Mineral
Waters in Japan
|
1.
|
Market Overview
|
1.1
|
Supply Trend
|
1.2
|
Import Trend
|
2.
|
Import System and Regulations
|
2.1
|
Imports Regulated by Food Sanitation Law
|
2.2
|
Tariff rates
|
2.3
|
Classification of Mineral Water
|
2.4
|
Labelling requirement and a labelling sample
|
2.5
|
Outline of Container/Packing Recycling Law
|
2.6
|
International Standards for Mineral Waters
|
3.
|
Distribution
|
3.1
|
Distribution Routes
|
3.2
|
The Function of Wholesalers
|
3.3
|
Distribution Expenses
|
3.4
|
Sales Promotions
|
4.
|
Consumption trends as shown by survey of retailers and consumers
|
4.1
|
Consumption trends seen in retailers
|
4.2
|
Trends revealed by consumer research
|
5.
|
Current Sales and consumption and future prospects
|
5.1
|
Current sales and consumption
|
5.2
|
Future prospects
|
6.
|
Advise on Accessing the Japanese Market
|
Appendix
|
1
|
Outline of provisions on mineral water provided for under the
Foods Sanitation Law
|
2
|
Example Retail Price of Mineral Water
|
3
|
Selected domestic Suppliers and Importers
|
4
|
Wholesalers, Distribution Agents
|
5
|
Relevant Organization
|
6
|
Exhibitions and Trade Fair
|
Removing
Administrative Barriers to Investment in Georgia. FIAS (Foreign Investment Advisory Service, a joint service of the
International Finance Corporation (IFC) and the World Bank) conducted a study
of administrative barriers to investment in Georgia. The principal counterpart
for this project was the Presidential Commission on Support of the Private
Businesses in Georgia. The Presidential Commission on Support of Private
Businesses is the lead counterpart for this project (for more details refer to
Paragraph 1.3.1 describing the activities of Foreign Investment Advisory Council - FIAC). The main objective
of this study was to identify the major administrative impediments to investment and to recommend the steps
for streamlining, simplifying and increasing transparency in order to help
improve the environment for business in Georgia. Although the primary focus of
the study was foreign investment, the administrative procedures and regulatory
framework affect domestic investors as well. Therefore, applying the principle
of national treatment (i.e. no preferential treatment for foreign investors),
this study is intended to help strengthen the business environment for all
investors—domestic and foreign alike.
The
study covers the core administrative processes for:
·
Establishing a business - including investor entry (visa and residency
requirements for expatriates) and business registration.
·
Locating a business - including land acquisition, site development,
construction and operation.
·
Operating a business - including taxation, trade regime and customs,
licensing, permits, inspections, intellectual property issues, and product
standardization.
Establishing
a Business—Investor Entry and Business Registration. The procedures for obtaining entry
visas are relatively transparent and 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 Georgia.
The
court registration procedures have been simplified in the past 2 years.
However, because of the lack of technical and human capacity, court registrars
are unable to fulfill the provisions of the Law on 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 Georgia. The
current system may not pose an overwhelming difficulty for investors because of
the low volume of transactions and the institutionalized system of unofficial
payments and influence peddling to facilitate the process. However, there are a
number of specific areas where regulations, requirements, and procedures need
to be clarified, simplified and streamlined. The report includes a number of
detailed short and long-term
recommendations for strengthening the laws related to the privatization of
agricultural land and improving the quality of service provided by the various
bureaus responsible for processing the permits necessary for property
development and construction in Georgia.
One of the principal recommendations relates
to the Law On Privatization of Agricultural Land. The set of laws on
privatization of real estate exclude a legal basis for privatization of large
agricultural holdings, all of which are presently held under government leases.
To the extent that investment in commercial scale agriculture is viewed as
having significant potential in Georgia, privatization of larger agricultural
holdings is an appropriate next step. A law on privatization of large
agricultural holdings is being developed and is an element of the government’s
longer-term plan for further development of property relationships.[1] Enactment of this law should be a priority.
Operating a Business - Tax Administration. On the basis of interviews with
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 Georgia,
particularly compared with other former Soviet Union countries. However, some
of the sectoral licensing laws and regulations do not conform to the provisions
of the framework Law on Licensing.
The Law on Local Charges and related normative
acts (including municipal regulations) are not entirely clear in defining the
purpose and scope of permits. The criteria and conditions for authorizing and
terminating permits (similar to licensing conditions) are not clearly specified
in the laws and regulations. In effect, the enforcement of the permit system is
arbitrary and subject to abuse of the compliance provisions and the assessment
of violations. While this permit regime does not generally impede business in
Georgia, it does create unequal conditions for newcomers and arbitrary
enforcement can cause significant problems for individual companies.
The main recommendations for strengthening the framework for the
system of licensing and permits and facilitating the streamlining and
simplification of the current system in Georgia include:
·
Passage and
adoption of a strong and clear framework law and implementing regulations on
the licensing and permit regimes.
·
Review and
rationalization of the number and level of legally permissible permits to avoid
the proliferation of permits for revenue generation.
·
Development
of a basic set of guidelines on the procedures for processing and enforcing
permits (similar to those in place for licenses).
·
Development
of a monitoring mechanism within the Ministry of Justice that will ensure
consistent enforcement of provisions for permits.
·
Publication
and dissemination of information on the legally sanctioned licenses and permits
(e.g., regulations, procedures, documentation requirements, fees and appeals
mechanisms).
Operating a Business - Inspections. The passage of the Law on Supervising
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 Georgia that the existing environment for investment needs to
improve if the country wishes to attract new FDI flows and secure the expansion
of existing investments. This report has focused on the principal
administrative barriers that increase the cost and risk of doing business in
Georgia.
Pervasive corruption and the apparent lack of
political will to implement reforms have emerged as two fundamental issues
affecting the business environment in Georgia. While the degree of corruption
may not be the worst in the region, it has a negative effect on business
activity and increases the risks and costs of doing business in Georgia. The
process of streamlining and simplifying administrative procedures must go
hand-in-hand with anti-corruption programs. In a similar vein, it should be noted
that number of reforms (e.g. Customs reform) have been stalled as a result of
resistance to change and the apparent lack of political will effect change.
In addition to making recommendations for
solving some of the regulatory, administrative, and institutional issues that
need to be addressed in order to improve the business environment in Georgia,
the report points out the areas where further review is necessary and where
significant technical assistance is already being channeled, albeit with limited
impact.
The experience of other countries clearly
demonstrates that sustainable change cannot be achieved without government
commitment at the highest political levels. Successful and sustained change
requires leadership, strong champions, and shared goals among all stakeholders
within the government and the private sector. On the basis of shared goals,
the process of rationalizing, streamlining, and simplifying bureaucratic
procedures can develop, gain momentum, and improve the values of government agencies
and transform them into service-oriented organizations. A 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 commission’s secretariat should constitute the core group of the
implementation team. The responsibilities of the team would include the
development of the Action Plan, coordination of implementation activities,
solicitation of donor funds and resources to support reform, coordination of
related initiatives, and regular reporting on progress to the Commission.
·
A consultative committee. The
committee should provide a mechanism for regular consultation with a broad group
of stakeholders on various reform initiatives.
The above - mentioned Action Plan
should be utilized to document the agreed-upon changes, establish priorities
and timeline, provide a basis for accountability, and keep an ongoing record of
progress. Therefore, it must be emphasized that the Action Plan is not a static
document but one that must evolve over time.
Law
of Georgia "On Investment Activity Promotion and Guarantees". On 12 November 1996 the
Parliament of Georgia adopted the law of Georgia "On Investment
Activity Promotion and Guarantees", which replaced the Law of the
Republic of Georgia "On Investment Activity" adopted on 10 August
1991 and the Law of the Republic of Georgia "On Foreign Investments"
adopted on 30 June 1995.
The
Law defines the legal bases for realizing both foreign and local investments
and their protection guarantees on the territory of Georgia. The purpose of the
Law is to establish the investment-promotional regime in Georgia.
Investments. Investments shall be deemed to
be all types of property and intellectual valuables or rights
invested and applied for gaining possible profit in the investment activity
carried out in the territory of Georgia, such as:
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 Georgia. A foreign investor shall be deemed to
be:
a)
A foreign
citizen;
b)
A stateless
person temporarily residing on the territory of Georgia;
c)
A Georgian
citizen permanently residing abroad;
d)
A legal
person registered beyond Georgia.
An enterprise with a foreign investment of
not less than 25% shall enjoy the same rights as the foreign investor.
In
order to assist foreign investment inflow into Georgia, improve investment
climate in the country and support private sector development, it became
necessary to create a special government agency, which would serve the
above-mentioned goals. Therefore, on March 30, 1997, according to the
presidential decree N87, Foreign Investment Advisory Council (FIAC) was created
under the supervision of the President of Georgia, intended to assist the
development of the private sector and improve the investment environment in the
country, to coordinate donors and donor financed projects, to monitor these
projects and to ensure a transparency and accounting of foreign aid inflow into
Georgia.
The Investment Council operates through its secretariat, which is responsible
for the fulfilment of the responsibilities assigned to the Foreign Investment
Advisory Council. The Secretariat of the Investment Council works in three
directions:
Prepares
the Council's meetings;
Cooperates
with the donors and coordinates the donor financed projects;
Assists
the private sector.
Preparation of the council's meetings. The secretariat of the
council plans, 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 Georgia.
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 Georgia was
formed in the year 2000. By means of close cooperation of the Commission and
FIAS, it became possible to study all administrative barriers to investment
(see above). As a result, the problems impeding the development of business in
Georgia were identified. On the basis of the results of this study, the
recommendations were drafted and action plan was compiled, which was approved
by the president of Georgia. The commission of cooperation with investors
conducts permanent monitoring of fulfilment of the action plan, appraises its
fulfilment and prepares relevant recommendations. The Secretariat of Foreign
Investment Advisory Council actively cooperates with other donor organizations
in terms of the private sector development projects.
Legal
Framework. The Tax Code of Georgia, adopted on
June 13, 1997,[2] is the principal law on taxation
policy and administration. Other legislation that regulate taxation include the
Administrative Offences Code, the Criminal Code, bankruptcy legislation,
customs legislation, the Law on the Road Fund of Georgia, and the Law on the
Medical Insurance Fund of Georgia.
The
taxation system in Georgia includes both national and local taxes; the latter
are set by local authorities following guidelines and limits set forth in the
Tax Code. Every taxpayer must register with their regional tax inspectorate and
is given a tax identification number, which must be indicated on all tax
documents.
Taxes
Paid by Individuals, Individual Enterprises.
Income
Tax. Income
tax must be paid on wages and income earned from economic activity, including
income received in non-monetary form. Physical persons, both resident and
non-resident, individual enterprises, and entrepreneurs are subject to this
tax. Under Georgian law, residents are physical persons in the territory of
Georgia for more than 182 days during any 12-month period ending in a given tax
year.
An
individual enterprise is defined as an entity owned and managed by a single
person, an enterprise run solely by family members, or a farm solely owned by
an individual or members of that individual’s family. Physical person
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 Georgia.
In
addition to monetary wages, benefits are considered wage income and are taxable
as part of gross income. Generally, benefits are included in income at the
market price at the moment of receipt, reduced by any portion of the benefit
paid by the employee. These include: use of an automobile for private service;
gifts of goods or gratuitous performance of services; educational assistance to
the employee or dependents; and employee expenses reimbursed by the employer.
Table
1.4.1.1 shows income tax rates. Income tax on dividends, interest payments,
and payments to non-residents are withheld at the source of payment and are
subject to different rates. Dividends and interest payments are taxed at the
rate of 10 percent. Dividends and interest payments received by physical
persons, taxed at the source of payment, are not subject to additional
taxation. Further, taxes paid on the first 3,000 GEL of combined interest and
dividends may be applied to reduce the taxpayer’s tax liability, assuming
adequate documentation of the tax payment is provided.
Table 1.4.1.1: Income Tax
Rates
Amount of taxable income
during the tax year
|
Tax rate
|
Up to 200 GEL
|
12% of the taxable income
|
201 to 350 GEL
|
24 GEL + 15% of the
amount in excess of 200 GEL
|
351 to 600 GEL
|
46.5 GEL + 17% of the amount in excess of 350 GEL
|
More than 600 GEL
|
89 GEL + 20% of the amount in excess of 600 GEL
|
Source:
Tax Code.
Tax
agents who withhold tax at the source of payment are required to:
·
Transfer the tax to the
budget when making payments to physical persons;
·
When paying wages,
issue to the physical person receiving the income (at his or her request) a
statement with the person’s name, amount and type of income paid, and amount of
tax withheld; and
·
Within 30 days of the
end of the tax year, present to the tax agencies and, if requested, to the
person paid, a statement containing the person’s registration number, total
income, and total amount of tax withheld during the year.
Physical
person 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 taxpayer’s actual liability.
Payments may be reduced if income in the current year is expected to be at
least 30 percent less than income in the 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.
Profit
Tax. Profit
taxes must be paid by Georgian entities and foreign entities with permanent
establishments in Georgia. Foreign entities that do not have permanent
establishment presence in Georgia are taxed via a withholding tax at the source
of payment, as stated above. Enterprises are defined as:
·
Legal persons
established according to the legislation of Georgia
·
Corporations,
companies, firms, and other entities established pursuant to the legislation of
foreign states
·
Branches and other
separate units that are structural units of the entities indicated in the first
bullet and that have their own balance sheet and a separate settlement or other
account.
Georgian
and foreign enterprises are distinguished by place of activity and management.
A Georgian enterprise has its place of activity or management within the
territory of Georgia, whereas a foreign enterprise has its place of activity or
management outside the territory of Georgia. If there is more than one place of
management or activity, or the place of management and activity do not
coincide, then the predominant location should be used to determine the place
of activity or management.
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
payments—10 percent
·
Insurance proceeds—4
percent
·
Telecommunication and
transportation services, shipments, and oil and gas transactions—4 percent
·
Royalties, management
fees, income from performing work or rendering services (except income earned
as wages), income from leasing movable property, income from management,
financial, and insurance services—10 percent
·
Certain oil and gas
profits—10 percent.
Foreign enterprises
receiving profits from the sale of some stocks, assets, and property not
connected to their permanent establishment must pay profit tax, with allowable
deductions, on the income from these sales. Annex D provides a listing of
profit tax exemptions as well as allowable deductions from gross income.
Table 1.4.1.2 summarizes the
asset categories into which fixed assets subject to 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 Georgia, as long as the credit does
not exceed the amount of tax charged in Georgia.
A taxpayer may record income
and expenses under either the cash basis method or accrual basis method of
accounting, but must use the same method for both accounting and tax purposes,
and must use the same method throughout the tax year. A physical person must
keep records using the accrual basis method for income from 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 year’s tax liability
·
Before August 15th: 30
percent of the previous year’s tax liability
·
Before November 15th:
40 percent of the previous year’s 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 Georgia must submit an income tax return to
the tax agency within 30 days of ceasing activities. Legal persons who decide
to liquidate must immediately notify the tax service in writing of their plans
to liquidate and must file a profit tax return within 15 days of the decision
to liquidate.
Value
Added Tax.
Value added tax (VAT) is collected at every stage of production and
distribution. Persons or enterprises with annual taxable turnover less than
24,000 GEL per year are not required to register with the tax authority and pay
VAT, although they may.
An enterprise charges VAT on
its sales and pays VAT to the suppliers of materials and providers of services
it receives. The enterprise then accounts to the tax department for the
difference between the tax that it charged on its sales and the tax that it
paid on the goods and services supplied to it. This difference usually results
in a net payment to the budget, but in some circumstances it can result in a
credit to the enterprise.
An enterprise registered for
VAT that carries out a taxable transaction is required to 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 Georgia is
20 percent. A zero percent rate applies to exports and the categories of goods
and services identified below. Annex D provides a list of VAT exemptions.
Exemption means that
producers or suppliers of exempt goods and services do not charge VAT on their
output, but cannot claim a credit on the VAT paid on inputs used to produce the
exempt output.
Social
Taxes. Social
taxes include both social and employment taxes and are imposed on monetary and
non-monetary wages and other forms of compensation paid to employees, as well
as on income earned by physical person 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 Georgia.
|
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
Georgia or who make payments to physical person who render services in Georgia
·
Physical persons
receiving remuneration from employment or the performance of services
·
Physical person
entrepreneurs who conduct entrepreneurial activity in Georgia
·
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 employer’s 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 Georgia or imported into Georgia. Unless
exempted, all physical and legal persons who produce excisable goods on the
territory of Georgia or who import excisable goods must pay excise taxes.
Exports of excisable goods are taxed at a zero rate.
Several
products are exempt from excise taxes, including:
·
Alcoholic beverages
produced by a physical person for personal consumption
·
The import of 2 litres
of alcoholic beverages and 200 cigarettes by a physical person for personal
consumption
·
The transit and
temporary import of excisable goods into the customs territory of Georgia
·
The re-export of
excisable goods
·
The import of
automobiles and tires for humanitarian aid during a natural disaster
·
Aviation fuel to be
supplied on board for international flights
·
Import or supply of oil
products necessary to carry out oil and gas transactions (specified by the oil
and gas law of Georgia).
Excise taxes must be paid up
to the 10th of the next month after carrying out the taxable transaction. The
taxable transaction for products produced in Georgia is considered to occur at
the earlier of 90 days from the delivery (transfer) of goods or the moment of
payment. In the case of imports, the taxable transaction is considered to occur
at the time the goods are imported, and the excise tax is collected by customs
agencies. For excisable products subject to excise stamping, the taxable
transaction is considered to occur at the time the goods are delivered, and the
total amount of excise must be paid upon purchasing the stamps. Excise stamps
are required for most imported and domestically produced alcohol products and
tobacco products, except for pipe tobacco.
For goods produced on the
territory of Georgia, the amount of the taxable transaction is the payment
received or to be received by the taxpayer from the customer, excluding the
amount of the excise tax and VAT. This amount cannot be less than the wholesale
market price excluding the excise tax and VAT. For goods sold at the retail
level, the amount of the taxable transaction is the market price of the goods
at the wholesale level not including the amount of the excise tax and VAT. For
alcohol products, the amount of the taxable transaction is based on the volume
of alcoholic beverages. For imported goods, the amount of the taxable
transaction is the customs value of the goods determined in accordance with the
customs legislation of Georgia (but not less than the wholesale market price,
excluding the excise tax and VAT) plus the amount of duties and taxes payable
on the import of the goods (except for the excise tax and VAT).
Property
Taxes.
Georgian enterprises, branch offices, and other similar subsidiary enterprises
that have an independent balance sheet and settlement account, foreign
enterprises operating through a permanent establishment, and organizations
whose property or part of property is used for economic activity must pay
property tax.
Property subject to this tax
includes fixed assets, installed equipment, uncompleted capital investment,
intangible assets that are listed on the balance sheet of an enterprise, as
well as such property listed on the balance sheet of an organization and used
for economic activity. For foreign enterprises, only property connected with
the permanent establishment of the enterprise is subject to property tax.
The property tax rate is 1
percent of the value of the property. The tax is due in four equal payments,
before February 15th, May 15th, August 15th, and November 15th.
Tax on the Use of
Land. Physical and
legal persons who are owners or users of land plots, including land used for
agricultural and non-agricultural purposes, are subject to tax on the use of
land.
The base rate of the tax for
the use of nonagricultural land is 0.24 GEL per square meter of land. This tax
is due in equal parts before August 15th and before November 15th of the
reporting year.
The base rates for
agricultural land are set on a per hectare basis and vary depending on location
and use. This tax is due on or before November 1st of the reporting year.
Tax
on Economic Activity.
This local tax is paid by all physical and legal persons engaged in any
economic activity on the territory of a corresponding city (region).
This tax rate is set by
local governments, but cannot exceed 1 percent of income (less material
expenditures and VAT). For port services (loading and unloading ships) the
maximum rate is 2 percent of income (less VAT).
Other Taxes.
Tax on the
Transfer of Property.
This tax is imposed on the transfer of real estate located in Georgia,
inheritances and gifts, and the transfer of motor vehicles. The transferee is
subject to the tax. Transfers of title, as well as certain leases of real
estate are taxable.
The taxable amount is the
amount of compensation transferred (but not less than the market price),
including assumed indebtedness. In the case of a lease or tenancy, the taxable
amount is determined by discounting the amount payable under the lease or
tenancy agreement.
The tax rate on the transfer
of real estate is 2 percent of the taxable amount. The tax is due prior to the
registration of the documents transferring the property. If the property is not
registered, the tax is due at the time the property is transferred.
For property received as
inheritance, the tax is due no later than 6 months from the receipt of
documents transferring title. For property received as gifts, the tax is due
within 1 month of the transfer.
Tax on the Use of
Natural Resources.
Physical and legal persons engaged in any activity that requires a license for
the use of natural resources (with the exception of land) owned by the state
must pay this tax. The tax is imposed on the volume of natural resources
extracted.
The tax rates vary by
natural resource. For minerals, the rate is between 1 and 15 percent (of the
price of the mineral resources extracted), timber 2–34 percent, water 3–10
percent, animals 2–55 percent.
The tax for the use of natural
resources is due before the 15th of the month following the reporting month.
However, the tax for timber and flora resources should be paid at the time of
their transportation from the forest; the tax for water resources should be
paid before December 1st of the relevant year; and the tax on hunting birds in
migration should be paid on receipt of the license.
The tax on natural resources
must be paid within 3 months after receiving the license for using the natural
resources.
Exempt from this tax are the
mineral resources gained in the course of underground construction. In
addition, the tax rate is reduced by 70 percent for use of natural resources in
connection with scientific and cultural activities and for users of natural
resources that have carried out restoration or replacement of natural resources
from their own funds, within the limits of the volume of restored resources.
