Doing business

As the result of the reform agenda set out by the Government of Georgia after the Rose Revolution in 2003, the country has witnessed impressive improvements in the macro-economic situation that subsequently led to greater growth and stability. Since 2004, Georgia has reoriented its policy toward further improvement of the business climate, deregulation and privatization, establishment of free markets and improved control of corruption. The results of their performance have gained international recognition. Georgia was ranked nr 1 reformer in the World Bank’s 2007 “Doing Business Survey”, improving its overall ranking from 112 to 37. In the “Doing Business 2009” Georgia was further promoted to the 15th place  in the overall aggregate rankings.

Despite of the hostilities with Russia in August 2008 and the negative impact of the recession, Georgia hopes to overcome the slowdown of the economy and maintain 2% economic growth in 2010.

Priority areas for the Georgian government for 2008-2012 and onwards are to continue the reforms, focus on attracting FDI; building its national economy that should lead to job creation and poverty reduction. One of the main objectives of the Government has been to improve the business and investment climate and tackling corruption. 

In addition, Georgia enacted a Tax Code that introduced lower, flat-tax rates and significant procedural and institutional innovations. The total number of taxes was reduced to seven (personal income 12%; corporate profits 20%). VAT (generally 18%) is not applicable to export of goods, international transportation, tourist and certain other services.

As part of its ambition to establish Georgia as transit route between Central Asia and the West, rehabilitation of infrastructure has been a top priority for the Government. Primary focus is on the transport and energy  infrastructure including roads, railways, sea ports and airports.

Potential sectors for investors are infrastructure, the financial sector, construction, agriculture and tourism.

Based on the current import / export figures between the Netherlands and Georgia, the country has a one-star ranking under the NL matrix for economic priority countries. The Economic Department of the Embassy can assist you with the following:  

Provide general information about the business climate in Georgia

Provide information about the regulatory / legal framework for doing business in Georgia

Provide you with guidance and advise on finding local intermediate agents and/or relevant governmental agencies in Georgia

Provide you with information about trade fairs

Provide you with names of potential business counterparts (import/export/investment) agents, etc.

Provide you with advice on how to best handle business related problems.

Useful links in Georgia:

Links

Government of Georgia -  http://www.government.gov.ge/

Ministry of Environment Protection and Natural Resources of Georgia -  http://moe.caucasus.net/

Ministry of Economic Development of Georgia -  http://www.economy.ge/

Ministry of Foreign Affairs of Georgia -  http://www.mfa.gov.ge/

Ministry of Agriculture of Georgia -  http://www.maf.ge/

Ministry of Finance of Georgia -  http://www.mof.ge/

National Bank of Georgia  -  http://www.nbg.gov.ge/

                                EBRD –  www.ebrd.com

                                 IMF –  www.imf.ge

                                 World Bank –  www.worldbank.org.ge      

                                 International Chamber of Commerce –  www.icc.ge

                                 Georgian Chamber of Commerce and Industry –  www.gcci.ge                                         

•   American Chamber of Commerce
•   Georgian-European Policy and Legal Advice Centre (GEPLAC)
•   Georgian Investment Agency
•   Investment Guide in Georgia
•   State Department of Statistics of Georgia – www.statistics.ge

Usefull links in the Netherlands:

•   Amsterdam Stock Exchange
•   CBI (Centre for the Promotion of Imports from developing countries)
•   Chambers of Commerce in The Netherlands
•   Dutch Employers Cooperation Programme (DESCP)
•   Dutch Export Site
•   Dutch manufacturers, listed by name and product
•   EVD (International Business and Cooperation)
•   FMO (Finance for Development)
•   Ministry of Economics Affairs
•   Ministry of Finance
•   Netherlands Foreign Trade Agency
•   PUM (Netherlands Senior Experts)
•   The Central Bank
•   The Euro
•   The Netherlands Bureau of Statistics

Financial Instruments

Development Cooperation Matchmaking Facility - MMF. www.evd.nl/mmf

Open for Georgia from October 2007, Small and medium companies looking for a Dutch partners can apply for support under the MMF.

