The FINANCIAL — Foreign investment in Georgia has doubled year after year for the past 3 years, with levels climbing from around USD 250 million in 2004 to more than USD 2 billion in 2007. As Amy Denman, Executive Director of American Chamber of Commerce in Georgia (AmCham Georgia) told The FINANCIAL, she thinks that Foreign Direct Investment (FDI) will continue to increase in the coming years.
FDI won’t be doubling every year as it has done, but that is a simple function of math. An economy of any scale at all cannot see a doubling of FDI each year for a sustained period of time.
As Denman mentioned, the Government has no intention to reverse any of the reforms it has put in place. The country will continue to have a competitive edge in the long term. What future investors will be looking for now is stability.
Q. What’s your view how could the current Russian-Georgian conflict influence the business climate in the local market?
A. The market has and will take a hit, there is no question of that. Business deals that have been postponed, suspended or cancelled will certainly have an effect on the local market. Revenues will drop in the short-term.
The sector that has been most damaged so far is trade & transportation. As of Saturday morning, the east-west rail and road artery is still cut off. Goods are not moving, and though both Poti and Batumi Ports are operational, the goods cannot move on from there. Transportation companies have contracts to fulfil – and cannot fulfil them due to this force majeure situation. It is urgent that the Russians leave immediately thereby opening up the transportation route. We are cautiously optimistic that this will happen in the coming days.
Q. What would be your advice to the existing foreign investors in Georgia and those who planned to put money in the country?
A. My advice to potential foreign investors would be not to make any hasty decisions at the moment. Investors who have been looking at Georgia as a place to put their money are obviously going to step back and re-evaluate. Assuming the situation stabilizes, we hope in the coming months that potential investors will again see that Georgia is a stable country, with absolutely no intention to reverse any of the market liberalization policies.
I have full confidence that the Georgian economy can and will overcome this setback – and will again thrive. It will take time certainly, but it will happen.
Q. As for the AmCham members, what’s your information on their assessment of the situation?
A. AmCham members are deeply saddened by the situation and are doing their best to help alleviate the suffering of the Georgian people. The loss of life and homes has been devastating.
The members of AmCham are hopeful and generally positive that the situation will improve. AmCham members are united in their goal to support the re-construction of Georgia and the return of the refugees of war. Also, our members will work in the long term to repair the image of Georgia as a safe place to invest. AmCham pledges to take a leading role to restore investor confidence in Georgia.
None of our members have any current intention to pull out of the market. Yes, business operations are suffering and most companies are predicting some loss in revenue due to the Russian invasion. In some cases, revenue loss will be significant. Thankfully, the news coming out over the weekend is relatively positive. The Russians seem to be pulling back (though not in full accordance with the peace-treaty); international AID is coming in. Re-construction packages are being negotiated for significant amounts.
In a recent poll of AmCham members, a majority of respondents saw the chamber’s role towards the country’s recovery as one of restoring investor confidence, encouraging FDI, and promoting Georgia abroad.
Q. “We appreciate the increasingly strong diplomatic involvement by the United States and the European Union, which offers the best hope of ending the crisis,” was said in the chamber’s statement. What concrete measures do you think the U.S and EU could take in order to support Georgia’s economic development?
A. Many concrete measures have been taken so far. The US has been unwavering in its support of Georgia as an independent sovereign country whose territorial integrity must be respected. The war in Georgia has launched this small country into the living rooms and dens of Americans who previously knew little or nothing about the region. I was in the states when the war broke out – I saw first hand the sympathy Americans have for what happened here.
The US and the EU will continue its support in the form of re-construction packages. Diplomatic pressure will continue through all mechanisms possible including NATO, the UN, G-7, WTO. The US is not acting unilaterally here. The western international community is united and determined to put a halt to the situation and to prevent any further aggression.
Q. Do you think Russia’s exclusion from G8 and other international unions could stop their aggression toward Georgia?
A. Despite the face the Russian Government is putting on, I do not believe it is immune to embarrassment in the eyes of the world. All diplomatic pressure needs to continue. If Russia wants to join the ranks of the western democratic countries, it needs to start acting like a democracy. If Russia wants a place at the table, it needs to behave in a civilized manner.
Written by Kate kabatadze
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