Renewed Reforms for Growth in Georgia

Turkish businessman, Cemal Bilgingullugolu, operates a textile-manufacturing company in the Georgia’s Black Sea city of Batumi.

He says he has no trouble finding people in the country who are eager to work.  But very often, Georgians don’t have the skills which his factory requires.

“I think the government has to open some training schools to make people seeking jobs more skilled. So, when the investor comes here, there will be no need to spend time for training.  That is the important issue,” says Bilgingullugolu.

Medea Umetadze has been employed for four years at the Batumi textile factory, which gave her professional training and put her in charge of inventory.

“These kinds of companies are important for development,” she says, adding that reforms in support of even more economic growth are a must, because they create needed jobs for thousands of Georgians, including herself.

Reforms toward attracting foreign investment through better labor resources are among several recommendations outlined in the World Bank’s Country Economic Memorandum for Georgia.

The report states that in order to promote business and further economic growth Georgia must address certain constraints.

Those include strengthening vocational education systems, reducing high borrowing costs, improving the electricity pricing system, and streamlining other complexities presently involved in doing business in the country, such as closing a business and audits.

“When big companies are being audited, they are put in the defensive mode rather than expansion mode. This happened with the previous government and it has happened again, and it is definitely of concern to us because when a company is being audited, it becomes fearful and is not motivated to expand,” says Andrea Wilson, Executive Director of the Georgia’s International Chamber of Commerce.

Economic growth in Georgia was strong at 6.1 percent during 2004-2012, thanks to structural reforms and a favorable global economy, which led to large foreign direct investment inflows and expansion in the service sectors.

But the World Bank report states that the country’s current account deficit has remained large, raising concerns about the sustainability of growth going forward.

Supporting GDP growth of 5 percent per year during 2013-2017 will require investment of more than 30 percent of GDP and productivity growth of more than 3 percent per year.

The reforms suggested in the report aim at promoting strong and stable economic growth in Georgia for an extended period of time which would lead to shared prosperity in the country.