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Corruption presents a low business risk for companies looking to invest in Georgia. Overall, the country has had success in reducing corruption. Increasing government transparency and efficiency have led to Georgia becoming one of the easiest places in the world to start a business and to deal with licenses and permits. Georgia has made great progress in fighting visible low-level corruption, but high-level corruption by public officials remains a problem. Georgian anti-corruption legislation is largely contained within the Criminal Code which provides for a robust legislative framework for curbing corruption in the country, even though enforcement, which has been hampered by a lack of independence of law enforcement agencies, still lacks in some sectors. Deficiencies, for instance, exist in the judiciary and in public procurement. Georgian law does not make an exception for facilitation payments, so these should be assumed to be prohibited. Gifts are not commonly expected in everyday business transactions in Georgia.
Last updated: August 2017
Corruption within the Georgian judiciary is not considered to be a major problem for doing business (ES 2013). Companies do not have complete trust in the judiciary's independence (GCR 2016-2017), but irregular payments and bribes to obtain favorable judicial decisions are rather uncommon (GCR 2015-2016). Companies do not have sufficient trust in the ability of the legal framework to effectively settle disputes or challenge regulations (GCR 2016-2017). Widespread concerns exist about political interference in some cases due to Georgia's selection process for the appointment of judges to lifetime terms (HRR 2016). Judges are also said to be influenced by the prosecution service; in 85% of administrative appeal cases, the court sided with the public authorities (OECD 2016). The judiciary is understaffed and faces backlogs (EC 2016); particularly in investment dispute cases due to a lack of specialized judges (ICS 2017). Enforcing a contract in Georgia is a relatively speedy process; it takes roughly nine months, compared to a regional average of around fifteen months (DB 2017).
Georgia is a signatory to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and a member state to the International Centre for the Settlement of Investment Disputes (ICSID).
Police corruption is not a hindrance to doing business in Georgia. Following a string of institutional reforms, low-level corruption within the police force is almost completely eradicated (ICS 2017). Civilian authorities have effective control over the security services, and internal mechanisms to investigate abuse and corruption (HRR 2016). Companies indicate police services can be relied upon to enforce law and order in Georgia (GCR 2016-2017).
Strong enforcement of anti-corruption policies has dramatically decreased low-level graft in Georgia's public services (OECD 2016), to the point of virtual extermination (NiT 2017). Bribes and irregular payments when obtaining public utilities are uncommon (GCR 2015-2016). Nepotism in Georgia's civil service remains a problem; a recent analysis by Transparency International found 70 cases of hiring of family members by government officials (NiT 2017). Local governments are often ineffective and have weak leadership (NiT 2017; BTI 2016). Georgia is among the easiest countries in the world to start a business, with the number of procedures and costs and the length of time associated with obtaining a construction permit or registering property significantly lower than regional and OECD averages (DB 2017).
There is a moderate risk of corruption within Georgia's land administration. Foreign investors report some difficulties in resolving disputes over property rights due to an occasional lack of judicial impartiality (ICS 2017). Georgia is in the process of improving land title registration; currently only a quarter of all land is properly titled (ICS 2017). There are various restrictions on foreigners owning agricultural land (ICS 2017). Expropriation in Georgia is properly regulated under the law; the government generally pays adequate and fair compensation to owners and legal recourse is available (ICS 2017). Businesses indicate property rights are generally adequately protected (GCR 2016-2017). Registering property in Georgia only takes one single procedure (DB 2017).
An official in Tbilisi was arrested in July 2016 for taking a GED 50,000 bribe from a foreign businessman for speeding up a land auction. No further information about the outcome of the case was available at the time of review (Interpressnews, Jul. 2016).
The risk of corruption in Georgia's tax administration is low. Companies report only very rare instances of undocumented extra payments or bribes in connection with annual tax payments in Georgia (ES 2013; GCR 2015-2016). The government has made strides in preventing corruption in the tax system; tax collection rates have improved markedly (BTI 2016). Companies make tax payments only five times a year, which is well below the regional average, but they do spend significantly more hours on this than the regional average (DB 2017).
Corruption is unlikely in customs clearing processes in Georgia. Businesses indicate that irregular payments or bribes to customs agents are very rare (GETR 2016). Border authorities function transparently and the time-predictability of imports is good, but businesses do rate the efficiency of the customs clearance procedure as poor (GETR 2016). To liberalize trade, Georgia has reduced the number of customs control institutions and has simplified procedures for customs clearance (BTI 2016). Georgia has made recent improvements to its electronic filing system for import documentary compliance procedures (DB 2017). Importing and exporting goods requires fewer documents and takes less time than in other countries in the region, but costs are comparatively higher (DB 2017).
