Georgia is a wonderful place to live in. No wonder you have decided on picking up Georgia real estate for living-in or investing. Your Georgia real estate hunt can quite easily start with looking for the real estate prices (i.e. average prices) so as to gauge what kind of house and location will fit your budget. This is assuming that you have already estimated how much you can afford to spend on that Georgia real estate piece that you are so much after.

With little effort you can easily find out the Georgia real estate prices. You can do this in a lot of different ways. One way is to directly give a call to a Georgia real estate agent and ask him about what kind of house you can get within your budget (if you are looking for Georgia real estate for investment purposes).

In fact, a lot of people find it easier to just make a call to the real estate agent and get a grasp of the going prices for properties in any place let alone Georgia. Now, as mentioned above, if you are looking for Georgia real estate piece as an investment option, then you would start with checking out what you can get for your budget. However, if you are looking for Georgia real estate because you actually want to live in Georgia (and enjoy your life), then you would be better off starting with your most basic requirements from a house e.g. you could specify a 1 bedroom house or a condo or whatever, if that is the minimum space you would need to be able to live in comfortably with your partner or your family etc.

If you cannot get that basic house in the location of your choice in Georgia, you might have to rethink and figure out other options (e.g. not going for Georgia real estate at all, or picking up a house at another location in Georgia, or waiting for some more time before you can actually own a Georgia real estate piece etc). So evaluation of affordability is important. Here, we are not saying that you should not evaluate the affordability factor if you are looking for Georgia real estate for living in and not investing. It’s just that you will need to pose the question differently to that Georgia real estate agent. In any case, you should never reveal your real budget to that Georgia real estate agent. Mention an amount that is lower than your real budget by 10-20% even if your Georgia real estate insists on what maximum you can spend.

For a person who is looking at Georgia real estate as an investment avenue, the Georgia real estate agent is just a way to find out the going rate, he will have to use other real estate investing techniques to find the best deal.

So your Georgia real estate hunt can easily start with just calling up a real estate broker.

For the Support  of Small Business in Georgia

Content.

In the conditions of deep economic crisis and  during the period of extreme restriction in requisite  resources for economic investments of tendency of selecting priority in investing activities enquire upmost importance. According to these circumstances, small and average businesses must be admired in such system of priorities. It follows not only from conjectural, political  or ideological  purposefulness, but also from objective activities of social-economic conditions; Simultaneously it is also connected to the position perspectives of this field to solve vital questions of the country. (creating concrete atmosphere, increasing employment level and efficiency, treating and spreading technical decisions etc)  however, it is baseless to speak that small and average businesses in our country have any kids of advantages in distribution of investing resources, ` moreover, it often moves to the second place.

Financing has always been the urgent problem of small and overage businesses.  According to the social research of small industrial management, half of respondents had to use  their own savings in organizing these enterprises. Only more than a quarter managed to receive credits, but less than 20% – to attract depositors’ sources.

The  employers admit that, the first and main problem is finances and buildings and then follows cooperation with local authorities. However, investment always remains as the main problem in the activities of a particular firm.

Pressent Day Situation of a Small Business.

In western countries outnumbered commercial banks, insurance companies, branch funds, regional commercial departments of tuition structures stimulating small business, regional guarantees, outnumbered charitable funds and associations, actively support  them.

Due to not existed similar institutions, the development of small and average businesses is prevented. So it is quite natural, that development of small industrial net is still unable to form the commodity market. Nowadays supporting industrial activity has  no main basis in small and overage businesses. The situation of providing these enterprises  with material, energetic and financial resources has recently   been deteriorated; according to results of selective researches in 2000-2005, in order study small industrial business activities in industry, building and retail trade showed  that  nearly 40% from small industries have their raw and building material supplies reduced. The existing level of orders and resource  maintenance was estimated as “..below average”; however unlike large industries, homogeneous tendency  of economical situation in small and average businesses is distincted, e.g. during 200-2005, the amount  of employees and usage level of industrial capacity maintained sufficiently stable in small industries.

Although capital investments of small industries include sufficiently large amount  of  money (11% of investment realized at the expense of financial resources in Georgian economy. The small enterprise activity of industry in the field of investment is still exceptionally low.

Inquiries showed that among active reasons  about  restriction of investing activities, about 60% of  respondents  consider high level of taxation, 30% – high rate of inflation, above 30% general economic and political instability.

The leaders of small industries, critically characterize competitiveness of their products over 50 % of leaders  consider   it as “average” towards the internal market.

Leaders of examined small industries consider lack of their own resources. (75% from inquired people), high payment rate (over 60%), unaccepted conditions of investing and accounting as a main resistance for their  innovational activities.

Financing Sources of a Small Business.

Analysis of financing sources for small and overage business  shows that the most available for their activities are inner developing sources which are used by over 3/4 of industry, while only one from four, manages to abtain any kind of means from external sources. Enquiries show that their own small business incomes take first place among financing sources. It’s  proved by every two participants from three ones. On the second place are the founders of average business with their own sources;  (21,7%). And private credit takes the third place, used by 17,9% of these industries. Other sources are used by 10-15% of small businesses. Simultaneously over 20% of enquired leaders consider that their enterprises have no any developing chances. More complete idea about the nature of investing in small and average business field is given by the results; Researches on tendencies of small business investments. According to this data, leaders are those industries which direct their investments towards the equipment and transportation (57,5%); and the enterprises which use investments to fill their sources of circulation. take the second place (44,3%). A lot of enterprises use their sufficient sources in repairing building and commercials (38%). Over 20% of small enterprises spend their sources on their staff training.

