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Ministry of Foreign Affairs of Georgia

 

Georgia - General Economic Overview

After the August incursion and the global financial crisis, the Government of Georgia set the following priorities: Sustaining and strengthening the economy; Further democratic and economic reforms; Deepening European and Euro-Atlantic integration.

 

In 2008 the GDP growth was 2.3% (in real figures 12.800 billion USD).

 

The GDP growth rate in 2009 was -3,8% (in real figures 10.767 billion USD).

 

In January-June 2010, GDP growth (preliminary data) equaled to 6.4% (in real figures 5.303 billion USD).

 

In 2008 GDP per capita equaled to 2.921 thousand USD.

 

In 2009 GDP per capita equaled to 2.455 thousand USD.

 

In January-June 2010, GDP per capita equaled to 1.195 thousand USD.

 

Inflation rate in 2008 was 5,5% and in 2009 it was 3%. In 2010 inflation is 10.5% (NBG info).

 

In 2008, the foreign trade turnover amounted to 7.6 bln.USD, among them export was 1.5 billion USD and import was 6.1 billion USD.

 

In 2009, the foreign trade turnover amounted 5.513 bln.USD, among them export was 1.135 billion USD and import was 4.378.3 billion USD.

 

In January-October 2010, the foreign trade turnover amounted to 5.23 billion USD (18% increase in comparison with same period of last year), among them export was 1.23 billion USD (33% increase) and import was 4 billion USD (14% increase).

 

The foreign direct investment in Georgia in 2008 amounted to 1.564 billion USD.

 

In 2009 foreign direct investment equaled to 658,4 million USD.

 

In January-September 2010, foreign direct investment amounted to 433 million USD.

 

Source: National Statistics Office of Georgia

 

The fact that our economy is standing despite the severe consequences of the August Russian aggression and the global financial crisis, is thanks to the strength of our institutions, open economy, simplified tax code and liberal economic reforms.

 

Banking Sector

 

As for August 2010, there are about 120 branches of local and foreign Commercial Banks in Georgia. At present subsidiaries and branches of commercial banks from Turkey (HALYK BANK, Ziraat Bank), Azerbaijan (The International Bank of Azerbaijan), Russia (VTB), Kazakhstan (BTA), Germany (Procredit Bank), France (Bank Republic-Societe General), Ukraine (TAO-Privat Bank) and Great Britain (HSBC) are operating in Georgia.

 

Taxation System

We have initiated important reforms in tax system. The new Tax Code introduced in 2005, reduced the number of taxes, simplified administrative tax collection mechanisms, and laid a foundation for stable legal base in tax collection. We have initiated important reforms in tax system. The number of taxes from 21 has been reduced to 6. Now we have following taxes:

 

          1) VAT (reduced from 20% to 18%);

             2) Income Tax (reduced from 25 to 20%, will be reduced until 2013 to 15%);

             3) Corporate Profit Tax (reduced from 20% to 15%);

             4) Excise;

             5) Property Tax (1%);

             6) Custom Tax (0%, 5%, or 12%). Currently 86% of customs tariff lines are duty free. 

 

"New Course for Fair, Simple and Reliable Tax System", in force from January 1, 2011, is introduced (www.mof.ge).

 

Free Industrial Zone

Free Industrial Zones (Poti, Kutaisi) offers to investors the most favorable conditions for starting and operating business. Poti Free Industrial Zone (FIZ), established in 2008 is the first FIZ in Caucasus. Poti FIZ is covering the territory of 300 hectares and is situated next to the Poti Sea Port on historic Silk Road between East & West.

 

Poti FIZ offers world class business infrastructure, very simplified registration and licensing procedures, company registration will take only 1 day. RAKIA Georgia offers "One-Stop-Shop" system for the need of every investor, which means that all necessary procedures will be conducted at one spot in Poti FIZ.

 

Poti ZIT offers 100% foreign ownership in free zone, 100% capital and profit repatriation, Zero tax on profits in the Free-zone for foreign companies, 100% duty free import and export of raw materials and finished goods, etc. At present moment 25 investors from different countries are registered in Poti Free Industrial Zone.

