2018-07-14
Let me greet the Esteemed Chairman and Members of the Parliament of Georgia!
As you are all aware, Government Program is supported and Parliamentary Majority has clearly demonstrated its appreciation towards the structural adjustments. Once again please accept my gratitude for this.
We will be implementing fundamental and innovative reforms in all the directions. As a result of these initiatives, we will get a model of economy, with fair rules of game that will be felt by every household in Georgia, each citizen of our country. As a result, we will combat poverty and advance to a high standard of democracy and economic performance.
As noted earlier, we need small, but effective, efficient and flexible bureaucracy; public institutions that operate with high standard of transparency and subject to public and institutional oversight and control, including that of the anti-corruption nature.
Education, youth and innovations - the desired outcome will be shaped by the educated, motivated, entrepreneurial and confident youth and Georgia will thus stand alongside the developed and innovative economies of the world. Hence, fundamental reform and wide-scale investments will be our absolute priority in the education sector. We will be presenting a very significant set of initiatives this autumn in relation with this reform.
Individual has always been and will remain to be the key value of the Georgian Dream. Respectively, every effort or initiative will be oriented at the human being, citizen, freedom and dignity, welfare and greater prospects of self-realization within the homeland.
These principles will drive every step and reform we will carry out within the coming two years.
With an aim of fully-fledged integration with the European Union, every mechanism of cooperation will be used by the Government of Georgia. EU integration agenda will be based on the roadmap, which defines specific directions and key priorities to ensure greater regularity, consistency, forecasting and transparency of the EU integration process. We will be delivering all the commitments assumed under the EU Association Agreement with greater speed, as a result of which we will regain our place within the historic family, by thereby maintaining our culture and identity.
Fully-fledged integration with NATO is the most important goal of our foreign and security policies, thus being a vital factor for strengthening the sovereign security and development of stability.
Our main foreign policy priority is to solidify the internationally recognized borders and sovereignty, de-occupation and territorial integrity of Georgia. We continue constructive and active engagement in the International Negotiations of Geneva, which is the most important format for Georgia for being the key strategic line and direction of the de-occupation of our territories. Proactive work will be pursued for the timely implementation of the mandate assigned to the EU Monitoring Mission in the occupied regions of Georgia. The same applies to the further development and strengthening of the non-recognition policy at an international arena.
Care towards our expatriates living and working overseas is most important to us. Government will facilitate the achievement of common interests of our expatriates and Diasporas, maintenance of the national and cultural identity. Priority towards this end will be the Georgian language courses and we plan to carry out wide-scale initiatives in this area.
As noted earlier, EU integration implies approximation in every direction, inter alia towards the defense capacity of the country. Considering the current hybrid challenges, our goal is to establish high combat preparedness, equipped with sustainable, mobile and effective skills and ability to achieve territorial defense and resistance, compatible with the NATO forces. We will focus your attention to the several important directions. Primarily, it is a concept of total defense, which I elaborated 3 weeks ago in fine detail. It is an establishment of military reserves, which will be piloted from the current year. Indeed, it is our military industry which has a very good potential and needs to be utilized. We made a decision to allocate spending from the state budget for the Ministry of Defense in the volume of 2% of GDP. In addition, we will be presenting a new legislative initiative this autumn, which implies the establishment of a coordination unit in the form of a Security Council.
Future development of our country will be based on the fundamental and innovative reforms in every sector of the country, which will lead to the significant synergy of between the effective legal framework, institutions and real economy. Inclusive economic growth is the key priority of the government, which implies the universal engagement of population in the process of economic development. Government intends to introduce such economic model, which implies equal access to opportunities along with the economic growth, thereby reducing unemployment and poverty. To ensure the desired economic growth, economic policy of the government will be targeted at attraction of foreign direct investments (FDI) especially towards high technology areas, thus improving the qualitative indicators of the structure of economy and will increase the competitiveness of our country at the global market. We have rater ambitious goals to achieve a sovereign credit rating, leading to the investments of large international funds and access to cheaper financial resources, inter alia in the private sector. This will truly increase the attractiveness of the country to the FDI. We have designed specific measures and a road map for this and it will become key pillars of the country. Our reforms are oriented towards achieving the investment rating to increase the qualitative competitiveness of our country.