A local company looking for an international (in this case Dutch) partner has to submit the Matchmaking application form to the Embassy. The Dutch Embassy and the Agency for International Business and Cooperation which is the part of the Dutch Ministry of Economy (EVD) will screen the intake form (final decision by EVD).  If the result of the screening is positive, the EVD will start identifying suitable Dutch companies. The EVD will offer to the local company a voucher for EUR 5,000 only if possible contacts can be identified. For this amount the local company can hire a consultant company from a list provided by he EVD. The consultant will help the local company  to establish contacts with potential Dutch business partners. Since October 2007, eight rounds were open (every three months companies can submit the applications). 25 Georgian companies submitted their applications for the MMF programme, out of which three Georgian companies have received the vouchers. Next round will open in January  2010.  ("   Intake Form MMF")

Private Sector Investment Programme – PSI www.evd.nl/psi

PSI is a new name of a programme under which investments projects in Georgia and Armenia have been eligible  from 1998 (though the name of the programme was different – PSO; PSOM and now PSI). The programme supports innovative investments in developing countries, with the aim to strengthen economic growth, employment and income generation. The investment is to be realised by a Dutch company in cooperation with a local partner, with whom a sustainable relationship is being established.

The terms and modalities of the programme have been revised in 2008 and in the beginning of 2009 the programme was re-launched under its new name PSI. In 2009 the total annual budget was raised from EUR 55 million in 2008 to EUR 70 million. There are no budgets earmarked for particular countries, it is a competitive programme, managed on behalf of the Ministry of Foreign Affairs by the Agency for International Business and Cooperation which is the part of the Dutch Ministry of Economy (EVD).

The maximum grant percentage a particular investment project can get is 50% with a maximum project amount of EUR 1,500,000. PSI will have two tenders a year.

Number of projects for Georgia – 1997-present: 17; The last grant was awarded in 2009 on the basis of the  first PSI tender in spring 2009.

The closing date for the second PSI Tender 2009 is end of February 2010

See Project overview for Georgia

PSI09/GE/01 Establishment of a Decorative Plant Nursery, Tbilisi Georgia

In the first tender of 2009, the EVD received one proposal for Georgia. This proposal, in the field of pot plants, was selected. The Applicant in this project is Fachjan B.V. The project deals with the establishment of a modern greenhouse in the neighbourhood of Tblisi, to grow decorative plants to be sold through flower shops and supermarkets. Another activity will be to supply plant arrangements (project planting) to offices, hotels, hospitals, airport etc. Rendering of maintenance services to the users of project planting is an integrated component. The business opportunity that will be explored is the growing of decorative plants and bedding plants for the institutional and private consumer market in Georgia.

ORIO (former ORET)  Facility for Infrastructure Development.   www.orio.nl

http://www.evd.nl/home/financiering_projecten/financiering/programma.asp?land=ori

The Georgian government is eligible for grants under the ORIO facility as of January 2009. ORIO  is a grant facility provided by the Dutch Ministry of Foreign Affairs under the responsibility of the Minister for Development Cooperation. It contributes to the development and implementation of public infrastructure projects in developing countries. An application for a grant must be submitted by a central government. The scope of the project budget must be between EUR 2 million and EUR 60 million. ORIO finances 50% of the budget for the development phase and 35% of the budget for the implementation and operation phases of the project.  ORIO sectors chosen for Georgia are: Public Works, Environment, Transport. Recently, at the request of the Georgian Ministry of Finance, the transport sector was replaced by the water sector as one of the maximum of three sectors in scope for receiving support under ORIO.

Monday the 15 of February, the first ORIO Call for proposals for 2010 has opened. This Call will close on Monday the 26th of April 2010 at 17.00 CET. The second Call for Proposals for 2010 will most likely open end of May and close around mid September, exact dates are still to be confirmed.

The ORIO facility is successor to the previous public infrastructure facility that was called ORET.

Since ORET has been available to Georgia, three ORET Programmes have been awarded to Georgia. These three projects are:

• ORET 03/22 Boskalis/Rehabilitation of the Breakwater of the Port of Poti, (Ended in October2008)
• ORET GE/WM07061 Orange Water Solutions (Netherlands) and Tbilisi Water company – Tbilisi Water Supply Improvement.
• ORET GE/WM07015 Orange Water Solutions (Netherlands) and Kobuleti Water Company – Kobuleti Water Supply Project.

