The essence and role of small and medium-sized businesses in the modern Georgian economy

Abstract

At present, in the modern world economy, including Georgia, there is no uniform definition of small and medium-sized enterprises, which leads to some confusion. That is why in this paper we tried to clarify what exactly is meant by „small and medium-sized business. We primarily support the view that an enterprise belongs to the SMB sector if it meets the criteria for classifying entities of SMB’s in a particular country. However, the criterion threshold is based on the indicators of the country’s economy and companies’ development at this stage and is in line with European criteria for processing of statistics. However, the author emphasizes that the small enterprise defined by the methodology of the National Statistics Office of Georgia is a broader concept than the status of a small entrepreneur recognized under the Tax Code. This can lead to serious misunderstandings when implementing and evaluating different programs. That is why, within the framework of the reform, it is necessary to harmonize and unify the different definitions of small and medium-sized businesses used for tax and statistical purposes. Through the old and the new methodology of the EU indicators and comparative analysis of the relevant parameters of small and medium-sized enterprises in Georgia and the EU countries the article shows that the essence and significance of a small business is manifested in its functions, the priority of which, due to the socio-economic problems of the country, is changing in time and space. The stages of development of small and medium-sized enterprises in Georgia during the transition period to the market economy of Georgia are chronologically analyzed. The belief that legal small business formation in Georgia began in the 90s of the XX century is rejected. The point is that the first stage of the legal regeneration and formation process of legal small business in Georgia, albeit in a limited way, began even in the period of so-called „perestroika,„ in the form of the legitimacy of individual labor activities and cooperatives. This process has become increasingly sophisticated during the transition to a market economy and as a result small and medium-sized businesses have taken the modern form somewhat, but the process of its development and perfection still continues.