The FINANCIAL — As the new “Business Optimism Study” of IFC suggests, 40% of the 400 companies surveyed in 6 big cities of Georgia, are postponing plans to expand because of August’s events. More than 40% are re-considering the decision to expand company operations in Georgia.
IFC, a member of the World Bank Group, has presented the results of the “Business Optimism Study” to the Government of Georgia. “It will help identify the areas of the private sector which were most affected by August 2008’s events,” say IFC representatives.
“According to the survey the number of employees has been decreased by 3.3 percent, a minor reduction is expected in the near future. On average 31 staff members were laid off in each company. Losses in terms of employment were slightly higher in Tbilisi, but regional enterprises have more pessimistic expectations. Salaries have decreased in more enterprises compared to those in which salaries have increased. In the following 6 months more enterprises predict increase rather than decrease of salaries,” said Irina Kokaia, IFC Georgia Business Enabling Environment Project Manager.
The highest plans for loan applications in the next 6 months are among finance sector representatives. In more than 75% of the companies the revenues have been decreased. Less than 2% of respondents replied that their revenues were increased as a result of the conflict. Decrease in revenues was most frequent in construction and transport industries. The majority of companies were expecting 16% growth in revenues, but as a result of the war revenues decreased by 23%.
IFC surveyed 400 enterprises in Tbilisi and six other large Georgian cities; Batumi, Kutaisi, Zugdidi, Gori, Poti and Rustavi. The surveyed companies were from the following sectors: Industry, Construction, Trade, Transport, Service and Finance.
Findings revealed that the conflict had a negative effect on the revenues of 77% of enterprises. According to the entrepreneurs surveyed, as a result of August’s events there was a 3.3 percent reduction of staff. 55% of entrepreneurs think that the revenues will not change in the next 6 months, while 33% believe that revenues will increase. 66% of firms expressed high or medium optimism about the short term business environment in Georgia, while 75% expressed optimism about the country’s business environment in the medium term.
On average, each enterprise anticipated 16% revenue growth, but in reality they experienced 23% loss. The main reasons were fall of demand for products during the conflict situation, saving money and delays in receiving new supplies. For these reasons 40% of companies surveyed postponed plans for expanding.
To date, the IFC Business Enabling Environment Project has conducted two national surveys of small and medium enterprises in Georgia and identified the main administrative and regulatory barriers to the development of the business sector. It has also helped the Government draft a Decree on Procedures for licensing of Natural Resources with the expected economic impact of USD 1.3 million. The project has trained 160 government officials, non-government and private sector representatives on improved regulatory procedures.
Written By Levan Lomtadze