In less than two years, imports to Georgia will enjoy zero customs duties, a move that government officials hope will encourage foreign businesses to set up shop here.

Minister of Economic Development Irakli Chogovadze is leading the new initiative that, assuming it gets Parliament's approval in the coming weeks, will abolish all custom taxes as of January 1, 2008.

The present draft calls for an immediate reduction of customs duties in several areas. Duties that are set at 14 to 30 percent will be reduced to a flat 12 percent fee. Customs rates that are currently 6 to 15 percent will be decreased to 5 percent, and the 4 percent customs rates will be completely abolished. At the same time, the government plans to abolish all of its seasonal customs duties.

Then from January 2007, the 12 percent customs rate will be slashed to 5 percent and the remaining 5 percent duties will be abolished altogether. Specific customs taxes on alcoholic beverages will be changed to 12 percent and products that are produced in countries that are not members of the World Trade Organization (WTO) will be taxed at the same rate as established for WTO member countries' goods.

The bill also stipulates a change for Georgia to adopt the 2002 harmonized system of product codes that has already been established between WTO member countries

"The Georgian government worked out the basic principles on liberalization of foreign trade. The goal of the reform is the improvement of the investment climate, protection of the customers rights and prevention of the corruption in the country," Chogovadze said last week while explaining the changes to Georgian and foreign businesses.

A customs expert for the American Chamber of Commerce in Georgian Giorgi Petraia told the paper this week called the changes "a small but right step forward."

"One more step forward will be the exemptions of the custom taxes have touched before only upon members of WTO countries," he stated. Petraia added that another major change will be the end of certificates of origin.

One criticism of the ministry's mechanical approach to cutting customs duties is that specific types of imports, like hi-tech goods, receive no priorities despite the fact they are not readily available domestically. Petraia suggests this could be done more wisely by studying which foreign goods are most needed for business development. "The ministry avoided this and mechanically reduced taxes - it reduced only figures. They could reduce taxes on the basis of the economic analysis and reduce them on the basic goods, new technologies and so on," he said.

Still local companies see several advantages in the changes. "I think that the abolishment of the import taxes will promote the elimination of import taxes for Georgian products abroad," Deputy Director of the Georgian Glass and Mineral Waters Company Badri Japaridze said last week.

Legislators are less certain. Speaking to the paper, the chair of the parliamentary committee on sector economy and economic policy Niko Lekishvili expressed concerns that local products should still be protected.

"From one side this initiative may be good for Georgia, but from another standpoint it may create a challenge for our production," Lekishvili said.