 

Tourism

 

Tourism Sector is one of the most rapidly growing sectors in Georgia. There is a variety of possibilities to invest in tourism in Georgia starting from Sea resorts, continuing to mountain, skiing, mineral waters and healthy, cultural and other type of tourism.

Number of international tourist arrivals to Georgia reached over 1,500,000 in 2009 representing 16 % growth. Within the 9 months of 2010, 1,491,925 tourists visited Georgia which is 38 % higher than the number of tourists of the same period in 2009. 

At the same time, the Ministry of Economy and Sustainable Development of Georgia started accepting statements from physical and legal entities concerning the construction of hotels with the intention to develop Kobuleti "Free Touristic Zone" (so called "Pichvnari" territory, 140 meters from the sea.) in Adjara region.

It is remarkable that Management of the construction building land will happen at a symbolic price;
Project construction documentation will be handed to the client for free; The territory will be provided with Engineering Utility Networks and corresponding infrastructure.

In case if the project is finished by August 1, 2011, the investor will receive a 15-year income and property tax exemption.

Construction of "Anaklia-Zugdidi" Free Touristic Zone has also started. The Government of Georgia offers to investors unprecedented terms for the construction of hotels along the seaside that has the best climate conditions. In is notable that land, hotel projects and communications for investors will be provided by the Government gratis! Tax exemption for 15 years, new road from Poti to Anaklia along the seaside; the Government will lay mineral water to the new resort for free; a new airport in "Anaklia-Zugdidi" Free Touristic Zone will be constructed; a sea resort with a yacht club.

The lands that will be handed over to investors are located alongside the boulevard which was designed by Spanish architects.

The deadline for submitting applications is January 30, 2011.

Agriculture

 

Top exported products: wines and spirits, nuts, mineral and spring waters, sheep, cattle, citruses,  non- alcoholic beverages, bay leaf, herbs.

 

Investment Opportunities in Agriculture: wine and mineral water, fresh fruit and vegetables, greenhouse production, vegetables production, berries, citrus, exotic fruit (Persimmon, Pheikhoa and Kiwi).

 

Georgia has a rich agricultural tradition. Georgia's climate and soil have made agriculture one of its most productive economic sectors. As the country has a nine climate zones almost all types of agricultural products can be grown in Georgia.

 

Agricultural land in Georgia is approximately 3 million ha and is characterized by its vertical zones with almost all soil types and climates. Due to such diversity, the country is divided into 13 zones and 6 sub-zones of agricultural specialization.

 

Recent progressive reforms in land privatization, registration, and development of infrastructure, accession to the WTO, favorable trade and tax regimes, transparent government regulations and investment opportunities have already yielded positive results, such as growing export trends of agricultural products.

Trade

Main Aspects of the Georgian Trade Policy are:

1.      Liberal Trade Regimes;

2.      Low Tariffs on Import;

3.      Simplified Licensing and Permitting Procedures;

4.      Nonexistence of Quantitative Restrictions of Export and Import;

5.       Nonexistence of Customs Tariffs of Export and Re-Export;

6.      Nonexistence of VAT on Export;

7.      Simplified Export-Import Procedures.

Georgia is a WTO Member State from 2000. At the same time existing free trade (Azerbaijan, Armenia, Ukraine, Russia, Moldova, Turkmenistan, Uzbekistan, Kazakhstan, Turkey) and preferential trade regimes with number of countries (GSP with Norway, USA, Japan, Switzerland and Canada and GSP+ with EU), as well as ongoing consultations on FTA with EU and USA are good stimulus for foreign investors to invest in Georgia. 

 

Bilateral Agreements on the Promotion and Protection of Investments

Georgia has bilateral treaties on investment promotion and protection with the following 32 countries:  8 CIS countries (Armenia, Azerbaijan, Kazakhstan, Kyrgyzstan, Moldova, Turkmenistan, Ukraine, Uzbekistan); 17 EU countries (Austria, Belgium, Bulgaria, Czech Rep., Estonia, Finland, France, Germany, Greece, Italy, Latvia, Lithuania, Netherlands, Romania, Sweden, Luxemburg, UK) and also 7 countries (China, Egypt, Iran, Israel, Turkey, Kuwait, USA). Negotiations launched to conclude bilateral treaties with 24 countries.

