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Regional Office for Europe and Central Asia
FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS
EASTERN EUROPE AND
CENTRAL ASIA AGROINDUSTRY DEVELOPMENT
COUNTRY BRIEF
GEORGIA
Contents
Agro-industry national policy framework ........................................................................................................................................... 2
Economic and social development and trends ................................................................................................................................. 3
Agro-industry outlook and performance ............................................................................................................................................ 4
Foreign direct investments .....................................................................................................................................................................10
Food safety, certification and quality control ..................................................................................................................................11
Retail, domestic market and international trends ..........................................................................................................................12
Business environment and competitiveness ...................................................................................................................................12
Ranking Georgia .........................................................................................................................................................................................14
Key indicators
Key Economic Indicators1
2006
2009
Food & Beverages
indicators
2011
GDP (PPP), US$ billion
17.78
20.90
22.46
Manufacturing VA, % of GDP
12.73
11.47
Agriculture VA, % of GDP
12.82
Employment in Agric., % of
total
2006
2009
2011
Output, % of manufacturing
44.89
39.24
n/a
9.90
Value Added, % of
manufactur.
34.30
31.93
n/a
9.36
7.23
Enterprises, % of
manufactur.
43.86
36.71
n/a
55.30
53
n/a
Employment, % of
manufactur.
38.89
30.95
n/a
Gross Fixed Capital F., % of
GDP
25.56
15.32
17.21
Investments, % of
manufactur.
39.83
31.32
n/a
FDI net inflows, % of GDP
15.11
6.11
6.77
FDI inflows, % of total inflow
n/a
n/a
n/a
n/a
n/a
n/a
R&D, % of Output
n/a
n/a
n/a
59.57
52.32
64.36
-0.20
-0.24
-0.36
Merchandise Exports, US$
billion
0.94
1.13
2.19
Exports, %of merchandise
Exp
16.3
13.4
9.7
Merchandise Imports, US$
billion
3.68
4.50
7.06
Imports, % of merchandise
Imp
9.6
9.0
8.6
Exports annual growth, %
8.1
-24.3
25.7
Exports annual growth, %
-26.6
-16.9
10.1
Import annual growth, %
47.6
-27.9
25.4
Import annual growth, %
12.8
-29.3
19.9
GNI per capita, 1’000 US$
1.68
2.54
2.86
Output per capita, US$
110.0
150.3
n/a
2,348
Exports per capita, US$
34.7
34.4
42.8
R&D, % of GDP
Merchandise Trade, % of
GDP
Trade per capita, US$ 20092011
Doing Business Indicators
Rank
Global Merchandise Exports
Imports Rank
100
Net Trade, US$ billion
9
Agribusiness Indicators
Value
133
108
3.85
FDI Inward Attraction Index
Global Competitiveness
Index
60
77
1
Agro-industry national policy framework
National development programmes: The key documents that set out the Government’s policies for overall economic
development as well as for agriculture, the agro-industry and rural development include: (i) the Comprehensive Strategy in
Competition Policy (2010); the Comprehensive Strategy and Legislative Approximation Programme in Food Safety (2010);
(iii) the Strategy on Standardization, Accreditation, Conformity Assessment, Technical Regulations and Metrology and
the Programme on Legislative Reform and Adoption of Technical Regulations (2010); (iv) the State Strategy for Regional
Development for 2010-2017; (v) the Annual State Control Programme of Food Business Operators (2010); and (vi) the Strategy
for Agricultural Development. The government also launched a state programme of “Cheap Credit” aimed at supporting
SMEs, including farms and other agricultural businesses, as well as the programme, 100 New Agro-industry Enterprises (2007),
based on which companies can purchase state-owned agricultural land at concessional prices. The Government adopted the
General Plan for Food and Feed Crisis Management (2010). The Bank of Georgia promoted access to finance through a Small
and Medium Enterprise (SME) Lending credit line, approved in 2010. In 2010, agriculture became a development priority for
1 World Bank Indicators Database and ITC accessed in October 2012. Author’s calculations
2
the Government, and the Ministry of Agriculture initiated the preparation of a sector development strategy. The 2011 budget
of the Ministry (GEL 69 million) was increased by 72 percent from the previous year’s allocation (GEL 40 million) to support the
implementation of the Agriculture Development Strategy. Most of the activities of the Ministry in 2011 will aim to improve
sector performance and increase output.2
Georgia has had a Partnership and Cooperation Agreement with the EU since 1999, although the Action Plan
(ENP AP) expired on 31 December 2011. The EU and Georgia have agreed to an open-ended extension, until the
Association Agreement, currently under negotiation, is signed. In the area of agriculture, the EU and Georgia
signed an agreement on the protection of Geographical Indications in 2011. With EU support the Ministry of
Agriculture prepared a long term sector strategy which was approved by the Georgian government in March 2012.
