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Is Georgia's Business Environment As Good As It Looks?

Georgia -- World Bank (L) and Georgian Flags, Tbilisi, 20Oct2009
Georgia -- World Bank (L) and Georgian Flags, Tbilisi, 20Oct2009
The World Bank has good things to say about Georgia.

Each year, the bank ranks the world's economies by how friendly they are toward business. According to the World Bank's "Doing Business 2010" survey, Georgia could hardly be friendlier.

Georgia's business environment is ranked 11th in the world -- ahead of such dynamic economies as Sweden, Switzerland, and Japan.

It also ranks far ahead of its regional rivals. Armenia, for instance, is ranked a respectable 43rd out of 183 countries. Russia comes in at a dismal 120th.

Georgia's superb results have been noticed -- even trumpeted by some. President Mikheil Saakhashvili has pointed to the impressive results to justify his economic stewardship.

To calculate the overall rankings, the World Bank relies on 10 different indicators. These include such factors as the ease of starting a business, protecting investors, and paying taxes.

For example, George is ranked fifth in the world when it comes to the ease of starting a business.

To launch a business in the United States, it takes six days to complete the official procedures. In Russia, it takes 30 days.

In Georgia, it takes just three days.

Francesco Caselli of London School of Economics told RFE/RL that a strong business environment like Georgia's does not necessarily produce economic success.

"It would be completely wrong to think that improvement in the business environment [is] the only key or the panacea to all problems. If you have a great business environment but you don't have say good transport infrastructure, [then] you'll get a very partial benefit from it," Caselli said.

"If you don't have good financial markets, even if you have fantastic laws for the entry of new firms but these new firms cannot get cheap credit, that's also going to be a problem.... So I think [the business environment] is very important, but it's part of a much bigger parcel."

Svetlana Bagaudinova, the World Bank researcher responsible for Georgia in the study, also cautioned against reading too much into the rankings.

She told RFE, "I think rankings are actually the least important item of the report. What we are trying to capture is really the environment that local entrepreneurs live in and the amount of red tape they will have to overcome to do very basic transactions."

-- Michael Hirshman

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