The International Finance Corporation (IFC) and BP, the two largest investors in the Georgian economy, recently launched the Georgia Small and Medium Enterprise (SME) Policy Project. The project aims to improve the business enabling environment in the country by streamlining regulation of the private sector.
The SME Policy Project will work closely with the Georgian government to improve two regulatory issues in particular, inspections and permits/licences.
Implemented by IFC, the Georgia SME Policy Project is a three-year, US$1.5mn initiative. BP and its oil and gas partners have contributed US$750,000 under the Regional Development Initiative (RDI). The Canadian International Development Agency (CIDA) has contributed US$250,000, while IFC is providing US$500,000.
The project has the following objectives:
Reducing the regulatory burd to businesses. The project will work directly with key regulatory agencies to improve their practice of conducting business inspections and issuing operating permits/licences, by streamlining their procedures according to international best practices. This will increase the efficiency and transparency of the regulatory system.
Monitoring the business environment for SMEs. The project will conduct surveys of entrepreneurs in Georgia, providing first-hand information on administrative barriers hindering SME development. The IFC SME survey reports will present clear recommendations for improvement to the government. The survey instrument will also be used to measure the effect of administrative reforms on businesses against a baseline established by IFC’s first survey in Georgia, conducted in 2004.
Improving SME access to information. The project will produce easy-to-read materials aimed at helping Georgian SMEs comply with government regulations. These materials will raise this awareness of small businesses about their rights and responsibilities as participants in a market economy.
A developed SME sector is critical for Georgia to ensure future economic growth and stability: SMEs constitute 97% of the country’s active firms. However, SMEs’ share in GDP remains extremely low – only 10% in Georgia as compared to more than 60% in most European Union countries. Although the Georgian government has taken a number of steps to streamline the regulatory framework for businesses, further improvement, in accordance with best international practice, is necessary.
Tania Lozansky, IFC’s principal operations manager for SME Policy, emphasises, “IFC has contributed to a more hospitable environment for SMEs in a number of CIS countries, by leading the drive to implement regulatory reform. I believe that our extensive experience can now be applied successfully to improving the business climate in Georgia.”
David Glendinning, communications and external affairs manager of BP Georgia, adds: “BP and its partners in oil and gas pipeline projects have committed more than US$100mn to social investment projects. SME development is one of the most important areas of BP’s social investment initiatives, which we believe will help the country maintain its rapid progress in social and economic development.”