ICC: Revenue Service Number One Impediment to Doing Business in Georgia

ICC: Revenue Service Number One Impediment to Doing Business in Georgia

The FINANCIAL -- Fady Asly, Chairman of the International Chamber of Commerce (ICC) Georgia believes Revenue Service has become the number one impediment to doing business in the country. In his words the practice of auditing companies for months and penalizing them with incredible amounts in addition to freezing their bank accounts have gained Georgia a “terrible reputation” within investors and foreign businesses spheres.

“Georgia’s GDP per Capita after the recent adjustments is about 3500 USD; with a 2 percent GDP growth as forecasted for the coming two years, Georgia will need fifty years to reach the current GDP per capita levels of Turkey and Romania, hundred years to reach the current level of Cyprus and hundred twenty five years to reach the current level of France the UK or Germany and this is scary!” said Asly.

“I believe that this puts everything into perspective and therefore the government should make sure that any piece of legislation that has to be adopted in any sphere should be weighed on the basis of its impact on the GDP.

“Any legislation that will negatively affect GDP should be immediately rejected. The minimum acceptable annual GDP growth should be ten percent and the government needs to deploy every necessary effort to reach this target,” he added.

Q. Let’s talk about the current business environment in Georgia. What are the positive remarks that you see for improving the business climate?

A. We have been very critical of the economic policies of the Government for the past two and a half years; as a matter of fact ICC is the business climate ombudsman of Georgia.

The Government has issued many business unfriendly legislations that seriously undermined the confidence of investors and businesses in the country; I will mention the Immigration Law, The Law on Landownership, the Labor Code, and the Competition Law just to mention those.

We have systematically warned the Government over the years of the danger of those laws to the economy unfortunately they didn’t want to listen.

All those laws have created nebulosity and lack of visibility and have affected the confidence of businesses in the future of the country.

Fortunately since January this year we feel that Government has understood that they made mistakes and they have started reversing some of those business unfriendly laws and this is by itself a very good step forward.

Serious investors need political stability and long-term visibility to commit to a country; unfortunately external political stability does not help Georgia however there is nothing we can do about it; but Government can do a lot to improve on the internal political stability and give investors a real feeling of stability.

For that they will need to stop prosecution of former Government officials and to work towards a political reconciliation in the country. As long as the spirit of retaliation prevails within the political players Georgia will remain a questionable destination for investment.

We believe that the business unfriendly laws have played a much bigger role in discouraging investors than the tension and war between Russia and Ukraine.

Q. You said the Economy Minister should be “more free” in his activities. What do you mean? And why do you think he is not free?

A. I sincerely believe that we have a good Government bar couple of ministers; the same Government would have done very well under the previous administration; the major problem is that in my opinion ministers are unable or too scared to decide of anything on their own, they always wait for the secret go ahead that will come from Bidzina Ivanishvili [Georgia’s former Prime Minister and creator of ruling party Georgian Dream] and this is a very serious problem for the country.

Most Government and Parliament members were fiercely defending the terrible Immigration Law till Mr. Ivanishli openly criticized it on February 18; all of a sudden they all shifted hundred eighty degrees and started criticizing the law admitting that it was a terrible impediment to the economy.

When the Lari [Georgia’s national currency] started devaluating everyone was silent till Mr. Ivanishvili made a public statement on February 26, accusing the National Bank of being responsible for that; in the hours that followed half of the government and half of the parliament condemned the National Bank.

On March 30th Mr. Ivanishvili made a statement saying that the auditing procedures of the Revenue Service needed to be reconsidered, the very next day Prime Minister Garibashvili requested Parliament to start working on amending the Tax Law in this respect.

Government members are too scared to take an initiative so they are not publicly reprimanded or humiliated by Mr. Ivanishvili and this is very seriously damaging the business climate and stalling the economy.

Q. There are some top priority sectors for the Government today which are agriculture, energy sectors, etc. Also, they try to make the rural places more attractive for the investors. Do you agree these sectors should be priority? And why?

A. Honestly and as a man who has spent his professional life in agriculture and in the trade of agriculture products I don’t think that agriculture should be a main priority for Georgia. It is a small country with twenty two different micro-climates and therefore no areas large enough to cultivate any crop competitively at the international level. Of course there are some profitable niches but Georgia is surely not an agriculture country and therefore I do not think that the Government should mobilize too much resource for this sector beside facilitating the logistics of it.

Energy and tourism have surely a huge potential, nevertheless the role of the Government is not to manage those sectors but to create the necessary infrastructure and legislation that will help the private sector develop those sectors properly.

Q. The Government tries to stimulate the country’s real estate market. One initiative involved reducing taxes for landlords who rented out an apartment, while the other foresaw removing all state liabilities for companies who were unable to complete construction works for projects that began before August 2008. What do you think, how would these initiatives help the construction sector to revive?

A. I believe those are good initiatives that will raise the interest of the stakeholders of this particular sector. There is a large demand for real estate nevertheless and till the GDP per capita and employment increase substantially most Georgians will find it very hard to purchase a property or to have it financed; that is why the only focus of the Government should be economic growth to increase the population’ wealth.

Q. Now, let’s talk about ICC. What are the recent developments, what are the future plans?

A. ICC is the largest and most vocal business organization in the country. It includes more than 350 members of which 150 corporate, 28 business organizations and close to 200 youth members; we have not stopped growing and as a matter of fact in 2014 our membership grew by fifty percent which is an all-time record.

We do have 19 various commissions that are very active and that work on various issues pertaining to business.

We do also have a Consultative Board that includes eight Ambassadors accredited to Georgia in addition to the heads of three International Financial Institutions and two International Organizations.

We have no political agenda but to make of Georgia the best place for business and we shall not stop our fight till this happens and it will happen.

We call ourselves the “Business Climate Ombudsman” of Georgia, and we have no other agenda but to insure a proper business environment for both foreign investors and Georgian business people operating in the country. We do argue regularly with various stakeholders regarding issues related to the business climate, it is not easy because we upset many people but we believe that no one can make an omelet without breaking eggs.

Q. ICC has been supporting the Golden Brand Award Ceremony for years already. Why?

A. ICC supports as a matter of principle anyone of its members; The Financial is a member that we pride ourselves to count among our membership in addition to being one of the most serious publications in the country. The Golden Brand Award Ceremony is a testimony to the resilience and commitment of businesses in the country and this is what ICC is all about,” said Asly.

When a business is granted the Golden Brand Award it is an incentive for this business to maintain a high level of performance and to do better. Business people need to be recognized and appreciated.

The Golden Brand Award Ceremony is extensively covered by the local media and gives local companies an extensive exposure to Georgian consumers, whereas international awards remain confined in general between the awarding body and the company that received the award.

Businesses need exposure to improve their sales and increase their brand visibility and therefore it is much more important for a business in Georgia to be awarded locally a prestigious award like the Global Brand,” Asly said.

This year ICC awarded the chief-editor of The FINANCIAL Zviad Pochkhua for the newspaper’s effort for businesses in Georgia.
The Financial has been awarding the business community for years and we thought that it would only be fair that ICC awards the Financial for being an outstandingly serious publication and for appreciating the efforts and commitment of other businesses in Georgia.


Author: Galt & Taggart