Economy of Georgia (country)
From Wikipedia, the free encyclopedia
 |
This article or section needs to be updated. Please update the article to reflect recent events / newly available information, and remove this template when finished. |
| Economy of Georgia | |
 |
|
| Currency | 1 Georgian lari (GEL) = 100 tetri |
|---|---|
| Fiscal year | 1 January - 31 December |
| Trade organisations | WTO, GUAM and others |
| Statistics | |
| GDP (PPP) | $19.65 billion (2007[update] est.) (118th) |
| GDP growth | 12.4% (2007[update] est.) |
| GDP per capita | $4,700 (2007[update] est.) (PPP) (108th) |
| GDP by sector | agriculture (13.1%), industry (29.3%), services (57.6%) (2007[update] est.) |
| Inflation (CPI) | 10% (2006[update] est.) |
| Population below poverty line |
31% (2006[update]) |
| Labour force | 2.02 million (2007[update] est.) |
| Labour force by occupation |
agriculture (40%), manufacturing (20%), services (40%)(1999[update]) |
| Unemployment | 12.6% (2004[update] est.) |
| Main industries | steel, aircraft, machine tools, electrical appliances, mining (manganese and copper), chemicals, wood products, wine |
| External | |
| Exports | $1.24 billion (2007[update] est.) |
| Export goods | wine, mineral water, ores, vehicles, fruits and nuts |
| Main export partners | Turkey 12.6%, US 10.9%, Azerbaijan 7.9%, Armenia 5.9%, UK 5.8%, Bulgaria 4.9%, Ukraine 4.8%, Russia 4.7%, Turkmenistan 4.4% (2006[update]) |
| Imports | $5.2 billion (2007[update] est.) |
| Import goods | machinery and equipment, fuels, chemicals, metals, foodstuffs |
| Main import partners | Turkey 14.1%,Russia 13.1%, Ukraine 8.5%, Azerbaijan 7.4%, Germany 6.8% (2006[update]) |
| Public finances | |
| Public debt | $1.76 billion (2006[update]) |
| Revenues | $3.68 billion (2007[update] est.) |
| Expenses | $3.08 billion (2007[update] est.) |
| Economic aid | ODA $309.8 million (2005[update] est.) |
| Main data source: CIA World Factbook All values, unless otherwise stated, are in US dollars |
|
Despite the severe damage the economy suffered due to civil strife in the 1990s, Georgia, with the help of the IMF and World Bank, has made substantial economic gains since 2000, achieving robust GDP growth and curtailing inflation.
GDP growth, spurred by gains in the industrial and service sectors, remained in the 9-12% range in 2005-07. In 2006, the World Bank named Georgia the top reformer in the world[1].
Contents |
[edit] History
Georgia's economy has traditionally revolved around Black Sea tourism, cultivation of citrus fruits, tea and grapes; mining of manganese and copper; and output of a big industrial sector producing wine, metals, machinery, chemicals, and textiles. The country imports the bulk of its energy needs, including natural gas and oil products. Its only sizable internal energy resource is hydropower. During the turmoil of 1990-es Georgian economy experienced large budget deficits due to a failure to collect tax revenues. Georgia privatized the distribution network in 1998, since then deliveries have been steadily improving. The growing trade deficit, persistent problems with tax evasion and corruption, and political uncertainties put economic development at risk.
Georgia's economic recovery has been hampered by the separatist disputes in Abkhazia and South Ossetia, a persistently weak economic infrastructure, resistance to reform on the part of some corrupt and reactionary factions, and the Russian and Asian economic crises. Under President Shevardnadze's leadership, the government has nonetheless guided the economy to some gains: slashing inflation, meeting most IMF targets through its July 1998 review, and qualifying for economic structural adjustment facility credit status, introducing a stable national currency (the lari), introducing free market prices of bread products, preparing for the second stage of accession to the World Trade Organization (the first stage has already been met), signing agreements that allow for development of a pipeline to transport Caspian oil across Georgia to the Black Sea, and passing laws on commercial banking, land, and tax reform.
