,,,
Private Sector and Human-resource Development in
Author: Lasha Martashvili
E-mail: lmg@bk.ru
(18.02.2004)
TABLE OF CONTENTS
TOC o "1-3" h z u 1. Government Policies. PAGEREF _Toc84649293 h 5
1.1 Government promotion policies of small and medium size enterprises. PAGEREF _Toc84649294 h 5
1.2 National Investment Agency of Georgia.. PAGEREF _Toc84649295 h 5
1.3 Georgian Investment Center. PAGEREF _Toc84649296 h 5
1.2.1 Governments Export Promotion Policy. PAGEREF _Toc84649297 h 6
1.2.2 Georgian Export Promotion Agency (GEPA) PAGEREF _Toc84649298 h 9
1.4 Foreign Investment Promotion.. PAGEREF _Toc84649299 h 14
1.3.1 Governments Foreign Investment Promotion Policy. PAGEREF _Toc84649300 h 14
1.3.2 Foreign Investment Advisory Council (FIAC) PAGEREF _Toc84649301 h 21
1.5 Tax Regime. PAGEREF _Toc84649302 h 23
1.3.3 Taxation System and Tax Rates in Georgia. PAGEREF _Toc84649303 h 23
1.3.4 Existing Taxation Practices. PAGEREF _Toc84649304 h 34
1.3.5 Tax Reform Areas. PAGEREF _Toc84649305 h 38
1.6 Legislative Basis for the Operation of the Private Companies. PAGEREF _Toc84649306 h 44
1.5.1 Law of Georgia on Entrepreneurs (LoE) (Corporate Law) PAGEREF _Toc84649307 h 44
1.5.2 Law of Georgia on Securities Market (SML) PAGEREF _Toc84649308 h 51
1.5.3 Employment Regulations in Georgia. PAGEREF _Toc84649309 h 57
1.5.4 Regulations about Real Estate in Georgia. PAGEREF _Toc84649310 h 59
1.7 The Business Environment in Georgia.. PAGEREF _Toc84649311 h 61
1.8 Institutional Arrangements. PAGEREF _Toc84649312 h 64
1.3.1 Securities Industry. PAGEREF _Toc84649313 h 64
2. Society.. PAGEREF _Toc84649314 h 65
2.1 Poverty issues. PAGEREF _Toc84649315 h 65
3. Economics. PAGEREF _Toc84649316 h 70
3.1 Main economic indicators. PAGEREF _Toc84649317 h 70
3.2 Agriculture. PAGEREF _Toc84649319 h 77
3.3 Trade. PAGEREF _Toc84649320 h 104
3.4 Construction.. PAGEREF _Toc84649321 h 106
4. Business. PAGEREF _Toc84649322 h 110
4.1 Company Registration and Licensing System.. PAGEREF _Toc84649323 h 110
4.1.1 Company Registration System.. PAGEREF _Toc84649324 h 110
4.1.2 Company Licensing System.. PAGEREF _Toc84649325 h 117
4.2 Local Enterprises. PAGEREF _Toc84649326 h 119
4.1.3 Joint Stock Companies traded at Georgian Stock Exchange. PAGEREF _Toc84649327 h 120
4.1.4 Joint Stock Companies not traded at Georgian Stock Exchange. PAGEREF _Toc84649333 h 132
4.3 Human-Resource Development in the Private Sector. PAGEREF _Toc84649334 h 134
5. Other Donors Activities. PAGEREF _Toc84649336 h 138
5.1 The World Bank and IMF. PAGEREF _Toc84649337 h 138
5.1.1 List of the Active World Bank Projects in Georgia. PAGEREF _Toc84649338 h 138
S Satisfactory. PAGEREF _Toc84649339 h 138
U - Unsatisfactory. PAGEREF _Toc84649340 h 138
5.1.2 List of the Closed World Bank Projects in Georgia. PAGEREF _Toc84649341 h 139
5.1.3 Description of the Closed World Bank Projects in Georgia. PAGEREF _Toc84649342 h 140
5.1.4 The World Bank and IMF Cooperation in Georgia. PAGEREF _Toc84649343 h 149
5.1.5 The World Bank Country Assistance Strategy for Georgia. PAGEREF _Toc84649344 h 154
5.1.6 The World Bank Partners in Georgia. PAGEREF _Toc84649345 h 161
5.2 USAID.. PAGEREF _Toc84649346 h 162
5.3 EBRD.. PAGEREF _Toc84649347 h 162
5.4 EU.. PAGEREF _Toc84649348 h 162
5.5 GTZ.. PAGEREF _Toc84649349 h 163
5.6 CIDA.. PAGEREF _Toc84649350 h 163
5.7 DFID.. PAGEREF _Toc84649351 h 163
5.8 The Government of the Netherlands. PAGEREF _Toc84649352 h 163
5.9 IFAD.. PAGEREF _Toc84649353 h 164
5.10 UNDP. PAGEREF _Toc84649354 h 164
5.11 UNICEF. PAGEREF _Toc84649355 h 164
Currency
(Exchange rate as of
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Currency Unit = Georgian Lari (GEL) |
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1 USD = 2.11 GEL 1.0 GEL = 0.47 USD |
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Abbreviations and Acronyms |
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CAS |
Country Assistance Strategy of the World Bank |
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CFAA |
Country Financial Accountability Assessment |
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CIS |
Commonwealth of Independent States |
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CPIA |
Country Policy and Institutional Assessment |
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DFID |
Department for
International Development, |
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EBRD |
European Bank for Reconstruction & Development |
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EDPRP |
Economic Devt & Poverty Reduction Program |
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EU |
European Union |
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FAO |
Food and Agriculture Organization |
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FDI |
Foreign Direct Investment |
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FIAS |
Foreign Investment Advisory Service |
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FSAP |
Financial Sector Assessment Program |
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FSU |
Former |
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FY |
Fiscal Year |
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GDP |
Gross Domestic Product |
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GEL |
Georgian Lari |
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GNP |
Gross National Product |
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GoG |
Government of |
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GSE |
Georgian Stock Exchange |
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GTZ |
German Technical Cooperation |
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IDA |
International Development Association |
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IDF |
Institutional Development Fund |
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IDP |
Internally Displaced Persons |
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IFC |
International Finance Corporation |
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IMF |
International Monetary Fund |
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IOSCO |
The International Organization of Securities Commissions |
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JSC |
Joint Stock Company |
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KfW |
German Financial Cooperation |
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LLC |
Limited Liability Company |
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MDGs |
Millennium Development Goals |
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MoF |
Ministry of Finance |
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NBG |
National Bank of |
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NGO |
Non-Governmental Organization |
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NBG |
National Bank of |
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NGO |
Non-Governmental Organization |
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OECD |
Organization For Economic Coopn & Development |
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PER |
Public Expenditure Review |
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PPP |
Purchasing Power Parity |
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PRGF |
Poverty Reduction and Growth Facility |
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PRSP |
Poverty Reduction Strategy Paper |
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SAC |
Structural Adjustment Credit |
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SATAC |
Structural Adjustment Technical Assistance Credit |
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SEC |
Security and Exchange Commission |
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SIDA |
Swedish International Development Agency |
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SIF |
Social Investment Fund |
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SME |
Small and Medium Enterprises |
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SRS |
Structural Reform Support Project |
