The FINANCIAL — “We hope that a new era of optimism for Georgian business has been brought by Mr. Ivanishvili; an era when all businesses are given equal opportunities, when there will be no more monopolies, when there will be no harassment, an era when businesses will not be considered milking cows anymore,” said Fady Asly, Chairman of the International Chamber of Commerce (ICC-Georgia) and Founder of Agritechnics Holding.
The FINANCIAL — “We hope that a new era of optimism for Georgian business has been brought by Mr. Ivanishvili; an era when all businesses are given equal opportunities, when there will be no more monopolies, when there will be no harassment, an era when businesses will not be considered milking cows anymore,” said Fady Asly, Chairman of the International Chamber of Commerce (ICC-Georgia) and Founder of Agritechnics Holding. Mr. Asly talked with The FINANCIAL last Friday.
“Nothing lasts forever; nothing is shorter than being at the top and longer than being at the bottom; people who are in power or on their way up should realize this and answer phone calls, respond to mail and help people, since they will surely meet the same people on their way down. The new government should learn that they have to serve the people, to listen, help and respond to them. The main challenge will be changing the arrogant mentality of those in power. When in power politicians think that they can get away with whatever they want and that the situation will last forever,” Asly said.
Q. It has been announced that Imedi TV has been returned to the family of the deceased businessman and previous owner of the channel, Patarkatsishvili. Some other businesses are also seeking “new” justice. Are there members of ICC who are going to appeal to the courts to have businesses returned to them?
A. I have not heard any of our members complaining of having had problems in this respect; however it is a fact that many people have lost their businesses, whether it was justified or not they feel that they were robbed and they will surely apply to the Georgian courts to get their businesses back whether their businesses were taken away from them by the government or by people close to government. Out of our membership no one has complained of being a victim of illegal expropriation. Most businessmen who were persecuted had left the country for fear of imprisonment; unfortunately many businesspeople were jailed such as the owner of Elit Electronics. I do not have detailed information on whether he was jailed justly or unjustly but the fact is that this was a very bad message delivered to the business community at large. People will definitely go to court to get their businesses back. I believe that we have an excellent Minister of Justice and an outstanding General Prosecutor and therefore deprived businesspeople can seek justice through the courts.
Q. Why do you think Ivanishvili decided to enter politics?
A. Mr. Ivanishvili decided to enter politics because he saw that there were many outrageous things happening in the country. The relationship between the government and businesses was based on fear. He decided to enter politics because he could afford it. In order to get into politics you need two things. Firstly you need to be “clean”, meaning that no one can dig out old skeletons from your closet and use them against you to discredit you and burn you politically. Mr. Ivanishvili was running his business in Georgia transparently and had nothing to fear from this side furthermore he had spent more than a billion Dollars over the past ten years on charity and philanthropy so he was very popular and perceived to be a real benefactor of Georgia and therefore the authorities had very little in hand to burn him politically. The second factor is that he was able to sustain his political campaign financially; before October 2011 the opposition did not have the financial backing to be self sustained. Ivanishvili saw that people were fed up with the current government, that nobody could lead the opposition properly and that it was time for a change because the international community was starting to understand that things were not as rosy as they looked from the outside, therefore the timing to enter politics was perfect for Mr. Ivanishvili.
Q. You said that no one (yourself included) expected Georgian Dream to win the 1 October elections – why?
A. The parliamentary elections were divided into two parts: Popular vote and majoritarian vote. I and many other people thought that the United National Movement (UNM) could lose the popular vote but would win the single constituencies because their majoritarian, candidates were known figures. Those candidates had been working in their constituencies for many years. They had attended weddings and funerals, opened roads, distributed presents and donations. Contrary to the UNM candidates, the representatives of the Georgian Dream were not popular figures. So I assumed that UNM would could lose the popular vote but win the majoritarian vote. Therefore the final results did surprise me, it also surprised the members of UNM, and probably surprised the Georgian Dream as well. I do not think that the Georgian Dream was expecting such an overwhelming victory.
Q. After the political parties introduced their economic policies, you stated that you could not find any difference between them and that each looked similar to the other. You also mentioned that the statement of Georgian Dream was to prohibit foreigners from purchasing agriculture land. What would you suggest to the new government now, what are the main steps to be implemented for the development of the Georgian economy?
A. What I believe needs to be done right now is to wait for five or six months, to see how things evolve. I am against doing any changes without first making accurate observations. Any changes will have an impact on something else, for every action there is a reaction; I will give you an example, APM Terminals that owns 80% of Poti Port was planning to invest a considerable amount of money to increase the capacity of the port, the area of the Port; when President Saakashvili came up unexpectedly with the idea of Lazika and Anaklia ports APM decided to freeze their investments; this should be a lesson to the new government to refrain from taking emotional decisions and to proceed on the basis of well-thought plans. My advice would be for the government to wait and see before touching anything.
The government should also ensure that all free trade agreements that Georgia has signed with different countries are working in both ways. Today the situation is that anyone can enter the Georgian market, but Georgian products cannot flow freely to the neighbouring markets. It should therefore be the main priority of the government to insure that the principle of reciprocity is properly implemented with the signatories of the free trade agreements.
On another note and because of the atmosphere of fear prevailing within the business community, businesses were mainly focusing on protecting and shielding their operations from the Revenue Service attacks instead of focusing on how to develop their businesses and therefore the new government should be very cautious to secure a peaceful operational climate for businesses.