Environmental
Taxes. This tax
must be paid by physical and legal persons engaged in any activity listed in
categories 1–4 of the Law of Georgia on Environmental Permits (October 15,
1996), who pollute the environment from fixed sources or who import or produce
gasoline, diesel fuel, kerosene, natural gas (except as used as a raw material
for production of goods), or liquid gas.
Tax rates are based on the
pollutant emitted, whether it is emitted into the atmosphere or water (either
directly or through sewers and storm drains), and geographic region. For other
items the tax is based on the amount imported or produced. Imported goods that
are later exported are exempt from this tax.
Tax rates apply to
pollutants emitted within limits set by environmental laws. Pollutants emitted
in excess of established limits are subject to a fine equal to five times the
tax rate for pollution within the limit (see the section on fines and penalties
below).
Taxpayers who pollute the
environment from fixed sources must submit a tax return certified by the
Ministry of Environment and Natural Resource Protection to the tax agency and
pay the tax by the 15th of the month following the reporting quarter. Taxpayers
who produce or supply gasoline, diesel, kerosene, natural gas, or liquid gas
must submit a tax return by the 15th day of the month following the reporting
month.
Taxpayers who import any products
subject to the pollution tax must pay the tax before the customs agency clears
the products. Customs may clear the products only after the tax agency issues a
receipt indicating that the tax has been paid.
Background. Georgia was one of the first CIS
countries to codify its tax legislation in a comprehensive Code. However, since
its adoption in 1997, there have been numerous amendments, which have
considerably reduced the consistency of the Code. Some of the mayor changes in
recent amendments include: i) changes in the tax rates for tobacco
products and the tax rates of the motor vehicles ownership tax;
ii) repealing provisions in the Code allowing the tax administration to
seize and sell delinquent taxpayers’ property; iii) introduction of exemptions
from property taxation for enterprises and physical persons in mountainous
regions. The IMF carried out a review of tax policy in 2000 and a number of the
recommendations from this review were actually included in a tax reform package
prepared by the Ministry of Finance in September 2001. However, this package
has not been presented to Parliament so far. Key issues remaining on the tax
policy side are:
Unstable
tax policy framework. The history of tax policy changes in Georgia since adoption of the
tax code demonstrates a lack of long-term policy planning and a focus on
short-term policy measures, disregarding the general consistency of the Code.
Such approach has led to constant changes to Article 273 (on transitional
provisions). Even fundamental policy changes are not introduced as permanent
features of the tax system, but as temporary ones. A typical example is the
cigarette taxation, which has been modified six times (!) since the Code entered
into force. New taxation schemes are often introduced late in the year, for
short periods of time and without clarification as to their duration. The
current taxation scheme for tobacco products was introduced for the year 2001
only on December 2000 and was extended for another year through another
amendment to the Code on December 2001. An even worse case is the excise tax on
the importation of pyrolysis liquid products which was set at a rate of 400 GEL
per ton on December 2000 and reduced to 50 GEL per ton less then four month
later. There are numerous similar examples of short-term tax policy measures
and frequent changes of tax legislation Such an approach neither allows the
business community to calculate its tax burden over a longer period of time,
nor does it permit the revenue authorities to design appropriate taxation
strategies and develop a long-term planning of resource mobilization. The strong
influence of lobbies in Parliament and the obvious tendency of parliamentarians
to further narrow the tax base by granting sector and specific exemptions and
rate reductions also contributes significantly to the low quality of tax policy
making in Georgia.
VAT
Threshold.
Currently, VAT registration is mandatory for businesses with an annual taxable
turnover of 24,000 GEL or more (and voluntary for a businesses below this
threshold).[4] As a result of the low
registration threshold, the tax administration has to deal with a large number
of small businesses as VAT taxpayers who contribute little to total VAT
revenues. For example, an increase of the threshold from 24,000 to 100,000 GEL
would reduce the number of mandatory taxpayers from around 13,000 to 3,200. It
would at the same time reduce the total VAT collection by around 23 percent. A
reduction in the number of taxpayers could substantially facilitate the
administration of the tax and help combat VAT evasion by permitting a more
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 Georgia the amount of unpaid VAT refunds
is large (about 29 million GEL at the end of 2001). Tax
inspectors should eliminate the practice of treating VAT as advanced payments
against future tax liabilities in order to meet their monthly revenue targets
(see section on tax administration below). Third, while many countries have
introduced limited exemptions or reduced rates in their VAT laws to reduce
regressive elements of the tax, the scope of tax privileges in the Georgian VAT
continues to increase, and the country has embarked on the dangerous path to
use tax privileges as a way to compensate for administrative or legal
deficiencies.
Frustration
with the distortion effects of the VAT has caused some policy makers to
consider whether to replace the VAT with a sales tax. The objective would be to
reduce compliance risks by applying the tax to one stage of the business cycle
only. There are serious concerns regarding this idea. VAT despite its
relatively low efficiency has become the main revenue source, contributing 45
percent to total gross tax revenues in 2001. Experience in other countries
shows that sales taxes have a far lower revenue potential than the VAT, because
it does not capture the total value added in the production and distribution
phases and their rates normally are not higher than 5 percent--because of administrative difficulties. In addition,
compliance risks and compliance management challenges would not be reduced because
collection would have to rely on the retail sector which is more difficult to
administer. Rather than replacing the VAT with a sales tax, the focus should be
to improve VAT administration and actually implement the key principles of the
tax, such as an effective refund system for exporters. A performance of the tax
improves; consideration could then be given later to lowering the standard VAT
rate.
Proposed
simplified tax. To
compensate for the revenue loss caused by increasing the VAT threshold, MoF
plans to introduce a simplified tax for taxpayers who are not registered for
VAT, and to modify the current 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 Georgia faces major
problems collecting excise taxes. Reduction in excise tax rates has been the
preferred method to improve compliance, but with no positive results so far.
Despite this experience the trend to reduce excises continues, which is
worrisome. Georgian excise taxes are actually very low by international
standards already, and the focus should more be on efficiently enforcing the
excise tax regime. Compared to the CIS country average, excise tax revenues in
Georgia are low; in 2000 excises in Georgia contributed 1.5 percent to GDP,
while the CIS average was 2.1 percent. Looking at neighbouring countries,
excise revenue performance is much higher in Armenia with 2.5 percent of GDP
and somewhat higher in Russia with 1.9 percent of GDP; it is much lower,
however, in Azerbaijan with only 0.5 percent of GDP (which is together with
Tajikistan the lowest figure in the CIS region). The fact that Georgia has
managed to accumulate a surprisingly high level of tax arrears in an area where
arrears normally should not build up – according to IMF data the amount of tax
arrears on excises was equivalent to 2.7 percent of GDP by beginning of 2000 –
shows, however, that excise revenue increases will also depend on the ability
and support of the tax administration to collect revenues from major businesses
in the oil and cigarette industry.
Income
and social tax. The
high tax burden of the personal income tax (PIT) and the social security tax
provides a strong incentive to evade the payment of these taxes. Although the
personal income tax has reasonably progressive rates (from 12 percent to a
maximum of 20 percent), the marginal cost of taxes for both employees and
employers creates strong incentives not to formalize the labor contract:
employees 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 Georgia, the possibility to enforce tax collection has
been unduly restricted by reducing the powers given to the tax administration
in chapter 42 of the tax code to seize and sell delinquent taxpayer property.
As a consequence the only remaining enforcement measure, which does not require
a court ruling, is the freezing of a taxpayer’s bank account. Considering the
absence of specialized tax courts and the weakness of the court system in
Georgia, this does not provide the tax administration with sufficient means to
improve its compliance management. Enforcement powers of the tax administration
should be harmonized with current practice in Organization for Economic
Co-operation and Development (OECD) countries.
Abolishing
nuisance taxes. Earlier
the World Bank and IMF reports have recommended the elimination of nuisance
taxes because they typically have extremely low revenue yield and are a burden
for small businesses. The tax package 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 Georgia is generally
very negative.[7] Substantial and visible
improvements on the ground will be needed to begin dispelling this perception.
This also requires a political commitment to abolish practices which protect
and support special interests of taxpayer groups by introducing special
exemptions in the tax legislation, thus eroding the tax base, or/and executing
pressure on the revenue authorities to grant favourable treatment to specific
taxpayers. It will also be necessary to reduce the incentives for revenue
officials to participate in corrupt practices and to develop the necessary
control mechanisms to detect and punish such behaviour.
Efforts
to reduce capture and corruption are to be complemented by long-term strategies
to improve the tax policy design and build revenue administration capacity. Tax
policy reforms should focus on overall policy design issues instead of
exclusively discussing the level of tax rates. Eventual tax rate reductions
will only be feasible if accompanied by broadening of the tax base and
administrative improvements. Key to improving administration is the effective
implementation of self-assessment and the fair and equitable treatment of all
taxpayers. Two areas that require special attention are (a) customs
administration, and (b) enforcement of personal income tax and social security
contributions.
Short-term
Reform Priorities.
While
substantial capacity building in tax and customs requires long-term strategies,
there are a number of essential short-term reform initiatives, which should be
launched immediately, to improve revenue performance and reduce tax-related
distortions.
Tax
policy. The
main challenge is to stabilize the tax policy framework, and avoid ad-hoc
short-term policy measures. In general, the revenue impact of tax exemptions
should be properly analyzed, and no further exemptions/tax reductions should be
introduced without such analysis is explicitly 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.
- Prepare
legislative changes to reintroduce sufficient powers for the tax
administration to enforce tax collection.
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 Georgia should be to reduce
the tax burden on consumption and labor. However, this can only be achieved by
(a) broadening the tax base of VAT and profit/income taxes; (b) increasing
collection by improving the efficiency and effectiveness of tax and customs
administration.
Past experience with tax policy reform in
Georgia has shown that mere tax rate reductions without corresponding
improvements in enforcement and compliance management will not contribute to
increasing tax compliance. Rate reductions therefore do seem not feasible as
long as revenue losses from the rate reduction cannot be
compensated by a broader tax base and a better enforcement. Tax policy reform
in Georgia therefore will need to mirror experience with tax reform in OECD
countries in the last two decades, where rate reductions (mainly in the area of
direct taxation) were achieved through base broadening and improving tax administration.
VAT
Reform. The
VAT should not be replaced by a sales tax. Rather, the VAT as the mainstay of
the revenue system in Georgia should be strengthened. The VAT design appears
buoyant, albeit if its base has been eroded by exemptions, privileges, and
fraudulent practices involving both tax inspectors and tax payers. Increasing
the threshold and reducing the number of taxpayers will help improve its
administration and implement the true spirit of the VAT. Corresponding
decreases in revenues can be compensated by introducing a simplified tax, as
proposed by Government, and reducing exemptions to broaden the tax base. The
implementation of a true VAT necessarily has to ensure refunds for exporters
and zero rated goods. On the administrative side, it is important to advance
existing initiatives to improve cross-checking, monitor registration, and
regulate invoices.
Tax
Simplification.
The elimination of nuisance taxes will facilitate administration and reduce the
administrative burden on small businesses. In Georgia, nuisance taxes are local
taxes generating little revenue. The best would be to eliminate these taxes and
find alternative (more solid) own revenue sources for local governments, such
as the land and property tax, which are not currently collected centrally (see
Chapter IV on Inter-governmental Fiscal Relations). In some cases, these are
complemented by a small turnover tax, as is already the case in Georgia.
Addressing
corruption. The
creation of an Inspector General Office (IGO) within the MoR has been a step in
the right direction. The work of the IGO should be provided with the
appropriate legal and technical instruments to carry out its function.
Technically, it is important to develop accurate assessments of where the
opportunities for corruption arise, through an analysis of the business process
and the use of indirect statistical methods. Legally, the IGO must have the
powers to access relevant information from tax-offices and taxpayers. It should
also be clear to the agencies and to the public how the recommendations of the
IGO would be implemented. The role of the Chamber of Control in evaluating tax
performance will no doubt be helped as the IGO builds up strength. The government
needs to consider if the current profile of corruption requires development of
legal instruments, other than those dealing with corrupt practices in the
public sector, to address corruption in the revenue agencies.
Making
effective a functional organization. The centrepiece of a modern approach to
tax administration is self-assessment. To properly implement self-assessment
requires changing the culture, both in government and society, of how taxes are
calculated and collected. The direct contact between officials and taxpayers
should be reduced, with emphasis shifted to taxpayer services, quick attention
to arrears enforcement and selective but effective auditing. Internal control
and anti-corruption services should help keep taxpayers and officials honest.
Appeals mechanisms should serve to protect taxpayers rights. The extensive
advise provided by donors has already acquainted the authorities with the
principles of self-assessment. However, the reform agenda continues to be broad
and will take time to implement. Te following issues would seem to require
special attention:
Registration. It is necessary to review the
current registry with emphasis on taxpayers that are not active and looking for
quality taxpayers that may be hiding as small or not even registered.
Arrears
enforcement. The
current stock of arrears plus fines and penalties is large but a large portion
of it might not be collectable. It is necessary to make a realistic assessment
of what can be collected from the stock and develop timely methods to 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 Georgia
IDA's
Policy. To support private sector development and attract needed foreign
investment, the World Bank (namely IDA) has developed the Country Assistance
Strategy (CAS), which focuses on removing key policy and institutional
(including governance) constraints, as well as financial, energy and
infrastructure bottlenecks. On the basis of the FY03 Integrated Trade
Development Strategy IDA will provide reform support and progress
monitoring through the ongoing Enterprise Rehabilitation Project, an FY06
Private Sector Development Project, and the ongoing Business Environment
Surveys and Studies. IDA will also provide support (in conjunction with USAID)
for improving access to affordable finance through further financial sector
reform, and will help reduce trade, transit and marketing costs through the FY05
Trade and Transport Facilitation Project, building on the FY03 South
Caucasus Trade and Transport Facilitation Study. IFC will complement these
activities through investments in small and medium-sized businesses and, in
coordination with USAID, through technical assistance for business
development. Support for alleviating energy bottlenecks will be provided by
IDA’s ongoing energy portfolio and dialogue.
Support
to SMEs. The Small and Medium Scale Enterprise (SME) sector is a crucial
area for potential private sector growth, and IDA has been supporting the
sector through its ongoing Enterprise Rehabilitation Project. IDA plans,
through the FY06 Private Sector Development Project to provide expanded
support for management training, creation of export-oriented clusters of SMEs,
advice to business associations and government, and monitoring of the business
environment. Additionally, IFC will conduct a targeted study of the SME sector
in Georgia to identify key obstacles to its development, and then recommend
specific improvements in the regulatory and administrative environment.
IFC Financial Support to the Private Sector in Georgia
IFC's Policy. IFC’s lending and
investments in Georgia have been tailored to the country’s special circumstances:
limited foreign investments, the non-existence of large local companies,
limited access to financing for a nascent SME sector, and the lack of advice
for private companies on business related issues such as corporate governance
and leasing. IFC would also provide support directly to the private sector
through the Georgia Business Development Project, a five-year technical
assistance program implemented by the Private Enterprise Partnership with the
support of the Canadian International Development Agency (CIDA). The main
components of the project, as already stated in the above, include development
of the leasing sector and improvement of corporate governance practices. The
corporate governance initiative is helping Georgian businesses improve their
practices to build investor confidence and increase their access to financing.
This component of the program also includes advice to the Government on
improving corporate governance policies and regulations.
Assistance
to SME Sector. To reach small and medium enterprises, IFC provided equity
and long-term credit lines to TBC Bank and helped establish Georgia
Microfinance Bank – the ProCredit Bank - the country’s first bank specializing
in lending to micro and small enterprises. In June 2000,
IFC purchased a 10 percent stake in TBC
Bank. IFC’s support helped TBC to grow
from a “pocket” bank into the largest and one of the best performing commercial
banking institutions in Georgia. In 1999, IFC helped establish the ProCredit
Bank - the first bank dedicated to lending to micro and small
enterprises in the country, and now the fastest growing banking institution in
Georgia. IFC has also supported other Local Companies,
for example, GG&MW, a mineral water production company, where
IFC’s loans supported the company’s acquisition of key strategic assets and
strengthened control over its key brand, Borjomi mineral water. IFC’s equity
investment helped the company rehabilitate two mineral water bottling
facilities, diversify its product mix and develop the distribution network. IFC
sold its stake in the company in 2002.
Development
of Mortgage Lending. In the financial sector, IFC has focused on supporting
the development of the housing finance market. The introduction of mortgage
financing has allowed individuals for the first time to leverage their
residences to increase their standard of living. In 2000, IFC extended a $3
million credit line to the Bank of Georgia, and together with re-flows,
this credit line financed over 500 projects totalling $4.5 million. In June
2003, IFC provided a second $5 million credit line to the Bank of Georgia for
housing finance and for on-lending to small and medium enterprises. In August
2001, IFC provided a second $3 million loan to TBC Bank to
support the development of its mortgage lending.
Facilitation of Foreign Investments: IFC invested in equity and provided
loans to Ksani Glass Factory, a producer of high-quality glass bottles and
packaging. IFC’s The $2.5 million equity investment and
$6.3 million loan supported Ksani’s expansion and modernization. At project
completion, the facility will be producing 40,000 tons of high quality glass
bottles annually with a high level of product flexibility. In the power
sector IFC provided a $30 million loan to AES Corporation to support the newly
privatized Tbilisi area power distribution company. The loan was pre-paid in
August 2003, when the AES Corporation sold Tbilisi electricity distribution
system to UES.
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 Georgia:
i.
Sole
proprietorship—An enterprise operated by a physical person with unlimited liability
and no minimum capital requirement. A sole proprietorship is not considered a
legal entity under the commercial code of Georgia.
ii.
Joint
Liability Company—A legal entity with unlimited liability established on the basis of
a partnership of several individuals or companies.
iii.
Limited
Partnership—A
legal entity consisting of general and limited partners. The limited partners
have limited liability and general partners bear full and direct liability for
the obligations of the company.
iv.
Limited
Liability Company—A legal entity that is separate and distinct from its shareholders
(one or more legal or physical persons). The company’s liability is limited to
its authorized capital. Founders and shareholders are not liable for the
obligations of the company.
v.
Joint Stock
Company—A
legal entity characterized by the limited liability of the partners. The
company’s liability is limited to its authorized capital.
vi.
Cooperative—A legal entity characterized by the
limited liability of the shareholders. In Georgia, this is a common form of
organization for agricultural enterprises.
Sole
proprietorships, joint liability, limited partnerships and cooperatives are
rarely established by foreign investors in Georgia. Therefore, the following
focuses on the legal requirements for Limited Liability Companies (LLCs) and
Joint Stock Companies (JSCs), which are the most popular forms of incorporation
used by foreign investors in Georgia.
The
Law on 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 November 12, 1996,
companies with foreign investments enjoy national treatment and the same rights
as Georgian companies.
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
Georgia. A branch is not a separate legal entity and it is allowed to engage in
commercial activities that would constitute all or part of the activities of
foreign head office. For purposes of registration, representative offices are
treated as branches and are obliged to fulfil the same requirements.
All
actions on behalf of a company can be performed by the head of the company
(executive body) or by any person authorized to perform such actions by a power
of attorney of the relevant body of the company. Foreign legal entities bear
full liability for the activities of branches or representative offices.
Analysis
- Law on Entrepreneurs (LoE). As
the main company law for Georgia, the Law on Entrepreneurs provides a good
basis for corporate governance for all the private companies including those
with traded securities. However, based on the experience of other central and
eastern European countries, there are several provisions in the Law on Entrepreneurs
that could be amended to further strengthen the corporate governance
provisions. They are: (1) although the LoE envisages a cumulative voting for electing the members of a supervisory board to
protect minority shareholders, it should be made a mandatory requirement. As a
result, there will be a mandatory cumulative voting for members of supervisory
boards as a means of allowing shareholders with small shareholdings to vote at
least one member of the supervisory board; (2) requirement that the shareholders’
meeting approve the auditing company’s contract (covering the scope of work and
annual auditing fees) so that shareholders interested in a highly quality
audit, requiring more time from the auditing company, can obtain such an audit,
and (3) There is a need to establish a minimum quorum below which no
shareholders’ meeting may be considered valid; (4) although the LoE requires
the financial statements of JSCs to be prepared on the basis of the
International Accounting Standards (IAS), it does not specifically require that
audits are conducted in accordance with the International Standards on Auditing
(ISA), which needs to be amended; and (5) the LoE does not provide takeover
rules to protect the interests of minority shareholders.
More
specifically, the World Bank (WB) and the International Monetary Fund (IMF)
conducted the Assessment of the Implementation of the Corporate Governance
Principles of the Organisation of Economic Co-operation and Development (OECD)
in Georgia. It is interesting to note that the assessment identified a number
of the shortcomings in the corporate governance practice existing in Georgia.
Namely, according to the study: (i) There are uncertainties in knowing if
shareholders are sharing in company’s profits; (ii) It is not uncommon practice
of failing to hold the required shareholders’ meetings; (iii) Markets for
corporate control are limited; (iv) Court system has not yet made any decisions
on the cases concerning corporate disputes; (v) Minor
role is played by supervisory boards in the strategic guidance of companies;
(vi) There is a less than complete disclosure by most reporting companies,
particularly of financial and operating results; (vii) There are weak auditing
practices;
More detailed results of the assessment are summarised in Table
1.2.1.1 below:
Table 1.2.1.1. Georgia: Assessment of the Implementation of
the OECD Principles
of Corporate Governance
OECD
Principles of Corporate Governance
|
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 company’s profits
|
Principle 2 - Fundamental corporate changes.
