Private sector and human-resource development in Georgia
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Private Sector and Human-resource Development in Georgia
Author: Lasha Martashvili
TABLE OF CONTENTS
- 1. Government Policies 5
- 1.1 Government promotion policies of small and medium size enterprises 5
- 1.2 National Investment Agency of Georgia 5
- 1.3 Georgian Investment Center 5
- 1.2.1 Government's Export Promotion Policy 6
- 1.2.2 Georgian Export Promotion Agency (GEPA) 9
- 1.4 Foreign Investment Promotion 14
- 1.3.1 Government's Foreign Investment Promotion Policy 14
- 1.3.2 Foreign Investment Advisory Council (FIAC) 21
- 1.5 Tax Regime 23
- 1.3.3 Taxation System and Tax Rates in Georgia 23
- 1.3.4 Existing Taxation Practices 34
- 1.3.5 Tax Reform Areas 38
- 1.6 Legislative Basis for the Operation of the Private Companies 44
- 1.5.1 Law of Georgia on Entrepreneurs (LoE) (Corporate Law) 44
- 1.5.2 Law of Georgia on Securities Market (SML) 51
- 1.5.3 Employment Regulations in Georgia 57
- 1.5.4 Regulations about Real Estate in Georgia 59
- 1.7 The Business Environment in Georgia 61
- 1.8 Institutional Arrangements 64
- 1.3.1 Securities Industry 64
- 2. Society 65
- 2.1 Poverty issues 65
- 3. Economics 70
- 3.1 Main economic indicators 70
- 3.2 Agriculture 77
- 3.3 Trade 104
- 3.4 Construction 106
- 4. Business 110
- 4.1 Company Registration and Licensing System 110
- 4.1.1 Company Registration System 110
- 4.1.2 Company Licensing System 117
- 4.2 Local Enterprises 119
- 4.1.3 Joint Stock Companies traded at Georgian Stock Exchange 120
- 4.1.4 Joint Stock Companies not traded at Georgian Stock Exchange 132
- 4.3 Human-Resource Development in the Private Sector 134
- 5. Other Donors' Activities 138
- 5.1 The World Bank and IMF 138
- 5.1.1 List of the Active World Bank Projects in Georgia 138
- S - Satisfactory 138
- U - Unsatisfactory 138
- 5.1.2 List of the Closed World Bank Projects in Georgia 139
- 5.1.3 Description of the Closed World Bank Projects in Georgia 140
- 5.1.4 The World Bank and IMF Cooperation in Georgia 149
- 5.1.5 The World Bank Country Assistance Strategy for Georgia 154
- 5.1.6 The World Bank Partners in Georgia 161
- 5.2 USAID 162
- 5.3 EBRD 162
- 5.4 EU 162
- 5.5 GTZ 163
- 5.6 CIDA 163
- 5.7 DFID 163
- 5.8 The Government of the Netherlands 163
- 5.9 IFAD 164
- 5.10 UNDP 164
- 5.11 UNICEF 164
(Exchange rate as of 01 Feb. 2004)
Currency Unit = Georgian Lari (GEL)
1 USD = 2.11 GEL
1.0 GEL = 0.47 USD
Abbreviations and Acronyms
Country Assistance Strategy of the World Bank
Country Financial Accountability Assessment
Commonwealth of Independent States
Country Policy and Institutional Assessment
Department for International Development, U.K.
European Bank for Reconstruction & Development
Economic Dev't & Poverty Reduction Program
Food and Agriculture Organization
Foreign Direct Investment
Foreign Investment Advisory Service
Financial Sector Assessment Program
Former Soviet Union
Gross Domestic Product
Gross National Product
Government of Georgia
Georgian Stock Exchange
German Technical Cooperation
International Development Association
Institutional Development Fund
Internally Displaced Persons
International Finance Corporation
International Monetary Fund
The International Organization of Securities Commissions
Joint Stock Company
German Financial Cooperation
Limited Liability Company
Millennium Development Goals
Ministry of Finance
National Bank of Georgia
National Bank of Georgia
Organization For Economic Coop'n & Development
Public Expenditure Review
Purchasing Power Parity
Poverty Reduction and Growth Facility
Poverty Reduction Strategy Paper
Structural Adjustment Credit
Structural Adjustment Technical Assistance Credit
Security and Exchange Commission
Swedish International Development Agency
Social Investment Fund
Small and Medium Enterprises
Structural Reform Support Project
Technical Assistance to the CIS (EU)
United Nations Development Program
United Nations High Commissioner for Refugees
United States Agency for International Development
Value Added Tax
World Trade Organization
1. Government Policies
1.1 Government promotion policies of small and medium size enterprises
[To be described:] "Small and Medium Enterprise State Support Program for 2002 - 2004 in Georgia"
[To be described:] Law of Georgia "On Promotion of Small and Medium Enterprises"
1.2 National Investment Agency of Georgia
[To be described:] Law of Georgia "On National Investment Agency of Georgia"
[To be described:] Activities of the National Investment Agency of Georgia
1.3 Georgian Investment Center
[To be described:] Activities of the Georgian Investment Centre1.2.1 Government's Export Promotion Policy
Foreign Trade Regimes. Reforms carried out in recent years in Georgia, including serious legal reforms, are working successfully to create a favourable foreign trade regime in the country. Since 1995 the following major reforms have taken place in Georgian legislation:
· The system of quotas has been eliminated.