An Agriculture Support Programme with a total budget of EUR 40 million is planned for 2012.
Together with the UN organizations the country elaborated UNDAF for 2011-2015. Since 2008 Georgia has not
been a member of the CIS.
Legal framework: Georgia has adopted a number of laws to encourage agricultural and agro-industry growth and
rural development, including the Act on Food Safety and Quality (amended in 2010), the Act on Food and Tobacco
(1999), the Act on Vines and Wine (1998), the Act on Privatization of State-owned Agricultural Land (2005), the Act
on Free Trade and Competition (2005) and the Act on Free industrial Zones (2007).
Supporting institutions: The main state bodies for agriculture and the agro-industry in Georgia are the Ministry
of Agriculture and the Ministry of Economy and Sustainable Development. In 2011, the former National Service
of Food Safety, Veterinary and Plant Protection was transformed into the National Food Agency (NFA) in line with
the Act on Food Safety and Quality. The NFA provides food and feed safety and quality assurance, and also carries
out state control over hygiene, veterinary-sanitary and phytosanitary rules and requirements, and conducts
risk management and assessment tasks, among other things. In order to promote and facilitate foreign direct
investment in Georgia, the National Investment Agency (GNIA) was established in 2002 under the Ministry of
Economy and Sustainable Development.
In 2010, the government created the Georgian Agriculture Corporation, a 100 percent state-owned company
with the objective of supporting and developing the sector’s competitiveness in the country. The National Wine
Agency was established to promote wine production. An Inter-agency Working Group was created by the decision
of the EU Integration, chaired by the Minister of Agriculture in order to involve relevant government institutions
and agencies in the drafting process of the Strategy and Legislative Approximation Programme. The Government
started registering food business operators in order to create a sophisticated database and it also established a
public fund to support private sector investment.
Economic and social development and trends
Economic and social development: Georgia is a lower middle income country with GNI per capita of US$ 2,860
in 2011. The population is 4.49 million, of which 47 percent live in rural areas, and the annual population growth
is 0.74 percent. Georgia showed an increase in GDP between 2003 and 2007 with average growth of about 10
percent. As a result of the global economic crisis, GDP growth fell sharply to 2.3 percent in 2008 and further to
-3.9 percent in 2009. In 2010 and 2011, Georgia consolidated its economic recovery, with GDP increasing by
6.25 and 6.95 percent respectively. Growth has been broad-based with manufacturing, financial services and
tourism among the main contributors. The military conflict with Russia in 2008 negatively affected the business
environment and the functioning of state institutions. The agricultural sector contributed only 10 percent of value
2 FAO and of the Ministry of Agriculture, Government of Georgia (2011) Agriculture Sector Bulletin Winter 2011. Supported by EU
3
added to GDP but employed more than 54 percent of the total labour force in 2009. Agriculture added value
continued to decrease in both 2010 and 2011 and contributed only 7.23 percent to GDP in 2011. Agricultural
production in Georgia is fragmented and productivity is low. Industry sector annual growth also showed negative
trend again of five percent. The manufacturing industry generated more than 74 percent of total industrial output
and accounted for 9.9 percent of GDP in 2011 with negative annual growth as of -6.6 percent. It also employed
about five percent of the total labour force. According to the UNIDO Industrial Development Report, Georgia has
medium importance in terms of manufacturing but high importance in terms of agriculture.