Shareholders have the right to participate in, and to be sufficiently
informed on, decisions concerning fundamental corporate changes, such as: (i)
amendments to the governing documents of the company; (ii) the authorization
of additional shares; and (iii) extraordinary transactions that in effect
result in the sale of the company.
|
|
X
|
|
|
|
|
Principle 3 - Shareholder meetings. Shareholders
should have the opportunity to participate effectively and vote in general
shareholder meetings and should be informed of the rules, including voting
procedures that govern shareholder meetings.
|
|
|
X
|
|
|
Not
uncommon practice of failing to hold the required shareholders’ meetings
|
Principle 4 - Proportionate control. Capital
structures and arrangements that enable certain shareholders to obtain a
degree of control disproportionate to their equity ownership should be
disclosed.
|
X
|
|
|
|
|
Principle 5 - Markets for corporate control. Markets
for corporate control should be allowed to function in an efficient and
transparent manner. The rules and procedures governing the acquisition of
corporate control in the capital markets, and extraordinary transactions such
as mergers and sales of substantial portions of corporate assets, should be
clearly articulated and disclosed so that investors understand their rights
and recourse. Transactions should occur at transparent prices and under fair
conditions that protect the rights of all shareholders according to their
class. Anti-takeover devices should not be used to shield management from
accountability.
|
|
|
X
|
|
|
Limited
by low liquidity in stock market
|
Principle 6 - Equal treatment of shareholders. The
corporate governance framework should ensure the equitable treatment of all
shareholders, including minority and foreign shareholders. All shareholders
should have the opportunity to obtain effective redress for violation of
their rights.
All shareholders of the same class should be
treated equally. Within any class, all shareholders should have the same
voting rights. All investors should be able to obtain information about the
voting rights attached to all classes of shares before they purchase. Any
changes in voting rights should be subject to shareholder vote.
|
|
|
X
|
|
|
Effective
redress requires review under a court system that is heavily overburdened and
has not yet made any decisions on similar cases
|
Principle 7 - Procedures for shareholder meetings. Processes
and procedures for general shareholder meetings should allow for equitable
treatment of all shareholders. Company procedures should not make it unduly
difficult or expensive to cast votes.
|
|
X
|
|
|
|
|
Principle 8 - Insider trading. Insider trading
and abusive self-dealing should be prohibited.
|
|
|
X
|
|
|
Effectiveness
of legal restrictions limited by low liquidity of the stock exchange and
small size of the business community
|
Principle 9 - Insider disclosure. Members of the
(supervisory) board and management board should be required to disclose any
material interests they have in transactions or matters affecting the
corporation.
|
|
|
X
|
|
|
Minor
role played by supervisory boards in the strategic guidance of companies
|
Principle 10 - Rights of stakeholders. The
corporate governance framework should recognize the rights of the
stakeholders as established by law and encourage active cooperation between
corporations and stakeholders in creating wealth, jobs, and the
sustainability of financially sound enterprises.
|
|
X
|
|
|
|
|
Principle 11 - Corporate disclosure. The
corporate governance framework should ensure that timely and accurate
disclosure is made on all material matters regarding the corporation,
including the financial situation, performance, ownership and governance of
the company. Channels for disseminating information should provide for fair,
timely and cost-efficient access to relevant information by users.
Disclosure should include, but not be limited to,
material information on: (i) the financial and operating results of the
company; (ii) major share ownership and voting rights; (iii) members of the
board and key executives, and their remuneration; (iv) material foreseeable
risk factors; (v) material issues regarding employees and other stakeholders;
(vi) governance structures and policies.
|
|
|
X
|
|
|
Less
than complete disclosure by most reporting companies, particularly of
financial and operating results
|
Principle 12 - Accounting and auditing. Information
should be 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) board’s accountability to the
company and the shareholders.
(Supervisory) Board members should act on a fully
informed basis, in good faith, with due diligence and care, and in the best
interests of the company and the shareholders.
|
|
|
X
|
|
|
Absence
of detailed guidelines for supervisory boards
|
The
Securities Market Law (SML) regulates the Joint Stock Companies whose shares
are traded at Georgian Stock Exchange.
The main
principles of the Securities Market Law (SML) are the following:
The
purpose of the Law is to develop securities market in Georgia, to protect the
investors' interests on securities market, as well as to establish fair and
transparent public trading in securities and free competition;
The
Georgian Securities Market is regulated by the National Securities Commission
of Georgia (NSCG);
The
public offering of securities is an offer to sell securities directly or
indirectly on behalf of the issuer to at least 100 persons or to unspecified
numbers of persons;
A
company, which has a class of Publicly Held Securities, shall be deemed to be a
reporting company;
All
reporting companies shall 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 Eastern Europe indicates on crucial importance of
CIS, such as investment funds, in increasing the corporate governance standards
and facilitating the trust amongst investors towards stock markets; and (ii)
The NSCG does not have an authority to supervise private placements.
More
specifically, the World Bank (WB) and the International Monetary Fund (IMF),
also conducted the Assessment of the Implementation of the Objectives and
Principles of Securities Regulation of The International Organization of
Securities Commissions (IOSCO) in Georgia. The assessment identified quite a
lot of problems in the operation of the securities regulator, the functions of
which is assumed by the National Securities Commission of Georgia (NSCG).
Namely, the report lists the following problems: (i) NSCG has a seriously
insufficient budget; (ii) Code of ethics for NSCG staff is awaited; (iii) No
specific oversight program to supervise self-regulatory organizations (SROs) has
been established; (iv) Inspection and investigation powers of the NSCG over
Reporting Companies and their major shareholders are not adequate; (v)
Enforcement power of the NSCG on the basis of criminal legislation is limited;
(vi) International Accounting Standards (IAS) are recognized but are not fully
adopted in practice; (vii) There in no legislation on Collective Investment
Schemes (CIS) in Georgia; (viii) There is no market surveillance and stock
watch system to detect abnormal movements and unfair trading practices.
More detailed results of the assessment are summarised in Table
1.2.2.1 below:
Table 1.2.2.1 Georgia: Assessment of the Implementation of
the IOSCO Principles
for Securities Regulation
IOSCO
Principles for Securities Regulation
|
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 - Independence and accountability.
The regulator should be operationally independent and accountable in the
exercise of its functions and powers.
|
|
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 NSCG’s
enforcement power over Reporting Companies is limited.)
|
Principle 16 - Accounting standards. Accounting and auditing standards should be
of a high and internationally acceptable quality.
|
|
X
|
|
|
|
IAS recognized but not fully
adopted in practice.
|
Principle 17 - Eligibility standards. The regulatory system should set standards
for the eligibility and the regulation of those who wish to market or operate
a collective investment scheme.
|
|
|
|
|
X
|
No law, no CISs.
|
Principle 18 - Legal form and structure. The regulatory system should provide for
rules governing the legal form and structure of collective investment schemes
and the segregation and protection of client assets.
|
|
|
|
|
X
|
No law, no CISs.
|
Principle 19 - Disclosure for suitability
and valuation. The regulations should
require disclosure, as set forth under the principles for issuers, which is
necessary to evaluate the suitability of a collective investment scheme for a
particular investor and the value of the investor’s interest in the scheme.
|
|
|
|
|
X
|
No law, no CISs.
|
Principle 20 - Basis for valuation and
pricing for redemption. The regulations
should ensure that there is a proper and disclosed basis for asset valuation
and the pricing and the redemption of units in a collective investment
scheme.
|
|
|
|
|
X
|
No law, no CISs.
|
Principle 21 - Entry standards. The regulations should provide for minimum
entry standards for market intermediaries.
|
X
|
|
|
|
|
|
Principle 22 - Initial and on-going
prudential requirements. There should be
initial and ongoing capital and other prudential requirements for market
intermediaries that reflect the risks that the intermediaries
undertake.
|
|
X
|
|
|
|
Monthly capital.
adequacy report not audited. NSCG does not have power to reject an auditor.
|
Principle 23 - Internal organization and
operational conduct and risk management. Market
intermediaries should be required to comply with standards for internal
organization and operational conduct that aim to protect the interests of
clients, ensure proper management of risk, and under which management of the
intermediary accepts primary responsibility for these matters.
|
|
X
|
|
|
|
No specific
requirement of compliance officer / dept. with specific responsibilities.
|
Principle 24 - Procedures for failure. There should be procedures for dealing with
the failure of a market intermediary in order to minimize damage and loss to
investors and to contain systemic risk.
|
|
X
|
|
|
|
No procedures to
manage winding down of a failed broker although other investor protection
legislation, and regulations have been 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
Georgia have the rights and obligations equal to the rights and obligations of
citizens of Georgia with some exceptions envisaged by the Constitution and law.
Nondiscrimination. Under the constitution labor is
free. Each person has right to choose its field of activity and profession.
Discrimination in obtaining a job, or in the workplace, based on race, skin color,
language, sex, religion, political and other beliefs, national, ethnic and
social origin, property and title of nobility or place of residence is
prohibited.
Minimum
and Maximum Age of Employment. According to the legislation of Georgia minimum working age is 16
years. Maximum working age is not determined, but pension can be given to a man
in the age of 65 years and a woman in the age of 60 years.
Working
Hours. According to
the Labor Code of Georgia the duration of the working period is:
-
41 hours per week, with five working days;
-
36 hours per week in certain dangerous or unhealthy activities or jobs.
-
The duration of a working day totals 8 hours and 15 minutes.
-
Thus, the number of working days per month equals 21,1 days.
-
Minimum leave is equal to a total of 24 working days.
Wages. Reimbursement of labor is carried
out according to labor amount and quality. According to the legislation,
minimum level of salary is determined in the amount of 20 GEL. The nominal
average monthly salary of an employee in 2001 made up 91.4 GEL. Higher labor
reimbursement is considered for employees working in certain dangerous or unhealthy
climatic conditions. However, the wages for each professional category are
usually negotiated in labor agreements.
Social
Taxes. The
article on Social Taxes of the Tax Code of Georgia stipulates a new system of
social tax payment. According to the tax code of Georgia, social tax rates are
as follows: The amount to be paid into the United State Fund of Social Security
is equal to 28% of the salaries paid, out of which the employer has to
contribute 27% and the employees have to contribute 1%, and the payment to the
United State Fund of Employment is equal to 1% of the salaries paid, which has
to be contributed by the employers.
Medical
Insurance Fee. Medical
Insurance Fee for legal entities is equal to 3% of the salaries paid. Medical
Insurance Fee for all employed persons is equal to 1% of their income
(exemptions: compensation surplus for annual leave; bonuses; awards; pensions
and allowances).
Social
Security System.
The social security system of Georgia is based on compulsory social insurance.
According to the Presidential Decree dated by June 29, 2000 (No 278), issues
relating to the assignment and distribution of state pensions and aids,
definition of vulnerability and other medical-social expertise are the
responsibility of the Ministry of Health and Social Security. The reform in
social insurance system, which was recently carried out in Georgia, encourages
the improvement of the social security system and the establishment of private
pension funds.
Georgian
Trade Unions League. Georgian
Trade Unions League is a joint national professional centre of trade unions in
Georgia. The main goal of the league is to protect the labor, socio-economical,
legal rights and interests of its members. The league includes 33 trade unions
and 2 member organizations. Currently, there are 900 000 trade union members in
the different organizations of the league. Under the Constitution of Georgia
all employees (workers) have the right to join Trade Unions. Georgian Trade
Unions League, together with the member organizations, co-operates productively
with the General Confederation of Trade Unions, International Labor
Organizations, Trade Unions of United States of America, Germany, Denmark,
France, Turkey, Israel and other countries. At present, treatment of an issue
on accepting the League of Trade Unions of Georgia as a member of Free Trade
Unions International Confederation is in progress.
Freedom
of Association and the Right to Collective Bargaining. The law prohibits discrimination
by employers against union members, and employers may be prosecuted for
antiunion discrimination and forced to reinstate employees and pay back wages;
however, there are reports of managements warning staff not to organize trade
unions. Some workers, including teachers in the Imereti region, employees of
various mining, winemaking, pipeline, and port facilities, and the Tbilisi
municipal government reportedly complain of being intimidated or threatened by
employers for union organizing activity. Observers also claimed that employers failed
to transfer compulsory union dues, deducted from wages, to union bank accounts.
The Ministry of Labor has investigated some complaints, but no action has been
taken against any employers to date. There are no legal prohibitions against
affiliation and participation in international organizations. The Constitution
and the law allow workers to organize and bargain collectively, and some
workers exercise this right; however, the practice of collective bargaining is
not 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. Georgia is both a source and a transit country
for trafficked persons. There have been unconfirmed reports that government
customs and border officials were involved in the trafficking of persons. The
Government has prosecuted some traffickers using fraud statutes, but otherwise
has no active programs to address the problem of trafficking. A government
program for combating violence against women included a proposal for measures
to eliminate trafficking in women for the purpose of sexual exploitation;
however, it has not been implemented due to budgetary constraints. Georgia
itself is generally not a destination place for trafficked persons.
Effective
Abolition of Child Labor. According to the law, the minimum age for
employment of children is 16 years; however, in exceptional cases, the minimum
age can be 14 years. The Ministry of Health, Social Service, and Labor enforces
these laws and generally they are respected. The Government has not ratified
the ILO Convention 182 on the worst forms of child labor.
Elimination
of Discrimination in Employment. The Constitution provides for the
equality of men and women. Women's access to the labor market has improved but
remained primarily confined, particularly for older women, to low-paying and
low-skilled positions, often without regard to high professional and academic
qualifications. Salaries for women continued to lag behind those of men.
Reportedly men were given 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 purchaser’s registration in general list
is required. The application for registration could be submitted by the seller
or purchaser as well.
The right of ownership on agricultural
and as well as non-agricultural lands is granted only to citizens of Georgia
and to private legal entities registered according to Georgian legislation.
The fee for getting legal (notary)
approval on real estate transactions is different in each case and depends on
the value of real estate. The fee decreases with the increase of property value
and fluctuates within 3-0,05%. The fee should not exceed GEL 10 000.
Transfer of real estate, except new
dwelling constructions (new constructions are defined to be dwelling
constructions built up within 2 years period) are free from VAT. Tax for
transfer of immovable thing makes up 2% of property value.
For
the registration of right on ownership on land-lot and related real
estate and issue of relevant registration notice, the state registration fee
makes up GEL 26.
Investors face a difficult environment in
Georgia starting with the fundamental issue of geopolitical instability. In
addition, several surveys of existing and potential domestic and foreign
investors show that the business environment is generally perceived as
bureaucratic, non-transparent and corrupt. Georgia is perceived as having
significant obstacles to investment in the areas of taxes and regulations,
policy instability/uncertainty and corruption. While the average official and
unofficial fees for business procedures and the resources required (staff and
time spent) may not be the highest in comparison to other countries, the
unpredictability of costs and delays related to administrative procedures
combined with uneven implementation and enforcement of regulations increases
business risk and results in differential treatment among firms.
As shown in the above Figure, when scores on
general constraints to business operations for enterprises in Georgia are
compared to regional averages, the constraints are shown to be worse in Georgia
for every category except the performance of the judiciary and anti-competitive
practices. This substantiates the earlier observation that the business
environment is perceived as being much more constrained in Georgia compared to
competitors in the region. Further, it emphasizes the need for the Government
of Georgia to address these critical constraints in order to help improve the
country’s attractiveness for domestic and international investors.
Time and again it has been observed that
decrees and programs of reform have been adopted but weakly implemented in the
absence of the strong political will necessary to effect change. For example,
the State Customs Department (SCD) reform committee was established by
Presidential Order to finalize a reform strategy and implement an action plan.
To date, little has been done on implementation. The committee rarely meets.
Reform has been impeded by competing agendas and frequent changes in SCD
leadership due to absence of strong political will to reform the customs
department.
Corrupt practices significantly affect the
process of doing business in Georgia by increasing the cost and the risk
associated with a range of administrative procedures. From the perspective of
foreign investors in particular, facilitation payments or bribes do not simply
increase business costs. They constitute significant risk because in Georgia
they are unpredictable and uneven. Also, in all OECD countries bribery
constitutes a serious legal offence that can be prosecuted in the home country.
Finally, corrupt taxation administration (income tax evasion) and customs
procedures (smuggling) result in unfair competition for legitimate, law-abiding
enterprises.
In addition, the following fundamental issues
have the impact on administrative procedures in Georgia, particularly in the
areas of customs and tax administration, licensing, and inspections:
·
Inconsistent
implementation of legislation and lack of transparent implementing regulations
and procedures.
Since 1991, a number of laws have been revised and new laws have been written
and promulgated. Although these laws are generally modern and well written,
poor implementation and enforcement effectively undermine the intent of the
laws. Throughout this report, it is clear that the legal framework and official
requirements for most administrative procedures are relatively sound. However,
problems and inconsistencies arise in implementation as officials often seek to
maintain and exercise discretionary authority and control of administrative
procedures.
·
Lack of
published information on the various administrative procedures required for
business establishment and operation. For example, the official gazette is
significantly behind schedule and the business stamp approval procedure is
still issued by the police at the cost of 10 GEL. The challenge of publishing
and disseminating timely and current information among officials and the public
is even greater because of the ongoing changes to existing laws. However,
timely publication and dissemination is necessary in order to minimize
information gaps and opportunities for corruption.
·
Absence
of effective mechanisms for holding public officials accountable. In principle, the Administrative
Code and the Civil Code include provisions on the conduct and accountability of
public officials. However, in practice these provisions are not enforced.
Efforts to introduce and implement codes of conduct for taxation and customs
officials have had limited effect to date.
·
Absence
of effective appeals mechanisms and the inadequate capacity of the courts. The Administrative Code provides
for the public’s right to be heard in protesting or seeking clarification on
the actions of most government agencies. However, there is no provision for an
independent or autonomous arbiter to provide recourse. This function is
apparently to be carried out by the courts. However, the integrity of the
courts is often suspected and the capacity of the courts to address these
issues is limited.
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. Georgia’s annual income per capita is about 56 percent
below the pre-independence level, unemployment rates are high (16 percent in
2001) and many Georgians are underemployed. In the circumstances, poverty,
vulnerability and inequality have all increased over the period. Georgia
clearly needs to achieve and sustain higher economic growth rates to improve
living conditions. Given the small size of the domestic market, this can be
achieved only through a stronger expansion in export activities, especially of
those in which Georgia has a comparative advantage and the potential to
generate new job opportunities, such as agro-processing.
Poverty Profile. Strengthened economic
performance resulted in an reduction of poverty in the mid 1990s. However,
Georgia’s growth rate slowed considerably between 1998 and 2000, and
consequently inequality and poverty increased as measured by any of several
methodologies increased (see Table 2.1.1). Growth was affected by a number of
shocks, including the 1998 Russian crisis, severe droughts in 1998 and 2000,
and the increase in the price of energy imports in 2000. These problems were
compounded by internal and external political instability. Growth recovered in
2001-02, leading to a slight reduction in overall poverty.
Table
2.1.1. Change in poverty in Georgia between 1997 and 2002
|
Poverty Headcount (% of population)
|
Poverty definitions (lines)
|
1997
|
1998
|
1999
|
2000
|
2001
|
2002a/
|
Official minimum
|
46.6
|
50.5
|
53.0
|
52.5
|
52.0
|
51.3b/
|
Urban
|
46.7
|
53.3
|
60.4
|
56.6
|
54.3
|
53.7
|
Rural
|
46.4
|
47.1
|
44.6
|
48.0
|
49.6
|
48.8
|
US$4.30 per capita/day at PPPc/
|
13.6
|
19.8
|
23.2
|
23.0
|
22.8
|
21.7
|
Recommended poverty line (baseline)
|
13.6
|
19.8
|
23.2
|
23.0
|
22.8
|
21.7
|
Urban
|
13.8
|
22.2
|
27.4
|
24.6
|
24.1
|
22.6
|
Rural
|
13.4
|
16.8
|
18.4
|
21.4
|
21.3
|
20.7
|
US$2.15 per capita/day at PPP c/
|
9.7
|
11.8
|
14.5
|
15.4
|
14.8
|
13.5
|
US$1.075 per capita/day at PPP c/
|
1.7
|
3.0
|
3.2
|
3.3
|
3.4
|
2.7
|
Source: SDS SGHH primary data and World Bank,
see Georgia Poverty Update, Report No. 22350-GE. Note: 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$25) per month per equivalent adult. The equivalence scale
used in the official and recommended methodology is the scale developed by
SDS and used in Georgia to determine the social assistance payments.
International poverty lines expressed in dollar terms (US$ in PPP) are per
capita and use the latest (1996) revision of the World Bank, updated with the
Georgia CPI. All figures are averages of quarterly data. a/ Preliminary
estimate; corrections for changes in the Survey not made. b/ Bank estimates
using official methodology. c/ Using 0.33 as PPP conversion factor.
|
Differential Impact of Rising Poverty. IDA, in close
collaboration with the State Department of Statistics, 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 Georgia in
the period between 1998 and 2000 were economic: employment status, sector of
employment, ownership of productive assets and education. It found an elevated
poverty risk among urban households, households with an unemployed head and
female headed households, as well as children aged 7-15, the disabled, those
with low levels of education, single pensioners and orphans were experiencing.
The working poor are becoming the majority, often employed in the informal
sector with insecure, temporary and low productivity jobs.
Non-Income Indicators of Poverty.
Non-income indicators of poverty in Georgia, inherited from Soviet times, still
compare favorably with those of countries with similar per capita income. The
UNDP 2003 Human Development Report ranks Georgia 88th among 175
nations. However, Georgia faces a major challenge in sustaining these
relatively favorable indicators. Studies conducted by various international
organizations (UNICEF, USAID, EC, etc.), indicate that there has been no
improvement in the indicators during the 1990s. In fact, maternal mortality
rate, immunization rates, access to health and education, access to safe water
and sanitation and other living conditions indicators have deteriorated and the
quality of social services has worsened substantially in comparison to the
pre-transition situation.
Internally Displaced People.