Comparison of data according to the groups of small industries prove all the following differences connected   with specificity of a business field. e.g. small industries of trade fill their  sources of circulation, frequently (76%), but they stay backward in investment of human capital – only 8% of them provide staff training, whilst corresponding average index for all enterprises is 20,8%.

One of the main problems in small business development is their slight investment in the process of crediting due to existing high risks in this field. It  is caused by following factors: usually, small industries have no ability to represent absolute  guarantee independently over their responsibilities and there’s no complete system of guarantees and insurance of their investing activities.

Usually, personnel of small and average  businesses have no sufficient knowledge in economy, which is the main cause of those incomplete projects which are introduced by them. As for consulting service of business management and preparation of investing projects, as a rule it is excessively expensive for enterprises of small and average businesses.

The results show that in the process of providing crediting resources, leaders of small and average enterprises experience not only general inflexibility of crediting, but also discriminative policy of banks towards small and average businesses.

The main difficulty in the process of receiving credits is price restriction (very high percentage was mentioned by 47,6% of leaders of small enterprises); It is followed by the range of nonprice restriction – unpractical mortgage and  guarantees (21,9%), innaccessibility of investing credits (10,5%), restriction of crediting terms (14,3%) and subjective evaluation of discriminative conditions. Besides, the role of organizing factors is not sufficient.

The interests of commercial banks are not directed towards crediting of small enterprises due to their non-existing complete technologies of investment; Besides it claims to discuss numerous investing projects, though working procedures are highly  significant. Banks don’t take risks, due to their negative experience in disappearing of credited firms, no returned credits and hidden mortgages, including small and average businesses as well. Hence, due to controlling and providing insurance, they choose organizations having accounts in a particular creditor bank.

Banks avoid crediting of newly founded firms and insist on collateral security guaranteeing  a small enterprise. The level of percentage implies the level of risk that is significantly high for every small industry. Standard validities of given credits include  3-6 months period.

Thus, Georgian banks. like in western countries must inevitably develop assisted financial services for small and average businesses. First of all, it includes detailed treatment and examination of any kind of projects independently from credited funds and improvement for abilities of banks in estimation of loans. The same time, they must rely more on the knowledge of potential resources for enterprises and markets than in the amount of funds and guarantees.

Who Helps and How to Developa Small Susiness.

Noticeably developing non-governmental specific structures formed for supporting small and average industries are also of great importance. The first similar structure was founded in 1992. It was an agency, supporting small and average businesses. Its purpose is to increase industrial activity among the population with the  help of consulting, informational and expert services provided not only for small and average industries but for pioneer implcyers as well. It includes issues on economic, financial and taxation policy; recommendations about keeping a ledger; support for composing constituent documents; registration of enterprises and allowance of their activities; elaboration of a firm mode, teaching business; (hobbits based on special programmers, worked out  of the agency together with foreign experts). for  the successful development of their own activihes; (business planning; marketing; commercials; industrial experience etc); informational support for the operations of external trade. customs issues and other normative juridical problems. Agency constantly tries to expand its  own activities. It mainly includes issues on the support  of activity of small and average business industries. Special investing department is created in the structure of agency for this purpose, which is directed towards the preparation, training and conducting of recommendations for composing  business plans, investing projection and financial management; working and conducting of examination for investing projects; researches of their financing sources. The given department is an official agent of the federal fund for supporting small industries, that is directed to the selection of industrial projects for providing credits.

In the beginning, the functions of agency were distinctly oriented on the demands of developing small and average businesses in Tbilisi region, but now it has begun to play the role of informal-methodical – coordinative organizational structure throughout the country.

Realization of this role is significantly depended on the formation of corresponding regional agencies and their active participation in the country. Above mentioned activity of  the agency must necessarily be established by state departments.  Namely, it is advisable for the government to elaborate a special document about “regional agencies for supporting small industries”. In this document, it is necessary to be mentioned the labor financing scheme of the regional agencies’ net at the expense of assignation from the state budget. Formation of regional agencies supporting small and average businesses   is decisive to serve physical and juridical persons in creating small and average enterprises and to provide their effectiveness. Such schedule of services is defined by developing quality of agencies which may include practically all types of support for small and overage businesses including informational services,  legal advice and participation in investments. As a rule, the purpose of agencies is not receiving profits and that is why their quite high level of services  compared with ones of other organizations are relatively cheap, but in some cases it is  absolutely free of charge; if agencies function into contact with the government and authority organizations of all level. and are based on the assistance of these organizations.

Herewith, the first task is that the agency of small and overage business supporting, leads the work to form united  informational net of regional agencies, that will take active part in the field of modern informational technologies, highly quailfield organizations. It is a significant stage of business, for united as well as regional agencies. Practice showed that, distinct division is the most essential task for separate regional agencies and affective organizational development of their net. It implies the gradual development according to the accumulation  of organizational experience,  stabilization of financial situation and  equipment with modern organizational-technical means and so forth. At the some time, determined service must be formed gradually and  successively, not only in accordance with the principle of senseless expansion of above men toned factors, but also selecting  the variants which are the most profitable and essential for the agencies in this or that concrete region. It must be said that estimation of perspectives in small and average business support activities is connected with the fact, that its significance is constantly outlined by the central government of the country as well as regional authorities. Of course, it clearly gives the chance to make optimistic prognosis. Unfortunately, in reality, the existed mechanism to support small and average businesses can’t still put into practice not only present-day objective demands, moreover the tasks which are not only possible to be solved but should be , for the development of its investing activities.