Georgia's deficit fell from the 1996 rate of 6.2% to 3.6% in 1997 and to 3% in 1998. In 1998, President Shevardnadze announced that tax revenues have "risen dramatically", and the tax reform, encouraged by the IMF, would lead to further increases. Although total revenue indeed increased from 1996 to 1998, these increases were lower than expected. International financial institutions continued to play a critical role in Georgia's budgetary calculations. Multilateral and bilateral grants and loans totalled 116.4 million lari in 1997 and totalled 182.8 million lari in 1998.
During the last decade of XX century there has been some progress on basic market reforms. All prices and most trade have been liberalized, and massive government downsizing took place. More than 10'500 small enterprises have been privatized, and although privatization of medium- and large-sized firms has been slow, more than 1'200 medium - and large-sized companies have been set up as joint stock companies. A law and a decree establishing the legal basis and procedures for state property privatization reduced the number of companies controlled by the state.
Georgia's inherited its transportation and communication infrastructure from Soviet regime.
The United States began assisting Georgia in reform process soon after the country gained independence from Soviet Union. Gradually, the focus shifted from humanitarian to technical and institution-building programs. Provision of legal and technical advisors was complemented by training opportunities for parliamentarians, law enforcement officials, and economic advisers.
[edit] Institutional reforms
Under the Saakashvili admistration, Georgia undertook a number of profound institutionl reforms, aimed at modernizing the economy and improving business climate.
Georgia has seen a drastic fall in perceived corruption of tax officials. In 2005 only 11% of businesses, surveyed by the World Bank, reported that bribery was frequent, down from 44% in 2002[2].
Reducing corruption in courts was one of the chief priorities of the new goverment. Since 2004, when the Saakashvili admistration came in, 7 judges have been detained for taking bribes and 15 brought before the criminal courts. In 2005 alone the judicial disciplinary council reviewed cases against 99 judges, about 40% of the judiciary, and 12 judges were dismissed. At the same time judges’salaries were increased fourfold, to reduce dependence on bribe money.
[edit] Licensing regulation
Just 3 years ago getting a construction permit for a commercial warehouse in Tbilisi required 29 different procedures. Before even applying for the permit a builder needed permission from agencies as diverse as the Center of Archaeology at the Academy of Science and the Inspector of Sanitary Observation. Illegal construction activity was widespread. In 2004 less than 45% of ongoing construction projects in Tbilisi had permits[3].
Things have changed after new Law on Issuance of Licenses and Permits was introduced in 2005. The law cut from 909 to 159 the number of activities subject to licensing. A one-stop shop was created for license applications, so that now businesses can submit all documents there, with no verification by other agencies required[4]. In the construction industry Georgia eliminated many of the approvals required to obtain a construction permit (while maintaining procedures necessary for regulating in the public interest) and introduced a “silence is consent” rule, whereby a permit or license is automatically granted if no government action is taken within statutory time limits[5]. The number of procedures needed to build a warehouse dropped to 12. The time required fell by nearly 3 months. The approval process for building a warehouse in Georgia is now more efficient than in all EU countries except Denmark[6].
[edit] Tax collection
In 2005, Georgia enacted a new Tax Code that introduced lower, flat tax rates. The total number of taxes was reduced from 22 to only 7. The number of taxes was further reduced starting January 1, 2008, when new changes to the Tax Code of Georgia took effect that abolished the 20% social tax paid by businesses. The rate of personal income tax was rased istead, from 12% to a flat 25% rate[7].
[edit] Labour regulation
With unemployment around 15% and many jobs in the informal sector, Georgia undertook a far-reaching reform of labor regulation. The new Labour Code was adopted on 25 May 2006. The new law eases restrictions on the duration of term contracts and the number of overtime hours and discards the premium required for overtime work. It also eliminates the requirement to notify and get permission from the labor union to fire a redundant worker. The new law provides for 1 month’s severance pay, replacing complex rules under which required notice periods depended on seniority and the manager had to write long explanations to labor unions and the Ministry of Labor[8]. In general, new regulation makes Georgian labour market much more flexible.
Coupled with the fact that Georgia also reduced the social security contributions paid on wages by businesses from 31% to 20% in 2005, and abolished them entirely starting January 2008, these changes make Georgia the sixth easiest place to employ workers globally[9].
More flexible labor regulations boost job creation. But they don’t mean giving up protections. Georgia has ratified all the core labor standards of the International Labour Organization[10]. Flexible labor regulations that give workers the opportunity for a job in the formal sector and easy transitions from one job to another.
