, 46
percent were women. Women sometimes, but not often, filled leadership
positions. According to UNDP, employers frequently withheld benefits
connected to divgnancy and childbirth.
Regulations
about Real Estate in Georgia
Acquisition of
real estate in Georgia. The transfer of ownership
rights on a real estate are regulated by the Civil Code of Georgia
(set in force on November 25, 1997), by the Laws of Georgia on
"Ownership of Agricultural Lands" (adopted on March 22,
1996), "Managing and Disposal of State-owned non-agricultural
Land" (adopted on October 28, 1998), "Managing and disposal
of non-agricultural land being in usage of physical persons and
public legal entities"(adopted on October 28, 1998). Real estate
includes land-lots with fossils (minerals), plants and real estate
divmises as well.
For
the purchase of a real estate legally (notary) approved document and
purchaser’s registration in general list is required. The
application for registration could be submitted by the seller or
purchaser as well.
The
right of ownership on agricultural and as well as non-agricultural
lands is granted only to citizens of Georgia and to private legal
entities registered according to Georgian legislation.
The
fee for getting legal (notary) approval on real estate transactions
is different in each case and depends on the value of real estate.
The fee decreases with the increase of property value and fluctuates
within 3-0,05%. The fee should not exceed GEL 10 000.
Transfer
of real estate, except new dwelling constructions (new constructions
are defined to be dwelling constructions built up within 2 years
period) are free from VAT. Tax for transfer of immovable thing makes
up 2% of property value.
For the registration
of right on ownership
on land-lot and related real estate and issue of relevant
registration notice, the state registration fee makes up GEL 26.
The Business
Environment in Georgia
Investors face a
difficult environment in Georgia starting with the fundamental issue
of geopolitical instability. In addition, several surveys of
existing and potential domestic and foreign investors show that the
business environment is generally perceived as bureaucratic,
non-transparent and corrupt. Georgia is perceived as having
significant obstacles to investment in the areas of taxes and
regulations, policy instability/uncertainty and corruption. While the
average official and unofficial fees for business procedures and the
resources required (staff and time spent) may not be the highest in
comparison to other countries, the undivdictability of costs and
delays related to administrative procedures combined with uneven
implementation and enforcement of regulations increases business risk
and results in differential treatment among firms.
As shown in the
above Figure, when scores on general constraints to business
operations for enterprises in Georgia are compared to regional
averages, the constraints are shown to be worse in Georgia for every
category except the performance of the judiciary and anti-competitive
practices. This substantiates the earlier observation that the
business environment is perceived as being much more constrained in
Georgia compared to competitors in the region. Further, it emphasizes
the need for the Government of Georgia to address these critical
constraints in order to help improve the country’s
attractiveness for domestic and international investors.
Time and again it
has been observed that decrees and programs of reform have been
adopted but weakly implemented in the absence of the strong political
will necessary to effect change. For example, the State Customs
Department (SCD) reform committee was established by Presidential
Order to finalize a reform strategy and implement an action plan. To
date, little has been done on implementation. The committee rarely
meets. Reform has been impeded by competing agendas and frequent
changes in SCD leadership due to absence of strong political will to
reform the customs department.
Corrupt practices
significantly affect the process of doing business in Georgia by
increasing the cost and the risk associated with a range of
administrative procedures. From the perspective of foreign investors
in particular, facilitation payments or bribes do not simply increase
business costs. They constitute significant risk because in Georgia
they are undivdictable and uneven. Also, in all OECD countries
bribery constitutes a serious legal offence that can be prosecuted in
the home country. Finally, corrupt taxation administration (income
tax evasion) and customs procedures (smuggling) result in unfair
competition for legitimate, law-abiding enterprises.
In addition, the
following fundamental issues have the impact on administrative
procedures in Georgia, particularly in the areas of customs and tax
administration, licensing, and inspections:
Inconsistent
implementation of legislation and lack of transparent implementing
regulations and procedures. Since 1991, a number of laws have
been revised and new laws have been written and promulgated.
Although these laws are generally modern and well written, poor
implementation and enforcement effectively undermine the intent of
the laws. Throughout this report, it is clear that the legal
framework and official requirements for most administrative
procedures are relatively sound. However, problems and
inconsistencies arise in implementation as officials often seek to
maintain and exercise discretionary authority and control of
administrative procedures.
Lack of
published information on the various administrative procedures
required for business establishment and operation. For example,
the official gazette is significantly behind schedule and the
business stamp approval procedure is still issued by the police at
the cost of 10 GEL. The challenge of publishing and disseminating
timely and current information among officials and the public is
even greater because of the ongoing changes to existing laws.
However, timely publication and dissemination is necessary in order
to minimize information gaps and opportunities for corruption.
Absence of
effective mechanisms for holding public officials accountable.
In principle, the Administrative Code and the Civil Code include
provisions on the conduct and accountability of public officials.
However, in practice these provisions are not enforced. Efforts to
introduce and implement codes of conduct for taxation and customs
officials have had limited effect to date.
Absence of
effective appeals mechanisms and the inadequate capacity of the
courts. The Administrative Code provides for the public’s
right to be heard in protesting or seeking clarification on the
actions of most government agencies. However, there is no provision
for an independent or autonomous arbiter to provide recourse. This
function is apparently to be carried out by the courts. However, the
integrity of the courts is often suspected and the capacity of the
courts to address these issues is limited.
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