Bilateral Agreements on Double Taxation

Georgia has concluded double taxation treaties with the following 33 countries: 6 CIS countries (Armenia, Azerbaijan, Kazakhstan, Turkmenistan, Ukraine, Uzbekistan); 19 EU countries (Austria, Belgium, Bulgaria, Czech Rep., Denmark, Estonia, Finland, France, Germany, Greece, Italy, Latvia, Lithuania, Netherlands, Romania, Poland, Spain, Malta, UK) and also 8 countries (China, Iran, Japan, Switzerland, Kuwait, Singapore, Israel, Egypt). Negotiations launched to conclude bilateral treaties with 6 countries.

 

Renewable Energy

 

It is important to negotiate with interested investors regarding the construction of HPPs (Hydro Power Plants), wind plants, high voltage transmission lines in order to use effectively country's renewable energy potential.

 

Georgian Government is committed to expand hydro generation capacity in the coming years and is currently actively seeking investors. In this way Georgia will develop Clean Development Mechanism projects and expand the share of clean energy generated locally which could be supplied to European markets as well.

 

Energy Security

 

Georgia participates in successful projects within the South Caucasus energy corridor: "the Baku-Tbilisi-Supsa" and "the Baku-Tbilisi-Ceyhan" (BTC) oil pipelines; South Caucasus gas pipeline "Baku-Tbilisi-Erzurum".

 

For ensuring energy security of Europe, it is important to realize "Nabucco'', "White Stream", "Trans-Caspian", "Trans Black Sea links", "Euro-Asian Oil Transportation Corridor" (EAOTC), "LNG" and "CNG" projects;

 

On September 14, 2010 the Summit of the Heads of States of the Republic of Azerbaijan, Georgia, Romania and Hungary was held in Baku dedicated to the realization of the AGRI (Azerbaijan Georgia Romania Interconnect) project aimed at transportation of liquefied natural gas to Europe. It was featured by the Hungary's accession to this project. The Heads of States signed the AGRI Baku Declaration while the Heads of relevant companies signed the cooperation Agreement. The above-mentioned project, which is the part of the Southern Corridor, will strengthen Georgia's role as a transit country.

 

Georgia-EU Trade and Investments

 

In 2009, the foreign trade turnover with EU amounted to 1.5 billion USD, where the export was 200 million USD and import - 1,3 billion USD.

 

In January-October 2010, the foreign trade turnover with EU amounted to 1,375 billion USD, where the export was 235 million USD and import - 1.14 billion USD.

 

The FDI's from EU in 2009 amounted to 224,7 million USD and in January-June 2010 to 98,5 million USD.

 

International Ratings

 

Our main point is a simple one: We are not using the conflict to delay reforms. Rather, the aggression is a reminder of the need to continue result-oriented liberal democratic and economic reforms. As a result:

 

In 2009, Georgia was ranked as the 4th best performer worldwide by the Forbes Tax Misery & Reform Index (only Qatar, UAE and Hong Kong had bested Georgia).

 

„Doing Business 2011" named Georgia as the most active reformer amongst the 174 countries it has researched (in the period of 2005-2010).

 

At the same time, according to the „Doing Business 2011", Georgia made a step ahead from the previous year's performance in terms of Ease of Doing Business and currently holds 12th position.

 

Furthermore, apart from the Ease of Doing Business Ranking, Georgia is amongst the leaders in other ratings namely, Starting a Business Ranking - 8th position, Construction Permits - 7th position, Registering Property - 2nd position.

 

According to the Transparency International, Georgia is the top country in the post-soviet region in terms of fighting corruption.

 

According to the Index of Economic Freedom 2010, published by the Heritage Foundation, Georgia moved foreword by 6 positions, and currently holds 26th place amongst 183 nations.

 

According to the 2010 annual report of Fraser Institute about Economic Freedom of the World, Georgia advanced by 22 steps in the ranking compared to last year and is on the 23rd place (with 7.47 points) among 141 countries.

 

On October 6, 2010, the International Ratings Agency "Moody's" published  Georgian sovereign credit rating with category Ba3 (Long Term Local and Foreign Currency Rating).

 

 
 

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