Doing Business

Doing Business 2016 Georgia
Economy Profile 2016

Georgia
Doing Business 2016 Georgia 2
2016 The International Bank for Reconstruction and Development / The World Bank
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AttributionPlease cite the work as follows: World Bank. 2016. Doing Business 2016: Measuring
Regulatory Quality and Efficiency. Washington, DC: World Bank Group. DOI: 10.1596/978-1-4648-0667-4.
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ISBN (paper): 978-1-4648-0667-4
ISBN (electronic): 978-1-4648-0668-1
DOI: 10.1596/978-1-4648-0667-4
ISSN: 1729-2638
Cover design: Corporate Visions, Inc.
CONTENTS
Introduction .................................................................................................................................. 4
Starting a business ..................................................................................................................... 16
Dealing with construction permits ........................................................................................... 22
Getting electricity ....................................................................................................................... 32
Registering property .................................................................................................................. 42
Getting credit .............................................................................................................................. 52
Protecting minority investors ................................................................................................... 58
Paying taxes ................................................................................................................................ 65
Trading across borders .............................................................................................................. 69
Enforcing contracts .................................................................................................................... 76
Resolving insolvency .................................................................................................................. 84
Labor market regulation ........................................................................................................... 93
Distance to frontier and ease of doing business ranking .................................................... 100
Resources on the Doing Business website ............................................................................ 104
INTRODUCTION
Doing Business sheds light on how easy or difficult it is provides data for other selected economies (comparator
for a local entrepreneur to open and run a small to economies) for each indicator. The data in this report are
medium-size business when complying with relevant current as of June 1, 2015 (except for the paying taxes
regulations. It measures and tracks changes in indicators, which cover the period JanuaryDecember
regulations affecting 11 areas in the life cycle of a 2014).
business: starting a business, dealing with construction
The Doing Business methodology has limitations. Other
permits, getting electricity, registering property, getting
areas important to businesssuch as an economys
credit, protecting minority investors, paying taxes,
proximity to large markets, the quality of its
trading across borders, enforcing contracts, resolving
infrastructure services (other than those related to
insolvency and labor market regulation. Doing Business
trading across borders and getting electricity), the
2016 presents the data for the labor market regulation
security of property from theft and looting, the
indicators in an annex. The report does not present
transparency of government procurement,
rankings of economies on labor market regulation
macroeconomic conditions or the underlying strength of
indicators or include the topic in the aggregate distance
institutionsare not directly studied by Doing Business.
to frontier score or ranking on the ease of doing
The indicators refer to a specific type of business,
business.
generally a local limited liability company operating in
In a series of annual reports Doing Business presents the largest business city. Because standard assumptions
quantitative indicators on business regulations and the are used in the data collection, comparisons and
protection of property rights that can be compared benchmarks are valid across economies. The data not
across 189 economies, from Afghanistan to Zimbabwe, only highlight the extent of obstacles to doing business;
over time. The data set covers 47 economies in Sub- they also help identify the source of those obstacles,
Saharan Africa, 32 in Latin America and the Caribbean, 25 supporting policy makers in designing regulatory reform.
in East Asia and the Pacific, 25 in Eastern Europe and
More information is available in the full report. Doing
Central Asia, 20 in the Middle East and North Africa and
Business 2016 presents the indicators, analyzes their
8 in South Asia, as well as 32 OECD high-income
relationship with economic outcomes and presents
economies. The indicators are used to analyze economic
business regulatory reforms. The data, along with
outcomes and identify what reforms have worked, where
information on ordering Doing Business 2016, are
and why.
available on the Doing Business website at
This economy profile presents the Doing Business http://www.doingbusiness.org.
indicators for Georgia. To allow useful comparison, it also
CHANGES IN DOING BUSINESS 2016
As part of a two-year update in methodology, Doing The case study underlying the trading across borders
Business 2016 expands the focus of five indicator sets indicators has been changed to increase its relevance.
(dealing with construction permits, getting electricity, For each economy the export product and partner are
registering property, enforcing contracts and labor now determined on the basis of the economys
market regulation), substantially revises the comparative advantage, the import product is auto parts,
methodology for one indicator set (trading across and the import partner is selected on the basis of which
borders) and implements small updates to the economy has the highest trade value in that product. The
methodology for another (protecting minority investors). indicators continue to measure the time and cost to
export and import.
The indicators on dealing with construction permits now
include an index of the quality of building regulation and Beyond these changes there is one other update in
its implementation. The getting electricity indicators now methodology, for the protecting minority investors
include a measure of the price of electricity consumption indicators. A few points for the extent of shareholder
and an index of the reliability of electricity supply and governance index have been fine-tuned, and the index
transparency of tariffs. Starting this year, the registering now also measures aspects of the regulations applicable
property indicators include an index of the quality of the to limited companies rather than privately held joint
land administration system in each economy in addition stock companies.
to the indicators on the number of procedures and the
For more details on the changes, see the What is
time and cost to transfer property. And for enforcing
changing in Doing Business? chapter starting on page
contracts an index of the quality and efficiency of judicial
27 of the Doing Business 2016 report. For more details
processes has been added while the indicator on the
on the data and methodology, please see the Data
number of procedures to enforce a contract has been
Notes chapter starting on page 119 of the Doing
dropped.
Business 2016 report. For more details on the distance to
The scope of the labor market regulation indicator set frontier metric, please see the Distance to frontier and
has also been expanded, to include more areas capturing ease of doing business ranking chapter in this profile.
aspects of job quality. The labor market regulation
indicators continue to be excluded from the aggregate
distance to frontier score and ranking on the ease of
doing business.
THE BUSINESS ENVIRONMENT

For policy makers trying to improve their economys
regulatory environment for business, a good place to start ECONOMY OVERVIEW
is to find out how it compares with the regulatory
environment in other economies. Doing Business provides
an aggregate ranking on the ease of doing business
Region: Europe & Central Asia
based on indicator sets that measure and benchmark
regulations applying to domestic small to medium-size Income category: Lower middle income
businesses through their life cycle. Economies are ranked
from 1 to 189 by the ease of doing business ranking. Population: 4,504,100
Doing Business presents results for 2 aggregate measures:
the distance to frontier score and the ease of doing GNI per capita (US$): 3,720
business ranking. The ranking of economies is determined
by sorting the aggregate distance to frontier scores, DB2016 rank: 24
rounded to two decimals. An economys distance to
frontier score is indicated on a scale from 0 to 100, where DB2015 rank: 24*
0 represents the worst performance and 100 the frontier.
Change in rank: 0
(See the chapter on the distance to frontier and ease of
doing business).
DB 2016 DTF: 77.45
The ease of doing business ranking compares economies
with one another; the distance to frontier score DB 2015 DTF: 76.84
benchmarks economies with respect to regulatory best
practice, showing the absolute distance to the best Change in DTF: 0.61
performance on each Doing Business indicator. When
compared across years, the distance to frontier score * DB2015 ranking shown is not last years published
shows how much the regulatory environment for local ranking but a comparable ranking for DB2015 that
entrepreneurs in an economy has changed over time in captures the effects of such factors as data revisions
absolute terms, while the ease of doing business ranking and the changes in methodology. See the data notes
can show only how much the regulatory environment has starting on page 119 of the Doing Business 2016
changed relative to that in other economies. report for sources and definitions.
The 10 topics included in the ranking in Doing Business

2016: starting a business, dealing with construction
permits, getting electricity, registering property, getting
credit, protecting minority investors, paying taxes, trading
across borders, enforcing contracts and resolving
insolvency. The labor market regulation indicators are not
included in this years aggregate ease of doing business
ranking, but the data are presented in the economy
profile.

Figure 1.1 Where economies stand in the global ranking on the ease of doing business
Source: Doing Business database.


For policy makers, knowing where their economy regional average (figure 1.2). The economys rankings
stands in the aggregate ranking on the ease of doing (figure 1.3) and distance to frontier scores (figure 1.4)
business is useful. Also useful is to know how it ranks on the topics included in the ease of doing business
relative to comparator economies and relative to the ranking provide another perspective.
Figure 1.2 How Georgia and comparator economies rank on the ease of doing business
Note: The rankings are benchmarked to June 2015 and based on the average of each economys distance to frontier (DTF) scores
for the 10 topics included in this years aggregate ranking. The distance to frontier score benchmarks economies with respect to
regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economys
distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier.
For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities.
Figure 1.3 Rankings on Doing Business topics - Georgia

(Scale: Rank 189 center, Rank 1 outer edge)
Figure 1.4 Distance to frontier scores on Doing Business topics - Georgia

(Scale: Score 0 center, Score 100 outer edge)

Note: The rankings are benchmarked to June 2015 and based on the average of each economys distance to frontier (DTF) scores
for the 10 topics included in this years aggregate ranking. The distance to frontier score benchmarks economies with respect to
regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economys
distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier.
For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities.

Just as the overall ranking on the ease of doing business Doing Business introduced the distance to frontier score.
tells only part of the story, so do changes in that ranking. This measure shows how far on average an economy is
Yearly movements in rankings can provide some indication from the best performance achieved by any economy on
of changes in an economys regulatory environment for each Doing Business indicator.
firms, but they are always relative.
Comparing the measure for an economy at 2 points in time
Moreover, year-to-year changes in the overall rankings do allows users to assess how much the economys regulatory
not reflect how the business regulatory environment in an environment as measured by Doing Business has changed
economy has changed over timeor how it has changed over timehow far it has moved toward (or away from)
in different areas. To aid in assessing such changes, the most efficient practices and strongest regulations in
areas covered by Doing Business (figure 1.5).
Figure 1.5 How far has Georgia come in the areas measured by Doing Business?
Note: The distance to frontier score shows how far on average an economy is from the best performance achieved by any economy on
each Doing Business indicator. Starting a business is comparable to 2010. Getting credit, protecting minority investors, paying taxes and
resolving insolvency had methodology changes in 2014 and thus are only comparable to 2013. Dealing with construction permits,
registering property, trading across borders, enforcing contracts and getting electricity had methodology changes in 2015 and thus are
only comparable to 2014. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the
frontier). See the data notes starting on page 119 of the Doing Business 2016 report for more details on the distance to frontier score.

The absolute values of the indicators tell another part of regulationsuch as a regulatory process that can be
the story (table 1.1). The indicators, on their own or in completed with a small number of procedures in a few
comparison with the indicators of a good practice days and at a low cost. Comparison of the economys
economy or those of comparator economies in the indicators today with those in the previous year may
region, may reveal bottlenecks reflected in large numbers show where substantial bottlenecks persistand where
of procedures, long delays or high costs. Or they may they are diminishing.
reveal unexpected strengths in an area of business
Table 1.1 Summary of Doing Business indicators for Georgia
Best performer globally

Azerbaijan DB2016
Romania DB2016
Armenia DB2016
Bulgaria DB2016
Georgia DB2016
Georgia DB2015
Belarus DB2016
Turkey DB2016
Indicator
DB2016
Starting a Business
6 4 5 7 12 52 45 94 New Zealand (1)
(rank)
Starting a Business (DTF

97.76 97.73 97.78 97.75 96.32 91.1 91.94 85.18 New Zealand (99.96)
Score)
Procedures (number) 2.0 2.0 2.0 2.0 3.0 4.0 5.0 8.0 New Zealand (1.00)*
Time (days) 2.0 2.0 3.0 3.0 3.0 18.0 8.0 7.5 New Zealand (0.50)
Cost (% of income per

3.1 3.4 1.0 1.2 0.9 0.7 2.0 16.6 Slovenia (0.00)
capita)
Paid-in min. capital (%

0.0 0.0 0.0 0.0 0.0 0.0 0.6 11.0 105 Economies (0.00)*
of income per capita)
Dealing with
Construction Permits 11 11 62 114 34 51 105 98 Singapore (1)
(rank)
Dealing with
Construction Permits 82.77 82.38 72.43 65.79 76.64 74.45 67.19 67.82 Singapore (92.97)
(DTF Score)
Procedures (number) 7.0 7.0 18.0 18.0 16.0 16.0 15.0 18.0 5 Economies (7.00)*

Azerbaijan DB2016
Romania DB2016
Armenia DB2016
Bulgaria DB2016
Georgia DB2016
Georgia DB2015
Belarus DB2016
Turkey DB2016
Indicator
DB2016
Time (days) 48.0 53.0 84.0 203.0 115.0 110.0 257.0 103.0 Singapore (26.00)
Cost (% of warehouse
0.2 0.3 1.0 4.1 0.8 4.1 2.3 3.6 Qatar (0.00)
value)
Building quality control

7.0 7.0 9.5 13.0 12.0 13.0 13.0 9.5 New Zealand (15.00)
index (0-15)
Getting Electricity
62 70 99 110 89 100 133 36 Korea, Rep. (1)
(rank)
Getting Electricity (DTF

76.15 72.89 65.46 63.01 69.08 64.97 56.44 82.84 Korea, Rep. (99.88)
Score)
Time (days) 71.0 71.0 180.0 87.0 112.0 130.0 182.0 63.0 Korea, Rep. (18.00)*
Cost (% of income per

461.8 503.8 87.3 103.6 296.2 317.3 573.7 599.6 Japan (0.00)
capita)
Reliability of supply and

transparency of tariff 4.0 3.0 4.0 4.0 7.0 5.0 7.0 6.0 18 Economies (8.00)*
index (0-8)
Registering Property
3 3 14 22 7 63 64 52 New Zealand (1)
(rank)
Registering Property
91.16 91.16 87.29 82.55 90.53 69.34 69.19 73.01 New Zealand (94.46)
(DTF Score)
Time (days) 1.0 1.0 7.0 8.5 3.0 11.0 19.0 7.0 3 Economies (1.00)*
Cost (% of property
0.1 0.1 0.2 0.2 0.0 2.9 1.4 4.0 Saudi Arabia (0.00)
value)
Quality of the land

administration index (0- 19.5 19.5 21.0 15.5 21.5 18.0 16.0 21.5 3 Economies (28.50)*
30)

Azerbaijan DB2016
Romania DB2016
Armenia DB2016
Bulgaria DB2016
Georgia DB2016
Georgia DB2015
Belarus DB2016
Turkey DB2016
Indicator
DB2016
Getting Credit (rank) 7 6 42 109 109 28 7 79 New Zealand (1)
Getting Credit (DTF

85 85 65 40 40 70 85 50 New Zealand (100)
Score)
Strength of legal rights

9.0 9.0 5.0 2.0 2.0 9.0 10.0 3.0 3 Economies (12.00)*
index (0-12)
Depth of credit
8.0 8.0 8.0 6.0 6.0 5.0 7.0 7.0 26 Economies (8.00)*
information index (0-8)
Credit registry coverage

0.0 0.0 0.0 33.6 66.9 64.7 15.9 74.9 Portugal (100.00)
(% of adults)
Credit bureau coverage 22 Economies

74.5 56.8 94.1 0.0 0.0 0.0 50.1 0.0
(% of adults) (100.00)*
Protecting Minority
20 20 49 36 57 14 57 20 Singapore (1)*
Investors (rank)
Protecting Minority
68.33 68.33 60 63.33 58.33 71.67 58.33 68.33 Singapore (83.33)*
Investors (DTF Score)
Strength of minority
investor protection 6.8 6.8 6.0 6.3 5.8 7.2 5.8 6.8 3 Economies (8.30)*
index (0-10)
Extent of conflict of
interest regulation 7.7 7.7 6.3 7.7 5.0 6.3 6.0 6.7 Singapore (9.30)*
index (0-10)
Extent of shareholder
governance index (0- 6.0 6.0 5.7 5.0 6.7 8.0 5.7 7.0 4 Economies (8.00)*
10)
United Arab Emirates

Paying Taxes (rank) 40 40 41 34 63 88 55 61
(1)*
Paying Taxes (DTF United Arab Emirates

82.76 82.76 82.51 83.77 78.74 74.19 80.69 79.44
Score) (99.44)*
Payments (number per 5.0 5.0 10.0 7.0 7.0 14.0 14.0 11.0 Hong Kong SAR,

Azerbaijan DB2016
Romania DB2016
Armenia DB2016
Bulgaria DB2016
Georgia DB2016
Georgia DB2015
Belarus DB2016
Turkey DB2016
Indicator
DB2016
year) China (3.00)*
Time (hours per year) 362.0 362.0 313.0 195.0 176.0 423.0 159.0 226.0 Luxembourg (55.00)
Total tax rate (% of

16.4 16.4 19.9 39.8 51.8 27.0 42.0 40.9 Ireland (25.90)
profit)
Trading Across Borders

78 78 29 94 25 20 1 62 Denmark (1)*
(rank)
Trading across Borders

75.31 75.31 93.23 69.59 94.88 97.45 100 81 Denmark (100)*
(DTF Score)
Time to export: Border

14 14 3 34 5 4 0 8 15 Economies (0.00)*
compliance (hours)
Cost to export: Border