Wat is the Programme of Small and Average Business Investment Support?

As it is know, programme realization of investment support in small  and average businesses, may have double substantiation. The first assistance of a small  enterprise development, represents the effective way of solving social and foremost, employment  problems. Thus, conception of social direction for financial support in small and average business fields, follows that, grant realization of socially useful functions in a small business, must be fulfilled by state and society. The second-progress of small and average businesses are significant factor from the standpoint of effective use of people’s economic resources. Due to such approach , from the position of market   economy, defined means for small and average businesses must be considered as profitable investments.

Nowadays, systematical crisis is proceeded in our country. Factual unemployment problem instead of falling is rising steadily and it requires of taking vast  and active measures for small and average business  development. Simultaneously, tensity of central and local budgets  and lack of foreign investments do not give chance to form such material-financial basis, that includes all the above mentioned factors.

It’s clear that the way out of exiting situation can be found in the treatments of conception, such is investing support (and realization)  of small and overage businesses, when all the possible funds used with this purpose will  be spent on forming organizations and such financial machinery, that has high level guaranteeing aptitude for the feedback of invested resources. For the realization  of this conception, several main directions can be singled out, for the fulfilment of investing activity in small and average businesses.

1. Scientific-analytical and informative provision development of investment support mechanism  in small and average business fields.   Here, main goal is to study priority system of financing  for small enterprises, according to essential directions of development  and substantiation of their realization activities with the purpose of reflecting aims at each level. (central, regional as well as small and average enterprises). Strategic research organization and financing, forming development conceptions and treatment of inter-active mechanism for investing support system in small and average businesses. In addition to the point above, the following must be taken into account.

The first and foremost, the mechanism for investment support in small and average businesses must be based on state structural and industrial policy, financing of private investments or definition of essential directions for stimulation, in the section of divisions,  subdivisions and enterprises – definition of so called dot priorities.

Second – towards the formation of mentioned mechanisms, maintenance of scientifically proved approach is accessible as far  as it reflects the real peculiarities of economic development and  investing processes in this or that region.

Third – Improvement of scientific -methodic and informative supply for investment activities, mostly in small and average businesses is simultaneously connected with the existence of investing projects of small enterprises in order to restrict existing risks. The most is financial, technological and marketing accompaniment, i.e. financial analysis, technical examination, and marketing research of investing projects of enterprises in small and average businesses.

2. Reinforcement of objective direction and transfer the obstacle centre of topping-up process of investment activities in small and average enterprises at regional level. It must be taken into consideration that, formation of regional politics of investment support of these enterprises, in accordance with this qualitative index of region economy, that creates the peculiarities for small and average business development and support. Simultaneously, the development level of industrial production, resourceful base, consumers market provision, regional problems of population employment and social  defence must be taken into account. Only complex  consideration of all these factors, gives chance to study those activities that provide attraction of owners of industries for people’s demands in the most suitable fields and stimulation of economic development, first of all at the expense of local possibilities.

Nonexistence of financing, due to the deficit of state and local budgets, is one of the main reasons, that  represents the obstacle for the outcome of central and regional programmers in supporting small industries. In such cases, it is advisable, not only subsidization of industries, but also the assistance for the development of infrastructure in small and average enterprises. (marketing as well as industrial). It must also be admitted, that the state should do its bit to establish special regional banks, innovational funds, informational analitic centers and such organizational-regional structures that serve small and average businesses and keep their interests by means of preferential duties privileged regime of transferring buildings to the possession, licensing, etc.

3. Development  of perspective forms of small and average business support and financing. In this field, for reinforcement of purposeful direction of investing process and raising its effectiveness, local administrations should orientate on the creation of main tendencies of progressive investment infrastructure for small and average businesses. Great attention should be paid to the following factors:

Grade 1. Development of crediting system for the purpose of increasing the number of financial support receivers and simplify the way of giving commercial credits to small industries, implies the expansion of financial institutes net, that realize small and average business crediting with preferential conditions. It includes: lowering interest, extension of crediting term, reduction of demands at the expanse of guarantee and free consultations.

Grade 2. Development of guarantee mechanisms of investing credits, given to small and average business industries must include given state guarantees  to commercial banks, which took part in financing these enterprises. Compensation of  some parts of interests rate. at the expense of commercial credits of banks, could be considered as the significant tendency of using guarantee reserves,  especially at the initial stage of project realization, when returning of funds is still delayed in small and overage business field, for the support of investing business activity.

Grade 3. Financial crediting mechanism of small and average business support, implies the assistance of development, including cooperation of small enterprises and establishment of new mutual – crediting forms of societies in crediting field.

Grade 4. Leasing  development, as the most perspective form, is inevitable process as the most perspective form for small enterprise investors. In industrial countries, leasing includes 25-30% of direct investments annually, but in our country it is not still well expanded. for moving complicacy centre of financial operations from circulation field into real sector of economy in leasing development, it is essential that the participation of reliable commercial banks and insurance companies to be actively stimulated.

