Economy of Georgia (country) - Institutional Reforms

Institutional Reforms

Under the Saakashvili administration, Georgia undertook a number of profound institutional reforms aimed at modernizing the economy and improving business climate.

Implemented institutional reforms created the effective, professional and transparent public sector, motivated to protect the principles of democracy.

Due to the economic deregulation policy, number of state regulated spheres sharply decreased, as well as regulation procedures were simplified.

• Georgia succeeded in fighting against corruption, that was the one of the main obstacles for development. Success of Georgia is recognized by different rating agencies. According to the Transparency International, Georgia is the top country in the post-soviet region in terms of fighting corruption. According to the Transparency International’s “Corruption Perception Index 2011, Georgia ranks 61th (up from 85th in 2002). „Global Corruption Barometer 2010“, Georgia ranks the first among world countries in the term of decrease corruption level. According to International Finance Corporation (IFC) Business Perception Survey 2012 only 0.11% of surveyed (1 respodent out of 920) named corruption as a problem in relations with public organizations.

• Georgia has the most liberal tax jurisdiction in Europe. The number of taxes is decreased from 21 to only 6, tax rates were reduced also. In addition, significant procedural and institutional reforms was implemented - simplified system of tax disputes was established, tax administration system was streamlined and most of taxes currently are paid on-line.

• Due to the customs reform customs procedures were dramatically simplified. Customs tariffs reform significantly simplified and sharply reduced the costs connected to the foreign trade. Number of import tariffs was abolished on approximately 90% of products and only 3 tariff rates exist instead of previous 16. Currently 86% of tariff lines are duty free compared to 26% in 2005. Modern Customs Clearance Zones were established and customs clearness procedures could be made starting from 15 minutes only.

• Modernization of system of licenses and permits resulted in decrease of number of licenses and permits and simplification of related administrative procedures.

• Privatization of state property – Starting from 2004, provision of transparent privatization policy was one of the important reforms of the Government of Georgia, that was addressed to denationalization of the remained state property in order to attract foreign investments, increase and develop the private sector and effective use of country’s resources. • Liberal labour legislation simplified the relations between employers and employees. As a result of the reform, ”Heritage Foundation” and other analytical centers named Georgian Labour Code as one of the most liberal in the world, because it significantly reduced hiring and firing expenses.

• Simplified administrative procedures – Georgia offers the most simplified procedures and unique service for registration of business, property, for getting different documentations via “One-Stop-Shops”, where the most procedures could be done on-line. Doing Business 2012 report (WB) places Georgia 16th in terms of Ease of Doing Business index (up from 112 in 2006), naming Georgia as the top reformer amongst the 174 countries over the last 5 years. Georgia is amongst the leaders in other ratings, namely, registering property – first place; Dealing Construction Permits - 4th place, Starting a Business - 7th place; Getting Credits - 8th place.