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TACIS |
Technical Assistance to the CIS (EU) |
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UNDP |
United Nations Development Program |
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UNHCR |
United Nations High Commissioner for Refugees |
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USAID |
United States Agency for International Development |
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VAT |
Value Added Tax |
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WTO |
World Trade Organization |
[To be described:] "Small and
[To be described:] Law of
[To be described:] Law of
[To be described:] Activities of the
National Investment
Agency of
[To be described:] Activities of the Georgian Investment Centre
Foreign Trade Regimes. Reforms carried out in recent years in
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
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,
Furthermore,
On
In 1996
In 1999
Many countries have granted to
Law of
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
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 present draft law lays down the legal basis for eliminating the technical barriers to trade during the process of the preparation, 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
The second chapter defines the requirements to the content of technical regulations, preparation 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 preparation, 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.
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 comprehensive information on business opportunities both for Georgian and overseas companies.
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
Offering online trade leads both for Georgian exporters and overseas importers
Assisting Georgian companies in developing an export marketing strategy
Overseas
Exhibitions and Trade Missions. GEPA is actively involved in preparing overseas business visits for
Georgian business groups to meet with new trading partners; we also prepare 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
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
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.
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 previous 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 prepares 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 prepared in corporation with the
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
Market Briefs. Market Briefs are prepared in Georgian and are available for Georgian companies interested in specific industries and markets. Market briefs prepared to date are as follows:
1.
2. Pipes' Market in
3. Organic Food market in
4.
5. Timber Market in
6. UK Tea market
7. Intellectual Property - overview
8. EU Fertilizer Market
9.
10. Wine Market in
11. Mineral Waters in
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Removing Administrative Barriers
to Investment in
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 BusinessInvestor
Entry and Business Registration. The procedures
for obtaining entry visas are relatively transparent and present no significant
administrative impediments. Most notably, foreign investors and expatriate
employees do not require special work or residence permits to live and work in
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 Entrepreneurs aimed at guaranteeing timely service, ensuring public availability of information on companies, publishing data on newly registered companies, and protecting company names. The most pressing 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 Entrepreneurs 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
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 presently held under government
leases. To the extent that investment in commercial scale agriculture is viewed
as having significant potential in
Operating a Business - Tax Administration. On the basis of interviews with representatives 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 pre-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 interpretations, and instructions in a timely manner. Also, a credible resource must be established to respond to queries offer binding interpretations 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 interpretation 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 previous chairmen have been reversed in many instances. The detailed action plan prepared 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 comprehensive 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 pre-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.
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 present
significant barriers to investment and business activity in
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
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
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 Entrepreneurial Activity represented 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
Pervasive
corruption and the apparent lack of political will to implement reforms have emerged as two fundamental
issues affecting the business environment in
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 comprehensive 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 commissions 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
The Law defines the legal bases for
realizing both foreign and local investments and their protection guarantees on
the
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:
a) Monetary assets, a share, stocks and other securities;
b) Movable and immovable property (real estate) - land, buildings, structures, equipment and other material valuables;
c) Lease rights to land and the use of natural resources (including concession), patents, licenses, know-how, experience and other intellectual valuables;
d) 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
a) A foreign citizen;
b)
A stateless person temporarily
residing on the
c) A Georgian citizen permanently residing abroad;
d)
A legal person registered
beyond
An enterprise with a foreign investment of not less than 25% shall enjoy the same rights as the foreign investor.
In order to assist foreign investment
inflow into
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, prepares meeting and monitors their procession. The meetings are
preceded by a preparatory 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 prepares 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
Private sector related activities. To fulfil this obligation the
council works in few directions. According to the presidential decree N1324, a
Presidential Commission on Support of the Private Businesses in
Legal Framework. tc "1. Legal
Framework " f C l 3The Tax Code of Georgia, adopted on
The taxation system in
Taxes Paid by Individuals, Individual Enterprises. TC "2. Taxes Paid by Individuals, Individual Enterprises" f C l "3"
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 entrepreneurs are
subject to this tax. Under Georgian law, residents are physical persons in the
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 individuals family. Physical person entrepreneurs are individuals who engage in entrepreneurial activity without first establishing themselves as legal persons (and in accordance with the entrepreneurs law). Physical person entrepreneurs and individual enterprises with annual gross income equal to or less than 24,000 GEL are subject to a presumptive tax in lieu of an income tax. The presumptive 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 entrepreneurial 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
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 taxpayers 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 persons name, amount and type of income paid, and amount of tax withheld; and
Within 30 days of the end of the tax year, present to the tax agencies and, if requested, to the person paid, a statement containing the persons registration number, total income, and total amount of tax withheld during the year.