Grade 5. Establishment of industrial and technological service  system  in small and average businesses, implies the consideration of this fact that, nowadays, actual reserve of  forming  some element of infrastructure of small businesses, can be usage of industrial capacities and properties of poor  industries, after their liquidation, reorganization and changing profile. (namely, it is possible to locate supporting units of small groups of ownership and enterprises on their base). Distinct experience of realization of such approaches is already existed in a number of regions from the standpoint of industrial-technologic support of industries.

Grade 6. The problem of developing modern tendencies in small overage and large business cooperations has already been matured, e.g. franchise development of small industries in Russia will help to solve many essential economic  and social problems. Here, first and foremost is meant the creation of new working places and broad involvement into business of all these people, who can’t manage it independently, without any support and getting suitable knowledge. In modern conditions, a range of obstacles arised against the franchise development in  Russia: non-existence of special normative-legitimate base and suitable informational insurance, owners insufficient knowledge of running business  by means of peculiarities of such skills and possibilities; nonexistence of sufficient consultative structures; and common financial-crediting problems.

In the development of modern tendencies of cooperation in large and average businesses, financial-industrial groups play a drastic role. According to the practice of development countries, such groups grow the stability of economy and give chance  to solve investing problems. It’s especially important  for the regions, where there are outnumbered branches and subbranches with high investment capacity. Such as: (fuel-energetic complex, wine-making, mineral waters, etc) and conversional enterprises. Financial-industrial groups can become the significant means of realization of state selective structural politics, as with the help of these large integrated structures, it  is easy to carry out rational manoeuvverability in industrial sector; among them, definition and support of prioritative  fields and enterprises.

Grade 7. It’s necessary to put ventural financing schemes into motion and develop investment insurance system in small and average business fields. During realization of the above mentioned schemes,  effectiveness of scientific-research and experimental-constructive works are significantly increased in small enterprises. Innovational campaigns of a small business, in most of the countries function by direct backing of the state, that really estimates their great national-economic importance and due to this is ready to assign corresponding  financial expenses. Innovational small enterprises, technological development funds, incubator of technologies etc. nowadays, in Georgia,  experiments of a range of ventural financing programmes realization, in small and overage business fields take place from foreign financial institutes. These are: European World Bank, Inter-American Development Bank, Development Credit Bank and so on. In the realization of ventural financing of small business, their experience can be acceptable for Georgian banks and financial institutes. In a country market, the most vital subject is insurance problems. In western countries, the insurance is considered as unavoidable mechanism of risk redistribution. Its increased level in small and average industries, causes a number of difficulties in the working process of insurance companies: herewith, simultaneously insurance and reinsurance, also guarantee systems of credit returning can be created. Perhaps, it is necessary, these systems to be supported distinctly by central and regional organs. (e.g. for specialized risk insurance companies, checking privileges or compensation of their loss). In perspective, Georgian financing crediting system must be filled with specialized net of risk insurance, connected with investment credit issue.

4. Establishment of united investment infrastructure in small  and average businesses. Specialization of financing-crediting system in small and overage businesses can be carried out in two ways: a) Investment. In the way of forming financial organizations, specialized at the expense of investing operations: 6) In the way of orienting, just connected with small business operations. Different combinations of the above mentioned directions of specialization for financing-crediting organizations in small and average  business fields, are also possible. But in any case, these organizations   must be given distinct privileges by  federal and regional organs. Unfortunately, for fear of next “financing pyramids”, at present, population don’t have  eny confidence in establishing these specialized investment banks and sharing investment funds, that assemble the private investors’ funds and after, these are put in small enterprises as well as in small and average infrastructural units as the investment portfolio. Thus, at initial stage ideological training for the sharers of small business and population is necessary. It’s not less important that such specialized investment organizations, for the  purpose of guarantee and getting confidence must be created on the initiative of these state, social and commercial organizations, which are highly qualified in successful running of small business industry field and have authority over this field.

5. The role of small and overage business support agencies in the development of crediting and investment mechanism of this field. In  the regions,  these agencies characterized by a range of peculiarities due to their status, that creates quite profitable atmosphere for them, during the corresponding service. First regional agencies are fully specialized in their field. With  the difference from many other organizations, for which small and average business support is either temporary or accompanying with essential business. These agencies can use their priorities for getting experience and advices, attracting highly trained  specialists, having permanent relationship with  administrative organs and  so  forth. That is why, the service of regional agencies is famous for its quality. Their consultations and other forms of small and average business support are high trained in all, and recommendations – useful and practically acceptable. Second, such agencies have right to use all the various forms and methods of small and average business support, that on its side securing the complexity of their service. Third, from the very beginning regional agencies are involved in federal, regional and local systems of small and average business support; That is very important for the successful realization of their registration, investment and other functions. Fourth, regional agencies take objective part in the whole net of intercommunicated and inter useful organizations, that is practically expanded all over Russia.

In the case of successful development of regional agencies’ net, this advantage can be essential for small and average business support, due to their specialization and professionalism,  treatment of regional politics, development of proper federal and regional programmers and also because of having participation ability in creating similar regional bases.