383 383 0 375 148 52 0 356 18 Economies (0.00)*
compliance (USD)
Time to export:
Documentary 48 48 2 35 4 2 1 2 Jordan (0.00)
compliance (hours)
Cost to export:
Documentary 200 200 150 300 87 52 0 87 20 Economies (0.00)*
compliance (USD)
Time to import: Border

14 14 3 32 1 1 0 36 19 Economies (0.00)*
compliance (hours)
Cost to import: Border

396 396 0 423 0 0 0 655 28 Economies (0.00)*
compliance (USD)
Time to import:
compliance (hours)
Cost to import:
compliance (USD)
Enforcing Contracts 13 18 28 40 29 52 34 36 Singapore (1)


Azerbaijan DB2016
Romania DB2016
Armenia DB2016
Bulgaria DB2016
Georgia DB2016
Georgia DB2015
Belarus DB2016
Turkey DB2016
Indicator
DB2016
(rank)
Enforcing Contracts
75.06 73.21 70.46 67.51 70.36 65.09 69.23 68.87 Singapore (84.91)
(DTF Score)
Time (days) 285.0 285.0 570.0 277.0 275.0 564.0 512.0 580.0 Singapore (150.00)
Cost (% of claim) 29.9 29.9 14.0 18.5 23.4 23.8 28.9 24.9 Iceland (9.00)
Quality of judicial
13.0 12.0 11.5 6.5 9.0 10.5 13.0 13.0 3 Economies (15.50)*
processes index (0-18)
Resolving Insolvency
101 105 71 84 69 48 46 124 Finland (1)
(rank)
Resolving Insolvency
40.24 39.6 48 44.68 48.38 58.93 59.77 35.09 Finland (93.81)
(DTF Score)
Recovery rate (cents on

39.9 38.7 36.9 39.5 37.6 34.0 32.7 18.7 Japan (92.90)
the dollar)
Time (years) 2.0 2.0 1.9 1.5 3.0 3.3 3.3 4.5 Ireland (0.40)
Cost (% of estate) 10.0 10.0 11.0 12.0 22.0 9.0 10.5 14.5 Norway (1.00)
Outcome (0 as
piecemeal sale and 1 as 0 0 0 0 1 0 0 0
going concern)
Strength of insolvency
6.0 6.0 9.0 7.5 9.0 13.0 13.5 8.0 4 Economies (15.00)*
framework index (0-16)

Note: DB2015 rankings shown are not last years published rankings but comparable rankings for DB2015 that capture the effects of such
factors as data revisions and changes to the methodology. The global best performer on time for paying taxes is defined as the lowest
time recorded among all economies in the DB2016 sample that levy the 3 major taxes: profit tax, labor taxes and mandatory
contributions, and VAT or sales tax. If an economy has no laws or regulations covering a specific areafor example, insolvencyit
receives a no practice mark. Similarly, an economy receives a no practice mark if regulation exists but is never used in practice or if a
competing regulation prohibits such practice. Either way, a no practice mark puts the economy at the bottom of the ranking on the
relevant indicator. * Two or more economies share the top ranking on this indicator. A number shown in place of an economys name
indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business
website (http://www.doingbusiness.org).
STARTING A BUSINESS
Formal registration of companies has many WHAT THE STARTING A BUSINESS
immediate benefits for the companies and for
business owners and employees. Legal entities can INDICATORS MEASURE
outlive their founders. Resources are pooled as
several shareholders join forces to start a company. Procedures to legally start and operate a
Formally registered companies have access to company (number)
services and institutions from courts to banks as well
Preregistration (for example, name
as to new markets. And their employees can benefit
verification or reservation, notarization)
from protections provided by the law. An additional
benefit comes with limited liability companies. These Registration in the economys largest
limit the financial liability of company owners to their business city
1
investments, so personal assets of the owners are not

Postregistration (for example, social security
put at risk. Where governments make registration
registration, company seal)
easy, more entrepreneurs start businesses in the
formal sector, creating more good jobs and Time required to complete each procedure
generating more revenue for the government. (calendar days)
What do the indicators cover? Does not include time spent gathering
information
Doing Business records all procedures officially
required, or commonly done in practice, for an Each procedure starts on a separate day (2
entrepreneur to start up and formally operate an procedures cannot start on the same day).
industrial or commercial business, as well as the time Procedures that can be fully completed
and cost to complete these procedures and the paid- online are recorded as day.
in minimum capital requirement. These procedures Procedure completed once final document is
include obtaining all necessary licenses and permits received
and completing any required notifications,
verifications or inscriptions for the company and No prior contact with officials
employees with relevant authorities. The ranking of Cost required to complete each procedure
economies on the ease of starting a business is (% of income per capita)
determined by sorting their distance to frontier
scores for starting a business. These scores are the Official costs only, no bribes
simple average of the distance to frontier scores for No professional fees unless services required
each of the component indicators. by law or commonly used in practice
To make the data comparable across economies, Paid-in minimum capital (% of income
several assumptions about the business and the per capita)
procedures are used. It is assumed that any required
information is readily available and that the Deposited in a bank or with a notary before
entrepreneur will pay no bribes. Assumptions about registration (or within 3 months)
the business:
Is a limited liability company (or its legal Has a start-up capital of 10 times income per
equivalent), located in the largest business city capita and a turnover of at least 100 times
1
and is 100% domestically owned with five income per capita.
owners, none of whom is a legal entity.
Has a company deed 10 pages long.
Has at least 10 and up to 50 employees, all of
Does not qualify for any special benefits.
them domestic nationals.
Leases the commercial plant or offices and is not
Performs general commercial or industrial
a proprietor of real estate.
activities.
1
For 11 economies the data are also collected for the second largest business city.
STARTING A BUSINESS
Where does the economy stand today?
What does it take to start a business in Georgia? largest business city of an economy, except for 11
According to data collected by Doing Business, starting a economies for which the data are a population-weighted
business there requires 2.00 procedures, takes 2.00 days, average of the 2 largest business cities. See the chapter
costs 3.10% of income per capita and requires paid-in on distance to frontier and ease of doing business
minimum capital of 0.00% of income per capita (figure ranking at the end of this profile for more details.
2.1). Most indicator sets refer to a case scenario in the
Figure 2.1 What it takes to start a business in Georgia

Paid-in minimum capital (% of income per capita): 0.00

Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the
total time calculation. For more information on the methodology of the starting a business indicators, see the Doing Business
website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter.
STARTING A BUSINESS
Globally, Georgia stands at 6 in the ranking of 189 average ranking provide other useful information for
economies on the ease of starting a business (figure 2.2). assessing how easy it is for an entrepreneur in Georgia to
The rankings for comparator economies and the regional start a business.
Figure 2.2 How Georgia and comparator economies rank on the ease of starting a business

STARTING A BUSINESS
Economies around the world have taken steps making it they often are part of a larger regulatory reform
easier to start a businessstreamlining procedures by program. Among the benefits have been greater firm
setting up a one-stop shop, making procedures simpler satisfaction and savings and more registered businesses,
or faster by introducing technology and reducing or financial resources and job opportunities.
eliminating minimum capital requirements. Many have
What business registration reforms has Doing Business
undertaken business registration reforms in stagesand
recorded in Georgia (table 2.1)?
Table 2.1 How has Georgia made starting a business easieror not?
By Doing Business report year from DB2011 to DB2016
DB year Reform
Georgia simplified business start-up by eliminating the

DB2012
requirement to visit a bank to pay the registration fees.
Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports
for these years, available at http://www.doingbusiness.org.
STARTING A BUSINESS
What are the details?
Underlying the indicators shown in this chapter for
STANDARDIZED COMPANY
Georgia is a set of specific proceduresthe
bureaucratic and legal steps that an entrepreneur
must complete to incorporate and register a new Legal form: Limited Liability Company
firm. These are identified by Doing Business through
collaboration with relevant local professionals and Paid-in minimum capital requirement: GEL 0
the study of laws, regulations and publicly available City: Tbilisi
information on business entry in that economy.
Following is a detailed summary of those procedures, Start-up Capital: 10 times GNI per capita
along with the associated time and cost. These
procedures are those that apply to a company
matching the standard assumptions (the
standardized company) used by Doing Business in
collecting the data (see the section in this chapter on
what the indicators measure).
Table 2.2 Summary of time, cost and procedures for starting a business in Georgia
Time to
No. Procedure Cost to complete
complete
Pay the registration fee and register the company with the
Entrepreneurial Register and obtain an identification number and
certificate of state and tax registration
Statutorily, the registration process of the LLC shall commence once the
applicant submits the following documents:
(a) Application for Registration and
(b) document evidencing payment of a registration fee. The application
must be signed by all founding partners of the company. The
information contained in the application may be included in the charter
of the company or partners' agreement (in this case no separate
application shall be required). The application (or charter/partners
agreement) need to be executed before a public notary. In addition,
though not specifically required by law, in accordance with the GEL 100 (regular
registration instruction, the applicant must submit a document registration) or GEL
1 confirming lawful occupation of the premises to be used as a legal 1 day 200 (expedited
address of the company (lease agreement) and the written consent of registration) + GEL
the appointed director (manager) to serve on this position. A signature 1 (bank charges)
sample may also be accepted instead of the said consent.
Submission of application for registration may be carried out by one of

the founding partners of the Company (in which case the documents
must be certified by notary preliminarily), the appointed director or by a
person appointed by the partner (or partners) by virtue of a duly issued
and certified power of attorney. In such cases as well, all documents to
be submitted to the registration agency must be certified by notary
preliminarily (i.e. execution of the documents in the registration agency
itself is not an option).
According to the amendment on registration of a company NAPR

requires companies to provide E-mail and alternative address, which
Time to
complete
differs from company's legal address, in order to simplify formal contact
with the company (e.g.: for Revenue Service, administrative agencies,
Courts, creditors, etc.). This regulation is mandatory upon initial
registration of a company, as well as for registration of changes in
constituent documents.
Agency: NAPR
Open a bank account
Since January 2011, NAPR offers the option to open a bank account
with a selected group of banks. Some companies prefer to open the
bank account directly with banks as it provides wider choice of
2 providers, it gives them an opportunity to obtain better quotes and 1 day no charge
develop some personal relations with future bankers.
Agency: Commercial Bank
* Takes place simultaneously with another procedure.

Note: Online procedures account for 0.5 days in the total time calculation.
DEALING WITH CONSTRUCTION PERMITS

Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION
public. But it needs to be efficient, to avoid excessive
PERMITS INDICATORS MEASURE
constraints on a sector that plays an important part in
every economy. Where complying with building
regulations is excessively costly in time and money, Procedures to legally build a warehouse
many builders opt out. They may pay bribes to pass (number)
inspections or simply build illegally, leading to Submitting all relevant documents and
hazardous construction that puts public safety at risk. obtaining all necessary clearances, licenses,
Where compliance is simple, straightforward and permits and certificates
inexpensive, everyone is better off. Submitting all required notifications and
What do the indicators cover? receiving all necessary inspections
Doing Business records all procedures required for a Obtaining utility connections for water and
business in the construction industry to build a sewerage
warehouse along with the time and cost to complete Registering and selling the warehouse after its
each procedure. In addition, this year Doing Business completion
introduces a new measure, the building quality
Time required to complete each procedure
control index, evaluating the quality of building
(calendar days)
regulations, the strength of quality control and safety
mechanisms, liability and insurance regimes, and Does not include time spent gathering
professional certification requirements. information
The ranking of economies on the ease of dealing with Each procedure starts on a separate day.
Procedures that can be fully completed online
construction permits is determined by sorting their
are recorded as day
distance to frontier scores for dealing with
construction permits. These scores are the simple Procedure considered completed once final
average of the distance to frontier scores for each of document is received
the component indicators. No prior contact with officials
To make the data comparable across economies, Cost required to complete each procedure (%
several assumptions about the construction of warehouse value)
company, the warehouse project and the utility
Official costs only, no bribes
connections are used.
Building quality control index (0-15)
Assumptions about the construction company
Sum of the scores of six component indices:
The construction company (BuildCo):
Quality of building regulations (0-2)
Is a limited liability company (or its legal
equivalent). Quality control before construction (0-1)
Operates in the economys largest business Quality control during construction (0-3)
city. For 11 economies the data are also Quality control after construction (0-3)
collected for the second largest business
Liability and insurance regimes (0-2)
city.
Professional certifications (0-4)
Is 100% domestically and privately owned.
Has five owners, none of whom is a legal
entity.
Is fully licensed and insured to carry out
construction projects, such as building
warehouses.
The construction company (BuildCo) (continued): Will be a new construction (there was no
previous construction on the land), with no
Has 60 builders and other employees, all of
trees, natural water sources, natural reserves
them nationals with the technical expertise
or historical monuments of any kind on the
and professional experience necessary to
plot.
obtain construction permits and approvals.
Will have complete architectural and
Has at least one employee who is a
technical plans prepared by a licensed
licensed architect or engineer and
architect. If preparation of the plans requires
registered with the local association of
such steps as obtaining further
architects or engineers. BuildCo is not
documentation or getting prior approvals
assumed to have any other employees who
from external agencies, these are counted as
are technical or licensed experts, such as
procedures.
geological or topographical experts.
Will include all technical equipment required
Has paid all taxes and taken out all
to be fully operational.
necessary insurance applicable to its
general business activity (for example, Will take 30 weeks to construct (excluding all
accidental insurance for construction delays due to administrative and regulatory
workers and third-person liability). requirements).
Owns the land on which the warehouse will
be built and will sell the warehouse upon
Assumptions about the utility connections
its completion.
The water and sewerage connections:
Is valued at 50 times income per capita.
Will be 150 meters (492 feet) from the
Assumptions about the warehouse
existing water source and sewer tap. If there
The warehouse: is no water delivery infrastructure in the
economy, a borehole will be dug. If there is
Will be used for general storage activities,
no sewerage infrastructure, a septic tank in
such as storage of books or stationery. The
the smallest size available will be installed or
warehouse will not be used for any goods
built.
requiring special conditions, such as food,
chemicals or pharmaceuticals. Will not require water for fire protection
reasons; a fire extinguishing system (dry
Will have two stories, both above ground,
system) will be used instead. If a wet fire
with a total constructed area of
protection system is required by law, it is
approximately 1,300.6 square meters
assumed that the water demand specified
(14,000 square feet). Each floor will be 3
below also covers the water needed for fire
meters (9 feet, 10 inches) high.
protection.
Will have road access and be located in the
Will have an average water use of 662 liters
periurban area of the economys largest
(175 gallons) a day and an average
business city (that is, on the fringes of the
wastewater flow of 568 liters (150 gallons) a
city but still within its official limits). For 11
day. Will have a peak water use of 1,325 liters
economies the data are also collected for
(350 gallons) a day and a peak wastewater
the second largest business city.
flow of 1,136 liters (300 gallons) a day.
Will not be located in a special economic
Will have a constant level of water demand
or industrial zone. Will be located on a land
and wastewater flow throughout the year.
plot of approximately 929 square meters
(10,000 square feet) that is 100% owned by Will be 1 inch in diameter for the water
BuildCo and is accurately registered in the connection and 4 inches in diameter for the
cadastre and land registry. sewerage connection.

What does it take to comply with the formalities to build business city of an economy, except for 11 economies for
a warehouse in Georgia? According to data collected by which the data are a population-weighted average of the
Doing Business, dealing with construction permits there 2 largest business cities. See the chapter on distance to
requires 7.00 procedures, takes 48.00 days and costs frontier and ease of doing business ranking at the end of
0.20% of the warehouse value (figure 3.1). Most this profile for more details.
indicator sets refer to a case scenario in the largest
Figure 3.1 What it takes to comply with formalities to build a warehouse in Georgia

total time calculation. For more information on the methodology of the dealing with construction permits indicators, see the
Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the
end of this chapter.
.

Globally, Georgia stands at 11 in the ranking of 189 economies and the regional average ranking provide
economies on the ease of dealing with construction other useful information for assessing how easy it is for
permits (figure 3.2). The rankings for comparator an entrepreneur in Georgia to legally build a warehouse.
Figure 3.2 How Georgia and comparator economies rank on the ease of dealing with construction permits


Smart regulation ensures that standards are met while an effort to ensure building safety while keeping
making compliance easy and accessible to all. Coherent compliance costs reasonable, governments around the
and transparent rules, efficient processes and adequate world have worked on consolidating permitting
allocation of resources are especially important in sectors requirements. What construction permitting reforms has
where safety is at stake. Construction is one of them. In Doing Business recorded in Georgia (table 3.1)?
Table 3.1 How has Georgia made dealing with construction permits easieror not?
DB year Reform
Georgia made dealing with construction permits easier by

DB2016
reducing the time needed for issuing building permits.

