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Georgia

Unlocking Georgia’s potential through export-led job creation

Rashmi Shankar's picture
Having lived in Tbilisi for almost three years now, I continue to be fascinated by the contradictions of the Georgian story.

On one hand, Georgia has achieved significant economic growth over the past decade, successfully introduced much needed governance reform, and become synonymous with world leadership in terms of doing business (ranked in the top 15 and better than some OECD countries).

On the other hand, the country has been dogged persistently by high poverty rates – among the highest in the Europe and Central Asia region. And, despite a highly improved business environment, unemployment rates remain in the double digits: official unemployment is currently around 15 percent!

The story behind Georgia's E-Procurement success

Sandro Nozadze's picture
 

Georgia e-procurement

Public procurement is at the core of how government conducts its business. As such, reforming procurement systems can prove transformational for development in any country.
 
In Georgia, the introduction of e-procurement (Ge-GP) is a good example of how strong political will and commitment can be critical in the context of reforming public procurement. Within a year, the State Procurement Agency of Georgia (SPA) designed, developed, and tested an e-procurement system, and eventually moved to the mandatory use of e-Procurement, fully replacing paper-based tenders.  

Apply for SAFE Trust Fund grants

Soukeyna Kane's picture



The SAFE Trust Fund application (Word document) is now open until 27 February 2015.
 
What is SAFE?
 
SAFE means Strengthening Accountability and the Fiduciary Environment. It is a Trust Fund group administered by the World Bank and established by the Swiss State Secretariat for Economic Affairs (SECO) and the European Commission with the aim of improving public financial management in the Europe and Central Asia region. This Trust Fund group provides support for activities to assess public financial management (PFM) performance, identify and implement actions to achieve improvements and share knowledge and good practices across countries in the region.

Rising Financial Pressures from the East

Aurora Ferrari's picture
It’s hard to get a break in the Europe and Central Asia region, it seems – even a short one. Hit hard by the troubles in the Eurozone at the beginning of the decade, emerging and developing countries in Eastern Europe are, at the beginning of this year, contending with renewed fears. Meanwhile, external pressures have built up on the Central Asia side as well.

All eyes turned to Russia recently, when on 16 December the ruble plunged by more than 11 percent, despite the Central Bank of Russia’s last-minute interest rate hike of 6.5 percentage points to 17 percent. When it looked like Russia’s turmoil might spread to global markets, western economies sat up and paid close attention.

What may have gone unnoticed, however, is the ongoing impact on our client countries in the Europe and Central Asia region.

From Paper to Practice: How Easy Is It to Ease Doing Business

Borko Handjiski's picture

A storefront that specializes in nuts The stroke of the pen is powerful indeed; it has led to wars, peace, and lots of other things in between, including changes in a country’s business environment. A large part of what defines the environment for doing business in a country is set in legislation. In many countries around the world, business regulations are more difficult than necessary, and some have taken great efforts to remove unneeded impediments with the aim of stimulating entrepreneurship and investment.

Does Your Country Export What It Should?

Siddhesh Kaushik's picture

Customs reforms have made trade easier in Georgia. Photo - Irakli Tabagari / World Bank.One of the core principles of trade economics is that of “comparative advantage.” First described by David Ricardo, the theory says that countries are best off if they specialize in products that they can make relatively more efficiently – with lower opportunity cost – than other countries. If this happens, the theory goes, global welfare will increase. This concept is more difficult than it sounds, however – as Paul Krugman has pointed out quite eloquently – and benefits from illustration.

Basketball genius Michael Jordan stars in one example sometimes used in textbooks and classrooms: If Jordan mows his lawn faster than anyone else in the neighborhood, he has anabsolute advantage in lawn mowing. But that doesn’t mean that he should mow his neighbor John Smith’s lawn, because that would come at an opportunity cost: in the same two hours it would take Jordan to cut the grass, he could earn much more by playing basketball or making a commercial.

While it is difficult to measure comparative advantage in world trade, one indicator is something called “Revealed Comparative Advantage” (RCA). This is a measure of how a country’s exports compare to those of a bigger group, such as a region or the rest of the world. For example, if a country’s RCA in wheat is high (typically greater than one), that means wheat makes up a higher share of that country’s total exports than it does of the world’s exports. This suggests that that country is a more efficient wheat-producer than the average country.

But countries don’t always produce the products in which they have a revealed comparative advantage. Sometimes Michael Jordan mows the lawn. Let’s take a look at a couple of examples from this new data visualization tool.

Does Your Country Export What It Should?

Siddhesh Kaushik's picture

Customs reforms have made trade easier in Georgia. Photo - Irakli Tabagari / World Bank.One of the core principles of trade economics is that of “comparative advantage.” First described by David Ricardo, the theory says that countries are best off if they specialize in products that they can make relatively more efficiently – with lower opportunity cost – than other countries. If this happens, the theory goes, global welfare will increase. This concept is more difficult than it sounds, however – as Paul Krugman has pointed out quite eloquently – and benefits from illustration.

