The FINANCIAL — According to the preliminary data of GeoStat, FDI from China to Georgia in 2015 amounted to USD 58 million, down from the USD 218 million of 2014. Several large-scale projects of Chinese investors, including the Tkibuli thermal power plant and cement plant project are currently underway in Georgia. If these projects continue to develop smoothly, it is expected that there will be more Chinese investment flowing into Georgia in 2016 than there was in 2015.
“Georgia has been very successful in terms of economic reform. Georgia has a very good investment environment and a simple tax regime. It is attractive to potential investors from many countries including China. Although the world economic situation was not good and the economies of the neighbouring countries of Georgia were shrinking in 2015, Georgia remained stable and achieved growth. The decrease of FDI from China in 2015 does not mean that Georgia is no longer an attractive place for Chinese investors. I could tell you that there are many potential Chinese investors visiting Georgia to look for investment opportunities after the Chinese New Year,” Liu Bo, Economic and Commercial Counsellor of the Embassy of P.R. China in Georgia, told The FINANCIAL.
In his interview with The FINANCIAL Mr. Liu discussed the investment climate of Georgia and its attractiveness for Chinese investors.
According to Liu, nowadays China is the second largest economy in the world. In 2015, China’s direct investment to other countries was up to USD 118 billion and covered 155 countries. “The cooperation in trade and investment between China and Georgia has been becoming closer and closer in the last several years. Now China is the main trading partner and one of the main FDI sources of Georgia. The preliminary data of FDI from China to Georgia in 2015 is just the data of one year. Actually, in the long term perspective China is always one of the main FDI sources of Georgia. Last year, China and Georgia successfully co-organized the first session of Tbilisi Silk Road Forum. More than 500 Chinese businessmen visited Georgia and took part in the Forum. They showed great interest in investing in Georgia. Now, several important large-scale projects are underway, such as the Tkibuli thermal power plant project and investment of the cement plant project. I can foresee that the FDI from China to Georgia will increase greatly in 2016,” he said.
Q. What were the main positive steps of the current Georgian Government to improve the investment climate of the country?
A. The current Georgian Government attaches great importance to improving the investment environment. They take practical measures to improve the investment climate. The profit tax reform is a very good measure and will boost reinvestment. Also, the Georgian Government is working on a new law of better investor protection. In my opinion, the Georgian Government is very open-minded and pragmatic. This is one of the most important factors to attract foreign investors.
Q. Which new Chinese companies have been established in Georgia so far this year?
A. There is a Chinese company whose name is China Georgian Ceramics company registered in Georgia in 2015. It mainly focuses on the trade of ceramics and light industry products. If the projects which I mentioned above go on smoothly, I could foresee that several large-scale Chinese companies would register in Georgia this year.
Q. How is Chinese business developing in Georgia?
A. There are now around 20 Chinese companies operating in Georgia. Their business scopes cover trade, infrastructure, telecommunication, real estate, energy, finance, transportation, agriculture and so on. They are all developing well and smoothly overall. Huawei, the leading telecommunication company in the world, is one of the most successful Chinese companies operating in Georgia. Now Huawei is the main player in the telecommunication sector and the second-biggest seller of cell phones in Georgia. It provides a lot of employment opportunities for Georgians. Over 90% of the employees of Huawei Georgia are locals. Another example is Sinohydro. Now Sinohydro is one of the most important infrastructure contractors in Georgia. It has built several important roads and tunnel projects in Georgia and gets high recognition from the Georgian Government. It also employs many locals.
Q. Georgia has entered into a cycle of elections that will last for the next three years. In general such periods are characterized as less attractive for investors. Will the attitude of potential Chinese investors vary in line with the results of the elections?
A. A stable social and political environment is vital for the economy’s development. It is also vital for the foreign companies operating in the country. Of course, it is an important factor for the potential investors both at home and abroad too. I do believe that the potential Chinese investors will take consideration of and keep a close eye on that.
Q. The recent year has been quite difficult for the Chinese economy. How does the country manage to overcome its problems?
A. China is now the second largest economy and the largest trade in goods country in the world. In 2015, China’s economy grew 6.9 percent, the lowest in 25 years, but its economic volume topped USD 10 trillion for a second year. China and the United States are the only two economies overstepping the threshold. Although the growth is not as high as a few years ago, it is among one of the highest in the world against a shrinking world economy background.
Economies with more than USD 2 trillion in volume usually see a growth rate below 5 percent. The larger the size of an economy, the more significant its growth rate matters to the global economy. When understanding Chinese economy, people should have more patience and confidence as the fundamental elements of the world’s second largest economy are still strong. Unlike in previous years, when investment was a major contributor to growth, consumption accounted for 66.4 percent and investment only 10 percent last year.
Now China is in the process of transition to a service economy. China has initiated the concept of “new economy” to foster new growth drivers for overall economic transformation. The new economy is not just about the emerging forms of businesses and industries, such as e-commerce, cloud computing and the Internet of Things. It is also found in smart manufacturing, large-scale customized production, family farms, and share-holding cooperatives in agriculture.
In the meantime, China is upgrading traditional growth drivers, where there is still much the Government can do, because China remains at a stage of industrialization and urbanization. Propelled by the twin engines — the new growth drivers and upgraded traditional ones, China’s economy will be able to get beyond difficulties and rise to a more promising level.
Q. How would you estimate the trade potential of China and Georgia and how can Georgian producers increase export volume to Georgia?
A. China is a main trading partner of Georgia. There are great potentials in trade between China and Georgia. Last year, Georgia exported over 2.67 million bottles of wine to China and grew by 122% year to year. China is the fourth largest market for Georgian wine. Now both sides are negotiating an FTA. After the signing of the FTA, it will greatly reduce the customs tariff of both countries. It will promote the export of wine of Georgia to the Chinese market. Georgian wine will be more competitive in the Chinese market. It will also help to promote investment between our two countries.
Q. Which fields remain attractive for Chinese investors in Georgia?
A. Georgia has a very good investment environment. More and more Chinese potential investors are coming to Georgia and looking for investment opportunities. In my opinion, they are mostly interested in the energy sector, tourism sector, transportation and communications sector, logistics and infrastructure projects.
Discussion about this post