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Former Minister of Finance: The Government should Abolish the Regulations for Business

An interview with Ex-Minister of Finance of Georgia Lexo Alexishvili

In recent period the government has been increasingly criticized, not only by the opposition but also by the President. What caused the difficult economic situation in the country?
First of all, it should be noted that the political forces always serve their own political interests in the evaluation of certain events – some say that everything is bad, and others vice versa – everything is good.

In reality, the picture is not so black and white. Everything is much more diverse and at the same time difficult.

It is clear that Georgia’s economy is too weak to withstand external shocks. The only thing we can do is to develop the economy of the country and thus make it less dependent on external factors.

This issue should be divided into two parts – the first is a long-term policy, which is to determine the general direction of development for the years ahead. This is a very important question, because concrete solutions should be taken based on this vision. The government aims to achieve high economic growth in the long term in  10, 15 or even 20 years. Only in this  situation the country could really feel the progress.

Otherwise there will be no tangible positive changes either in economy or in the social sphere, health care or education.

The government’s social policy is largely focused on subsidies. Is it a right policy for the long term?

No. First of all, we are talking about economic growth that can be achieved only  if  an attractive investment climate is created. This is the main problem, and after all the rest will come by itself.

Of course, the country should have necessary health care, education system, social spending, no one argues. But most importantly is to achieve economic growth, which can be reached only by investing. Moreover, the investment is not only money that comes into the country, this  is also the introduction of the business culture in the country. This is money and knowledge.

Georgia is a small country that has neither one nor the other. Accordingly, the only way is to attract investment from abroad.

Does the growth of bureaucracy in recent years hinder this process?

Naturally, the large bureaucracy hampers the growth of the economy. It is obvious that there is a good business climate in Georgia, but it is mainly concerned with investors already working in the country – but whether the new investors  will come is  a big question. To encourage new investors, it is necessarily to do a lot.

In recent years, the government is going in the opposite direction, and the business is facing considerable difficulties. For example, excise taxes on beer and alcohol increased. Visa regime was introduced, which is a very big mistake. Now authorities are trying to improve the law, but new mistakes may be admitted in the process.

The same can be said about the legislation on the rules of the sale of agricultural land to foreign citizens – a ban was a big mistake that should be corrected, so that more foreigners can come to Georgia and do business.

In recent period, businessmen complain that the tax audits have become a serious problem as they drag on and create difficulties. Whether they have  an impact on  the business climate?

Of course, tax  policy is also part of the business environment, and it certainly needs   to be improved. There are many examples of how tax audits are delayed indefinitely, and this naturally hinders work.
It also must be corrected, but in my opinion, the increasing bureaucracy  is much more serious problem that  will grow during  the integration with the  European space.

Bureaucracy, in general, is  characterized by the desire to take on as many functions as possible and to regulate the economy as much as possible. It’s pretty dangerous process that takes place in Georgia.

If we want economic growth  in the country, the government should go for deregulation, particularly in issues such as land ownership. It is necessary to remove artificial bureaucratic barriers.