After the smooth, â€œvelvetâ€ transition of power in November, 2003, Georgiaâ€™s current government has pursued a course of radical and irreversible reforms. The creation of more favorable business environment is at the core of these polices. Economic reforms were observed in various directions:
The strategic objective of the Georgian Government is to develop an effective, professional, honest and transparent public service committed to the safeguarding of democratic principles.
One of the core objectives of the Georgian Government is to fight corruption. The anti-corruption measures administered in the country are aimed at reforming law-enforcement and judicial systems, as well as the fiscal, administrative and public service sectors. Significant payroll raises for public servants employed in the ministries were carried out within a short time-frame in order to help fight economic crime and corruption.
In 2005, the National Security Council of Georgia developed and approved the National Anti-corruption Strategy of Georgia. The strategy is targeted at developing an effective government system, activating legal and civil measures to fight against corruption and preventing corrupt practices in governance. Anti-corruption measures carried out recently have significantly improved fiscal administration and scaled down Georgiaâ€™s shadow economy.
Liberal Economic Reforms
One of the chief goals of the economic policy of the Georgian Government is to promote the development of private entrepreneurship by creating a favorable business climate. Economic reforms are aimed at ensuring economic growth based on liberalization and private sector development. To this end, the Government has made a number of important steps:
Â· Lower Tax Rates
In 2005 a new Tax Code was enacted. Under the Code, the number of taxes was reduced 3-fold and tax rates were lowered considerably.
The number of business activities subject to licensing and permitting regimes was reduced by 84%. Licensing procedures were simplified and the one stop shop principle was introduced.
The technical regulation system was reformed to give way to a voluntary standards system and reduce state regulation in this sphere. The new laws provide for the introduction of technical regulations in compliance with international standards to significantly simplify procedures for exporters and importers.
The deregulation policy significantly reduced the number of spheres regulated by the state and simplified the necessary regulation procedures.
Privatization of state property is in progress, stimulating the growth and development of the private sector.
A new Customs Code has been elaborated, offering significantly simplified customs administration procedures.
On September 1, 2006 one additional and significant step was made towards trade liberalization, when the Law of Georgia on "Customs Tariffâ€ came into force.
The new law provides for the reduction of tariff rates up to 0%, 5% and 12%, instead of the existing 16 tariff rates (0%, 4%, 5%, 6%, 7%, 8%, 10%, 12%, 14%, 15%, 16%, 17%, 18%, 20%, 25%, 30%) used till 1 September of 2006. The law stipulates a further liberalization of the Georgian customs tax system and envisages transition to the Harmonized Commodity Description and Coding System HS 2002.
The adoption of the new law aims at improvement of investment climate and protection of customerâ€™s rights through trade liberalization.
According to the Law of Georgia on "Customs Tariffâ€ all existing tariffs were reduced from 12-30% to 12%, from 5-12% - to 5%, and from 0-5% - to 0%.
It should be emphasized that except for construction materials, all kinds of raw materials and equipment delivered to Georgia will be totally exempted from custom fees.
Today Georgiaâ€™s tariff rates are the second lowest worldwide. The Government of Georgia plans to achieve phased reduction of all existing tariff rates by 2007 and exemption from customs fees of all imported products to Georgia by 2008.