Chart 1. Evolution of value added to GDP in Georgia (percent)
Source: WBDI, accessed in October 2012; UNIDO database; National Statistics; Author’s calculations
Growing demands and trends: Georgia is a net food importer with about 80 percent of all food requirements
being met by imports. A share of total household expenditure declined from 62 percent in 2005 to 51 percent
in 2010.3 Bakery products and pasta, fruit and vegetables and dairy products account for the majority of food
consumption, although fish and seafood consumption is still low. Demand for processing food products, including
ready-to-eat food, is increasing mainly in urban areas. It is estimated that 24.7 percent of the population was living
below the national poverty line in 2009.4
In 2010, the five top agricultural products in terms of values in Georgia were: cow’s milk (ranked by commodity in
the world 80), cattle meat (ranked 109), grapes (ranked 49), hazelnuts (ranked 4), and potatoes (ranked 84).5 Crops
with potential for domestic production include tea and fruit, especially citrus fruits.
Agro-industry outlook and performance
Agro-industry background and challenges: Reforms in the agriculture and agro-industry sectors in Georgia are
ongoing. In 2010, the Government identified agriculture as a development priority in order to improve sector
performance and increase its output.6 The food industry – with the exception of wine, mineral water, dairy, poultry
and some sorting and packaging industries – has retracted further. Agriculture is based on a dual system of family
holdings and commercial operators and more than 90 percent of production is concentrated in highly fragmented
small-scale family holdings. Around 82 percent of family holdings produce mainly for self-consumption, while
3
4
5
6
http://www.geostat.ge/index.php?action=page&p_id=434&lang=eng
http://en.wikipedia.org/wiki/List_of_countries_by_percentage_of_population_living_in_poverty
FAOSTAT, accessed in October 2012
FAO and of the Ministry of Agriculture, Government of Georgia (2011) Agriculture Sector Bulletin Winter 2011. Supported by EU
4
the remaining 18 percent produce cash crops. Agricultural production is diverse, including viticulture, cereal
production, and a wide range of vegetables, fruits, nuts, livestock, dairy, citrus and tea. Farming systems vary
according to climatic zones. Non-irrigated areas are used for livestock and rainfed cereal crops, while irrigated
areas are devoted to fruits and vegetables. The subtropical climate in west Georgia favours a wide variety of crops
including citrus and tea, while viticulture and fruit production prevail in the east. Livestock are raised throughout
the country. Today, one of the main challenges Georgian entrepreneurs face in the farming sector is coping with
the lack of modern agricultural know-how, and in food processing the main challenge is to improve hygienic
conditions throughout the supply chain and to develop new products.
Georgia is well known as a wine producing country and became a member of the Wine World Trade Group along
with Argentina, Australia, Canada, Chile, New Zealand and the United States. The country has started taking
significant steps to protect its wines as intellectual property of the country. The National Intellectual Property
Centre of Georgia signed a memorandum with the Wine Association, promoting the competitive environment of
the market and securing Georgian wine from falsification both within the country and abroad. At the initial stage,
18 Georgian wines have been given protected geographical indication in the EU. 7
Recently, organic products have become popular and expensive commodities in developed countries. Georgia
is still in the early stages of developing organic production within existing regulations. The total amount of land
under organic agriculture grew slowly, from 0.01 percent in 2005 to 0.06 percent in 2010. The number of registered
producers is only 64, and they concentrate mainly on producing fruit, grapes, and medicinal and aromatic plants.8
The Government included bio-farming in its Agricultural Programme.
Food and beverage industry performance: The food and beverage industry makes up a modest part of the
Georgian’s economy, generating 3.2 percent of GDP, although it makes up a significant part of manufacturing
production. In 2009, the food and beverage industry generated US$ 660 million, which represents about 39.2
percent of manufacturing output and 31.9 percent of manufacturing added value. Per capita output amounted to
US$ 150.3. The industry grew steadily at about 33 percent on average every year, between 2003 and 2007. In 2008,
output decreased by 2.2 percent but it by 9.6 percent in 2009. While the volume of food products increased over
time, the performance in terms of share of output and value added has been declining.
In 2009, the food and beverage industry employed 20,500 people (or 31 percent of the manufacturing labour
force), although this level has not remained stable over time. Labour productivity increased significantly between
2001 and 2009. In 2009, there were 2,324 enterprises operating (or about 36.7 percent of total number of
manufacturing enterprises), most of which were private, small or medium-scale enterprises. SMEs generated more
than 30 percent of total food, beverages and tobacco industry output in 2008. Processing units in sub-sectors such
as dairy, meat, fruit and vegetables and wine production are situated closer to the raw material production areas.
