Wednesday, 30 October 2019 13:24

Business environment improvement is our priority, Minister of Finance of Georgia

Caspian Energy (CE): Azerbaijan and Georgia are actively cooperating within the framework of international organizations, including implementation of large investment and transit projects.  Which projects are the most demanded and will be important in coming years?
Ivane Matchavariani, Minister of Finance of Georgia: Georgia and Azerbaijan have very successful history in implementing large investment projects aiming at creation of important transit corridor. Oil pipeline project Baku-Supsa, Baku-Tbilisi-Ceyhan were first very important energy projects, followed by Baku-Tbilisi Kars railway project which has been finished recently. I am sure this corridor in South Caucasus can become a transit route of a global importance.

CE: Georgia is ranked 6 in the ease of doing business, according to the World Bank’s latest report.  How do you assess the ease of performing an entrepreneurial activity in Georgia?
Ivane Matchavariani: Georgia ranks number 6 in World Bank Doing Business.  This is a remarkable achievement for us.  This is on the one hand the acknowledgment of the reforms undertaken by different Governments, on the other hand it is a big motivation for us to follow the path of the transformation of the country. Improvement of the business environment has always been the priority to the Georgian government and the driver of our future reforms.
We have recently implemented new quite innovative corporate income tax reform, which not only reduced the tax burden for the country but also significantly simplified tax compliance process. We started automated VAT refund system in this year. Ease of doing business is our primary focus and in this direction we have other important reforms which will further advance the investment climate in the country further forward.

CE: In 2018, the Ministry of Finance of Georgia stated that it was important to mobilize financial resources and broaden economic relations within the framework of the One Belt, One Road trade corridor initiated by China. What is the size of funds needed, and which projects are in need of funds first of all?
Ivane Matchavariani: One Belt One Road initiative is the essential part of the strategy of Government of Georgia to capitalize on country’s huge transit potential, develop logistics hub and enhance regional connectivity. We have implemented a very important fiscal reform which, by enhancing fiscal space, allowed us to significantly increase the capital investments.
This increase goes to investment projects in spinal road network of the country – these are East-West highway and South-North corridors. Another important initiative is the railway modernization project. The financing is ensured for these projects and they have either already started or are on the final stage of procurement. The expected finish time is 2022-2023.

CE: The depositors of the TBC Bank, the biggest bank in Georgia, are concerned about the future of the Bank and invested assets. Which measures have been taken and still will be undertaken? In your opinion, what can earn much broader trust of clients in the Georgian banks?
Ivane Matchavariani: Well, they should not be worried. Banking sector in Georgia is very strong and it demonstrated high robustness during past years. TBC Bank is a leading financial institution listed in LSE prime listing. The strength of the banking sector in Georgia, in my view, should be attributed to strong and independent National Bank. National bank and TBC Bank expressed themselves, that there are no more outstanding issues. I am sure that the Banking sector and TBC Bank will continue strengthening and contributing to the economic development of the Country.

CE: Georgia is the only country of the Black Sea basin, which does not have a deep-water port. Anaklia port can be a transit point for Azerbaijan and Central Asia.  When is it planned to launch the construction of the port and how much investments will the public sector make?
Ivane Matchavariani: Anaklia deep see port is of strategic importance not only for Georgia but for the region as well. All leading International Financial institutions acknowledge that and support this project. This project is a private sector initiative. However, the Government of Georgia supports this project. I think that strong support from many different parties is a very good ground for the success of the project. I am very optimistic about the project and I hope construction will come soon.

CE: Since 2017 the European Union has applied a visa-free system for Georgia. Which positive and negative impacts did Georgia’s entry into a free visa regime cause for the operation of banks? 
Ivane Matchavariani: On March 28 it is two years already since the Georgians are allowed to enter EU visa free. This is only two years, however, it is already our livelihood. The Georgians, especially young people, travel to EU much more frequently, for short visits, for weekends, to meet friends there and the European lifestyle.
Visa-free system brought a lot for Georgians but, I am sure, there is more benefits are to come. I am very much confident, very soon it will be reflected in more intensive business ties between the European countries and Georgia.
CE: The process of reducing of loans to zero ran from December 2018 to January 2019 in Georgia? What have been the results of this process? 
Ivane Matchavariani: Responsible lending is a very important initiative of the government of Georgia, and it is critical for countries’ development. Responsible lending reform was mentioned by credit rating agencies as a rating friendly initiative. Existing lending practices were a quite impeding factor for economic growth. We introduced fair rules of game in this sector based on best international practices.

CE: What potential do you see for foreign, including Azeri investors, in Georgia? Which sectors of economy are the most important for the today’s cooperation?
Ivane Matchavariani: According to preliminary data of 2018, Azerbaijan is number one among the top three foreign direct investor countries.  According to Geostat, investments from Azerbaijan amounted to USD 240 million in 2018. Economic cooperation between Azerbaijan and Georgia is focused on developing the transport corridors as well as trade and tourism. Investment climate has improved significantly in recent years in Georgia as a result of current economic reforms. This has positively reflected on business activities and the increase in business interests of Azerbaijan toward Georgia is an illustration of this fact. We have all the possibilities to deepen the partnership in all fields such as tourism, financial sector, construction, agriculture etc.

CE: What are the main tasks facing the Ministry of Finance of Georgia in coming years?
Ivane Matchavariani: Georgia is quite an outlier in terms of high and robust economic growth prospects. This is also supported by the forecasts of IMF. Higher Increased fiscal strength lowers external vulnerabilities where identified by rating agencies in as a main reasons for improving Georgia’s credit rating. During last year Moody’s and Fitch upgraded our rating by a notch and S&P improved the outlook.
We have many important reforms ahead, which should bring country forward and successful implementation of which will increase the strength of our economy.
I thing Georgia’s precious reform has materialized in outstanding business climate and high Government efficiency, documented by 6th place in WB doing business, 5th place in Open Budget Index, and improved position in WB Governance indicators.
Despite all this success, education reform is becoming a key reform for the Government of Georgia. I think that in medium term human capital may become main constraint for development. We in the Government of Georgia think that education reform is critical for the country to overcome middle income country trap.

Thank you for the interview

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