The FINANCIAL — “I am sure that the Georgian economy will do pretty well and I strongly believe that Georgian businesses will perform strongly in the future too. Georgia will continue being a very attractive place for foreign investors and will no doubt become the pearl of the Caspian and of Central Asia,” says Fady Asly, Chairman of the International Chamber of Commerce and President of Agritechnics Holding.
In his Interview with The FINANCIAL Fady Asly reviews the investment climate in Georgia and says that businesses in Georgia are now in a period of assessing their damages.
“Give us stability and take billions, this should be our motto,” says Fady Asly.
Q. In a previous interview with The FINANCIAL, you said that Georgia remains the beacon of progress, democracy and leadership. After one year what is your opinion on that issue?
A. Well I have not changed opinion; I am still holding to what I said. Georgia remains a beacon of democracy, leadership and of progress in the region despite the challenges that we have been facing in 2009. I am glad to notice that everything ended relatively happily despite the negative impact of having Georgia shown regularly on international news for about 2 and a half months. Yes there are many challenges but the Government is pro-active and tackling them properly..
Q. The year 2009 has been quite tense, politically and economically. How would you evaluate the last year, has Georgia lost or attracted more foreign investors in the country?
A. Georgia is not the only country to have lost its attractiveness; all emerging markets have lost their competitive edge. There is a shortage of liquidities on the international markets, and for those investors who have access to cash, the western markets offer today very attractive opportunities and therefore such investors are ignoring emerging markets for the time being.
Georgia being one of those emerging markets is suffering for sure. However among the emerging markets I believe that Georgia is still offering many advantages that other competing markets are not, be it the geographical location, the country’s potential or the business and investment climates, all of which play tremendously in Georgia’s advantage.
Q. What can you tell us about the investment climate in Georgia at the moment?
A. Georgia’s legislation is very business friendly however we are still waiting for investors; if you own a good restaurant but have no customers you have to be patient!. If the location is good, the food tasty, the service efficient and the prices moderate, all the parameters are there to succeed. I strongly believe that FDI will increase substantially starting the end of 2010.
We will have a difficult year in this respect but there is nothing to worry about as long as political stability is guaranteed, this is where the opposition needs to take responsibility and preserve internal stability by keeping their struggle within the frame of the institutions.
Q. What about Agritechnics Holding, what novelties did this company have in 2009 and what investments did this company make in 2009?
A. Well unfortunately we haven’t had a good year in 2009, we have suffered just as many other businesses have been suffering, but this has not undermined our determination to develop and expand our activities. We are currently in the process of establishing a 120 hectares fruit orchard and we are as well preparing for the building a potato chip and savoury snacks factory. We believe that there is a tremendous potential in agro-industry and will be developing a lot in this sector.
Q. In mostly which sectors did Agritechnics Holding develop its activities in 2009?
A. As mentioned earlier we focus on agriculture, food industry and distribution.,
Q. Which sectors of Agritechnics were most hit by the crisis?
A. We were mostly affected by a reduced demand in the food sector and were confronted like all other businesses to a more expensive cost of money.
Q. Doux Frangosul, Brazil (frozen poultry), John Deere, USA, (agricultural machinery), Felco, Switzerland (agriculture tools), Hunter Industries, USA and Elysee Irrigation, Cyprus (irrigation equipment), and The Messenger (English language daily newspaper in Georgia) are the partners of Agritechnics. How does this fact affect attracting investors to Georgia, in your view do foreign investors have enough information about Georgia?
A. I think that foreign investors cannot be grouped in one category only. On one hand there are the larger or wealthier foreign investors who are specialized in emerging markets. Those investors are well informed about Georgia and track regularly all information related to emerging markets through the data released by the International Financial Institutions However a very large number of insular investors don’t know where Georgia is on the map considering the small size of our country and this is where the government is doing a very good job by advertising Georgia and doing business in Georgia on the major international TV channels.
Q. In your interview with The FINANCIAL in 2008 you said that there had been some cancelled deals by foreign investors due to the Georgian Russian conflict. What were the main challenges for Georgia in 2009?
A. Well starting November 2007 it has been an uninterrupted ballet of events that seriously undermined the investment climate in Georgia. It all started with street protests in November 2007 that were followed by presidential elections, legislative elections, the 5 days Russian aggression on Georgia, then the international financial crisis and to rap it all the April and May 2009 protests.
ICC was very vocal about the negative impact that the street protest would have on the economy but a proverb says: “No one is more deaf than the person that doesn’t want to listen” and unfortunately the Georgian opposition had an agenda and didn’t want to hear the voice of reason…
It takes years of hard work to improve the image of a country but it unfortunately takes 30 seconds on CNN and Euronews to destroy years of hard work.
.Those were the challenges that culminated in 2009, currently businesses are assessing their damages and implementing the proper strategies to recover… I sincerely hope that all political leaders understand now that the only way to improve things is through dialog within the frame of the institutions and not in the streets
Q. World leading companies have already started rehabilitation after the crisis’ effects, what can you tell us about Georgia at the moment, has rehabilitation begun or not and what is the main point for Georgia in your view in overcoming the crisis?