Physical person entrepreneurs and individual enterprises are required to submit income tax payments in three instalments, based on their income tax liability for the previous year. Instalments are applied against the taxpayers 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 previous year. Taxpayers with no income from the previous year must make payments based on actual income during the previous quarter.
Tax payers[3] 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 entrepreneurial activity must submit a tax return within 30 days of the cessation of activities.
Taxes Paid by Enterprises.tc "3. Taxes Paid by Enterprises" f C l 3
Profit Tax. Profit taxes must be paid by Georgian entities and foreign
entities with permanent establishments in
Legal persons established
according to the legislation of
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
Individual enterprises and physical person entrepreneurs are subject to income tax (or presumptive 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 payments10 percent
Insurance proceeds4 percent
Telecommunication and transportation services, shipments, and oil and gas transactions4 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 services10 percent
Certain oil and gas profits10 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 depreciation are grouped.
Table 1.4.1.2: Summary of Asset Categories
|
Group |
Types of Fixed Assets |
Percentage Depreciation |
|
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 pressing 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 depreciation not included in other groups. |
10 |
Source: Tax Code.
Buildings and structures are each depreciated separately, whereas the other asset groups are depreciated 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 depreciated 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
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 entrepreneurial activity.
Profit taxes must be paid in three installments based on the profit tax liability of the previous year. These are:
Before May 15th: 30 percent of the previous years tax liability
Before August 15th: 30 percent of the previous years tax liability
Before November 15th: 40 percent of the previous years tax liability.
Taxpayers who have no taxable income in the previous year make payments according to the actual income of the previous quarter.
Installment payments may be reduced if current year income is expected to be at least 30 percent less than income of the previous 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 entrepreneurial activity in
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 prepare 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, representative 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
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 entrepreneurs 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 Entrepreneurs |
Taxes Paid by Employees |
|
|
Social Tax |
Employment Tax |
Social security Tax |
|
|
Physical person entrepreneurs and legal persons who pay wages to employees. Physical person entrepreneurs 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 entrepreneurs. |
27%, not less than 16 GEL per month |
1% |
|
|
Physical persons who carry
out non-entrepreneurial economic activities in |
27%, not less than 16 GEL per month |
1% |
|
Source: Tax Code.
Social taxes must be paid by:
Physical person entrepreneurs
and legal persons who make wage payments to employees working in
Physical persons receiving remuneration from employment or the performance of services
Physical person entrepreneurs
who conduct entrepreneurial activity in
Physical persons who perform non-entrepreneurial 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 employers social tax payment. Employers are required to submit their social tax returns before the 15th day following the reporting month.
Physical person entrepreneurs and physical persons who carry out economic activities classified as non-entrepreneurial (under the Law on Entrepreneurs) 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
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
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
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
For goods produced on the
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.tc "4. Other Taxes" f C l 3
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 234 percent, water 310 percent, animals 255 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 14 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.
Background.
Unstable tax policy framework. The history of tax policy changes in
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 comprehensive cross-checking of VAT invoices and making it more difficult to establish shell companies for evasion purposes. [5]However, 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
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 presumptive tax for individual enterprises, which raises relatively little revenues (in 2000 actual presumptive 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 presumptive 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 presumptive tax. Although some (Foreign Investor Advisory Service (FIAS) December 2001 report[6]) 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 presumptive 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
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 prefer 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 preparing 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 presented 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
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 prepared 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.
General. The public perception of the quality and fairness of tax and
customs administration in
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 presented in Parliament. Any tax policy changes should be taken in the context of the annual budget. It also recommended that the 2001 tax package prepared 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 comprehensive 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
Past experience
with tax policy reform in
VAT Reform. The VAT should not be replaced by a
sales tax. Rather, the VAT as the mainstay of the revenue system in
Tax Simplification. The elimination of nuisance taxes will facilitate administration
and reduce the administrative burden on small businesses. In
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 prevent 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
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 IDAs 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
IFC Financial Support to the Private
Sector in
IFC's Policy. IFCs lending and investments in
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 countrys first bank specializing in lending to
micro and small enterprises. In June 2000, IFC purchased
a 10 percent stake in TBC Bank. IFCs support helped TBC to grow from a pocket bank
into the largest and one of the best performing commercial banking institutions
in
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. IFCs The $2.5 million equity investment and $6.3 million loan
supported Ksanis 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
General. The operation of the private companies in Georgia is mainly regulated by the following two laws: a) Law on Entrepreneurs (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.
Under the Law of Georgia on
Entrepreneurs the following forms of commercial entities may be established in
i.
Sole proprietorshipAn 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
ii. Joint Liability CompanyA legal entity with unlimited liability established on the basis of a partnership of several individuals or companies.
iii. Limited PartnershipA 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.
iv. Limited Liability CompanyA legal entity that is separate and distinct from its shareholders (one or more legal or physical persons). The companys liability is limited to its authorized capital. Founders and shareholders are not liable for the obligations of the company.
v. Joint Stock CompanyA legal entity characterized by the limited liability of the partners. The companys liability is limited to its authorized capital.
vi.
CooperativeA legal entity characterized by the limited liability of the
shareholders. In
Sole proprietorships, joint liability,
limited partnerships and cooperatives are rarely established by foreign
investors in
The Law on Entrepreneurs 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
Provisions of the Law on Entrepreneurs 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 Entrepreneurs 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 presented 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 representation 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.
Representative Offices and
Branches. A foreign company may operate a
branch or a representative office in
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 representative offices.
