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In accordance with the State Audit Service’s report on the Financial Performance of the Ministry of Economy and Sustainable Development of Georgia, Enterprise Georgia LEPL leased a non-residential building from JSC Bechdviti Sitkvis Kombinati, located at N5/16-18 Marjanishvili Street, Tbilisi, in the period between 30 July 2014 and 31 December 2018. As per the contract, the leasing part was 198 square metres whilst the monthly leasing fee was USD 3,564. That contract was amended several times which envisioned either an increase in the leasing space or a growth of the monthly leasing fee. Since 7 September 2017, the leasing space has been 922 square meters and the leasing fee was USD 16,378. In 2014-2018, Enterprise Georgia LEPL paid GEL 1,442,259 in total as a leasing fee and GEL 495,376 in 2018.

The aforementioned report also indicates that Enterprise Georgia failed to submit a cost-efficiency analysis. Therefore, it could not be assessed how economically and efficiently the building’s lease money has been spent.

Since Enterprise Georgia LEPL is the main implementing body of the Produce in Georgia project, FactCheck will take the project’s statistical data into account to assess the LEPL’s performance.

As of September 2019 and in accordance with official information, a total of 532 projects (including industry, village, hotel and property directions) have received support as part of the Produce in Georgia project since 2014 with the total investment exceeding GEL 1.228 billion. Of that amount, the volume of loans approved by commercial banks is over GEL 670.1 million. More than 18,410 new jobs have been created as a part of those projects.

Table 1: Enterprise Georgia Project’s Budget in 2014-2018

Year

Plan

Execution

2014

264,500

264,500

2015

10 Million

5.7 Million

2016

10.5 Million

11.8 Million

2017

15.5 Million

13.8 Million

2018

16.7 Million

14.8 Million

The factual budget of the project in 2014-2018 was GEL 46.5 million.

The international business consultancy company BDO carried out research for Enterprise Georgia LEPL to evaluate the efficiency of the Produce in Georgia project (wealth created by beneficiaries as part of the project).

In order to evaluate the impact of the project, the value of production created by the beneficiaries was put vis-à-vis the country-produced total added value. Since companies do their accounting in current prices, a comparison is made with the nominal GDP.

In 2014-2017, the share of the GDP created by project beneficiaries vis-à-vis the total Georgian GDP increased from 0.001% to 0.158% (0.15 of a percentage point). Therefore, the share of the GDP created by beneficiary companies as part of the project is marginal as compared to the total GDP, albeit it is growing.

In accordance with the concluding part of the research, the correlation coefficient is positive. This means that the growth of subsidies given as part of the project causes a growth of the GDP, too. However, the value does not change proportionally and the effect produced by the project beneficiaries remains less as compared to the subsidy.

In addition to the expenses of Enterprise Georgia, the State Audit Service’s report also gives an assessment of the efficiency of Enterprise Georgia’s performance.

As mentioned previously, Enterprise Georgia LEPL is the main implementer of the Produce in Georgia project. In accordance with the report, Enterprise Georgia fails to carry out a comprehensive monitoring of the project’s beneficiaries, is uninformed about the observance of contract terms on the part of the beneficiaries and it does not identify inactive enterprises. Furthermore, it is reported that Enterprise Georgia LEPL cannot ensure a proper controlling environment. Therefore, it is possible that there will not be a thorough control vis-à-vis the purpose of the money spent as a part of the Produce in Georgia project nor will the deficiencies and shortcomings be detected as well as the absence of a timely and proper reaction.

In conclusion, we can say that according to the State Audit Service’s report, the principal coordinator of the Produce in Georgia project cannot exert a thorough control of the activities of the project’s beneficiaries or the money provided. In regard to the Produce in Georgia project itself, based on BDO’s research, its efficiency is much lower as compared the subsidies allocated as a part of the project. In this light, Enterprise Georgia LEPL is spending almost half a million in a year on the office fee only (without submitting a cost-efficiency analysis) which shows signs of an inefficient spending of funds.


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