The indicators reported here for Georgia are based
BUILDING A WAREHOUSE
on a set of specific proceduresthe steps that a
company must complete to legally build a
warehouseidentified by Doing Business through Estimated value of
information collected from experts in construction GEL 321,147
warehouse :
licensing, including architects, civil engineers,
construction lawyers, construction firms, utility
City : Tbilisi
service providers and public officials who deal with
building regulations. These procedures are those
that apply to a company and structure matching the The procedures, along with the associated time and cost,
standard assumptions used by Doing Business in are summarized below.
what the indicators cover).
Table 3.2 Summary of time, cost and procedures for dealing with construction permits in Georgia
Time to
complete
Request and obtain terms of construction from Tbilisi
Architecture at the Tbilisi Hall
Governmental Decree # 57 of March 24, 2009 on the Procedures

and Conditions of Issuance of Construction Permit established
that the Legal Entity of Public Law - Tbilisi Architecture under
Tbilisi Hall has been created on the basis of Tbilisi Urban
1 Planning Service. All applications regarding construction permits 15 days no charge
shall be submitted with Tbilisi Architecture. The process of
obtaining construction permit is facilitated due to the
introduction of online application system.
Agency: Tbilisi Architecture at the Tbilisi Hall
Request and obtain building permit from Tbilisi Architecture
The cost is determined by the project value. According to Tbilisi

Government Resolution No 2-21, as of February 28, 2008, the fee
has been increased to GEL 1.00 per sq. m. and only the ground
floor space is counted. Thus, the breakdown in the case
considered here is 1300.6/2 x GEL 1.00 = GEL 650.30.
According to GOG Resolution No. 57 as of March 24 2009,

construction projects are classified into risk-based categories.
2 Depending on the complexity of each category, different types of 5 days GEL 650
procedures are to be followed by applicants. The first category is
the lowest risk, and the fifth is the most complex one. The Doing
Business case study warehouse falls under category III, which
does not require project expertise and entails a simplified
process of approval that also excludes the need for approval of
Architectural-Construction Design.
Agency: Tbilisi Architecture

Time to
complete
Receive an inspection during construction from the Tbilisi
Supervisory Service Agency
The Tbilisi Supervisory Service Agency will conduct inspections

twice a year or at its discretion to check whether there are any 1 day no charge
3
deviation from the approved project.
Agency: Tbilisi Supervisory Service Agency
Receive final inspection from the Tbilisi Supervisory Service

Agency
The Tbilisi Supervisory Service Agency will conduct a final

4 inspection after the completion of construction. 1 day no charge
Request and receive connection to water and sewage service
Having obtained the conditions from the water authority,

BuildCo starts building the water and sewage pipes to the main
water pipeline. Once there is a connection to the main pipeline,
5 the inspector from private water company (Georgian Water and 10 days no charge
Power) comes to confirm the connection and sign the protocol.
Agency: Georgian Water and Power
Request and obtain exploitation of building construction

from Tbilisi Supervisory Service Agency
After the completion of construction and prior to registration at

the Public Registry, BuildCo submits a request to the Department
of Supervision of Tbilisi for a decision on completion/occupancy
permission. The list of documents required for the submission 15 days no charge
6
are approved by the Resolution of Government of Georgia 57
on March 24, 2009 "On the Procedures and Conditions of
Issuance of Construction Permits", Article 96, Paragraph 3.
Register the building with the National Public Registry
The company must submit the document obtained in the

previous procedure and the exploitation permit. The time line is
faster under the Georgian Law on Registration of Rights on 1 day GEL 150
7
Immovable Property (December 28, 2005).
Agency: National Public Registry



Building Quality Control Index
The building quality control index is the sum of the The index ranges from 0 to 15, with higher values
scores on the quality of building regulations, quality indicating better quality control and safety mechanisms in
control before construction, quality control during the construction permitting system.
construction, quality control after construction,
The indicator is based on the same case study
liability and insurance regimes, and professional
assumptions as the measures of efficiency.
certifications indices.
Table 3.3 Summary of quality control and safety mechanisms in Georgia
Answer Score
Building quality control index (0-15) 7.00
Quality of building regulations index (0-2) 1.00
In what way are the building regulations (including the building

code) or any regulations dealing with construction permits made Available online. 1.0
available? (0-1)
Which requirements for obtaining a building permit are clearly List of required
specified by the building regulations or by any accessible website, documents; Fees to be 0.0
brochure or pamphlet? (0-1) paid.
Quality control before construction index (0-1) 1.00
Who is part of the committee or team that reviews and approves

building permit applications in the relevant permit-issuing Licensed architect. 1.0
agency? (0-1)
Quality control during construction index (0-3) 2.00
Inspections by in-house
What types of inspections (if any) are required by law to be
engineer; Unscheduled 1.0
carried out during construction? (0-2)
inspections.
Mandatory inspections
Do legally mandated inspections occur in practice during
are always done in 1.0
construction? (0-1)
practice.
Quality control after construction index (0-3) 3.00
Yes, final inspection is

done by government
Is there a final inspection required by law to verify that the
agency; Yes, in-house
building was built in accordance with the approved plans and 2.0
engineer submits
regulations? (0-2)
report for final
inspection.
Final inspection always

Do legally mandated final inspections occur in practice? (0-1) 1.0
occurs in practice.
Liability and insurance regimes index (0-2) 0.00
Which parties (if any) are held liable by law for structural flaws or
Owner or investor. 0.0
problems in the building once it is in use? (0-1)
Answer Score
Which parties (if any) are required by law to obtain an insurance No party is required by
policy to cover possible structural flaws or problems in the law to obtain insurance 0.0
building once it is in use? (0-1) .
Professional certifications index (0-4) 0.00
What are the qualification requirements for the professional

There are no specific
responsible for verifying that the architectural plans or drawings 0.0
requirements.
are in compliance with existing building regulations? (0-2)
What are the qualification requirements for the professional who There are no specific
0.0
supervises the construction on the ground? (0-2) requirements.
GETTING ELECTRICITY
Access to reliable and affordable electricity is vital for WHAT THE GETTING ELECTRICITY
businesses. To counter weak electricity supply, many
firms in developing economies have to rely on self- INDICATORS MEASURE
supply, often at a prohibitively high cost. Whether
electricity is reliably available or not, the first step for Procedures to obtain an electricity connection
a customer is always to gain access by obtaining a (number)
connection.
Submitting all relevant documents and
What do the indicators cover? obtaining all necessary clearances and permits
Doing Business records all procedures required for a Completing all required notifications and
local business to obtain a permanent electricity receiving all necessary inspections
connection and supply for a standardized warehouse,
as well as the time and cost to complete them. These Obtaining external installation works and
procedures include applications and contracts with possibly purchasing material for these works
electricity utilities, clearances from other agencies Concluding any necessary supply contract and
and the external and final connection works. In obtaining final supply
addition, this year Doing Business adds two new
measures: the reliability of supply and transparency Time required to complete each procedure
of tariffs index (included in the aggregate distance to (calendar days)
frontier score and ranking on the ease of doing Is at least 1 calendar day
business) and the price of electricity (omitted from
these aggregate measures). The ranking of Each procedure starts on a separate day
economies on the ease of getting electricity is Does not include time spent gathering
determined by sorting their distance to frontier information
scores for getting electricity. These scores are the
Reflects the time spent in practice, with little
simple average of the distance to frontier scores for
follow-up and no prior contact with officials
each of the component indicators. To make the data
comparable across economies, several assumptions Cost required to complete each procedure (%
are used. of income per capita)
Assumptions about the warehouse Official costs only, no bribes
The warehouse: Excludes value added tax
Is owned by a local entrepreneur. The reliability of supply and transparency of
tariffs index
Is located in the economys largest
business city. For 11 economies the data Sum of the scores of six component indices:
are also collected for the second largest Duration and frequency of outages
business city.
Tools to monitor power outages
Is located in an area where similar
warehouses are typically located. In this Tools to restore power supply
area a new electricity connection is not Regulatory monitoring of utilities performance
eligible for a special investment promotion
Financial deterrents aimed at limiting outages
regime (offering special subsidization or
faster service, for example). Transparency and accessibility of tariffs
Is located in an area with no physical Price of electricity (cents per kilowatt-hour)*

constraints. For example, the property is Price based on monthly bill for commercial
not near a railway. warehouse in case study
Is a new construction and is being *Price of electricity is not included in the calculation of
connected to electricity for the first time. distance to frontier nor ease of doing business ranking
Assumptions about the monthly consumption

The warehouse (continued): It is assumed that the warehouse operates 8
hours a day for 30 days a month, with
Has two stories, both above ground, with a
equipment utilized at 80% of capacity on
total surface area of approximately 1,300.6
average, and that there are no electricity cuts
square meters (14,000 square feet). The
(assumed for simplicity). The subscribed
plot of land on which it is built is 929
capacity of the warehouse is 140 kVA, with a
square meters (10,000 square feet).
power factor of 1 (1 kVA = 1 kW). The
Is used for storage of goods. monthly energy consumption is therefore
26,880 kWh, and the hourly consumption 112
kWh (26,880 kWh/30 days/8 hours).
Assumptions about the electricity connection
If multiple electricity suppliers exist, the
The electricity connection: warehouse is served by the cheapest supplier.
Is a permanent one. Tariffs effective in March of the current year
Is a three-phase, four-wire Y, 140-kilovolt- are used for calculation of the price of
ampere (kVA) (subscribed capacity) electricity for the warehouse.
connection (where the voltage is 120/208
V, the current would be 400 amperes;
where it is 230/400 B, the current would be
nearly 200 amperes).
Is 150 meters long. The connection is to
either the low-voltage or the medium-
voltage distribution network and either
overhead or underground, whichever is
more common in the area where the
warehouse is located.
Requires works that involve the crossing of
a 10-meter road (such as by excavation or
overhead lines) but are all carried out on
public land. There is no crossing of other
owners private property because the
warehouse has access to a road.
Includes only a negligible length in the
customers private domain.
Will supply monthly electricity
consumption of 26,880 kilowatt-hours
(kWh).
Does not involve work to install the internal
electrical wiring. This has already been
completed, up to and including the
customers service panel or switchboard
and installation of the meter base.
GETTING ELECTRICITY
What does it take to obtain a new electricity connection Most indicator sets refer to a case scenario in the largest
in Georgia? According to data collected by Doing business city of an economy, except for 11 economies for
Business, getting electricity there requires 4.00 which the data are a population-weighted average of the
procedures, takes 71.00 days and costs 461.80% of 2 largest business cities. See the chapter on distance to
income per capita (figure 4.1). frontier and ease of doing business ranking at the end of
this profile for more details.
Figure 4.1 What it takes to obtain an electricity connection in Georgia

Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the
getting electricity indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected
here, see the summary at the end of this chapter.
GETTING ELECTRICITY
Globally, Georgia stands at 62 in the ranking of 189 average ranking provide another perspective in assessing
economies on the ease of getting electricity (figure 4.2). how easy it is for an entrepreneur in Georgia to connect
The rankings for comparator economies and the regional a warehouse to electricity.
Figure 4.2 How Georgia and comparator economies rank on the ease of getting electricity

GETTING ELECTRICITY
Obtaining an electricity connection is essential to enable ensure safety in the connection process while keeping
a business to conduct its most basic operations. In many connection costs reasonable, governments around the
economies the connection process is complicated by the world have worked to consolidate requirements for
multiple laws and regulations involvedcovering service obtaining an electricity connection. What reforms in
quality, general safety, technical standards, procurement getting electricity has Doing Business recorded in
practices and internal wiring installations. In an effort to Georgia (table 4.1)?
Table 4.1 How has Georgia made getting electricity easieror not?
DB year Reform
Georgia made getting electricity easier by simplifying the

DB2013 process of connecting new customers to the distribution
network and reducing connection fees.
GETTING ELECTRICITY
The indicators reported here for Georgia are based on a
OBTAINING AN ELECTRICITY CONNECTION*
set of specific proceduresthe steps that an
entrepreneur must complete to get a warehouse
connected to electricity by the local distribution utility Name of utility: Telasi JSC
identified by Doing Business. Data are collected from the
distribution utility, then completed and verified by
Price of electricity
electricity regulatory agencies and independent (US cents per kWh): 8
professionals such as electrical engineers, electrical
contractors and construction companies. The electricity
City: Tbilisi
distribution utility surveyed is the one serving the area
(or areas) in which warehouses are located. If there is a *Price is calculated as a monthly consumption of 26,880 kWh
choice of distribution utilities, the one serving the largest for business customers, based on a standardized case study
number of customers is selected. adopted by the getting electricity methodology. Doing Business
measures the price of electricity but does not include these
The procedures are those that apply to a warehouse and data when calculating the distance to frontier score for getting
electricity connection matching the standard electricity or the ranking on the ease of getting electricity.
assumptions used by Doing Business in collecting the
data (see the section in this chapter on what the
indicators cover). The procedures, along with the
associated time and cost, are summarized below.
Table 4.2 Summary of time, cost and procedures for getting electricity in Georgia
Time to
complete
Submit application to Telasi and await technical conditions and
project design
The application for an electricity connection can be submitted online or

in person. It includes the applicant's bank account in order for the Utility
company to pay the 50% fine if the prescribed time is not met. The
applicant also submits a document certifying property rights or lending
rights for the space/buildings where applicants electrical installation is
located is attached to the application; and a receipt of payment of the
50% of the connection fee.
1 In a few days after the application has been submitted, Telasi visits the 16 calendar days GEL 29,661.02
premises during which the preliminary specifications of the connection
are discussed. After the inspection, the 50% of the connection fee has to
be paid if it has been suggested that the connection is to be 380/220 V.
After the inspection technical conditions related to the external
connection only and a project design which outlines in detail
specifications of the connection are issued and the connection contract
is signed.
The Technical conditions generally include instructions for construction
of a new substation; lining of high-voltage and low-voltage cables; in a
case of reconstruction works - participation of the customer in the
required works.
Time to
complete
Agency: Telasi
* Receive external site inspection by Telasi
After the application is submitted in order to prepare the technical

conditions, Telasi carries out an external review of the site. Somebody
2 from the applicants party is required to be present during the review. 7 calendar days GEL 0
Agency: Telasi
Await completion of external works by Telasi
After the technical conditions are issued the external connection works
can be completed by an electrical contractor and/or Telasi.
Before the contractor can start his work he needs to receive a number of
3 permits for his work: from water agency (), telephone agency, 51 calendar days GEL 0
Mayors office and other institutions depending on the whether the
connection passes any roads, etc.
Agency: Telasi
Await and receive meter installation and electricity flow
After the external connection works are completed the electrical

contractor submits to Telasi a document certifying that the electrical
installation is ready to be connected (
()). Telasi employees come to the site to check
internal wiring and external works. The inspection has to be requested by
mail attaching a document certifying that the electrical installation is
ready to be connected. Someone from the applicants party has to be
present during the inspection. At this stage the meter is installed by
Telasi. After this inspection if everything is in order a Telasi employee will
4 visit the site and fills out a document certifying that the completed works 4 calendar days GEL 0
are in accordance with technical conditions ( )
and delivers it to the department of Telasi in charge of turning on the
electricity ( ). The electricity starts flowing. It is a
common practice that a supply contract is not signed as there is a verbal
agreement between the applicant and Telasi after the connection
contract has been signed that electricity will be supplied at certain rates
from the utility. If the applicant wishes, he can ask for the contract.
Agency: Telasi

GETTING ELECTRICITY
Reliability of supply and transparency of tariffs index
The reliability of supply and transparency of tariffs Doing Business uses the system average interruption
index encompasses quantitative data on the duration duration index (SAIDI) and the system average
and frequency of power outages as well as interruption frequency index (SAIFI) to measure the
qualitative information on the mechanisms put in duration and frequency of power outages in the largest
place by the utility for monitoring power outages business city of each economy (for 11 economies the data
and restoring power supply, the reporting are also collected for the second largest business city).
relationship between the utility and the regulator for SAIDI is the average total duration of outages over the
power outages, the transparency and accessibility of course of a year for each customer served, while SAIFI is
tariffs and whether the utility faces a financial the average number of service interruptions experienced
deterrent aimed at limiting outages (such as a by a customer in a year. Annual data (covering the
requirement to compensate customers or pay fines calendar year) are collected from distribution utility
when outages exceed a certain cap). companies and national regulators on SAIDI and SAIFI.
Both SAIDI and SAIFI estimates include load shedding.
The index ranges from 0 to 8, with higher values
indicating greater reliability of electricity supply and
greater transparency of tariffs.
Table 4.3 Reliability of Supply and Transparency of Tariff Index in Georgia

Answer Score
Reliability of supply and transparency of tariff index (0-8) 4.00
Total duration and frequency of outages per customer a year (0-3) 2.00
System average interruption duration index (SAIDI) 3.6
System average interruption frequency index (SAIFI) 2.0
Mechanisms for monitoring outages (0-1) 0.0
Does the distribution utility use automated tools to monitor outages? No
Mechanisms for restoring service (0-1) 0.0
Does the distribution utility use automated tools to restore service? No
Regulatory monitoring (0-1) 1.00
Does a regulatorthat is, an entity separate from the utilitymonitor

Yes
the utilitys performance on reliability of supply?
Financial deterrents aimed at limiting outages (0-1) 0.00
Does the utility either pay compensation to customers or face fines by