Analysis - Law on Entrepreneurs
(LoE). As the main company law for
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
More detailed results of the assessment are summarised in Table 1.2.1.1 below:
Table
1.2.1.1.
of Corporate Governance
|
OECD Principles of Corporate Governance |
O[8] |
LO[9] |
MNO[10] |
NO[11] |
NA[12] |
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 companys 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 prepared, 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 prepared and presented. |
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) boards 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 |
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
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 prepare and submit to the National Securities Commission of Georgia (NSCG) and publish or distribute to registered owners:
I.
Annual reports;
(b) Semi-annual reports; and
(c) Current reports.
II. 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;
III. 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;
IV. 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;
V. 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;
VI. A Stock Exchange shall be the exclusive organizer of secondary public trading in securities;
VII. 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:
a)
Pprepare 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 Georgia[13].
Meanwhile, the experience obtained from the Central and
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
for Securities Regulation
|
IOSCO Principles for Securities Regulation |
C[14] |
PC[15] |
MNC[16] |
NC[17] |
NA[18] |
Comments |
|
Principle 1 - Clear responsibilities. The responsibilities of the regulator should be clearly and objectively stated. |
X |
|||||
|
Principle 2 - |
X |
The scope of accountability is limited. Lack of legal immunity for NSCG staff acting in good faith. |
||||
|
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 comprehensive inspection, investigation and surveillance powers. |
X |
Inspection power over Reporting Companies and their major shareholders is not adequate. Investigation power not adequate. |
||||
|
Principle 9 - Adequate enforcement power. The regulator should have comprehensive 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 NSCGs 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 investors 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 prepared. |
||||
|
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 |
NSCG has no real time access to trading information, no real time oversight. SML does not expressly require fair trading rules for different members. |
||||
|
Principle 27 - Trading transparency. The regulations should promote transparency of trading. |
X |
SML does not expressly require real time transparency of pre-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 |
The GCSD needs to comply with the requirement of ownership structure. The legal requirement for efficiency in settlement arrangements could be stated more explicitly. |
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
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
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
Georgian Trade Unions League. Georgian Trade Unions League is a joint national professional centre
of trade unions in
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 widespread.
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.
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 preference 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 pregnancy and childbirth.
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 premises as well.
For the purchase of a real estate legally (notary) approved document and purchasers 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.
Investors face a difficult environment
in
As
shown in the above Figure, when scores on general constraints to business
operations for enterprises in
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
In addition, the following fundamental
issues have the impact on administrative procedures in
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 publics 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.
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 presented in Fig. 1.3.1.1:
|
Georgian Central Securities Depository |
|
Georgian Central Securities Depository |
|
Georgian Stock Exchange |
|
Clearing Bank |
|
Share Registrar |
|
Brokerage Company |
|
Brokerage Company |
|
Investor |
|
Shareholder |
|
Georgian Securities Industry Association |
|
The National
Securities Commission of |
Fig. 1.3.1.1. The Structure of Georgian Stock Market
Poverty Trends. The relatively slow rebound from the economic collapse after
independence has led to a severe decline in welfare.
Poverty Profile. Strengthened economic performance
resulted in an reduction of poverty in the mid 1990s. However,
Table 2.1.1. Change in poverty in
|
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: The official 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 |
||||||
Differential Impact of Rising Poverty. IDA, in close collaboration with the State Department of Statistics, prepared 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
Non-Income Indicators of Poverty. Non-income indicators of
poverty in
Internally Displaced People. IDPs vulnerability to poverty is magnified by their lack of access to land. Thus IDPs living in collective centers are 3½ times less likely to have access to land than the local population, and those living in private accommodations half as likely. In addition, IDPs 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
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 |
Likely. The Economic Development and
Poverty Reduction Program of Georgia envisages economic performance that
would allow |
|
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, preferably 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 |
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 |
|
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 spread of HIV/AIDS. Target 8: Have halted by 2015, and begun to reverse, the incidence of malaria and other major diseases. |
HIV/AID is spreading fast. The number of new HIV cases in 1997 increased nearly threefold compared with the previous 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 predominantly present 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 prevalence of TB has increased from 28.2 in 1991 to 85.8 in 2001, reflecting the spread of disease, but also better recording of incidence. |
While Political commitment and additional resources are required to keep the spread 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 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 represent 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 |
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
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.
Introduction. Only 44 percent of
|
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,
Since independence in 1991 the country experienced many years of civil war and ethnic conflicts, with 260,000 people internally displaced.
However,
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
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 present 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
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
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 |
|
Citruss |
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 |
|
Citruss |
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
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 |
|
Citruss |
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 |
|
395,4 |
|
710,0 |
|
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 |
|
|
|
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
|
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
|
|
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
Consumption of energy, fat and albumen by
population in
|
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
|
|
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
|
|
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,
Agriculture in Georgian Export (2001)
|
Export Position |
Million |
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 |
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
|
|
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
|
|
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 |
|
3,455 |
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
Georgian Wines.
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
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
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 presented 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%) |
|
|
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 prevalent |
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 farmers 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
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 consumers nostalgia for Georgian wines, and the governments 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
represented by mineral waters. In
[19][1]Structural
geologic and hydrochemical properties of the so-called geotechtonic zones
account for the distribution of various kinds of mineral waters in
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
Besides its beautiful nature and climate, the Borjomi region is famous for its mineral waters, which represent the other major natural curative factor of this place. Instead of natural springs known since older times, gusher-boreholes are being used at present.
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
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
GG&MW mainly orients its exports towards
the
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
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
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
Mitarbi is prescribed 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
At present 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 present 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 predict 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
One
of the advantages of
Georgian Tea.
