The urgency of the use of foreign investment in the Georgian economy — remains one of the most important issues. The openness of the national economy and enhancing its competitiveness, increasing her confidence in the international market, in the interests of the international financial exchange — all this makes it necessary to create conditions for attracting foreign investments.[1]
Experience almost all the former socialist countries shows that the appearance of foreign strategic investors ready to mobilize the resources needed for the reconstruction of enterprises played an important role in the economic development of these countries in the post-Soviet period.
To attract investment of no less importance is the provision of legal safeguards for foreign investors. This guarantees their safety, freedom of investment and the transfer of profits and dividends abroad. The issue of granting guarantees in the exporting countries studied in detail by the Economic Cooperation and Development (OECD). Guarantee schemes which differ only in volume, there is in every country with a developed industry.[3; 16]
Most of the developing countries are trying to create almost the same guarantees as proposed by OECD member countries. For example, in Egypt, those foreign investors who invest for expansion of business in the purchase of land, have a guarantee of full payment of its value in the event of expropriation. According to Brazilian law allows free repatriation of investment capital and profit, however, repatriation of capital shall be exempt from income tax and is carried out automatically.[2]
In general it can be said that foreign capital brings with it new technologies, new management methods, the ability to enter new markets and, most importantly, the funds themselves.
Despite this, we can highlight those general laws, which must be taken into account in the development of new strategies for attracting foreign investments into the Georgian economy:
- All countries to comply with the conditions of national treatment;
- All countries require registration of foreign capital;
- In all countries, there are those special industry, when investing in that need special permission — a license;
- In all countries, there are sectors of the economy closed to foreign investment.[2]
In recent years, significant economic reforms have been carried out in Georgia. These reforms were aimed at creating an attractive business environment, which is the basis for the inflow of foreign investment, create new jobs, growth of business activity in all sectors of the economy and welfare of population growth.
As a consequence of the country carried out institutional reforms formed effective, professional and transparent public services. As a result of policies aimed at regulating the economy, significantly reduced the number of spheres regulated by the state and simplified regulatory procedures themselves. [5;29]
It should be noted national implementation of the privatization policy, which has contributed to both direct foreign and local investment, and increase the role of the private sector in the economy. One of the main objectives of the country’s economic policy is the development of private enterprise in the country, thanks to the creation of unfavorable conditions. Economic reforms are aimed at ensuring economic growth that is based on liberalization and private sector development. In this direction the Government of Georgia has taken significant steps:
Liberal tax policy — as a result of reforms in the tax system, the Georgian tax legislation is one of the most liberal in Europe. Significantly reduced the number of taxes (from 21 th to 6 in 2004-2008), as well as tax rates. In accordance with the Tax Code of Georgia, six tax act to date, including five national and one local:
- National taxes: income, profit, customs duty, VAT and excise duties;
- Local taxes: property tax.
Customs reform — in accordance with the Customs Code of Georgia, customs procedures much simpler. As a result of the reform of customs tariffs, simplify and reduce costs associated with international trade.
The tariff on imports canceled about 90% of the products, in addition only 3 types of tariffs are today (0%, 5%, 12%) instead of the pre-existing 16. Customs duties are imposed only on certain types of agricultural products and construction materials. In addition, there are no quantitative restrictions (quotas) on imports and exports.
The upgraded system of licensing / permit business — thanks to the reforms in the system of issuing licenses and permits, their number decreased by 84%. To date, licenses and permits are only required for products and services, high-risk, use of natural resources and to carry out specific activities. Greatly simplified licensing procedures and permits, rooted principles of «one window» and «silence — a sign of consent».
Free industrial zone — for the greater liberalization of the investment environment and, accordingly, with a view to greater attraction of foreign investments, the Law on «Free Industrial Zones», according to which such a zone could be established on the territory of over 10 hectares, the decision of the Government of Georgia on its own or on the initiative of the investor. In the action area of special tax regime, further simplified the registration and other procedures.
The emergence of free economic zones and their functioning largely stimulate inflow of new technologies, will create demand for skilled labor and a positive impact on the development of both regions and the country as a whole.
