Government better shift focus from ratings to action plans
13 January, 2011
Government better shift focus from ratings to action plans

Georgia received encouraging international ratings for the past 2010 that picture the country as one of the best place for doing business and investment haunt. The fact is that Georgia still remains investment-deficient.
Georgia seems rolling the right track to win hearts of international investors. It eased tax burden, red tape and corruption problem and gained the name of reformatory country worldwide even against the backdrop of the global financial. But investors still shun the country. In 2010 Georgia failed

to attract even the pessimistic investment prognosis of USD 800 million [the optimistic was USD 1.2 billion] it  could  attract in the most problematic 2009 year  affected by financial crisis. 
Government names the August war and global financial crisis as a reason. Bigger part of economic analysts say the problem is bad management skills and advise government to focus on drafting detailed economic programs rather than chase after international acclaim on papers.
“The years of 2008 and 2009 were difficult from crisis point of view not 2010, it is much better and arguments that financial crisis is a reason of sluggish investments inflow in 2010 is not well-reasoned,” Davit Narmania, Director Executive of the Institute of Caucasus Economic and Social Research, told Georgian Journal. “There is GEL 400 thousand built in the state budget on purpose to pay for service of international credit agencies like Fitch and Standard & Poor’s that is a waste of money in fact as far as you cannot attract investor through exposure ratings alone. Moreover some of them are of notorious fame. Investors sued Fitch for example past year for their misleading assessments. The money earmarked on service-payment of credit rating agencies is better to be diverted on remedies stimulating Georgian economy.”
Indeed Georgia seems a pet to almost all international ratings except the World Economic Forum (WEF). The political tension and short-lived war with Russia in 2008 somewhat affected its international ratings but by 2010 Georgia regained the lost scores back again.
In 2010 Standard & Poor’s improved the rating from B to B+, while Moody’s granted the first ever sovereign rating Ba3 to Georgia. The country improved its ranking by 22 positions in the annual report of Economic Freedom of the World and moved from 45 to 22 in the ranking of 141 countries for 2010.  The World Bank’ named Georgia as a top reformatory among 174 countries  in its Doing Business 2011 report  and one of the most open countries to investments according to Investing Across Borders 2010 report that covers 87 countries. All the ratings stress that Georgia is a simple place to start business: number of licenses and permissions is reduced to insignificant number and they are delivered in few days while the process takes months in other countries, property acquisition and registration can be processed with similar easy terms, and that investors can feel protected. Forbes based on all these ratings and attainments named Georgia 61 among 128 Best Countries for Business 2010.
The fact is that irrespective this positive acclaim of rating coutures investments diminish rather than increase in the country starting 2008 that bespeaks of problems. 
“No serious investor enters country without its own in-depth research based only on the ratings. Besides investors have bigger trust in the WEF report that [unlike other rating reports] presents much more comprehensive picture of country’s image based on deeper economic, political and social analyze according to at least 100 criteria,” Levan Kalandadze, Director Executive of Association of Georgian Small and Medium Enterprises, said. “And WEF’s Global Competitive Index of 2010-2011 ranks Georgia 93 among 139 countries.”
In the WEF report Georgia ranks 120 on property right protection, 104 in judicial independence, and 97- in intellectual property protection that indicates that country still has serious problems with key issues important for investors to feel safe. It makes investors think twice before coming here. 
Common approach of Georgian economic analysts is that most ratings except WEF focus on terms that made easier to start business in Georgia that is really well-done. But when it comes to further business operation here entrepreneurs face serious problems in key issues including tax administration and property right protection.
Dirikh Muller, one of the founders of Georgian Investment Group (GIG), assures that Georgian business environment is the best in the region and it deserved the improved international ratings fairly as far as Georgia handled with the post-crisis situation better than most EU countries and the US. Many EU countries including Portugal, Ireland, Greece as well as California of the US suffer of huge budgetary deficits while Georgia managed to reduce its deficit by 4%.
However Muller acknowledges that the year of 2010 was the worst in GIG practice and to lure investors Georgia needs more comprehensive approach.
“Georgian government has to think over why irrespective improved business climate investment inflow is sluggish here. The problem is that they have to undertake more complex action plan stimulating economy and back their good ideas with detailed programs. Usually government puts out good ideas and do not follow with a well-calculated action plan, it does not work. Investors need to see calculations and detailed analyze. All the EU countries stimulate agriculture via subsidies but look there is a food crisis and they enjoy profit of doubled prices. We have to know where we go not only by words,” He said.

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