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 Gurias total agricultural land, 27 percent of Samegrelos total agricultural land, 58 percent of Ajaras total agricultural land and 6 percent of Imeretis 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
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
Tea remains an important cash crop
among rural households in most of
Table 1. Land under Tea Plantations, 2001
|
Region |
District |
Total |
Total Area under ha |
Area of Tea |
Area of Usable ha |
Percent of Plantations |
Share of the |
Area of Land |
|
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 |
|
|
TOTAL |
564,518 |
37,296 |
6,887 |
30,409 |
18% |
28% |
7 |
Source: State
Department of Statistics of
Table 2. Annual Tea Leaf Production in
(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
Table 3. Tea Leaf Production by Regions, tons
|
|
Ajara |
Imereti |
Samegrelo |
Guria |
|
|
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
(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.
|
|
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, authors 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 |
|
|
4 |
TKM |
KGZ |
TJK |
TJK |
TJK |
TKM |
|
DEU |
|
5 |
UZB |
KAZ |
UKR |
MNG |
SYR |
|
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, authors 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
|
Georgian Foreign Trade Statistics. In 2002 Georgian foreign trade turnover (registered) totalled US$1045,0 million, that is 104,6 % of previous 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$395,0 million.
|
|||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||
|
Georgian
Foreign Trade: 2001-2002 (in US$ millions) |
|||||||||||||||||||||||||||||||
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 countrys 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
1. Non-efficient and partially destroyed equipment and machinery.
2. Lack of investment in majority spheres of construction (except private construction).
3. Weak management of the sector from the governments side.
4. Lack of professional managers and specialists with knowledge of international principles.
5. Great need of specialized trainings for the staff.
6. Harsh economic condition of scientific, projecting and architecture institutions.
7. Import of foreign construction materials and workforce.
Among other important factors,
considering the importance and crucial character of the construction industry
for the countrys 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
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
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 represents a good opportunity for
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
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) |
Representation of directors |
Trade representatives (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 |
Representation of directors |
Trade representatives (procurators) |
The Law on Entrepreneurs 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. tc "2. Business
Registration Procedures" f C l 3Figure 4.1.1.1 provides an outline of the sequence of the procedures
to register and establish a business in
Figure 4.1.1.1 Business Registration Procedures
|
Legalize, translate, and notarise the founders documents |
|
Acquire office space (legal address) |
|
Produce the incorporation documents |
|
Approve, sign, and notarise the incorporation documents |
|
Notarise signature samples |
|
Open a temporary bank account |
|
Deposit equity capital |
|
Obtain certificate from the bank |
|
Pay the stamp duty for registration |
|
Submit the documents to the local court |
|
Receive the court resolution on registration |
|
Submit the documents to the local tax department |
|
Receive the tax registration certificate |
|
Statistical Department registration and stamp approval* |
|
Open a permanent bank account |
|
Inform the tax department about the permanent bank accounts |
|
START OPERATIONS |
* 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
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 entrepreneur;
Representative authorities.
(2) Charter (five copies)
(3) Minutes of the foundation meeting
(4) Founders decision to set up the company
(5) Directors 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 founders 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 auditors 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 representative office:
(1) Charter of the foreign company
(2) Decision of the foreign company to set up the representative 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 representative office.
All registration documents must be submitted in the Georgian language and must be notarized. Foreign documents must be certified by an apostille[21] 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 100400 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 entrepreneurs 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 companys 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 enterprises 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 companys 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) Directors 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
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 companys total taxable transactions over the previous 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 Entrepreneurs (effective June 1, 2001), company stamps are no longer required, and state institutions have been explicitly prohibited from requiring a company to present 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 Entrepreneurs 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 Entrepreneurs,[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
Amendments[23] 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
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)
Representation powers of director(s)
Trade representative (procurator)
Legal status
Date of registration
Remarks
As mentioned above, a company may be
registered in any one of 66 local courts throughout
General.
The law of
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:
a) Insurance activities and intermediary (agency) services in the field of insurance Insurance State Supervision Service of Georgia;
b)
Banking
activities, activities of foreign currency exchange points National Bank of
c)
Production,
repair of and trading with arms and ammunition Ministry of Justice of
d)
Air
transportation of passengers and goods or/and carrying out aviation related work
at the
e)
Activities of
the regulated participants of the securities market (brokerage companies,
brokers, stock exchanges, central securities depositary and securities
registrars) Ministry of Finance of
f)
Organizing
lotteries and other money-making games Ministry of Finance of
g) 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;
h) Activities of diagnostic centers for technical examination of motor vehicles Ministry of Internal Affairs of Georgia;
i) Design - construction works Ministry of Urbanization and Construction of Georgia (in the cases defined by the law);
j) Activities of auditing firms Parliamentary Council on Audit Activity of Georgia;
k)
Activities of
private educational institutions Ministry of Education of
l) Production and repair of metrological and measurement equipment Department of Standardization, Metrology and Certification of Georgia;
m) 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:
a)
Activities
related to precious metals, precious stones and their products Testing
Supervisory Inspection of Ministry of Finance of
b) 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;
c) Activities related to job finding services (including abroad) - Ministry of Labor, Health and Social Protection;
d) Geologic activities - State Department of Geology;
e) Transportation of passengers by a minicab Relevant Department of local government (self-government) authorities;
f) 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:
a) For an individual data about the identification card of a citizen of Georgia, registration into enterprise register, occupation, home address);
b) For a legal entity - the company's name, legal status, location (legal address), name of authorized representative;
c) 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:
For an individual:
a) First name, last name, date and place of birth
b)
Registration data
from the registry
c)
Registration
number
d)
Occupation
e)
Work and home
addresses
f)
Type of license
requested
g) Document proving the payment of license fee
For a legal entity:
a)
Company name
b)
Organizational-legal
status
c)
Legal address
d)
First and last
names of company representative
e)
Type of license
requested
f) 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:
a) Data about the holder of a license (first name, last name)
b) Home address
c) The type (types) of licensed activities
d) The number of a license and the date of issue
e) Data about suspending, resuming, revoking a license or issuing a copy of the license
For a legal entity:
a) Data about the holder of a license (the company's name)
b) The company's legal status
c) The data of the state registration
d) Location (legal address)
e) 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
f) The type (types) of licensed activities
g) The number of a license and the date of issue
f) Data about suspending, resuming, revoking a license or issuing a copy of the license
First, we will analyse the aggregate figures concerning all Joint Stock Companies (JSC) traded at Georgian Stock Exchange (GSE) and then will present the data on individual enterprises.