Investments in fixed capital in the food and beverage industry are not stable from year-to-year. In 2009, this
amounted to US$ 270 million, or 31.3 percent of the total investments in manufacturing, which was 2.7 times
higher than the 2003 level but 5.4 percent lower than the 2008 level. Enterprises in beverage production especially
have made large investments to assure compliance with standards due to export oriented products and foreign
investments.
Important subsectors include beverages (mainly wine and mineral water), processed fruit and vegetables,
and flour. Since the 2006 Russian trade embargo on wine, spirits and mineral water came into force, Georgian
winemakers, with Government support, have taken steps to diversify exports and improve production quality for
expending the markets for their products.
7 FAO and of the Ministry of Agriculture, Government of Georgia (2011) Agriculture Sector Bulletin Winter 2011. Supported by EU
8 Research Institute of Organic Agriculture FiBL and International Federation of Organic Agriculture Movements IFOAM, 2012, http://
www.organic-world.net
5
Chart 2: Evolution of the share of food and beverage industry in the economy of Georgia over time (percent
of Manufacturing)
Evolution of share of Food & Beverages industry in economy of Georgia
over time (percent of Manufacturing)
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
%
2000
2001
Value Added
2002
2003
Output
2004
2005
Employment
2006
2007
Enterprises
2008
2009
Investments
Source: Author’s calculations are based on UNIDO data and national statistics
Chart 3. Distribution of output, employment, enterprises and investments in the food and beverages subsectors in Georgia in 2009
Breakdown of Food & Beverages branches in Georgia, 2009
100%
90% 44,527,175
80% 17,737,430
70% 31,561,817
60% 16,646,433
50%
40%
30% 156,010,811
20%
10%
0%
3,077
6,641
2,533
1,748
6,524
204
109,361,146 19,977,671
130,528,647 39,251,537
1,386
178
85
471
21,019,701
139,418,075 13,458,446
41,523,206
242,162,419 76,771,786
Processed meat, fish, fruit,
vegetables, fats
Other food products
Grain mill products; starches;
animal feeds
Dairy products
Beverages
Source: Author’s calculations are based on UNIDO data and national statistics
Trade liberalization, WTO accession and trade performance
Trade regulation and trade unions: Georgia has streamlined its customs procedures and continued to liberalize
its trade regime. Georgia adopted the Act on Custom Code and the Act on Customs Tariffs (2006), which provide
for the reduction of tariff rates and cutting the number of the existing tariff rates, in most cases, to zero percent.
Georgia’s weighted average import tariff is among the lowest in the world. Imports of agricultural products are
subject only to tariffs (zero, five or 12 percent) and sanitary and phytosanitary measures. In 2010, the Customs
Code was combined with the existing tax code to create the unified Tax Code, which came into effect on 1 January
2011.
6
Georgia has signed bilateral free trade agreements with eight countries and with the CIS, of which seven are
in effect. Georgia is one of only fifteen countries in the world that benefit from GSP+ access to the EU market,
allowing duty-free access for more than 7,200 products as well as with the US, Switzerland, Norway, Canada, and
Japan. Fixed excise tax rates apply to certain goods such as alcoholic drinks, ethyl alcohol and cigarettes.
According to an EC progress report9, Georgia made sufficient progress in fulfilling the key recommendations
necessary for launching negotiations on a Deep and Comprehensive Free Trade Area (DCFTA), as an integral
part of the future Association Agreement. However, the reforms undertaken in the trade-related areas are far
from complete and Georgia will need to continue them if it is to benefit fully from the future DCFTA, notably by
diversifying its export base and attracting foreign direct investment.
WTO accession: Georgia has been a member of the WTO since June 2000 and is an observer to the Agreement
of Government Procurement (GPA) accession with 0.027 percent of contribution to the WTO budget in 2012. The
simple average of import duties for agricultural goods applied in 2011 was 7.2 percent. The first Trade Policy review
by the Trade Policy Review Body of the WTO was carried out in December 2009. According to the report, further
structural reforms will be a key to Georgia’s sustained development.
Trade Performance: From 2006 to 2010, Georgia’s exports increased on average by 14.1 percent each year
although they contracted by 40 percent in 2011, amounting to US$ 2.2 billion (or 8.6 percent of GDP). During the
same period, imports increased by an average of 8.5 percent each year and amounted to US$ 7.1 billion in 2011.
