The FINANCIAL — Business friendly government, different fields of economy with further prospective, good legislation system, few taxes to pay, good rate compared to other emerging markets, these are the main reasons foreign as well as local investors should think of Georgia as an opportunity to invest compared to other countries, believe the CEOs of companies interviewed by The FINANCIAL.
The FINANCIAL — Business friendly government, different fields of economy with further prospective, good legislation system, few taxes to pay, good rate compared to other emerging markets, these are the main reasons foreign as well as local investors should think of Georgia as an opportunity to invest compared to other countries, believe the CEOs of companies interviewed by The FINANCIAL.
Moreover geographically Georgia is a strategic place where east and west meet, as well as the centre of the Caucasus region, which means as well as investing in the country, it brings the chance of diversifying businesses later in the whole region.
Georgia is the number one reformer in the world named by the World Bank and is among the world’s 174 economies, which improved its business environment the most in the last five years, according to Doing Business 2011: Making a Difference for Entrepreneurs, the eighth in a series of annual reports published by IFC and the World Bank.
Due diligence comes when businesses start investigating the business climate, environment, investment opportunities and political-economical factors.
According to Luc Caltrider, CEO of Caltrider Advisors, the political climate stabilized and the economy expanded in 2010, resulting in improvements in Georgia’s credit ratings among the international credit rating agencies. Notably, in October 2010, Moody’s Investors Service upgraded Georgia to “Ba3” with a stable outlook. Likewise, Standard & Poor’s upgraded Georgia from “B” to “B+” and Fitch Ratings maintained a “B+” with a stable outlook.
“These upgraded ratings reflect the Georgian Government’s marked progress in building social, economic and political institutional capacity that provides a safe and healthy operating environment for businesses and new investment opportunities,” Caltrider added.
“Georgia is extremely well rated compared to other emerging markets. From a legislative point of view there are very few taxes paid in Georgia, which are very transparent and easy to handle. The Government is very business-friendly wherever there is any foreign investor involved,” said Fady Asly, ICC Chairman.
“In recent times, we see steps being put forward from the government side in order to communicate with businesses, better relationships and eliminate the problems concerning the tax administration system,” said Giorgi Chirakadze, founder and President of UGT, President of the Supervisory Board of the Business Association of Georgia (BAG).
Chirakadze believes this attitude is quite welcoming and moreover, there are different fields like energy, tourism, agriculture, healthcare, and the banking sphere which might be quite attractive for investing in.
“Since the beginning of the financial crisis, Georgia’s economy has proved to be quite resilient. Although there was a slight decrease in GDP growth in 2009, Georgia’s real GDP growth in 2010 was 5.5%. In fact the Georgian authorities are forecasting 6-6.3% growth for 2011. This is an ideal environment for new investors, because they can take advantage of the upswing in the economy,” Caltrider said.
“The investment climate is continually improving, and I believe that there are many opportunities for both foreign and domestic investment. Unfortunately due to the recent recession, international investors continue to invest a large percentage of their portfolios in more conservative investments, which means fewer investments for emerging markets in general. This means that the business community and the Georgian Government have to increase their efforts in promoting Georgia as an investment destination,” Caltrider added.
Despite these terms, Georgia has potential in different sectors of the country’s economy, believe CEOs. The major prospects are seen in agriculture business, which should be the number one priority for the country, as well as the energy sector, tourism and infrastructure.
“There are many sectors that have potential for generating profits and attracting investors; however it really depends on the investor. Generally when investors evaluate whether or not to invest in a project, they search for the highest possible returns within an acceptable range of risk. Considering the fact that different investors have widely varying tolerances for risks, there are opportunities with every major sector of the economy that have high potential. Even a conservative investment in Georgia can return 5-10% annually while a conservative investor would only get 3.66% on a 10-year US Treasury bond,” Caltrider said.
“There are three areas: agriculture, water power because of the 26,000 rivers and the strategic location, which need to be developed immediately. There is the opportunity to continue to develop strong ports in Poti and Batumi,” David Lee, the President of AmCham and General Director of Magticom.
“However I believe it’s the land that gives Georgia its true competitive advantage. Most of all three I would focus on agriculture. I think the wine industry is doing a good job, but it’s completely wrong that Georgia imports 70% of its food,” Lee added.
“I would distinguish several fields with high potential in the Georgian economy. Due to the strategic location and resources of our country as well as demand from neighbour countries the energy sector might become quite successful. There are investors arriving in the country from Turkey, and from Eastern Europe who wish to invest in the Georgian energy system,” Chirakadze said.
Despite the fact that during recent years there has not been significant economic growth in agriculture sectors, Chirakadze believes there is still high potential in developing local production and agro biz.
“Considering support from Georgia’s government and international partners, I think agriculture, tourism and the hotel industry present many attractive investment opportunities. In agriculture, I think there is tremendous opportunity in greenhouse cultivation, cold storage and wholesale trading. This is especially true if investors are able to invest vertically along the value chain,” Caltrider said.
“Despite the concrete successes in the tourism field, there are still many zones which have further potential for sector development. Moreover, if the problems are solved in the field and the quality of tourism increases the number of tourists will also increase. We hear information that Georgia was visited by 2 million tourists last year and there will be 3 million this year. This means tourists have to stay somewhere and enjoy being in the country. The demand for tourism services will increase and consequently there is high potential in tourism,” Chirakadze added.
“Regarding tourism and the hotel industry, with more than 2 million international travellers arriving in Georgia in 2010 – a 36% increase over 2009, which was already a 16% increase over 2008 – demand for high quality hotel accommodations, resorts and tourist activities will continue to grow,” believes Caltrider.
“This is especially true since there has traditionally been so little promotion of Georgia as a tourist destination over the last 10-15 years. It has only been in the last few years that tourism-related businesses in Georgia have begun to be promoted so aggressively. Combine this with the Government’s efforts to promote Georgia as a prominent tourist destination, the establishment of the National Tourism Agency and the renovation of major tourism infrastructures in Georgia, I believe there are, and will be, many serious opportunities to capitalize upon for the next several years,” Caltrider added.
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