IDPs vulnerability to poverty is magnified by their lack of access to land.
Thus IDPs living in collective centers are 3½ times less likely to have
access to land than the local population, and those living in private
accommodations half as likely. In addition, IDP’s rate of unemployment is very
high -- 40% among IDPs living in collective centers. Government benefits do
seem, however, to be reaching the IDPs, with 80% to 90% receiving a government
benefit.
Millennium
Development Goals. The estimates of Georgia’s prospects for achieving the
Millennium Development Goals (MDGs) show a mixed picture based on Georgia’s
current performance, as indicated in Table 2.1.2.
Table 2.1.2: Millennium Development Goals
Millennium Development Goal
|
Present
Situation
|
Prospects
for Achievement by 2015
|
Goal 1: Eradicate extreme
poverty and hunger.
Target 1: Halve, between 1990 and 2015, the proportion of
people whose income is less than $2.15 a day.
NOTE: While the MDG
indicator and target include $1 a day, a higher poverty line such as $2.15 is
considered more appropriate in ECA given the extra expenditure on heat,
winter clothing and food. (“The Millennium Development Goals in ECA”, World
Bank, forthcoming)
Target 2: Halve between
1990 and 2015, the proportion of people who suffer from hunger.
|
In 2002, the
poverty incidence at the international poverty line of US$2.15 per
capita/per month at PPP was 13.5 percent.
While the exact percentage of people suffering from
hunger in Georgia is not known, there is no evidence that would indicate
that hunger is an issue in Georgia.
|
Likely. The Economic Development and Poverty
Reduction Program of Georgia envisages economic performance that would allow
Georgia to meet the MDG.
|
Goal 2: Achieve universal
primary education.
Target 3: Ensure that by
2015, children everywhere, boys and girls alike, will be able to complete a
full course of primary schooling.
|
Enrollment
rates in basic education (grades 1-9) are close to 100 percent.
|
Likely.
|
Goal 3: Promote gender equality and empower women.
Target 4: Eliminate gender disparity in
primary and secondary education, 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 Georgia in 2001 was 29 per 1,000 live
births. This was better that the average for ECA (36/1,000); and much better
than the average for medium human development group of countries – 61 per
1,000 live births.
|
Due to current efforts and actions planned under the
EDPRP to keep immunization rates at high level, improve breast-feeding rates,
provide appropriate case management and home and in community for acute
respiratory infection, pneumonia and diarrhea and improve access to
appropriate health care, reliable water and improved sanitation, it is
estimated that Georgia will make a significant progress in reducing the
U5MR. However, the MDG target (U5MR of 9.7 per 1,000 live births,
which is close to the current U5MR level in developed countries) is
estimated as unlikely to be met, given Georgia’s very low public spending on
health.
|
Goal 5: Improve maternal
health.
Target 6: Reduce by
three-quarters, between 1990 and 2015, the maternal mortality ratio.
|
Available data suggests the
MMR doubled over the last 10 years to almost 59 per 100,000 live births in
2001. Only 59 percent of women complete the mandatory 4 antenatal visits but
96% of births are attended by skilled health personnel
|
Planned actions aimed at improving antenatal care
are expected to result in decreased maternal mortality. However, given high
maternal mortality rate and its recent increase, the MDG target (15
per 100,000 live births) is estimated as unlikely to be met.
|
Millennium Development Goal
|
Present
Situation
|
Prospects
for Achievement by 2015
|
Goal 6: Combat HIV/AIDS,
malaria and other diseases.
Target 7: Have halted by
2015 and begun to reverse the 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 Georgia has improved HIV recording
and reporting, there is an urgent need to introduce prevention &
education on a broad basis, as well as surveillance among high risk groups. The
MDG target for HIV/AIDS is unlikely to be met
Political commitment and additional
resources are required to keep the 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 Georgia 2.8% of the land area is protected to maintain
biological diversity compared with the world average of 6.5%. Forest cover is
40% but the quality of management is inadequate. Energy intensity and carbon
emissions indicators are not high, but there are severe problems with
delivery of energy services to the population.
In 1999, about 86% of urban population
and 43% of rural population had access to piped water supply. Reliability
and quality of services are serious problems. Water systems are largely in a
state of severe disrepair. Low capacity of people to pay for the services
together with limited government budgets 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 Georgia will meet this
target.
|
Sectoral Growth. Agriculture,
industry, trade and transport dominate the structure of the Georgian economy.
Agriculture is the largest sector accounting for just under 20 percent of GDP
and 50 percent of employment, although its share in GDP has decreased
steadily (from over 30 percent of GDP in 1996). Industry contributes about 14
percent of GDP and 6 percent of employment, with its share changing little.
The share of transport and telecommunications has nearly tripled from 4.6
percent in 1996 to 12.1 percent by 2002. Transport has been the fastest
growing sector, growing at over 20 percent annually because of the rapid
expansion of oil transit from the Caspian Sea. Although transport turnover has
tripled, it is still at one third of the pre-independence level. Other fast
growing sectors include construction and financial services. Trade has grown
slightly faster than overall GDP. Sectoral growth index is presented in Fig.
3.1.1.
According
to information from 2001 88.6% of the economically active population was
employed, thus the unemployment rate was 11.4%.
The
distribution of the employed work force by economic sectors is as follows:
Sector
|
%
|
Agriculture & forestry,
fishery
|
53,4
|
Mining Industry
|
0,3
|
Processing Industry
|
6,5
|
Energy, gas or water production
and supply
|
1,2
|
Construction
|
1,6
|
Trade & household goods
technical service
|
8,6
|
Hotels & Restaurants
|
0,9
|
Transport, Warehouse economy and
communications
|
4,0
|
Financial mediation
|
0,7
|
Operations with real estate, lease
(rent) and business activity, research and projecting works
|
2,1
|
State management and self-defense,
compulsory social insurance
|
5,8
|
Education
|
7,4
|
Health care and social service
|
4,3
|
Other communal, social and
personal service, culture, entertainment, rest
|
2,4
|
Hired (engaged) service in private
domestic economy
|
0,4
|
Ex-territorial (International)
organization
|
0,1
|
Unidentified
|
0,1
|
Total
|
100
|
According
to 2001 data, the minimum subsistence level for a medium sized family (4
persons) at average prices was 205.2 GEL.
Introduction. Only 44 percent of Georgia’s
land is used for agriculture. Twenty-six percent is arable land, 9 percent is
used for perennials, 65 percent is pastureland, and 0.4 percent is fellow land.
Sixty percent of the arable land needs artificial irrigation. The soil is
mainly moderately fertile and easy to cultivate. Table 1 below shows the
distribution of the agricultural land by agricultural product.
Table 1 Distribution of
Agricultural Land by Product
Product
|
Land occupied (thousand ha)
|
Cereals
|
379,0
|
Citrus
|
10,9
|
Fruit
|
60,0
|
Potato
|
34,0
|
Sunflower
|
40,0
|
Tea
|
40,0
|
Vegetables
|
40,0
|
Vineyards
|
61,3
|
In the 20th century, Georgia became
a country of agro-industry, with well-developed agriculture and food industry
and with a good level of production. More than half of its GDP came under the
agro-industrial sector of the country; 47 - 48% of the main funds were
accumulated within the sector and it employed 41 - 42% of the total population
of Georgia.
Georgia used to be an important
exporter of food and one of the main suppliers of vegetables, tea, citrus
fruits, wine, mineral waters, brandy, canned and fresh vegetables and fruits to
the markets of the former Soviet Union. In the second half of the 1980s, the
Georgian share of the food market of the former Soviet Republics was 10
percent. The total amount of exported food products was 1.7 times more than imported
ones. The country is now undertaking actions to re-establish this exporting.
Since
independence in 1991 the country experienced many years of civil war and ethnic
conflicts, with 260,000 people internally displaced.
However,
Georgia's economy is still strongly linked to the Russian Federation and the
Commonwealth of Independent States (CIS). Approximately 50 percent of its trade
is with the CIS.
Agriculture
is a main source of income and employment for the majority of the population,
accounting for more then 30 percent of GDP. Output in the sector is only about
40 percent of its 1990 level, but employment in the sector has doubled and it
now accounts for over 50 percent of the total employment.
Land
privatisation has focused on the small-scale (household/subsistence) sector
with little real progress in restructuring the former large state farms. Land
reform has resulted in the allotment of small parcels of land up to 1.25
hectares to each rural family and the lease, through district authorities, of
state owned land to persons or legal entities, with the aim of creating a
subsistence sector for small farmers and a market sector controlled by large
leaseholders.
Private
producers account for the significant share of fruit, vegetable and livestock
production, when their share in wheat production is about two thirds of the
total wheat production in the country. The bulk of the domestic wheat
production is consumed on farms for food, seed or feed. Indications are that
only 20 percent of domestic production of wheat is marketed.
Low yields, also as a result of
poor infrastructure, inadequate access to credit for inputs and suitable
machinery, and high costs associated with transport and marketing have had a
negative impact on food production and the earning capacity of a significant
proportion of the population and thus on household food security.
The
state of irrigation and drainage systems is also a major constraint to
increasing crop yields and the competitiveness of domestic produce with
imports. More than 60 percent of grain, 60 percent of dairy products and 33
percent of meat consumed in the country are imported.
Agricultural
production in Georgia dropped sharply in 2000 due to a serious drought. WFP/FAO
Crop and Food Supply Assessment mission carried out in mid-August 2000
estimates that Georgia will face a severe food crisis due to the drought. This
situation is being exacerbated by on-going serious economic problems.
After
droughts, agricultural production showed a slight increase of 5.6 percent in
2001, however the share of agricultural output in GDP dropped from 21 percent
in 2000 to 19.2 percent in 2001.
During
the 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 US government will support agriculture
development through market expansion, standards on organic food production,
distribution, improved credit and whole-chain food distribution networks.
Key
Agriculture Indicators.
Agricultural
output per hectare of agricultural land and per capita (US $)
Year
|
Per 1 ha of
agricultural land
|
Per capita
|
1990
|
1195
|
725
|
1995
|
481
|
272
|
1996
|
539
|
302
|
1997
|
583
|
328
|
1998
|
531
|
301
|
1999
|
435
|
285
|
Source: Georgian Agriculture 1999
Agriculture
in GDP
1990
|
1991
|
1992
|
1993
|
1994
|
1995
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
29,7
|
|
|
|
|
41,7
|
31,0
|
28,2
|
24,8
|
25,0
|
21,5
|
19,2
|
31,9
|
28,8
|
55,5
|
70,4
|
34,2
|
39,5
|
32,6
|
|
|
|
|
|
Source: State Department for Statistics of Georgia (1st
Row), GEPLAC , 1997(2nd Row).
Trends
in Share of Total Agricultural Production, (%)
|
1985
|
1990
|
1995
|
1996
|
1997
|
1998
|
1999
|
2000
|
Crop production
|
68.1
|
68.7
|
58.4
|
49.8
|
59.3
|
56.4
|
56.8
|
45,8
|
Livestock Production
|
31.9
|
31.3
|
41.6
|
50.2
|
40.7
|
43.6
|
43.2
|
54,2
|
Source: SDS,
Georgian Agriculture 2000, p.9.
Agricultural
output (Current prices, mln. lari)
Agricultural Production
|
1980
|
1985
|
1990
|
1995
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
Total production
|
3219
|
4167
|
5199
|
1851
|
2062
|
2299
|
2266
|
2650
|
2024
|
1860
|
Of which: Plant-growing
|
2240
|
2838
|
3571
|
1081
|
1027
|
1363
|
1278
|
1506
|
927
|
|
Livestock
|
979
|
1329
|
1627
|
770
|
835
|
936
|
988
|
1144
|
1097
|
|
Of which by households
|
1584
|
2087
|
2495
|
1407
|
1650
|
1863
|
2116
|
2490
|
1903
|
|
Of which: Plant-growing
|
1102
|
1421
|
1714
|
816
|
805
|
1150
|
1163
|
1386
|
870
|
|
Livestock
|
481
|
666
|
781
|
845
|
713
|
953
|
1105
|
1033
|
|
Source: Georgian Agriculture 2000, p. 6
Distribution
of Georgian Agricultural Territory by Inclination
0 – 2 gr.
|
2
- 10 gr.
|
10
– 20 gr.
|
20
gr. over
|
Total
|
Sq. km
|
%
|
Sq. km
|
%
|
Sq. km
|
%
|
Sq. km
|
%
|
Sq. km
|
%
|
13545,9
|
42,3
|
9237,1
|
28,8
|
5146,7
|
16,0
|
4166,7
|
12,9
|
32096,4
|
100
|
Distribution
of Agricultural Land
|
1986
|
1991
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
Agricultural lands, total
|
3267,1
|
3275,4
|
3048,0
|
3034,5
|
3037,0
|
3063,5*
|
3018,4*
|
3019,7*
|
Of which: Arable
|
783,2
|
790,4
|
759,3
|
781,1
|
785,0
|
791,9
|
790,4
|
792,9
|
Of which sown areas
|
730,1**
|
701,9**
|
452,8
|
597,5
|
616,1
|
594,7
|
610,8
|
|
Perennial plants
|
357,0
|
336,9
|
307,0
|
284,6
|
277,5
|
269,8
|
270,1
|
269,3
|
Meadows
|
176,3
|
158,4
|
147,9
|
148,6
|
141,2
|
142,7
|
142,5
|
142,3
|
Pastures
|
1947,7
|
1983,7
|
1822,1
|
1820,2
|
1833,3
|
1839,7
|
1796,0
|
1795,8
|
Fallow
|
2,9
|
6,0
|
11,7
|
-
|
-
|
-
|
-
|
-
|
*Unlike to other years, this
data includes the areas of dwelling and economic buildings and yards - 19,4 ths
hectares** - accordingly 1985-1990
Source: Georgian Agriculture-2000, Tbilisi 2001, p.18
Areas
kept by some plant-growing cultures (1000 hectares)
Culture
|
1988
|
1993
|
1997
|
1998
|
1999
|
2000
|
2001
|
Cereals and beans
|
272,0
|
256,0
|
437,2
|
415,8
|
378,8
|
386,4
|
|
Industrial crops
|
40,6
|
21,1
|
36,5
|
59,0
|
75,8
|
69,8
|
|
Potatoes, vegetables and melons
|
77,0
|
48,8
|
62,4
|
84,7
|
85,7
|
93,1
|
|
Fodder crops
|
344,8
|
43,2
|
57,7
|
56,6
|
54,4
|
61,5
|
|
Fruit-berries
|
128,2
|
83,5
|
85,3
|
65,3
|
|
|
|
Vineyard
|
115,6
|
78,9
|
81,2
|
70,2
|
|
60,0?
|
61,0?
|
Citruses
|
26,7
|
16,7
|
11,4
|
15,9
|
|
|
|
Tea plantations
|
65,1
|
33,7
|
34,7
|
39,9
|
|
|
|
Source: State Department for Statistics; ? Rezonansi, Interview,
04,04.2002
Agricultural
production
Name
|
Produced, thousand tons
|
1998
|
1999
|
2000
|
2001
|
Wheat
|
144,7
|
226,1
|
89,4
|
306,5
|
Barley
|
20,2
|
50,8
|
30,0
|
|
Maize
|
420,2
|
490,5
|
295,9
|
300,0
|
Pulses
|
9,2
|
9,3
|
2,6
|
5,0
|
Sunflower
|
22,8
|
40,5
|
2,6
|
30,2
|
Tobacco
|
3,4
|
2,1
|
1,5
|
1,6
|
Potatoes
|
349,8
|
443,3
|
302,0
|
415,0
|
Vegetables
|
380,0
|
417,0
|
354,2
|
350,0
|
Melons
|
32,2
|
108,2
|
80,0
|
70,0
|
Annual
and perennial grass
|
108,3
|
127,3
|
50,0
|
|
Fruits
|
279,0
|
296,0
|
250,0
|
200,0
|
Grapes
|
238,5
|
220,0
|
210,0
|
150,0
|
Citrus’s
|
85,1
|
56,0
|
40,0
|
60,0
|
Tea
leaves
|
47,2
|
60,0
|
24,0
|
23,0
|
Source:
SDS;
Agricultural
production
Name
|
Produced, thousand tons
|
|
1980
|
1985
|
1988
|
1990
|
Wheat
|
208,6
|
174,2
|
638,1
|
257,7
|
Barley
|
87,5
|
96,7
|
117,8
|
Maize
|
306,2
|
321,5
|
270,2
|
Beans
(Pulses)
|
na
|
16,1
|
na
|
7,3
|
Soy-Bean
|
3,9
|
6,0
|
na
|
3,4
|
Sunflower
|
9,5
|
9,3
|
16,9
|
7,7
|
Sugar
Beet
|
119,9
|
61,2
|
51,2
|
30,6
|
Tobacco
|
16,8
|
20,4
|
11,9
|
8,1
|
Potatoes
|
392,8
|
393,8
|
337,9
|
293,8
|
Vegetables
|
583,1
|
604,3
|
662,3
|
443,2
|
Melons
|
42,5
|
38,8
|
Annual
and perennial grass
|
na
|
796,9
|
na
|
624,3
|
Fruits
|
539,3
|
724,2
|
653,0
|
591,2
|
Grapes
|
995,6
|
914,9
|
619,7
|
691,0
|
Citrus’s
|
147,7
|
134,6
|
436,9
|
283,1
|
Tea
leaves
|
501,8
|
581,2
|
458,7
|
501,7
|
Source:
SDS; Alexandre Didebulidze. Agriculture and Rural Development in Georgia. UNDP, Tbilisi, 1997, p.63.
