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Irakli Lekvinadze

Business Ombudsman’s First Six Months in Office – What are the challenges of business sector?

Irakli Lekvinadze: “Georgia has positive business environment compared to the countries in our region and international rating companies also recognize this”.

Business Ombudsman of Georgia Irakli Lekvinadze has introduced a new web-portal to the private sector representatives. The portal (www.portal.businessombudsman.ge) will assist businessmen in resolving issues for attracting new investments and creating new job places. Starting today, thanks to the new web-portal, businessmen will be able to contact the Business Ombudsman via email, including, on such issues as entrepreneurial activities, protection of business sector rights and so on.

The web-portal was created with the support of an advisory project of International Finance Corporation (IFC), a World Bank Group member. This project is financed by SECO, State Secretariat of Economic Affairs of Switzerland.

Irakli Lekvinadze was appointed as Business Ombudsman of Georgia six months ago. This was an overloaded six-month period, because business sector intensified contacts with the Business Ombudsman’s office, Lekvinadze said.

What are real problems before the business sector? How does he appraise the six-month period and how protected is the business sector in Georgia? Business Ombudsman of Georgia Irakli Lekvinadze talks about these and other interesting issues for the Versia newspaper.

In this period, not only business sector activated communication with us, but also all state instances are open  and this factor enables to ensure valuable mediation. In January-June we held more than 600 meetings with business sector representatives in relation to individual cases and system aspects. We also conducted about 20 meetings with various business associations, including  8 meetings were held in regions. In this period, we have provided about 80 reactions in the form of conclusions, mediations or recommendations and I would like to note that  about 70% of our actions  were satisfied pertly or fully. This is our achievement and all state offices are open to listen to business sector problems.

In reality, Tbilisi-based business companies are  the most active bodies, because the most part of business activities are recorded in Tbilisi. Adjara Region is second in this respect. The most active and frequent response is provided by Ministry of Finance and LEPL Revenue Services. We actively cooperate with these structures. We have flexible relations and the main thing is that we have our own representative in the Board of Disputes of Ministry of Finance. Consequentially, we are able to show our position in the process of discussing disputes and protect business sector interests through immediate involvement in the disputes discussion process.

Along with Ministry of Finance and Revenue Service, Ministry of Economy and State Agency for Property Management are the most active instance in communication with us. There are a lot of issues, especially, from regions, that are related to investment activities and property issues, leasing and sales-purchase operations. Therefore, we receive a lot of applications. Local municipalities create the next chain, where we mainly discuss issues related to licensing issues and supervision aspects. As to business, companies from commerce and service sector are most active companies. If we compare major, medium and small business sectors, about 80% of applications are submitted by small and medium business sector. However, major business sector emerges also active in relation to system issues and regulations.

What sort of problems have emerged in this six-month period?

-In this period, we have identified several challenges. In whole, business environment in Georgia, in its regions, are positive and dynamic. Even the business sector recognizes this, as well as international rating companies. At the same time, there are a lot of issues, including technical and system issues, that require our engagement. As a result of our supervision, we make accents on several challenges and, first of all, this is the court system, as we think the business sector faces certain problems in this direction. The problems are related to trial deadlines and specialization. Therefore, we back activation of private arbitration and the bill on commerce chambers, because we believe that this approach will make the court system more specialized.

The second problem is related to the existing bureaucracy, especially in the middle chain, because everybody is open in top management and communication is not difficult. However, a number of decisions should be taken by the middle chain, but this process is hampered.  In most cases, there are no answers, or they provide ambiguous answers or answers just delay. Consequently, we believe that efficiency should increase in this direction.

The third problem – accessibility to finances and qualification of workforce. In this respect, the problem is revealed in its sharpest form in regions. The business sector representatives say that they have problems, for example, in terms of floating capital guarantees, while in certain operations, they need access to similar capital, because the banking resources are expensive for them. On the other hand, they face difficulties in finding workforce and this factor has certain reasons.

The four problem – difficulties with implementation of investment projects in regions. Frequently, investors with valuable projects that satisfy legal norms face certain difficulties, predominantly from the side of interested groups.  Because some of them serve political orders, another part follows other goals and they hamper implementation of similar projects. Therefore, in this case, we believe that local governments should activate communication. Other instances should be also involved in similar cases so as investors feel maximum protection and comfort.

The fifth problem – frequent revision of regulations. We believe that business sector should have more time to get to know regulations and get adapted to them. Naturally, we work with all instance, to resolve these issues and tackle problems.

