1. Condition of business
environment and the
concept for its
improvement
Main directions
YOUR LOGO
Geben Sie hier Ihre Fußzeile ein

2. 2.1. Depth of existing problems
2.1.1. Incomplete list of the problems
The essential segment of GDP growth is from state sector and it is supported by
1 foreign credits.
The share of real sector in GDP (agriculture, industry construction) is permanently
2 decreasing.
Share of the capital formed by private sector compared with GDP is decreasing in
3 recent years.
Turnover of bussiness sector and a volum of production sicne 2007 is falling down in
4 the real figures.
Share of small and medium enterprises (production turnover) in the economy is very
5 insignificant.
Despite nominal growth of GDP the emplyment indicators in the country are the
6 same.
7 The problems in accesability of bank credits hinders business development.
Tax administration and banckruopcy sistem problems deteriorate investment
8 environment.
Problems in protecting property rights as well as court sistem considerebly worsen
9 business environment.
YOUR LOGO
Free trade and competition in theSie hier Ihre Fußzeile ein
Geben country is ignored. Monopolies and oligopolies exist
10 in the market.

3. 2.1. Depth of existing problems
2.1.2. Condition of real sectors
Dynamic od real sector (agriculture, industry, construction) and its share in
GDP
Million GEL
Share, %
Source: www.geostat.ge YOUR LOGO
Geben Sie hier Ihre Fußzeile ein

4. 2.1. Depth of existing problems
2.1.3. Business sector turnover and production
Real turnover of business sector and a volume of production output (deflator
corrected)
Source : www.geostat.ge YOUR LOGO
Geben Sie hier Ihre Fußzeile ein

5. 2.1. Depth of existing problems
2.1.4. Capital formed by private sector GDP and VAT
VAT and Share of capital formed by private sector in comparison with GDP
(deflator corrected)
Source: www.geostat.ge YOUR LOGO
Geben Sie hier Ihre Fußzeile ein

6. 2.1. Depth of existing problems
2.1.5. Business sectors employment indicators
GDP growth and the quantity of employed in business sector (small, medium and
large business)
Employment dynamics
Rate of GDP growth
YOUR LOGO
Geben Sie hier Ihre Fußzeile ein
Source: www.geostat.ge

7. 2.1. Depth of existing problems
2.1.6. Low level of development of small and medium
business
The number of employed in 2010 in the SME, its turnover and the volume of
production
Small Small
Medium Medium
Small
Medium Large
Large Large
Source: www.geostat.ge
Example: In the EU 27 countries turnover of small and medium size businesses in 2010 was 58% of
the total turnover, while the production was 59%. 67% of total employed persons are employed in
the small and medium size businesses.
YOUR LOGO
Geben Sie hier Ihre Fußzeile ein

8. 2.1. Depth of existing problems
2.1.7. the indicators for small and medium size businesses
in EU
Indicators for small and medium size
businesses in EU 27 countries
The turnover
The volume of
production
The number of
employed
Source: www.eurostat.com YOUR LOGO
Geben Sie hier Ihre Fußzeile ein

9. 2.1. Depth of existing problems
2.1.8. Problems in protecting property rights
Georgia holds 120th position among 142 countries in regards of
protecting property rights.
YOUR LOGO
Geben Sie hier Ihre Fußzeile ein

10. 2.1. Depth of existing problems
2.1.9. Problems in protecting property rights
According to Heritage Foundation 2011 Economic Freedom Index data by property rights
protection indicators Georgia stands next to Kazakhstan, Shr-ilanka, Pakistan, Nepal, Cambodia
etc. (with 40 points).
YOUR LOGO
Geben Sie hier Ihre Fußzeile ein

11. 2.1. Depth of existing problems
2.1.10. Credit accessibility problems
YOUR LOGO
Geben Sie hier Ihre Fußzeile ein

12. 2.1. Depth of existing problems
2.1.11. problems of bankruptcy and closing down a
company
Problem of bankruptcy and closing down of a company is a difficult issue in
Georgia, because:
Bankruptcy and closing down (liquidation) of a company takes approximately 3.3 year;
There are official state fees - GEL 5,000.
For your information, in eastern European countries bankruptcy process takes
approximately 2.7 years and in OECD countries- 1.7 year.
Bankruptcy completion period
Eastern European
Georgia OECD countries
countries
Time/years 3.3 2.7 1.7
Source: Doing Business, 2011.
YOUR LOGO
Geben Sie hier Ihre Fußzeile ein

13. 2.1. Depth of existing problems
2.1.12. The most problematic factors in business
The most problematic factors while conducting business are.clear-cut fixed by the
World Economic Forum.
Availability of finances
Inadequate education of manpower
Inflation
Low ethics of manpower
Taxation regulations
Unstable politics
Inadequate infrastructure
Tax rates
Instability of the government
Ineffective state bureaucracy
Poor public healthcare
Corruption
Limited labor regulation
Foreign currency regulation
Crime and theft
YOUR LOGO
Geben Sie hier Ihre Fußzeile ein
Source: The Global Competitiveness Report 2011-2012, World Economic Forum, www.weforum.org