Companies face a moderate risk of corruption in the public procurement sector. Companies report that favoritism in decisions of government officials does occur, but irregular payments and bribes are perceived to be rare (GCR 2016-2017). The percentage of firms in Georgia that claim to resort to gifts to secure a government contract is insignificant compared to the rest of the region (ES 2013). Companies generally do not have to be concerned about unfair competition from State-Owned Enterprises (ICS 2017). Companies found guilty of major violations of procurement regulations (e.g., through bribery) are blacklisted on the State Procurement Agency’s website. Georgia continues to strengthen its public procurement framework and has been applauded for its transparency and use of e-procurement (OECD 2016). However, the current laws allow for direct contracting in many instances (OECD 2016). The government provides excemptions from complying with the Public Procurement Law and to use the e-Procurement system in cases of urgent and complex procurement for a limited time period, particulalry applying to the utilities and public infrastructure sectors, leaving them vulnerable to corrupt practices (OECD 2016). Procurement in sectors that are granted the excemptions follow special procedures set by the government (OECD 2016). Transparency International has ranked the risk of procurement corruption in Georgia's defense sector as high (GDI 2015).
There is a moderate risk of corruption in Georgia's natural resources sector. Corruption is one of the main contributors to the alarming rate of deforestation in Georgia, with an estimated 60% of annual forest harvest going unrecorded due to a lack of capacities for sustainable resource management (BTI 2016).
Georgia's anti-corruption legislation is largely contained within the Criminal Code (Articles 332-342), which criminalizes attempted corruption, active and passive bribery, embezzlement, bribing a foreign official and money laundering. Abuse of public office and passive bribery are punishable with imprisonment of up to 15 years and confiscation of property, while penalties for active bribery include a fine and/or a minimum prison sentence of two years. Georgian law does not make a clear exception for facilitation payments, so companies doing business in Georgia should assume these could be considered as bribery payments. Corporations as well as natural persons can be liable for bribery charges. The Law of Georgia on the Conflict of Interests and Corruption in Public Service prohibits corruption among public servants and requires the disclosure of assets by public officials (the records are accessible online to ensure transparency). The law sets strict limits on the value of gifts and stipulates that all gifts worth more than five percent of the receiving official's annual salary, among other restrictions, must be transferred to the Service Agency of the Ministry of Finance of Georgia. The law also prohibits public servants' involvement in private business. The legal framework also includes the Money Laundering Law and the Law of Georgia on the Conflict of Interests and Corruption in Public Service (Art. 20), which guarantees the protection of whistleblowers in the public sector. Georgia is committed to international anti-crime cooperation and is taking the necessary steps to curb corruption through the anti-corruption action plan 2014-2016. Georgia is not a signatory to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions but has ratified the Council of Europe Civil and Criminal Law Conventions on Corruption, and the country’s legislation complies with the United Nations Convention against Corruption (UNCAC).
The Constitution of Georgia provides for freedom of speech, and the country has some of the most progressive legislation in the region, with Article 19 of the Law on Freedom of Speech and Expression containing protections against censorship (FotP 2016). Independent media is active and is able to express a wide range of views and citizens generally feel free to criticize the government, but polarization of media outlets is a problem (BTI 2016). Notwithstanding, there are still allegations of government interference in the media, especially in relation to Georgia's Public Broadcaster (HRR 2016). Furthermore, journalists continue to face harassment and intimidation (FotP 2016). Georgia's press environment is described as 'partly free' (FotP 2017).
The Soviet legacy in Georgia left a weak civil society in its wake, but NGOs and civil society groups are increasingly active in the country (BTI 2016). Some NGOs in the capital are able to function as serious watchdogs challenging the government and politicians (BTI 2016). NGOs can register and operate without arbitrary restrictions, and civil society plays a key role in important legislative decisions and policy making in certain areas of the government (BTI 2016).
- World Bank Group: Doing Business 2017.
- Freedom House: Freedom of the Press 2017.
- US Department of State: Investment Climate Statement 2017.
- Freedom House: Nations in Transit 2017.
- World Economic Forum: Global Competitiveness Report 2016-2017.
- World Economic Forum: Global Enabling Trade Report 2016.
- European Commission: Association Implementation Report on Georgia 2016.
- Bertelsmann Foundation: Transformation Index 2016.
- OECD: Georgia Fourth Round of Monitoring of the Istanbul Anti-Corruption Action Plan 2016.
- Freedom House: Freedom of the Press 2016.
- US Department of State: Human Rights Practices 2016.
- Interpressnews: "Deputy Chief of Tbilisi City Hall's Security Service Arrested for Bribery", 27 July 2016.
- World Economic Forum: Global Competitiveness Report 2015-2016.
- Transparency International: Government Defence Anti-Corruption Index 2015.
- World Bank Group: Enterprise Surveys - Georgia 2013.