IFC Survey Reveals Business Environment Improvements and Challenges in Georgia
IFC, the private sector arm of the World Bank, today released the results of a comprehensive survey of Georgia’s small and medium business sector. The survey of some 2,000 smaller business owners revealed that the government’s reform efforts have resulted in a more favorable environment for doing business. But it also indicates that business owners are less optimistic about the future.
IFC conducted the study, “Business Environment in Georgia 2006,” with financial support from BP, the company’s oil and gas partners, and the Canadian International Development Agency.
According to the study, business worries over political instability, corruption, and taxes—once seen as serious obstacles—have declined significantly since 2003, the last time the survey was administered.
Georgia’s improved conditions for business have been confirmed by the country’s rise in international rankings. The joint IFC/World Bank report, Doing Business in 2007: How to Reform, rated the country as the top reformer in the world. In overall ease-of-doing-business ratings, Georgia came in 37th place —an unprecedented leap from 112th the previous year.
The new survey suggests that significant challenges remain, including concerns over tax code ambiguities, licensing and inspections, and customs inefficiencies. Unfair competition, insufficient infrastructure development, and ongoing concerns about corruption are highlighted as well. These issues contributed to the business owners’ lack of optimism: only 40 percent indicated confidence that the business environment would continue to improve in the coming year, down from 75 percent in 2003.
The survey also details recommendations for removing additional barriers to business development. It places emphasis on the assessment of recent regulatory reforms, their impact to date, and the steps that still need to be taken to attract increased business activity to the country.
At a presentation on the survey, Hugh McDowell, Country Manager of BP Georgia, said, “BP and our oil and gas partners are committed to contributing to Georgia’s economic and social development. We recognize that the development of smaller businesses provides the basis for stable growth, and IFC’s work to improve the country’s business-enabling environment has already shown results that we are proud of.” He added, “We believe the IFC project will enhance ongoing reform efforts in Georgia.”
The survey is one of several ways in which IFC engages with Georgia’s government to improve legislation and regulatory practice in permit and license issuance. For example, work is underway on business inspections, and IFC is planning to work with the government of Georgia in the near future to improve food inspections procedures, according to Irina Kokaia, IFC Project Manager.
Simeon Djankov, the author of the Doing Business report, said, “I am impressed with the commitment of Georgia’s government to continue reforms. Georgia has made the biggest jump seen by any country since our report was launched. But reforms need time to have the desired impact. I hope that the government will continue to promote reforms that ease business operations in the country.”
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