A. As I have already mentioned both businesses and government are assessing the damages and creating the proper strategies to overcome the crisis. The good thing is that most economic parameters have improved and Georgia is performing fairly well compared to many of our neighbours; Now that the US economy is getting out from recession this will no doubt have a very positive effect on the rest of the world’s economies.
Georgia being a smaller market it will pick up much faster than heavier economies so I remain very confident in the huge potential of the country.
Q. What is your suggestion, how should Georgia become attractive in terms of investment?
A. I think that Georgia is attractive in terms of investment. There can be no investment without political stability. Therefore all political forces should work constructively and with a big sense of responsibility to ensure internal political stability. Once we have long term political stability the potential for investment is huge in so many sectors, be it hydro power, green energy, agriculture, tourism, real estate, infrastructure, services, you name it;. Georgia is the entry gate for the whole Caucasus and Central Asia and therefore offers so many opportunities,
In Georgia both local and foreign investors are treated equally which is not the case in many of our neighbouring countries. One of the sectors for improvement is the proficiency of the mid-level public servants who need more training so they could perform better and this is true mainly in Tax and Customs;
At the highest level of the hierarchy things are handled very professionally in general, our economy is free and business friendly and there is a genuine political will to transform Georgia into one of the most attractive destinations for business in the world.
Q. Why should foreigners invest in Georgia, what is the most attractive things about the country?
A. Well there are several sectors, first of all in green energy there is huge potential, and Georgia with hundreds of hydropower stations is a leader in this respect. Agriculture is for sure another area of tremendous potential for both internal and export markets. When we speak of agriculture we mean value added agriculture of course not cereals.. Georgia is blessed with many microclimates that vary from subtropical to temperate. Infrastructure offers lot of opportunities starting with new roads, ports, dams creating, building, you name it. Services like banking, insurance, restaurants, tourism, I am just giving you some examples as there really is a lot of potential in almost every sphere. Georgia is serving the whole region, the region is very wealthy, it’s an oil and gas region so this will have a formidable impact on Georgia.
Q. Several weeks ago a US-Georgian business council was held. What was the main message of it?
A. Well I did not attend this particular event, however any event, council or seminar bringing foreign and local investors and businesses together can only have a positive impact. One good investment encourages ten new investors and considering that we have such a good business and investment climate it is very important to have anchor investors.
Q. Georgia is often targeted for its pro-American orientation. Against this background, do you not think that the US should be more active in regard to investments? I know that the US did much supporting and lobbying of Georgia, but I mean much more than this.
A. frankly I think that the United States has done as much as anyone could do. What do you expect the US administration to deport investors to Georgia? Through USAID the US Government has done a lot for the country and the US Embassy in Tbilisi is extremely active in assisting to improve the business climate. By the same token we have a very active Georgian Ambassador in Washington who is doing a great job in promoting Georgia there as much as possible.
Georgia remains a small country and potential investors in the States and elsewhere are struggling themselves, therefore no one expects flocks of investors invading Georgia anytime next week; Once the good opportunities that were created by the world financial crisis in the west will dry out, then investors will be massively eying towards emerging markets that would have regained their competitive edge,
Q. What should Georgia do to attract US businesses, to become as attractive as Singapore or the United Arab Emirates?
A. Georgia cannot become overnight as attractive as Singapore or the United Arab Emirates, for the simple reason that these are very wealthy countries with very high revenues and that have been building up their economies since the 1950’s.. In the United Arab Emirates there are thousands of investments worth hundreds of billions of dollars on a totally different scale from what we see in Georgia. However if it will take us several decades to reach this level is not important, what is important is that we are on the right track to achieve it.
Q. Are Americans interested in doing businesses in the Free Industrial Zone in Poti? What are your suggestions for them in this regard?
A. I think that not only Americans but any businessman interested in operating in the region should have huge interest in the free industrial zone. I think that the free industrial zone is a brilliant idea. I think that it’s extremely well managed; the concept is very good and I would strongly encourage any business that operates in the region to use Poti Free Zone as a base.
Prices are way below competing free zones in the area and you have hundred fifty million consumers at the grab of your hand. The bottom line is: Give us stability and take billions, this should be our motto.
Q. Several years ago Russia was the main market for Georgian products. After the Russian embargo Georgian exporters started occupying new markets but they failed to recover fully. Do you think that potentially the US could replace the Russian market for Georgian produce? If so, why has it not happened yet?
A.The US markets cannot substitute the Russian market. that was substantially supplied with Georgian products. During Soviet times, Georgian wines and fresh produce were heavily present in the Soviet markest and very much in demand. Today in the US, Georgian wines are not well known and have to compete with the best wines coming from Chile, Argentina, France, Italy and every other wine-producing country, so it is a very difficult market. Yes the Georgian embargo has hurt the Georgian economy but it did not destroy it as planned by Russia. Little by little the market will readjust, and we will reach a golden equilibrium between our potential to produce and our ability to sell. On a positive note the Russian embargo has helped Georgian businesses to find other markets that gradually will totally substitute the traditional Russian market.
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