No
the regulator (or both) if outages exceed a certain cap?
Communication of tariffs and tariff changes (0-1) 1.00
Are effective tariffs available online? Yes
Link to the website, if available online http://telasi.ge/ru

Answer Score
/customers/tariffs
Are customers notified of a change in tariff ahead of the billing cycle? Yes
Price of electricity (US cents per kWh) 7.90

Note: If data on power outages is not collected or if the SAIFI index or SAIDI index are above the threshold of 100, the
economy is not eligible to obtain a score in the Reliability of Supply and Transparency of Tariff Index. If SAIDI and SAIFI are 12
(equivalent to an outage of one hour each month) or below, a score of 1 is assigned. If SAIDI and SAIFI are 4 (equivalent to an
outage of one hour each quarter) or below, 1 additional point is assigned. Finally, if SAIDI and SAIFI are 1 (equivalent to an
outage of one hour per year) or below, 1 more point is assigned. Doing Business measures the price of electricity but does
not include these data when calculating the distance to frontier score for getting electricity or the ranking on the ease of
getting electricity. The price of electricity is measured in cents per kilowatt-hour. On the basis of the assumptions about
monthly consumption, a monthly bill for a commercial warehouse in the largest business city of the economy is computed for
the month of March. As noted, the warehouse uses electricity 30 days a month, from 9:00 a.m. to 5:00 p.m., so different tariff
schedules may apply if a time-of-use tariff is available.
REGISTERING PROPERTY
Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY
Effective administration of land is part of that. If
INDICATORS MEASURE
formal property transfer is too costly or
complicated, formal titles might go informal again.
And where property is informal or poorly Procedures to legally transfer title on
administered, it has little chance of being accepted immovable property (number)
as collateral for loanslimiting access to finance. Preregistration (for example, checking for liens,
notarizing sales agreement, paying property
What do the indicators cover?
transfer taxes)
Doing Business records the full sequence of Registration in the economys largest business
procedures necessary for a business to purchase city
2
property from another business and transfer the

property title to the buyers name. The transaction is Postregistration (for example, filing title with
the municipality)
considered complete when it is opposable to third
parties and when the buyer can use the property, Time required to complete each procedure
use it as collateral for a bank loan or resell it. In (calendar days)
addition, this year Doing Business adds a new
Does not include time spent gathering
measure to the set of registering property information
indicators, an index of the quality of the land
administration system in each economy. The Each procedure starts on a separate day.
ranking of economies on the ease of registering Procedures that can be fully completed online
are recorded as day.
property is determined by sorting their distance to
frontier scores for registering property. These scores Procedure considered completed once final
are the simple average of the distance to frontier document is received
scores for each of the component indicators. To No prior contact with officials
make the data comparable across economies,
several assumptions about the parties to the Cost required to complete each procedure
transaction, the property and the procedures are (% of property value)
used. Official costs only, no bribes
The parties (buyer and seller): No value added or capital gains taxes included
Are limited liability companies, 100% Quality of land administration index (0-30)
domestically and privately owned and
Is located in a periurban commercial zone, and
perform general commercial activities and
no rezoning is required.
are located in the economys largest
business city . Has no mortgages attached, has been under
2
the same ownership for the past 10 years.

Have 50 employees each, all of whom are
nationals. Consists of 557.4 square meters (6,000 square
feet) of land and a 10-year-old, 2-story
The property (fully owned by the seller):
warehouse of 929 square meters (10,000
Has a value of 50 times income per capita. square feet). The warehouse is in good
The sale price equals the value and entire condition and complies with all safety
property will be transferred. standards, building codes and legal
Is registered in the land registry or cada- requirements. There is no heating system.
stre, or both, and is free of title disputes.
2
For the 11 economies with a population of more than 100 million, data for a second city have been added.
What does it take to complete a property transfer in Most indicator sets refer to a case scenario in the largest
Georgia? According to data collected by Doing Business, business city of an economy, except for 11 economies for
registering property there requires 1.00 procedures, which the data are a population-weighted average of the
takes 1.00 days and costs 0.10% of the property value 2 largest business cities. See the chapter on distance to
(figure 5.1). frontier and ease of doing business ranking at the end of
this profile for more details.
Figure 5.1 What it takes to register property in Georgia

total time calculation. For more information on the methodology of the registering property indicators, see the Doing Business
website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter.
Globally, Georgia stands at 3 in the ranking of 189 regional average ranking provide other useful
economies on the ease of registering property (figure information for assessing how easy it is for an
5.2). The rankings for comparator economies and the entrepreneur in Georgia to transfer property.
Figure 5.2 How Georgia and comparator economies rank on the ease of registering property

The indicators reported here are based on a set of
STANDARD PROPERTY TRANSFER
specific proceduresthe steps that a buyer and seller
must complete to transfer the property to the buyers
nameidentified by Doing Business through
information collected from local property lawyers, Property value: GEL 321,147
notaries and property registries. These procedures
are those that apply to a transaction matching the City: Tbilisi
standard assumptions used by Doing Business in
what the indicators cover). The procedures, along
with the associated time and cost, are summarized
below.
Table 5.2 Summary of time, cost and procedures for registering property in Georgia
Time to
complete
Register the purchasers title with the district Public Registry Expedited
procedure: Super
The sale purchase agreement is not required to be notarized, as of the fast procedure (1
amended Civil Code of March 2007, clause 183. The extract can be calendar day) -
obtained by following ways: GEL 200;
1 business day (1-
a) online,
2 calendar days)-
150 GEL (including
b) visit to the Registry and get it there,
VAT (18%);
c) in case of registering property via authorized entities (banks, notaries Regular procedure
or real estate companies) extract can be received on the spot. (4 business days) is
Same day 50 GEL (including
procedure - 1 VAT (18%).
The new online registry of property was launched in 2007-2008. Online calendar day
business registry was launched in 2010. Above-mentioned registers are 1 business day (1- There is also an
1
unified under the Georgian National Agency of Public Registry - NAPR 2 calendar days) option available to
(www.napr.gov.ge), which is widely used. Registration fees may be paid Regular apply for an
at any commercial bank in Georgia. If registration is completed at the procedure (4 extract
NAPR, the payment can be done with the bank representative, who is business days) electronically via
always presented at every NAPR office. Registration can be also
the Georgian
conducted by an authorized users (all banks), notaries, real estate
National Agency
companies). In this registration fee is applied on the spot. Online
payment of registration fee is also possible. of Public Registry
(NAPR) website
with fees being as
All properties in Tbilisi have been systematically transferred into the follows: 1 working
electronic database. All the system operations are fully computerized, day - 10 GEL
including Old Bureau of Technical Inventory files that have been (including VAT
scanned. (18%) and at the
day of application
- 40 GEL (including
Time to
complete
The NAPR may conduct registration process and issue an Ownership VAT (18%).
Certificate (exctract) at the same day of submission documents, in 1
business day and in 4 days (ordinary registration procedure).
The documentation shall include:
(1) Sale and Purchase agreement
(2) Copy of ID document of seller and buyer
(3) Receipt confirming payment of Public Registry registration fee.
It is also possible to submit the transaction at one of the 500 authorized

users. These can be banks, notaries or real estate companies. These
entities can verify the transaction and submit the purchase and sale
agreement to the National Public Registry. The employees dealing with
these transactions receive a training provided by the National Public
Registry and a memorandum is signed between the National Public
Registry and the entity. The most commonly used authorized users are
banks.
The authorized entity receiving the application will verify the identity of
the buyer and seller, as well as the ownership of the property. Once the
information is submitted though a specific software, the National public
registry employee will verify again the ownership and the existence of
the individuals (in the Civil registry database that they can access
electronically) and process the transfer. Another software is used at this
stage.
Georgian legislation provides for the possibility of accelerated

proceedings, therefore if the buyer wishes to register property transfer
on the same day of submission of all necessary documents, the fee is
respectively GEL 200. If registration is carried out on the day following
the day of submission, the fee totals to GEL 150. GEL 50 is a fee paid for
ordinary registration procedures, which take 4 business days following
the submission of all required documents to the Public Registry. The
payment is done at any commercial bank.
There is also an option available to apply for an extract electronically via

the Georgian National Agency of Public Registry (NAPR) website with
fees being as follows: 1 working day - 10 GEL and at the day of
application - 40 GEL.
The 2% immovable property transfer tax has been abolished. A new Tax
Code specifies Income Tax for physical persons and Profit Tax for
Time to
complete
legal entities in case of property sale, only if sale of property takes place
within 2 years after its purchase and equals to 20% (for physical persons)
and 15% (for legal entities) of the difference between purchase and sale
price. These are capital gains taxes. If the sale of property takes place
after 2 years since its purchase, physical persons are exempted from
paying "Income Tax".
Agency: National Agency of Public Registry

Quality of land administration
The quality of land administration index is the sum of If private sector entities were unable to register property
the scores on the reliability of infrastructure, transfers in an economy between June 2014 and June
transparency of information, geographic coverage 2015, the economy receives a no practice mark on the
and land dispute resolution indices. procedures, time and cost indicators. A no practice
economy receives a score of 0 on the quality of land
The index ranges from 0 to 30, with higher values
administration index even if its legal framework includes
indicating better quality of the land administration
provisions related to land administration.
system.
Table 5.3 Summary of quality of land administration in Georgia

Answer Score
Quality of the land administration index (0-30) 19.50
Reliability of infrastructure index (0-8) 8.00
National Agency
of Public Registry
What is the institution in charge of immovable property registration?
under Ministry of
Justice of Georgia
In what format are the majority of title or deed records kept in the
Computer/Fully
largest business cityin a paper format or in a computerized format 2.0
digital
(scanned or fully digital)?
Is there an electronic database for checking for encumbrances (liens,

Yes 1.0
mortgages, restrictions and the like)?
National Agency
Institution in charge of the plans showing legal boundaries in the of Public Registry
largest business city: under Ministry of
Justice of Georgia
In what format are the majority of maps of land plots kept in the
Computer/Fully
largest business cityin a paper format or in a computerized format 2.0
digital
(scanned or fully digital)?
Is there an electronic database for recording boundaries, checking

plans and providing cadastral information (geographic information Yes 1.0
system)?
Is the information recorded by the immovable property registration

agency and the cadastral or mapping agency kept in a single database, Single database 1.0
in different but linked databases or in separate databases?
Do the immovable property registration agency and cadastral or

Yes 1.0
mapping agency use the same identification number for properties?
Transparency of information index (06) 4.50

Answer Score
Who is able to obtain information on land ownership at the agency in Anyone who pays
1.0
charge of immovable property registration in the largest business city? the official fee
Is the list of documents that are required to complete any type of

Yes, online 0.5
property transaction made publicly availableand if so, how?
http://napr.gov.g
Link for online access:
e/c/30
Is the applicable fee schedule for any property transaction at the

agency in charge of immovable property registration in the largest Yes, online 0.5
business city made publicly availableand if so, how?
http://napr.gov.g
e/p/455
Does the agency in charge of immovable property registration commit

to delivering a legally binding document that proves property
Yes, online 0.5
ownership within a specific time frameand if so, how does it
communicate the service standard?
http://napr.gov.g
e/c/30
Is there a specific and separate mechanism for filing complaints about

a problem that occurred at the agency in charge of immovable property No 0.0
registration?
Contact information:
Are there publicly available official statistics tracking the number of

Yes 0.5
transactions at the immovable property registration agency?
Number of property transfers in the largest business city in 2014: 173,915
Freely accessible
Who is able to consult maps of land plots in the largest business city? 0.5
by anyone
Is the applicable fee schedule for accessing maps of land plots made
Yes, online 0.5
publicly availableand if so, how?
http://napr.gov.g
e/p/455
Does the cadastral or mapping agency commit to delivering an

updated map within a specific time frameand if so, how does it Yes, online 0.5
communicate the service standard?
http://napr.gov.g
e/c/30
Is there a specific and separate mechanism for filing complaints about

No 0.0
a problem that occurred at the cadastral or mapping agency?
Answer Score
Contact information:
Geographic coverage index (08) 0.00
Are all privately held land plots in the economy formally registered at
No 0.0
the immovable property registry?
Are all privately held land plots in the largest business city formally
No 0.0
registered at the immovable property registry?
Are all privately held land plots in the economy mapped? No 0.0
Are all privately held land plots in the largest business city mapped? No 0.0
Land dispute resolution index (08) 7.00
Does the law require that all property sale transactions be registered at
the immovable property registry to make them opposable to third Yes 1.5
parties?
Is the system of immovable property registration subject to a state or

Yes 0.5
private guarantee?
Is there a specific compensation mechanism to cover for losses

incurred by parties who engaged in good faith in a property transaction
Yes 0.5
based on erroneous information certified by the immovable property
registry?
Does the legal system require a control of legality of the documents

necessary for a property transaction (e.g., checking the compliance of Yes 0.5
contracts with requirements of the law)?
If yes, who is responsible for checking the legality of the documents? Registrar; Notary.
Does the legal system require verification of the identity of the parties
Yes 0.5
to a property transaction?
If yes, who is responsible for verifying the identity of the parties? Registrar; Notary.
Is there a national database to verify the accuracy of identity

Yes 1.0
documents?
For a standard land dispute between two local businesses over tenure
rights of a property worth 50 times gross national income (GNI) per
Tbilisi City Court.
capita and located in the largest business city, what court would be in
charge of the case in the first instance?
How long does it take on average to obtain a decision from the first- Between 1 and 2
2.0
instance court for such a case (without appeal)? years
Are there any statistics on the number of land disputes in the first
Yes 0.5
instance?
Number of land disputes in the largest business city in 2014: In 2014 due to
land legislation
Answer Score
2640 disputes
were at the court
in the first
instance.

GETTING CREDIT
Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS
credit and improve its allocation: credit information
MEASURE
systems and borrowers and lenders in collateral and
bankruptcy laws. Credit information systems enable
lenders rights to view a potential borrowers financial Strength of legal rights index (012)
history (positive or negative)valuable information to Rights of borrowers and lenders through
consider when assessing risk. And they permit collateral laws
borrowers to establish a good credit history that will Protection of secured creditors rights through
allow easier access to credit. Sound collateral laws bankruptcy laws
enable businesses to use their assets, especially
movable property, as security to generate capital Depth of credit information index (08)
while strong creditors rights have been associated Scope and accessibility of credit information
with higher ratios of private sector credit to GDP. distributed by credit bureaus and credit
registries
What do the indicators cover?
Credit bureau coverage (% of adults)
Doing Business assesses the sharing of credit
information and the legal rights of borrowers and Number of individuals and firms listed in
lenders with respect to secured transactions through largest credit bureau as percentage of adult
2 sets of indicators. The depth of credit information population
index measures rules and practices affecting the Credit registry coverage (% of adults)
coverage, scope and accessibility of credit
Number of individuals and firms listed in
information available through a credit registry or a
credit registry as percentage of adult
credit bureau. The strength of legal rights index
population
measures whether certain features that facilitate
lending exist within the applicable collateral and
bankruptcy laws. Doing Business uses two case
scenarios, Case A and Case B, to determine the scope
of the secured transactions system, involving a Has up to 50 employees.
secured borrower and a secured lender and Is 100% domestically owned, as is the lender.
examining legal restrictions on the use of movable
collateral (for more details on each case, see the Data The ranking of economies on the ease of getting
Notes section of the Doing Business 2016 report). credit is determined by sorting their distance to
These scenarios assume that the borrower: frontier scores for getting credit. These scores are the
distance to frontier score for the strength of legal
Is a private limited liability company. rights index and the depth of credit information
Has its headquarters and only base of index.
operations in the largest business city. For
the 11 economies with a population of
more than 100 million, data for a second
city have been added.
GETTING CREDIT
How well do the credit information system and collateral Globally, Georgia stands at 7 in the ranking of 189
and bankruptcy laws in Georgia facilitate access to economies on the ease of getting credit (figure 6.1). The
credit? The economy has a score of 8.00 on the depth of rankings for comparator economies provide other useful
credit information index and a score of 9.00 on the information for assessing how well regulations and
strength of legal rights index (see the summary of institutions in Georgia support lending and borrowing.
scoring at the end of this chapter for details). Higher
scores indicate more credit information and stronger
legal rights for borrowers and lenders.
Figure 6.1 How Georgia and comparator economies rank on the ease of getting credit

GETTING CREDIT
One way to put an economys score on the getting credit rights index for Georgia and shows the scores for
indicators into context is to see where the economy comparator economies as well as the regional average
stands in the distribution of scores across economies. score. Figure 6.3 shows the same for the depth of credit
Figure 6.2 highlights the score on the strength of legal information index.
Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared
and lenders? and how widely?
Economy scores on strength of legal rights index Economy scores on depth of credit information index
Source: Doing Business database. Source: Doing Business database.

