Why the Development of Small Business is Vital for Georgia

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The FINANCIAL  — Large businesses remain the main employers in Georgia, according to the latest statistics provided by Geostat, the official statistics bureau. They occupy almost all the fields of business and are the major suppliers of products and services. Economists believe that the poor development of small and medium business is causing the high rate of unemployment in Georgia.


And this reduces the chances of the country becoming richer.

“Small business had problems not just in 2011, but in previous years also. Big business is responsible for 85% of the entire economic activity in Georgia. That shows how small business is not developed,” said economist Nodar Khaduri. He believes that the development of small business will solve the problem of unemployment in the country. “People will not be dependent on the Government and the Government will be able to disclaim much social responsibility as many more people will have their own incomes. Small business development means that income is equally distributed amongst people. This would mean greater social justice in the country,” he added.

“Today, as unemployment is reaching its highest level, supporting small business has become a very important issue,” said economist Eter Kharaishvili. “Three major issues will develop small business: encouraging small business, trainings for small entrepreneurs and helping them in sales. If the Government develops the programme for supporting small business and considers these three major issues, 200,000 small enterprises will be created in 3-5 years. These enterprises would create 25-30 percent of total production,” she added.

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Supporting small business is one of the strategies of economic development and poverty reduction. The Government encourages its development but economists find some faults in the process of its development. Nodar Khaduri believes that the Government of Georgia should not implement a Cheap Credit Programme as this interferes with private business.

He says that access to credit is very difficult in Georgia. Interest rates are too high for small businesses to afford. “There are also problems connected to tax administration,” said Khaduri.

“A fixed fee or progressive taxation system, affordable loans in state programmes would help small businesses to develop,” economist Levan Gogoladze believes. “It is also important to make some programmes for small and medium enterprises where they could get cheap loans from. The availability of such programmes is slim today, production costs are high for small businesses and that’s why small businesses cannot develop,” Gogoladze said.

The best sectors in Georgia for developing small business in are agriculture, the processing industry, family business in tourism, light industry. Small business is very profitable and can give big profit to businessmen, economists say. But in Georgia the number of employees in big business is much more than in small business.

From 360.1 thousand people 62.1 percent are employed in big business, 14.7 percent in medium business and the remaining 23.1 percent – in small business, according to data of the National Statistics Office of Georgia.

“Employment statistics show that Georgians cannot use the profitability of small business. For the number of employees in small business to be equal to the number of employees in big business it is necessary to support small business. Nowadays lots of small business entrepreneurs are facing bankruptcy. They cannot compete with big business because of the deficit of financial, technical or qualified human resources,” said Levan Gogoladze.

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Tbilisi remains the number one city in Georgia for doing business in. Statistics shows that in terms of total turnover the advantage of Tbilisi compared to other regions is 72.9 percent. Also, according to the number of employees, the majority of them, 60.2 percent, live in Tbilisi. “This is due to the low level of economic infrastructure. Still, there is huge employment potential in Tbilisi. Nowadays the regions have lots of problems but the Government’s projects will bring about a result. I mean the development of infrastructure in Adjara, free zones and other programmes. The result will be equal distribution of total turnover and production value throughout the territory of Georgia,” said Gogoladze.



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