Agricultural
Production
Name
|
Produced, tons
|
1999-2001 as % of 1988-1990
|
1988-1990
|
1999-2001
|
Grain
(after cleaning)
|
621,9
|
640,2
|
102,9
|
Sunflower
|
10,8
|
24,4
|
225,9
|
Potatoes
|
321,4
|
386,8
|
120,3
|
Vegetables
and Melons
|
528,3
|
459,8
|
87,0
|
Tobacco
|
9,9
|
19,2
|
Fruits
and Berries (without Citruses)
|
616,3
|
248,7
|
40,4
|
Grapes
|
608,3
|
193,3
|
31,8
|
Citrus’s
|
271,4
|
52,0
|
19,2
|
Tea
leaves
|
486,0
|
35,7
|
7,3
|
Meat
|
173,7
|
103,6
|
59,6
|
Milk
|
700,4
|
663,1
|
94,7
|
Eggs
(mln. pieces)
|
840,1
|
382,3
|
45,5
|
Wool
|
6,5
|
1,8
|
27,7
|
Number
of livestock (for January 01), x1000
|
1988
|
1993
|
1995
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
2002
|
Cattle
|
1584
|
1002
|
944
|
974
|
1008
|
1027
|
1051
|
1122
|
1177
|
1250
|
Of which: Milk-cows
|
626
|
502
|
514
|
531
|
544
|
551
|
575
|
640
|
646
|
685
|
Horses
|
24
|
18
|
20
|
24
|
26
|
28
|
30
|
34
|
35
|
|
Pigs
|
1118
|
476
|
367
|
353
|
333
|
330
|
366
|
411
|
443
|
481
|
Sheep and goats
|
1921
|
1192
|
793
|
725
|
652
|
584
|
587
|
633
|
628
|
701
|
Poultry
|
23900
|
11200
|
12300
|
13847
|
14645
|
15541
|
8240
|
8473
|
7826
|
|
Bees (Families)
|
112
|
65
|
35
|
55
|
66
|
77
|
78
|
94
|
98
|
|
Source: SDS
Data
series for livestock
Year
|
Cattle
|
Pigs
|
Sheep and goat
|
Poultry
|
Total
|
Public
|
Private
|
Total
|
Public
|
Private
|
Total
|
Public
|
Private
|
Total
|
Public
|
Private
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
9
|
10
|
11
|
12
|
13
|
1941
|
1607,0
|
581,5
|
1025,5
|
615,6
|
53,3
|
562,3
|
2193,6
|
1085,7
|
1107,9
|
|
|
|
1942
|
1518,8
|
607,5
|
911,3
|
475,0
|
59,8
|
415,2
|
2051,5
|
1144,0
|
907,5
|
|
|
|
1943
|
1434,3
|
631,7
|
802,6
|
365,9
|
77,2
|
288,7
|
1891,7
|
1156,0
|
735,7
|
|
|
|
1944
|
1480,8
|
658,2
|
822,6
|
424,1
|
74,3
|
349,8
|
1997,5
|
1254,8
|
742,7
|
|
|
|
1945
|
1501,3
|
668,2
|
833,1
|
484,5
|
71,6
|
412,9
|
2170,2
|
1448,5
|
721,7
|
|
|
|
1950
|
1492,7
|
764,7
|
728,0
|
472,7
|
109,6
|
363,1
|
2509,2
|
1988,6
|
520,6
|
6651
|
|
5900
|
1955
|
1319,2
|
677,5
|
641,7
|
557,2
|
124,4
|
432,8
|
1625,8
|
1178,8
|
447,0
|
8173
|
|
7642
|
1960
|
1502,6
|
671,5
|
831,1
|
581,6
|
253,1
|
328,5
|
2125,0
|
1375,2
|
749,8
|
7471
|
|
6016
|
1965
|
1457,6
|
651,6
|
806,0
|
452,5
|
208,1
|
244,4
|
2183,0
|
1409,9
|
773,1
|
8664
|
|
6610
|
1970
|
1445,9
|
616,8
|
829,1
|
588,8
|
237,6
|
351,2
|
1826,8
|
1177,0
|
649,8
|
12046
|
|
8917
|
1975
|
1513,0
|
677,4
|
860,1
|
743,6
|
310,9
|
432,7
|
1982,4
|
1256,7
|
725,7
|
14161
|
|
8172
|
1980
|
1556,3
|
675,0
|
881,3
|
950,7
|
434,3
|
576,4
|
2041,2
|
1302,9
|
738,2
|
18376
|
|
9080
|
1981
|
1564,0
|
671,2
|
892,8
|
943,1
|
428,4
|
514,7
|
2043,8
|
1284,5
|
759,3
|
18781
|
9551
|
9230
|
1982
|
1588,9
|
668,2
|
920,7
|
980,9
|
393,5
|
527,4
|
2109,2
|
1285,1
|
824,1
|
19394
|
10372
|
9022
|
1983
|
1621,8
|
664,3
|
957,5
|
1011,1
|
464,4
|
546,7
|
1947,3
|
1125,1
|
822,2
|
19693
|
10739
|
8954
|
1984
|
1633,8
|
662,6
|
971,2
|
1082,1
|
492,0
|
590,1
|
1984,8
|
1136,9
|
847,9
|
20108
|
11341
|
8767
|
1985
|
1652,6
|
668,1
|
984,5
|
1133,4
|
509,3
|
624,1
|
1955,7
|
1103,5
|
852,2
|
22452
|
13803
|
8649
|
1986
|
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
|
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
|
|
|
Machine
Park (condition by the end of year) x1000
Technical means
|
1988
|
1994
|
1998
|
2000
|
Demand
|
Tractor
|
27,2
|
18,2
|
10,7
|
|
18,0
|
Combine
|
1,8
|
1,2
|
0,9
|
|
1,2
|
Loading machine
|
26,3
|
12,6
|
8,8
|
|
|
Pumping mounting
|
1,4
|
0,4
|
0,3
|
|
0,5
|
Sprayer
|
0,9
|
0,4
|
0,2
|
|
0,1
|
Source:
SSD
Technical
Dynamic in Agrarian Sector of Georgia
Year
|
Tractor
|
Grain combine
|
Plough
|
Cultivator
|
Seeding machine
|
Tractor-drawn
implement
|
Mineral
fertilization thrower
|
Sprinkler
|
Loading machine
|
1988
|
26.806
|
1.576
|
10.343
|
5.370
|
4.237
|
10.490
|
2.534
|
4.851
|
20.182
|
1990
|
26.000
|
1.343
|
8.339
|
4.370
|
3.852
|
8.589
|
2.373
|
4.027
|
17.800
|
1992
|
23.009
|
1.236
|
6.720
|
3.184
|
2.987
|
6.846
|
1.832
|
2.928
|
15.255
|
1993
|
20.800
|
1.140
|
5.491
|
2.626
|
2.737
|
5.251
|
1.635
|
2.262
|
13.823
|
1994
|
18.200
|
1.080
|
5.365
|
2.567
|
2.692
|
5.298
|
1.319
|
2.206
|
13.240
|
1995
|
15.160
|
949
|
5.216
|
2.307
|
2.018
|
5.265
|
1.084
|
1.905
|
12.860
|
1996
|
15.240
|
996
|
5.232
|
2.335
|
2.064
|
5.483
|
1.192
|
1.628
|
12.371
|
1997
|
17.583
|
1.018
|
5.367
|
2.340
|
1.910
|
5.617
|
1.230
|
1.498
|
12.110
|
1998
|
17.240
|
969
|
4.190
|
1.750
|
1.870
|
5.083
|
949
|
1.450
|
1999
|
18.147
|
1.064
|
4.434
|
2.346
|
1.912
|
5.610
|
1.030
|
1.428
|
10.240
|
2000
|
17.199
|
1.002
|
4.528
|
2.216
|
1.575
|
5.600
|
709
|
1.102
|
9.398
|
2001
|
|
|
|
|
|
|
|
|
|
Source: The Ministry of Agriculture and Food
Food
consumption in Georgia (1999)
|
Kg per capita
|
Scientific standard,
Kg
|
Consumption as
% Of standard
|
Bread,
flour, grouts, legumes
|
141,1
|
125
|
113
|
Meat
& meat products
|
19,8
|
78
|
25
|
Milk
and milk products
|
209
|
405
|
52
|
Eggs,
pieces
|
124,6
|
232
|
54
|
Fish
and canned fish
|
1,3
|
10,2
|
13
|
Sugar
|
24,8
|
40
|
62
|
Margarine
& other fats
|
9,0
|
9
|
100
|
Potatoes
|
47,6
|
110
|
43
|
Vegetables,
melons
|
66,8
|
130
|
51
|
Fruit
and grape
|
43,5
|
90
|
48
|
Source:
State Department for Statistics of Georgia
Consumption
of energy, fat and albumen by population in Georgia
Index
|
Measurement
|
Dwelling minimum
|
In rational
nourishment conditions
|
Actual 2000 year
|
Energy
|
KW in day and night
|
2.250
|
3.200
|
2630
|
Albumen
|
Gr. in day and night
|
74
|
100
|
|
Fat
|
Gr. in day and
night
|
57
|
130
|
|
Source: Gordeev A, MSXJ, 2-2000, food consumption condition-t.2
Privatisation
in Agriculture of Georgia (1998)
|
Total
Area
thsd. ha
|
Including
|
Private
|
Rent
|
State property,
%
|
thsd. ha
|
%
|
thsd. ha
|
%
|
Arable
land
|
785,0
|
431,9
|
55,0
|
255,9
|
32,6
|
12,4
|
Perennial
plants
|
277,5
|
185,7
|
66,9
|
31,0
|
11,2
|
21,9
|
Meadows
|
140,6
|
47,6
|
33,9
|
28,6
|
20,3
|
45,8
|
Pastures
|
1788,0
|
124,5
|
7,0
|
441,4
|
24,7
|
68,4
|
T o t
a l
|
2991,1
|
789,7
|
26,4
|
756,9
|
25,3
|
48,3
|
Privatization
in Agriculture of Georgia (2001)
|
Total
Area
thsd. ha
|
Including
|
Private
|
Rent
|
State property,
%
|
thsd. ha
|
%
|
thsd. ha
|
%
|
Arable
land
|
792,9
|
434,8
|
54,8
|
257,5
|
32,5
|
12,7
|
Perennial
plants
|
269,3
|
181,8
|
67,5
|
31,6
|
11,7
|
20,8
|
Meadows
|
142,3
|
41,3
|
29,0
|
57,1
|
40,1
|
30,9
|
Pastures
|
1795,8
|
84,3
|
4,7
|
593,4
|
33,0
|
62,2
|
T o t
a l
|
3019,7
|
762,1
|
25,2
|
939,6
|
31,1
|
43,6
|
Source:
Source: State Department of Land Management, Land Bal; ance for 04.2001
[GFA/KfW, 38]
Farm
Structures
Farm
type
|
Number of entities
|
Total area in ha
|
Average farm size in ha
|
Families
with private land
|
1 055 200
|
762 100
|
0,72
|
Families
and groups with rented land
|
31 900
|
352 000
|
11,03
|
Legal
entities with rented land
|
6 300
|
587 600
|
93,27
|
Source:
State Department of Land Management, Land Balance for 04.2001
Share
of private farms in agricultural output (per cent)
|
1990
|
1995
|
1996
|
1998
|
2000
|
Cereals
and bean crops
|
26
|
79
|
78
|
88
|
94
|
Of
which:
|
|
|
|
|
|
Winter wheat
|
0,1
|
26
|
20
|
73
|
89
|
Maize
|
62
|
95
|
94
|
94
|
96
|
Bean crops – total
|
62
|
95
|
98
|
98
|
99
|
Sunflower
seeds
|
1
|
25
|
52
|
69
|
81
|
Soy
beans
|
3
|
50
|
6
|
82
|
96
|
Potatoes
|
49
|
97
|
96
|
90
|
99
|
Vegetables
|
59
|
97
|
95
|
87
|
99
|
Melons
|
52
|
86
|
77
|
62
|
99
|
Fruit
|
80
|
99
|
99
|
99
|
99
|
Citruses
|
83
|
97
|
95
|
98
|
99
|
Grapes
|
45
|
94
|
97
|
97
|
99
|
Tea
leaves
|
7
|
47
|
36
|
45
|
34
|
Total
output
|
48
|
|
|
|
94
|
Source: Georgian Agriculture 2000, p.36
Share
of private farms in agricultural output (per cent)
|
1988
|
2000
|
Grain
|
25
|
94
|
Sunflower
seeds
|
1
|
81
|
Soya
–beans
|
2
|
96
|
Tobacco
|
17
|
99
|
Potatoes
|
43
|
99
|
Vegetables
|
47
|
99
|
Melons
|
65
|
99
|
Fruits
|
78
|
99
|
Citruses
|
77
|
99
|
Grapes
|
50
|
99
|
Tea
|
7
|
34
|
Total
output
|
50,1 (1985),
48,0(1990)
|
94,0
|
Source: Georgian Agriculture 2000
Privatisation
in Georgian Agriculture
The
least
|
In private position, %
|
1986
|
2001
|
Agricultural
lands
|
5,6
|
25,2
|
Of
which: Arable
|
12,3
|
54,7
|
Perennial plants
|
23,7
|
Meadows
|
1,4
|
29,0
|
Pastures
|
0
|
4,7
|
Cattle
|
58,9
|
99,4
|
Of
which milk cows and she-buffalo
|
71,0
|
99,6
|
Pig
|
54,2
|
99,8
|
Sheep
and goat
|
44,5
|
95,6
|
Horse
|
74,0
|
98,9
|
Bird
and wing
|
39,7
|
99,0
|
Poultry
|
15,6
|
100
|
Bee
family
|
45,5
|
100
|
Source: Georgian Agrostatistic 2000, Tbilisi, 2001. – p
Agriculture
in Georgian Export (2001)
Export
Position
|
Million US$
|
Percentage and Place
|
General
Export
|
320028,8
|
100,0
|
Incl.:
Wine
|
32195,3
|
10,1 (3)
|
Mineral Water
|
11663,4
|
3,6 (7)
|
Nuts
|
9843,5
|
3,1 (9)
|
Source: SDS
Import
of Main Food Products (2001)
Import
Position
|
Million US $
|
Percentage and Place
|
General
Import
|
684097,5
|
100,0
|
Incl.:
Sugar
|
24105,1
|
3,5 (4)
|
Tobacco Wares
|
24065,2
|
3,5 (5)
|
Meal
|
14792,9
|
2,2 (8)
|
Wheat
|
11186,1
|
1,6 (10)
|
Source: SDS; * - estimate
Agricultural
Export and Import
Year
|
Export
|
Import
|
Turnover
|
1995
|
9536,4
|
11652,1
|
21188,5
|
1996
|
14977,3
|
72917,9
|
87895,2
|
1997
|
12388,0
|
68032,4
|
80420,4
|
1998
|
40918,2
|
268955,5
|
309873,7
|
1999
|
102171,0
|
436740,9
|
538911,9
|
2000
|
139554,5
|
529371,8
|
668926,3
|
Dynamic
of Agrarian Export, 1997-2001 (mln US$)
|
1997
|
1998
|
1999
|
2000
|
2001
|
Tea
|
18,5
|
8,9
|
11,4
|
6,1
|
5,8
|
Citruses
|
9,1
|
9,5
|
1,9
|
2,5
|
1,6
|
Alcoholic
drinks (instead wine)
|
5,2
|
5,5
|
5,5
|
4,0
|
5,9
|
Nuts
|
5,3
|
9,4
|
15,4
|
19,3
|
9,8
|
Wine
|
12,5
|
15,4
|
14,6
|
29,1
|
32,2
|
Mineral
waters
|
18,5
|
7,2
|
2,6
|
9,5
|
15,2
|
Total
export
|
239,8
|
192,3
|
238,2
|
329,9
|
320,0
|
Source: IMF (account No.211, 11.2001, pg.123;) in red State
Statistic Department
Dynamic of Agrarian Import, 1997-2001 (mln US$)
|
1997
|
1998
|
1999
|
2000
|
2001
|
Sugar
|
39,1
|
16,2
|
16,2
|
24,6
|
24,1
|
Tobacco
wares
|
107,8
|
120,0
|
35,2
|
29,4
|
28,8
|
Wheat
and flour
|
37,1
|
26,5
|
14,8
|
20,3
|
28,2
|
Beer
|
3,1
|
0,8
|
0,1
|
0,1
|
0,1
|
Bread
products
|
57,2
|
31,8
|
15,5
|
21,9
|
17,3
|
Vegetable
oil
|
2,2
|
4,7
|
1,1
|
1,0
|
3,4
|
Poultry
meat, eggs
|
10,2
|
12,3
|
14,5
|
11,0
|
10,3
|
Coffee
|
9,0
|
5,4
|
5,0
|
4,3
|
2,0
|
Total
import
|
941,7
|
884,3
|
601,9
|
650,7
|
684,1
|
Source: State Department of Statistic s; IMF(account No. 211,
11.2001, pg.124);
Investments
in Fixed Capital
Year
|
Investments in Fixed Capital, total,Mln GEL
|
Of which Foreign
Investments
|
Share of
Agriculture, %
|
Mln GEL
|
% of Total
|
1995
|
127
|
42
|
33,9
|
0
|
1996
|
170
|
86
|
50,6
|
0
|
1997
|
266
|
180
|
67,7
|
0
|
1998
|
512
|
401
|
78,3
|
0,04
|
1999
|
364
|
169
|
46,4
|
1,7
|
2000
|
349
|
119
|
34,1
|
0,4
|
Source: SDS, 25.01.2001
Foreign
investments in fixed capital by fields and years
(in actual prices, mln Lari)
|
1995
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
Foreign
investments
|
42,9
|
86,4
|
179,9
|
401,0
|
168,6
|
119,0
|
128,2
|
The same in US$
|
33,2
|
68,5
|
138,6
|
271,2
|
83,1
|
60,2
|
62,2
|
Of which: Agriculture
|
-
|
-
|
-
|
0,2
|
6,0
|
1,3
|
|
Food industry
|
2,6
|
3,2
|
4,4
|
19,9
|
14,8
|
17,6
|
|
The same Gagua (EK 3/4/00
|
|
3,455
|
4,902
|
21,714
|
|
|
|
Sum
|
2,6
|
3,2
|
4,4
|
20,1
|
20,8
|
18,9
|
|
% of Foreign Investments
|
6,1
|
3,7
|
2,4
|
5,3
|
12,3
|
15,9
|
|
Source: Investment activities in Georgia, State Statistic
Department, 1999
Most Exportable Agricultural
Products.
Georgian
Wines. Georgia
is known as the birthplace of viticulture and winemaking and has 5000 years of
wine culture. The rich land, hot sun and hard work have developed about 500
varieties of wine in Georgia.
According
to the State Department of Statistics exports of different types of Georgian
wine during first nine month of the 2001 made up 18186,5
thousand USD which is 7,8 percent of the total Georgian exports.
At the end of the 20th
century, the collapse of the Soviet Union has caused an economic decline in
Georgia, which negatively affected the Georgian wine sector. To be more precise
– the overall territory of vineyards has decreased by 50%, (1990 – 112,6
thousand hectares, 2000y – 60,5 thousand hectares). This tendency was mainly
caused by the following reasons: lack of enough funds among farmers to purchase
chemicals, technical devices and machines for vine cultivation, also huge
numbers of farmers had to convert their vineyards into land to grow edible
products such as corn, vegetables, and grain.
In addition, from the mid 1990s
the tendency of vineyard rehabilitation has been quite dynamic, still the total
area of vineyards is far less than it was even 20 years ago.
Table # 1 Tendency of wine sector
development for the last ten years
Sector
|
Measure
|
1981-85 average
per year
|
1986-90 average
per year
|
1990
|
1995
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
Total area of vineyards
|
(1000)
Hectares
|
137,4
|
116,1
|
112,6
|
94,2
|
94,0
|
72,0
|
70,0
|
60,1
|
60,5
|
61,5
|
Production of grape
|
(1000)
Tones
|
768,0
|
712,0
|
691,0
|
160,0
|
342,0
|
370,0
|
370,0
|
219,0
|
210,0
|
170,0
|
Grape
Processing
|
(1000)
Tones
|
422,5
|
433,5
|
38,0
|
60,0
|
46,0
|
23,5
|
29,5
|
34,4
|
19,1
|
Production of wine materials
|
(1000)
decaliters
|
21969,0
|
14997,0
|
16283
|
3670
|
2223
|
3121,6
|
2303,8
|
1859,2
|
1816
|
1900
|
Production of champagne and sparkling wines
|
(1000) decalitres
|
1375,7
|
1526
|
1451
|
49,2
|
94,6
|
75,6
|
40,3
|
64,7
|
87,9
|
88,35
|
Production of Brandy
|
(10000 decaliters
|
1563
|
1865
|
2165
|
158
|
135
|
82.,3
|
37,8
|
30,4
|
70,6
|
71,0
|
Production of the liqueur
|
(10000decaliters)
|
937.0
|
523,0
|
822
|
103
|
132
|
251
|
112,7
|
473,0
|
430,0
|
569,0
|
Source: Samtrest, Ministry of Agriculture.2002
Even though the Georgian wine
sector is famous for its 500 traditional grape varieties, the vast majority is
currently grown and available only in limited areas and numbers. Traditionally
in accordance with climate and soil characteristics – Georgia is divided into 5
main wine producing regions. Kakheti, Kartli, Imereti, Racha-lechkhumi and the
Black Sea Subtropical zone.
In accordance with the development
and strength of the wine sector Kakheti could be easily considered as the
leader. The region is characterized by huge variety of grapes and assortment of
wine.
From the structural point of view,
80% of Georgian vineyards is allocated to white grapes: Rkaciteli amounts to
almost 75% of all white wines and the remaining 25% is allocated to Cicka,
Colikauri, Mcvane, and Tetra. The dominant type in red grapes is 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%)
|
West Georgia
|
0,27
|
8,74
|
9,01 (~15%)
|
Total
|
1,8
|
58,3
|
60,1 (100%)
|
Source: Ministry of Agriculture, 2002
Table #3 below indicates the information on main types of Georgian
grape, as of 2001
Species of grapes
|
Colour
|
Regions of
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 farmer’s revenue
will increase, thus creating the ability for the farmer to procure some
necessary tools, chemicals and machinery and increase the volume of his grapes
for the next season. This could lead to the rehabilitation and positive
redevelopment of the whole Georgian wine sector, though it should be mentioned
that this positive tendency will not be implemented without sophisticated grape
processing factories and new export markets.
In Table #1 it is clearly
indicated that during the first part of last decade of the 20th
century there was a huge drop in the volume of processed grape. This was mainly
caused by the following reasons: Weak economic condition of the country, loss
of traditional Russian market and huge amount of fake vintage Georgian wines,
both in the Georgian and Russian markets. It should be mentioned that during
the same period both farmers and wine factories had huge amounts of grapes in
their warehouses, which did not find its path towards wine, simply because of
the aspects mentioned above. And this is happening in Georgia – a country,
which during the Soviet period was producing 55% of the total vintage wines and
more than 25% of brandy in the USSR.
Despite all the negative factors
mentioned above, in the second part of last decade of the 20th
century developmental steps ahead were made in the Georgian wine sector, which
on its behalf has led to the participation of foreign investors in the sector.
The positive aspects were mainly caused by the fact that a new generation
businessmen have acquired western knowledge of management and marketing, the
consumer’s nostalgia for Georgian wines, and the government’s support. Lately,
the participation of foreign companies is getting clearly noticeable – both in
the fields of wine-making and in establishing new vineyards.
As
a result, the number of local Georgian wine-making companies could be easily
outlined in accordance with their financial strength, good marketing campaign,
progressive management and export volume. These companies are: GWS (Georgian
wines and spirits), “Telavi wine cellar”, “Akhasheni”, “Tbilwine”
“Vaziani”, “Kinzmarauli”, “David Sarajishvili and Eniseli”, “Okami”, “Teliani
Veli”, “Rachuli Gvino” and “Zmebi askaneli”.
Mineral
and Spring Waters.
According to the State Department of Statistics exports of different types of
Georgian mineral waters during the first nine months of 2001 made up 6646,9
thousand USD which is 2.8 percent of the total Georgian exports.
One of the biggest assets –
essential for the resort development in the country is represented by mineral
waters. In Georgia almost all kinds of mineral water can be found, with more
than 2,000 mineral springs, out of which 1700 are natural phenomena and 300 are
boreholes. Their estimated total yield per day is 120 million liters. The most
common kind is a carbonic acid mineral water, the daily yield of which amounts
to approximately 60 million liters.
[19][1]Structural geologic and
hydrochemical properties of the so-called geotechtonic zones account for the
distribution of various kinds of mineral waters in Georgia. For instance,
within the limits of the Main Range and the Southern slope of the Greater
Caucasus – cold, mostly carbonic and hydrocarbonated waters predominate. On
Georgian Block the typical water includes cold as well as thermal sulphide-methane
and nitric-methane, chloride and sulphate. Within the Adjara –Trialeti system
and the adjoining Somkhiti Block the following kinds of water predominate:
carbonic acid hydrocarbonated or chloride-hydrocarbonated as well as weak
sulphide nitric, sulphate-chloride or carbonate-bicarbonate.
Georgia has large reserves of
thermal water of various chemical compositions. The territory occupied by
Georgian Block and Adjara Trialeti System is especially rich in them. Thermal
radioactive (Radonic) mineral waters are the main natural curative factors of
the Tskaltubo and Tkvarcheli Resorts. So-called hyperthermal waters, forming a
class by themselves are extracted from the earth’s deep levels by boring. The
main pools of these waters are: Tsaishi (Temp 81-82 C), Kvaloni (Temp 94 C),
Kindghi (103 C), Khorga (Temp 110 C). Hyperthermal waters are mostly used for
heating purposes.
Drinkable
mineral waters are used for health-restoration not only at resorts, but also
outside them in the form of bottled mineral waters. Such as Borjomi, Nabeglavi,
Sairme, Ucera, Djava, and Zvare.