Imports were more diversified across partners than exports: 18 major partners accounted for 80 percent of imports
(compared to 14 major partners for exports). The main export commodities were precious stones, steel, beverages
and edible fruits, nuts and citrus, which accounted for about 50 percent of total export revenue. 10
Georgia is a net importer of food and had a negative trade balance of US$ 360 million in food and beverages in
2011. Food and agricultural exports together accounted for 17.8 percent of all merchandise exports and 15.5
percent of all imports to Georgia in 2011. Processed food and beverage products accounted US$ 190 million or
9.7 percent of total merchandise exports and US$ 550 million or 8.6 percent of total merchandise imports in 2011
with an average annual growth of 10.1 percent and 19.9 percent respectively, compared to negative growth of
16.9 percent in exports and of 29.3 percent in imports in 2009. Per capita exports of food and beverages were US$
42.8 in 2011. Between 2005 and 2009, beverage and spirit exports fell by 27 percent, as did exports of vegetables
and fruits due to the Russian trade embargo, which led to Georgia losing its main export market for agricultural
products (especially 80 percent of wine) and forced wine producers to try to enter new markets, mainly in EU, the
CIS, the US, and China.
Sugars and sugar confectionery products were the most imported product (20 percent, ranking in world imports
81), followed by vegetable oils (16 percent, ranked 105), miscellaneous edible preparations (12 percent, ranked 93),
and cereals and flour and cocoa preparations (each 10 percent, ranked 103 and 70 respectively). Beverages, spirits
and vinegar products accounted for 84 percent of exports (ranked 53 in world exports).11
In 2011, Ukraine was Georgia’s most important partner of both exports and imports of food and beverage
commodities.
Top destinations for food and beverage products: Ukraine (41 percent), Kazakhstan (13 percent), Azerbaijan (nine
percent), Belarus (seven percent), and Armenia (6.7 percent) in 2011.
Top origins for food and beverage products: Ukraine (28 percent), Russia (14 percent), Brazil (13 percent), Turkey
(nine percent) and Azerbaijan (four percent) in 2011
9 EC (2012) Implementation of the European Neighbourhood Policy in Georgia Progress in 2011 and recommendations for action.
Brussels
10 Source: UN Comtrade briefs
11 ITC (UNCDAT/WTO)
7
Chart 4. Food and beverages and agricultural trade performance over time
Source: ITC (UNCTAD/WTO): Trade Map online, accessed in October 2012
Chart 5. Share of product groups in total exports and imports of food and beverages in 2011
Source: ITC (UNCTAD/WTO): Trade Map online, accessed in October 2012
8
Chart 6. Evolution of the top five Destinations of exported food and beverage products by Georgia over
time
Source: ITC (UNCTAD/WTO). Data is based on the selected products’ groups. Trade Map online, accessed in October 2012
Chart 7. Growth of national supply and international demand for exports of food and beverage products by
Georgia in 2011
Source: ITC (UNCTAD/WTO). Data is based on the selected products’ groups. Trade Map online, accessed in October 2012
9
Foreign direct investments
Strategies, regulations and ranking: The Act on the Investment Activity Promotion and Guarantees (1996) and
the Act on Free Industrial Zone (2007) provide the legal basis for foreign investment in Georgia. The country
encourages foreign investors with low tax rates, competitive trade regimes, low import tariffs and simplified
licensing and permit procedures. To protect investors and to enhance Georgia’s role as an investment destination,
it has established bilateral treaties on investment promotion and protection with 32 countries. In order to
provide the necessary information and to facilitate a public-private dialogue, the National Investment and Export
Promotion Agency has established Business Information Centres in Tbilisi and other cities.
According to WIR 201212, Georgia was ranked 60 (among 181 economies) by the FDI Inward Attraction Index in
2011, which was a slight improvement on 74 in 2000 (among 178 economies).
According to IAB13, Georgia is one of the most open countries in terms of foreign equity ownership. There are
neither sectors with monopolistic or oligopolistic market structures nor any perceived difficulties in obtaining
the required operating licenses. With only four procedures and four days, Georgia is among the fastest countries
in the world in terms of establishing a foreign-owned limited liability company (LLC). A foreign company requires
no additional procedures other than the authentication of the parent company’s documents abroad. Companies
are free to open and maintain bank accounts in foreign currencies. There is no minimum capital requirement for
foreign or domestic companies. The registration of land-related rights has become a simpler and quicker process.