[edit] Energy
Before 2004 Georgia's electrical energy sector was in critical condition, with electricity blackouts being common throughout the country. Since late 2005, distribution has been much more reliable, approaching consistent 24-hour-a-day services. Investments in infrastructure have been made as well. In 2006 hydroelectricity output increased by 27% and thermal by 28%[11].
By the end of 2007, Georgia became a net exporter of electricity[12]. When the electric power station in Inguri reached capacity in November that year, Deputy Minister of Energy Archil Nikoleishvili reported that Georgia would not need supplies from Russia anymore[13]. And in July 2008 Georgia began exporting electricity to Russia through the Kavkasioni power line[14].
Georgian Natural gas consumption stood at 1.8 billion cubic meters in 2007. Like electricity, Natural gas used to be supplied to Georgia by Russia. In recent years, hovewer, Georgia has been able to eliminate its dependency on imports from Russia, thanks to increased hydroelectricity production, and the availability of new sources of natural gas in Azerbaijan.
In addition, all russian gas exports to Armenia pass through the georgian pipeline system. Georgia takes 10% of that gas as a transit fee[15].
[edit] Agriculture
Currently, about 55% of the total labor force is employed in agriculture, though much of this is subsistence farming[16].
Georgian agricultural production is beginning to recover following the devastation caused by the civil unrest and the necessary restructuring following the breakup of the Soviet Union. Livestock production is beginning to rebound, although it continues to be confronted by minor and sporadic disease outbreaks. Domestic grain production is increasing, and will require sustained political and infrastructure improvements to ensure appropriate distribution and revenues to farmers. Tea, hazelnut and citrus production have suffered greatly as a result of the conflict in Abkhazia, a crucial area for planting the latter crops.
While approximately 13.1% of the Georgian GDP is generated by the agrarian sector, crops often spoil in the field because farmers can't sell their goods because of high transportation cost, which make domestic goods more expensive than imported goods. In collaboration with European assistance, Georgia has taken steps to control the quality of natural spring water and how to appropriately sell it.
Viticulture and winemaking are the most important fields of Georgia’s agriculture. Over 450 species of local vine are bred in Georgia, and the country is considered as one of the oldest places of producing top-quality wines in the world. Russia was traditionally the biggest export market for Georgian wine. This, however, changed in 2006, when Russia banned imports of wine and mineral water from Georgia. Since then Georgian wine producers have struggled to mantain output and break into new markets.
In 2007 Georgia sold 11 million bottles of wine in about 40 countries, less than it sold in Russia alone before the ban was imposed. Total wine sales abroad in 2007 were down by about nine million bottles, forcing many vineyards to sell land, buildings and equipment to survive[17].
[edit] Construction
The transition to legal construction is not without pain. On July 20, 2007 fire brigades had begun demolishing a 13-story building in downtown Tbilisi that had gone up before the reform and was now in danger of collapsing because of faulty engineering. The building had no project or operating license—and didn’t even show up in the city plan. To avoid the many approval procedures, the building company had simply paid off the mayor.
[edit] See also
[edit] References
- ^ [Doing Business: Georgia is This Year's Top Reformer], The World Bank Group
- ^ Doing Business 2007 The World Bank Group
- ^ Doing Business 2008 The World Bank Group
- ^ Doing Business 2006 The World Bank Group
- ^ 10 reasons to invest in Georgia, investingeorgia.org
- ^ Doing Business 2008 The World Bank Group
- ^ 10 reasons to invest in Georgia, investingeorgia.org
- ^ Doing Business 2007 The World Bank Group
- ^ Doing Business: Georgia is This Year's Top Reformer, The World Bank Group
- ^ Georgia: ratification status of up-to-date conventions, ilo.org
- ^ http://www.infoplease.com/country/profiles/georgia.html
- ^ [CIA World Factbook]
- ^ Russia and Georgia: economy as a battlefield en.rian.ru
- ^ Inter RAO UES begins importing energy from Georgia en.rian.ru
- ^ en.rian.ru
- ^ Main Indicators of Agriculture Development investingeorgia.org
- ^ Being Russia's No 1 enemy could be good for Georgian business,Irish Times. August 30, 2008
[edit] External links
- Sakartvelos Ekonomika, an online monthly on Georgia's economy.
|
|||||||||||
|
|||||||||||