Borjomi
Mineral Water.
The Borjomi resort is considered as one of the most spectacular locations in
Georgia. It is located at 950 meters above sea level between the evergreen
slopes of the Meskheti and Trialeti Ridges.
Besides
its beautiful nature and climate, the Borjomi region is famous for its mineral
waters, which 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 Soviet Union
In
September of 1995 the Georgian Glass and Mineral Water company. N.V.
(GG&MW) began to produce Borjomi mineral water at two Soviet – era bottling
plants in Borjomi. A short period later the bottling plants, pipelines and
quality control systems were brought up to world standards.
The
Khashuri Glass plant, located 30 km from Borjomi, has also been reconstructed.
After being purchased by GG&MW, the production process was modernized and a
new automated bottle-packaging system was installed.
In
1997, GG&MW obtained the license and exclusive right to use the Borjomi
name until 2007. In order to restore Borjomi mineral water and make it
compatible with international standards, GG&MW found it essential to
cooperate with international financial institutions, such as: IFC, EBRD, ING
Barings, and TBC Group of Georgia.
GG&MW
mainly orients its exports towards the Russian Federation, Ukraine, Baltic
States, USA, and Israel, and it is considered as the biggest, financially
strongest and most progressive Borjomi bottling company.
Sairme
Mineral Waters.
The Sairme resort is situated in the valley of the Tsalabris tskali river 950 m
above sea level and 55 km south of the second biggest town in Georgia –
Kutaisi. The nearby mountainsides are overgrown with leaf bearing (oak, beech,
etc.) and also coniferous woods. The resort has been operating since 1930.
Climate of the region is moderately humid, subtropical, average temperature of
the air totals 8.8 C, the annual amount of precipitation makes up on average
1100mm, average humidity of the air is 80%.
The
word “Sairme” in Georgian means “a place of deer”. In winter many deer and roes
used to come down to the mineral watering places from the nearby woods,
therefore the hunters called the place “Sairme.”
As
it was mentioned above, the Sairme resort is rich with mineral water springs –
the major natural curative factor of the resort. Sairme mineral waters are
known since the end of the 19th century. In terms of their chemical
composition, they are of acidulous hydrocarbonate calcium-sodium kind of
acidulous hydrocarbonate sodium Borjomi – like variety. It has been established
that “Sairme” acidulos waters have a curative action against diseases of
kidneys, urinary tracts, and liver.
The
only company that bottles Sairme is the CARTU group. The company uses a German
bottling line and produces water in 1 liter PET and 0.33 and 0.5-liter green
glass bottles. The only raw materials the company imports are capsules for its
bottles from Turkey, bottle caps from Bulgaria and Turkey, and clay from
Turkey. The company mainly orients its export towards the FSU republics.
A
new foreign company with better experience in promotion and distribution could
easily enter the Sairme bottling market. This takes into consideration the fact
that CARTU has a normal license and is not the exclusive company to bottle
Sairme water.
Mitarbi
Mineral Water.
The Mitarbi source is located near the Borjomi resort and is surrounded by
picturesque mountains in an unspoilt and unpolluted environment. The debit of
the water constitutes 40.000 M per year.
Mitarbi
was bottled and very successfully marketed during Soviet times throughout the
USSR and in some foreign countries. Success to the waters came due to their
taste and curative features. These are colorless, odorless, fully transparent
waters with a mild taste.
Mitarbi
is 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 USSR, due to severe political and economic circumstances bottling of water
was temporarily seized.
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 Georgia since ancient times. Scientists
conclude that this species of thick hazelnuts originates from the Caucasus.
Since the mid-1990s farmers started a mass planting of hazelnuts in Western
Georgia, particularly in the Black Sea coastal region and in Eastern Georgia in
the region of Kakheti. It should be mentioned that since 1998 Georgian nuts
have become one of the country’s major export products.
One of the advantages of Georgia’s
agricultural sector is the high percentage of produce that is organic in
nature. The country has not been using fertilizers and pesticides for some 10
years. Now the country is preparing a certification process whereby all farmers
producing organic food will have their farms approved and certified as organic.
This is expected to generate new interest in Georgia’s agricultural sector,
particularly from markets in the West where demand for organic food is
increasing far beyond supply.
Georgian
Tea. Georgia
is a northerly tea growing country with a relatively shorter growing season
than other tea producing nations. Tea is grown in West Georgia in Guria,
Samegrelo, Ajara, and Imereti Regions. According to official statistics for
2001[20][2], these regions possess slightly
more than one-quarter of the country’s total 564,518 hectares of agricultural
land.
At independence in 1991, the
country had 64,500 hectares of state-owned tea plantations. Civil war, decline
in demand from former markets in the FSU and the loss of state financing have
caused much of the area formerly planted to tea to be abandoned. As of January
2002, 37,296 hectares of agriculture land were planted to tea. Tea plantations
now occupy 65 percent of Guria’s total agricultural land, 27 percent of
Samegrelo’s total agricultural land, 58 percent of Ajara’s total agricultural
land and 6 percent of Imereti’s total agricultural land (Table 1). Following the
abolition of collective agriculture, land under tea plantations has mostly been
privatized in Guria, while in Samegrelo, Ajara, and Imereti most of the tea
plantations have been leased out.
Tea
leaf production data in the early 1990s is extremely unreliable and so not
reported here. It is clear that production levels have fallen greatly from
those of the late 1980s. Production has generally continued to drift downward
since the mid-1990s (Tables 2-3, Figures 1-2).
According to the Ministry of Agriculture
and Food, as of January 1, 2001 there were 146 tea processing enterprises in
Georgia (including Abkhazeti) with a total annual capacity of 722,800 tons.
There were 50 tea factories in Samegrelo, 30 in Guria, 16 in Imereti, and 18 in
Ajara. Forty-six of the 50 enterprises in Samegrelo had been privatized, while
30, 11 and 1 enterprises had been privatized in Guria, Imereti, and Ajara,
respectively. These enterprises mostly use worn-out, obsolete equipment and are
in poor financial condition. Some of these enterprises are reported to have
vertically integrated operations, while others operate on a contractual basis
with tea growers. As might be expected, almost all tea grown appears to be sold
to the factories so that the processing trends follow those of production
(Table 4, Figure 3). The nature of tea also means that the producers are much
more dependent on the processors than are, say, owners of vineyards. Homemade
wine is a reasonable and widely practiced option for primary producers; homemade
tea is not.
During
1994-2001 Georgia was a net exporter of tea, although it also was a substantial
importer and the balance of trade appears to be turning against Georgia (Table
5, Figure 4). In the early and mid 1990s the major importers of Georgian tea
were in the FSU, but since 1997 geographic coverage has widened as processors
developed new markets. Exports of Georgia tea to US, Germany, and Poland show
an increase (Table 6).
Tea
remains an important cash crop among rural households in most of West Georgia.
The share of households in total tealeaf production in 1999 was 43 percent, in
2000, 34 percent, and 93 percent in 2001 (Table 7).
Table 1.
Land under Tea Plantations, 2001
Region
|
District
|
Total
Agricultural Land, ha
|
Total Area under
Tea Plantations,
ha
|
Area of Tea
Plantations
Damaged, ha
|
Area of Usable
Plantations,
ha
|
Percent of Plantations
Damaged, %
|
Share of the
Region in total agricultural land of Georgia
|
Area of Land
under Tea as Percent of Total Agricultural Land in Region
|
Ajara
|
Regional Total
|
9590
|
5,518
|
1,674
|
3,844
|
30%
|
1.70
|
58
|
|
|
|
|
|
|
|
|
|
Samegrelo
|
Zugdidi
|
10,169
|
5,061
|
654
|
4,407
|
13%
|
1.80
|
50
|
|
Martvili
|
9,334
|
2,721
|
330
|
2,391
|
12%
|
1.65
|
29
|
|
Senaki
|
9,699
|
1,202
|
324
|
878
|
27%
|
1.72
|
12
|
|
Chkhorotsku
|
4,830
|
2,492
|
463
|
2,029
|
19%
|
0.86
|
52
|
|
Tsalenjikha
|
3,886
|
2,993
|
0
|
2,993
|
0%
|
0.69
|
77
|
|
Abasha
|
9,654
|
67
|
67
|
0
|
100%
|
1.71
|
1
|
|
Khobi
|
10,340
|
1,438
|
0
|
1,438
|
0%
|
1.83
|
14
|
|
Regional Total
|
58524
|
15974
|
1838
|
14136
|
12
|
10.37
|
27
|
|
|
|
|
|
|
|
|
|
Guria
|
Ozurgeti
|
5,501
|
7,358
|
890
|
6,468
|
12%
|
0.97
|
|
|
Lanchkhuti
|
7,864
|
1,988
|
445
|
1,543
|
22%
|
1.39
|
25
|
|
Chokhatauri
|
3,720
|
1,786
|
518
|
1,268
|
29%
|
0.66
|
48
|
|
Regional Total
|
17085
|
15,974
|
1,838
|
14,136
|
12%
|
3.03
|
65
|
|
|
|
|
|
|
|
|
Imereti
|
Tskaltubo
|
12,025
|
1,141
|
385
|
756
|
34%
|
2.13
|
9
|
|
Tkibuli
|
3,811
|
1,073
|
200
|
873
|
19%
|
0.68
|
28
|
|
Chiatura
|
7,323
|
246
|
38
|
208
|
15%
|
1.30
|
3
|
|
Vani
|
5,335
|
130
|
70
|
60
|
54%
|
0.95
|
2
|
|
Zestafoni
|
6,127
|
38
|
0
|
38
|
0%
|
1.09
|
1
|
|
Terjola
|
7,741
|
120
|
39
|
81
|
33%
|
1.37
|
2
|
|
Samtredia
|
8,103
|
380
|
0
|
380
|
0%
|
1.44
|
5
|
|
Khoni
|
6,971
|
1,544
|
790
|
754
|
51%
|
1.23
|
22
|
|
Regional Total
|
73065
|
11,132
|
1,853
|
9,279
|
17%
|
12.94
|
6
|
|
|
|
|
|
|
|
|
|
Georgia, Excluding Abkhazeti
|
TOTAL
|
564,518
|
37,296
|
6,887
|
30,409
|
18%
|
28%
|
7
|
Source: State Department of Statistics of Georgia, author's
estimates. The data for Ozurgeti clearly contain an error.
Table 2. Annual Tea Leaf Production in
Georgia, 1985-2001
(tons)
1985
|
581,200
|
1990
|
501,700
|
1994
|
60,700
|
1995
|
38,500
|
1996
|
34,000
|
1997
|
33,200
|
1998
|
47,200
|
1999
|
60,330
|
2000
|
23,999
|
2001
|
23,000
|
Source: State Department of
Statistics of Georgia
Table 3. Tea Leaf Production by Regions, tons
|
Ajara
|
Imereti
|
Samegrelo
|
Guria
|
Georgia
|
1999
|
7,326
|
6,693
|
28,791
|
17,520
|
60,330
|
2000
|
2,914
|
2,662
|
11,453
|
6,970
|
23,999
|
2001
|
1,924
|
1,050
|
12,518
|
7,508
|
23,000
|
Source: State Department of
Statistics of Georgia, author's estimates
Table 4. Tea Processing, 1994-2001
(tons)
|
1994
|
1995
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
First Stage Processing,
Including
|
13,424.3
|
7,992.0
|
8,895.7
|
9,158.5
|
9,988.9
|
12,897.8
|
4,793.1
|
4,478.6
|
Black Baikhi
|
|
6,732.0
|
5,804.7
|
6,152.6
|
8,360.7
|
11,789.8
|
4,361.9
|
4,219.4
|
Green Baikhi
|
|
1,260.0
|
3,091.0
|
3,005.9
|
1,628.2
|
1,108.0
|
431.2
|
259.2
|
Natural Tea, Including
|
4,473.3
|
4,230.0
|
3,747.4
|
7,759.2
|
4,871.0
|
4,509.0
|
3,014.7
|
3,765.1
|
Packed
|
4,003.9
|
1,997.2
|
2,796.2
|
6,420.0
|
2,955.7
|
2,648.4
|
1,904.8
|
2,695.5
|
Green Break
|
469.4
|
2,232.8
|
951.2
|
1,339.2
|
1,915.3
|
1,860.6
|
1,109.9
|
1,069.6
|
Granulated Tea
|
|
|
|
144.0
|
890.1
|
605.3
|
474.1
|
658.7
|
Liquid Tea
|
|
|
|
|
|
|
39.0
|
58.0
|
Total
|
17,897.6
|
12,222.0
|
12,643.1
|
17,061.7
|
15,750.0
|
18,012.1
|
8,320.9
|
8,960.4
|
Source: State Department of Statistics
Table 5. Georgia’s Tea Trade
|
Imports,
USD
|
Exports,
USD
|
Coverage
Ratio, %
|
1994
|
12439
|
11555495
|
929.0
|
1995
|
157876
|
8380262
|
53.1
|
1996
|
151898
|
16814164
|
110.7
|
1997
|
292190
|
13872490
|
47.5
|
1998
|
434761
|
8918643
|
20.5
|
1999
|
380428
|
11394714
|
30.0
|
2000
|
536702
|
6084280
|
11.3
|
2001
|
544454
|
5792750
|
10.6
|
Source: State Department of Statistics,
author’s estimates
Table 6. Top 10 Export Destinations of
Georgian Tea, 1994-2001
|
1994
|
1995
|
1996
|
1997
|
1998
|
1999
|
2000
|
2001
|
1
|
RUS
|
TKM
|
TKM
|
RUS
|
RUS
|
RUS
|
RUS
|
RUS
|
2
|
UKR
|
RUS
|
RUS
|
UZB
|
UZB
|
UKR
|
UKR
|
POL
|
3
|
BLR
|
UKR
|
UZB
|
TKM
|
DEU
|
DEU
|
DEU
|
USA
|
4
|
TKM
|
KGZ
|
TJK
|
TJK
|
TJK
|
TKM
|
USA
|
DEU
|
5
|
UZB
|
KAZ
|
UKR
|
MNG
|
SYR
|
USA
|
MNG
|
UKR
|
6
|
TJK
|
UZB
|
KAZ
|
UKR
|
NLD
|
UZB
|
UZB
|
MNG
|
7
|
KAZ
|
TJK
|
MNG
|
POL
|
MNG
|
MNG
|
POL
|
UZB
|
8
|
TUR
|
MNG
|
AZE
|
KAZ
|
BLR
|
TJK
|
UKR
|
9
|
MDA
|
BLR
|
BLR
|
BLR
|
UKR
|
BLR
|
KAZ
|
IDN
|
10
|
POL
|
MDA
|
KGZ
|
KEN
|
KAZ
|
POL
|
TKM
|
TJK
|
Source: State Department of Statistics,
author’s estimates
Table7. Household Contribution to Total
Production
All of Georgia excluding Abkhazia
|
1999
|
2000
|
2001
|
Production
by Households, tons
|
25,942
|
8,160
|
21,390
|
Total
Production, tons
|
60,330
|
23,999
|
23,000
|
Household
Share in Total Production, percent
|
0.43%
|
0.34%
|
0.93%
|
Source:
State Department of Statistics, author's estimates
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$395,0 million.
The following table shows the trends in Georgia's trade balance:
|
|
Number of
Countries
|
Foreign Trade
Balance - US$ million
|
Negative trade balance
|
Year 2001
|
88
|
378,8
|
Year 2002
|
89
|
454,2
|
Positive trade balance
|
Year 2001
|
30
|
20,1
|
Year 2002
|
40
|
59,2
|
All trade partners
|
Year 2001
|
118
|
358,7
|
Year 2002
|
129
|
395,0
|
|
|
In 2002 Georgia had
a negative trade balance with 89 partner countries, with whom the trade gap
amounted 454,2 million US Dollars in comparison with the last year when the
same figure was indicated by 378,8 million US $ with 88 partner countries.
Georgia had a positive trade balance of US $ 59,2 million with 40 countries,
and in 2001 with 30 countries (positive balance of US $ 59,2 million).
In 2002 the foreign trade with CIS countries have increased. The 30.6% of the
trade gap covers these countries (29.7% for the same period of the last
year). The foreign trade with CIS countries amounted US $ 4337.4 million in
2002 (the amount increased by 10.6% in comparison with the same period of the
year 2001). CIS countries share 41,9% of Georgia's foreign trade turnover,
among them exports share 48,7% and imports 38,8% (accordingly 39.6%; 45.1%
and 37.0% - in the year 2001).
Trade turnover with Russia reflected US $ 162.8 million and has declined by
1.2% in comparison with the same period of the year 2001, and Georgian
foreign trade turnover with Russia have decreased by 0.9 per cent points from
16.5% to 15.6%.
Georgian
Foreign Trade: 2001-2002 (in US$ millions)
Georgia's Top Ten Export
Destinations in 2002 (in US$ millions)
Major export products in
2002 (in US$ millions)
|
Overview
of Georgian Construction Sector. Georgian construction sector mainly consists
of civil, industrial, hydro-technical, transport, and communication
construction projects.
The
construction sector was established long before the formation of the country as
a legal state and has passed from primitive buildings to complicated and
sophisticated complexes. Throughout various stages of the country’s
development, buildings and other construction projects reflect the period in
which they were built. For nearly the last two centuries Georgia was part of
the Russian empire and the Soviet Union, thus, the development of the
construction sector was in accordance with the laws and conditions accepted by
Russia and the FSU, i.e. massive construction of industrial facilities. During
that period the construction sector employed almost 250,000 people and produced
construction materials worth approximately US$1.5 million annually.
After
the collapse of the Soviet Union, the Georgian construction sector ceased
development, which was mainly caused by the political, social and economic
conditions of the country (i.e. a coup, civil war, and armed conflicts in
Abkhazia and South Osetia), and also by non-efficient, highly energy consuming
technologies and outdated equipment and machinery. As a result, almost one hundred
percent of the construction factories and facilities ceased functioning.
During
the early ‘90s, when Georgia became independent and positioned itself towards
democracy and integration into the world economy, the Georgian construction
sector realized that it was totally unprepared to meet the demands and
standards of country’s development phase. The main negative aspects
characterizing such non-preparedness were:
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 government’s 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 country’s economic development, the Georgian
government made several positive steps towards rehabilitation of the
construction industry to create a favourable investment environment including
passing the law on promotion and guarantee of foreign investment activities,
and instituting a process of restructuring and privatisation. A few years ago
the government of Georgia launched a process of restructuring and privatisation
of large Soviet era construction enterprises. As a result, various
non-efficient, illiquid and monster enterprises have changed their
organizational structure and been converted into small cost and energy
efficient, liquid plants. Derived from the privatisation process the majority
of state construction companies have become private joint stock and limited
liability companies. In addition, a huge number of uncompleted construction
sites have been privatised and completed.
Main
Indicators of Development in the Construction Sector. The
slight revival and positive trends in the construction sector have been noticed
since 1995 – the period when the Georgian national currency the Lari (GEL) was
introduced.
The table below indicates the main
financial flow in the construction sector during 1995-2002 (first nine months).
Year
|
Monetary unit
|
Investment in main capital
|
Government investment
|
Construction and engineering work
|
Personal funds of population*
|
Foreign investment
|
1990
|
Million Rubles
|
2545
|
2233
|
1313
|
93
|
-
|
1991
|
2698
|
2435
|
1882
|
140
|
-
|
1992
|
12368
|
11521
|
8636
|
532
|
-
|
1993
|
Billion Coupon
|
311
|
142
|
270
|
168
|
-
|
1994
|
55821
|
30769
|
41758
|
25000
|
-
|
1995
|
Million Lari
|
127
|
65
|
90
|
19
|
43
|
1996
|
170
|
60
|
91
|
24
|
86
|
1997
|
266
|
67
|
114
|
19
|
180
|
1998
|
512
|
915
|
244
|
16
|
401
|
1999
|
364
|
119
|
248
|
76
|
169
|
2000
|
349
|
141
|
181
|
89
|
119
|
2001
|
362
|
201
|
101
|
33
|
128
|
2002
|
246
|
158
|
86
|
59
|
29
|
Source: Ministry of Construction and Urbanization
* The construction of dwellings in
Georgia is mainly based on up-front deposits made by people who will live there
after the construction is completed.
According to the table
investments in main capital from 1995-2002 constitutes 2396 million Georgian
Lari (1109 million USD) which includes: Government investment – 906 million GEL
(419 million USD) – 37.8%, personal funds of the population – 335 million GEL
(155 million USD) – 14.0%, foreign investment – 1155 million GEL (534 million
USD) – (48.2%). Derived from this data we can state that investment in main
capital shows a trend toward a positive increase (+2.7) from 1995-2001 compared
to 1995. In addition, the increase in foreign investment is quite noticeable.
This was mainly due to the construction of the oil pipeline and Supsa oil
terminal in 1998.
In 2002 the positive developments in
the construction sector continue to accelerate, resulting in construction of
545 buildings, among theses are the construction of a new Marriott hotel, 62
stores, 38 gas stations, and 12 food outlets (all in Tbilisi).
Market
demand (Construction Materials). Even
though several local construction material manufacturing plants have been
restructured and rehabilitated, the goods manufactured by them do not have a
high demand among Georgian customers. Mainly this is due to low quality and
narrow assortment. The only Georgian made product of comparatively good quality
is cement, produced by the Rustavcement and Kaspicement companies. This
situation represents a good opportunity for U.S. firms to invest in and/or
upgrade local building materials manufacturing plants. Presently, product
imported from Turkey, Dubai, Iran and Russia occupies almost 95% of the
Georgian building materials market. Even though they are perceived to be of a
lower quality, the majority of people still buy them because of the low price.