Note: Higher scores indicate that collateral and bankruptcy Note: Higher scores indicate the availability of more credit
laws are better designed to facilitate access to credit. information, from either a credit registry or a credit bureau,
Source: Doing Business database. to facilitate lending decisions. If the credit bureau or registry
is not operational or covers less than 5% of the adult
population, the total score on the depth of credit
information index is 0.
GETTING CREDIT
When economies strengthen the legal rights of lenders information, they can increase entrepreneurs access to
and borrowers under collateral and bankruptcy laws, and credit. What credit reforms has Doing Business recorded
increase the scope, coverage and accessibility of credit in Georgia (table 6.1)?
Table 6.1 How has Georgia made getting credit easieror not?
DB year Reform
Georgia improved access to credit by implementing a central

DB2011
collateral registry with an electronic database accessible online.
Georgia expanded access to credit by amending its civil code to
DB2012
broaden the range of assets that can be used as collateral.
Georgia strengthened its secured transactions system through
DB2013 an amendment to the civil code allowing a security interest to
extend to the products, proceeds and replacement of collateral.
Georgia improved its credit information system by
DB2014
implementing a new law on personal data protection.
GETTING CREDIT
The getting credit indicators reported here for Georgia The data on the legal rights of borrowers and lenders are
are based on detailed information collected in that gathered through a survey of financial lawyers and
economy. The data on credit information sharing are verified through analysis of laws and regulations as well
collected through a survey of a credit registry and/or as public sources of information on collateral and
credit bureau (if one exists). To construct the depth of bankruptcy laws. For the strength of legal rights index, a
credit information index, a score of 1 is assigned for each score of 1 is assigned for each of 10 aspects related to
of 8 features of the credit registry or credit bureau (see legal rights in collateral law and 2 aspects in bankruptcy
summary of scoring below). law.
Strength of legal rights index (012) Index score: 9.00
Does an integrated or unified legal framework for secured transactions that extends to the
creation, publicity and enforcement of functional equivalents to security interests in movable No
assets exist in the economy?
Does the law allow businesses to grant a non possessory security right in a single category of
Yes
movable assets, without requiring a specific description of collateral?
Does the law allow businesses to grant a non possessory security right in substantially all of its
Yes
assets, without requiring a specific description of collateral?
May a security right extend to future or after-acquired assets, and may it extend automatically to
Yes
the products, proceeds or replacements of the original assets?
Is a general description of debts and obligations permitted in collateral agreements; can all types
of debts and obligations be secured between parties; and can the collateral agreement include a Yes
maximum amount for which the assets are encumbered?
Is a collateral registry in operation for both incorporated and non-incorporated entities, that is
Yes
unified geographically and by asset type, with an electronic database indexed by debtor's name?
Does a notice-based collateral registry exist in which all functional equivalents can be registered? No
Does a modern collateral registry exist in which registrations, amendments, cancellations and
Yes
searches can be performed online by any interested third party?
Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor
Yes
defaults outside an insolvency procedure?
Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is
Yes
liquidated?
Are secured creditors subject to an automatic stay on enforcement when a debtor enters a
court-supervised reorganization procedure? Does the law protect secured creditors rights by No
providing clear grounds for relief from the stay and/or sets a time limit for it?
Does the law allow parties to agree on out of court enforcement at the time a security interest is
created? Does the law allow the secured creditor to sell the collateral through public auction and Yes
private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt?
Depth of credit information index (08) Credit bureau Credit registry Index score: 8.00
Are data on both firms and individuals distributed? Yes No 1

Are both positive and negative credit data distributed? Yes No 1
Are data from retailers or utility companies - in addition
to data from banks and financial institutions - Yes No 1
distributed?
Are at least 2 years of historical data distributed? (Credit
bureaus and registries that distribute more than 10 years
Yes No 1
of negative data or erase data on defaults as soon as
they are repaid obtain a score of 0 for this component.)
Are data on loan amounts below 1% of income per
Yes No 1
capita distributed?
By law, do borrowers have the right to access their data
Yes No 1
in the credit bureau or credit registry?
Can banks and financial institutions access borrowers
credit information online (for example, through an online Yes No 1
platform, a system-to-system connection or both)?
Are bureau or registry credit scores offered as a value-
added service to help banks and financial institutions Yes No 1
assess the creditworthiness of borrowers?
Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not
operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0.
Coverage Credit bureau Credit registry
Number of firms 26,360 0

Number of individuals 2,230,000 0
Total 2,256,360 0
Total percentage of adult population 74.50 0.00
PROTECTING MINORITY INVESTORS

Protecting minority investors matters for the ability of
companies to raise the capital they need to grow, WHAT THE PROTECTING MINORITY
innovate, diversify and compete. Effective regulations INVESTORS INDICATORS MEASURE
define related-party transactions precisely, promote
clear and efficient disclosure requirements, require
shareholder participation in major decisions of the Extent of disclosure index (010)
company and set detailed standards of accountability
Review and approval requirements for related-party
for company insiders.
transactions; Disclosure requirements for related-
What do the indicators cover? party transactions
Doing Business measures the protection of minority Extent of director liability index (010)
investors from conflicts of interest through one set of Ability of minority shareholders to sue and hold
indicators and shareholders rights in corporate interested directors liable for prejudicial related-party
governance through another. The ranking of economies transactions; Available legal remedies (damages,
on the strength of minority investor protections is disgorgement of profits, fines, imprisonment,
determined by sorting their distance to frontier scores rescission of the transaction)
for protecting minority investors. These scores are the
Ease of shareholder suits index (010)
simple average of the distance to frontier scores for the
extent of conflict of interest regulation index and the Access to internal corporate documents; Evidence
extent of shareholder governance index. To make the obtainable during trial and allocation of legal
data comparable across economies, a case study uses expenses
several assumptions about the business and the Extent of conflict of interest regulation index
transaction. (010)
The business (Buyer): Simple average of the extent of disclosure, extent of
director liability and ease of shareholder indices
Is a publicly traded corporation listed on the
economys most important stock exchange Extent of shareholder rights index (0-10)
(or at least a large private company with Shareholders rights and role in major corporate
multiple shareholders). decisions
Has a board of directors and a chief executive Extent of ownership and control index (0-10)
officer (CEO) who may legally act on behalf of
Buyer where permitted, even if this is not Governance safeguards protecting shareholders from
undue board control and entrenchment
specifically required by law.
Extent of corporate transparency index (0-10)
The transaction involves the following details:
Corporate transparency on ownership stakes,
Mr. James, a director and the majority
compensation, audits and financial prospects
shareholder of the company, proposes that
the company purchase used trucks from Extent of shareholder governance index (0
another company he owns. 10)
The price is higher than the going price for Simple average of the extent of shareholders rights,
used trucks, but the transaction goes forward. extent of ownership and control and extent of
corporate transparency indices
All required approvals are obtained, and all
required disclosures made, though the Strength of investor protection index (010)
transaction is prejudicial to Buyer. Simple average of the extent of conflict of interest
regulation and extent of shareholder governance
Shareholders sue the interested parties and
indices
the members of the board of directors.

How strong are minority investor protections against protection index (figure 7.1). While the indicator does
self-dealing in Georgia? The economy has a score of 6.80 not measure all aspects related to the protection of
on the strength of minority investor protection index, minority investors, a higher ranking does indicate that an
with a higher score indicating stronger protections. economys regulations offer stronger minority investor
protections against self-dealing in the areas measured.
Globally, Georgia stands at 20 in the ranking of 189
economies on the strength of minority investor
Figure 7.1 How Georgia and comparator economies perform on the strength of minority investor protection index


One way to put an economys scores on the A summary of scoring for the protecting minority investors
protecting minority investors indicators into context indicators at the end of this chapter provides details on
is to see where the economy stands in the how the indices were calculated.
distribution of scores across comparator economies.
Figure 7.2 highlights the scores on the various
minority investor protection indices for Georgia.
Figure 7.2 Summary of the various minority investor protection indices for Georgia and comparator economies.


Economies with the strongest protections of minority result, reforms to strengthen minority investor
investors from self-dealing require detailed disclosure protections may move ahead on different frontssuch
and define clear duties for directors. They also have well- as through new or amended company laws, securities
functioning courts and up-to-date procedural rules that regulations or civil procedure rules. What minority
give minority shareholders the means to prove their case investor protection reforms has Doing Business recorded
and obtain a judgment within a reasonable time. As a in Georgia (table 7.1)?
Table 7.1 How has Georgia strengthened minority investor protectionsor not?
DB year Reform
Georgia strengthened investor protections by allowing greater

DB2011
access to corporate information during the trial.
Georgia strengthened investor protections by introducing
DB2012 requirements relating to the approval of transactions between
interested parties.
Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for
these years, available at http://www.doingbusiness.org.

The protecting minority investors indicators reported to disclosure, director liability, shareholder suits,
here for Georgia are based on detailed information shareholder rights, ownership and control and corporate
collected through a survey of corporate and securities transparency in a standard case study (for more details,
lawyers about securities regulations, company laws and see the Data Notes section of the Doing Business 2016
court rules of evidence and procedure. To construct the report). The summary below shows the details underlying
six indicators on minority investor protection, scores are the scores for Georgia.
assigned to each based on a range of conditions relating
Table 7.2 Summary of scoring for the protecting minority investors indicators in Georgia
Answer Score
Strength of minority investor protection index (0-10) 6.80
Extent of conflict of interest regulation index (0-10) 7.70
Extent of disclosure index (0-10) 9.00
Which corporate body can provide legally sufficient Shareholders excluding interested
3.0
approval for the Buyer-Seller transaction? (0-3) parties
Is disclosure by the interested director to the board of
Full disclosure of all material facts 2.0
directors required? (0-2)
Is disclosure of the transaction in published periodic filings Disclosure on the transaction and
2.0
(annual reports) required? (0-2) on the conflict of interest
Is immediate disclosure of the transaction to the public Disclosure on the transaction and
2.0
and/or shareholders required? (0-2) on the conflict of interest
Must an external body review the terms of the transaction
No 0.0
before it takes place? (0-1)
Extent of director liability index (0-10) 6.00
Can shareholders sue directly or derivatively for the damage
caused by the Buyer-Seller transaction to the company? (0- Yes 1.0
1)
Can shareholders hold the interested director liable for the
Liable if unfair or prejudicial 2.0
damage caused by the transaction to the company? (0-2)
Can shareholders hold members of the approving body
liable for the damage cause by the transaction to the Liable if negligent 1.0
company? (0-2)
Must the interested director pay damages for the harm
caused to the company upon a successful claim by a Yes 1.0
shareholder plaintiff? (0-1)
Must the interested director repay profits made from the
transaction upon a successful claim by a shareholder Yes 1.0
plaintiff? (0-1)
Is the interested director fined and imprisoned or
disqualified upon a successful claim by the shareholder No 0.0
plaintiff? (0-1)
Can a court void the transaction upon a successful claim by
Only in case of fraud or bad faith 0.0
a shareholder plaintiff? (0-2)
Ease of shareholder suits index (0-10) 8.00
Before filing suit, can shareholders owning 10% of the No 0.0
companys share capital inspect the transaction documents?

(0-1)
Can the plaintiff obtain any documents from the defendant
Any relevant document 3.0
and witnesses during trial? (0-3)
Can the plaintiff request categories of documents from the
Yes 1.0
defendant without identifying specific ones? (0-1)
Can the plaintiff directly question the defendant and
Yes 2.0
witnesses during trial? (0-2)
Is the level of proof required for civil suits lower than that of
Yes 1.0
criminal cases? (0-1)
Can shareholder plaintiffs recover their legal expenses from
Yes if successful 1.0
the company? (0-2)
Extent of shareholder governance index (0-10) 6.00
Extent of shareholder rights index (0-10) 6.00
Does the sale of 51% of Buyers assets require shareholder
Yes 1.0
approval?
Can shareholders representing 10% of Buyers share capital
Yes 1.0
call for an extraordinary meeting of shareholders?
Must Buyer obtain its shareholders approval every time it
Yes 1.0
issues new shares?
Do shareholders automatically receive preemption rights
No 0.0
every time Buyer issues new shares?
Must shareholders approve the election and dismissal of the
No 0.0
external auditor?
Must changes to the voting rights of a class of shares be
No 0.0
approved only by the holders of the affected shares?
Assuming that Buyer is a limited company, does the sale of
Yes 1.0
51% of Buyers assets requires shareholder approval?
Assuming that Buyer is a limited company, can shareholders
representing 10% of Buyers share capital call for an Yes 1.0
extraordinary meeting of shareholders?
Assuming that Buyer is a limited company, must Buyer
obtain its shareholders approval every time it issues new Yes 1.0
shares?
Assuming that Buyer is a limited company, do shareholders
automatically receive preemption rights every time Buyer No 0.0
issues new shares?
Extent of ownership and control index (0-10) 4.00
Is the CEO prohibited from also being chair of the board of
No 0.0
directors?
Must the board of directors include independent and
No 0.0
nonexecutive board members?
Can shareholders remove members of Buyers board of
Yes 1.0
directors without cause before the end of their term?
Must Buyers board of directors include a separate audit
No 0.0
committee?
Must a potential acquirer make a tender offer to all
Yes 1.0
shareholders upon acquiring 50% of Buyer?
Must Buyer pay dividends within a maximum period set by
No 0.0
law after the declaration date?
Is a subsidiary prohibited from acquiring shares issued by its
No 0.0
parent company?

remove members of Buyers board of directors without Yes 1.0
cause before the end of their term?
Assuming that Buyer is a limited company, must a potential
acquirer make a tender offer to all shareholders upon Yes 1.0
acquiring 50% of Buyer?
Assuming that Buyer is a limited company, must Buyer pay
dividends within a maximum period set by law after the No 0.0
declaration date?
Extent of corporate transparency index (0-10) 8.00
Must Buyer disclose direct and indirect beneficial ownership
Yes 1.0
stakes representing 5%?
Must Buyer disclose information about board members
other directorships as well as basic information on their Yes 1.0
primary employment?
Must Buyer disclose the compensation of individual
No 0.0
managers?
Must a detailed notice of general meeting be sent 30 days
Yes 1.0
before the meeting?
Can shareholders representing 5% of Buyers share capital
Yes 1.0
put items on the agenda for the general meeting?
Must Buyer's annual financial statements be audited by an
Yes 1.0
external auditor?
Must Buyer disclose its audit reports to the public? Yes 1.0
Assuming that Buyer is a limited company, must a detailed
notice of general meeting be sent 30 days before the Yes 1.0
meeting?
representing 5% of Buyers share capital put items on the Yes 1.0
agenda for the general meeting?
Assuming that Buyer is a limited company, must Buyer's
annual financial statements be audited by an external No 0.0
auditor?

