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“East Gate Group” – The Current Government Get Involved in Regulations

An interview with Director of “East Gate Group” Irakli Iashvili

President  of the International Chamber of Commerce Fadi Asli said that businessmen didnot trust the tax authorities. Do you agree with this statement?
I do not know on what grounds he says so. Today, the business is not under pressure, businessmen arenot summoned to the prosecutor’s office, and so on. What happened in the past? Businessmen were forced to do what they did not need, were given different instructions. Now this does not happen, no onedeprives the property, no one is arrested, no one blackmails businessmen, and so on.

If the business is so free, why the economy is growing so slowly? 

These are different things. Freedom or unfreedom of business is not the reason for the weak development of the economy. There are many objective reasons.

Under the previous government, economic growth was mainly due to government projects. The government has spent a lot and it certainly affected the economic situation.

Now, the state does nothing artificially – respectively, the budget money is being spent to a lesser extent. Economic growth was a short-term under the previous government.

In general, there are two ways of development of the economy – exports and investments, in none of them we have a progress. The largest investments were carried out in 2006-2007, after 2008 the flow began to decline, and has not recovered until now.

In your opinion, is Georgia an attractive country for investors? 

It’s another issue. This is a global theme that is not directly related to economic growth. Freedom of business and economic development – are different topics. Economy has its own formula. The economy is growing at the expense of investment, export growth, public and private expenditure. Growth is registered in none of these components.

In addition, Georgia’s economy is not too attractive for international investment. The Co-investmentFund was established, but it has not  launched  any serious project. One of the main reasons is thatGeorgia is not a country of such  a scale to invest here a great investment.

There are several sectors that develop and attract major foreign investment – for example, energy. There are prospects for major transit projects. While  the rest  fields face  problems.

For example, for many years Georgia has had a preference for the export of a number of goods to Europe, but so far no one uses it.

It turns out that the recently signed Association Agreement with the EU will not bring any good?

It’s a very long-term process. The European market is very specific, and the Georgian producers need a lot of  time in order to get there. Very complex mechanisms and procedures are enacted on the European market .

But Georgia still sells products which were produced under the communists – wine, Borjomi, and so on. Nothing that could be sold on the international market has been created in our country yet.

Are  the government’s  messages clear for business? Whether or not they are uncertain?

The Government has established several funds which are tools for  doing business. The state itself cannot engage in business, it can create tools to revitalize business, for example, cheap loans, cheap insurance.But it cannot do business instead of businessmen.

It is a matter of private initiative. Currently, the economy is in a crisis. We have no factors that could attract a huge inflow of money. Some investments are coming from Asia, but to attract investors we need years of stability, and it is hoped that with time the situation will change.

How would you assess  the government’s initiatives of  last time – for example, a ban on the sale of agricultural land to foreigners, a tightening of procedures in the aviation business, the tightening of visa regulations, etc.? 

The previous government had the ultra-liberal approach, that is, the government  gave a full freed to business and completely eliminated from the intervention in the economy, even in issues such as food security.

Today,  the situation is opposite. I would advise the current government to abandon the introduction of various regulations and promote competition. At present, there is a tendency in  the government to introduce regulations but  it will not lead to anything good.