Apart from the sovereign rating, our goal is to rank Georgia in the top ten of reputable ratings. That is why, Government of Georgia will actively pursue the cycle of reforms and will develop a strategy and action plan for improving our position in international ratings. It will facilitate the increased effectiveness of the government in every direction and will thus ensure the increased welfare of population and positive reflection of the achievements in international ratings.
Private sector maintains a leading role in the economic development of the country and its role needs to be increased even further. Therefore, our priority is to boost the improvement of the business environment and we have a number of significant reforms planned to achieve this goal. Namely, you all know that VAT refund system is made efficient and by the end of the year it will be fully automated. Thus, taxpayers will get their tax credits instantly to significantly improve the business environment. Over 1.5 billion GEL will be refunded to businesses in 2018-2020. So far, within the past months of 2018 taxpayers have received over 200 million GEL.
To facilitate the local production we will set significant tax incentives. We have sectors in the economy that are subject to asymmetric regulations, thus leading to unfair rules of game and we will be abolishing inequality in every such sector. We took a decision at the Executive Government Meeting to waive VAT from the production of natural milk, including the dairy production derived from natural milk. We plan to apply the same approach to the production of bio food. In addition, significant initiative will be announced in autumn, which will imply the application of the same approach to the pharmaceutical sector. Today, substantial part of the out-of-pocket expenses of population is spent on medication. Hence, it is vital that this sector gets developed in Georgia, be highly competitive and result in low and acceptable prices. Tax arrears served as a significant bottleneck hampering the business development. It is no longer a problem now.
New Tax and Customs Codes are being developed with the engagement of public and private sectors. You know my attitude towards this issue. The current Code fails to respond to the changes currently faced in the country. Hence, we will create new Tax and Customs Codes based on an open platform, which will give an additional incentive to the development of business in this country.
Single tax return will be institutionalized to further simplify the compliance, interaction with tax authorities and tax collection. Single tax return will cover 5 different returns and instead of so many templates businesses will be lodging a single return to comply with their filing and payment obligations. By essence, it is an unprecedented novelty for modern tax administrations. Reform will simplify tax filing, reduce the time and financial resources spent in tax administration. At the same time, as we already announced, sanctions will be reduced significantly, which are currently completely incommensurate to the breaches made by taxpayers.
New innovative tax administration systems will be introduced to significantly reduce the burden of tax administration, both for business and tax authorities. Special focus will be made on the application of the Blockchain technology, which will service not only VAT, but any other tax type. Special taxation regimes will be designed to make the country particularly attractive to multinationals, manifesting in opening their branches in the country. Multinationals will be able to gain exposure to Georgia and benefit of the most concessional tax regime in the world. Non-residents will be able to incorporate their companies and open bank accounts in Georgia online. This process will enable the country to turn into a financial hub of the region. Online services will be improved and advances even further. It will be possible to incorporate companies online and make adjustments to digital data online. At the same time, number of public services will also rise to benefit businesses. Every service should be made possible 100 per cent digital.
Together with the central bank of the country, Government will facilitate the introduction of the express wire settlement system. We are significantly lagging behind in this area, even among the neighboring countries, saying nothing about south-eastern Asian and other developed markets. This reform needs to be implemented in a very short period of time and that is how we will carry it out.
Amendments to the legislation have been drafted and will be submitted in the nearest future for consultations. They relate to the Commercial Chambers to be established within the general court system. We have mentioned at numerous occasion that none of the economic reforms will have an impact of a comprehensive initiative if we do not implement this basic reform. It is crucial for businesses to spend as little time as possible on such disputes. I am not only referring to disputes among businesses, but taxpayers against tax authorities as well.
Insolvency system reform will be implemented to improve the procedures related to bankruptcy procedures, which is related to individuals and corporations. I believe that for the complete introduction of the market economy and vital principles implied by such market economy, it is the most significant reform. Unfortunately, it is not yet enforced in real life and we will address this shortcoming in the nearest future.