PAYING TAXES
Taxes are essential. The level of tax rates needs to be
carefully chosenand needless complexity in tax WHAT THE PAYING TAXES INDICATORS
rules avoided. Firms in economies that rank better MEASURE
on the ease of paying taxes in the Doing Business
study tend to perceive both tax rates and tax Tax payments for a manufacturing company
administration as less of an obstacle to business in 2014 (number per year adjusted for
according to the World Bank Enterprise Survey electronic and joint filing and payment)
research.
Total number of taxes and contributions paid,
What do the indicators cover? including consumption taxes (value added tax,
Using a case scenario, Doing Business records the sales tax or goods and service tax)
taxes and mandatory contributions that a medium- Method and frequency of filing and payment
size company must pay in a given year as well as
Time required to comply with 3 major taxes
measures of the administrative burden of paying
(hours per year)
taxes and contributions. This case scenario uses a set
of financial statements and assumptions about Collecting information and computing the tax
transactions made over the year. Information is also payable
compiled on the frequency of filing and payments as Completing tax return forms, filing with
well as time taken to comply with tax laws. The proper agencies
ranking of economies on the ease of paying taxes is
Arranging payment or withholding
determined by sorting their distance to frontier
scores on the ease of paying taxes. These scores are Preparing separate tax accounting books, if
the simple average of the distance to frontier scores required
for each of the component indicators, with a Total tax rate (% of profit before all taxes)
threshold and a nonlinear transformation applied to
one of the component indicators, the total tax rate .
3 Profit or corporate income tax
All financial statement variables are proportional to Social contributions and labor taxes paid by
2012 income per capita. To make the data the employer
comparable across economies, several assumptions Property and property transfer taxes
are used.
Dividend, capital gains and financial
TaxpayerCo is a medium-size business that transactions taxes
started operations on January 1, 2013.
Waste collection, vehicle, road and other taxes
The business starts from the same financial
Taxes and mandatory contributions include
position in each economy. All the taxes
corporate income tax, turnover tax and all
and mandatory contributions paid during
labor taxes and contributions paid by the
the second year of operation are recorded.
company.
Taxes and mandatory contributions are
A range of standard deductions and
measured at all levels of government.
exemptions are also recorded.
The nonlinear distance to frontier for the total tax rate is equal to the distance to frontier for the total tax rate to the power of 0.8.
3
The threshold is defined as the total tax rate at the 15th percentile of the overall distribution for all years included in the analysis up
to and including Doing Business 2015, which is 26.1%. All economies with a total tax rate below this threshold receive the same
score as the economy at the threshold.
PAYING TAXES
What is the administrative burden of complying with 2 largest business cities. See the chapter on distance to
taxes in Georgiaand how much do firms pay in taxes? frontier and ease of doing business ranking at the end of
On average, firms make 5.00 tax payments a year, spend this profile for more details.
362.00 hours a year filing, preparing and paying taxes
and pay total taxes amounting to 16.40% of profit (see
economies on the ease of paying taxes (figure 8.1). The
the summary at the end of this chapter for details). Most
rankings for comparator economies and the regional
indicator sets refer to a case scenario in the largest
average ranking provide other useful information for
business city of an economy, except for 11 economies for
assessing the tax compliance burden for businesses in
which the data are a population-weighted average of the
Georgia.
Figure 8.1 How Georgia and comparator economies rank on the ease of paying taxes

PAYING TAXES
Economies around the world have made paying taxes and exemptions. Many have lowered tax rates. Changes
faster, easier and less costly for businessessuch as by have brought concrete results. Some economies
consolidating payments and filings of taxes, offering simplifying tax payment and reducing rates have seen
electronic systems for filing and payment, establishing tax revenue rise. What tax reforms has Doing Business
taxpayer service centers or allowing for more deductions recorded in Georgia (table 8.1)?
Table 8.1 How has Georgia made paying taxes easieror not?
DB year Reform
Georgia made paying taxes easier for firms by simplifying the

DB2012 reporting for value added tax and introducing electronic filing
and payment of taxes.
Georgia made paying taxes easier for companies by enhancing
DB2013 the use of electronic systems and providing more services to
taxpayers.
PAYING TAXES
LOCATION OF STANDARDIZED COMPANY
on the taxes and contributions that would be paid by
a standardized case study company used by Doing
Business in collecting the data (see the section in this City: Tbilisi
chapter on what the indicators cover). Tax
practitioners are asked to review a set of financial
statements as well as a standardized list of
assumptions and transactions that the company
The taxes and contributions paid are listed in the
completed during its 2nd year of operation.
summary below, along with the associated number of
Respondents are asked how much taxes and
payments, time and tax rate.
mandatory contributions the business must pay and
how these taxes are filed and paid.
Table 8.2 Summary of tax rates and administration

Total tax Notes on
Tax or mandatory Payments Notes on Time Statutory
Tax base rate (% of total tax
contribution (number) payments (hours) tax rate
profit) rate
taxable
Corporate income tax 1 online 191 15% 14.28
profit
all fixed
Property tax 1 online 1% assets 2.08
minus land
GEL 0.24
per sq.
Land tax 1 online meter of land area 0.04
nonagricult
ural land
value not
Value added tax (VAT) 1 online 115 18% 0
added included
Personal income tax 1 online 56 20% 0 withheld
Totals 5.00 362.00 16.40
TRADING ACROSS BORDERS

In todays globalized world, making trade between WHAT THE TRADING ACROSS BORDERS
economies easier is increasingly important for
INDICATORS MEASURE FOR IMPORT & EXPORT
business. Excessive document requirements,
burdensome customs procedures, inefficient port
operations and inadequate infrastructure all lead Documentary compliance cost (US$) & time
to extra costs and delays for exporters and (hours)
importers, stifling trade potential. Obtain, prepare and submit documents:
What do the indicators cover? -During transport, clearance, inspections and
port or border handling in origin economy
Doing Business records the time and cost
associated with the logistical process of exporting -Required by origin, transit and destination
and importing goods. Under the new methodology economies
introduced this year, Doing Business measures the Covers all documents by law and in practice
time and cost (excluding tariffs) associated with
Border compliance cost (US$) & time (hours)
three sets of proceduresdocumentary
compliance, border compliance and domestic Customs clearance and inspections
transportwithin the overall process of exporting Inspections by other agencies
or importing a shipment of goods. The ranking of
Port or border handling
economies on the ease of trading across borders is
determined by sorting their distance to frontier Obtaining, preparing and submitting documents
scores for trading across borders. These scores are during clearance, inspections and port or border
the simple average of the distance to frontier handling
scores for the time and cost for documentary Domestic transport*
compliance and border compliance to export and
Loading and unloading of shipment
import.
Transport between warehouse and terminal/port
To make the data comparable across economies, a Transport between terminal/port and border
few assumptions are made about the traded goods
Obtaining, preparing and submitting documents
and the transactions:
during domestic transport
Time Traffic delays and road police checks while
shipment is en route
Time is measured in hours, and 1 day is
24 hours (for example, 22 days are * Although Doing Business collects and publishes data on the
recorded as 22 24 = 528 hours). If time and cost for domestic transport, it does not use these
customs clearance takes 7.5 hours, the data in calculating the distance to frontier score for trading
data are recorded as is. Alternatively, across borders or the ranking on the ease of trading across
suppose that documents are submitted borders.
to a customs agency at 8:00 a.m., are Cost
processed overnight and can be picked
up at 8:00 a.m. the next day. In this case Insurance cost and informal payments for which
the time for customs clearance would be no receipt is issued are excluded from the costs
recorded as 24 hours because the actual recorded. Costs are reported in U.S. dollars.
procedure took 24 hours. Contributors are asked to convert local currency
into U.S. dollars based on the exchange rate
prevailing on the day they answer the
questionnaire.
Assumptions of the case study

For each of the 189 economies covered by Shipping cost based on weight is assumed to be
Doing Business, it is assumed that a shipment greater than shipping cost based on volume.
travels from a warehouse in the largest
If government fees are determined by the value
business city of the exporting economy to a
of the shipment, the value is assumed to be
warehouse in the largest business city of the
$50,000.
importing economy. For 11 economies the
data are also collected, under the same case The product is new, not secondhand or used
study assumptions, for the second largest merchandise.
business city.
The exporting firm is responsible for hiring and
The import and export case studies assume paying for a freight forwarder or customs
different traded products. It is assumed that broker (or both) and pays for all costs related to
each economy imports a standardized international shipping, domestic transport,
shipment of 15 metric tons of containerized clearance and mandatory inspections by
auto parts (HS 8708) from its natural import customs and other government agencies, port
partnerthe economy from which it imports or border handling, documentary compliance
the largest value (price times quantity) of auto fees and the like for exports. The importing firm
parts. It is assumed that each economy is responsible for the above costs for imports.
exports the product of its comparative
The mode of transport is the one most widely
advantage (defined by the largest export
used for the chosen export or import product
value) to its natural export partnerthe and the trading partner, as is the seaport,
economy that is the largest purchaser of this
airport or land border crossing.
product. Precious metal and gems, live
animals and pharmaceuticals are excluded All electronic submissions of information
from the list of possible export products, requested by any government agency in
however, and the second largest product connection with the shipment are considered to
category is considered as needed. be documents obtained, prepared and
submitted during the export or import process.
To identify the trading partners and export
product for each economy, Doing Business A port or border is defined as a place (seaport,
collected data on trade flows for the most airport or land border crossing) where
recent four-year period from international merchandise can enter or leave an economy.
databases such as the United Nations Government agencies considered relevant are
Commodity Trade Statistics Database (UN agencies such as customs, port authorities, road
Comtrade). For economies for which trade police, border guards, standardization agencies,
flow data were not available, data from ministries or departments of agriculture or
ancillary government sources (various industry, national security agencies and any
ministries and departments) and World Bank other government authorities.
Group country offices were used to identify
the export product and natural trading
partners.
A shipment is a unit of trade. Export
shipments do not necessarily need to be
containerized, while import shipments of auto
parts are assumed to be containerized.

The Trading across Border indicator refers to a case Globally, Georgia stands at 78 in the ranking of 189
study scenario of a warehouse in the largest business city economies on the ease of trading across borders (figure
of an economy (except for 11 economies for which the 9.1).
data are a population-weighted average of the 2 largest
While not included in the distance to frontier or ease of
business cities) trading with the main import and export doing business ranking, data on domestic transportation
partner through the economys main border crossing. is also recorded for all economies and provided in Table
9.3.
Figure 9.1 How Georgia and comparator economies rank on the ease of trading across borders


In economies around the world, trading across borders systems. These changes help improve the trading
as measured by Doing Business has become faster and environment and boost firms international
easier over the years. Governments have introduced competitiveness. What trade reforms has Doing Business
tools to facilitate tradeincluding single windows, risk- recorded in Georgia (table 9.1)?
based inspections and electronic data interchange
Table 9.1 How has Georgia made trading across borders easieror not?
DB year Reform
Georgia reduced the time to export and import by creating

DB2013
customs clearance zones.

LOCATION OF STANDARDIZED COMPANY
on a set of specific predefined procedures for trading
a shipment of goods by the most widely used mode
of transport (whether sea, land, air or some City: Tbilisi
combination of these). The information on the time
and cost to complete export and import is collected The details on the predefined set of procedures, and the
from local freight forwarders, customs brokers and associated time and cost, for exporting and importing a
traders. shipment of goods are listed in the summary bellow,
along with the required documents.
Table 9.2 Summary of export and import time and cost for trading across borders in Georgia
Georgia Europe & Central Asia
Time to export: Border compliance (hours) 14 28

Cost to export: Border compliance (USD) 383 219
Time to export: Documentary compliance (hours) 48 31
Cost to export: Documentary compliance (USD) 200 144
Time to import: Border compliance (hours) 14 23
Cost to import: Border compliance (USD) 396 202
Time to import: Documentary compliance (hours) 24 27
Cost to import: Documentary compliance (USD) 200 108
Table 9.3 Summary of trading details, transport time and documents for trading across borders in Georgia
Export Import
HS 8708: Parts and accessories

Product HS 72 : Iron and steel
of motor vehicles
Trade partner Turkey Germany
Border Poti port Poti port
Distance (km) 334 334
Domestic transport time (hours) 7 7
Domestic transport cost (USD) 460 464
Domestic transport speed (km/hour) 49.1 49.7
Domestic transport cost per distance (USD/km) 1.4 1.4

Note: Although Doing Business collects and publishes data on the time and cost for domestic transport, it does not use these
data in calculating the distance to frontier score for trading across borders or the ranking on the ease of trading across
borders.
Documents to export
Bill of lading
Commercial invoice
Customs Export Declaration
Documents to import
Bill of lading
CMR waybill
Commercial invoice
Customs Import Declaration

Note: Doing Business continues to collect data on the number of documents needed to trade internationally. Unlike in previous
years, however, these data are excluded from the calculation of the distance to frontier score and ranking. The time and cost
for documentary compliance serve as better measures of the overall cost and complexity of compliance with documentary
requirements than does the number of documents required.
Figure 9.2 Summary of Georgia on the ease of trading across borders

Export Import

ENFORCING CONTRACTS
Effective commercial dispute resolution has many WHAT THE ENFORCING CONTRACTS
benefits. Courts are essential for entrepreneurs
INDICATORS MEASURE
because they interpret the rules of the market and
protect economic rights. Efficient and transparent
courts encourage new business relationships because Time required to enforce a contract through
businesses know they can rely on the courts if a new the courts (calendar days)
customer fails to pay. Speedy trials are essential for Time to file and serve the case
small enterprises, which may lack the resources to
Time for trial and to obtain the judgment
stay in business while awaiting the outcome of a long
court dispute. Time to enforce the judgment
What do the indicators cover? Cost required to enforce a contract through

the courts (% of claim)
Doing Business measures the time and cost for
resolving a standardized commercial dispute through Attorney fees
a local first-instance court. In addition, this year it Court fees
introduces a new measure, the quality of judicial
Enforcement fees
processes index, evaluating whether each economy
has adopted a series of good practices that promote Quality of judicial processes index (0-18)
quality and efficiency in the court system. This new Court structure and proceedings (0-5)
index replaces the indicator on procedures, which
was eliminated this year. The ranking of economies Case management (0-6)
on the ease of enforcing contracts is determined by Court automation (0-4)
sorting their distance to frontier scores. These scores
Alternative dispute resolution (0-3)
are the simple average of the distance to frontier
scores for each of the component indicators.
The dispute in the case study involves the breach of a
sales contract between 2 domestic businesses. The The value of the dispute is 200% of the
case study assumes that the court hears an expert on income per capita or the equivalent in local
the quality of the goods in dispute. This distinguishes currency of USD 5,000, whichever is greater.
the case from simple debt enforcement. To make the The seller sues the buyer before the court
data comparable across economies, Doing Business with jurisdiction over commercial cases worth
uses several assumptions about the case: 200% of income per capita or $5,000.
The dispute concerns a lawful transaction The seller requests a pretrial attachment to
between two businesses (Seller and Buyer), secure the claim.
both located in the economys largest
The dispute on the quality of the goods
business city. For 11 economies the data
requires an expert opinion.
are also collected for the second largest
business city. The judge decides in favor of the seller; there
is no appeal.
The buyer orders custom-made goods,
then fails to pay. The seller enforces the judgment through a
public sale of the buyers movable assets.
ENFORCING CONTRACTS
How efficient is the process of resolving a commercial frontier and ease of doing business ranking at the end of
dispute through the courts in Georgia? According to this profile for more details.
data collected by Doing Business, contract enforcement
takes 285.00 days and costs 29.90% of the value of the
economies on the ease of enforcing contracts (figure
claim. Most indicator sets refer to the largest business
10.1). The rankings for comparator economies and the
city of an economy, except for 11 economies for which
regional average ranking provide other useful
the data are a population-weighted average of the 2
benchmarks for assessing the efficiency of contract
largest business cities. See the chapter on distance to
enforcement in Georgia.
Figure 10.1 How Georgia and comparator economies rank on the ease of enforcing contracts

ENFORCING CONTRACTS
Economies in all regions have improved contract reducing backlogs by introducing periodic reviews to
enforcement in recent years. A judiciary can be improved clear inactive cases from the docket and by making
in different ways. Higher-income economies tend to look procedures faster. What reforms making it easier (or
for ways to enhance efficiency by introducing new more difficult) to enforce contracts has Doing Business
technology. Lower-income economies often work on recorded in Georgia (table 10.1)?
Table 10.1 How has Georgia made enforcing contracts easieror not?
DB year Reform
Georgia made the enforcement of contracts easier by

streamlining the procedures for public auctions, introducing
DB2011
private enforcement officers and modernizing its dispute
resolution system.
Georgia made enforcing contracts easier by simplifying and

DB2013
speeding up the proceedings for commercial disputes.
Georgia made enforcing contracts easier by introducing an
DB2016
electronic filing system for court users.
ENFORCING CONTRACTS
The data on time and cost reported here for Georgia
ECONOMY DETAILS
are built by following the step-by-step evolution of a
commercial sale dispute within the court, under the
assumptions about the case described above (figure Claim value: GEL 11,776
10.2). The time and cost of resolving the
standardized dispute are identified through study of
Court name: Tbilisi Civil Court
the codes of civil procedure and other court
regulations, as well as through questionnaires
City: Tbilisi
completed by local litigation lawyers (and, in a
quarter of the economies covered by Doing Business,
by judges as well).
Figure 10.2 Time and cost of contract enforcement in Georgia and comparator economies

Table 10.2 Details on time and cost for enforcing contracts in Georgia
Europe & Central

Indicator Georgia
Asia average
Time (days) 285 481
Filing and service 35
Trial and judgment 100
Enforcement of judgment 150
Cost (% of claim) 29.9 26.2
Attorney fees 18.0
Court fees 5.0
Enforcement fees 6.9

ENFORCING CONTRACTS
Quality of judicial processes index
The quality of judicial processes index measures The scores reported here show which of these good
whether each economy has adopted a series of good practices are available in Georgia.
practices in its court system in four areas: court
This methodology was initially developed by Djankov and
structure and proceedings, case management, court
others (2003) and is adopted here with several changes.
automation and alternative dispute resolution. The
The quality of judicial processes index was introduced in
score on the quality of judicial processes index is the
Doing Business 2016. The good practices tested in this
sum of the scores on these 4 sub-components. The
index were developed on the basis of internationally
index ranges from 0 to 18, with higher values
recognized good practices promoting judicial efficiency.
indicating more efficient judicial processes.
Figure 10.3 Quality of judicial processes index in Georgia and comparator economies

Table 10.3 Details of the quality of judicial processes index in Georgia

Answer Score
Quality of judicial processes index (0-18) 13.00
Court structure and proceedings (0-5) 3.0
1. Is there a court or division of a court dedicated solely to hearing

No 0.0
commercial cases?
2. Small claims court 1.5
2.a. Is there a small claims court or a fast-track procedure for small

Yes
claims?
2.b. If yes, is self-representation allowed? Yes
3. Is pretrial attachment available? Yes 1.0
4. Are new cases assigned randomly to judges? Yes 0.5
Case management (0-6) 5.5
1. Time standards 1.0
1.a. Are there laws setting overall time standards for key court events in
Yes
a civil case?
1.b. If yes, are the time standards set for at least three court events? Yes
1.c. Are these time standards respected in more than 50% of cases? Yes
2. Adjournments 0.5
2.a. Does the law regulate the maximum number of adjournments that
No
can be granted?
2.b. Are adjournments limited to unforeseen and exceptional