2xplore former PESP- Programme Economic Cooperation Projects. www.evd.nl/2xplore

2xplore is a programme through which the Dutch companies can acquire funds to undertake a feasibility study and/or studies for the preparation of an investment. The aim of 2xplore is to strengthen bilateral economic relations with non-OECD countries with the aim of increasing the likelihood of Dutch companies obtaining orders in those countries. Dutch companies and their Georgian counterparts can submit proposals for activities leading up to such export transactions. The activities may be feasibility studies, project identification, and investment preparation studies. 2xplore is for projects and not for market research or acquisition activities of individual companies.

Two proposals were approved for Georgia in 2009:

1. Cheese production in Georgia.

2. Mushroom production in Georgia.

CBI -  Centre for the Promotion of Imports from developing countries www.cbi.eu

Since 5 October 2006 Georgia has been put on the country list of CBI. The main aim of CBI is to assist developing countries in strengthening their export capabilities towards the European Union. Since then CBI has held a few trainings and seminars how to enter EU market in Georgia. On the basis of two pre-feasiblity studies for CBI Technical Assistance in 2007, a Partnership Agreement was signed with Georgian Chamber of Commerce in March 2008. In the spring of 2009, an export coaching programme was launched which provides long term advice (until 2013) to selected Georgian wine producers / exporters by a Dutch wine marketing expert with longstanding experience in Georgia (Mr. Theo Janssen). In the beginning of July 2009, an identification mission of CBI visited Georgia to identify scope for institutional capacity building support to Georgian Business Support Organisation.

PUM  Netherlands Management Co-operation Programme (PUM)  www.pum.nl

The Netherlands Management Co-operation Programme offers senior NMCP advisers (most of them retired or early retired persons) to companies and institutions that can transfer knowledge and experience from their own specialist fields. The expenses for this advice are extremely low, compared to commercial consultancy firms (the recepient company / organisation only has to cover costs for accommodation and meals). NMCP is funded by the Ministry for Development Co-operation and managed by the Netherlands employers federation.

Local representative in Georgia: Mr. Alexander Sokolowsky ( pum@ece.ge) T. + 995 32 31 14 67 or 68

Upcoming trade fairs/exhibitions in Georgia (List of Trade fairs)

Upcoming Trade Shows in Georgia

 Georgia International Oil Gas Energy & Infrastructure Conference & Exhibition
Date: 24-MAR-10 to 25-MAR-10
Georgia Oil & Gas Exhibition, the objective of the exhibition will be to bring together the manufacturers and suppliers of process plant and equipment, for this growing industry, all under one roof. The exhibition will provide an excellent platform for service providers to showcase their products and services to decision makers from leading Chemical manufacturers.
Venue: Sheraton Metechi Palace Hotel, Tbilisi, Georgia

 Caucasus Tourism Fair
Date: 23-APR-10 to 25-APR-10
Caucasus Tourism Fair is dedicated to the promotion of tourism products of the Silk Road countries. This fair will help to develop a tourism infrastructure in Georgia and the integration of the region into the world tourism market. Trade and public visitors will get the opportunity to receive information about services and products from exhibiting companies.
Venue: Georgia International Convention Center, Tbilisi, Georgia

 Caucasus Build
Date: 19-MAY-10 to 22-MAY-10
The Georgia building industry benefits from the economic growth and the inflow of foreign capital and is regarded as a very promising market. It is growing rapidly, and numerous projects in the field of road construction, house building and the construction of office premises are planned.
Venue: Georgia International Convention Center, Tbilisi, Georgia

 Tbilisi Beauty & Medical Aestetics
Date: 03-JUN-10 to 06-JUN-10
Tbilisi Beauty & Medical Aestetics fully covers the fields of Cosmetic Products and Services, Perfumery, Hair Care Industries and Medical Esthetics. This project will arouse the interest of both professionals and general public and will become the best opportunity to promote products, enter immerging Georgian market, get the complete information about the innovations.
Venue: Georgia International Convention Center, Tbilisi, Georgia

 Caucasus Healthcare
Date: 03-JUN-10 to 06-JUN-10
Caucasus Healthcare covers all fields of medicine including medical technology, laboratory equipment, hospital equipment, dentistry, pharmaceuticals and optics. This exhibition organized by Expo Georgia Company. It is will be four days between from 3 to 6 Jun, 2010 at Georgia International Convention Center in the Georgia.
Venue: Georgia International Convention Center, Tbilisi, Georgia

