The FINANCIAL -- An almost 10 percent increase was observed in registering business in the first quarter of 2014 compared to the same period of 2013, according to official data provided by the National Agency of Public Registry. While the number of individual entrepreneurs increased by 10.5 percent, the number of registered for-profit entities reduced by 6.6 percent, the data shows.
The number of registered business entities in Georgia amounted to 4,082 units in May 2014. Out of which 96.5 percent are individual entrepreneurs and 3.5 percent - for-profit entities.
The decline was observed in registering business entities by 3.1 percent in May compared to April. However, there is growth by 7.3 percent compared to the same month of 2013. The number of individual entrepreneurs decreased by 3.8 percent in May 2014 compared to April 2014, but the number of for-profit entities increased by 20.5 percent. As for comparing this year’s data to the same period of 2013, the result is that the number of individual entrepreneurs increased by 7.6 percent and for-profit entities decreased by 1.4 percent.
In total 141 non-profit legal entities, 44 cooperatives, 11 foreign for-profit legal entities and 7 joint-stock companies were registered in May 2014, according to the National Agency of Public Registry.
The economist Vaja Beridze says that currently business is free and the environment for doing business is really favourable in Georgia, but a lack of creativity and experience of businessmen remains the main challenge in the country. “Today the main problem of Georgian business is know-how and no experience in management, which is a challenge for new as well as old businesses in Georgia. How the production should be planned, how the market should be chosen, how the product should be distributed and other issues are still not correctly resolved,” he said.
“The EBRD likes to do business in Georgia,” said Andras Simor, Vice President of Policy at the EBRD. “We have done more than EUR 2 billion worth of business in about 160 projects. We also read a lot of satisfactory World Bank’s Doing Business rankings, which rate Georgia very highly. But at the same time Georgia needs to realize that it should never stop. Because if Georgia stops, it will be left behind. We believe that there is still progress to be made in areas like competition, legislation, local currency markets for lending, the local capital market, for stock exchange Georgian companies to have a wider selection of where they get financing from,” he said.
“Generally, we propose to the Government that it establishes what we call an Investor Council, which we have done in a number of countries in our region. The first response of the Government to this suggestion was positive, and the reason behind establishing this council is that we would like to see formal, regular dialogue within this council between the authorities, business community including the EBRD, where we could hear the issues that come from the business sector, where they need solutions, where they need changes in the regulations, where they see that there is too much bureaucracy, how to reduce that, etc. Issues like that should all be discussed there,” Simor added.
“TBC Bank has joined the world’s leading companies listed on the London Stock Exchange - one of the largest stocks exchanges in the world,” said Giorgi Kvirikashvili, Minister of Economy and Sustainable Development. “This transaction is of international significance where the price of shares listed by TBC Bank exceeded GEL 400 million. More than 100 institutional investors have invested in the Georgian bank. This means that more than 100 institutional investors have overcome the risk of investing in Georgia and this country has already become an investment destination for many investors. Attracted investments will of course strengthen Georgia’s economy and contribute to its development,” he added.
Several start-ups also describe the current investment and business environment in Georgia as very convenient. However, some of them still face challenges in their specific areas.
“The business environment is quite favourable in Georgia,” said Vakhtang Meladze, Director of GEO Plast. The company produces PET bottles (bottles made of Polyethylene terephthalate) and distributes them to different wholesale markets. “First of all, there are lots of manufactures such as alcoholic and non-alcoholic beverages, milk products, and chemical fluid manufacturers (liquid soap, dishwashing liquid). The market has becoming larger and larger. We are still a small company but we see a strategy for how to develop further and it is not challenge in Georgia anymore,” he added.
“In general, the business environment is more free compared to in previous years. There is no longer pressure on business from the state’s side, which was a big problem in Georgia up until 2012,” said Giorgi Jokhadze, founder of Vita Logistics, the international shipping company. “As for the sector where my company operates, there are many problems. In fact, the Georgian transport business in the direction of ground shipping is completely unprotected and all the useful conditions for its development are limited. Even after the Russian market opened to Georgian products and goods turnover increased significantly, it positively affected Armenian and Azerbaijani shipping companies rather than Georgian companies,” he added.
As Jokhadze explains, the problem is that the Armenian and Azerbaijani drivers do not have to face visa challenges when crossing the Russian border, meaning it is possible to employ their drivers 40 percent cheaper than Georgian drivers. To find drivers who have double citizenship of Georgia and Russia, have an E category driving license with the experience of driving trailers, is a challenge for shipping companies in Georgia, he says. “Besides, fuel price is 35 percent cheaper for our neighbours. We also have to take into consideration the fact that Georgians pay illegal taxes on the roads and at the customs-houses of our neighbour countries. As a result, Georgian shipping companies meet difficulties in trying to develop,” Jokhadze said.
“It is unfortunate that many things are based on a political factor in Georgia,” said Vakho Vakhtangishvili, CEO and Co-Founder at Leavingstone. “Our company is involved in marketing activities which is directly linked to other industries’ activities, which is always sensitive to the political environment. This is one problem. Another problem, which I want to sort out, is related to the field where Leavingstone operates. Georgia does not even appear on the world technological map, which is a problem. Georgia does have the potential to become a leading country in the Caucasus region in the direction of digital services and we should not miss out on this opportunity. It would be better if the Government and private sector were to collaborate together,” said Vakhtangishvili.