Our main goal is to make each household feel the benefits of economic growth. Therefore, we will intensify our efforts to achieve a greater inclusive economic growth. We will be implementing reforms to facilitate the small and medium enterprises with an ultimate goal of inclusive economic growth.
You all know that a tax regime of unprecedented magnitude has been enforced from July 1. We have reduced the tax rate and increased the threshold fivefold for sole traders, who will benefit of paying only 1% of PIT from their turnover under the new tax regime for small business status holders.
Economic policy will be deemed successful if we manage to increase the share of small and medium enterprises in the total economy, in our gross domestic product. However, reduction of tax rates is far from being enough for small and medium enterprises to make this segment successful. It essentially requires removal of other obstacles. Access to finance nowadays is one of the most painful dilemmas for small businesses and it requires fundamental solution. Respectively, development of lending and indemnity mechanisms is a significant venue for facilitating additional lending in the economy. We are actively supported by the EU in this. We hold consultations and negotiations with the European Commission and we will do our best to enforce the most significant mechanism along with the reform of the start-up capital this autumn
Full deployment of the export potential, we will be introducing export indemnity mechanisms for small businesses with an active engagement of the private sector. We have acquires a tremendous competitive advantage by being the only country in the region to have Free Trade Agreements with EU and China, however we need to introduce additional mechanisms to fully capitalize on this potential.
As for the other economic reforms, National Bank and Government of Georgia will be implementing capital market reform with the engagement of international experts on the basis of our joint strategy. Momentum geared towards this end is not satisfactory. There may well be a conflict of interests in the reform of the capital market and naturally this needs to be eradicated in the nearest future.
We will by all means implement the pension system reform. It was a topic of hot debate in every country and naturally it is very logical. It is a long term reform, however we need to remember that none of the successful economies managed to achieve the standard of social security, which we see in the European countries without pension funds. Solid performance of pension funds is an essential pre-condition in our economy to achieve a high level of sustainable social security.
Development of public-private partnerships (PPP), which will be enforced in the nearest future, will create more opportunities to attract the FDI to our economy.
Establishment of a responsible lending system is given a huge importance for the creation of socially sustainable and effective economic environment in the country. We have made strides in this direction already. I wish to thank every supporter of this very important initiative.
Excessive indebtedness is a significant problem of our population nowadays and we need to apply drastic changes to find a solution to this problem. Comprehensive program of larisation (i.e. de-dolarisation) initiated by us is based on the development of natural tools to increase trust and credibility of the national currency, adequate distribution of risks and increased attractiveness of the national currency. Naturally, we will be consistent in our efforts towards this end.
Georgia has a geographic location, which serves as a significant advantage. However, naturally it needs to be utilized. Challenges are increasing. Competition between the corridors is rising. Hence, we once again make our position clear and state that development of a deep sea port is vital for Georgia. Marine port in Anaklia has a huge mission. Government of Georgia has assumed relevant commitments. We will by all means deliver them and provide maximum support to the consortium to help the timely implementation of this project. I need to mention herewith that logistic business is rather comprehensive endeavor. Development of its separate components is important. However, it will not give us the desired results if it is not part of a common strategy. Hence, development of other logistic services will be a very important priority for our Government. You may well be aware that part of these initiatives implies the development of logistic centers in Kutaisi and Tbilisi and other ideas will be added to this initiative by all means.
Development of infrastructure in Georgia is progressing at high speed, however it is not sufficient. We need greater momentum towards this end. You know our policy. We draw down from our donor agencies only for the financing of infrastructure projects and this policy will be pursued further.
It is very important to increase the speed in developing the installed capacity of the energy sector. We need to understand that this needs to precede the economic growth rate, as otherwise energy may become a significant obstacle to the development of economy.
We have witnessed reduced speed recently in this area and naturally it needs to be addressed. We have resources to build the capacity on cheap energy sources of Georgia, however I need to stress that interest of the local population are decisive in this area. Respectively, Government will be very active towards this end. When we talk about the development of energy sector, we should not be referring only to the established capacity, but should rather extend the scope and think about energy efficiency. Unfortunately, Georgia is still one of the most inefficient countries in terms of energy consumption. We have a huge room of improvement here and it needs to be dwelled upon.