Both privately and publicly held land may be leased or bought. There are no restrictions on the amount of land
that may be leased or any limits on the duration.
Foreign direct investment flows: According to WIR 2012, FDI in Georgia recovered some lost ground after two years
of stagnant flows and accounted for six percent of the global total. In 2011, Georgia’s FDI inflows generated US$
970 million or 6.8 percent of GDP, which is an almost 50 percent increase on 2009 levels. However, it was not as
high as in 2007, when FDI inflows peaked. All industries shared 21 percent of total FDI inflows. The vast majority of
FDI is directed towards the real estate sector and industry. Manufacturing accounts for 18 percent of FDI inflows.
More than 4,600 companies have been established by foreign investors in Georgia.
The major investors in agriculture and the food industry invested more than US$ 100 million in the 1994 to 2011
period; they are: Denmark in wine (since 1994), Sweden in milk and dairy (since 1997), Italy in nut farming and
processing (since 2007), Germany in wine, fruit and juices (since 2007), Turkey in olive oil (since 2009), Russia in
dairy (since 2009), Ukraine in fruit and juices (since 2007), USA in poultry (in 2011).14
12 UNCTAD (2012) World Investment Report 2012: Towards a New Generation of Investment Policies, UN Conference on Trade and
Development NY and Geneva, Switzerland
13 IFC/MIGA/WB (2010) Investing Across Borders: Indicators of foreign direct investment regulation in 87 economies. The World Bank
Group. Wachington
14 PwC and GNIA (2011) Agriculture: Invest in Georgia…ripe for Investments
10
Chart 8. Foreign direct investments in Georgia over time
Source: WBDI; ITC (UNCTAD/WTO); accessed in October 2012
Food safety, certification and quality control
Food safety background and Georgia’s membership: Georgia is a member of the Codex Alimentarius Commission
and a correspondent member of the International Organization of Standardization (ISO). The area of food safety is
regarded as a key priority for the proper functioning of a future Deep and Comprehensive Free Trade Agreement
(DCFTA) between Georgia and the EU. Therefore, Georgia’s goal is to approximate its domestic legislative
framework with relevant EU acquis by 2014. While preparing the Comprehensive Strategy and Legislative
Approximation Programme in Food Safety, the GoG took relevant EU recommendations into consideration. 15
Food products are subject to the Act on Food Safety and Quality (2005), which introduced a fundamentally
different approach, shifting the emphasis from end-product testing to a focus on the production process and the
identification and prevention of threats. The Food Safety Law was amended to extend inspections and traceability
to all food and feed operators starting in January 2011. The new Code of Food Safety and Free Movement of
Goods and the Code of Food/Feed Safety, Veterinary and Plant Protection were enforced in 2012. Sanitary-hygienic
norms related to food and trade as well as the Issuance of Hygienic Certificate related to food were adopted
in 2007 by the Minister of Labour, Health and Social Protection. In 2010, Georgia drafted and adopted several
implementing acts such as the General Hygienic Rules of Food/Feed Producing Enterprises/Distributors and the
Rules of Implementation of Supervision, Monitoring and Official Control in the Areas of Food Safety, Veterinary and
Plant Protection. In 2012, the Special Rules on Hygiene of Food of Animal Origin were enforced. Since 2011, the
National Food Agency has elaborated an Annual Control Plan of Food/Feed Business Operators. For the purpose
of programme implementation and in order to measure the risk of processing establishments, the National Food
Agency together with the Ministry of Agriculture of Georgia prepared risk level identification criteria.
Quality control, certification and supporting institutions: The Ministry of Agriculture of Georgia is the policy
making body in the field of food safety. As part of the reforms, in 2006, the National Food Agency (NFA) was
established as a subordinated body of the Ministry of Agriculture and it became a Legal Entity in 2011 in line
with the Act on Food Safety and Quality. The NFA provides food/feed safety and quality assurance and carries
out state control over the fulfilment of hygiene, veterinary-sanitary and phytosanitary rules and requirements.
