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Firms in Georgia see the benefits of reform

The Enterprise Surveys team has introduced a new product called Country Notes. This series of notes provide a customized snapshot of a country’s business environment relative to other economies surveyed in the region. While the survey fieldwork itself is a complex task, the notes themselves provide succinct analyses and policy recommendations based on the collected data.

Each note is 5-6 pages long and highlights the important differences in the investment climate between various firm subgroups such as exporters vs. non-exporters, business sectors, and different geographic locations within a country. There are currently six notes available and many more on the way. For now we are concentrating on the Eastern Europe and Central Asia (ECA) region, but over time we will cover most emerging markets.

One of the first notes to be published is on Georgia, which has been an active reformer as measured by Doing Business. This country note, based on data recently released by the Enterprise Surveys team, shows that these reforms have generated tangible benefits for firms.

The improved regulatory environment is reflected in the Enterprise Surveys data in two important ways. First, senior managers in Georgia spend less time dealing with government regulation than in any other country in ECA. Second, as shown in the figure below, the number of visits or required meetings with tax inspectors has fallen sharply since 2005.

Tax   
Source: Enterprise Surveys

There are still, however, challenges for the Georgian economy. One of these challenges is to improve in the area of crime and security. As the figure below shows, Georgian firms both pay a lot for security and face high losses due to theft, robbery, vandalism, and arson.

Crime
Source: Enterprise Surveys

Apart from security, the note identifies several areas that policymakers may wish to target in order to improve the business environment. In particular:

…the business environment goes beyond regulation and there is room for improvement in areas outside of business regulation. For instance, loans to Georgian firms require extremely high levels of collateral. Also internet usage by businesses is quite low, as are capacity utilization and export rates. Policymakers can focus future reform efforts in these areas.

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