journal N1 2025

DOI: 10.52340/ekonomisti.2025.01.06

Expanded Summary

The economic development of a country relies on enhancing its competitiveness, ensuring socio-economic sustainability, and effectively execution of country’s strategic plans. The success of a development strategy depends on the state's ability to foster stability, ensure predictability in economic processes, prioritize structural goals appropriately, and implement an effective policy of state support for the economy.

Stabilizing the national economy and fostering inclusive growth require innovative approaches. The role of the state as an entrepreneur and modern strategies for managing state-owned enterprises remain among the most critical and underexplored topics in Georgian economic science. These issues are closely tied to fiscal concerns, particularly the regulation of the state's internal debt and its legislative framework, which is currently ambiguous and, in some cases, inconsistent.

Addressing this challenge demands immediate scientific inquiry to develop a new legal framework for governance and to introduce modern standards for the economic activities of state-owned enterprises. The objective of this research is to explore contemporary approaches to the management of state-owned enterprises and to reinterpret their fiscal role. Key areas of focus include analyzing the economic function of the state as an entrepreneurial entity, defining the legal status of state enterprises, systematically examining their accountability to the central budget, and establishing modern mechanisms for managing financial obligations.

In modern global economic development, the importance of states individualism has been increased considerably. This, on its turn, has intensified the significance of governments’ autonomous political and economic activities (Tabatadze, 2020). Intensified state’s economic function is revieled in number of reforms and development strategies out of which developing state-owned enterprises has gained signifiant importance. Thus, coordination of the state-business relation becomes particularly important. This tendency is reviled in the European Comission’s strategy to promote self-sufficient economy (European Commission. 2020). 

The IMF uses risk and debt stress indices to assess fiscal stability, and the general framework principles of fiscal security and its main norms, in accordance with the Organic Law on Economic Freedom, are defined as follows:

• Tax burden - 30% of GDP (23.0% in Georgia)
• Budget deficit - 3% of GDP (2.5% in Georgia)
• State debt - 60% of GDP (36.8% in Georgia)
• Ensuring stable revenues

According to the evaluation of International Monetary Fund, Georgia's fiscal system is stable and its indices correspond to the threshold level of sustainability. However, the fund has identified some challenges that need to be addressed to ensure the sustainability of the financial sector, the resolution of which is an important prerequisite for achieving stability in the country's budgetary system and its integration into the European Union. These challenges are:

• Ensuring long-term fiscal sustainability
• Effective use of state budget reserve funds
• Financial management of state-owned enterprises

Despite Georgia's leading position in the world in terms of ease of starting a business, the trend for maintaining and growing a business is not very favorable. In this regard, the development of an effective state support policy and its practical implementation are particularly relevant. The state support policy for the real sector is based on grant and state subsidy programs. For the same purpose, the state in Georgia is resorting to issuing transfers, introducing an accessible credit system, widespread use of state credit guarantee programs, mobilizing the main domestic resources necessary for macroeconomic balance, and other methods.

Goeriga has implemented a great deal of reforms in this regards in recent years. The goal of these reforms is to create a favorable environment for business by attracting foreign investments, liberalizing the market, improving state services, reducing taxes and administrative barriers, fighting corruption, etc. Which was ultimately reflected in sharply improved indices and high international ratings, however, the study of the economic and legal foundations of state-owned enterprises is practically not being carried out at this stage and requires significant innovations.

The legislative and executive authorities of Georgia, their reports and studies have played an important role in shaping modern standards for the management of state-owned enterprises.  The regulation of this area was significantly facilitated by a number of legislative acts adopted by the Parliament of Georgia, including: “Law on Entrepreneurship”, “Law on Bankruptcy”, “Law on Insolvency Proceedings”, “Budget Code of Georgia”, among others. Additionally, two new institutions were created: the Entrepreneurship Development Agency and the Georgian Innovation and Technology Agency, in order to significantly improve entrepreneurs' access to finance and technology.

The results of the study are important both for the government, in terms of developing the right budget policy, and for scientific circles, as a new, original scientific-research topic. In this regard, it is recommended:

• Determining the economic standards for the functioning of state-owned enterprises, their organizational and legal status, and the features of their optimal structuring in Georgia;
• Identifying government regulations governing the management of state-owned enterprises in the Georgian legislative framework and, based on this, assessing their impact on the country's fiscal system;
• Development of scientific foundations for the management of state-owned enterprises and creation of its conceptual basis;
• Establishment of new standards for accounting for domestic debt and, on this basis, a new structuring of the liabilities of state-owned enterprises;
• Determining the economic effect of the transformation of debt obligations of state-owned enterprises and assessing its impact on the country's investment environment.

The presented recommendations will make it possible to refine the economic and legal foundations of state-owned enterprises and assess their fiscal impact and it will allow the formation of a new attitude of the state towards economic entities and new approaches to the management of state enterprises.

The government becomes accountable to society not only for the successful performance of its legislative, executive, and governance functions, but also for its purely entrepreneurial function.

Insofar as, along with creating a free, competitive market environment for the economy, the state itself performs the function of an economic entity and, in addition to allocating national wealth, participates in the creation of this wealth as an entrepreneurial entity.

Considering the above, at the current stage of the transformation of the governance system of entrepreneurial activity, the fiscal function of enterprises and, in relation to this aspect, the issues of its regulation are becoming more relevant.

This research topic underscores its multidimensional complexity and highlights the importance of collaborative efforts. Such joint research is considered a key priority of state policy, aiming to foster partnerships with international scientists and integrate with global research initiatives.

Key words: Modern standards of state enterprise management; Fiscal function of state enterprise; Debt relations of state enterprise.