Nevertheless, another Georgian customer segment, the high income family, still
prefers building materials made in the U.S. or Europe, due to the high quality
and regardless of the higher price.
The following imported materials are
in the highest demand on the Georgian market:
·
Ceramic Products (tile, mats)
·
Insulated
American style windows, doors.
·
Various
colored wood and flooring materials.
·
Heat,
ventilation, air conditioning systems.
·
Roofing
materials
·
Varnish
paints
·
Plastic
tubes for water communication
·
Wallpapers
·
Lights
and bulbs
·
Vinyl
sidings
Due
to the growing wave of construction, a large market share still remains
unoccupied and is ready for new companies and potential investors. The
construction sector will play an essential and important role in Georgia’s
further economic development and integration into the world economy.
Enterprise
register. Registration
of an enterprise is to be carried out by the Court by making due records in the
Enterprise Register. The information concerning the registration is to be
recorded into the Register Card. The Register Card specimens are presented
below:
Registration card (sample) for Limited Liability
Companies (LLC)
Ser. No.
|
Date
|
Subject of activity and aggregate capital
of the society
|
Name, date and place of birth,
occupation, address of partners
|
Name, date and place of birth,
occupation, address of directors
|
Name, date and place of birth, occupation
of members of the supervisory council (if any)
|
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. Figure
4.1.1.1 provides an outline of the sequence of the procedures to register and
establish a business in Georgia.
Figure 4.1.1.1 Business Registration
Procedures
* Statistical Department registration and stamp approval. Although the
law no longer requires these procedures, they are still being followed by some
entities and required by certain authorities due to uncertainty, lack of
information, and corruption.
In
practice, the entire registration process reportedly takes 2 to 3 weeks.
However, it is possible to register a company within few days by means of
unofficial payments.
Registration
with the Local Court.
In accordance with the procedures set forth in the Law on Entrepreneurs, all
legal businesses are required to register at the local court that has
jurisdiction over the legal address of the enterprise. Further, all registered
companies are required to officially record any changes in their registration
data.
In
order to register an LLC, the following documents must be submitted to a local
court:
(1) Application form signed by the founders.
Application form must include:
Firm
name (firm);
Organizational
and legal form;
Location
(legal address);
Subject
of the activity;
Information
on the start and end of the fiscal year;
For
each founder - the family name, first name, date and place of birth, occupation
and place of residence of the entrepreneur;
Representative
authorities.
(2) Charter (five copies)
(3) Minutes of the foundation meeting
(4) Founder’s decision to set up the company
(5) Director’s sample of signature
(6) Document
confirming the legal address of the company (this may be a lease agreement, a
certificate issued by manager of the company that subleases the office space,
or notarised consent of the owner of a flat)
(7) Copy of the
company founder’s passport, if the founder is an individual person; or a
registration certificate (e.g., extract from the register of enterprises), if
the founder is a legal entity. If the founder is a Georgian company, the
certificate of the local court should be less than 1 week old.
(8) The amount of the
authorized equity capital and the documents confirming payment of at least 50
percent of the equity capital (a certificate from the bank or, for in-kind
contributions, an auditor’s assessment of its value)
(9) A document confirming payment of the
registration fee.
To
register a JSC, the decision of the supervisory board to appoint directors is
required in addition to the above-listed documents.
The following supporting documents are
required to register a branch or a 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
100–400 GEL). Box II.2 provides a summary of the official registration fees.
A
company receives a court resolution when the company is registered. The law on
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 company’s legal form. The court stamp
duty is currently $180 to register a JSC, $80 to register a LLC, $90 to
register a branch of a JSC, and $40 to register a branch of a LLC. Fees for
registering changes to entries are half of the fee for registering the
respective type of company (i.e. $40 to register changes for an LLC and $90 for
a JSC).
All
the payments charged for notarization of an enterprise’s charter are different
in each case and depend on the amount of the authorized capital. The percentage
of the amount to be paid is reduced with the increase of the authorized capital
and ranges from 3 to 0.05 per cent of the authorized capital. The charge must
not be less than GEL 25 and must not be more than GEL 50. It should be noted
that a 20% VAT is added to the sum charged for the notarization.
Peripheral
services can be provided by private lawyers and related professionals at
additional cost. Lawyer charge in the range of $300-600 to draft a company’s
charter and to provide advice. A notary public typically charges about $30 to
certify the documents and about $2 per page to certify copies of the documents.
Taxation
Department Registration. In accordance with the Cabinet of Ministers Decree 899 (December
31, 1994), within 10 days of completing the company registration process, an
investor must register with the local office of the taxation department that
has jurisdiction over the legal company address. This registration requirement
applies to all tax types except the value-added tax (VAT). VAT registration is
required for all firms with total taxable transactions greater than GEL 24,000.
A
taxpayer registration application package should contain the following
documents:
(1) Taxpayer registration form (4 copies)
(2) Court resolution showing company registration
(notarised copy)
(3) Charter (original or notarised copy)
(4) Minutes of the
foundation meeting (original or notarised copy)
(5) Decision to set up
the company (original or notarised copy)
(6) Director’s sample
of signature (notarised)
(7) Document
confirming the legal address of the company (original or notarised copy).
In
accordance with Decree 899, the Taxation Department is required to issue a
taxpayer registration certificate within 10 working days. The compliance with
the 10-day limit depends on whether or not operations at local taxation offices
are computerized. There is no fee for taxpayer registration.
Taxpayers
are assigned a 9-digit taxpayer identification number (TIN). The first digit
specifies the taxpayer type (1 is for an individual person, 2 is for a legal
entity), the next 7 digits are sequential numbers (each local tax office has
its own block of 7-digit sequential numbers), and the last digit is a control
digit. There is no relation between a court registration number and a TIN.
If
a company changes its legal address, opens a branch, changes bank accounts, or
makes any other changes that require registration at the enterprise register,
then the investor is required to notify the tax department within 10 days of
the change.
As
of June 2001, sole proprietorships are no longer required to register with the
courts. They need only to register with the relevant local taxation office.
If
a company’s total taxable transactions over the 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
June 19, 2001, parliament amended the Law on Entrepreneurs and abolished the
provision that the courts must assign tax and statistics codes when a company
has registered with the relevant bodies.
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 Georgia still go to the central bureau of the
statistical department in Tbilisi to register in order to comply with the
previous provisions of the law.
Public
Availability of Information. Company registration data are recorded in the registration card as
approved under the law (see in the above). The same format is used to respond
to requests for company registration information. The following information is
required to complete a registration card:
·
Name of the
local court
·
Court
registration number
·
Company name
·
Address
·
Activities
·
Equity
capital
·
Names of
partner(s), their occupations, and addresses
·
Names of
director(s), their occupations, and addresses
·
Members of
the supervisory board, their occupations, and addresses (if a supervisory board
was established)
·
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 Georgia.
General. The law of Georgia on
"Licensing of Entrepreneurial Activity" adopted on 14 May, 1999
defines those business activities which can be carried out only by licenses
issued by the corresponding state agencies.
The law lists those types of
business activities about which corresponding state bodies must be notified.
The law does not cover export-import relations, environmental control and
utilization of natural resources, electric power, oil and natural gas,
communication and post services, where licensing procedures are regulated by
special legal acts.
Activities
to be Licensed and Licensing Agencies. The types of business activities
that require obtaining a license and the respective state licensing agencies
are as follows:
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
Georgia;
c)
Production,
repair of and trading with arms and ammunition – Ministry of Justice of Georgia
(within the limits defined by National Security Council of Georgia);
d)
Air
transportation of passengers and goods or/and carrying out aviation related
work at the territory of Georgia, maritime transportation and hauling –
Ministry of Transport and Communications of Georgia;
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 Georgia;
f)
Organizing
lotteries and other money-making games – Ministry of Finance of Georgia;
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 Georgia;
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 Georgia;
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
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 Georgia and also for
other Eastern European (mainly former Soviet Block) countries, whose economies
are in transition mode from the command economy to a market driven system
likewise Georgia. It can be seen from this Figure that Georgian stock market is
rather underdeveloped in comparison to other Eastern European countries, not to
speak about the Western European Countries and the USA, which have much higher
values of this ratio.
Fig. 4.1.1.1. Market
Capitalization as % of GDP for Eastern European Countries, including Georgia
It is interesting to note that
about 82.8% of the total market capitalization is formed by only 10 companies.
The remaining 278 companies that are admitted for trading at the GSE constitute
to only about 17.2% of the total market capitalization. This is shown in Fig.
4.1.1.2:
Fig. 4.1.1.2 Market
Capitalization of 10 Leading Georgian Joint Stock Companies
Volume and Value of Trades. The figures given in Table 4.1.1.2 reflect
the combined volume and value of trades of all Joint Stock Companies conducted
at GSE since its inception to date.
Table 4.1.1.2 Volume & Value
of Trades at GSE
Year
|
2000*
|
2001
|
2002
|
2003**
|
Volume of Trades
(Shares)
|
4,354,640
|
10,862,784
|
11,418,196
|
5,103,555
|
Value of Trades
(GEL)
|
5,892,326
|
13,077,244
|
8,401,206
|
1,398,781
|
*
Apr. – Dec. 2000; ** Jan. – Oct. 2003.
Source:
GSE
|
Value
Turnover. The value
turnover is calculated by dividing the annual value of trades over the total
market capitalization in that year. This is shown in Table 4.1.1.3 for years
2001 and 2002:
Year
|
2001
|
2002
|
Value of Trades
(GEL)
|
13,077,244
|
8,401,206
|
Market
Capitalization (GEL)
|
184,017,886
|
218,402,008
|
Value Turnover
|
7.11%
|
3.85%
|
Source:
GSE
|
Table 4.1.1.3 Value Turnover at
GSE
The large
part of the total value of trades comes on the trading of the securities of 10
leading companies mentioned in the above. This is shown in Fig. 4.1.1.3:
Fig. 4.1.1.3 Value of Trades of
10 Leading Georgian Companies
Liquidity. All the
factors considered in the 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:
Fig. 4.1.1.5
G&T Blue-Chip Index (GEL), 2002
The problems facing GSE. Below is the problem tree describing the
set of problems currently facing GSE:
General
recommendations for improving the performance of GSE. The fact that at present there is
no sound and liquid
capital market in Georgia can be attributed to two fundamental problems: (I) A
low potential of the capital market in Georgia; and (II) A high
unrealized potential of Georgian capital market. The government of Georgia
(GoG) should undertake both, long-term and short-to-medium term measures in
order to improve the performance of Georgian Stock Exchange (GSE).
(I) It is
suggested that the potential of the capital market in Georgia could be
increased by means of:
Long-term goals:
Increasing
the rate of country's economic growth;
Reducing the
size of the shadow economy;
Attracting
higher Foreign Direct Investments (FDI).
short-to-medium
term goals:
Conducting
the 2nd round of the privatization through GSE by involving
investment funds into the privatization process;
Including the
majority of leading Georgian companies into the listing of the securities
traded at GSE.
(II) A
high unrealized potential of Georgian capital market can be explained by low confidence
(trust) amongst the investors towards the stock market, which in turn is the
result of the problems existing in terms of protecting the shareholders'
rights. In order to solve the latter problem, there is a need: (i) to
improve the corporate governance practice, and (ii) to ensure the
fairness of the market. These mainly are the goals that can be achieved in short-to-medium term.
The
measures needed to improve the corporate governance practice in Georgia
include:
To simplify
the tax system;
To adopt the International
Standards on Auditing
(ISA) into law;
To enforce
the International Accounting Standards (IAS).
These measures are designed to remove the
incentives to pay bribes for
the purposes of hiding profits and avoiding paying taxes, which would result in lower levels of
corruption in tax administrations and increased transparency of corporate disclosure.
Another
measure to improve the
corporate governance practice in Georgia is:
To conduct an
educational campaign amongst
shareholders, company directors and the members of supervisory boards.
The objective of the educational campaign is to lessen the entrenched culture of abusive
self-dealing and to give to shareholders sufficient knowledge about their
rights. The entrenched culture of abusive self-dealing can also be alleviated
by means of putting in place effective regulations and institutions for
controlling the self-dealing. All these should lead to regular shareholder
meetings and increase the role of the supervisory boards in giving the
strategic direction to companies.
Another
important factor for improving the corporate governance practice in Georgia
is to have an active market for corporate control. Namely, there is a need:
To
put in place an adequate legislation for investor protection. More
specifically, to introduce the investment compensation schemes, strengthen the
bankruptcy system and adopt the rules for takeovers;
To
adopt the legislation regulating the financial intermediaries (such as private pension funds and mutual funds), which at present are absent in
Georgia.
Properly functioning financial
intermediaries would act as large domestic institutional investors and ensure
that large volumes of capital resources are directed to the market. This, in
turn, would facilitate the competition in the financial market and lead to an
active market for corporate control.
The
measures needed to ensure the fairness of the market include:
To
Enforce a trading transparency;
To
deter an unfair trading.
The last two objectives can be
reached by means of ensuring an effective functioning of the National
Securities Commission of Georgia (NSCG), which should be capable of ensuring an
effective enforcement of the securities regulations. More specifically:
The
NSCG should have an adequate Inspection, Investigation and Enforcement power,
including the criminal prosecution authority;
The
Government of Georgia (GoG) should increase the budgetary support of the NSCG
to ensure a proper functioning of the agency;
The
NSCG should be more accountable to GoG for its activities regarding the
regulation of Georgian capital market;
The
NSCG should develop a program to supervise the activities of Self‑Regulatory
Organizations (SROs); and
The
NSCG has to develop a code of ethics for its staff.
Another
measure needed to ensure the fairness of the market is:
To
enforce adequately the rights of the shareholders, which should be done through
the improved court system.
In order to improve Georgian court
system, it is important to conduct training of judges in the topics concerning
the corporate law and operation of the securities market
All
the above-described measures are designed to achieve in future a sound and liquid capital market in Georgia.
Specific
recommendations for improving the performance of GSE. More specific recommendations, together with the objectives to be achieved,
performance indicators, responsible agencies, duration, etc., are 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
|
Net Income (GEL
mln.)
|
1.2
|
1.4
|
EPS (GEL)
|
0.43
|
0.51
|
Total Assets (GEL
mln.)
|
6.3
|
7.7
|
Equity/Assets (%)
|
70.8
|
73.2
|
ROA (%)
|
19.0
|
18.2
|
ROE (%)
|
26.8
|
24.9
|
Book Value per
Share (GEL)
|
1.60
|
2.00
|
P/E
|
5.77
|
4.91
|
P/BV
|
1.57
|
1.25
|
Sources:
Kazbegi, Galt & Taggart
|
Kazbegi JSC – Valuation (Refer to Annex 1)
|
Valuation Limits
|
True Value (GEL mln.)
|
True Value/Market Cap.
|
Low
|
15.0
|
2
|
High
|
22.5
|
3
|
BANK OF GEORGIA JSC
|
Sector:
|
Financial Services
|
GSE Ticker:
|
GEB
|
Summary
Information:
·
Bank
of Georgia JSC is the country's leading commercial bank;
·
Last
year the company reported about 6% increase in annual sales to GEL 36.6 mln.;
·
Net
profit of the company has decreased by about 7% in 2002 mainly due to higher
administrative expenses;
·
The
Earning Per Share (EPS) in 2002 was GEL 0.72;
·
The
company's assets grew by remarkable 30% over the year to reach GEL 176.7
mln.;
·
The
company's equity increased by 13% over the last year and amounted to GEL 46.6
mln.;
·
The
company continues to pay dividends, which amounted to GEL 2 mln.or GEL 0.20
per share.
|
Source:
Galt & Taggart
|
BANK OF GEORGIA JSC - Summary
|
Current Price (GEL)
|
1.55
|
Year High (GEL)
|
1.90
|
Year Low (GEL)
|
1.00
|
Market
Capitalization (GEL mln.)
|
15.5
|
Shares Outstanding
(mln.)
|
10.0
|
Free Float (%)
|
47.6
|
Free Float (GEL
mln.)
|
7.4
|
Source:
Galt & Taggart
|
BANK OF GEORGIA JSC – Key Figures (IAS)
|
Year
Ending December 31
|
2001
|
2002
|
Net Sales (GEL
mln.)
|
34.4
|
36.6
|
Net Income (GEL
mln.)
|
7.7
|
7.1
|
EPS (GEL)
|
0.78
|
0.72
|
Total Assets (GEL
mln.)
|
135.6
|
176.7
|
Equity/Assets (%)
|
30.5
|
35.8
|
ROA (%)
|
5.7
|
4.0
|
ROE (%)
|
18.6
|
16.5
|
Book Value per
Share (GEL)
|
4.13
|
5.14
|
P/E
|
2.02
|
2.15
|
P/BV
|
0.38
|
0.30
|
Sources:
Bank of Georgia, Galt & Taggart
|
BANK OF GEORGIA JSC – Valuation (Refer to Annex 1)
|
Valuation Limits
|
True Value (GEL mln.)
|
True Value/Market Cap.
|
Low
|
50.8
|
3.3
|
High
|
68.6
|
4.4
|
4.3.1
Business
Schools/Universities
European School of
Management (ESM).
Data Sheet.
- European
School of Management ESM-Tbilisi
- 40,
Vazha Pshavela Ave. 1077, Tbilisi, Republic of Georgia
Tel.: (995-32) 39 68 64
Fax: (995-32) 37 55 16
e-mail: esmtbs@gol.ge
Internet: esm-tbilisi.ge
- Simon
Kadagidze
- Mission of European School of Management in
Tbilisi (ESM-Tbilisi) is to create a new Georgian management elite -
professionally thinking and professionally acting under market economy
managers – providing high quality management education using modern and
innovative teaching technologies and highly qualified faculty.
- LTD,
Nonprofit
- Self
financed through students tuition fees
- 1992
- 20
- 87
- 4
- Undergraduate Program, Graduate Program, Base Certificate Program,
Foundation Program
- 224+46+58+50
- Look
the attached sheets
- Undergraduate
– 4 years
Graduate – 2 years
Base Certificate Program –
7 months
Foundation Program – 1 year
- Undergraduate - 224
Graduate - 46
Base Certificate Program -
58
Foundation Program - 50
- School
leavers and young professionals
- Undergraduate
Program - secondary school leavers with
certificate
Graduate Program - young people with min bachelor
diplomas and min 2
years experience
Base certificate program -
any person with high education
Foundation Program - secondary school leavers or students
in their last school year
- Undergraduate -
$ 2200/ year
Graduate - $ 3500
Base Certificate Program -
$ 1200
Foundation Program - $ 1000
- Entrance
examinations, visiting schools with presentation, visiting educational
fairs, marketing campaign through an advertising agency
- Georgian
with good command of either English or German languages.
- Undergraduate - Bachelor of Business Administration
(General Management)
Graduate - Master of Business Administration
(General Management,
Finance, Marketing)
Base Certificate Program -
Certificate
- $
2000/year
The ESM Evening
& Weekend MBA Program, A Curriculum
2003-2005
4.3.2
Government
Sponsored Training Programs
GEPA's
In-Company Export Marketing Programme.
|
The objective of GEPA's new programme is to increase the export capabilities
of Georgian companies. An integrated programme has been designed to assist
Georgian companies to systematically plan and prepare for export marketing.
The programme includes in-company export market development, training, the
organisation of inward and outward missions and a cost sharing grant scheme.
The in-company programme involves GEPA's Export Advisers working closely with
individual companies to establish an export marketing function. Participating
companies will be assisted and guided through the process of defining their
objectives and capabilities, the first step in the process. They will be
shown how to identify suitable markets and have access to all the information
sources in the Export Information Centre. They will then be in a position to
draw up a realistic export marketing strategy. GEPA staff will help them to
prepare for exporting and to implement their defined strategy.
In working through the programme, training needs will be identified and
addressed and some financial assistance may be available to assist companies
in financing eligible actions they need to take to prepare for exporting.
Participating companies will have in place a system for reviewing and
redefining their export marketing strategies on an on-going basis. This will
enable Georgian companies to anticipate and to be prepared for the ever
changing marketing environment, rather than just reacting to it.
During recent weeks GEPA staff has been visiting companies to explain the
programme in detail. Four companies have already begun the first stage of the
programme and another four will be added over the next few weeks. Companies
committed to developing an achievable export marketing strategy and willing
to devote time and effort to the process are invited to contact GEPA.
|
Projects under
implementation
|
Commitment
(US$ million)
|
Develp’t. Objective
|
Impl.
Progress.
|
Approval Date
|
Signing Date
|
Closing Date
|
Social Investment
Fund
|
25.0
|
S
|
S
|
12/11/97
|
06/05/98
|
12/31/03
|
Primary Health
Care Dev.
|
20.3
|
S
|
S
|
08/01/02
|
05/06/03
|
12/31/07
|
Education 1 (APL)
|
25.9
|
S
|
S
|
03/20/01
|
12/03/01
|
06/30/05
|
Social Investment
Fund 2
|
15.0
|
S
|
S
|
05/15/03
|
08/29/03
|
09/30/07
|
Roads Project
|
40.0
|
S
|
S
|
05/25/00
|
01/31/01
|
12/31/04
|
Electricity Market
Supp.
|
27.4
|
S
|
S
|
05/03/01
|
09/26/02
|
12/31/05
|
Energy Transit
Institution
|
9.6
|
S
|
S
|
03/13/01
|
11/19/01
|
07/31/05
|
Municipal
Development 2
|
19.4
|
S
|
S
|
08/01/02
|
02/19/03
|
06/30/06
|
SAC3
|
40.0
|
S
|
S
|
06/29/99
|
08/02/99
|
10/30/02
|
Structural Ref.
