COMMITTED TO IMPROVING THE STATE OF THE WORLD

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1 COMMITTED TO IMPROVING THE STATE OF THE WORLD Ministry of Economy and Sustainable Development of Georgia 2016

GCI - Ranking In 2016-2017, Georgia takes 59 th position, its ranking score amounts to 4,32

Comparison of Georgia s Rating with other Countries 120 100 80 60 40 20 0 94 3.14 3.

Score 2013/ 2014 2014/ 2015 2015/ 2016/ 2016 2017 7 6 5 4 3 2 1 0 Switzerland [5,81]

2 GCI - Ranking In , Georgia takes 59 th position, its ranking score amounts to 4,32 (middle indicator) Georgia improved its position by 7 steps Georgia s Rating by Years Comparison of Georgia s Rating with other Countries / / / / / / 2010 Ranking 2010/ / / 2013 Score 2013/ / / 2016/ Switzerland [5,81] Estonia [4,78] Lithuania [4,60] Azerbaijan [4,55] Russia [4,51] Latvia[4,45] Turkey [4,39] Georgia [4,32] Armenia Ukraine [4,00] Georgia [3,14] 2004/

GCI Stages of Development GCI factor group contains 3 stages of country development.

Stage-Factor-driven Less than 2000 35 economies Transition from Stage 1 to Stage 2 2,000-2,999 17 economies II.

Stage-Innovation-driven More than 17,000 37 economies I Stage Basic Requirements II Stage Efficiency Enhancers III Stage - Innovation and Sophistication Factors 1. Institutions 2. Infrastructure 3.

3 GCI Stages of Development GCI factor group contains 3 stages of country development. Three main stages of country development contain 3 sub-indexes, that are grouped into 12 pillars of competitiveness Stages of Development GDP per capita (US$) Number of Countries I. Stage-Factor-driven Less than economies Transition from Stage 1 to Stage 2 2,000-2, economies II. Stage-Efficiency-driven 3,000-8, economies (Georgia) Transition from Stage 2 to Stage 3 9,000-17, economies III. Stage-Innovation-driven More than 17, economies I Stage Basic Requirements II Stage Efficiency Enhancers III Stage - Innovation and Sophistication Factors 1. Institutions 2. Infrastructure 3. Macroeconomic environment 4. Health and primary education 1. Higher education and training 2. Goods market efficiency 3. Labor market efficiency 4. Financial market development 5. Technological readiness 6. Market size 1. Business sophistication 2. R&D Innovation In Georgia s position compared to Basic requirements 46 th position with the score of 4.9 (improved by 4 steps) Efficiency enhancers 69 th position with the score of 4.1 (improved by 8 steps) Innovation and sophistication factors 113 rd position with the score of 3.2 (improved by 5 steps)

4 GCI Indicators and Scores Three main stages of country development contain 3 sub-indexes, that are grouped into 12 pillars of competitiveness, which encompass 114 components. Pillars are measured by the scores from 1 to 7 from 5.45 to 7 score - very high indicator from 4.51 to 5.44 score - high indicator from 3.51 to 4.50 score - middle indicator from3.01 to 3.50 score - law indicator from 1 to 3 score - very law indicator Innovation (2.8) Business sophistication (3.6) market size (3) Institutions (4.4) Infrastructure (4.1) 64 Macroeconomic environment (5.2) Health and primary Technological readiness (4.2) Higher education and training (4.1) Financial market development (4.2) Labor market efficiency (4.5) Goods market efficiency (4.6)

5 I. Factor Driven Basic Requirements I. Institutions 43 rd position (overall score - 4.4) II. Infrastructure 65 th position (overall score - 4.1) Property rights (4.8) Strength of investor 43 Diversion of public protec. (6.8) 42 funds (4.2) Reliability of police services (5.3) 40 Organized crime (5.8) Business costs of crime and viol. (5.5) 38 Business costs of terrorism (5.7) Protec. of minority shareholders inter (6.8) Efficacy of corporate boards (4.8) Intellectual prop. protection (3.6) Irregular payments and bribes (5.6) Favori. in decisions of govern. Offic. (3.5) Burden of govern regul (4.8) Transparency of govern. Policym (4.5) 77 Public trust in politicians (2.9) 63 Judicial independence (4) Fixed telephone lines/100 pop. Mobile telephone subscr/100 pop Quality of electricity supply 99 Available airline seat km/week, Quality of overall infrastructure (4) Quality of roads (3.8) 71 Quality of air transport Quality of railroad infrastructure (3.9) Quality of port infrastructure (4) Strength of auditing and repor. stand (4.7) 61 Ethical behavior of firms (3.9) Efficiency of legal framework in 69 Wastefulness of government spending (3.2) Effic. of legal framework in settling disp. (4)

6 I. Factor Driven Basic Requirements III. Macroeconomic Environment 40 th position (overall score - 5.2) IV. Health and Primary Education 64 rd position (overall score 5.9) Govern. budget balance, % of GDP(-1.2) Primary education Malaria cases (0.0) Business impact of malaria (6.3) Country credit rating Gross national savings, % of GDP (21.7) Quality of primary Tuberculosis cases (106) Government debt, % of GDP (41.2) Inflation, annual % change (4) Life expectancy (74.7) 69 Infant mortality (10.6) Business impact of HIV/AIDS (6.0) 67 Business impact of tuberculosis (5.7) HIV prevalence,% adult pop.(0.3)