14. 2.1. Depth of existing problems
2.1.13. The problems existing in key components
In Global Competetivness Report Georgia does not have desirable position in the key component indicators, often
there is negative dinamics (the indicators show the rating of the country worldwide).
2005 2006 2007 2008 2009 2010 2011
Court independence 94 110 112 112 117 104 91
Effectiveness of legislation for dispute
91 89 82
resolutions
2005 2006 2007 2008 2009 2010 2011
Property right 86 99 117 109 109 120 120
Small shareholders’ rights 93 114 123 123 117 122 119
2005 2006 2007 2008 2009 2010 2011
Effectiveness of state regulation
102 98 92
appeals
Local market competition 91 92 115 114 115 124 128
102 101 108 95 98 113 112
Quality of domineering on local market
Effectiveness of antimonopoly
85 82 94 111 125 135 135
regulation
106 107
Diversity of financial services
Accessibility of financial services. 108 96
Availability of deceiving finances in
108 108 111 107 125 125 122
local market
2005 2006 2007 2008 2009 2010 2011
Quality of education system 96 96 93 83 97 119 116
Quality of management schools 104 103 114 110 106 116 115
Potential of innovation 85 92 100 97 119 112 103
Simple procedures of hiring and
24 14 14 5 7 9 10
dismissing
Availability of scientist and engineers 44 64 93 84 96 122 120
Brain gain 96 100 89 76 YOUR
88 104 LOGO
102
Companies equipped withGeben highhier Ihre Fußzeile ein
Sie
technology 103 107 109 108 115 125 115

15. 2.1. Depth of existing problems
2.1.14. Low level of investments caused by the problems
Recently investments’ volume into Georgia is decreasing in absolute figures as well
as in comparison with GDP. Decrease of investments’ volume are mainly caused by
the existing problems in business environment.
YOUR LOGO
Geben Sie hier Ihre Fußzeile ein
Source: www.geostat.ge

16. 2.2. Goals to be achieved and target indicators
2.2.1. General objectives
Improving of business
environment through
Investment climate achieving following goals:
Improving the •Improving of legislation and
Open financial legislation and rule guarantee of rule of law;
markets and of law
credit Business environment: •Political stability;
accessibility
1. Political and legislative •Development of labor force ;
frame;
•Creation of fair and effective labor
2. Administrative stimulation; Qualification market;
Fair and and
3. Diversified communication development of
effective labor
network; administrative
•Formation of economical
market
resources prognosis;
4. Sectoral stimulation;
•Arranging infrastructure;
5. Nation wide, regional and
regional stimulus. •Formation of open financial
Economic
Political stability forecasting
markets and accessibility of credits.
Infrastructure
YOUR LOGO
Geben Sie hier Ihre Fußzeile ein

17. 2.2. Goals to be achieved and target indicators
2.2.3. Precise goals and target indicators
YOUR LOGO
Geben Sie hier Ihre Fußzeile ein

18. 2.3. Steps to be implemented until end of current year
 Precisely diagnosing business environment:
- Identification a goal and tasks in details;
- Identifying main beneficiaries and the parties involved;
- Analysis for limitations and barriers;
- Analysis of the capacity of the state bodies which should be activated during the first stage of
the reform;
- Valid accumulation of basic data;
- Attracting funds.
 Preparing packages draft legislation amendments:
- Law on Entrepreneurs;
- Georgian Tax Code and appropriate acts;
- Bankruptcy legislation.
 PR and informative campaigning :
- Carrying out PR activities for informing business sector and the society about the forthcoming
reforms
- Highlighting importance of reform in regards of increasing public welfare. YOUR LOGO
Geben Sie hier Ihre Fußzeile ein

19. 2.4. Short term tasks of the prime necessity
1 Formation of models for creating efficient public institution
2 Certification and traning on aproproate public servants
3 Accessibility of market information and availability of transparent state information
4 Harmonization of Labor Code to the European legislation
5 Caring out activities for facilitating free trade and competition
6 PR campaign for reporting the process and completion of the above-mentioned tasks
7 Perfection of the procedures of carrying out reforms based on feedback of beneficiaries
YOUR LOGO
Geben Sie hier Ihre Fußzeile ein

20. 2.5. Medium term tasks as a second step
1 Simplification of the tax administration
2 Decrease of interest rates and improving the accessibility of bank credits
3 Guaranteeing legislative protection of the investors
4 Perfection of competition policy
5 Increasing business education level in the country
6 Reporting of the implemented reforms in 2016
7 Evaluating the impact of reforms on business environment
YOUR LOGO
Geben Sie hier Ihre Fußzeile ein

21. Thank you for attention!
E-mail: davit.narmania@ciesr.org
Tel.: (+995 32) 272 90 21
(+995 599) 11 66 33
YOUR LOGO
Geben Sie hier Ihre Fußzeile ein