The FINANCIAL — Foreign direct investments in first two quarters of 2011 amounted to 174 million USD according to the preliminary data of National Statistics Office of Georgia.
This is a significant increase compared to the same period of last year as investment volume has more than doubled and trade has increased by 43 percent. Bochorishvili also talked with the FINANCIAL about the current activities of the Georgian National Investment Agency.
Q. What are the best current business opportunities in Georgia?
A. As the Georgian market is not yet developed enough, there are many fields we advise our partners to invest in. I would single out several of them in particular though.
Energy sector has been attracting huge investment even during the most difficult times. I am talking about 2009-2010. During that period due to world financial crisis and as a consequence of Russian invasion investors were hesitant to commit big sums to other industries, but Georgian energy sector kept its attractiveness and currently more than dozen projects are under way with the total amount of investment exceeding two billion USD. .
Tourism is another sector in Georgia that is currently flourishing the most. As you know last year we had a record number of visitors, more than 2 million and we expected that munber to grow at average of 35% in the next 3-5 years. But if we will look at the data for the first half of 2011, we will see that reality has exceeded our expectations as by end of May of this year we had more than a million visitors coming to our country, which is a 45% increase If this pace keeps till end of 2011 and all the indications show that it will, Georgia will receive around 3 million people, which you would agree is quite an impressive number. All this raises confidence in foreign and local businessman and that is the reason that Batumi, Kobuleti, Anaklia and Tbilisi have new hotels openings practically every month.
We in this country have some very good 4 and 5 star hotels, but really lack quality 3 star hotels. Hence our agency is working intensively to attract investors who will establish a good network of 3 star hotels all around Georgia.
However tourism is not limited to the hotel business. As there are 9 climate zones in Georgia, investors have quite a wide range of choice for their business development. Seaside resorts as well as mountainous ones offer very good possibilities of development in different directions. If an investor is interested in health resorts, we’d advise the areas of Tskaltubo, Akhtala. Borjomi, Likani etc.
Because of good climate zones the land is very fertile in Georgia and the country is becoming interesting for investors in terms of agriculture. If a foreign businessman registers a company in Georgia, he can buy land and produce any type of product. Primary production as well as processing and packing are quite attractive businesses, theyl generate high profit.
Light manufacturing is rather lucrative sector of Georgian economy due to several factors including qualified workforce and low labour costs, low communal expenses, good trade relations and the geographical position of the country. Georgia is positioned on the crossroads of Europe, Asia, Middle East and Africa, and is an easiest and fastest transit route for passenger and cargo transportation. We have already included African nations in the list of our potential partners. Another factor that makes the sector attractive is favourable trade regimes with all neighbouring countries and rest of the world. We have a GSP+ regime with Europe, GSP with USA, Canada, Japan Switzerland and Norway. free trade regimes with Turkey and CIS states. .
Q. Why are investors starting businesses in Georgia specifically? What are the unique characteristics the country has to offer?
A. As I’ve already mentioned, highly qualified human recourses combined with low labour costs and corruption free evnironment are one of the main advantages of Georgia.
Asides from that, the current business environment is very convenient for investors. Establishing a company in the country is very easy and doesn’t require any extra bureaucratic processes. Searching for any kind of information about Georgia or business in the country is very simple. According to the World Bank Report 2011(Ease of Doing Business) it is easy to both start and run any kind of business in Georgia. In fact Georgia occupies 12th position, while in 2005 the country was on 112th place. I think you will agree this is a dramatic and highly positive change. Based on country’s ratings in prestigious international surveys more investors reveal interest and of course all of them want their business to be running in a favourable business climate.
The low rate of corruption is another advantage of the country. All investors check the rate of corruption before starting to think seriously about investments. A safe environment encourages businessmen to invest in Georgia.
The best business opportunities in Georgia are available right now. They are here. Few years from now Georgia will still be one of the best countries to start a business in, but the level of competition will surely rise and same opportunities won’t be around anymore. As an example, I’d single out privatization processes. Now is the time when the Government is selling its real estate to the private sector for lower prices than the real market prices are. After two years such opportunities will be exhausted. What is more important the most of real estate sites are in the very centre of Tbilisi and there is a high competition for such government owed privatization sites.
Q. Which countries are currently expressing firm interest in investing in Georgia?
A. In general all countries are interested in new regions and opportunities to invest in. Starting a business is easier and more profitable in countries where the business sector is not yet fully developed. Currently the main interest is coming from Asian countries including China, India, Persian Gulf countries, our neighbours Azerbaijan, Armenia, Ukraine etc. Turkey remains one of our main business partners and has been for a long time.
Q. What are the most important current investments in Georgia?
A. Currently we are working actively with China. We have almost completed negotiations and I hope that we’ll soon sign a contract on a construction of hotel in Anaklia.
There is another main investment in Adjara. One of the investors wants to build a hotel in Batumi with a conference hall for 4,500 people. That will significantly help the popularization of Batumi not only in summer but in winter as well. Such spacious facilities are practically non-existent in region.
There are lots of important negotiations going on in regards to agriculture. One investor from the Persian Gulf is interested in the nuts business and wants to build nut growing plantations in Georgia. He is one of the biggest nut providers to the USA.