7 II. Efficiency Driven - Efficiency Enhancers Pillar V. Higher V. Education and and Training 89 th 92position nd Pillar VI. VI. Goods Goods Market Efficiency 46 th 60position th (overall score ) 4.1) (overall score ) 4.6) Extent of staff training (3.3) Availability of 125 research & training services (3.5) Internet access in schools (4.2) Secondary education enrollment,% gross (99.4) Tertiary education enrollment (39.2) Quality of the education system (3.3) Quality of math and science education (3.5) იმპორტის წილი მშპ-ში (66.7) საბაჟო პროცედურების სიმძიმე (5.4) ბიზნესის გავლენა პირ. უცხოურ 23 ინვესტიც. (5.4) სავაჭრო ტარიფები (0.9) გადას.ეფექტი ინვესტიციებზე (5.1) მთლიანი საგად. განაკვეთი (16.4) ბიზნესის დაწყებისათვის საჭირო ბიზნესის დაწყ. საჭირო დრო (2) სავაჭრო ბარიერ. აღმოფხვრა (5) Quality of management schools (3.8) Intensity of local competition (45) Buyer sophistication (3.1) Extent of market dominance (3.6) 105 Degree of customer orientation (3.1) 92 Prevalence of foreign ownership (4.2) Agricultural policy costs (3.8) Effectiveness of anti-monopoly policy (3.1)

8 II. Efficiency Driven - Efficiency Enhancers VII. Labor Market Efficiency 43 th position (overall score - 4.5) VIII. Financial Market Development 58 th position (overall score 4.2) Financial services Cooperation in meeting business labor-employer needs (4.1) Women in labor 89 Flexibility of wage Legal rights force, ratio to 84 determination (5.7) index (9) Hiring and firing 20 practices (4.6) Country capacity 10 to retain talent Reliance on 75 professional Pay and productivity (3.9) Redundancy costs, weeks of salary Effect of taxation on incentives to Regulation of securities exchanges (4.1) Soundness of banks (5.2) Venture capital availability (2.6) Affordability of financial services (3.6) 130 Financing through local equity market (2.4) Ease of access to loans (2.4)

9 II. Efficiency Driven - Efficiency Enhancers IX. Technological Readiness 65 th position (overall score - 4.2) X. Market Size 101 st position (overall score - 3) Mobile broadband subscriptions /100 pop (50.4) Int l internet bandwidth, kb/s per user (101.5) 73 Availability of latest technologies (4) Fixed broadband internet subscriptions /100 pop (14.6) Firm-level technology 111 absorption (4) 97 Individuals using internet,% (45.2) FDI and technology transfer (4) Exports as a percentage of GDP (37.6) Domestic market s size index (2.7) GDP (PPP$billions) (35.6) 104 Foreign market size index (3.7)

10 III. Innovation Driven - Innovation & Sophistication Factors XI. Business Sophistication 102 nd position (overall score - 3.6) XII. R&D Innovation 116 th position (overall score - 2.8) Willingness to delegate authority (3.2) Extent of marketing (4.3) Production process sophistication (3.4) Control of international distribution (3.4) Local supplier quantity (3.5) Local supplier quality (3.7) 116 Value chain breadth (3.7) State of cluster 122 development (3) Nature of competitive advantage (3.6) PCT patents, applications/mln. pop (2.1) Availability of scientists and engineers (1.3) Gov't procurement of advanced tech products (3.1) Capacity for innovation (3.7) Quality of 118 scientific research institutions (3) 123 Company spending on R&D (2.7) University-industry collaboration in R&D (2.7)

2 Insufficient capacity to innovate 8.2 Poor work ethic in national labor force 8.0 Tax rates 4.6 Tax regulations 3.

11 GCI Problematic Factors for Doing Business The Most Problematic Factors for Doing Business Inflation 10.1 Inefficient government bureaucracy 9.8 Inadequate supply of infrastructure 9.0 Policy insability 8.2 Insufficient capacity to innovate 8.2 Poor work ethic in national labor force 8.0 Tax rates 4.6 Tax regulations 3.9 Government instability/coups 3.9 Foreign currency regulations 2.8 Restrictive labor regulations 1.6 Corruption 0.8 Crime and theft 0.3 Poor public health Percent of responses

12 The Global Competitiveness Index What is Measured What is Global Competitiveness Index (GCI) GCI is defined by the World Economic Forum. It is a set of institutions, policies, and factors that determine the level of productivity of a country, conditions of public institutions and technical conditions Data used in GCI Rating uses public accessible (statistic) datas (WB, IMF, etc.) and results of findings made by World Economic Forum. These findings are made annually with the support of partner institutions (research institutions and business centers) What GCI Report contains GCI analysis the factors that play significant role in creating favorable business-climate environment in the country and are important for competitiveness and manufacture point of view It considers strength and weaknesses of a country, identifies priorities for the facilitation of political reforms implementation How many countries GCI Report encompass The report encompasses 138 countries.

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