GEORGIA GETS IMPROVED RANKINGS ON BUSINESS

UNCLAS SECTION 01 OF 02 TBILISI 002451

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STATE FOR EUR/CARC, EB/CBA AND EB/TPP/BTA
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E.O. 12958: N/A
TAGS: ECON ETRD EINV PROV GG
SUBJECT: GEORGIA GETS IMPROVED RANKINGS ON BUSINESS
CLIMATE AND CORRUPTION


1. Summary: The annual report of the International
Financial Corporation (World Bank Group) has moved
Georgia up from thirty-seventh to eighteenth place out
of 178 surveyed countries in terms of ease of doing
business. Georgia is the fifth top reformer country on
the list. An annual report by Transparency International
also shows a substantial improvement for Georgia on the
corruption Perception Index. End Summary.

Georgia Enters the Top 20
--------------


2. On September 26, the International Financial
Corporation released its annual Doing Business report,
which provides objective measures of business regulations
and their enforcement across 178 countries and is a guide
for evaluating regulations that directly impact economic
growth. In terms of economic reforms over the past year
that promote the business environment, Georgia is ranked
fifth after Egypt, Croatia, Ghana, and FYR Macedonia.
This is Georgia's third straight year in the top five in
this category: last year Georgia ranked as the top
reformer, and was number two in 2005.


3. Georgia moved up significantly in the overall ranking
of countries for ease of doing business, leaping from
thirty seventh to eighteenth place. Estonia, ranked
seventeenth, is the only former Soviet country ahead of
Georgia. For comparison, Latvia is number 22,
Lithuania - 26, Armenia - 39, Azerbaijan - 156,
Russia - 166.

Specific Achievements
--------------


4. The report says Georgia's improved ranking is due to
reforms in six areas. Georgia strengthened investor
protections, including through amendments to its
securities law that eliminated loopholes that had allowed
corporate insiders to expropriate minority investors. It
adopted a new insolvency law that shortens timelines for
reorganization of a distressed company or disposition of a
debtor's assets. Georgia sped up approvals for
construction permits and simplified procedures for
registering property. It made starting a business easier
by eliminating the paid-in capital requirement. In
addition, the country's private credit bureau added
payment information from retailers, utilities, and trade
creditors to the data it collects and distributes.


5. The report credits Georgia for easing the entry of new
firms. Georgia now has 15 registered businesses per 100
people (the same rate as Malaysia). It also emphasizes
the three boldest reforms, driving the biggest
improvements in the Doing Business indicators, including
an increase in investor protection. As the report puts
it, "Georgia made investing safer. Amendments to its
securities law eliminated loopholes that allowed corporate
insiders to expropriate minority investors. Reformers
increased disclosure requirements for directors' conflicts
of interest, detailed stricter duties to the firm for
directors, and heightened penalties for self-dealing."
Georgia also improved in regard to licensing practices.

Georgia Improves in Transparency International's CPI Index
-------------- --------------


6. On September 26, Transparency International, the global
civil society organization leading the fight against
corruption, published the results of the Corruption
Perception Index (CPI) 2007. Georgia received 3.4 points
(out of a total ten),ranking seventy-ninth among 180
countries. The CPI ranks countries in terms of the degree
to which businesspeople and country analysts, resident and
non-resident, perceive corruption to exist in the public
and political sectors.


7. Georgia's score this year is a significant improvement
over the score in 2006 (2.8). Since the Rose Revolution,
Georgia's score has steadily risen, starting at 1.8 in

2003. This year's gain means that Georgia has moved out
of the group of countries considered to have a rampant
corruption problem (those under 3.0). In comparison with
countries of the former Soviet Union, it ranks well ahead
of Azerbaijan (2.1) and Armenia (3.0),and is in fourth
place, behind Latvia (4.8),Lithuania (4.8) and Estonia
(6.5) out of 15 countries listed in this category.

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Nevertheless, a score of 3.4 still indicates that
corruption is a significant problem in the public sector.

TEFFT