 Tbilisi International Auto Show
Date: 22-OCT-10 to 24-OCT-10
Tbilisi Auto Show has no analogies in the region. It has become one of the most successful events in the Automotive Business of the South Caucasus region. This is the best place to promote company on the new market of business opportunities with a total population 20 mln. people.
Venue: Expo Georgia Fairground, Tbilisi, Georgia

 Q&A

Frequently Asked Questions       I. Macroeconomic Environment:   1. What is Georgia’s GDP per capita?GDP per capita reached 1401.8 USD in the first half of 2008.   2. What is the GDP growth rate of Georgia?Actual GDP grew by 8.5 percent in the first half of 2008.   3. What is the inflation rate?The average CPI (e-o-p) in 2008 (YTD) is 12.8 percent.   4. What is the ratio of state foreign debt to GDP?The forecasted state foreign debt for 2008 is about 18 percent of GDP.     5. What is the ratio of tax revenues to GDP?The forecasted tax revenue for 2008 is 27.6 percent of GDP     6. What percentage of GDP is the budget proficit (surplus)?In 2007, the budget proficit was 1,2 percent of GDP     7. What is the exchange rate of the Georgian lari to the U.S. dollar and Euro? The average annual USD / GEL exchange rate in the first half of 2008 (period average) was 1.5 The average annual Euro / GEL exchange rate in the first half of 2008 (period average) was 2.28   II Starting a Business   8. How many documents are required to register a business? In general, the following documents are required:   Application Company charter Signature sample of the director  For limited liability companies and joint stock companies, document certifying the appointment of directors and members of the supervisory council  Receipt for payment of registration fees   9. How many days are required to register a business?   After submission of all documents, the Tax Inspection must register the business structure within three working days. Individual entrepreneurs must be registered within one working day.     10. What institutions should be contacted to register a business?       1. Notary       2. Bank (twice: for payment of fees and for opening a bank account)       3. Tax Department      III. Licenses and Permits   11. How many documents are required to obtain a license? There are three general documents to be presented: Application Extract from Entrepreneurs Registry Receipt for payment of license fee Other documents may be required depending on the type of license.     12. How many documents are required to obtain a permit? There are three general documents to be presented: Application Extract from Entrepreneurs Registry Receipt for payment of license fee Other documents may be required depending on the type of license.   13. Is there a "one stop shop" principle? Yes.   IV. Registering Immovable Property 14. What documents are required to register immovable property?   The following documents are required to register ownership rights in immovable property: Application for registration Agreement on the transfer of rights in immovable property Certificate on non-encumbrance Receipt for payment of the registration fee Copy of the identity card of the property owner Cadastral drawing   15. Where is property registered? Immovable property is registered with the National Agency of Public Registry, which is subordinated to the Ministry of Justice of Georgia.   16. How many days are necessary to register property? Property registration takes 1, 3, 5, or 10 business days, depending on the turnaround period requested and paid for.   17. What does the registration of a title to immovable property cost? The registration fee does not depend on the value of the property. It is a fixed amount and depends on the turnaround period requested. Fees range from GEL 150 for one-day service to GEL 7 for 10-day service.     18. Can international arbitration be used to resolve disputes over property in Georgia? Yes, Georgia honors the parties' agreement or contract to rely on international arbitration to resolve disputes over property located in Georgia.      V. Tax System 19. How many taxes exist?   There are only six type of taxes;   20. What are the tax rates?    Personal Income Tax is 25% flat Corporate Income Tax is 15%. VAT is 18%. Excise Taxes vary, depending on the product. Property Tax rates vary, depending on the type of property; Customs Duties fall into 3 brackets: 0%, 5% and 12%. 90% of goods are in the 0% category.   21. What are the rules for treating capital expenditures for corporate income tax calculation purposes?Georgia's Tax Code provides two options for deducting capital expenditures from taxable income:      1. Deducting of capital expenditures through the depreciation mechanism      2. 100% deduction in the year in which the capital expenditure is incurred without capitalization and further depreciation   VI. Foreign Trade 22. What favorable trade regimes are applicable to Georgia's foreign trade? MFN Tariffs with WTO Members Preferential Tariffs with the USA, Canada, Switzerland and Japan GSP + with the European Union and Turkey Free Trade with CIS Countries and Turkey   23. What goods are subject to import licenses or permits?     Goods subject to veterinary / phytosanitary control Materials of limited circulation Arms and ammunition Dual-purpose goods Therapeutic agents subject to special control Endangered species Radioactive substances Means of electronic surveillance   24. What goods are subject to export licenses and permits?   Materials of limited circulation Arms and ammunition Dual-purpose goods Therapeutic agents subject to special control Endangered species Radioactive substances Means of electronic surveillance   VII. Foreign Investments 25. Does Georgian law treat resident and non-resident investors differently? The law on "Investment Activities and Guarantees" secures equal treatment and rights to Georgian and foreign investors, except for ownership of agricultural land. Foreign legal and physical persons are allowed to purchase land in Georgia, except for agricultural land.   26. Does Georgia prohibit foreigners from investing in any sectors open to domestic investors? No, foreigners may invest in any sectors open for private investment.     27. Does Georgia have an established securities market? Yes, there is a securities exchange with a well-developed institutional structure and legal framework. Trading volumes are low but rising.     28. What restrictions will foreign investors face in repatriating capital? None. Georgia has no restrictions on capital repatriation. Dividends are subject to a 10% withholding tax.     VIII. Financial Institutions 29. What is the average interest rate? Interest rates for loans average 15-18%; and for deposits 6-10%.     31. Are foreign financial institutions restricted from opening branches or affiliates in Georgia? There are no limitations on opening branches and affiliate companies of foreign financial institutions in Georgia.  Licensing terms and conditions are the same as those for Georgian residents.      IX. Pricing and Tariffs 32. What types of price controls are in effect in Georgia? The only price controls are regulated tariffs in the following sectors:   Communication Transport Energy  Communal utilities /services  Personal Income Tax is 25% flat  Corporate Income Tax is 15%.  VAT is 18%.  Excise Taxes vary, depending on the product.  Property Tax rates vary, depending on the type of property;  Customs Duties fall into 3 brackets: 0%, 5% and 12%. 90% of goods are in the 0% category.

