On October 5 at Courtyard Mariotte Hotel was held presentation of the report "Doing Business 2008" produced by the International Finance Organization. The presentation was attended by the Prime Minister and members of the Government.
In his address the Prime Minister spoke in details about the results of the research held by the International Finance Corporation of the World Bank as well as the economic reforms implemented in Georgia.
He stated that due to the current and successful reforms which have made place in the country Georgia has been significantly improving its position in the worldwide rating year after year.
In 2005 Georgia was the 112th easiest country to do business while last year it was the 37th worldwide and was recognised #1 reformer.
In 2007 we aimed to enter in the number of 25 best countries in world. According to Doing Business 2008 from the aspect of easy doing business Georgia is rated the 18th country worldwide.
In order to make aware the public of the significance of the attained result I would like to bring the following example: in Georgia doing business is easier than in Belgium, Germany, Netherlands, Austria, France and other well-developed countries, nothing to speak about the post-Soviet countries.
All those reforms carried by us for improvement of the economic content and business environment are based on one principle only - to exclude any undesirable interference from the side of the state authorities in the private business. We have introduced quite simple and equal for all rules and secured their protection for all players.
The International Fiancee Corporation of the World Bank has appraised the entrepreneurial environment of the country by 10 key performance indicators.
I would like to tell you in brief about those reforms which were carried in Georgia for improvement of business environment this year and which are reflected in Doing Business 2008 Report.
Registration of entities
In order to improve the entrepreneurial environment for four years already we have continued the process of facilitation of registration of entities.
In 2005 in Georgia in order to register a business one should pass 9 various steps and wait for 25 days.
As you know the registration of business moved from the court to the tax department and enabled us to join the business and taxpayer registration procedures.
The requirement for a minimal charter capital of a limited liability company was decreased tenfold.
This year we have cancelled the obligatory requirement for the paid charter capital.
Following these changes was considerably decreased the time, cost and corruption risk in connection with the commencement of business.
Therefore, today registration of a limited liability company requires only 3 days and a natural person may commence an entrepreneurial activity in 1 day.
Currently, Georgia is the 10the easiest country to start business while past year it was the 39th.
As a result the number of registered entities has increased. Only in January-September of this year the number of newly registered entities and individual entrepreneurs exceeded 40 000 that by 35% exceed the similar index of the past year.
Licenses and permits
We have achieved a significant success in the implementation of the reform in the licensing and permission sphere as well.
Just 2 years ago a person needed to pass 25 steps and to wait for 195 days in order to obtain a license (this category was introduced 2 years ago).
By some 800 or 85% has decreased the number of those activities which were subject to the licensing or permit.
Therefore, only 86 licenses and 50 permits remain.
Doing Business 2008 Report displays Georgia as the modal country in the construction licensing sphere.
One-stop principle and tacit consent rule are introduced.
Just 3 years ago in order to obtain a permit for construction a person should pass 29 various types of bureaucratic steps that needed long time and great expenses, thus causing a risk of corruption.
This year to obtain the construction permit a person shall pass only 12 obligatory steps and maximum 3 months.
By these indices Georgia is the leader in comparison with EU members-countries (except Denmark).
As a result, we all know the current rate of development of construction business in Georgia. In the first half of the current year as compared with the same period of the year 2006 the actual growth of the construction sector made up 10%.
Today Georgia is the 11th easiest country to obtain licenses (past year it was the 27th).
Labor market
In 2005 in Doing Business Report the labor law of Georgia was assessed rather negative.
Dismissal of an employee was connected with rather complicated processes. The off-payroll expenses for labor force were very high.
In 2006 we adopted a new labor code which was acknowledged worldwide as the most liberal and stipulates all basic requirements of ILO.
By the 2008 rating Georgia is the 4th liberal country from the aspect of the labor law (the same was last year).
Property registration
Just 3 years ago the procedures related to the property registration were very complicated/
For registration of property were needed 8 bureaucratic barriers and 39 days... and rather big expenses (2.5% of property).
In 2005 the procedures necessary for property registration was significantly facilitated: only 6 steps 9 days and 0.6% of the property.
This year we have facilitated more the procedures of real estate registration.
Today, registration of property with the public register without notarization is possible on the same day already. Registration of any real estate is possible in 3 days at 0.1 % of the real estate cost.
Based on these indices Georgia is the 11th easiest country worldwide to register the property (the past year it was the 18th).
Availability of credit resources
We continue the reform of the financial sphere to develop the national financial brokerage and availability of credit resources.
In this part of Doing Business Georgia is rather successful.
The coverage area of the Credit Agency has been increased significantly and the data reliability quality has improved.