Government should follow up with foreign investors once they have started their operation to insure that they are growing without hurdles; there can be no better ambassador to attract a new foreign investor than a successful one in the country.
The government need to focus much more on Georgian businesses to ensure that they are competitive so they can build up a critical mass enabling them to be globally competitive.
Q. What were the main political mistakes of President Saakashvili and his party, United National Movement?
A. The mistakes started from the very first day. The Rose Revolution was not only the child of Saakashvili, Baramidze, Burdjanadze, and Jhvania. There were thousands of people in the streets standing beside them. When Saakashvili came to power, he isolated himself along with twenty people. His isolation was his first mistake and he made enemies from the people who had previously stood around him and supported him and who felt totally left out.
The second mistake was that dramatic reforms were implemented at people’s expense. When the government fired people from the police force for example, they did not think of facilitating their insertion somewhere else. Over the years his party accumulated many enemies. They became very arrogant. They felt they had international support. Georgia was an example of a success story. They stopped listening to anyone. They thought they could do everything better than anyone else. Then they started harassing and racketeering businesses. Businessmen were scared to speak out. They knew that if they objected they would be punished by the revenue service and their business could be taken away. Georgian businesses stopped investing in the country, anyone who had an oppositional family member was too scared to invest and it was the same for businesspeople who had interests in Russia.
Besides businesses that were close to the government very few people dared to invest willingly. Step by step the government became disconnected from the population both civil and business. The government was emboldened by the support from the international community who perceived Georgia as the only success story from the post Soviet space and complacently closed their eyes to the government’s authoritarian methods.
Armenia, Azerbaijan and Central Asian countries are closed economies where almost everything is a monopoly in the hands of business people close to their governments; however their authorities do not hide the fact and do not have complexes about it. Funnily enough, even those countries have now started to open their markets little by little; at a time when Georgia has done exactly the opposite; following the liberalization of the Georgian market in the wake of the Rose Revolution the government promised to offer equal opportunities to everyone and they fully liberalized the economy; this lasted till 2008 when we started witnessing a reverse trend; this is when the authorities decided to generate extra budgetary income through the creation of artificial monopolies where various business activities were “given” to friends who were a façade for high ranking people in the government. This is how cosmetically Georgia looked like being an open market economy at a time when several sectors were a no touch zone. This was a terrible mistake that defeated the initial philosophy of the Rose Revolution that the government needs to privatize everything and get out of business completely.
Q. Ivanishvili promised to restore relations with Russia and at the same time assured that Georgia will remain loyal to its political course of entering NATO and the EU. Do you think that that can be accomplished while as we know the thing that irritated Russia to begin with was Georgia’s western orientation?
A. I believe that in politics you are allowed to have a wife and a mistress. Georgia can have very good relations with the West, have aspirations of joining the EU and NATO, and at the same time have very good relations with Russia. The recent disagreement between Russia and Georgia was not caused by Georgia’s political orientation. It was a personality clash between two individuals. I see no problems in having good relations with Russia and being a member of NATO or the EU. Germany for example has very good relations with Russia and is at the same time a NATO member. Russia should back Georgia’s becoming a member of NATO, since this membership will guarantee that Georgia would become a one hundred percent stable country. I strongly believe that Bidzina Ivanishvili is a man who little by little can take Georgia’s integration with the EU and NATO forward and improve relations with Russia to a very normal level. I do not see any paradox or any antagonism to that.
Q. The International Chamber of Commerce initiated a meeting between Mr. Ivanishvili and the business community. During the meeting we witnessed the unexpected statements of many businessmen who started complaining about Saakashvili’s regime while they had been considered close allies of the Georgian President before. Why had these people kept silent for such a long time, or was it a case of reverence for the new government?
A. Trotsky’s idea is widespread in Georgia: “If you are not with me you are against me”. We have to divide Georgian businesses into four categories:
1. Businesses that belong to the government but have façade owners I assume that we are talking of about five to seven major groups.
2. Businesses whose owners are very close to people in power and who benefit from winning tenders and contracts, who handle certain oligopolies and who are never audited by the Revenue Service; those businesses had to contribute financially and extra-budgetary; I assume that we are talking of about 20 companies.
3. Businesses that the government perceive to be neutral; they are allowed to operate as per the terms of Georgian legislation but do not get any preferential support from the government; here we are talking of the majority of businesses.
4. Businesses that are perceived to be in the opposition; those businesses can simply not operate, they are the victim of endless audits, delays at customs, liens on their accounts and ultimately exile if not prison.
Based on the above, complaints were voiced during the meeting with Mr. Ivanishvili by businessmen representing the third and fourth categories. When you do business in such an atmosphere of fear you need to survive otherwise you will be out of the game. We will hear many more complaints from businesses in the coming weeks and months. After the new government is inaugurated people will start talking more freely; nowadays the only businesses that are apprehensive belong to the categories 1 and 2 mentioned above.
Q. How will the dominance of foreign investors in Georgia change? Will we see a shortage in the numbers of US and European investors, and an influx of businesses from post Soviet countries?
A. There has never been a big rush of US or European investors to Georgia. Most investors are Turks, Azerbaijanis, Armenians, Ukrainians, Middle Eastern and Asians. I do not think that the picture will change. The main challenge for the new government will be to insure that both foreign investors and Georgian businesses are treated fairly and given all chances to succeed so they can grow their businesses, reach a critical mass enabling them to start expanding to the neighbouring markets. Having said that, there can be no better ambassador for Georgia than a successful investor in the country.
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