Yes
circumstances?
2.c. If rules on adjournments exist, are they respected in more than 50%
Yes
of cases?
3. Can two of the following four reports be generated about the

competent court: (i) time to disposition report; (ii) clearance rate report; Yes 1.0
(iii) age of pending cases report; and (iv) single case progress report?
4. Is a pretrial conference among the case management techniques

Yes 1.0
used before the competent court?
5. Are there any electronic case management tools in place within the
Yes 1.0
competent court for use by judges?
6. Are there any electronic case management tools in place within the
Yes 1.0
competent court for use by lawyers?
Court automation (0-4) 2.5

Answer Score
1. Can the initial complaint be filed electronically through a dedicated
Yes 1.0
platform within the competent court?
2. Is it possible to carry out service of process electronically for claims

Yes 1.0
filed before the competent court?
3. Can court fees be paid electronically within the competent court? No 0.0
4. Publication of judgments 0.5
4.a Are judgments rendered in commercial cases at all levels made

available to the general public through publication in official gazettes, No
in newspapers or on the internet or court website?
4.b. Are judgments rendered in commercial cases at the appellate and

supreme court level made available to the general public through
Yes
publication in official gazettes, in newspapers or on the internet or
court website?
Alternative dispute resolution (0-3) 2.0
1. Arbitration 1.0
1.a. Is domestic commercial arbitration governed by a consolidated law

or consolidated chapter or section of the applicable code of civil Yes
procedure encompassing substantially all its aspects?
1.b. Are there any commercial disputesaside from those that deal
with public order or public policythat cannot be submitted to Yes
arbitration?
1.c. Are valid arbitration clauses or agreements usually enforced by the

Yes
courts?
2. Mediation/Conciliation 1.0
2.a. Is voluntary mediation or conciliation available? Yes
2.b. Are mediation, conciliation or both governed by a consolidated law

or consolidated chapter or section of the applicable code of civil No
procedure encompassing substantially all their aspects?
2.c. Are there financial incentives for parties to attempt mediation or

conciliation (i.e., if mediation or conciliation is successful, a refund of Yes
court filing fees, income tax credits or the like)?
RESOLVING INSOLVENCY
A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY
ensuring the survival of economically efficient
companies and reallocating the resources of INDICATORS MEASURE
inefficient ones. Fast and cheap insolvency
proceedings result in the speedy return of businesses Time required to recover debt (years)
to normal operation and increase returns to
Measured in calendar years
creditors. By clarifying the expectations of creditors
and debtors about the outcome of insolvency Appeals and requests for extension are
proceedings, well-functioning insolvency systems can included
facilitate access to finance, save more viable Cost required to recover debt (% of debtors
businesses and sustainably grow the economy. estate)
What do the indicators cover? Measured as percentage of estate value
Doing Business studies the time, cost and outcome of Court fees
insolvency proceedings involving domestic legal Fees of insolvency administrators
entities. These variables are used to calculate the
recovery rate, which is recorded as cents on the Lawyers fees
dollar recovered by secured creditors through Assessors and auctioneers fees
reorganization, liquidation or debt enforcement
Other related fees
(foreclosure or receivership) proceedings. To
determine the present value of the amount Outcome
recovered by creditors, Doing Business uses the
Whether business continues operating as a
lending rates from the International Monetary Fund, going concern or business assets are sold
supplemented with data from central banks and the piecemeal
Economist Intelligence Unit.
Recovery rate for creditors
In addition, Doing Business evaluates the adequacy
Measures the cents on the dollar recovered
and integrity of the existing legal framework
by secured creditors
applicable to liquidation and reorganization
proceedings through the strength of insolvency Outcome for the business (survival or not)
framework index. The index tests whether economies determines the maximum value that can be
adopted internationally accepted good practices in recovered
four areas: commencement of proceedings, Official costs of the insolvency proceedings
management of debtors assets, reorganization are deducted
proceedings and creditor participation.
Depreciation of furniture is taken into
The ranking of economies on the ease of resolving account
insolvency is determined by sorting their distance to Present value of debt recovered
frontier scores for resolving insolvency. These scores
are the simple average of the distance to frontier Strength of insolvency framework index (0-
scores for the recovery rate and the strength of 16)
insolvency framework index. The Resolving Sum of the scores of four component indices:
Insolvency indicators do not measure insolvency
Commencement of proceedings index (0-3)
proceedings of individuals and financial institutions.
The data are derived from questionnaire responses Management of debtors assets index (0-6)
by local insolvency practitioners and verified through Reorganization proceedings index (0-3)
a study of laws and regulations as well as public
information on bankruptcy systems. Creditor participation index (0-4)
According to data collected by Doing Business, resolving The resolving insolvency indicators are based on detailed
insolvency takes 2.00 years on average and costs 10.00% information collected through questionnaires completed
of the debtors estate, with the most likely outcome by insolvency experts, including lawyers, practitioners
being that the company will be sold as piecemeal sale. (administrators, trustees), accountants and judges. Data
The average recovery rate is 39.90 cents on the dollar. on the time, cost and outcome refer to the most likely in-
Most indicator sets refer to a case scenario in the largest court insolvency procedure applicable under specific
business city of an economy, except for 11 economies for case study assumptions. Data on provisions applicable to
which the data are a population-weighted average of the judicial liquidation and reorganization is based on the
2 largest business cities. current law governing insolvency proceedings in each
Globally, Georgia stands at 101 in the ranking of 189 economy.
economies on the ease of resolving insolvency (figure
11.1).
Figure 11.1 How Georgia and comparator economies rank on the ease of resolving insolvency

Figure 11.2 Efficiency of proceedings - time, cost and recovery rate in Georgia and comparator economies.

Note: The recovery rate is calculated based on the time, cost and outcome of insolvency proceedings involving domestic legal
entities and is recorded as cents on the dollar recovered by secured creditors. The calculation takes into account the outcome:
whether the business emerges from the proceedings as a going concern or the assets are sold piecemeal. Then the costs of the
proceedings are deducted. Finally, the value lost as a result of the time the money remains tied up in insolvency proceedings is
taken into account. The recovery rate is the present value of the remaining proceeds, based on end-2014 lending rates.
Table 11.1 Details of data on efficiency of insolvency proceedings in Georgia

Indicator Answer Explanation
BizBank is most likely to initiate liquidation proceedings, because it would want
to sell the assets as soon as possible. As a secured creditor, BizBank can prevent
Proceedin liquidation the use of reorganization procedure. It also holds 74% of the debt, which would
g allow it to select a representative to the Conciliation Council - a body that
decides whether liquidation or reorganization should be pursued.
Hotel's assets will be sold at a public auction. At the first auction, the assets must
be sold as a whole. If they are not sold at the first auction, the creditors may
authorize a piecemeal sale during the second auction and the price will be
Outcome piecemeal sale
decreased (Article 38 of the Law on Insolvency Proceedings). It is likely to be
difficult to find a buyer for the hotel as a going concern, therefore, the most
likely outcome is a piecemeal sale.
It takes 2 years to complete liquidation proceedings in Georgia, because

statutory deadlines are not always complied with. In particular, it may take a year
for the first meeting of the creditors to take place. As a first step, BizBank will
commence liquidation proceedings with the Tbilisi City Court. The court will
review the materials and accept the case for consideration. Once the case is
accepted, the National Enforcement Bureau will be appointed as a
trustee/supervisor (Article 26 of the Law on Insolvency Proceedings) and the date
for the first meeting of the creditors is set (Article 21 of the Law on Insolvency
Proceedings). The trustee will inform the creditors about the opening of the
insolvency proceedings by publication, will assume control over the
management of the debtor company, examine its financials and prepare a report
Time (in
2.0 on the insolvency of the debtor (Article 26 of the Law on Insolvency
years)
Proceedings). Creditors submit their claims, and then present them at the first
meeting of the creditors. The judge makes a decision whether to accept or reject
the claim after consulting with the trustee (Article 29 of the Law on Insolvency
Proceedings). Conciliation Council will be appointed (the debtor and the
creditors will each appoint one member and the two will elect the third member)
(Article 32 of the Law on Insolvency Proceedings). The Conciliation Council will
decide whether to proceed with liquidation or with reorganization (Article 33 of
the Law on Insolvency Proceedings). Once the decision to liquidate the debtor is
made, the creditors will appoint a liquidation manager (Article 37 of the Law on
Insolvency Proceedings). Debtor's assets will be sold at an auction organized by
the National Enforcement Bureau.
Around 7% of the value of the estate will be paid to the National Bureau of
Enforcement for their service as an insolvency trustee and 1% of the value of the
estate will be paid to the National Bureau of Enforcement acting as an
Cost (% of
10.0 auctioneer (Article 9 of the Order No 144 of the Minister of Justice, dated July 30,
estate)
2010). Other expenses will include attorneys' fees and remuneration of the
bankruptcy manager, if someone other than the National Bureau of Enforcement
is appointed.
Recovery rate: 39.90


A well-balanced bankruptcy system distinguishes change. Many recent reforms of bankruptcy laws have
companies that are financially distressed but been aimed at helping more of the viable businesses
economically viable from inefficient companies that survive. What insolvency reforms has Doing Business
should be liquidated. But in some insolvency systems recorded in Georgia (table 11.2)?
even viable businesses are liquidated. This is starting to
Table 11.2 How has Georgia made resolving insolvency easieror not?
DB year Reform
Georgia improved insolvency proceedings by streamlining the

DB2011
regulation of auction sales.
Georgia expedited the process of resolving insolvency by

DB2013 establishing or tightening time limits for all insolvency-related
procedures, including auctions.
Strength of resolving insolvency index
The strength of insolvency framework index is the with higher values indicating insolvency legislation that is
sum of the scores on the commencement of better designed for rehabilitating viable firms and
proceedings index, management of debtors assets liquidating nonviable ones. Georgias score on the
index, reorganization proceedings index and creditor strength of insolvency framework index is 6.00 out of 16.
participation index. The index ranges from 0 to 16,
Figure 11.3 Strength of insolvency framework index (0-16) in Georgia and comparator economies

Note: Even if the economys legal framework includes provisions related to insolvency proceedings (liquidation or
reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome
indicators are recorded as no practice.
Table 11.3 Summary of data for the strength of insolvency framework index in Georgia
Answer Score
Strength of insolvency framework index (0-16) 6.00
Commencement of proceedings index (0-3) 1.50
(b) Debtor may

What procedures are available to a DEBTOR when commencing insolvency
file for liquidation 0.5
proceedings?
only
Does the insolvency framework allow a CREDITOR to file for insolvency of

N/A 0.0
the debtor?
(a) Debtor is
What basis for commencement of the insolvency proceedings is allowed generally unable
1.0
under the insolvency framework? to pay its debts
as they mature
Management of debtor's assets index (0-6) 3.50
Does the insolvency framework allow the continuation of contracts

No 0.0
supplying essential goods and services to the debtor?
Does the insolvency framework allow the rejection by the debtor of overly
Yes 1.0
burdensome contracts?
Does the insolvency framework allow avoidance of preferential

Yes 1.0
transactions?
Does the insolvency framework allow avoidance of undervalued

No 0.0
transactions?
Does the insolvency framework provide for the possibility of the debtor
Yes 1.0
obtaining credit after commencement of insolvency proceedings?
(a) Yes over all

pre-
Does the insolvency framework assign priority to post-commencement
commencement 0.5
credit?
creditors, secured
or unsecured
Reorganization proceedings index (0-3) 0.00
(c) Other, please

Which creditors vote on the proposed reorganization plan? 0.0
specify
Does the insolvency framework require that dissenting creditors in

reorganization receive at least as much as what they would obtain in a No 0.0
liquidation?
Are the creditors divided into classes for the purposes of voting on the
reorganization plan, does each class vote separately and are creditors in No 0.0
the same class treated equally?
Creditor participation index (0-4) 1.00

Answer Score
Does the insolvency framework require approval by the creditors for
Yes 1.0
selection or appointment of the insolvency representative?
Does the insolvency framework require approval by the creditors for sale
No 0.0
of substantial assets of the debtor?
Does the insolvency framework provide that a creditor has the right to
No 0.0
request information from the insolvency representative?
Does the insolvency framework provide that a creditor has the right to
No 0.0
object to decisions accepting or rejecting creditors' claims?
LABOR MARKET REGULATION

Doing Business has historically studied the flexibility of regulations as well as secondary sources are reviewed to
regulation of employment, specifically as it relates to the ensure accuracy.
areas of hiring, working hours and redundancy. This year
Doing Business has expanded the scope of the labor To make the data comparable across economies, several
market regulation indicators by adding 16 new assumptions about the worker and the business are
questions, most of which focus on measuring job quality. used.
Over the period from 2007 to 2011 improvements were The worker:
made to align the methodology for the labor market Is a cashier in a supermarket or grocery store,
regulation indicators (formerly the employing workers age 19, with one year of work experience.
indicators) with the letter and spirit of the International Is a full-time employee.
Labour Organization (ILO) conventions. Ten of the 189 Is not a member of the labor union, unless
ILO conventions cover areas now measured by Doing membership is mandatory.
Business (up from four previously): employee The business:
termination, weekend work, holiday with pay, night work, Is a limited liability company (or the equivalent
protection against unemployment, sickness benefits, in the economy).
maternity protection, working hours, equal remuneration Operates a supermarket or grocery store in the
and labor inspections. economys largest business city. For 11
economies the data are also collected for the
Between 2009 and 2011 the World Bank Group worked second largest business city.
with a consultative groupincluding labor lawyers, Has 60 employees.
employer and employee representatives, and experts Is subject to collective bargaining agreements if
from the ILO, the Organisation for Economic Co- such agreements cover more than 50% of the
operation and Development (OECD), civil society and the food retail sector and they apply even to firms
private sectorto review the methodology for the labor that are not party to them.
market regulation indicators and explore future areas of Abides by every law and regulation but does not
research. grant workers more benefits than those
mandated by law, regulation or (if applicable)
A full report with the conclusions of the consultative collective bargaining agreements.
group, along with the methodology it proposed, is
available on the Doing Business website at:
http://www.doingbusiness.org/methodology/labor-
market-regulation.
Doing Business 2016 presents the data for the labor

market regulation indicators in an annex. The report
does not present rankings of economies on these
indicators or include the topic in the aggregate distance
to frontier score or ranking on the ease of doing
business. Detailed data collected on labor market
regulation are available on the Doing Business website
(http://www.doingbusiness.org). The data on labor
market regulation are based on a detailed questionnaire
on employment regulations that is completed by local
lawyers and public officials. Employment laws and

Employment laws are needed to protect workers from the past 5 years did so in ways that increased labor
arbitrary or unfair treatment and to ensure efficient market flexibility. What changes did Georgia adopt that
contracting between employers and workers. Many affected the Doing Business indicators on labor market
economies that changed their labor market regulation in regulation (table 12.1)?
Table 12.1 What changes did Georgia make in terms of labor market regulation?
DB year Reform
Georgia reduced the maximum duration of fixed-term

DB2015 contracts and introduced a notice period for redundancy
dismissals.

The data reported here for Georgia are based on a Employment laws and regulations as well as secondary
detailed survey of labor market regulation that is sources are reviewed to ensure accuracy.
completed by local lawyers and public officials.
Hiring
Data on hiring cover five areas: (i) whether fixed-term wage to the average value added per worker (the ratio of
contracts are prohibited for permanent tasks; (ii) the an economys GNI per capita to the working-age
maximum cumulative duration of fixed-term contracts; population as a percentage of the total population), and
(iii) the minimum wage for a cashier, age 19, with one (v) the availability of incentives for employers to hire
year of work experience; (iv) the ratio of the minimum employees under the age of 25*.
Hiring Data
Fixed-term contracts prohibited for permanent tasks? No
30 months - but if the next fixed term
labour agreement is concluded after 60
days after the initial agreement expires it
should be considered as fixed term
agreement. At the same time, this
Maximum length of a single fixed-term contract (months)
regulation does not apply to company
during 48 month of its registration (it is
considered as a newly established
company) (Labour Code of Georgia Art. 6,
Par1 prim 3 and prim 4)
Maximum length of fixed-term contracts, including renewals (months) 30.0
Minimum wage applicable to the worker assumed in the case study
23.2
(US$/month)
Ratio of minimum wage to value added per worker 0.1
Incentives for employing workers under age 25? No

*A new question introduced in the Doing Business 2016 report for the first time.