· Products included in the nation's export embargo policy include only works of art and antiques and items of national historical importance.
· There is no customs duty for exports in Georgia.
· A fiscal policy aimed at stimulating exports has been introduced whereby all export goods are free of VAT and excise duty;
Export of goods requiring an export license have been reduced to the following classes:
Collections and collectors' pieces of zoological, botanical, mineral, anatomical, historical, archaeological, paleonthological, ethnographic or numismatic interest (HS - 9705);
Wood and timber (4401, 4403, 4404, 4406, 4407);
Seeds of Caucasus Pine (120999100);
Ferrous and non-ferrous metal scrap (7204, 7404, 7602).
The system of compulsory registration of foreign trade contracts was eliminated in November 1997.
The establishment of favourable trade regimes with partner countries through bilateral and multilateral agreements has commenced. During the period 1992 - 1998, Georgia signed trade agreements with 22 countries. Agreements on free trade have been signed with eight CIS countries and Georgia already has working free trade agreements with Russia, Ukraine, Azerbaijan, Armenia, Kazakhstan and Turkmenistan. Currently a multilateral agreement on CIS free trade zone is being enforced. According to these agreements signatories to the agreement need not use customs duties and taxes for exports or imports of the goods originated in the territory of one party and destined to the territory of the other party.
Furthermore, Georgia has become a part of several international conventions.
On October 6, 1999 Georgia became a member of the World Trade Organization (WTO) which granted Georgia the status of the Most Favoured Nation with 135 WTO member countries. Through the mechanisms of this organisation, Georgia will be protected from discrimination, unfair competition, falsification and unjustified limitations.
In 1996 Georgia signed an agreement on partnership and cooperation with the European Union which deals with economic relations in almost every sector. In fact the agreement covers all sectors of the economy.
In 1999 Georgia became a member of the Council of Europe with full rights, which will further facilitate trade-economic relations between Georgia and member countries of the European Union.
Many countries have granted to Georgia reductions in import customs taxes to their countries, under the General System of Preferences. These include the countries of the European Union, Switzerland, the Czech Republic, Slovakia, Canada and Japan. This is one of the most important influences on the successful growth of exports for Georgia. The effective use of facilities such as GSP will substantially promote Georgian export development.
Law of Georgia "On Technical Barriers to Trade". The law "On Technical Barriers to Trade" lays down the basis for eliminating the technical barriers to trade during the process of the preparation, adoption and application of the technical regulations, standards and the procedures for the assessment of conformity.
The national technical regulations and standards should not create unnecessary obstacles to trade, which will put national products in favourable conditions. Therefore, the development of the national technical regulations and standards should be carried out on the basis of a direct use of the international standards.
Georgian legislation did not envisage the concept of technical regulations. The concept of technical regulations was defined by Law of Georgia "On Standardization" adopted in 1999. The technical regulations is a legal act, which defines the technical specifications for products or service, which is done directly or by means of referring to Georgian standards and requiring that complying with these standards is compulsory.
The principles of the state standards that are effective in Georgia envisage the application of the national standards on a compulsory basis from the moments of its effectiveness. However, based on the principles that define the standards as voluntary, the international practice envisages two-stage approach to making a standard as mandatory requirement: the standard that was adopted by national body is optional and it may be used by any party, however it will become mandatory, if it is defined by:
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 Georgia, includes laying down the mandatory product requirements.
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.