Support
|
16.5
|
S
|
S
|
06/29/99
|
09/22/99
|
03/31/04
|
Judicial Reform
|
13.4
|
S
|
S
|
06/29/99
|
09/22/99
|
12/31/04
|
Enterprise
Rehabilitation
|
15.0
|
S
|
S
|
12/17/98
|
09/08/99
|
12/31/04
|
Agriculture
Development
|
15.0
|
U
|
U
|
03/25/97
|
08/21/97
|
04/30/04
|
Forestry
Development
|
15.7
|
S
|
S
|
08/01/02
|
04/22/03
|
06/30/09
|
Protected
Areas Dev (GEF)
|
8.7
|
|
S
|
05/24/01
|
04/26/02
|
12/31/06
|
Integrated
Coastal Mngmt
|
4.4
|
S
|
S
|
12/17/98
|
05/21/99
|
12/31/04
|
Irrig/Drainage
Dev.
|
27.0
|
S
|
S
|
06/28/01
|
02/20/02
|
04/30/07
|
Cultural
Heritage
|
4.5
|
S
|
S
|
02/13/98
|
05/18/98
|
12/31/03
|
Integrated
Coastal Mngmt (GEF)
|
1.3
|
|
U
|
12/17/98
|
05/21/99
|
12/31/04
|
Agriculture
Research Ext (GEF)
|
2.5
|
S
|
S
|
05/11/00
|
02/05/01
|
12/31/05
|
Agriculture
Research Ext
|
7.6
|
S
|
S
|
05/11/00
|
02/05/01
|
12/31/05
|
Total
|
354.2
|
|
|
|
|
|
PROJECT
|
AMOUNT
(millions)
|
|
Rehabilitation
Credit
|
US$
75.0
|
Closed June 1996. Fully disbursed.
|
SAC
|
US$
60.0
|
Closed December 1997. Fully disbursed.
|
SATAC
|
US$
4.8
|
Closed December 1998. Fully disbursed.
|
Institution
Building Credit
|
US$
10.1
|
Closed June 1998. Fully disbursed
|
SAC
II
|
US$
60.0
|
Closed December 1998. Fully disbursed
|
Transport
|
US$
12.0
|
Closed June 30, 1999. Fully disbursed.
|
SATAC II
|
US$ 5.0
|
Closed December 31, 1999. Fully
disbursed.
|
Municipal Infrastructure Rehabilitation
|
US$ 18.0
|
Closed June 30, 2000. Fully disbursed.
|
Power Rehabilitation
|
US$ 52.3
|
Closed June 30, 2000.
|
Oil Institution Building
|
US$ 1.4
|
Closed December 31, 2000. Fully
disbursed.
|
Energy Sector Adjustment Credit (ESAC)
|
US$ 25.0
|
Closed March 1, 2002. Fully disbursed.
|
Third Structural Adjustment Credit (SACIII)
|
US$ 60.0
|
Closed October 30, 2002. Fully disbursed
|
Total:
|
US$
383.6
|
|
REHABILITATION CREDIT
Implementing
Agency Temuri
Basilia, Chief Economic Advisor to the President of Georgia; State
Chancellery, 7 Ingorokva str.
(99532)989953, (99532) 999757
Fax: (99532)995797
Task
Manager Michaelle
Riboud, EC4C2
Phone: (202) 4738743
Fax: (202)4773387
Project
Objective The main
objective is to support the government’s economic reform program aimed at
restoring macroeconomic stability and at promoting resumption of growth and
improvement in living standards. The other objectives are to:
1. Provide budgetary support to maintain the
level of basic public expenditures, in particular for wages and the social
safety net;
2. Provide foreign exchange for the purchase
of critical imports;
3. Improve the functioning of the foreign
exchange market;
4. Provide a framework for assistance from
other donor agencies.
Project
Description The reform
program to be supported by the credit comprises three sets of policies:
a) those aimed at reducing and redefining the
role of the public sector in the economy
b) those theta foster the development and
increase efficiency of markets;
c) those that maintain a minimum social safety
net through improved targeting of benefits.
Disbursement Fully disbursed
INSTITUTION BUILDING
Project Objective Assist the Georgian
government in its efforts to move to a private market economy through
strengthening public institutions on three functional areas: (a) financial
sector, (b) economic management , (c) privatization and enterprise reform
Project 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
(c) Statistical Services:
Consulting services, training, and equipment
to assist the Committee for Social and Economic Information in
-- reviewing the methodology used for
generating and maintaining national accounts and initiating steps to introduce
the internationally acceptable System of National Accounts (SNA);
-- designing and conducting an improved
household survey in the city Tbilisi
(d) Tax Administration:
-- computerization of tax offices; IDA pilot
project for the modernization and computerization of the central State Tax
Inspectorate (STI) and the Tbilisi City Inspectorate;
-- training of the STI staff.
(e) Treasure:
-- first phase: a central treasury function
will be established in the Ministry of Finance and regional branch in Tbilisi;
-- second phase: regional Treasuries will be
established throughout of Georgia:
-- IDA will finance computers for the
establishment of the Treasury offices.
(g) Strengthening of Customs Administration:
Support will be provided to the Customs
Committee in
(i) simplifying and reforming the organization
and procedures of customs operations: (ii) modernizing customs management ;
(iii) training the customs staff in the
customs management and the computerization;
(iv) computerizing customs clearance
procedures, accounts, and statistics at Tbilisi headquarters and at the
Tbilisi airport as the first pilot site.
(h) Aid Coordination:
-- Project will finance long-term external
advisor and equipment to assist and train the staff of Aid Management Unit
(AMU) in maintaining donor procedures, coordinating country’s external aid
priorities consistent with the national development objectives, and
communicating those with the external aid agencies.
-- Project will finance experts to assist the
government staff in analyzing Sectoral information with the objective to design
and develop project that will be acceptable to the donor community.
(i) Project Implementation: The project will
finance:
-- an external procurement consulting firm to
assist the PIU with the preparation of procurement an disbursement documents
under this project, and to ensure that all procurement under the project follow
the World Bank’s procurement guidelines
3. Privatization and Enterprise
Reform (US$ 2.27 million)
(j) Support for Privatization:
-- one short-term senior level adviser to
assist the Ministry of the state Property Management and the Office of the
Chief Economic adviser to the President in reviewing the current privatization
plan;
-- experts and equipment to assist in:
a) formulation the mass privatization program
and the voucher scheme
b) the design and implementation of a public
information campaign to support the mass privatization campaign;
c) provide training aimed at strengthening the
institutional capabilities of SPM;
d) review and further development of a
legislative framework for privatization.
Implementing
Agency Alex
Sikharulidze, Head of PIU, 42, Kazbegi ave.,
Phone: (99532)950865
Fax: (99532)950865
STRUCTURAL ADJUSTMENT TECHNICAL ASSISTANCE CREDIT (SATAC)
Project Objective To support the
Government’s reform program to stabilize the economy and create the conditions
for a resumption of growth and an improvement in living standards.
Project Description 1. Privatization and
post-privatization (US$ 0.95 million)
(i) Continued support for the implementations
of the privatization program and on support for the establishment of the share
registries.
(ii) Introduction of cash auctions and an
international tender program;
(iii) Strengthening of institutional capacities,
elaboration of standard procedures, advise on structuring of transactions and
bid evaluation, as well as legal assistance and licensing of private share
registries.
(iv) Elaboration of operational guidelines,
training of officials in securities market and in the starting-up of pilot
registries.
2. Financial Sector ( US$ 0.78 million )
(i) Advisory services on supervisory issues as
well as the development of training programs.
(ii) Audits if the three former state banks
will be financed to dacilitate a realistic assessment of the financial position
of each bank.
3. Energy sector reform ( US$ 0.86 million )
(i) Assistance in creating the capacity to
monitor and manage payment performance, and in reviewing structural and tariff
issues.
(ii) Assistance in reviewing the scope of the
regulatory authority and its tariff policy functions.
4. Social Protection ( US$ 0.56 million)
(i) Assistance in the design of a program of
social assistance which meets the needs of poor families that do not qualify under
any existing program;
(ii) Facilitating the establishment of private
pension schemes.
5. Resource mobilization and public
information
( US$ 1.43 million)
(i) A program aimed at improving the revenue
collection performance of the Customs Department through training, revision of
procedures and controls, and anti-fraud measures;
(ii) A public information/education program on
economic reforms, including mass media campaigns, round-tables/seminars on key
issues, and the design of an education program focusing on skills in high
demand in market economics
Implementing
Agency Zaal
Japaridze, Head of PIU, 12 Kazbegi Ave.
Phone: (99532) 950865
Ministry of Trade and Foreign Economic
Relations
42, Kazbegi Ave.
Phone: (99532)
225186 / (99532) 389652
TRANSPORT REHABILITATION
Project Objective 1. To support policy
reform in the transport sectoral and restructure its institutions to operate in
a market economy.
2. To repair and maintain some of the most
critical elements of the transport system.
Project Description (1) Institution
Building Component (US$ 4.9 million):
(i) advice and support to teams 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, 12 Kazbegi Ave.
Phone: (99532) 986385
Fax: (99532) 990461
STRUCTURAL ADJUSTMENT CREDIT (SAC)
Project Objective: The main
objective is to consolidate stabilization, foster a strong and sustained growth
recovery and reduce poverty.
The reform program aims at:
(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 Government’s 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
Georgia’s Development Strategy
1.
The IMF has taken the lead in
assisting Georgia in enhancing macroeconomic stability. In this regard, the
Fund has encouraged the authorities to pursue a prudent fiscal policy, including
by increasing tax revenues and reducing domestic expenditure arrears. The IMF
Board approved a new three-year program under the Fund’s Poverty Reduction and
Growth Facility (PRGF) in January 2001. The first and the second reviews under
the PRGF were completed in October 2001 and July 2002, respectively.
Implementation of the 2002 macroeconomic program was broadly on track.
Quantitative criteria and indicative targets were met, except for those on
domestic arrears, fuel and excise tax collection and reserve money. At 2 percent of GDP, the fiscal deficit was slightly higher
than programmed because of shortfalls in external financing, and revenue
collection improved only slightly from 14.3 percent of GDP to 14.4 percent over
the period. An IMF mission which visited Georgia in July 2003 to discuss
completion of the postponed third review found that the fiscal pressures that
emerged in early 2003 had continued, with tax revenue falling short of budget
targets, and an accumulation of substantial new budget arrears. The IMF thus
saw the need inter alia to introduce some tax reform measures, adjust
electricity tariffs and revise the 2003 budget to close the fiscal gap. The
authorities achieved the first two but were unable to secure parliamentary
approval of a revised budget. The current PRGF will expire in the next several
months and the IMF will soon be initiating discussions to assess prospects for
a possible new three-year program to support Georgia’s EDPRP.
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 Georgia’s Poverty Assessment based on household data collected on a
quarterly basis. The Bank’s focus has been to improve the budget execution of
expenditures for health, education and poverty benefits and to raise the
efficiency in the use of scarce public resources. Through the Social
Investment Fund Credits IDA is focusing in particular on areas with high
poverty levels to provide basic infrastructure to the poorest communities. A
recently approved Self-reliance Fund Grant will help authorities address the
complex issues related to internally displaced people. IDA is also supporting
a dialogue with the Government on social protection reform that may lead to an
IDA-supported project.
·
In education the Education Adaptable Program
Credit aims at improving the learning outcomes of primary and secondary
students, through curriculum reform, development of an examination system,
training of teachers, provision of learning materials, and development of
capacity to make better use of Georgia’s physical, financial and human
resources. While the investment needs of school buildings are substantially
higher than is currently affordable for Georgia, the Social Investment Fund
projects continue to assist in financing urgent repairs to school facilities in
many communities.
·
In health IDA Credits to support the
Government in improving the health care financing system, exploring
risk-pooling options, introducing a new system of primary health care and
improving the focus of services funded through public funds on the poor and on
priority public health interventions. In addition hospital restructuring has
been supported by SAC 3 and the Structural Reform Support Credit.
·
In infrastructure support is being provided
through the Municipal Development and Decentralization Credit and the Social
Investment Fund Credit. These projects are providing financing at the community
level for critical infrastructure needs, primarily for school and health facilities
heating and repair, small hydropower schemes to provide electricity, drinking
water and sanitation rehabilitation, as well as transportation infrastructure
rehabilitation.
·
In rural development IDA credits have
supported the development of private sector farming and agro-processing
improvements, agricultural credit, irrigation and drainage, and agriculture
research and extension. IDA has also been supporting
the creation of local institutions such as rural credit unions and water users
associations through its Credits.
Areas in which the World Bank leads and its
analysis serves as input into the IMF program
4.
The Bank has been leading the
dialogue on structural reforms through SAC 3, approved by the Bank’s Board of
Executive Directors in June, 1999, and closed in October, 2002. Despite
considerable delays, the core conditions of SAC 3 were met, but their impact
was reduced by poor governance. Institution building and technical assistance
has been supported through the Structural Reform Support Credit, also approved
by the Bank’s Board of Executive Directors on June 29, 1999. The Bank also
leads in the areas of:
·
Private sector development.
SAC 3 supported improvements in the environment for private sector development,
focusing on: (i) simpler licensing regulations; (ii) more transparent
government procurement; (iii) reduced cost of entry for businesses; and (iv)
privatization of state-owned commercial assets. IDA has also been supporting
private sector participation in other areas such as energy, telecommunications,
urban services and agriculture. The IMF has worked with the authorities to
initiate audits of the 2002 accounts of three major state owned enterprises.
· Energy. The energy system is in poor
condition, with unreliable supply, massive non-payment and mounting debts.
IDA has been working with other donors, including the IMF, to encourage more
private management and ownership, and to implement a series of short-term
action plans to improve the overall functioning of the sector. The IMF has
also been focusing on improved payments for electricity.
· Public Sector Management. The Bank is
supporting the development of a civil service reform program, while the Fund is
providing technical assistance in support of tax and customs administration
reform.
Areas of shared responsibility
of the World Bank and IMF
5.
The Bank and the Fund have
been working jointly in the following main areas (supported by the Bank’s SAC 3
and Structural Reform Support Credit, several investment operations and the
Fund’s PRGF):
·
Poverty Reduction
Strategy. Both institutions have been working closely with the Government to
provide support to the development of the PRSP, through seminars and workshops,
direct staff input, and a multi-donor Trust Fund to support the work of the PRSP
secretariat..
·
Budget Planning and
Execution. The annual process-based Public Expenditure Reviews will provide
the underpinnings for systemic changes in expenditure management, with the
immediate aim being improved budget formulation in 2004. The IMF is focusing
on Treasury reform within the Ministry of Finance.
·
Financial Sector
Reforms. The joint Financial Sector Assessment Program has supported: (i)
strengthened banking and non-banking supervision; (ii) introduction of
international accounting standards; (iii) and consolidation of banks through
higher capital requirement ratios; and (iv) anti money-laundering legislation.
The IMF has focused in particular on banking supervision.
·
Debt Sustainability
Analysis (DSA). Given Georgia’s heavy external debt burden, the Bank and the
Fund conduct joint Debt Sustainability Analysis on a regular basis.
Areas in which the IMF leads and
its analysis serves as input into the World Bank program
·
Fiscal Framework. The
IMF’s focus on prudent fiscal policy has served as an important framework for
IDA’s 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 Georgia, Ministry of Justice
|
Review of the existing legal framework
|
Initiation of legislative change and amendments
|
Public Sector Management Project; Public Expenditure Reviews
|
DFID
EU USAID UNDP
|
Duplications and overlap among the central state agencies reduced,
mandates more clearly defined
|
·
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
|
Kuwait Fund for Economic Development
|
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
Georgia’s Export Potential
|
Progress in implementing recommendations of Trade Study/Workshop
|
Trade and Transport Facilitation Project; Private Sector Development
Project; Business Environment Study; Rural Development Project
|
USAID
|
Improved perception of environment for exporters in business surveys
|
Human Capital
Development
|
|
|
|
|
|
|
Improvement of
Health
|
|
|
|
|
|
|
·
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
|
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, Kuwait Development Fund
|
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
Fund for
Cultural Heritage Protection
|
EU
|
Education
|
Ministry
of Education
|
SOROS
|
Energy
|
Ministry
of Fuel and Energy
Georgian
National Energy Regulatory Commission
|
USAID,
KFW, EBRD
|
Financial Sector
|
Ministry
of Finance and Tax Revenues
National Bank of Georgia
National
Securities Commission
Foreign
Investment Advisory Council
|
IMF
|
Forestry
|
State
Department of Forestry
|
FAO,
WWF, CIDA
|
Governance
|
State
Chancellery, Anti-corruption Policy Coordination Council
|
Netherlands,
IMF, DFID, USAID, UNDP,
|
Health
|
Ministry
of Labor, Health and Social Affairs
|
SIDA,
DFID, WHO
|
Judicial
|
Ministry
of Justice
Supreme
Court
ALPE (Association
of Legal Public Education)
|
EU,
USAID, SOROS, ABA, DOJ
|
Municipal Development and Decentralization
|
Georgian
Municipal Development Fund (MDF)
|
|
Poverty Reduction
|
Secretariat
of Governmental Commission on PREGP (Poverty reduction and Economic Growth
Program)
|
IMF,
UNDP, DFID, USAID
|
Private Sector
|
Ministry
of Economy, Industry and Trade
|
USAID,
EBRD, BP
|
Protected Areas
|
State
Department of Protected Territories, Preserves and Hunting Grounds
|
UNDP
|
Roads
|
Ministry
of Transport, Telecommunications and Post
State
Department of Roads
|
Kuwait Fund for Economic Development
|
Social Infrastructure
|
Georgian
Social Investment Fund (GSIF)
|
KFW
|
Transport and Communications
|
Ministry
of Transport, Telecommunications and Post
National
Commission of Telecommunications and Transport
|
|
USAID
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 Georgia is to expand private sector development activities in
the country. During years 2002 and 2003 it has been engaged in the active
political dialogue with the Government to support the substantial reduction of
administrative barriers to investments, representation on the board of
companies and banks, support of the initiatives of local business associations.
EBRD aims at further strengthening of the Georgian banking sector through
ongoing support to the regulator, management training, and further consolidation.
EBRD’s interventions include financing to business start-ups and existing
micro, small and medium-sized enterprises as well as selectively supporting
critical investments in infrastructure with specific focus on those projects
that promote the commercialization of infrastructure, particularly of the
energy sector.
EU’s
Partnership and Cooperation Agreement (PCA) provides for cooperation in a wide
range of areas including Food Security Program (in amount of € 25 million for
the period 2002-2003), rehabilitation in conflict zones (Engury Power Plan in
Abkhazia), macro-financial assistance (establishment of an agricultural credit
institutions, reforms in accountancy and audit, assistance to the insurance
sector and securities market regulation), support to trade liberalization,
customs, and development of transport infrastructure networks, advice on
economic legislation and country legislature harmonization with the EU
standards, investments in primary health care reconstruction program and
development of the Georgian National Health Program and training of medical and
administrative personnel as well as provision of the technical assistance for
the development of the model of Regional Health financing. TACIS is the main financial
instrument supporting the implementation of the PCA.
GTZ,
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 Canada (CIDA) mostly through the regional projects supporting
trade policy capacity, expanding the micro credit programs, promoting NGO
capacity development program that supports the principles of good governance,
strengthening health reform through the appropriate application of health
information technology and information management strategies, and contributing
drought victims relief operations.
DFID
has recently approved a new Primary Health Care (PHC) Development project through
which technical assistance will be provided to the Government in the areas of
human resource development for the PHC system, health care financing, health
management information systems, capacity building for the health policy
development. DFID has been supporting the SDS in the multi-sector household and
labor market surveys. The ongoing program also has a component aiming at
development of good governance and civil society in two regions of Georgia as
well as conflict reduction and confidence-building component.
The
Netherlands has
provided support for a wide range of activities, focusing on good governance,
human rights and peace building, as well as substantial budget support in
conjunction with SAC III. Dutch support in the three focus areas will
continue, including for . election preparation, prevention of trafficking in
human beings, confidence building measures in Abkhazia and support for NGOs
involved in poverty alleviation and human rights
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 Georgia focuses its program activities in three areas: (a) democratic
governance; (b) poverty reduction; and (c) environmental protection, as
outlined in the second Country Cooperation Framework for Georgia (2001-2005).
In the sphere of Governance, major ongoing initiatives include support to
Foreign Investment Advisory Council, strengthening the Anti-corruption
Promotion Group, and assistance to the Constitutional Court and Public
Defender’s Office. UNDP has been active in capacity building of the Georgian
International Oil Corporation and of the National Security Policy Management.
UNDP is contributing to land market development through creation of a
computerized program of registration. Technical and financial inputs have been
provided to strengthen the capacity of Georgian institutions responsible for
national statistics, notably the State Department of Statistics. Environmental
challenges are being addressed through the projects supporting recovery,
conversation and sustainable use of Georgia’s agro-biodiversity, removal of
barriers to small hydro power sector development, and capacity building of the
Ministry of Environment.
UNICEF
priorities in Georgia include: education, integrated childhood development,
immunization, fighting HIV/AIDS, and protecting children from violence,
exploitation, abuse and discrimination. It has been assisting the Government in
national training of health workers and professionals and in providing
universal access to basic health services for women and children. UNICEF has
been helping the Government in promoting the implementation of the Convention
on the Rights of the Child. Support also includes ensuring inclusive education
for children with disabilities and providing psychosocial support to children
in need of special protection as well as introducing alternative,
non-institutional methods of childcare. Child de-institutionalization has been
also supported by SIDA through provision of technical assistance during social
protection reform project preparation and implementation phases.
[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 Georgia; who have funds
in accounts in foreign banks; or whose expenditures during the tax year exceed
25,000 GEL. As well as, non-resident physical persons with income from a
Georgian source that is not taxed at the source of payment.
[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 Georgia published by the American
Chamber of Commerce newspaper demonstrate.
[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
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