The availability of the strong credit and information base in the country rather decreases the risks connected with the financial brokerage and makes the current processes in the bank sphere more transparent and predictable.
As a result of reforms implemented in this sphere the bank sector in 2007 has again the highest rate of growth; the interest of famous finance institutions worldwide in the country is increasing more.
Though Georgia is the 48th country in this part we are improving our position here every year (past year we were the 62nd).
Protection of investors
Protection of investor's interests is one of the important components of Doing Business.
Just one year ago in this part of the assessment we were on the 120th place. This year following the made legislative changes we are holding up the 33rd place.
The Law of Georgia On Security Market unequivocally protects the minority shareholders from conflict of interests.
In case of any conflict of interests the same law provides the publicity of information while persons having conflict of interests are prohibited by the court from voting in the decision-making process.
In Georgia the transactions with securities became more transparent process and practically excluded the possibility of unfair bargains.
Tax reform and tax payment
The main part of the tax reform was implemented in 2005-2006.
The number of taxes has been reduced from 22 to 7. The tax rates have been reduced significantly too: VAT rate was reduced from 20% to 18%, social tax from 31 to 20%, income tax - from 20 to 12 %.
We have introduced the 100% depreciation principle. Within implementation of investments VAT is calculated and refunded to the investor after a month and a half.
In 2007 was established the universal service of revenues. An entrepreneur shall state about his business activity to one governmental authority only.
This action has resulted in the decrease of the time spending for reporting before the tax authorities.
The society is aware of further simplification of the tax code from the next year. The profit tax will reduce from 20 to 15%; one single tax will aggregate the social and income taxes and the average weighed rate will be reduced to 25%.
From 2008 in Georgia will remain only 6 taxes.
You will agree with me that this will facilitate more the doing business in Georgia.
Georgia is the 102nd country in this part of assessment (past year we were the 103rd).
Trade policy
In line of promotion of foreign trade we are implementing a liberal trade policy.
We have abandoned the import taxes except for the agricultural products and building materials.
On January 1, 2007 took effect a new Customs Code which have been brought in conformity with the European Union standards.
The time required for import custom procedures were reduced from 52 days as of 2005 to 14 days until now and today the same procedures require only 4 days.
Similarly, were simplified the export procedures. 3-5 days are required for export of goods while just 2 years the same procedures required 54 days.
The bureaucratic barriers related to the foreign trade have been minimized.
The quantity of export documents reduced from 9 to 3-4 while the number of import documents - from 15 to 5-7.
We have elaborated the effective system of risk management. We have introduced the so called "Gold List" for fair entrepreneurs and simplified more the custom procedures.
In this part we are the 64th country (past year we were the 59th).
Termination of entrepreneurship (Bankruptcy Law)
In the beginning of 2007 we adopted the law On Insolvency Proceedings which replaced the earlier law On Bankruptcy Proceedings. The bankruptcy procedures have been reduced from
3,3 years to 5 months and the so called "collection interest" was increased from 27,5 to 85 percent.
Macroeconomic overview
As a result of successful structural and economic reforms Georgia took the road of the stable economic development.
Let's overview in brief the national microeconomic results as well:
In 2006 the GNP growth was 9,4%. This year the actual growth of GNP will attain to 14-15%.
This year began with a rather impressive results:
In the first half of 2007 the actual growth of GNP was 12,5 %. In January-September of this year in the state budget were mobilized the revenues by 30% more than in the same period of the past year (by 32% more in the consolidated budget).
As we have mentioned above from the beginning of the year until today up to 42000 enterprises were additionally established in Georgia that implies the creation of the enhanced entrepreneurial environment and additional working places.
From 2004 until now the cumulative growth rate of GNP made up 30%.
... and what is the most complimentary that is the active involvement of all sectors of the national economy in the total economic growth and twofold growth rates of the most of them.
Thos are: the banking sector, mining and processing industries, trade and commerce, transport, telecommunications, hotels and restaurants, health care.
The amount of foreign investments is increasing in Georgia from year to year. In 2006 as compared with the 2005 the amount of direct foreign investments increased by 165% and GNP made up 15%.
In the six months of 2007 the amount of foreign investments in the country totaled 1,2 billion USD. According to our estimates until the year-end this amount will increase to 2,5 billion
USD and the GNP will attain 25%.
The single-digit rate of inflation and stable rate of exchange are the additional stimulating factors for development of the national economy.
That is what I want to say about the Doing Business 2008 Report.
In conclusion I would like to note that the advancement in the international rating is not our end in itself. The economic and structural reforms serve to the development of the national economy and enhancement of the business environment whereby the Georgian economy takes the road of stable development.
Press center of the Chancellery of the Government of Georgia