In less than 20 years Georgia has managed to drag itself out of a state of near-collapse to become a rising star of the region: years of robust economic growth, liberal tax legislation, a safe, business-friendly, corruption-free environment paint a promising and impressive picture.
And we — the private sector — like what we see. Expectations are high and the country is on the right track. However, there are still challenges which could stand in the way of the country’s continued and sustainable development if not addressed in a timely and proper manner. Despite impressive results and positive trends, there is still a distance to cover to reach a point where development is stable and irrevocable.
I want to use this opportunity to speak about the issues that all major actors in the private sector consider as threats to Georgia becoming a competitive investment destination. My estimations are backed up by BAG’s recently finalised research: The Business Environment Evaluated by the Private Sector. As part of this research, BAG carried out interviews with representatives of major, large corporations operating in Georgia. Based on these interviews, we designed a survey and quantified the findings from the interviews. The research revealed that education, a changing legislative environment and a lack of infrastructure are among the major challenges the private sector faces in terms of growth and development.
Lack of infrastructure is a challenge, especially in the regions. However, infrastructure projects, either current or planned, are robust and we have high expectations that in the medium term a major part of Georgia will be covered with all necessary hard and soft infrastructure.
As for the legislative environment, the private sector welcomes changes of legislation as they are both necessary for development and inevitable, given that Georgia has the obligation under the EU Association Agreement to harmonise its legislation with the EU. What the private sector is concerned about is the pace and process of introducing new regulations or making changes to the existing legislative framework. The investment environment would benefit greatly if Georgia introduced RIA into its legislative process and allowed all stakeholders to review changes before final decisions are made.
The biggest problem facing Georgia, however, is a lack of qualified workers. Both the private and state sectors face difficulties in finding qualified employees with the appropriate skills and training. In some sectors, such as civil engineering, agriculture, and food technology, it is almost impossible to find and employ local professionals. The national education system fails to produce highly qualified professionals and there is a significant mismatch of skills and market demand. For this reason, a large part of the private sector’s resources is spent on hiring foreign consultants. On the plus side, Georgia is making significant progress in vocational education and we hope to see the results of these efforts in the coming years. However, we believe that a comprehensive education reform programme covering all levels of the education system to be of the utmost importance. Only major reform can ensure that the country creates the capacity to continue its social and economic development.
I will end my short review of the Georgian investment climate on a positive note. The outlook for Georgia is promising. Again, this is a statement backed-up not only by macro parameters but by our latest research, where a majority of businesses confirmed that their expectations are positive and that they intend to grow within a five-year period. The country has all the necessary preconditions to move to a higher level of development. The major factor that will greatly determine success in both the short and long-term is timely and proper education reform.
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The views expressed in this opinion editorial are the author’s own and do not necessarily reflect Emerging Europe’s editorial policy.
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