The year 2018 has brought positive results for the major businesses sector. Despite the depreciation of the GEL exchange rate, which generated certain problems, the current year turned out very attractive sales numbers, and many other aspects. There were a lot of problems in 2018, but the sector has also recorded growing sales and large-scale investment projects.
An analysis of economic parameters shows that we have not had a bad year. According to the January-September indicators, economic growth was at 5%, and this is not a bad result in the region. The country has also improved in international ratings, as noted by Irakli Aslanishvili, Executive Director for the Georgian Business Association.
“Naturally, there were obstacles too, including a slowdown in FDI inflows. The year also recorded a downturn in currency inflows. The insufficient engagement of the private sector also raised certain problems during the process of preparing various initiatives. As for reforms, I would bring up pension system reform, which is of crucial importance, but the authorities have shown insufficient communication on valuable aspects of the implementation of this reform. Therefore, a lot of questions arose regarding the reform of the pension system and its administration”, Aslanishvili said.
Lasha Papashvili, founder of Redix company, states that the year of 2018 brought a lot of challenges for the business sector, in regards to the bureaucracy and the electoral environment.
“Georgian businessmen have been facing various challenges over the past 30 years. However, over the past 3-4 months, we have sees political struggles, and the business sector is always frightened by similar fluctuations. Investors abstain from making investments, and the statistics regarding FDI inflows proves this.
According to Geostat, the national statistics service of Georgia, in the period from January to September, FDI inflows declined by 27% year on year. The Government does not assist the business sector, bureaucratic problems remain, and the work of the National Bank of Georgia (NBG) is invaluable”, Papashvili said.
At the same time, we welcome the Estonian taxation model. This is a joy for long-term investors, Papashvili said.
As to expectations for 2019 expectations, the next 2 years will pass without elections, and the business sector will be able to work in a peaceful and calm environment, Papashvili pointed out.
Nikoloz Khundzakishvili, Corporate Director of the Natakhtari Company, explains that, under the 2017 assessment, the business sector did not expect fundamental changes in 2018. This forecast was justified, and this year the beer industry has not grown. On the contrary, the beer industry recorded signs of contraction in 2018, he said.
“We always plan, and we always know what to expect in the future, including how to balance problems coming from GEL exchange rate devaluation. This is a very important component in terms of business planning. At the same time, similar approaches represent the advantages of major companies. Major challenges in the country mostly relate to small and medium business sectors. They cannot preliminarily plan for the future and use certain leverages for resolving problems”, Khundzakishvili noted.
2018 was stable and decisive, and we expect better things in 2019, he said. A lot of important events have taken place in the region in 2018. For example, the Turkish Lira’s devaluation, which seriously affected Georgia and boosted Turkish exports. As a result, Georgian analog production failed to develop, Khundzakishvili said.
“Similar events will always take place. Cheap tomatos will always enter the country, but you should know that your tomato is better without pesticides, and you should ensure that your tomato finds its niche on the market. We should work in this direction to better highlight the peculiarity of Georgian companies. Major companies have opportunities for that, but we should promote small companies”, Khundzakishvili said.
Vano Ioseliani, founder of the My Rancho company, also appraised 2018. The current year brought positive results for the business sector, with the noted exception of the pre-election tensions.
“Similar periods always bring tensions. We may suppose that the 27% downturn in FDI inflows in January-September period may be related to this factor. The recent elections were very polarized, and this factor have influenced the business sector too”, Vano Ioseliani noted.
The debt pardoning program turned out very favorable for the business sector, he added.
“This problem lead to My Rancho company to fire many employees, as their salaries were attached to bank cards and their economic activities were useless. Thus, debts pardoning will alleviate their condition”, Ioseliani said.
Zurab Chkhaidze, the founder of Kakhetian Traditional Winemaking (KTW Group) company, told Commersant that a lot of things have been done for the long-term progress of the country, for example, the agriculture sector has been announced as a priority field.
- Agro insurance has been introduced;
- Plant the Future program and gardens of perennial plants were arranged;
“As part of the aforementioned program, a lot of enterprises were created. According to my information, the Projects Management Agency of Agriculture Ministry serves 66,000 beneficiaries. This is the support of the business sector”, Zurab Chkhaidze said.
The business sector has succeeded despite a bad inheritance. Since the 1990s, continuous misery and economic collapse left the business sector in a grave situation. It took a long time to rehabilitate the sector. The sector has recently started a recovery. The business sector was freed from burdens, and everybody is able to start and develop business, he said.
Mr. Zurab Chkhaidze noted that the simplification of the taxation system is a significant source of support, as well as the introduction of the Estonian model of taxation, which has exempted reinvestments from taxation.
Many other important projects were implemented in the country, the businessman noted:
– A universal healthcare program;
– A Hepatitis C elimination program;
– A program for the supply of medications to the socially vulnerable.
– Important reforms in the banking sector. Debts forgiveness on behalf of 600,000 people, who were newly enabled to start business. The problem was resolved by the private sector with the support of the banking sector.
“To achieve a desirable level of development, lengthy and tireless effort are required. Patients cannot resume a normal lifestyle immediately after operation. They pass through the rehabilitation process. We have such a case for the entire country. We should not be ungrateful. Let’s engage in the process of reconstructing our country, and make our country valuable member of the European family”, Mr. Zurab Ckhaidze pointed out.