Market Capitalization. The figures describing the market capitalization of all Joint Stock Companies traded at GSE are presented in Table 4.1.1.1:
Table 4.1.1.1 Market 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
Fig.
4.1.1.1. Market Capitalization as % of GDP for Eastern European Countries,
including
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 previous 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:
|
Problem 6: Inadequate tax code |
|
Problem 8: Inadequate accounting standards |
|
Problem 9: Need to enforce IAS |
|
Problem 11 |
|
Problem 10 |
|
Problem 12 |
|
Problem 28 |
|
Problem 17 |
|
Problem 7: Need to simplify the tax system |
|
Problem 23 No legislation for financial intermediaries |
|
Problem 24 |
|
Problem 21 |
|
Problem |
|
Problem 18 |
|
Problem 22 |
|
Problem 30 |
|
Problem 41 |
|
Problem 42 |
|
Problem 40 |
|
Problem 37 |
|
Problem 36 |
|
Problem 38 |
|
Problem 39 |
|
Problem 25 |
|
Problem 16 |
|
Problem 29 |
|
Problem 35 |
|
Problem 26 |
|
Problem 27 |
|
Problem |
|
Problem 32 Weak court system |
|
Problem |
|
Problem 44 |
|
Problem 45: Fairness of Market is not ensured |
|
Problem 5: Low confidence (trust) amongst investors |
|
Problem 3: Even the existing market potential is unrealised |
|
Problem 1: No sound and liquid capital market in |
|
Problem 2: Low potential of capital market |
|
Problem 13 |
|
Problem 14 |
|
Problem 19: Low FDI |
|
Problem 15: Low rate of economic growth |
|
Problem 33: Inadequate auditing standards |
|
Problem 34 |
|
Problem 4: 80% of leading companies are not traded at GSE |
General recommendations for
improving the performance of GSE. The fact that at present there is no sound and liquid capital market in
(I) It
is suggested that the potential of the capital market in
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
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
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
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 present are absent in
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
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 presented 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 |
|
Conduct the 2nd round of the privatization process through GSE; Involve the Investment Funds into the privatization process. |
Privatization process is improved (Objective 13); Potential of the capital market is increased (Objective 2). |
The companies included in the privatization list of the 2nd round should be privatized through GSE; A number of (at least 3-5) Investment Funds take part into the privatization process. |
DSPM NSCG GSE |
1-2 years |
With the technical assistance of the WB. |
|
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. |
Majority of leading companies are traded at GSE (Objective 4); Potential of the capital market is increased (Objective 2). |
Majority of leading Georgian companies are listed at GSE; Simplified tax regime is introduced for the corporations traded at GSE. |
PoG MoF NSCG GSE |
1-2 years |
With the technical assistance of the WB |
|
Prepare and adopt the amendments into the Tax Code of Georgia (TCG); Conduct the tax administration reform.
|
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 |
6 months Ongoing |
With the technical assistance of the WB; In consultations with NSCG. |
|
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 |
6 months Ongoing |
With the technical assistance of the WB; In consultations with NSCG and GSIA. |
|
National Securities commission of Georgia (NSCG) requires reporting companies to prepare their financial accounts in compliance with the International Accounting Standards (IAS). |
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 prepare 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 |
3 months Ongoing |
In consultations with GSIA. |
|
National Anti-Corruption Bureau of Georgia (NACB) conducts the assessment of the activities carried out by the tax administrations. |
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 |
Ongoing |
With the technical assistance of the WB. |
|
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 |
1 year Ongoing |
With the financial and technical assistance of the USAID. |
|
Prepare and adopt the regulations for Pension Funds; Prepare and adopt the regulations for Mutual Funds. |
Legislation for financial intermediaries is adopted (Objective 23); Financial intermediaries are well-developed (Objective 21); Large domestic institutional investors are present 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 |
1 year |
With the technical assistance of the WB. |
|
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 present 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 |
1 year |
With the technical assistance of the WB. |
|
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 |
6 months 1 year |
In consultation with the IOSCO. |
|
Special training courses are conducted for the judges dealing with corporate disputes/ protection of shareholders rights. |
Georgian court system is improved (Objective 32); Shareholders rights are enforced adequately (Objective 31); Fairness of Market is ensured (Objective 45). |
Judges have sufficient knowledge of corporate/securities laws; Number of complaints against judges is reduced. |
MoJ NSCG GSIA |
6 months |
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 impressive 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 |
|
|
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 |
|
|
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 |
||
|
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 |
||
|
Valuation Limits |
True Value (GEL mln.) |
True Value/Market Cap. |
|
Low |
50.8 |
3.3 |
|
High |
68.6 |
4.4 |
Data Sheet.