Naturally, it is essential to establish and strengthen the effective environmental management bodies to ensure the rational use of natural resources, environmental safety and sustainability, mitigation of the risk of natural disasters.
You all know about our initiative, which implies the introduction of a concept of Environmental Ombudsman, which I believe will significantly help us in coping with challenges currently faced by the country in this area. Environmental challenges in Georgia are higher and this reality needs to be conceptualized by everyone.
We will announce rather important initiatives in a few days, which relate to the improvement of fuel quality and introduction of restrictions on the import of vehicles of old standards into the country, along with the construction works and development of public transport. They will significantly resolve the problems that we currently have in the country.
We will continue active work towards the development of green economy. We have a number of interesting initiatives towards this end and we will implement them successfully. Environmental Impact Assessment (EIA) system based on transparent procedures will be introduced. Justification of planned constructions will be assessed at the initial stage of design works, which will thereby protect the investors from vain investment expenditures. Sustainable forest management practices will be introduced and facilitated through effective mechanisms of care, protection and recovery of forests. It is essential to start active reforestation to re-cultivate the plants. What has been happening in Georgia for the past decade is absolutely unacceptable and we need to start a reforestation process in the nearest future by taking into account the best international practice. System improvements in the management of natural resources will enable the country to gain a significant benefit. Our goal is to make all the resources used to the greatest benefit and sustainable management based on environmental principles. Reforms in the soil management sector will lead to transparent, commercially attractive system, renewed mining, thus reflecting best international practice and aimed at the prevention of negative impact on the environment. Projects implemented within the common policy of rural development will be continued. This includes the support of cooperatives in the sector of agriculture. I have heard from many people that problems exist in agriculture. Indeed, we have problems. However, they would have been few if we actually had agriculture. Unfortunately, we do not have a conventional sector. What we have in the country is subsistence agriculture. Hence, we need to first transform it into an industry - genuine market economy principles and I am sure this sector will contribute more to our GDP. Exports in this sector are increased by 30%, which does by no means give us grounds to say that it is a high indicator, however this is a good starting point for advancing this area to the healthy market economy principles.
I have already spoken about the concept of a small government. Let me reiterate that the threshold we set in terms of 3.9% is very ambitious. It will enable us to save significant resources for our social security programs. Within the scope of the announced small government, I want to say that current regional governance systems are rather inefficient and we will be making significant adjustments in this area in the nearest future.
Dear Members of Parliament, I wish to reiterate again the most important issue, which is my key personal goal - fundamental reform of the education system, innovations and youth. It is impossible to think about a long-term development of the country if we fail to shape a competitive education system. Proposed reforms will be introduced in the nearest future. My intention is to implement a substantial part of the reform by the end of the current year, some other initiatives will move to 2019. Our activities are aimed at the reduction of poverty, however Georgia will fail to ever become an advanced economy if we do not implement wide-scale investments in the education sector. Our goal is to reach a double-digit indicator for education as a percentage of GDP. Only after all this, Georgia will have prospects to become an advanced economy and this is the only right way to go for the development of our country. We will be submitting very important initiatives this autumn, which will lead to the definition of a dominant role of the education sector in the national economy. I wish to remind you that the education system reform is implemented at every tier - five in total. These are early and pre-school education component; general education is the corner stone in the system; tertiary education, which is still under-developed in Georgia, which we plan to advance in every region with a strong and competitive presence; higher education followed with research and science of course.
I spoke about the education system, though innovative policy on youth is none the less wide area. We have to make a lot of steps and our goal is to increase the youth engagement in the social, cultural and political life of the country. We need to develop the prospects of self-realization of youth in various sectors of the economy. Only through this manner can the youth develop professional skills and gain the possibility of realizing their talent and full potential in homeland.
Support of aspiring entrepreneurs in the introduction of innovative approaches and advanced technologies, along with the nurturing of healthy ambitions for the development of economy is the most important pre-condition for a long-term economic growth. State Programs towards this end will be aimed at the knowledge based and innovative development of the economy and creation of an innovative eco-system at large. Country has made steps towards this end, though they were not sufficient. I need to say that some steps were not entirely effective. Hence, we will significantly alter them and apply new approached towards this end.
