Issue 2, 2013. April-May

   

FIVE QUESTIONS WITH... BUSINESS OMBUDSMAN GIORGI GAKHARIA

Prime Minister Bidzina Ivanishvili named Giorgi Gakharia the country's new business ombudsman on February 19. Gakharia has experience working in international companies, including Lufthansa airlines. Investor.ge asked him to share his vision of this agency and his plans as a business ombudsman.

Maia Edilashvili

Three years ago, the government created the Business Ombudsman's Office to give entrepreneurs a voice. By 2011, the most recent statistics available, the office had received 882 complaints and drafted 138 recommendations for the government.

Q: PM Ivanishvili has spoken about changes in how the business ombudsman operates. What is going to change?

A: This agency had been mostly seen as one focused solely on tax issues. My goal is to decrease the number of complaints concerning taxes. Special attention will be given to medium and small businesses, as well as to the rights of our exporters. We would like to speed up our response time to complaints because, in most cases, the actual reaction from our office begins 30 days after the complaint is received - which is not very helpful.

Our job is to analyze the complaints, react to them, and make proper recommendations to the government concerning loopholes in tax legislation. Our office is also involved in educational activities. Initially, I was pretty skeptical about this function, but now I am certain that this is a most important tool without which we cannot make progress.

Q: You have mentioned the need for education. What other challenges are facing businesses in Georgia?

A: The key challenge is that it is a very small market with low purchasing power. Our duty is to balance our time in a rational way so that we are not focusing purely on complaints referring to the alleged abuse of businessmen's rights in previous years.

Rather, we want to work on current problems and strive to solve them quickly. Initially, I expected that 80 percent of the complaints coming to us would be related to tax issues, but I was wrong. In recent years, new tools to protect taxpayers' rights have been put into force, including the Mediation Council. It's very good and, once such issues are no longer on our agenda, we can work in other directions.

Q: There have been complaints that, while large businesses are more or less involved in policy making, small and medium sized businesses are ignored. You have noted that small and medium sized business will be your main area of concentration. What will you do to increase their involvement?

A: Large companies have more financial and intellectual recourses. Another reason for the absence of small companies in the policy making process is that we have no strong business associations which are able to act as mouthpieces for small businesses. But this is a process which should happen naturally- without artificial interference from the government. Bottom-up initiatives are necessary.

If there is no opportunity for the development of medium businesses, we will not have a middle class. So I plan to commission one of our experts to work specifically on the challenges of small and medium businesses.

Q: The 2011 Business Ombudsman Report warned wine companies that when entering the Russian market, they should first consider its unpredictability and politically charged business environment. Now Russian quality experts are inspecting Georgian wine companies and granting them permission to enter the market. What is your position?

A: The warning was very logical. Any normal person understands that there are many political risks in the Russian market. The political aspect of the return to the Russian market is the easiest part of the challenge, however, even bigger problems are sure to begin once this political one has been resolved. Our winemakers will only feel it once they get there. But, currently, many entrepreneurs don't think about what is going to be the real concern - distribution, logistics, marketing, which is [very] expensive in Russia.

Monopolistic and cartel agreements between producers on the Russian market are an additional challenge. So my personal view is that expectations in Georgia are exaggerated. For instance, Moldova - whose wine was banned alongside Georgian wine in 2006 - returned much sooner to the Russian market with its wines and yet regained just 20 percent of what they had previously held. I mean that overly optimistic expectations lead to overly optimistic costs and, once our wine makers are confronted with reality, I fear that the idea of going back to the Russian market may become discredited.

Q: Prime Minister Ivanishvili has underlined the need for lower taxes and simplified customs procedures. What will be your recommendation to the government in this regard?

A: It's impossible to do everything together. For me, the key source of information will be the complaints that we receive. When a critical mass of similar complaints accumulates, this will be a sign for me that a certain issue needs particular analysis and attention from us. So, our recommendations will be based on what people complain about.

The hotline of the Business Ombudsman's Office is 2 282828; and the e-mail address is ask@businessombudsman.ge