To maintain the special status and role of their organizations, the staff of regional agencies must take into consideration  well, a main point of the politics of small financial industries  support, that must be realized on different levels of state government, clearly elucidate all the varieties of useful forms, methods and institutes, necessary for the development of this politics; They must easily manage to orientate on the proper segments of investment-financing,  momentary-crediting and stock markets.In the formation and  realization of regional politics of small and average business subjects, the first condition for successful  participation of regional  politics is to know as much as possible about real financial demands of concrete enterprises. But the problem is not only in the manifestation of the demands of additional finances, but also in structural-problematical analysis of the  above mentioned and also in the manifestation of these small enterprises,  that require financial support most of all; afterwards, selecting the most long-range enterprises from the standpoint of future profitability.  (after getting financial support).

The role of regional agencies in deciding these  problems will be shown in working out unavoidable systematic-analytical instruments, in leading proper date basis, creating informational guide and findings fulfilled by general as well as individual orders on the basis of their own estimation. Above mentioned  orders can be as   from enterprises themselves, as from authority and government organs and financial-crediting organizations.

Other direction of activity of the above mentioned  agencies, according to the regional politics context of financial support of small industry, must be the research of possible sources of free funds in the region and in solving financial problems of small and average business or working out principal schemes of their usage in investments.

Evaluation of regional politics structure for financial support of small industry. without the arrangement of systematic monitoring of this sphere, its constructive and in-time correction is impossible.

During the time of special and regular researches of industries, regional agencies can evaluate  programmer realization results in small and average businesses – (for different level budgets and enterprises, which require assistance) in the concrete regions. Also, practical results of giving credits and establishment of regional taxation privileges for small industries.

Thus, regional agencies can take part in the realization and formation of regional politics of financial support in small enterprises and play a mediator role and such a performer, who has to carry out a range of  the functions, which were not paid any proper attention by any kind of elements of regional  infrastructure in small and average businesses. With the help of all these, they would like to assist the growth of investment activity of this field.

The Funkcions of Regional Agencies in the Development of Small and Average Businesses.

Functions of above mentioned agencies, for small and average business support, enquire essential  analysis  in line with the development of progressive investment forms; and in the realization part of prioritative tendencies  of its state support.

1. The role of regional agencies in the development of leasing and franchise. In the development of these progressive forms of small and average business investment, participation forms of agencies can be absolutely different. There are united activities together with the organs of federal level, for getting normative acts and working out methodical  materials; forming statements about taxation privileges, establishment of specialized data banks etc; Parallel  activities at regional level, that supplement central authority actions (e.g. initiative of sentence study about getting privileges for local tax payment , also, independent steps for the development of leasing and franchising.

Such steps represent the following: a) making contact to these firms in Georgia, which are potential organizations of leasing and franchise, working out typical documents jointly (contracts, methodic, checking procedures etc). b) organization of juridical, consulting and informational assistance. (Search and selection of partners, consultations, assistance in teaching and control, etc). c) organization of international cooperation (leaseholders and  franchisers ‘ search in Russia and abroad, assistance in market research, selection of potential clients, adaptation of foreign system of leasing and franchise to Russian conditions, assistance in arranging these technical questions, which include partners separation a long way off, corresponding..service..etc).
d) Organization of leasing and franchise propaganda. (Conferences, Seminars, Symposiums, Coarses, Press and Televise etc.)  Participation in establishment of their supporting centers and also in the development of leasing and franchise association in regional departments. e) Participation in establishing those specialized mediatory  firms, which duty includes: selecting of partners, working of different tasks of leasing and franchise assistance and development on the commercial basis; f) organizational   assistance for the participants  of leasing and franchise system by transmitting buildings and constructions with preferential conditions.

2. The role of small and average business support agencies in the development of industry in innovative field. These agencies can play an important role in getting contact among innovative firms and their providing with necessary  information; They can render assistance to such industries, expressed by investment support. from the side of agencies, main directions of small industries support in innovative sphere are the following: information base development in innovative small enterprises, assistance to establish such data base, were advices about the publication are given in the proper scientific fields; notifications about introduction of distinct types of techniques, about perspective development of scientific-technical approaches. b) rendering assistance of preparing investment projects, in estimation of perspectives of offered scientific-technical projects, in creation and introduction of new techniques and risk determination connected to above mentioned factors. c) in assistance of providing small innovative enterprises  with industrial buildings and equipment and for scientific-research realized by them. d) ensuring of small innovative enterprises with consulting and teaching services and keeping intellectual questions: e) assistance in finding partners and making contact with those enterprises, which work in a joining fields.

