Thursday, September 07, 2006

Georgia- Top reformer!

Georgia is the top reformer, improving in 6 of the 10 areas studied by Doing Business . It reduced the minimum capital required to start a new business from 2,000 lari to 200 ($85). Business registrations rose by 20% between 2005 and 2006. Reforms in customs and the border police simplified border procedures. It took 54 days to meet all the administrative requirements to export in 2004—it now takes 13. Georgia also amended its procedural code for the courts, introducing specialized commercial sections of the courts and reforming the appeals process. The time to resolve simple commercial disputes fell from 375 days to 285.
Georgia’s new labor regulations help workers move to better jobs. The social security contributions paid by businesses decreased from 31% of wages to 20%, making it easier for employers to hire new workers. Better collection of corporate taxes, which shot up by 300%, more than made up for the loss in revenues. And unemployment has fallen by 2 percentage points.

Georgia's such a success is owed to State Minister for Economic Reforms Kakha Bendukidze in particular. It is not just that Georgia was called the top reformer of CIS members. It was named the world leader actually. The country improved six of 10 fundamentals and climbed to the 37th score in the world after skipping 75 positions.


Update: see critical article about this topic: Why reform has become a dirty word.


Writer'n said...

"Georgia’s new labor regulations help workers move to better jobs. The social security contributions paid by businesses decreased from 31% of wages to 20%, making it easier for employers to hire new workers."

It's good that reforms are taking place. Two things, though:

1.If there's a reduction in social security payment from companies. Where does the vanishing 11% go? Not to pensions for the workers, I think.

2. If you look at the hire/fire statistics you will see that there's no protection for workers in Georgia. They are have to be loyal and accept anything coming from whatever boss. No rights. No unions..aso. At zero this is disturbing news on long term basis. In short term it means more employees, in long term it means no rights and protection. If you compare with Norways 40 on that index it gives a indication. Only USA have zero on this hire-fire scale. And they have some fundamental and serious problems regarding recruitment of labour and labour rights. The workforce is divided into one class having all the benefits and another that is only temprary low-wage labour. No recruitment from the basis of the company. That makes the companys very vulnerable, and is discussed as a structural problem in american industry/business and society.

Ok. I just had to comment on this :-)

Levan said...

Thank you for a comment do it every time please! I understand your position and agree partly. I think that for a first time such radical reforms are vital for georgia. georgians prefer jobs and monye now, then pensions in 20 years, because they don't have money at all now.
First country shall gain some wealth, by stimulating privat sector and then think about social state. I hope this 11% goes at least partly for increasing salaries(I'm not sure though) or for creating more jobs. For pensions there are also private fonds available...
And don't forget that Norway is one of the richest with Oil and other minerals...

Writer'n said...

Yes, Levan. I agree. I just wanted to point out that there is a downside of the newliberalist approach to economy wich have to be taken in consideration. Less social security and less jobsecurity is problematic. In Norway it is expensive to hire and fire. That has lead to more stable jobs, and the possibility to plan for future for families. The Nordic Welfaremodel has made it possible to reach the top of the HD index. USA is nr 7 I think. And Tony Blair pointed to Scandinavia as a solution for increasing livingstandard in EU. Ireland has also the same model, and scores high.

But this is future for Georgia, I know. Most important is to create new markets, and that is done by forreign investments, as they invest in facilities to produce for already established markets.

In Norway oil only represent a minor part of employment. Most jobs are in other sectors (65% in public services in fact). In fact Norwy don't spend much of this oil money. It is invested international companies for future use as pensionfunds. The average use is 2.5% of the return of the investments to avoid overheating the economy.If we spend more, the unemploymentrate will drop, wages rise and interest on loans will encrease. Inflation will be a fact. So we have to manage without much of the income for oil. We pay 2 dollars a litre for petrol for instance. But of course the forreign debt is zero, and future pensions are almost secured.

As for the other industries fishfarming is the fastest growing and most profitable. Minerals are dropping because of expensive energy and labor. We are losing about 100 000 jobs pr year, and all new jobs are created within technology and construction.