It also conducts risk management and assessment, among other things, including providing information to
15 Codex Alimentarius Commission, FAO/WHO (2012). JOINT FAO/WHO FOOD STANDARDS PROGRAMME
FAO/WHO COORDINATING COMMITTEE FOR EUROPE. Twenty-eighth Session Batumi, Georgia, 25-28 September 2012
11
consumers. Following the structural reorganization, all district divisions of NFA were abolished and consolidated
into 12 Regional/City Divisions. The National Agency for Standards and Metrology (GEOSTM) is responsible
for standardization and working in line with the new law on Code of Product Safety and Free Movement of
Goods. One of the key principles is that Georgia will not develop or adopt national standards in fields in which
international or European standard are being developed or adopted. The government has adopted a system of
voluntary standards and certification. If foreign standards for food products are chosen, they must be registered
at the Ministry of Agriculture by the importer. Georgian wine can be imported to the EU after receiving end
product certification at an EU approved laboratory in Georgia. Accreditation is implemented by the National
Accreditation Body; an accreditation centre that performs accreditation largely in accordance with international
and EU standards and guidelines in both regulated and voluntary areas. A total of 3,000 companies that export
food products have registered in the NFA in order to implement food safety controls. Inspection will be carried out
once a year at high-risk enterprises, and once every two years at low-risk enterprises. Companies with International
Organization for Standardization and Hazard Analysis and Critical Control Points (HACCP) certificates will be
inspected less frequently.
Retail, domestic market and international trends
Georgia is becoming an attractive destination for global retailers, and although the market is small in size it is fastgrowing. According to the Global Retail Development Index 201216, seven countries from the EECA region were
included in the top 30 developing countries for retail expansion worldwide and Georgia was ranked sixth with a
score GRDI of 60.6. Modern retail penetration and saturation are low. Traditionally a country of bazaars and corner
shops, Georgia is gradually becoming a supermarket nation. Populi, the Georgia’s biggest supermarket chain, has
opened 20 stores over the past two years and plans to open 20 more in 2012. International firms such as France’s
Auchan acquired local player Goodwill, while Carrefour will open its first supermarket in a Tbilisi Mall.
Business environment and competitiveness
SME development: According to the OECD SME Policy Index assessment 201217, Georgia has made significant
achievements by following a horizontal approach to business climate development based on effective
consultations with the private sector and functioning intra-governmental co-ordination mechanisms. Georgia
shows high scores for responsive administration and access to finance. Key policies are in place for more
developed women’s entrepreneurship. Georgia provides advisory and financial support for start-ups through
publicly funded schemes. It has an agency that specializes in promoting export-oriented firms. However, limited
support is provided to export-oriented SMEs. SMEs account for 96 percent of all active enterprises and they
employ 43.6 percent of the total workforce. SMEs account for 19.3 percent of added value.
Business environment: According to the Doing Business Report18, Georgia is the top improver (with 31.6 percent)
since 2005 both in Eastern Europe and Central Asia, and globally. With 35 institutional and regulatory reforms since
2005, Georgia has improved in all areas measured by Doing Business and in 2011 alone it improved in six areas.
The economy was ranked ninth (out of 185 economies) in 2012 (one point up compared to 2010and 91 points up
16 A.T.Kearney (2012) Global Retail Expansion: Keeps on moving. The Global Retail Development Index is an annual study that ranks the
top 30 developing countries for retail expansion worldwide. The Index analyzes 25 macroeconomic and retail-specific variables to help
retailers devise successful global strategies and to identify emerging market investment opportunities. The GRDI score includes: market
attractiveness, country risk, market saturation, and time pressure.
17 OECD (2012) Eastern Partner Countries 2012. Progress in the implementation of the small business act in Europe. SME Policy Index.
Supported by EC, ETF, EBRD, CEI.
18 WB/IFC (2012) Doing Business 2013: Smarter Regulations for Small and Medium-size Enterprises. 10th edition. Washington, USA
12
compared to 2006). Cross border trading is ranked at 38, starting business at seven, paying taxes at 33, protecting
investors at 19 and getting credit at four.
It is also among the top 20 most business-friendly economies, which is reflected in the ease of doing business
ranking and the ease with which property can be registered. Through business reforms, Georgia has improved
the process for paying taxes by enhancing the use of electronic systems and providing more services to taxpayers.
It has made getting electricity easier by simplifying the process of connecting new customers to the distribution
network and reducing connection fees. It has made enforcing contracts easier by simplifying and speeding up the
proceedings for commercial disputes. Georgia protects investors by having requirements relating to the approval
of transactions between interested parties. It has made resolving insolvency easier by establishing or tightening
time limits for all insolvency-related procedures, including auctions. It has made getting credit easier by amending
the civil code to broaden the range of assets that can be used as collateral. It has also made starting business and
dealing with construction permits easier.
