“Produce in Georgia” about to start
22 May, 2014
“Produce in Georgia” about to start
“Produce in Georgia,” a new governmental program focused on the development of Georgian entrepreneurship, will start from 1 June. The program envisages preferential crediting of local entrepreneurs. The preferential credits mechanism is based on state co-financing banking credits disbursed to businessmen. To this end, the program budget has GEL 46 million at its disposal, out of which GEL 30 million will support agricultural credits and GEL 16 million will go to the industry.
“We declare this year the year of
local production and we turn our full attention to local production development,” Georgian PM Irakli Gharibashvili stated at the presentation of the program, which he initiated in order to give an impetus to the sluggish Georgian production and enhance the country’s export potential.
Ministry of Economy and Sustainable Development of Georgia and Ministry of Agriculture will carry out the program which focuses on entrepreneurship development, support start-up enterprises and raise the competitive power of the Georgian private sector through a better access to capital, real estate and state-of-the-art technologies. To achieve its goal, the program offers three key components: access to finances, infrastructure, and a consultation service. Beneficiaries may use all three components separately or simultaneously as they wish.
Although Georgia is in the top ten of countries where setting up a business is considered to be easy, researches show that start-up businesses are short-lived and ineffective. According to Giorgi Kvirikashvili, Minister of Economy and Sustainable Development of Georgia, half of the operating businesses cannot manage to enhance sales even five years after their start-up.
The newly initiated program aims to make businesses more viable: USD 2 million will be available for entrepreneurs who want to start up new enterprises or rehabilitate old ones that are inactive at the moment. The program will co-finance the loan interest rates by 10% while the remaining part will be paid by the businessmen. The benchmark interest for business credits stands at 13% in Georgia which means the entrepreneurs may pay around 3% per year for credits. Besides, the state will cover 30% of the collaterals that back up the credits, Kvirikashvili said. To make real estate more available, the state is ready to hand around 100 real estate properties and infrastructure in state ownership available to entrepreneurs [who want to set up new enterprises] for the symbolic price of GEL 1.
The priority sectors of the program include businesses that have the potential to supplant the import and were selected after consultations with the sector pundits. The list of beneficiary sectors cover paper and cardboards production, including production of packing materials, production of construction materials such as ceramic tiles, marble, granite and other natural stones, the textile industry, the chemical industry, wood processing, production of electricity appliances, production of pharmaceuticals including the diagnostic means, production of machinery spare parts, production of resin and plastic including pipes and office accessories, metal goods like ironware and kitchen appliances.
From an agricultural point of view the program prioritizes fruit-and-vegetable production, high technology-based green houses, cattle breeding, poultry farming, wool and leather processing; farming and processing of laurel, tobacco and tea, as well as nuts and walnuts, vegetable and citrus.
“This is a very optimistic, realistic and interesting project. We offer the business preferential conditions when entrepreneurs may get credits even as low as 1%... I very much believe in this project,” the Primer said.
Ditrikh Muller, co-founder of the Georgian Investment Group, approves of the governmental initiative but, unlike the Primer, is less optimistic. He believes the program is very much like the Agriculture Development program that was launched last spring and implies an almost similar credits co-financing scheme for the agricultural sector. The program enhanced its financing for the agricultural sector, but showed a staggering imbalance between the western and eastern parts of Georgia as almost 90% of the financing went to businesses based in eastern Georgia.
“The program is imperfect because it only includes banking loans while the leasing sector also should have been included, since leasing is an important mechanism to industrial activity,” Muller said. “But the best remedy would be if the state sets up or rehabilitates enterprises itself and then sell them to private sectors step-by-step via stakes. The process would have been much cheaper, more transparent and effective, without regional imbalance.”
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