The  law on   “supporting the development of small enterprises”   adopted on  23  Jule   1999   is  considered to be the next step toward supporting  the  development  of country’s small and medium enterprises. The law helped to create “the center for supporting and developing small business”. The year 2002 was very important for providing Georgia’s business enviornment with legislative basis and adopting new normative acts.Much attention is presently given to the changes in the law on supporting small and medium enterprises.The law defines the status of small and medium enterprises according to workers’ requirement and annual turnover of their funds. In the same year small and medium business support program 2002-2004 was finished and adopted on president’s descreet.From then on the law has been improving,but the desirable result hasn’t been achieved yet.It is noteworthy that in 1991 there were 600 small enterprises registered .In 1994 their number increased to 12000,in 1995 to 17000 and in 2000 it increased by 20%, in the year 2006 the total number of small and medium enterprises amounted to 22000,thought 28% of the enterprises are inactive.[

In Georgia, mastering new skills for industrial development  in small and average business fields, gives chance to make conclusion that, this field of economy gives vast possibilities for effective investment and its future progress. But it is essential to reveal and put into practice energetically, the most  effective ways of using these possibilities. In connection with this , it must be said, that state policy must be more flexible in the tasks of forming own financial sources of investment, which are the most important at present, for the small enterprises. These industries must be given free rein, while establishing amortization norms, which defines the structure of internal financial  sources of investment (in the job of using internal sources of investments, except the state legislative  support, the effective consultative assistance of small business support organs is also unavoidable). Active  state support is very important for the attraction of external financial sources of investment by small and average business enterprises. Small business characteristics, such as flexibility and mobility, implies that small industries must have ability to increase their financial resources  fast, in any proper time. Its realization is only possible at the expense of borrowed funds. On its side, it includes organizational state assistance in getting funds, guaranteeing commercial funds given to small industries and accomplishing other supporting activities . It is natural that, the progression of this support must be accompanying process of state control reinforcement from the view point of using investment sources and overall development of small and average businesses.

Thuse, the analysis of current social- economic  conditions in Georgia and valuable experience gained from foreign countries show that during transitional period small and medium business must play on important role in forming national economy.

   Small business representis one of the main structures of business, that must establish market economy provide the creation of private business as well as new social class- small and medium business managers and help to overcome the crisis in economy.Small and medium business proved its viability. Their exsistence encourages the mobilization of labour and material resourses creation of jobs,quickly reacts on investments and meets market needs and takes part in state and local budget fulfillment process.

   We must hope that if we use the experience gained from foreign enterprises,we will be able to support small business. From this point of view the structure “Business incubations” is the most effective. Business incubations hasten the development of small business and reduce fail in business by 22%. This question deserved our particular attention because the conditions of small and medium business in Georgia are unfavorable. We approve the creation of business incubations for supporting the small enterprises that have been chosen for some reasons, and their support is exercised by providing them with machinery, services, consultanting and

education.They act to establish contacts between other sectors of economy,grow innovative  activities of business that makes diversification of economy possible and on top of all encourages the growth of small and medium business and their viability.

   Business incubations are flexible structures and merge with infrastructural complexes of region very well. The analysis of functioning business incubations based on world experience and especially of those,like Georgia  enables us to prevent negative consequences and over come current difficulties. Business incbations proved to be fruitful in Post Soviet area. In Russia,Azerbaijan,kazakhistan and Lithuania,but from this point of view Georgia has significanthy dropped behind. We have to do our best to introduce this progressive infrastructural elements in our economy.

Our recomrndations:

   Based on these recommendations we set the goals and main directions of small and medium business development in the following way:

1.    To create a stable enviornment for business with the help of business incubations.

2.    To create  new highly  paid jobs in small and medium business.

3.    To introduce specialized multilateral business incubations.

4.    To provide small and medium business with informational,consulting and financial – credit means.

5.    To Supporing the increase of  independent traders’ number in small and medium business.

6.    To meet the consumers’ needs immediately.

7.    Formation of the enterpreuners’ class that should become the stable guarantee for economic security and overcoming poverty.

There are a lot of free economical zones in the world. What priorities will it have to form free industrial zone in Georgia, and what will make it successive?

We may consider geographical location of the country, also closeness with Azerbaijan, Armenia, Russia, Turkey, Ukraine, and markets of Middle Asia to be prior for forming free industrial zone. It must also be foreseen, that direct neighbor of Georgia on the Black Sea is Euro Union.

It must be mentioned, that Sea port of Poti is the larges in the Black Sea. It is the largest port servicing dry Caucasian cargo, it is situated on the TRASECA corridor and it the most important part of Caucasian transit transporting web. The port is connected by direct sea directions with Europe and Asian largest ports, has direct ferry connection with Ukraine, Russia, Bulgaria. The port is connected with the railway web of the country, it is connected with every Georgian city with the automobile road, has relations with Poti airport and international airport of Batumi. The seaport serves all kinds of cargo. It has received ISO-9001-2000.

Poti port can widen conductivity and serving more then 25 million tones of cargo annually.Together with geographical location, closeness with international transit arteries and cheap working force also are considered to be prior.

They are going to open free industrial zone on 400 hectares, it borders to the seaport from the north and followed the sea beach line.

Exactly advantage location of free economical zone and extremely liberal legislation system must provoke attracting foreign investments, as investment environment in Georgia is not very attractive from the various points of view. First defining factor of the investment environment is the size of a market. Larger is the market size, the more attractive it is. Georgian market doesn’t differ with large scales.

Second factor is legislation. Georgian legislation is liberal. Heritage Foundation considers us to be attractive country in this direction. According to the index of economical independence, Georgia occupies 32nd place. This means, that there are quite liberal barrier for displaying providing business and industrial initiatives in Georgia.

An interrupting factor is political instability. It is known, that inventors pay large attention to the political stability and investment guarantees. A problem of territorial integrity of our country, what puts Georgia under the permanent danger of war is also added to all, mentioned above.

There are some problems from the point of executing law. Fixed facts suppressing private property influenced negatively upon investment surrounding. It is important to provide profitable activities and creation of the mechanisms of legislative protection.

