The FINANCIAL — Georgia has moved 6 points forward from 21st to 15th position on World Bank’s Doing Business 2009 List. Azerbaijan is the world’s leading reformer of business regulations this year, with improvements in seven of the 10 areas studied by the report of World Bank and IFC. Georgia still keeps position in Top 25 of Ease of Doing Business. Ukraine is in the 145th place, down by four points compared to last ywar.
The situation concerning Business Environment Reforming in former soviet counties differs a lot. Georgia, Estonia, Lithuania and Latvia are in TOP 20 of the rating, Azerbaijan takes the 33rd position, Armenia – 44th, then Ukraine takes the 145th and Tajikistan 155th position.
The top 25 are, in order, Singapore, New Zealand, the United States, Hong Kong (China), Denmark, the United Kingdom, Ireland, Canada, Australia, Norway, Iceland, Japan, Thailand, Finland, Georgia, Saudi Arabia, Sweden, Bahrain, Belgium, Malaysia, Switzerland, Estonia, Korea, Mauritius, and Germany.
Georgia was the top reformer in the Commonwealth of Independent States (CIS) and led the global top 10 reformer rankings on the ease of doing business in 2005–2006, according to recent previous report by the WBank and IFC.
In 2007 Georgia bacame included in 10 Top List once again. "Georgia reformed in six areas. It strengthened investor protections, including through amendments to its securities law that eliminate loopholes that had allowed corporate insiders to expropriate minority investors. It adopted a new insolvency law that shortens timelines for reorganization of a distressed company or disposition of a debtor’s assets. Georgia sped up approvals for construction permits and simplified procedures for registering property. It made starting a business easier by eliminating the paid-in capital requirement. In addition, the country’s private credit bureau added payment information from retailers, utilities, and trade creditors to the data it collects and distributes", report said.
Doing Business 2009 report covers June 2007- June 2008 period and the August Russian-Georgian conflict could not have affected Georgia’s positions on the listing. Though, Doing Business is not dependent on political developments as the only aspect that might cause changes in this regard is- Investor Protection criteria, the indicator which describe three dimensions of investor protection: transparency of transactions (Extent of Disclosure Index), liability for self-dealing (Extent of Director Liability Index), shareholders’ ability to sue officers and directors for misconduct (Ease of Shareholder Suits Index) and Strength of Investor Protection Index. The indexes vary between 0 and 10, with higher values indicating greater disclosure, greater liability of directors, greater powers of shareholders to challenge the transaction, and better investor protection.
In August 2008, Georgia engaged in an armed conflict with Russia and separatist groups from South Ossetia. On 26th August, at the request of the Russian parliament, President Dmitry Medvedev declared that Russia officially recognised the Georgian regions of South Ossetia and Abkhazia as independent nations.
The International Monetary Fund (IMF) also announced that Georgia was to receive a $750m (£422m) loan, BBC reported. The IMF agreed in principle to offer the help amid concerns that Georgia's growth would be seriously hampered by the recent war.
According to Eurasianet, one month after war broke out with Russia, Georgian officials and foreign business executives are maintaining a cautiously upbeat outlook on the investor climate in the country.
Foreign direct investment has fueled Georgia’s recent economic boom, and allowed the government to manage its growing trade deficit, and to finance ambitious development programs. In 2007, the country received $1.6 billion in outside investment (more than 40 percent more than in 2006) and posted a 12.4 percent economic growth rate.
Before the conflict with Russia, the government estimated that Georgia would receive close to $2 billion in foreign direct investment for 2008, EurasiaNet reports. “Now, with economic growth expected to fall by nearly half, officials hope that strong support from Georgia’s allies in Washington and Brussels will help contain the damage to investor confidence”.
“Burlington Capital Group, an American investment developer based in Omaha, Nebraska, rethought its plans for a real estate development project after fighting between Georgia and Russia broke out on August 8”.
David Lee, the managing director of mobile communications company MagtiCom, noted that foreign companies are apt to follow the lead of Washington and Brussels. If the United States and European Union maintain a strong assistance commitment to Georgia, investor interest in the country is likely to remain strong.
Both Washington and Brussels have pledged to help Georgia rebuild after the war, although details about how the funds will be used remain vague. On September 3, the United States announced a $1 billion economic aid package, and the European Union has pledged assistance that could include trade agreements and new, simplified visa regimes. There are also plans for a EU-sponsored international conference on Georgia’s reconstruction in October.
The U.S. government will host a meeting of U.S. and Georgian business leaders in Tbilisi to help Georgia recover from its war with Russia, U.S. Commerce Secretary Carlos Gutierrez said.
"While our two-way trade of nearly $580 million is modest, we believe it can be expanded substantially with additional effort," Gutierrez said at a "Georgia Day" event hosted by the U.S. Chamber of Commerce.
Deputy Commerce Secretary John Sullivan will lead the business development trip, which is expected to take place in mid-October although exact dates have not been set.
Bush has pledged $1 billion in humanitarian and economic assistance to help rebuild Georgia and has instructed U.S. Trade Representative Susan Schwab to develop legislation to expand Georgia's duty-free access to United States.
Doing Business 2008 Worldwide
Regulatory reforms are gaining momentum worldwide, reaching record numbers this year, finds Doing Business 2009—the sixth in a series of annual reports published by IFC and the World Bank. The new report identifies 239 reforms between June 2007 and June 2008 that make it easier to do business in 113 economies.
Africa also had a record year for regulatory reforms, with 28 countries completing 58 reforms that make it easier to do business—more than in any other year. And three of the world’s top 10 economies that reformed their business regulations are from the region. The top 10 are, in order, Azerbaijan, Albania, the Kyrgyz Republic, Belarus, Senegal, Burkina Faso, Botswana, Colombia, the Dominican Republic, and Egypt.
Doing Business ranks economies based on 10 indicators of business regulation that record the time and cost to meet government requirements in starting and operating a business, trading across borders, paying taxes, and closing a business. The rankings do not reflect such areas as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions, or crime rates.
Singapore leads the global rankings on the overall regulatory ease of doing business for a third consecutive year. New Zealand is runner-up, and the United States third. Bahrain and Mauritius join the ranks of the top 25 this year.
“Economies need rules that are efficient, easy to use, and accessible to all who use them. Otherwise, businesses are trapped in the unregulated, informal economy, where they have less access to finance and hire fewer workers and where workers lack the protection of labor law,” said Michael Klein, World Bank/IFC Vice President for Financial and Private Sector Development. “Doing Business encourages good rules, and good rules are a better basis for healthy business than ‘who you know,’” he added.
In Africa, other economies making the most reforms of business regulations include two postconflict countries, Liberia and Sierra Leone , along with Rwanda . Half the economies in Latin America made such reforms, while in the Middle East and North Africa and in East Asia nearly two-thirds did.
Seven OECD high-income economies, including Canada , Greece , Hungary , and Portugal , made regulatory reforms this year. Among the large emerging markets, China led the way—reforms there make it easier to access credit, pay taxes, and enforce contracts. South Africa has made it easier to start a business and pay taxes. Brazil and India both eased trade processes.
“Economies worldwide are increasingly committed to their agendas for business-friendly reforms,” said Penelope Brook, Director, World Bank/IFC Financial and Private Sector Development Vice Presidency and a coauthor of the report. “We find newcomers looking to earlier reformers of businesses regulations. We are also seeing more such reforms in Africa , with many economies getting inspiration from the top-ranked African countries.”
The Doing Business project is based on the efforts of more than 6,700 local experts—business consultants, lawyers, accountants, and government officials—and leading academics around the world who provided methodological support and review.
By Kate Tabatadze
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