Working hours
Data on working hours cover nine areas: i) the maximum and nonnursing women can work the same night hours
number of working days allowed per week; (ii) the as men*; (vii) whether there are restrictions on weekly
premium for night work (as a percentage of hourly pay); holiday work; (viii) whether there are restrictions on
(iii) the premium for work on a weekly rest day (as a overtime work*; and (ix) the average paid annual leave
percentage of hourly pay); (iv) the premium for overtime for workers with 1 year of tenure, 5 years of tenure, and
work (as a percentage of hourly pay)*; (v) whether there 10 years of tenure.
are restrictions on night work; (vi) whether nonpregnant
Working Hours Data
Maximum number of working days per week 7.0
Premium for night work (% of hourly pay) 0.0
Premium for work on weekly rest day (% of hourly pay) 0.0
Premium for overtime work (% of hourly pay) 0.0
Restrictions on night work? 0.0

Whether nonpregnant and nonnursing women can work the same night Yes
hours as men
Restrictions on weekly holiday? 0.0
Restrictions on overtime work? No
Paid annual leave for a worker with 1 year of tenure (working days) 24.0
Paid annual leave for a worker with 5 years of tenure (working days) 24.0
Paid annual leave for a worker with 10 years of tenure (working days) 24.0
Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in 24.0
working days)

*A new question introduced in the Doing Business 2016 report for the first time.

Redundancy rules
Data on redundancy cover nine areas: (i) the length of whether the employer needs approval from a third party
the maximum probationary period (in months) for to terminate one redundant worker; (vi) whether the
permanent employees; (ii) whether redundancy is employer needs approval from a third party to terminate
allowed as a basis for terminating workers; (iii) whether a group of nine redundant workers; (vii) whether the law
the employer needs to notify a third party (such as a requires the employer to reassign or retrain a worker
government agency) to terminate one redundant worker; before making the worker redundant; (viii) whether
(iv) whether the employer needs to notify a third party to priority rules apply for redundancies; and (ix) whether
terminate a group of nine redundant workers; (v) priority rules apply for reemployment.
Redundancy rules Data
Maximum length of probationary period (months) 6.0
Dismissal due to redundancy allowed by law? Yes
Third-party notification if one worker is dismissed? No
Third-party approval if one worker is dismissed? No
Third-party notification if nine workers are dismissed? No
Third-party approval if nine workers are dismissed? No
Retraining or reassignment obligation before redundancy? No
Priority rules for redundancies? No
Priority rules for reemployment? No


Redundancy cost
Redundancy cost measures the cost of advance notice severance payments applicable to a worker with 1 year of
requirements and severance payments due when tenure, a worker with 5 years and a worker with 10 years
terminating a redundant worker, expressed in weeks of is considered. One month is recorded as 4 and 1/3
salary. The average value of notice requirements and weeks.
Redundancy cost indicator (in salary weeks) Data
Notice period for redundancy dismissal for a worker with 1 year of tenure 4.3
Notice period for redundancy dismissal for a worker with 5 years of tenure 4.3
Notice period for redundancy dismissal for a worker with 10 years of tenure 4.3
Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years 4.3
of tenure)
Severance pay for redundancy dismissal for a worker with 1 year of tenure 4.3
Severance pay for redundancy dismissal for a worker with 5 years of tenure 4.3
Severance pay for redundancy dismissal for a worker with 10 years of tenure 4.3
Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years 4.3
of tenure)

Job quality
Doing Business 2016 report presents, for the first time, on-the-job training at no cost to the employee; (viii)
data on 12 job quality areas: (i) whether the law whether a worker is eligible for an unemployment
mandates equal remuneration for work of equal value; protection scheme after one year of service; (ix) the
(ii) whether the law mandates nondiscrimination based minimum duration of the contribution period (in months)
on gender in hiring, (iii) whether the law mandates paid required for unemployment protection; (x) whether an
or unpaid maternity leave; (iv) the minimum length of employee can create or join a union; (xi) the availability
maternity leave in calendar days (minimum number of of administrative or judicial relief in case of infringement
days that legally have to be paid by the government, the of employees rights; and (xii) the availability of a labor
employer or both); (v) whether employees on maternity inspection system. If no maternity leave is mandated by
leave receive 100 % of wages; (vi) the availability of five law, parental leave is measured if applicable.
fully paid days of sick leave a year; (vii) the availability of
Job Quality Data
Equal remuneration for work of equal value? No
Gender nondiscrimination in hiring? No
Paid or unpaid maternity leave mandated by law? Yes
Minimum length of maternity leave (calendar days)? 183.0
Receive 100% of wages on maternity leave? Yes
Five fully paid days of sick leave a year? Yes
On-the-job training? No
Unemployment protection after one year of employment? No
Minimum contribution period for unemployment protection (months)? n.a.
Can employee create or join union? Yes
Administrative or judicial relief for infringement of employees' rights? Yes
Labor inspection system? Yes

DISTANCE TO FRONTIER AND EASE OF DOING BUSINESS RANKING
Doing Business presents results for two aggregate even though it is no longer at the frontier in a
measures: the distance to frontier score and the ease of subsequent year.
doing business ranking, which is based on the distance
For scores such as those on the strength of legal rights
to frontier score. The ease of doing business ranking
index or the quality of land administration index, the
compares economies with one another; the distance to
frontier is set at the highest possible value. For the total
frontier score benchmarks economies with respect to
tax rate, consistent with the use of a threshold in
regulatory best practice, showing the absolute distance
calculating the rankings on this indicator, the frontier is
to the best performance on each Doing Business
defined as the total tax rate at the 15th percentile of the
indicator. When compared across years, the distance to
overall distribution for all years included in the analysis
frontier score shows how much the regulatory
up to and including Doing Business 2015. For the time to
environment for local entrepreneurs in an economy has
pay taxes the frontier is defined as the lowest time
changed over time in absolute terms, while the ease of
recorded among all economies that levy the three major
doing business ranking can show only how much the
taxes: profit tax, labor taxes and mandatory
regulatory environment has changed relative to that in
contributions, and value added tax (VAT) or sales tax. For
other economies.
the different times to trade across borders, the frontier is
Distance to Frontier defined as 1 hour even though in many economies the
time is less than that.
The distance to frontier score captures the gap between
an economys performance and a measure of best In the same formulation, to mitigate the effects of
practice across the entire sample of 36 indicators for 10 extreme outliers in the distributions of the rescaled data
Doing Business topics (the labor market regulation for most component indicators (very few economies
indicators are excluded). For starting a business, for need 700 days to complete the procedures to start a
example, the former Yugoslav Republic of Macedonia business, but many need 9 days), the worst performance
and New Zealand have the smallest number of is calculated after the removal of outliers. The definition
procedures required (1), and New Zealand the shortest of outliers is based on the distribution for each
time to fulfill them (0.5 days). Slovenia has the lowest component indicator. To simplify the process two rules
cost (0.0), and Australia, Colombia and 103 other were defined: the 95th percentile is used for the
economies have no paid-in minimum capital indicators with the most dispersed distributions
requirement (table 14.1 in the Doing Business 2016 (including minimum capital, number of payments to pay
report). taxes, and the time and cost indicators), and the 99th
percentile is used for number of procedures. No outlier is
Calculation of the distance to frontier score
removed for component indicators bound by definition
Calculating the distance to frontier score for each or construction, including legal index scores (such as the
economy involves two main steps. In the first step depth of credit information index, extent of conflict of
individual component indicators are normalized to a interest regulation index and strength of insolvency
common unit where each of the 36 component framework index) and the recovery rate (figure 14.1).
indicators y (except for the total tax rate) is rescaled
In the second step for calculating the distance to frontier
using the linear transformation (worst y)/(worst
score, the scores obtained for individual indicators for
frontier). In this formulation the frontier represents the
each economy are aggregated through simple averaging
best performance on the indicator across all economies
into one distance to frontier score, first for each topic
since 2005 or the third year in which data for the
and then across all 10 topics: starting a business, dealing
indicator were collected. Both the best performance and
with construction permits, getting electricity, registering
the worst performance are established every five years
property, getting credit, protecting minority investors,
based on the Doing Business data for the year in which
paying taxes, trading across borders, enforcing contracts
they are established, and remain at that level for the five
and resolving insolvency. More complex aggregation
years regardless of any changes in data in interim years.
methodssuch as principal components and
Thus an economy may set the frontier for an indicator
unobserved componentsyield a ranking nearly
identical to the simple average used by Doing Business . The nonlinear transformation is not based on any
4
Thus Doing Business uses the simplest method: economic theory of an optimal tax rate that minimizes
weighting all topics equally and, within each topic, giving distortions or maximizes efficiency in an economys
equal weight to each of the topic components . overall tax system. Instead, it is mainly empirical in
5
nature. The nonlinear transformation along with the

An economys distance to frontier score is indicated on a
threshold reduces the bias in the indicator toward
scale from 0 to 100, where 0 represents the worst
economies that do not need to levy significant taxes on
performance and 100 the frontier. All distance to frontier
companies like the Doing Business standardized case
calculations are based on a maximum of five decimals.
study company because they raise public revenue in
However, indicator ranking calculations and the ease of
other waysfor example, through taxes on foreign
doing business ranking calculations are based on two
companies, through taxes on sectors other than
decimals.
manufacturing or from natural resources (all of which are
The difference between an economys distance to outside the scope of the methodology). In addition, it
frontier score in any previous year and its score in 2015 acknowledges the need of economies to collect taxes
illustrates the extent to which the economy has closed from firms.
the gap to the regulatory frontier over time. And in any
Calculation of scores for economies with 2 cities
given year the score measures how far an economy is
covered
from the best performance at that time.
For each of the 11 economies in which Doing Business
Treatment of the total tax rate
collects data for the second largest business city as well
The total tax rate component of the paying taxes as the largest one, the distance to frontier score is
indicator set enters the distance to frontier calculation in calculated as the population-weighted average of the
a different way than any other indicator. The distance to distance to frontier scores for these two cities (table
frontier score obtained for the total tax rate is 13.1). This is done for the aggregate score, the scores for
transformed in a nonlinear fashion before it enters the each topic and the scores for all the component
distance to frontier score for paying taxes. As a result of indicators for each topic.
the nonlinear transformation, an increase in the total tax
rate has a smaller impact on the distance to frontier
score for the total tax rateand therefore on the
distance to frontier score for paying taxesfor
economies with a below-average total tax rate than it
would have had before this approach was adopted in
Doing Business 2015 (line B is smaller than line A in
figure 14.2 of the Doing Business 2016 report). And for
economies with an extreme total tax rate (a rate that is
very high relative to the average), an increase has a
greater impact on both these distance to frontier scores
than it would have had before (line D is bigger than line
C in figure 14.2 of the Doing Business 2016 report).
4
See Djankov, Manraj and others (2005). Principal components and
unobserved components methods yield a ranking nearly identical to
that from the simple average method because both these methods
assign roughly equal weights to the topics, since the pairwise
correlations among indicators do not differ much. An alternative to the
simple average method is to give different weights to the topics,
depending on which are considered of more or less importance in the
context of a specific economy.
5
For getting credit, indicators are weighted proportionally, according
to their contribution to the total score, with a weight of 60% assigned
to the strength of legal rights index and 40% to the depth of credit
information index. Indicators for all other topics are assigned equal
weights
Table 13.1 Weights used in calculating the distance to implemented regulatory reforms making it easier to do
frontier scores for economies with 2 cities covered business in 3 or more of the 10 topics included in this
years aggregate distance to frontier score. Changes
Economy City Weight (%)
making it more difficult to do business are subtracted
Dhaka 78
Bangladesh from the total number of those making it easier to do
Chittagong 22
So Paulo 61
business. Twenty-four economies meet this criterion:
Brazil Armenia; Azerbaijan; Benin; Costa Rica; Cte dIvoire;
Rio de Janeiro 39
Shanghai 55 Cyprus; Hong Kong SAR, China; Indonesia; Jamaica;
China
Beijing 45 Kazakhstan; Kenya; Lithuania; Madagascar; Mauritania;
Mumbai 47 Morocco; Romania; the Russian Federation; Rwanda;
India
Delhi 53 Senegal; Togo; Uganda; the United Arab Emirates;
Jakarta 78 Uzbekistan; and Vietnam. Second, Doing Business sorts
Indonesia
Surabaya 22 these economies on the increase in their distance to
Tokyo 65
Japan frontier score from the previous year using comparable
Osaka 35
data.
Mexico City 83
Mexico
Monterrey 17 Selecting the economies that implemented regulatory
Lagos 77 reforms in at least three topics and had the biggest
Nigeria
Kano 23 improvements in their distance to frontier scores is
Karachi 65 intended to highlight economies with ongoing, broad-
Pakistan
Lahore 35
based reform programs. The improvement in the
Moscow 70
Russian Federation distance to frontier score is used to identify the top
St. Petersburg 30
New York 60 improvers because this allows a focus on the absolute
United States improvementin contrast with the relative improvement
Los Angeles 40
Source: United Nations, Department of Economic and Social shown by a change in rankingsthat economies have
Affairs, Population Division, World Urbanization Prospects, made in their regulatory environment for business.
2014 Revision. http://esa.un.org/unpd/wup/CD-
ROM/Default.aspx.
Ease of Doing Business ranking
Economies that improved the most across 3 or more
Doing Business topics in 2014/15 The ease of doing business ranking ranges from 1 to 189.
The ranking of economies is determined by sorting the
Doing Business 2016 uses a simple method to calculate aggregate distance to frontier scores, rounded to 2
which economies improved the ease of doing business decimals.
the most. First, it selects the economies that in 2014/15
RESOURCES ON THE DOING BUSINESS WEBSITE

Current features Law library
News on the Doing Business project Online collection of business laws and regulations
http://www.doingbusiness.org relating to business
http://www.doingbusiness.org/law-library
Rankings
How economies rankfrom 1 to 189 Contributors
http://www.doingbusiness.org/rankings More than 11,400 specialists in 189 economies who
participate in Doing Business
Data http://www.doingbusiness.org/contributors/doing-
All the data for 189 economiestopic rankings, business
indicator values, lists of regulatory procedures and
details underlying indicators Entrepreneurship data
http://www.doingbusiness.org/data Data on business density (number of newly
registered companies per 1,000 working-age
Reports people) for 136 economies
Access to Doing Business reports as well as http://www.doingbusiness.org/data/exploretopics/ent
subnational and regional reports, case studies and repreneurship
customized economy and regional profiles
http://www.doingbusiness.org/reports Distance to frontier
Data benchmarking 189 economies to the frontier
Methodology in regulatory practice and a distance to frontier
The methodologies and research papers underlying calculator
Doing Business http://www.doingbusiness.org/data/distance-to-
http://www.doingbusiness.org/methodology frontier
Research Information on good practices

Abstracts of papers on Doing Business topics and Showing where the many good practices identified
related policy issues by Doing Business have been adopted
http://www.doingbusiness.org/research http://www.doingbusiness.org/data/good-practice
Doing Business reforms

Short summaries of DB2016 business regulation
reforms and lists of reforms since DB2008
http://www.doingbusiness.org/reforms
Historical data
Customized data sets since DB2004
http://www.doingbusiness.org/custom-query

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Doing Business 2016 Georgia

Economy Profile 2016

CHANGES IN DOING BUSINESS 2016

THE BUSINESS ENVIRONMENT

The 10 topics included in the ranking in Doing Business

THE BUSINESS ENVIRONMENT

Source: Doing Business database.

THE BUSINESS ENVIRONMENT

THE BUSINESS ENVIRONMENT

Figure 1.3 Rankings on Doing Business topics - Georgia

Figure 1.4 Distance to frontier scores on Doing Business topics - Georgia

Source: Doing Business database.

THE BUSINESS ENVIRONMENT

THE BUSINESS ENVIRONMENT

Table 1.1 Summary of Doing Business indicators for Georgia

Best performer globally

Starting a Business (DTF

Cost (% of income per

Paid-in min. capital (%

Best performer globally

Building quality control

Getting Electricity (DTF

Cost (% of income per

Reliability of supply and

Quality of the land

Best performer globally

Getting Credit (DTF

Strength of legal rights

Credit registry coverage

Credit bureau coverage 22 Economies

United Arab Emirates

Paying Taxes (DTF United Arab Emirates

Best performer globally

Total tax rate (% of

Trading Across Borders

Trading across Borders

Time to export: Border

Cost to export: Border

Time to import: Border

Cost to import: Border

Enforcing Contracts 13 18 28 40 29 52 34 36 Singapore (1)

Best performer globally

Recovery rate (cents on

Source: Doing Business database.

investments, so personal assets of the owners are not

Figure 2.1 What it takes to start a business in Georgia

Source: Doing Business database.

Source: Doing Business database.

Georgia simplified business start-up by eliminating the

Submission of application for registration may be carried out by one of

According to the amendment on registration of a company NAPR

Open a bank account

Agency: Commercial Bank

* Takes place simultaneously with another procedure.

DEALING WITH CONSTRUCTION PERMITS

DEALING WITH CONSTRUCTION PERMITS

Source: Doing Business database.

DEALING WITH CONSTRUCTION PERMITS

Source: Doing Business database.

DEALING WITH CONSTRUCTION PERMITS

Georgia made dealing with construction permits easier by

DEALING WITH CONSTRUCTION PERMITS

Governmental Decree # 57 of March 24, 2009 on the Procedures

Agency: Tbilisi Architecture at the Tbilisi Hall