Qualification of working forces is also a serious problem. it is very low in Georgia. Intellectual resource is also reduced.

Main reason of creating free industrial zone is attracting investments, growth of business activity in the region and achieving employment. For this the country must form advantage financial conditions to the investors, for making their choice for the benefit of Georgia among many others. We’ll see in the future how much successful the functioning of free industrial zone is, and if inflow of investments take place.

They call free industrial zones off-shore ones. These are the territories, which are under the doubtful sight of everyone, because of being uncontrolled. Its creation in Georgia has been followed by opposition and critical dependence. Most of Georgian experts have negative dependence upon free industrial zones, because it is considered to be the sphere of unreduced actions of private interests of definite persons, for whitening “black money”, selling capital in the way of avoiding rules and taxation, perspective of which in Georgia is very doubtful. To their mind, it is incomprehensible, why is there any need of founding free economical zone in such country in which there have been made important steps towards liberalization of economical and industrial surrounding. Complete liberalization of foreign trade took place in the 90s. This meant that export was released from taxation. Tariff-free reductions, as quoting and licensing were abolished. Since 1998, currency operations have complete independence. In 2006 they reduced high custom tariffs. Today custom tariff on agricultural production is 12%, on building materials – 5%, others are zeroed. They simplified licensing and rights on beginning industrial activities and their realization. A professor, economical expert Vladimir Papava exclaims: “creating free economical zone under the conditions of free economy is the most ineffective step. Exactly for this I consider creation of free economical zone in Georgia to be nonsense”.

He finds following explanation to his point of view. There are countries of two kinds in the worlds – those, which have surplus investments and which suffer lack of them. Countries having surplus investments strengthen inner investor in its free economical zone. I.e. the country forms such conditions, that the investor invests money in the free zone at the territory of his/her country and doesn’t take it out of it. Creation of free economical zones in the country being in hunger of investments hardens the situation, as the investor doesn’t come in the country itself, but in the zone. Local investor will try to do same. Georgian economy is not firm and creation of free economical zone will ruin economy of whole country.

The expert Temur Giorkhelidze writes: “the fact, that something will be done in one town and whole country will be raised is illusion. One zone will not stand international capacity. Development of insufficient industrial surrounding at whole territory of the country will cause chaos in this zone!”

Authors of the project and supporters of founding of FIZ estimate its foundation to be positive and consider that Georgia will be better developed and will overcome poverty easier if the economy is more open and liberal.

The author of the bill Kakha Benduqidze considers such zone to be necessary for increasing business-activity in Georgian regions. This will be industrial zone with high technologies and processing industry, in which industrial persons will work in the zeroed regime, which will make additional stimuli for providing their business.

Deputy Minister of economics Vakhtang Lezhava writes: “there is quite liberal regime of business regulation in Georgia. Main goal of making free industrial zone is to create more liberal industrial surrounding in the definite territory of the country to be oriented towards real employment”. Lezhava exclaims, that “Georgia will not turn into the off-shore zone, there is no preconditions for this”. According to the governmental statement, free economical zone will bring economical raise to the country.

Thus, creation of free industrial zone has been followed by various points of view. There is a permanent question – “What will foundations of free industrial zone bring to Georgia?” in such situation they often say, that “a stick has two ends” or there are as positive, so negative sided of it. They must provide analyzing, which side surpluses another and make advantage decision, is it positive or not to found FIZ in Georgia.

Let’s discuss expected dangers and problems of founding free economical zone:

foundation of FIZ is followed by expenses, at the first stage because of tax payments, and this reduces budgetary incomes. Attractive legislative regime of free industrial zone will give rise to the inflecting investments to one concrete region of the country at the expense of other ones. This will ruin less interesting regions from the point pf investments. This may give rise to the opposition among various regions, as people living in this or that region may say that they are oppressed and have no opportunity for being developed.

It is defined by the law, that free economical zone may be founded at any territory of the country, i.e. it is possible to open it in every region. This is exactly where the experts see the danger, as foundation of FIZ is possible on those border territories, in which there is ethnical variety, as free industrial zone comes out of economical domain of our country and it becomes possible to be completely integrated for the territories of neighbor country from the economical point of view.

it is negative as there will be another uncontrolled territory in the country, in which trade may also not be controlled, as on the sections of Roki – Down Zaramaga and Adler -  Gantiadi. It will be very difficult to realize custom control it is necessary to foresee special measures of security, for not letting production provided on the territory of the zone to get to the inner market by the illegal ways. They must reduce entering and outgoing ways maximally and their strict controlling. There is a danger of contraband in the free economical zone. They see danger in the existence of fictive firms, which will pull amounts. Though the authors of the project exclaim that there are levers in the law for avoiding this danger. Free industrial zone will give rise to the danger of “whitening” money. There are a lot of methods of “whitening” money. Operations related with cash money, illegal usage of banking and other financial institutions, operations related with expensive movable and unmovable property, gambling games are considered to be classical mechanisms. The simplest way of “whitening” money is in the process of privatization and in the free zones. A free zone is the best way for entering commodity in the contraband way. It’s well-known axiom, that, in those countries, in which liberalization of economy, opening borders, transit development, entering foreign investments, increasing movement of physical persons are in progress, in the countries, where quite large part of the population is abroad and which is surrounded by ill-disposed countries, possibility of “whitening” “black” money is very high.

