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The challenges to business and investments in Georgia

Interview with Fady Asly, Chairman of ICC Georgia
Friday, June 13
ICC-Georgia is a leading and extremely successful business organization what is the secret behind that?

As you are aware ICC is the largest business organization in the world and includes more than 6 million companies and 12 thousand chambers of commerce in addition ICC works very closely with the G7, G20, WTO, WCO, World Bank and UN.

In Georgia ICC includes more than 100 companies, 17 organizations and 200 Georgian youth. One of the reasons behind our success is that we are very inclusive and have commissions and activities that involve tens of our members; in addition we are very much service oriented and operate like a strong family, whenever one of our members is facing a problem or is harassed we do cluster around him and fight for him; this is unique to ICC-Georgia and that’s why many members join us to feel secure.

We do as well express our views very loud and articulately and dare to tackle taboo issues that other organizations don’t want to touch. We are the most outspoken business organization in Georgia and of course this does not make us always very popular with the government.

Something particular to our organization is that we have a Consultative Board that includes 8 Ambassadors accredited to Georgia, the heads of 3 International Financial Institutions and the heads of 2 International Organizations; this Consultative Board meets once a quarter with our Executive Board to discuss of all economic and business developments in the country. Of course such format brings a huge added value to everyone involved considering the exchange of information and wise advice that we do get.

ICC has as well created an ICC-Youth branch that includes about 200 young Georgians between the age of 18 to 25 that we train on best business practices and that we send on internships within our member companies, this is kind of an ICC nursery for the future.

We do have as well 20 active commissions who work on all legislative issues pertaining to business and economy and who scrutinize new regulations, laws and legislations issued by government and parliament.

If you add up all what we do and how we do it you will surely understand why we are successful.

You have been re-elected last week for a new term as Chairman of the International Chamber of Commerce in Georgia, what are your plans?

Our major objective is to tackle the Tax Code and delete once and for all the articles that are killers for business and mainly the ones that relate to freezing of taxpayers’ bank accounts and levying on them. We will strive to decriminalize the Tax Code and to insure that businesses can operate in a free environment without being harassed by the Tax Authorities.

Another priority will be to insure that the government protects investors and business people’s properties and insure their full access to it; this is unfortunately not the case nowadays.

We will also fight to insure a real friendly business and investment climates on the ground and not only in the statistics published by International Organizations.

How do you assess the business and investment climates?

In two words? Not satisfactory!

There are many urgent things that the government needs to do so the business climate becomes normal not to say attractive:
a- Reshuffle totally the Tax Code that is a terrible liability for the business climate; there are many serious and fundamental flaws with the tax code, the most lethal one is the authority granted by the law to the Revenue Service to freeze companies’ bank accounts at will which can result in their bankruptcy. In addition to that, the Tax Department can levy any time from businesses bank accounts; the Tax Code is subject to freedom of interpretation and Tax Inspectors do not deprive themselves from the right to unilaterally interpret legislation the way that suits them; without fundamental changes to the tax code the business climate will remain extremely dangerous for any business operating in Georgia.
b- Protect property rights; the government is unwilling to secure the properties of foreign investors; we have members who own agriculture lands that they cannot access since a year and a half and the government is doing absolutely nothing to help them out; our members are prohibited to cultivate their lands by local villagers and are threatened; this is absolutely unbelievable and is a disgrace to the country, even more shocking however is that the government is unwilling to take any action to implement the law.
c- Stop issuing new business unfriendly legislation; businesses need stability and predictability to flourish and expand; how do you expect to insure stability when every month businesses have a new piece of legislation to deal with?
d- Government needs to liberalize the market and stop pushing for protectionist programs that will create an artificial economy built on subsidies and will collapse the minute the subsidies are lifted.
e- Government needs to open neighboring markets that are all protected; we claim that we have 400 million consumers at the grab of our hand, this is a huge lie considering that what is produced in Georgia cannot access any of the neighbors’ markets without a special agreement between the private business entity and local authorities in those countries. The role of the government should be to put pressure to open those markets instead of being totally lethargic or to copy our neighbors’ wrong policies by advocating for local protectionism.
f- Government should renew entry visas of all investors instead of refusing many investors re-entry which is resulting in having them leaving the country and leaving their investments behind them. It was also reported to us that many businesspeople from the Middle East and Asia who are not required by law to have an entry visa to Georgia are deported upon their arrival to the Georgian border without any explanation. How do you expect to attract investors when such things are happening?

Georgia will be signing the Association Agreement and the DCFTA with the European Union in few days how will this impact the business and economic environment?

This is no doubt a huge step for Georgia that will come with many rewards but also with many challenges. An Association agreement with the EU goes beyond business and economy; it is a public acknowledgement of shared values such as democracy, respect of human rights and transparency.

From the business and economic angle, the EU brings a reliable pool of more than 500 million consumers; this is a market that will not close for punitive political reasons, the EU is a steady and stable market for Georgia; by the same token Georgia needs to adapt more than 350 different regulations to be in conformity with the requirements; this will be a challenging process that will take time, adaptation but more importantly a change in mentality.