The ESM Evening & Weekend MBA Program, A Curriculum 2003-2005
|
Required Concentration Courses General Management
Financial Management
Marketing Management
|
|
REQUIRED COURSES |
|
|
||||||||||||||||||||||||||||||||||||||||||
|
ELECTIVE COURSES |
|
2 Required Core Courses
9 Required Advanced Core Courses
|
|
MBA Curriculum |
|
|
MBA DIPLOMA PROJECT |
|
|
GEPA's In-Company Export Marketing Programme. |
|
|
|
Projects under implementation |
Commitment |
Develpt. Objective |
Impl. Progress. |
Approval Date |
Signing Date |
Closing Date |
|
Social Investment Fund |
25.0 |
S |
S |
|
|
|
|
Primary Health Care Dev. |
20.3 |
S |
S |
|
|
|
|
Education 1 (APL) |
25.9 |
S |
S |
|
|
|
|
Social Investment Fund 2 |
15.0 |
S |
S |
|
|
|
|
Roads Project |
40.0 |
S |
S |
|
|
|
|
Electricity Market Supp. |
27.4 |
S |
S |
|
|
|
|
Energy Transit Institution |
9.6 |
S |
S |
|
|
|
|
Municipal Development 2 |
19.4 |
S |
S |
|
|
|
|
SAC3 |
40.0 |
S |
S |
|
|
|
|
Structural Ref. Support |
16.5 |
S |
S |
|
|
|
|
Judicial Reform |
13.4 |
S |
S |
|
|
|
|
|
15.0 |
S |
S |
|
|
|
|
Agriculture Development |
15.0 |
U |
U |
|
|
|
|
Forestry Development |
15.7 |
S |
S |
|
|
|
|
Protected Areas Dev (GEF) |
8.7 |
S |
|
|
|
|
|
Integrated Coastal Mngmt |
4.4 |
S |
S |
|
|
|
|
Irrig/Drainage Dev. |
27.0 |
S |
S |
|
|
|
|
Cultural Heritage |
4.5 |
S |
S |
|
|
|
|
Integrated Coastal Mngmt (GEF) |
1.3 |
U |
|
|
|
|
|
Agriculture Research Ext (GEF) |
2.5 |
S |
S |
|
|
|
|
Agriculture Research Ext |
7.6 |
S |
S |
|
|
|
|
Total |
354.2 |
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. |
|
|
US$ 10.1 |
Closed June 1998. Fully disbursed |
|
SAC II |
US$ 60.0 |
Closed December 1998. Fully disbursed |
|
Transport |
US$ 12.0 |
Closed |
|
SATAC II |
US$ 5.0 |
Closed |
|
Municipal Infrastructure Rehabilitation |
US$ 18.0 |
Closed |
|
Power Rehabilitation |
US$ 52.3 |
Closed |
|
|
US$ 1.4 |
Closed |
|
Energy Sector Adjustment Credit (ESAC) |
US$ 25.0 |
Closed |
|
Third Structural Adjustment Credit (SACIII) |
US$ 60.0 |
Closed |
|
Total: |
US$ 383.6 |
REHABILITATION CREDIT
Implementing
Agency Temuri
Basilia, Chief Economic Advisor to the President of
(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 governments 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
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 Description 1. 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 governments 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
(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
--
second phase: regional Treasuries will be established throughout of
-- 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
(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 countrys 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 preparation of procurement an disbursement documents under this project, and to ensure that all procurement under the project follow the World Banks procurement guidelines
3. Privatization and
(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
Project Objective To support the Governments 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,
Phone: (99532) 950865
Ministry of Trade and Foreign Economic Relations
42,
Phone: (99532) 225186 / (99532) 389652
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 preparing 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.
(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,
Phone: (99532) 986385
Fax: (99532) 990461
Project Objective: The main objective is to consolidate stabilization, foster a strong and sustained growth recovery and reduce poverty.
The reform program aims at:
(a) maintaining a tight monetary program supported by an improving fiscal position;
(b) streamlining the Government sector and improving efficiency of public spending;
(c) inducing a rapid adjustment of the productive sector to new market signals.
The other objectives are;
(i) provide budgetary support to maintain the level of critical public expenditures;
(ii) provide foreign exchange for the purchase of critical imports;
(iii) 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:
accelerating privatization;
restructuring the financial sector;
fostering export growth.
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 Governments structural reform program outline in the Letter of development Policy was presented 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:
judicial reform and anti-corruption initiative;
financial sector;
energy sector reforms;
social protection
health
resource mobilization
public information
The World Bank and IMF
Partnership in
1.
The IMF has taken the lead in
assisting
2. 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
3. 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
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 Georgias physical, financial
and human resources. While the
investment needs of school buildings are substantially higher than is currently
affordable for
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
4.
The Bank has been leading the
dialogue on structural reforms through SAC 3, approved by the Banks 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 Banks Board of Executive Directors on
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.
Table A. The World Bank-IMF Collaboration on
|
Areas of shared responsibility of the World Bank and IMF
5. The Bank and the Fund have been working jointly in the following main areas (supported by the Banks SAC 3 and Structural Reform Support Credit, several investment operations and the Funds 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
Areas in which the IMF leads and its analysis serves as input into the World Bank program
Fiscal Framework. The IMFs focus on prudent fiscal policy has served as an important framework for IDAs work on public expenditure management.
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.