Georgia “satisfies” almost every condition named above and it may be considered one of the zones for “whitening” money. The fact that so-called off-shore companies, which represent symbols of “whitening” money provide activities in Georgia, strengthens this danger.

To my mind, danger of “whitening” money is higher in FIZ, than at whole territory of Georgia, foreseeing the fact, that registration of such enterprises, as banks is prohibited in FIZ. To my mind, this process is in progress in Georgia today anyway, because foreign investors, placing their sources in Georgia do not belong to the number of transparent capital owners. In fact, there is no civilized capital flowing in Georgia. Invested capital is entered by the firms registered in off-shore zones (for example, from Marshal and Virginia isles), and this, of course, means, that they are doubtful.

Free industrial zone, to my mind, will support growth of inflation. Foreign investments will enter FIZ. This will give rise to the growth of masses of foreign currency in the country, which devaluates it in relation with Lari, and this is bad for export. There is no political stability in Georgia, rights of the owners are abolished, and working force is not qualified. Permanent changing of legislative system is still continuing. According to this, there is a danger, that foreseeing disadvantage business environment, short termed foreign capital of doubtful appear will enter FIZ, which will run out of the country as soon as the conjuncture worsens a little and thus provoke finance-economical destabilization.

There is danger in selecting an operator. FIZ wouldn’t b successive, if it operator were not recognized worldwide and a successful investor in this business. For being successive, it is also necessary to make Georgian FIZ a part of industrial infrastructure of the world and integrated chain.

Creation of free industrial zone has its positive sides. There are large possibilities for business development and growing business activity. It is possible to develop backward region, and zeroed taxation regime will be additional stimuli for providing business.

A positive side of free industrial zone also is the fact, that leading technologies and Know-How will enter the country.

It will increase inflow of foreign currency, because, the capital is objective in its nature it moves towards the place, where there is low payment. Inflow of investments gives the possibilities for economical and social development. Investments will give rise to the creation of working places, relatively – employment.

Creation of free industrial zone in Georgia, as a they say, is not calculated for fiscal effect, it is necessary to provide investments and create attractive surrounding for new business and new working places.

With free industrial zone export potential may be increases. The largest part of manufactured production will be for export that will definitely be successive for Georgia, as firming Lari in the country gave rise to the rise the price of export and worsening taxation balance. For example, data of covering import with export was 32% in 1995; in 2000 it grew up to 46%, for today it is reduced till 23%. From 1995, till 2007 the volume of export has been increased 8 times, and 11 times – of import. Nominal WIP at the same period has been increased from 3.9 Billion Laris to 17 billions i.e. 4.36 times, while real WIP has been increased only per 2.1. Exchange rate of the currency gave rise to the worsening of taxation balance. Only 10% of the production manufactured in FIZ will be permitted in Georgia, others will be exported to other countries. This will provoke improvement of taxation balance.

Free industrial zone – from the point of territorial integrity. FIZ is directed towards territorial expansion. Its territory duels in 5-10 years. if FIZ of Guria-Samegrelo works successfully, Guria-Sukhumi-Ochamchire will join it. Separatists will not be able to block all good of FIZ. For example, Turkish separatists of North Cyprus requested themselves to join economically successful Cyprus.

To the experts’ mind, economical integration is necessary. They must make joint investment projects with Abkhazians and Alanians. Founding such zones will give rise to the centralized lob in the conflict regions, which will play positive role in the affair of regulating conflicts. Though, this is only a dream today, as it is known, that they need very good control and stability. If realization of good administration is possible in the conflict regions and the investors have feeling of stability, it will be really possible to create FIZ there. In the modern reality it is utopia, though we can not exclude anything in the future.

Creation of free industrial zone is already decided and it will be activated very soon. FIZ is expected to be an impulse for economical development of Georgia, though opening of free industrial zone is not a miracle, there mustn’t be surplus expectation, it is a permanent process, which will bring first results in 5-10 years.

Modern century is of globalization. A process of economical globalization in the world will not be avoided by Georgia and it will be progressively integrated into the world economical system. The process, to our mind, has already begun. Foundation of free industrial zone speaks for this.

Georgian government passed the law “about global competition abilities of financial sector”, which foresees foundation of financial center. Main goal of the law is integration of Georgia to the world financial system. Articles involved in the processed “revolution legislative” package touches upon founding off-shore zone in Georgia. We mean foreign banks and assets per ten million dollars.  According to the articles put in the law, the banks’ profit up to 100 million dollars will not be taxed. They also touch upon providing the rule of taxing banking-financial operations, capital movement and so on.

How much does it matter to found financial center in Georgia on the background, when financial centers of London, Milan and Hong-Kong are on the highest level of development and need no representatives in Poti. In case, if we offer them taxation oasis and really advantage conditions, they may stop their choice on Georgia. Though it will not be enough, as foreign investors pay large attention to the countries distinguished with economical-political stability, to the category of which Georgia doesn’t belong. There is no institutional, technical-economical infrastructure and a mechanism of protecting property is very weak in Georgia.

Notwithstanding everything, integration of Georgia in the world economical domain is inevitable and this is only matter of time, because under the conditions of total globalization no national state may exist without total financial economical space.