The FINANCIAL — Chinese FDI to Georgiaslumped from USD 88.4 million to USD 8 million during the first half of 2014, year-by-year comparison shows. Two new Chinese companies were established in Georgia before 1 September this year, the date when Georgian officials implemented new visa and immigration restrictions. Over 30 Chinese delegates visited Georgia to try out the country’s investment climate. Chinese investors that are eager to invest in the Georgian energy field have arranged to meet with their Georgian counterparts. However, after more than 45 days they are still waiting to be granted visas.
“China Southern Airlines is offering direct flights from Xinjiang, Urumqi, to Tbilisi. Up until 1 September the number of passengers was over 100. However, since 1 September, the number is only about 15-20. If the current visa regime lasts for more than two or three months then this flight route will be probably closed. And if the only existing direct flight gets cancelled, then as a consequence nobody will come to Georgia. Profit is the only thing that motivates the air company and we will be powerless to do anything if they decide to leave the market,” Liu Bo, Economic and Commercial Counsellor of the Embassy of P.R. China, told The FINANCIAL.
On 1 September, 2014, Georgia introduced a new Law entitled ‘The Legal Status of Aliens and Stateless Persons’. Amongst other measures this included new provisions on visas for Georgia. The ability to stay in Georgia for 360 days without the need for a Residence Permit has been abolished. Speaking publicly, Tea Tsulukiani, Georgia’s Justice Minister, seen as the driving force behind the changes, has been dismissive of the complaints of expats, saying that they come from only a “small segment of foreigners” who have come to expect special treatment. “For some reason, they cannot believe that a law is a law,” said Tsulukiani. Later, in October, PM Irakli Gharibashvili apologized to all those foreign citizens who have faced inconvenience and problems because of the new visa policy. The Georgian Government promised to review its recent visa and immigration restrictions on foreigners amid concerns that the reforms may curtail foreign investment and encourage expats to leave the country. Meanwhile, Mr. Liu Bo says that almost nothing has changed since this statement was made.
“If the visa issue does not getresolved soon, it will affect the reputation of Georgia. Georgia will fail to attract more investments from foreign countries. It will contribute to a reduction of the economic development of the country in the future. Georgia aims to be a gateway to Europe, wants to be a hub in this region, to develop tourism, logistics, energyand infrastructure, and is trying to attract more investments, so a reasonable visa policy should be a precondition to this. The Georgian Government should base it on reasonable management. It should try to facilitate the visa policy,” said Mr. Liu.
According to Mr. Liu, the majority of EU countries have recently implemented a fast-track for Chinese citizens. Chinese people can get a visa to the UK, Italy or other EU countries within 48 hours. Meanwhile,getting a visa to Georgia in under a month is impossible. “There are investors who intend to invest in the energy field in Georgia. They have arranged meetings with their Georgian counterparts but 45 days later have still not received visas. This is a very big problem that needs to be resolved as soon as possible,” Mr. Liu told The FINANCIAL.
Q. Chinese investments to Georgia amounted to USD 8 million in the first half of the current year, down from USD 88.4 million from the prior-year period. What are the reasons behind this significant reduction?
A. Economics and commerce between China and Georgia have maintained a really good trend. Chinese companies have attached great importance to the investment opportunities in Georgia. For this year, until now, there have been more than 30 delegations from the Government or companies who have visited Georgia. They were eager to seek the investment opportunities in Georgia. The main reason behind the significant reduction of the FDI is that for the first half of the previous year Hualing Group issued a large amount of investments. Currently Hualing Group is the largest Chinese investor company in Georgia. Their investment portfolio is up to USD 300 million. They have created more than 3000 jobs in Georgia. The USD 8 million is in relation to the first half of 2014. We should wait to see the total amount for the year. I am expecting that by the end of the current year the figure of FDI will be equal if not more than the previous year’s data.
During recent years the economic and commercial relations between China and Georgia have been developing beneficially. Trade volume, as well as FDI, has been characterized by an increasing trend. China is the third largest trade partner and the third main investing country in Georgia. If the visa issue gets settled soon we will see continuing growth of Chinese FDI in Georgia. In general the investment climate of the country is quite attractive.
Q. Which are the most attractive fields for Chinese investors in Georgia?
A. Georgia hosted around 30 Chinese delegates this year. They were the representatives of huge Chinese companies that came to try out the investment opportunities in Georgia.There were more potential investors than in the previous year. Mostly, the representatives were interested in the sectors of energy, infrastructure, agriculture and tourism. Tourism is a very important sector in Georgia. There is a great demand forhotels that is encouraging investors in this field.
The Georgian Government is currently actively involved in promoting the country in order to attract more foreign investors. They have various workshops and presentations being held in Georgia. For example, in October the International Investment Forum was held in Tbilisi.Representatives of over 20 countries attended the Forum. Over 40 projects were presented at the Forum. I myself translated these 40 projects and uploaded them on to the website. Accordingly, during the past two weeks many potential investors have called me or emailed in order to get more information regarding these projects.
Q. The new visa and immigration policy as well as ban of agricultural land purchase by foreigners has created big concern among the foreign business society operating in Georgia. What is your opinion on this?
