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Each Country is in Need of the Economic Growth Policy that Meets its Demands

Each Country is in Need of the Economic Growth Policy that Meets its Demands

There are no internationally recognized theories, hence each country is in need of the economic growth policy that meets its demands – Prime Minister of Georgia noted in his speech during the Economic Development Forum of Georgia.

Pursuant to Giorgi Kvirikashvili, Georgia is a country with open economic system that is navigating quite well across the regional economies. Prime Minister recalled first steps taken by the ruling team in view of economic development of Georgia and outlined importance of Dani Rodrik’s theory.

“Four years ago, when I took the position of Minister of Economy and Sustainable Development, as any other person who believes in market economy till today, I had outlined universally recognized theories as a blueprint for ensuring rapid economic development of the country.

However, while taking practical steps, we indicated specific directions that required correct state intervention for the industry to start operating and ensure that the direction was viable. I addressed my old friend Nugzar Kakhuchashvili who graduated from Harvard University and asked him to join our team and create new direction of industrial development within the Ministry of Economy and Sustainable Development.

Both of us had knowledge obtained at highly reputable business schools, however, it is a given fact that today some additional element is essential to ensure correct development.

Hence, we demonstrated interest in Rodrik’s development theory, according to which as a result of correct assistance, certain directions become increasingly important and unutilized capacities are fully used – thus, the whole chain of values becomes operative. Nugzar’s team studied several directions and we elaborated serious plans for action and successfully implemented several projects,” – Prime Minister noted.

According to Giorgi Kvirikashvili, a four-point framework has been developed by the Government to ensure rapid economic growth of the country. The directions of the said framework include reform of education system, economic reforms, spatial arrangement and reform of the governance system.

“First of all, this includes correct reforms in the area of the education system. It will ensure alignment of the education system with demands of the labor market to avoid spending 4 years by students on studying profession that may not be demanded in Georgia. This also includes correct reforms in the area of vocational education and we have shared German model that implies dual education system, when private sector engages in preparation of young and not only young people to acquire skills in the area that is highly demanded.

The second most important direction is economic reforms. We consider that currently Georgia’s economic growth is greatly depended on foreign direct investments and economic conditions in the region leave much room for improvement due to the decline of the oil prices and regional conflicts – particularly, conflict in Ukraine. Hence, we decided that mobilization of the investment resources will be crucial. Hence, we suggested abolition of the corporate income tax. Starting from January 1st of 2017 the corporate income tax will be abolished.

We borrowed the Estonian model that envisages exemption of reinvested profit from taxation and taxing only distributed income. We kill two birds with one stone by increasing mobilization of internal investment resources and promotion of Georgia as an economically liberal state on the international arena,” – Giorgi Kvirikashvili noted.

Prime Minister also outlined the importance of amending capital market and reforming pension system that will be based on mandatory payments – reforms will start next year. He also elaborated on the model of state that is concentrated on provision of services and emphasized the importance of creating unified front-office.

“At the same time, we are creating digital space, which ensures provision of services to all interested legal entities following the e-governance model. This highly ambitious project has been launched, the concept has been elaborated. By the end of the year and in the beginning of next year we will start its implementation. And important direction of the third bloc of governance reform covers the component of involvement, which implies that business community as well as NGO sector is engaged in the decision making process.

We have taken certain steps in this direction by following the initiative of European Bank and setting up Council of Investors. We have gathered all international donors, ministers representing economic bloc and Prime Minister is the chair of the Council. The Council discusses all initiatives concerning legislative and institutional changes to eliminate any negative surprise for business and private sector.

Fourth direction that concentrates on the spatial arrangement and rapid infrastructural modernization of the country is also important. We suggested putting more emphasis on engagement of the private sector in the implementation of the infrastructural projects – by achieving correct balance between the stakeholders, the quality of infrastructural projects will be improved while burden on sovereign balance of the country will be decreased,” – head of the Government noted.

Economic Development Forum of Georgia is organized by the Ministry of Economy and Sustainable Development of Georgia. The first Vice Prime Minister, Minister of Economy and Sustainable Development Dimitri Kumsishvili delivered an opening speech.

Famous economists Dani Rodrik from Harvard University and Charles Sabel from Columbia University in the City of New York participate in the Forum, They will present their visions and ideas regarding development of economic policies.

Discussions with the participation of representatives of business, banking and academic sectors will take place.

Prime Minister’s Press Office