Technical Regulation Reform — the removal of technical barriers to the international movement of goods and services produced in Georgia is one of the most important tasks as soon as possible the future development of the Georgian economy.[2]
To achieve these goals in Georgia carried out the reform of the sphere of technical regulation, which will facilitate:
- Elimination of barriers to international trade;
- Improvement of the investment environment;
- Increase in the probability of penetration of Georgian products to the international markets;
- Approximation to international and European standards;
- Implementation of the commitments made to the WTO (World Trade Organization), is to move from mandatory standards to the initiative (voluntary);
- Transparency in the area of
In consequence of the above-mentioned reforms have occurred transition to a system of voluntary standards and reducing the regulatory role for the state, which is very important for the expansion of business activities.[7;42]
Privatization of state property. Of all the reforms undertaken by the Georgian government to improve the investment environment and attract private investment, the most important seems to us started in 2004 and the ongoing reform of state ownership through its privatization. Its main goal is the denationalization of state property objects to stimulate the country’s economic development, the development and growth of private enterprise, attracting local and foreign investment, efficient use of existing resources in the country, and others.
In Georgia, there are preferential trade regimes:
- Free trade regime with the CIS countries and Turkmenistan (November 1, 2008);
- preemptive favored nation treatment (MFN) — with the member countries of the International Trade Organization;
- separate system of preferences (GSP) — with the United States, Canada, Switzerland, Japan and Norway;
- «GSP +» — with the European Union (7 200 kinds of products) since 2005.
Georgia decorated the agreement on avoidance of double taxation with 33 countries-bedroom and 32 of the agreement on mutual encouragement and protection of investments. Go preparatory work for the start of negotiations on the conclusion of the European Union «On free trade» agreement.[8;83]
Thus, the import of foreign capital in developing countries — the process is very complex, multifaceted and requires special care.
Conclusion: In view of the fact that Georgia has decorated an agreement on avoidance of double taxation with 33-name the EU and 32 of the agreement on mutual encouragement and protection of investments, as well as the same are preparatory work for the start of negotiations on the conclusion of the European Union «On the free trade agreement «the economic situation in terms of attracting foreign investment can be regarded as promising.
In addition, it should be noted that the import of foreign capital in developing countries — the process is very complex, multifaceted and requires special care.
References
- Tax Code of Georgia (https://www.mof.ge/4203);
- Georgian Law «On Investment Activity» (N 29-30 / 5) of 15 June 1997 (https://matsne.gov.ge/index.php?option=com_ldmssearch&view=docView&id=37594);
- Georgian Law «On foreign investments» dated 30 June 1995, number 777 with a-11, (https://matsne.gov.ge/index.php?option=com_ldmssearch&view=docView&id=37594);
- The official website of the State Statistics Office of Georgiahttps://www.geostat.ge/;
- Campos N.M., Kinoshita, Y (2002). «Foreign Direct Investment as Technology Transferred: Some Panel Evidence from Transition Economies». P.29
- Moran T., 1988, «Foreign Direct Investment and Development: The New Policy Agenda for Developing Countries and Economic in Transition», Institute of International Economies, Washington, DC, 1998, p.9
- Baratashvili, Magrakvelidze D., Principles of investment environment improvement in the Georgia-TB., 2009. -S.42
- Datunashvili L., favorable investment environment — the basis of the country’s economic revival. See. Actual problems of economic development at the present stage. The collection of materials of scientific-practical conference of Georgian economists, December 25, 2008, TB. 2008 ,. -FROM. 83
- Shengelia, N. Skhirtladze, socio-economic essence of investments and their new understanding., Zh. «Business and Law», December 2010, P.39[schema type=»book» name=»THE MAIN DIRECTIONS OF REGULATION OF INVESTMENT ACTIVITY IN GEORGIA» description=»The article describes the country’s investment climate that is the environment in which the investment processes occur. According to the authors, it is influenced by legislative, institutional, economic, social and po-litical factors. These factors are crucial in the process of investment activity in the country and the region, city, etc. In conclusion, the authors give an overview of the most important for Georgia agreement with the Euro-pean Union «on free trade,» which feature double taxation avoidance agreement as well as agreement on mutual encouragement and protection of investments with 33 countries of the EU on me and concluded that the importation of foreign capital in developing country — the process is very complex, multifaceted and requires special care.» author=»Evgeni Baratashvili, Maia Chechelashvili» publisher=»БАСАРАНОВИЧ ЕКАТЕРИНА» pubdate=»2017-02-15″ edition=»ЕВРАЗИЙСКИЙ СОЮЗ УЧЕНЫХ_30.01.2017_1(34)» ebook=»yes» ]