Q. Cyprus is the leader in terms of investment in the first quarter of 2011. What are they making investments in and what is the reason for the high level of interest from them?
A. Yes, Cyprus and the Netherlands are the leaders in investments for the first quarter of 2011. But in reality these investments aren’t Cypriot. Simply speaking, lots of companies from various countries are registered in these two countries. When counting FDI, we count the country where the business is registered. That’s why Cyprus is the leader at the moment. There is nothing unusual about it. For example, the Italian company Ferrero is registered in the Netherlands and in FDI it’s counted as being from the Netherlands and not Italy. But everyone knows that Ferrero is an Italian company. So to define where investments are coming from is not always easy.
Q. How often do the countries interested in investments in Georgia change? Or do mostly the same countries tend to invest in Georgia?
A. The countries which I have already mentioned have been our partners for the last few years. Our main focus is currently on Asian countries. I’d say that we are open to the whole world and investments from any country are welcome. Any country interested in Georgia is our current priority.
Q. What would you say about Polish investments? How important are they to Georgia?
A. If we look at the Polish investments in 2010, there were quite few. But in 2011 we have had a huge increase in interest from Poland. We carried out several Georgian-Poland business forums in Georgia. Several business delegations were sent to Poland. We are trying to be more active in this direction. Poland is a friend to our country and we want to have better economic and business relations with them. We hope to have more investments from Poland and for trade between us to increase, which is most important.
Q. How many businesses are operating in Georgia in total? Out of them how many are foreign? How would you evaluate such a share?
A. We are interested in as many foreign investments as possible, but Georgian business is the backbone of the Georgian economy. The share of Georgian business is more than that of foreign business and that is a very acceptable trend for us. It’s significantly easier to attract investors when local business is well-developed.
Q. Trade and retail has the biggest share, almost half, of business activities in Georgia. Why is that?
A. First of all due to constant growth of GDP people start to have more disposable income, which in turn they spend buying varius goods. This will increase even more during the years to come, as standard of living in our country will keep growing. Second, our location as a regional centre draws big number of traders from neighbouring countries. For example, do you know what is our number one export product in 2011? Cars! And as you know we don’t produce any cars. In a short period Georgia became a hub for the car traders and currently we re-export vehicles to counties such Armenia, Azebaijan, Kazakhstan, etc. .
Q. What has been the most important recent change in the business sector in Georgia?
A. I would name ” Act of Economic Freedom”, so called “Liberty Act” as the most important initiative of Georgian Government. Through that initiative we assure our foreign partners and local businessman that current policy of liberal economy and open market principles will be preserved no matter what type of government will be in power.
Q. Please tell us more about the activities of the agency. What tools and means do you use to bring in more investments?
A. Our main aim is to attract as many investments as possible. We try to do it in different ways. Currently we are working to popularize Georgia as a place of shooting movies. We had negotiations going on with Bollywood producers for 8 months and fortunately our hard work with valuable contribution of Ministry of Culture has paid its toll as Indian producers will start shooting two films in November of this year. Partnership with Bollywood is important for quite a few reasons. Not counting the budget of the movies, which will exceed few million of USD, we will popularise Georgia as an attractive business and tourism destination in the market of more than a billion people. Positive outcome of this project is unimaginable. For example, the scene of one Bollywood movie depicted just-married couple spending their honeymoon in Switzerland. After the film’s release, about a million Indians travelled to Switzerland with most of them visiting the country in order to spend their honeymoon there.
Currently we are working on establishing relations with the Barrandov studio in the Czech Republic. We’ll start negotiations with other studios as well. We want to make Georgia a place of making movies.
Our joint project with the leading Ukrainian TV channel “Inter” is one of the best tools for the promotion of Georgia, its tourism potential and diverse economic sectors in Ukraine. There have been 18 shots dedicated to Georgia in morning Tv programme. Many government representatives along with Arts people and civil society were interviewed in order to inform Ukrainian audience on attracton of the country. Tbiulisi, Batumi, Anaklia and Martvili, Kakheti these are the places INTER producers visited and depicted beauty of Georgia.
Our name suggests that we are an investment promotion Agency, but in reality we are responsible for Export Promotion as well. In order to promote local beverage products we are organising first international Beverage Conference in Georgia which will be attended by more than 100 traders from all over the world. Among the guests will be Ms. Perrotti-Brown from Singapore who has a title of “Master of Wine” and is writing for the worlds most renown wine publication. Conference will be held during Novebmer 25-26 of this year and we would like to invite everyone to attend this event and support Georgian producers.Our target segment for alcoholic drinks is China. We have a well-defined plan of how to reach our target market and hope that Georgian wine consumption will soon increase in China. For non alcoholic ones we target Gulf countries.
Q. What is the main challenge for The Georgian National Investment Agency in 2011?
A. Generally challenges are present everywhere and all the time, but they have their advantages as well. Challenges make us stronger, more activited and well mobilized. Currently our stuff consists only of 22 people and each of them works tirelessly in order for Georgia to become an even better place to live and do business in.
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