A. There is a lot I would like to say regarding the recent visa regulation process. It is the biggest obstacle for potential foreign investors in Georgia. And I am not speaking only on behalf of Chinese investors. Visa issue has raised concern among all international chambers. The new visa policy was put in place on 1 September. Before 1 September, many potential investors were planning to visit Georgia. However, now they cannot enter Georgia to carry out their further work. The visa issue has significantly affected investors’ confidence to invest in Georgia. And we are not only talking about potential investors. Those who were already established in Georgia have also been affected. For example, the GM of some local Chinese companies cannot get a visa smoothly anymore.This is very bad for Georgia. We see it as a kind of move backwards. It is a very negative aspect for investors.
Permission for foreigners to purchase land is important for the development of the agricultural sector. This is especially important in this sector, as getting recoup takes decades. Banning the purchase of land does not give guarantees to investors from the Georgian Government. Lifting this ban will be good for the Government.
Q. There is a feeling that the Georgian Government is destroyingits bridge to foreign investors. Have you met with any officials on this and if so, what was their response regarding the current obstacles?
A. The new Georgian Government is modern and open-minded. They are actively working on improving people’s livelihoods. They are quite a positive factor in attracting potential investors. I have met with the representatives of the Ministries of Economy, Infrastructure and Agriculture. They are all very professional and effective. So, we really have quite good working relations. I have discussed these issues with them several times. They in turn responded that they are trying to change the current situation. However, it should not be delayed. If this situation lasts for even half a year it will be too long. There is big competition among the countries where investors can invest. So, maintaininga competitive advantage is crucial for Georgia. If the visa issue will not be resolved soon, the country will lose its attractiveness to foreign investors.
Q. Which positive and negative steps would you underline that have been implemented by the Georgian Government inits 2 years in office?
A. Concerning the investment climate there have been several good aspects implemented by the new government. Signing the AA and DCFTA with the EUsets a very good tone for Georgia. Gharibashvili’s government has a very clear economic development strategy for Georgia 2020. This is very important as it delivers clear messages for investors regarding the country’s strategy. Officials held a lot of activities, functions and platforms in order to better communicate with the business community. Arranging the International Investment Forum last month was quite significant for Georgia. It was at the end of 2012 that Georgia completed its change in government, and later held its presidential elections. For now Georgia has a very stable political situation. Besides the recent intergovernmental changes, the domestic politics of the country remain predictable.
I myself do my best to encourage potential Chinese businessmen to invest in Georgia. Meanwhile, Georgia is literally closing the door to them by not permitting them to enter.
If the visa regulation issue will not be resolved, all of the other positive steps will be meaningless. Any promotional commercial is targeting “customers”, however if you then do not allow them to “try” that which is being advertised, it will all be for naught.
Q. Which new Chinese companies have been established in Georgia during the current year?
A. Before 1 September there were various Chinese companies established in Georgia. The Chinese Gezhouba Group company opened its representative office in Georgia this year. It is quite a large, state-owned company. Its main business is infrastructure.Their turnover for the last year amounted to USD 10 billion. Greenford is another Chinese company established in Georgia in 2014. Their main business is logistics.
Q. Which are the most attractive foreign countries for Chinese investors?
A. Against the background of an increasing Chinese economy, the number of Chinese investors is also increasing. China has not only got the second largest economy, but it is also the second top investor in foreign countries. For the first ten months of 2014, China’s ODI was up 17.8 percent at USD 81.88 billion. The U.S., EU member states and Africa are the top destinations for Chinese businesses. A developed economy, stable society, transparent policy and legal system are the main factors that investors consider overseas. Due to their having the most developed economies, the USA and the EU manage to attract the most foreign investors. While investing in African countries has great potentialalso.
On 11 November, symbolically the “1111”leading e-commerce website, Alibaba traded nearly USD 10 billion during just 24 hours. This is a good example thatdemonstrates the purchasing capacity of the Chinese people. Any foreign country would be attracted by this figure and it has enhanced interest towards the Chinese market.
Q. After recent changes in Georgia’s ministerial cabinets the political orientation of Georgia has become questionable. Does it matter to Chinese investors which political orbit the country chooses?
A. Investors do not care which orbit Georgia chooses. The investment climate is the only thing that bothers investors. China has quite healthy commercial and economic relations with Russia, the U.S. and also with the EU. Georgia has only six taxes and the rates are quite low, according to the rate of corruption Georgia is ranked 55th by Transparency International. Georgia has carried out many efforts to improve the country’s business environment, including cutting the number and rates of taxes, improving tax and fiscal administration, streamlining licensing requirements, and deregulating and simplifying customs and border formalities. This is what is important for investors.
Q. How would you estimate the touristic potential of Georgia for Chinese travellers?
A. China Southern Airlines which flies to Georgia has been actively promoting the country. Various advertising brochures, as well as articles have been published. They tried to attract more tourists to Georgia. During the first half of the year the number of Chinese tourists in Georgia has been increasing. In addition, the travel company has been offering quite attractive fees. The attractive landscape of the country and the cheap air ticket prices have contributed to increasing travellers’ interest in Georgia. The issue now though, is that they cannot get a visa. Solving this problem quickly is most urgent and important.
Discussion about this post