* Minister expects FDI to be $1.63 bln-$1.64 bln in 2016
* Says FDI to rise by 7-8 percent in 2017
* Government considers selling stakes in energy firm,
* IMF sceptical about income tax reform
By Margarita Antidze
TBILISI, Dec 19 Georgia expects corporate tax
reform to boost foreign direct investment by 7-8 percent in 2017
and is considering selling two stakes in major state-owned
firms, Finance Minister Dimitry Kumsishvili said in an interview
He said the moves should lift Georgia's expanding economy,
but said the government did not plan to raise cash by issuing
Instead, Kumsishvili said it was considering initial public
offerings (IPO) of 25 percent stakes in the state Oil and Gas
Corporation (GOGC) and the state railways monopoly. The former
would be listed in London, the latter in Shanghai.
The ex-Soviet republic's economy, which has suffered from
falling exports and remittances and a plunge in the Russian
rouble, expanded by 2.5 percent in the first 10 months of
the year, compared with the same period a year before, when
growth was running at 2.8 percent.
The country, which is crisscrossed by pipelines taking
Caspian oil and gas from Azerbaijan to Europe, has cut its
economic growth forecast for 2016 to 2.7 percent from 3 percent
but expects its economy to expand by 4 percent next year.
"We expect to attract $1.63 billion-$1.64 billion this year
and we expect this indicator to rise by 7-8 percent in 2017,"
Kumsishvili, who is also a vice premier, said.
Foreign direct investment (FDI) in Georgia rose by 5 percent
in the first nine months of this year compared with the same
period in 2015 to reach $1.298 billion, preliminary statistics
office data showed earlier this month, with Azerbaijan the
biggest investor and the transport and communications sectors
the biggest beneficiaries.
Kumsishvili said that the existing liberal economic
environment and planned tax reforms would drive foreign
"When we talk to investors, they say that this reform will
be a big benefit for them and a big advantage for Georgia," the
finance minister said.
Georgia will stop taxing corporate undistributed profits,
reinvested or retained, from Jan. 1, 2017 and plans to tax
The government estimates revenues from corporate profit tax
will decline by 500 million lari ($187 million) next year and
plans to cover this gap by revenues with increased excise levies
on tobacco, cars and oil products as well as with taxes on
gambling from Jan. 1, 2017.
The IMF is sceptical about the corporate tax reform and
projects that it might knock 1.5 percent off Georgian GDP
growth, leading to a wider fiscal deficit.
"We don't think so ... The increase in excise tax will
offset losses and about 500 million lari will remain in the
economy," Kumsishvili said.
"As for the fiscal deficit, it will be down to 4.1 percent
next year from 4.4 percent expected in 2016."
He said that the next year's fiscal deficit was to be
covered by external and internal borrowing as well as by
proceeds from privatisations.
IPOs FOR STATE COMPANIES
Kumsishvili said that the government was considering
launching IPOs on foreign stock exchanges for the state-owned
energy corporation, GOGC, and for Georgia's Railway.
"We will do it when market conditions will be appropriate
for the placement ... It may be in one year or even in a year
and a half," he said.
The GOGC, which operates the North-South gas pipeline
transporting gas from Russia to Armenia via Georgia, issued $250
million of its first five-year Eurobonds in 2012 and the same
amount again in April 2016. Goldman Sachs and J.P. Morgan acted
as lead managers.
Georgia's state railways monopoly, which is involved in
developing new routes such as the Baku-Tbilisi-Kars project
providing a corridor from the Caspian Sea through Azerbaijan and
Georgia to Turkey, postponed a planned London listing in 2012
due to volatile markets.
(Editing by Jeremy Gaunt)