Georgia May Increase Fees for Extraction of Natural Resources

A review of fees for use of natural resources could have significant effect upon investment sentiment in Georgian agribusiness.

Much of the recent new greenhouse development in Georgia has been co-located with natural hot springs, with bores sunk during the Soviet era. Capital investments of well over $1 million per hectare, and significant expenses in staff training and management, make this a difficult sector into which investment can be attracted.  For the sake of lowering food prices, improving food security and generating employment and tax revenue, it is necessary for government not to erect too many impediments to development. Hopefully hot water charges per cubic metre will not increase too dramatically.

Civil.Ge | Georgia May Increase Fees for Extraction of Natural Resources

It would be reassuring for domestic and foreign investors in the sector for the Minister to clarify that “use of natural resources” excludes irrigation water from channels, groundwater from bores, or use of grazing land in semi-forested areas, stock routes or on mountain pastures.

Georgian Ministry for Sustainable Development and Economy said on November 1, that “inappropriately low” fees for extraction of natural resources might be revised.

Fee changes, if introduced, will apply resources like gold, copper, manganese, mineral waters and forestry.

Fees for the use of natural resources are determined by the law; for example, fee for extraction of gold is GEL 0.9 per one gram; copper – GEL 136 per tonne (the rate was increased from previous GEL 90 per tonne in 2007); manganese ore with 1% concentration – GEL 0.012 per tonne; mineral waters – GEL 3 per cubic meter.

“We will pay special attention to the issue of use of natural resources – such as copper, manganese and gold deposits; forests; water resources; mineral waters, like Sairme, Borjomi, Nabeghlavi and others,” new Economy Minister, Giorgi Kvirikashvili, said in a written statement. “The list is long and often use of [natural resources] takes place through irrational methods and because of inappropriately low rates of natural resources extraction fee, this important resource for the state is actually being wasted with the country receiving no adequate benefit.”

“In many cases it would be logical to think that corrupt deals were in place,” the statement reads.

“We plan to study obligations undertaken by investors in all the above mentioned directions with maximally taking into account the interests of both the state and businesses.”

“We do not rule out that fees for extraction of natural resources will be significantly reviewed,” the statement reads.

The Ministry for Sustainable Development and Economy also said that Georgia would remain committed to “all the international agreements and obligations which secure protection of freedom and rights of businesses in Georgia.”

via Civil.Ge | Georgia May Increase Fees for Extraction of Natural Resources.

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