General Description of Industrial Sector in Georgia

Georgia's industrial sector is rather diversified, encompassing food and timber processing, production of fertilizers, coal and magnesium ore mining, steel and non-ferrous metallurgy, and locomotive, ship building and aircraft assembly plants. In Georgia's industrial sector, companies are being modernized and modern managerial culture has been introduced. Many Georgian industrialists, especially new-generation entrepreneurs, are successfully meeting the challenge of upgrading production to international standards in order to target the demanding international market.

Impact of Government reforms - Government's economic reforms have created favorable investment climate for development of industry.

Tax reform - Under the tax reform, the number of taxes was reduced 3-fold and tax rates were lowered considerably. The new tax code enacted in 2005, introduced flat taxes and significant procedural and institutional innovations. It levies only 7 taxes, including the import duty.
Reform of licensing and permitting procedures - The number of business activities subject to licensing and permitting regimes was reduced by 84%. Licensing procedures were simplified and the "one stop shop" and "Silence is consent" principles were introduced.
Reform of standardization and technical regulation - The technical regulation system was reformed to give way to a voluntary standards system and to reduce state regulation in this sphere. The new laws introduced technical regulations harmonized with international standards that significantly simplify export and import procedures for businesses.
Labor Regulations - Georgia's labor regulations are very liberal, creating very low costs of hiring and firing workers and high flexibility in relations between employers and employees.

The government's policy is designed to facilitate integration into international markets and implementation of economic reforms. Reform has yielded strong growth of industrial output and the share of industrial output produced by private enterprises (see graphs below).

Industrial Output, Current Prices

Manufacturing is the leading sector of industrial output.

Composition of Industrial Output by types of Economic Activity

Georgia has become a stable, market-oriented environment where the work force is highly educated and motivated and foreign investment is very welcome.

Steve C. Nicandros

Frontera Resources Houston, President and CEO