The New Government’s Action Plan and the Business Ombudsman’s Expanded Mandate
What sectors should be focused on by the Business Ombudsman’s office, and what does the Business Ombudsman offer to the new government to help shape a better business environment in Georgia? – Business Ombudsman of Georgia Irakli Lekvinadze has talked about these issues for the TV Program BusinessPartner.
The new government’s program has a lot of positive messages that encourage the business sector, Lekvinadze noted.
“The program includes a lot of good details regarding the business environment and, on the whole, a lot of good ideas were brought up at the parliament. Therefore, the business sector is full of optimistic expectations. I believe that the program’s elements will be implemented in our everyday life, including improving consultations and coordination, ensuring fair rules of the game, and the introduction over a specific timeframe, of new regulations”, Lekvinadze said.
“The Georgian business sector is full of positive expectations, and we believe that the program prioritizes what will be implemented in real life, without changes,” Irakli Lekvinadze pointed out.
Georgian businesses are tired of new regulations, which have multiplied over the past 18 months, he added.
Our office is ready to engage in analyzing the expected economic effects of the current regulations, and the new government has granted similar competencies to us, Lekvinadze explained.
“When we talk about analyzing the economic effect of any regulation, as well as their social, cultural or environmental effects, we need a so-called RIA (Regulatory Impact Analysis). We conduct negotiations with donors, too, and we are ready to offer new initiatives in this part”, Lekvinadze said.
A lot of new regulations were imposed on the business sector over the past 18 months, and the country has felt some undesirable effects. The new regulations may be one of the key reasons behind the slowdown in FDI inflows in the second quarter of 2019, Lekvinadze said.
“About 54% of the contraction in FDI inflows was recorded in the second quarter. and the pace of growth declined in such leading economic fields as power, development, transport and communications, that is, so-called investment engines. I should mention several factors that, in our opinion, have narrowed FDI inflows. There were objective factors, including several major projects that were finished, and liabilities were covered. At the same time, I believe that new regulations were one of the key factors that burdened certain business sectors”, Lekvinadze said.
A lot of international reports prove that Georgia is a leading country in terms of maintaining a minimal tax burden and transaction costs, as well as covering bureaucratic and logistics expenditures. At the same time, new regulations impose a certain burden on our business sector, the Georgian Business Ombudsman said.
“Georgia is reported to be one of the attractive countries in the world, in terms of low tax burden and transaction costs, such as bureaucratic and logistics costs, according to estimations by the Fraser Institute, or economic cooperation and development organizations. At the same time, costs accompanying new regulations, naturally, have a certain impact on business sector performance”, Lekvinadze said.
The political developments in June 2019 have also narrowed FDI inflows, and this effect will hit the third quarter, too. In general, lower FDI inflows have a negative impact on the GEL exchange rate, Lekvinadze said.
“We should also mention the impact of the political developments that took place in June. Part of these expectations could be reflected in this context, too. However, a certain impact is expected in the third quarter as well. Naturally, this part of the contraction in FDI inflows affects the GEL exchange rate, too, and this is one of the key challenges for the business sector. Therefore, we have to work in various directions to achieve a breakthrough in our relations with investors’, the Business Ombudsman noted.
It should be noted that the Business Ombudsman’s office strengthens mechanisms for the protection of Georgian companies in foreign markets. An international business conferencein Tbilisi will be organized by the Georgian Business Ombudsman’s office and Civil Development Agency (CIDA), and with the financial support of the Swedish government, on October 11.
The conference “Shaping Sustainable Business Enlivenment in Eastern Europe and Central Asia” will cover such issues as mechanisms for the protection of business right, and international experience, and the importance of corporate responsibility for business sector development.
The Business Ombudsmen of six countries will arrive in Georgia, and their visit will be an additional mechanism for protecting Georgian companies in foreign markets, Irakli Lekvinadze noted.
“We are organizing such a large-scale international event for the first time. Business Ombudsmen will arrive from six countries: Poland, Ukraine, Uzbekistan, Kyrgyzstan, Kazakhstan, and Albania. In these countries, Business Ombudsman’s Offices operate in various formats, and they have two key objectives: these organizations are mainly established with the support of international organizations, including the European Bank for Reconstruction and Development (EBRD), International Finance Corporation (IFC), and the Organization for Economic Cooperation and Development (OECD). Therefore, their experience is very interesting for us. On the other hand, this is an additional instrument. Thanks to our partner organizations, we will acquire additional communication channels with our companies in foreign markets”, Irakli Lekvinadze said.