Georgia’s banking sector has been “at the forefront” of implementing good corporate governance practices and helping to strengthen the country’s economic and financial development, says a new report by a joint World Bank-International Monetary Fund programme.
Produced as part of the programme of Reports on Observance of Standards and Codes, with the assistance of the European Union, the report was published on June 21 and said since the Association Agreement between the European Union and Georgia had come into force in 2016, the legal and regulatory framework in Georgia had undergone “a total transformation” with regard to corporate governance and was now “closely aligned” with good practices.
Sebastian Molineus, the World Bank Regional Director for the South Caucasus, said over the past 20 years Georgia had achieved “noteworthy progress” in improving the country’s corporate governance framework.
“For example, the Government has accomplished this by adopting the new Law on Entrepreneurs and three corporate governance codes. To ensure these improvements contribute to economic growth, we believe the focus should now be on effective enforcement of the new framework, with a particular focus on improving corporate governance practices of state-owned enterprises, as well as continuous capacity building among regulators and companies to enhance corporate governance in Georgia”, he added.
To encourage continued improvement in company practices, the ROSC proposes three main recommendations:
– Strengthening corporate governance and centralizing the ownership function of the state over state-owned enterprises;
– Devoting efforts and resources to raising awareness and increasing the capacity of Georgian companies to comply with the new requirements, and of the regulatory bodies to enforce the new rules;
– Analysing and updating the corporate governance legal and regulatory frameworks over the medium- to long-term to keep it up to date with the local context and with global trends.
The corporate governance ROSC was based on a survey of Georgian companies that demonstrated large increases in awareness and the perceived importance of corporate governance over the past two decades. It also confirmed that the banking sector leads the way in the practical implementation of good corporate governance and independence requirements in Georgia.
“At the same time, however, corporate governance practices of state-owned enterprises are lagging behind and should receive more attention from stakeholders”, the World Bank also said. (Agenda/Business World Magazine)