Basketball genius Michael Jordan stars in one example sometimes used in textbooks and classrooms: If Jordan mows his lawn faster than anyone else in the neighborhood, he has an absolute advantage in lawn mowing. But that doesn’t mean that he should mow his neighbor John Smith’s lawn, because that would come at an opportunity cost: in the same two hours it would take Jordan to cut the grass, he could earn much more by playing basketball or making a commercial.

While it is difficult to measure comparative advantage in world trade, one indicator is something called “Revealed Comparative Advantage” (RCA). This is a measure of how a country’s exports compare to those of a bigger group, such as a region or the rest of the world. For example, if a country’s RCA in wheat is high (typically greater than one), that means wheat makes up a higher share of that country’s total exports than it does of the world’s exports. This suggests that that country is a more efficient wheat-producer than the average country.

But countries don’t always produce the products in which they have a revealed comparative advantage. Sometimes Michael Jordan mows the lawn. Let’s take a look at a couple of examples from this new data visualization tool.

Tax Reforms for Ageing Societies

Sebastian Eckardt's picture

Taxing Labor versus Taxing Consumption?

 Europe’s welfare systems face substantial demographic headwinds. Increasing life expectancy and the approaching retirement of “Baby Boomers” will increase public expenditures for years to come. Rightfully, much attention is focused on containing additional spending needs for pensions, health and long term care.  But how is all this being paid for?
 
Currently, the majority of social spending, including most importantly pension benefits, in most countries in Europe and Central Asia is financed through social security contributions, which are essentially taxes on labor.  This has two important implications. First, in terms of fiscal sustainability, the growth in spending is only a concern if expenditures grow faster than the corresponding revenues. Since labor taxes are the predominant source of financing for most welfare systems in both EU and transition countries, aging will not only increase spending, but simultaneously exert pressure on revenues. With the exception of countries in Central Asia and Turkey, the labor force, and hence the number of taxpayers that pay labor taxes will decline by about 20 percent on average across the region. Second, already today, labor taxes, including both personal income taxes and social security contributions account on average for about 40 percent of total gross labor costs in Europe and Central Asia (including EU member states), compared to an average of 34 percent in the OECD. This means that for every US$ 1 received in net earnings, employers on average incur a labor cost of US$ 1.67. And out of the 67 cents that are paid in labor taxes, 43 cents (or 65 percent) are directly used to finance social security benefits. By increasing the cost of labor, the high tax burden potentially harms competitiveness, job creation, and growth in countries in the region.

Why Inclusion of Sexual Minorities Is Crucial to Gender Equality

Fabrice Houdart's picture
In previous articles we discussed why inclusion of sexual minorities is instrumental to the World Bank’s goal of shared prosperity and constitutes smart economics. This piece focuses on how sexual minority inclusion is crucial to achieve progress on our gender equality agenda.

One of the background papers to the World Bank’s 2012 Gender World Development Report, “Masculinities, Social Change and Development,” alluded to Raewyn Connell’s theory of “hegemonic masculinity” as well as the strong correlation between heterosexism and gender inequalities.

Hegemonic masculinity is defined as the gender practice that guarantees the dominant social position of men and the subordinate social position of women. As summarized by Schifter and Madrigal (2000), it is the view that “Men, by virtue of their sex, [are] naturally strong, aggressive, assertive, and hardworking, whereas women [are] submissive, passive, vain, and delicate.” Hegemonic masculinity justifies the social, economic, cultural, and legal deprivations of women.

Don’t Put All Your Exports in One Basket (That Means You, Resource-Rich Country!)

Gonzalo Varela's picture

Baku, Azerbaijan. Source - flickr.com/photos/9464116@N08/7816929566/in/photolist-cUKNPG-fdSCiF-feJL8Y-feaJrS-feurU8-feuqP6-feb4rd-fdVqvc-febfvm-fdVVrX-fdVQWB-fe7YGL-fdSz12-feb68j-feJFA5-fevRZT-fdSAzV-feaNqs-fdVWBi-feJK3C-feanKW-feap55-8Sgjmp-fe5RVE-fe5vvC-fdQwrK-fdQpv4-fe5y7w-fdQtuK-fe5KvW-fe5Agf-fe5Nbm-fe5CjQ-fe5HHs-fe5Sbs-djYTYR-8F59Fq-bkr5Tf-8E86t9-8c3pDH-8c6JB5-8AjSRo-8AjSUJ-8eGwJc-aDwLd2-8AjSWj-8E86Tb-8E4VK2-8E85Mo-a4NYwC-7ZnFFRDiversification of a country’s exports – increasing both the number of products it produces and the destinations of those products – is considered part of the path to development. Many economists and policy-makers see export diversification as an important means for increasing employment and speeding growth. Diversification also makes growth more stable, as it provides protection against shocks; a country that exports many products will not be hit so hard when the price of one falls, and similarly, a nation that exports to a wide variety of destinations will be shielded against a recession in one of them.

But new evidence contributes to a body of work suggesting that countries with an abundance of natural resources might be more prone to export concentration during spurts of high natural-resource prices – mainly in products, but also to a milder extent in trading partners – leaving them more vulnerable to price swings. 


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