|
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 comprehensive, 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 |
|
Inventory of normative acts defining the competence of government agencies to avoid duplication of local government functions |
State Chancellery of |
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 |
|
Distinction of municipal property from central government and private property |
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 |
|
New road classification; new procedures for managing the road fund, including allocation of funds between road owners |
|
Macroeconomic Stability |
||||||
|
Preparation of indicative plans of development for the economy for 2004 and 2005 |
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 |
|
Initiate the process to convert a portion of government debt liabilities into long-term debt instruments |
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 |
|
Improvement of the management of international reserves of the NBG |
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 |
|
Completion of tax and customs administration reform |
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 |
|
Implementation of treasury reform, centralization of treasury service; development and introduction of commitment accounting and control system; development and introduction of expenditure control system |
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 |
|
Improve government procurement system and expand scope of its coverage |
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 |
|
|
Gradual increase of the share of targeted programs in the state budget |
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 |
|
Inventory of budgetary arrears |
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 |
|
Increase the number of participants in treasury bill market and improve bidding mechanisms to increase maturity and reduce the discount rate through market |
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 |
|
Develop legislation promoting the activities of investment funds in order to introduce best corporate management practice in enterprises and develop stock market |
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 |
|
|
Prepare and adopt bill on Personification and Registration of Insurance Contributions to Social Insurance System required for regularizing first (distributive) pillar of pension system and development of pensioners personified registration system |
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 |
|
|
For private pension funds, adopt statutory normative acts in accordance with the laws on Non-Government Pension Funds and on Securities Market |
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 |
|
|
Prepare amendments to the Tax Code and investment rules of pension assets to promote the development of non-banking financial sector, including nongovernmental voluntary insurance system |
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 |
||||||
|
Assess magnitude and share smuggled goods and those manufactured in informal sector of the economy by various commodity groups |
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 |
|
Develop proposals to encourage investment |
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 |
|
Implement export promotion measures |
Ministry of Economy, Industry and Trade; Ministry of Finance |
Support for removal of institutional (governance) obstacles
to fulfilling |
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 |
||||||
|
Revise government commitments in healthcare sector to ensure full financing |
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 |
||||||
|
Develop programs for basic 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 |
||||||
|
Definition of nature and periodicity of government commitments in the social sector to ensure full financing |
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 |
|
|
Enforce package of draft bills on compulsory social insurance |
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 |
|
|
Phased increase of pensions |
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 |
|
|
Fiscal sustainability of pension system based on compulsory social insurance |
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 |
||||||
|
Reorganize electricity wholesale market to resume the functions of financial and technical operator |
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 |
|
Amend tariff policy in line with model of wholesale market and consider liberalization of prices |
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 |
|
Approve strategy to manage energy sector debts |
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 |
|
Transfer energy sector companies, including National Distribution Company, under management contract in accordance with existing strategy |
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 |
|
Improve transport regulatory administration |
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 premises 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 |
|
|
Improve implementation of road construction plan, identify strategic projects and sources of financing |
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, |
Performance indicators to be developed in Secondary Roads project |
|
Form information network covering the entire country |
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 |
||||||
|
Prepare special program to attract additional funding from international donor organizations to develop 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 preservation |
Community-based tourism |
Realistic development strategy for community-based tourism, including reduced administrative barriers and more focus on preservation |
|
|
Agriculture and Food |
||||||
|
Establish water consumer associations in rural areas |
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 |
|
Develop unified geographic computer system of land cadastre and registration |
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 |
|
Establish private veterinary services |
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 |
|
Structural reorganization of plants protection services |
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 |
|
SECTOR |
LEAD NATIONAL AGENCY |
PARTNERS |
|
Agriculture |
Ministry of Agriculture and Food |
IFAD, FAO, DFID, UNDP, KFW |
|
Culture |
Ministry of Culture |
EU |
|
Education |
Ministry of Education |
SOROS |
|
Energy |
Ministry of Fuel and Energy |
USAID, KFW, EBRD |
|
Financial Sector |
Ministry of Finance and Tax Revenues
|
IMF |
|
Forestry |
State Department of Forestry |
FAO, WWF, CIDA |
|
Governance |
State Chancellery, Anti-corruption Policy Coordination Council |
|
|
Health |
Ministry of Labor, Health and Social Affairs |
SIDA, DFID, WHO |
|
Judicial |
Ministry of Justice |
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 |
|
|
Social Infrastructure |
Georgian Social Investment Fund (GSIF) |
KFW |
|
Transport and Communications |
Ministry of Transport,
Telecommunications and Post |
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 prevention.
EBRD
main objective in
EUs 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, 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.
Bilateral assistance also comes from
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
The
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 in
UNICEF
priorities in
[1] Presidential Decree 678 calls for elaboration of a new law on privatization of agricultural land and completion of the national land cadastre by the year 2005. Apparently a draft of such a law is already circulated in the Parliament.
[2] Amended September 3, 1997; September 18, 1997; December 12, 1997; February 5, 1998; May 1, 1998; May 13, 1998; May 29, 1998; June 26, 1998; October 13, 1998; October 30, 1998; December 24, 1998; April 2, 1999; April 16, 1999; June 8, 1999; June 9, 1999; June 25, 1999; July 23, 1999; September 9, 1999; December 9, 1999; December 24, 1999; December 28, 1999; March 24, 2000; June 28, 2000; July 13, 2000; September 27, 2000; September 28, 2000; October 11, 2000; October 13, 2000; November 10, 2000; November 24, 2000; December 5, 2000; December 13, 2000; December 29, 2000; March 16, 2001; April 27, 2001; June 8, 2001.
[3] Resident physical persons: who received income that was not taxed
at the source of payment in
[4] In hindsight, the VAT threshold should have been much higher when the VAT was adopted.
[5] For example, it would help screen shell companies created for the very purpose to evade tax payments.
[6] FIAS, Georgia: Study of administrative barriers to investment, December 2001.
[7] This also applies to foreign investors, as numerous
critical articles on taxation in
[8] O: Observed.
[9] LO: Largely Observed.
[10] MNO: Materially Non-Observed.
[11] NO: Non-Observed.
[12] NA: Not Applicable.
[13] Although a draft law on Investment Funds has been prepared with assistance from USAID (IOSCO, 2001)
[14] C: Compliant.
[15] PC: Partially Compliant.
[16] MNC: Materially Non-Compliant.
[17] NC: Non-Compliant.
[18] NA: Not Applicable.
[21] Because Georgia is a member of the 1961 Hague Convention, on the abolition of legalization requirements of documents issued in foreign countries, only documents originating from countries not signatories to the Hague Convention require legalization by the consular offices.
[22] Article 4.3
[23] No. 2132-11s
TBILISI, GEORGIA Private Sector and Human-resource Development in Georgia Author: Lasha Martashvili E-mail: lmg@bk.ru (18.02.2004) TABLE OF CONTENTS TOC o "1-3" h z u 1. Government Policies. PAGERE
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