Legal Status of Foreigners

Citizens of the following countries shall not be required to obtain visas for the period of up to 90 days:

1. Member states of the European Union
2. The United States of America
3. Canada
4. Japan
5. The Swiss Confederation
6. Lichtenstein
7.  Norway
8. The State of Israel
9. The Holy See

Permit of temporary residence in Georgia shall be issued for no more then 6 years to a foreigner intending to stay in Georgia for a period longer then 90 days, who:

1. carries out work activity in Georgia in compliance with the requirements of the Georgia laws, as well as to a self-employed person
2. arrived in Georgia for medical treatment or for educational purposes
3. is invited by respective governmental structure as highly-qualified specialist or art worker, or if his/her invitation is linked to state interests
4. is guardian or a curator of a citizen of Georgia
5. is under guardianship or curatorship of a citizen of  Georgia
6. is a spouse, patent, child, foster parent, foster child, sister, brother, grandfather or grandmother of a citizen of Georgia or a foreigner holding a permit of residence in Georgia.

Permit of permanent residence in Georgia may be issued to:

1. a foreigner having lived in Georgia legally within the last 6 years. This period shall not include a period of stay in Georgia for medical treatment or educational purposes and a period of employment at diplomatic missions and representations of equal status
2. a spouse, patent, child, foster parent, foster child, sister, brother, grandfather or grandmother of a citizen of Georgia
3. highly qualified scientific experts and technicians, sportsmen and art worker, whose arrival in Georgia is consistent with the interests of Georgia.

Registration of Foreigners

A foreigner who holds a permit of residence in Georgia shall be obliged to undergo registration at a respective service of the Ministry of Justice of Georgia according to his/her place of residence within one month after his/her entry to Georgia, and in case he/she is on the territory of Georgia – after obtaining a residence permit.

The Ministry of Justice shall issue a respective certificate to a foreigner obtaining a permit of residence.

Foreigners living in Georgia shall be subject to taxation in the same manner as citizens of Georgia and stateless persons having the right of permanent residence in Georgia.