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To improve banking sector stability and public confidence in banks, banking supervision needs to be further strengthened, focusing in particular on banks’ risk management practices. Further improvements in physical infrastructure and services of municipal utilities remain important challenges. A successful implementation of the reforms in the municipal utilities sector, including investment to modernise the infrastructure, is crucial to ensure the long-term financial sustainability of this sector. Recent economic growth was largely driven by the financial services and construction sectors and the global financial crisis has emphasised the need for further economic diversification. The successful implementation of the government’s programme to improve quality standards and competitiveness in the agricultural sector will contribute towards this goal, and similar initiatives are needed for other tradeable sectors.
Business environment and competition
The August 2008 military conflict with Russia and the international financial crisis have negatively affected the business environment in Georgia. Main obstacles to doing business identified by companies were transport, access to finance and political instability.
In order to facilitate foreign investment, the government has allowed the establishment of two Free Economic Zones. The government has recently prepared a Strategy for the Agricultural Development of Georgia that focuses on improving competition and quality standards. Among the priorities are access to credit and cheaper land for farms and agricultural businesses.
Infrastructure – Municipal sector
Georgian government is currently implementing a reform agenda aimed at improving water infrastructure and water quality, while also improving the municipal sector management to attract investment.
Infrastructure – Telecommunications
Competition in telecommunications has increased in the fixed-line and mobile operator markets, resulting in lower tariffs and better services. The fixed-line market continues to be state-dominated, although a number of smaller operators provide some competition. Fixed-line networks still remain outdated in many places across the country.
The August 2008 conflict and the international financial crisis have resulted in a fall in deposits and a dramatic slow-down in bank lending.
The National Bank of Georgia (NBG) took a number of emergency measures to ease liquidity in the banking sector. At the same time the authorities are working on a contingency plan for bank rescues to boost confidence in the banking sector and increase lending.
Last updated 21 April 2010