The FINANCIAL — Only a few companies in Georgia have adopted the idea of making money from waste. High bank interest loans, absence of economic incentives and what seems to be a complete lack of cooperation from the Tbilisi Municipality make this environmentally friendly business a tough enterprise.
“Generally, business in the area of waste management is quite new for Georgia so there is a real need for some incentives, even if they are coming from government institutions, to involve the business sector in these activities,” said Irakli Legashvili, deputy head of the waste management service of the Ministry of Environment Protection and Natural Resources.
Even though Georgia possesses the necessary base resources for developing a strong and economically viable recycling sector (Tbilisi produces about 0.6-0.7 kg of trash per capita per day, while regional municipalities are responsible for about 0.4-0.5 kg), this sphere remains underdeveloped. Currently, there are only about six operational paper recycling plants in Tbilisi and one PET (polyethylene terephthalate) recycling company in Rustavi.
Market realities greatly hamper the viability of recycling as a business.
“This type of business is not profitable in Georgia,” said Nino Shavgulidze, the administration and finance manager of the Caucasus Environmental NGO Network (CENN), in e-mail interview with the FINANCIAL. “To start a business, the entrepreneurs need to take a loan from the bank, but the banks have no confidence that they will make a profit from this type of activity.”
Enrico Mosulishvili, executive manager of the PET recycling factory in Rustavi, also said that the recycling business does not make money per se. “Unfortunately, it is not a profitable business, but it is supplementary for us, because we produce packaging for PET and recycling it allows us to partially use our own raw materials and make production more economical.”
PET is used to create packaging such as bottles and containers for a wide range of food products and other consumer goods such as soft drinks, alcoholic beverages, detergents, cosmetics, etc. It is one of the most common consumer plastics.
Shavgulidze also said that the recycling sphere remains underdeveloped in Georgia mainly because the country has not adopted any law on waste management; has no adequate strategic plan for the issue; offers no encouragement mechanisms to support the recycling business, such as reducing the level of taxation or cost of utilities; and lacks developed infrastructure for the collection and separation of recyclable waste.
The Ministry of Environment Protection and Natural Resources has already completed a draft waste management law. “This law has been drafted with international consultants so it is mostly harmonized with EU directives and requirements, however, it also considers the realities of the situation in Georgia,” Legashvili said. A national strategic waste management plan is scheduled to be drafted with the help of the European Commission at the beginning of next year.
Other realities, such as existing competition, also prevent environmentally conscious companies from turning a green profit. “The paper recycling companies mainly produce toilet paper and napkins,” Shavgulidze said. “Yet since this product is already available in the Georgian market from other sources, they have a problem selling it.”
The FINANCIAL visited one of the paper recycling plants in Tbilisi to learn whether environmentally friendly also means financially viable.
LTD “RULONI” has been functioning for three years. It produces about 100-120 tonnes of brown test liner paper per month from 150-170 tonnes of recycled paper. If running at full speed, the plant could more than double its production, but high interest loans and the prohibitive cost of recycled paper stops this business from increasing its profit margins.
Teaming up with the Tbilisi Municipality in the task of gathering recyclable paper could help the situation, but the city turned a blind eye to RULONI’s request to allocate a couple of trash collecting trucks for gathering only paper waste.
“We talked with them, but they are categorically against it,” said Teimuraz Janjalia, the company’s director. “Maybe there are regulations that all the trash should be collected at the same time. At the moment all this paper is being burned, but why burn it? I will pay money for it.”
The City of Tbilisi’s press centre could not be reached for comment on the issue.
Janjalia said that his company currently purchases recyclable paper from private individuals and Turkish firms, which have set up a paper gathering enterprise in Tbilisi. With the price of recyclable paper almost doubling during the past three months, RULONI is now paying more than ever for the waste it recycles.
Everything else also seems to be a problem for this environmentally conscious business: the lack of adequate storage facilities causes the recyclable paper to rot, reducing its quality; constant power and water cuts slow production, eating into profits and lowering output; huge energy bills place a strain on the company’s financial stability; and high interest loans prohibit it from relocating to the city’s outskirts where energy resources could be both cheaper and more reliable.
“The problem is financial,” Janjalia said. “We tried to get better financing, 8-10 percent per year. If we could get that, if we could get a loan of about 500,000-600,000 GEL, we could relocate and build a new factory and pay off that sum easily.”
If not for lower bank rates, Janjalia hopes are for governmental incentives that could help the business survive. “It is very difficult to work with such prices for energy resources,” he said. “If the prices could be cut in half, at least, the factory would get 15,000-20,000 GEL in addition to what it gets now in profits.” The money could be used to purchase better equipment, thus enabling RULONI to produce quality white paper, as good as that imported from Turkey or Ukraine.
“So far we are afloat, until when I do not know, but so far we are managing,” said Janjalia about the current state of the green business he is running. Turning trash into cash might be environmentally friendly, but it is far from economically easy.
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