A lack of job places is Georgia’s major challenge and Government of Georgia and recently appointed Prime Minister also prove this. Based on the above-mentioned  five problems that you have identified in this six-month period, why cannot business sector to create new job places?

In Georgia we have mainly structural unemployment and this signifies that we have more workforce compared to job places. On the one hand, there is demand for qualified workforce, on the other hand, the existing excessive workforce is unqualified and cannot satisfy the labor market requirements and this factor makes anomalous situation. Naturally, job places are Cretan by business sector. Therefore, the more comfortable and liberal environment for business sector is in the country, including in terms of regulations, the  business sector will more succeed and create more job places. Moreover, vocational education support is the Government’s answer to this problem. According to my information, the due bill is being prepared, because today we have absolutely new requirements on the labor market, including in tourism industry, IT industry, agriculture and so on.

Our workforce, especially in regions, is hopeless and morally outdated, because their skills are amortized. Therefore, current qualification of the existing workforce should be adapted to the current labor market requirements thanks to vocational education. On the one hand, very comfortable business environment, which creates job places, and, on the other hand, government’s efforts for vocational educational support will reduce the imbalance in this respect. Consequently, this problem was properly identified by the Prime Minister and I believe that the new Government will eradicate this imbalance based on the mentioned two approaches.

After 2012, the Finance Ministry Board of Disputes has changed radically, because in most cases, disputes are resolved ob behalf of business sector, even more so, the Business Ombudsman has its representative in this board…

-The statistics has radically changed, because before 2012, the number of disputes resolved on behalf of business sector ranged from 1% to 5%. today, this indicator has increased to 60%. This signifies that the Ministry of Finance is not an instance  oriented only on punishment and it does it best to become an instance providing due services. As noted above, we keep excellent communication with Ministry of Finance and Revenue Services. Therefore, if there are arguments on behalf of business sector, they always try to take into account these arguments. Frequently, fines are imposed on business,  various taxes are charged, but if similar actions are illegal and similar statement are mainly submitted to us, representatives of Ministry of Finance and Revenue Service do their best to take into account similar facts.

How can businessmen apply to you via the new web-portal, which was created to assist the business sector?

-Registration on this portal is simple. This portal makes two good things – it enables to do all cases in electronic format and all registered businesses are enabled to supervise the process from their own offices (studies) and receive information about which stage of discussion is and what is the status of this or that case. Simple registration and an identification code are required to to get onto the portal. On the other hand, this is a good opportunity to assess the performance of the Business Ombudsman. Based on our medication, conclusions and recommendations, the portal analyses the existing issues how much investments has the business saved and how many job places were maintained. We periodically publish similar analytics. We have good communication will all business associations and business companies, but we believe that the new web-portal will further improve our communication.

Over the past period, various politicians and economic experts stress the country lacks for foreign direct investments, What is the reason?

-In the first quarter of 2018, compared to the same period of 2017, FDI inflows have declined, But this is not tendency and we expect to have the real picture at the end of 2018, if we will provide adequate reaction to the mentioned challenges and problems. We will have higher indicators in the part of investments.

What are your plans?

As to future plans, we have determined several priority steps. First of all, we want to enhance our role in the direction of the court system from the position of the Court Friend. Today we  can act as the Court Friend only in the context of constitutional court  and we have used this mechanism this year for the first time. But we want to make amendments to the law to expand this function to common  court system too. This will enable to further strengthen business sector positions.

Secondly, we want to develop a permanent platform, where all business associations will be represented, especially among countries, bilateral business associations. We will serve two goals in this direction – we want that investors invited by them have maximum information and have no communication problems with various instances and to discuss the already collected problems in open regime and deliver them to the due instances. Moreover, we plan to activate efforts with donors to have wider access to  resources and implement business research works time to time. We plan to submit these research works to the Authorities to more evidently outline where and what problems exist. We want to set friendly relations with our colleague-institutions, mainly, in Georgia’s partner countries. On the one hand, this will enable to share their experience and knowledge, On the other hand we will protect the Georgian business sector’s interests on the markets, where they are widely represented. The first similar step will be taken in relation to the Business Ombudsman’s Office of Ukraine by the end of 2018. This is a very strong institute and it is financed by EBRD. This office participates in resolving many problems in Ukraine and the Ukrainian market is very interesting for Georgian business too. This component will further enhance our role and functions.

Maia Misheladze