Georgian culture, as a millennial record of our identity and authenticity, has always been a topic of special care for every citizen of the country. Goal of our Government is to care, maintain and restore the tenable and intangible treasures of Georgian culture, by thereby maintaining the infrastructure of cultural heritage. At the same time, we need to ensure a greater exposure of the international society with information on Georgian art and culture to ultimately gain our historic place in the oldest European family.
Healthy lifestyle, mass and professional sports need to be supported, especially those reaping significant recognition and success. They have greater potential of growth. It will be our key priority. Unfortunately, we lag behind in many successful countries in terms of mass sports. We are 7 or 8 times behind such countries in terms of youth engagement in mass sports. This is unacceptable, a very serious challenge, which will need to be addressed in an adequate manner.
Every reform - be that economic, structural, educational or social - is aimed towards one and only thing to ensure a long-lasting protection of rights and freedoms of citizens of Georgia and anyone living in this country.
You may well be aware that main achievement of the social policy oriented at the individual is the Universal Healthcare Program, which gave foundation to the universal coverage of every citizen of the country with healthcare services. Over 4 million people were funded through the Universal Healthcare Program since 2013. It is one of the milestone achievements of our political team, which will need to be further developed and solidified.
Tailor-made healthcare program funding will be continued. Elimination of Hepatitis C is an unprecedented program, which will admit patients in future as well. Mental health services will be improved in terms of quality both through the in-patient and out-patient care, as well as that of the community based. Following phases of the primary healthcare reform will be implemented and namely mechanisms of funding will be improved. Role and significance of a general practitioner (GP) will be increased, resulting in the savings of public funds and out-of-pocket payments by general public. Unfortunately, majority of population still spend the bulk of their disposable income on medication. State program has been launched for the treatment of chronic diseases to increase the access to medication among the socially vulnerable groups. This program will soon cover every pensioner, though this is not sufficient either. Budget earmarking towards this end will be increased significantly in the following year. Quality of healthcare services and medication will be increased and legislation will be improved. State monitoring system will be continued. High production practices and institution will be introduced in the pharmaceutical production.
Government will continue its targeted social programs for the vulnerable groups of population to elevate their conditions. Poverty is a key challenge of our economic policy and it calls for adjustments to our social programs. We will intensify the effective policy for the provision of housing for refugees and internally displaced people. Residential blocks with multiple units will be built, along with the so called Rural House project.
Measures will be extended for the people with disabilities, elderly and children left without parental care to cater for their physical and social needs. We intend to annually increase the state pensions by 20 GEL both in 2019 and 2020.
Our goal is to establish the highest standard of transparency in our operation. Particularly important is our proximity with the society and people. Intensive communication with general public will be ensured. You may well know how I initiated many tax incentives in the country. Majority of them originated from the general public. Our people, society, entrepreneurs, various groups know best what is needed at the given stage of our development. Hence, I wish each of you to know that this approach will be key for our Government. I need to repeat that we will be most efficient in the introduction of our reforms. It would have been hard without a concept of small government. I wish to once again thank you for supporting this initiative, as it will allow me to introduce these reforms together with my team. Majority of these initiatives will be introduced this year, some - in 2019. Education system reform is naturally going to entail a longer timeframe, but most important part will be implemented in the following 2 years. I wish to once again thank the previous Cabinet and every Minister for their dedicated work. They were truly working round the clock, trying to solve all those problems that were faced by the country. Once again, let me thank the staff of the line ministries.
We are united by one idea to ensure the right and consistent development of our country. We have tasks that go beyond any party agenda in Georgia and we thus crave to reunite our country, integrate into the Euro-Atlantic structures, combat poverty and fundamentally reform the education sector. Respectively, myself and my team stand ready to cooperate with every public or political group with constructive ideas and vision on how to address these issues beyond any political agenda for the benefit of our country and our nation.
I remain confident that we will by all means create a modern, European state and we will this create a real opportunity of a peaceful coexistence with our Abkhaz and Ossetian compatriots to jointly build a strong and independent Georgia.
God bless Georgia!
Thank you!