While many economies have made strides in improving some regulations; since 2005, Georgia has made the
greatest progress toward regulatory practice and it has improved in: Cross border trading by 49 percent, getting
credit by 63 percent, paying taxes by 47 percent and by 31 percent in dealing with construction permits and by
31 percent protecting investors. In 2011 Georgia created customs clearance zones, which are one-stop shops
for different clearance processes and it reduced the time needed to carry out exports and imports. Georgia has
formed a regulatory reform committee at interministerial level for the purpose to inform the organisations on
the the DBIs changes due to continue improving the business environment. It also shares knowledge on the
regulatory reform process related to the areas measured in Doing Business.
Tax Relief: With the aim of becoming the regional hub for businesses in the Caucasus and Central Asia, Georgia
embarked on an ambitious tax and commercial programme of legislative reforms. The success of this initiative has
been recognized by the World Bank, which now ranks Georgia 16th in its Ease of Doing Business Index and seventh
in terms of the ease of starting a business. According to a PwC report,19 in 2012, paying taxes was made easier in
Georgia by simplifying the reporting for VAT and introducing electronic filing and payment of taxes. Under the
new Tax Code (2011), the following tax rates came into force on 1 January 2012: i) personal income tax: 20 percent
flat-rate; ii) withholding tax on dividends: five percent; iii) withholding tax on interest: five percent. The General VAT
rate is 18 percent. As of 2012 Georgia is also a party to 38 double tax treaties.
Competitiveness: According to the Global Competitiveness Report 2012-2013, Georgia is at a transition stage from
1 to 2 and received a score of 77 overall on the Global Competitiveness Index of 144 economies (93 in 2010-2011
among 139 countries). Georgia is ranked only 126 for Innovation, 113 for Business sophistication factors, and 128
(score 3.1) for agricultural policy costs20. The five biggest barriers to doing business in Georgia are as follows: access
to financing, an inadequately educated workforce, inflation, poor work ethic among the national labour force
and tax regulations. According to IDR 201121, in the context of the Competitive Industrial Performance index (CIP)
Georgia was ranked 51 in 2009, seven points up compared to 2005, with manufacturing value added per capita of
US$ 185 and US$ 123 respectively.
19 PwC (2012) Paying Taxes 2012. The Global Picture, PriceWaterHouseCoopers supported by WB and IFC
20 Agricultural policy costs: How would you assess the agricultural policy in your country? [1 = excessively burdensome for the economy; 7
= balances the interests of taxpayers, consumers, and producers] | 2011–12 weighted average
21 UNIDO (2012) Industrial Development Report 2011. Industrial energy efficiency for sustainable wealth creation: Industrial energy
efficiency for sustainable wealth creation: capturing environmental, economic and social dividends. Vienna, Austria. UNIDO’s
Competitive Industrial Performance (CIP), page 18-19. Note: 144 economies in total. From 2011 the CIP index comprises eight indicators
classified in six dimensions: (i) Industrial capacity, measured by MVA per capita; (ii) Manufactured export capacity, measured by
manufactured exports per capita; (iii) Impact on world MVA, measured by an economy’s share in world MVA.
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Ranking Georgia
Doing Business Indicators Ranking in 2012 Agribusiness Indicators Values in 2012
Source: Author’s estimations and calculations; WB/IFC Doing Business Rankings online, accessed in October 2012
Source: EBRD database; UNCTAD; Author’s calculations of EECA average
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The designations employed and the presentation of material in this information product do not imply the expression of any opinion
whatsoever on the part of the Food and Agriculture Organization of the United Nations concerning the legal or development status
of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. The mention of
specific companies or products of manufacturers, whether or not these have been patented, does not imply that these have been
endorsed or recommended by the Food and Agriculture Organization of the United Nations in preference to others of a similar
nature that are not mentioned. The views expressed in this publication are those of the author(s) and do not necessarily reflect the
views of the Food and Agriculture Organization of the United Nations.
For more information please contact:
Stjepan Tanic
Agribusiness and Enterprise Development Officer
FAO Regional Office for Europe and Central Asia
Email: [email protected]
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