The FINANCIAL — German Business Association Georgia (DWVG) is supporting the development of the construction and agriculture sectors in Georgia.
For this purpose DWVG is arranging meetings between German and Georgian business entities, so they can evaluate which issues they can cooperate on. From the two groups of delegations one will be focused on agriculture while the other on the construction sector. The delegation of businessmen from Germany will be arriving between 27 and 29 September in Tbilisi and afterwards will travel to Armenia for two days.
“The aim of the delegation is the meeting between German and Georgian companies as business partners. This will be a matchmaking event of sorts and we would like to invite every Georgian company that could be a potential partner for each of the German entities,” said Uta Beyer, Executive Director of DWVG.
DWVG is looking for Georgian companies as partners which are operating in the following fields such as real estate developers, architects, real estate investors, road construction companies, agents/distributors and customers in cooling facilities (agriculture) and green houses, agents/distributors in oil, gas, chemical sector, agents/distributors for water tanks, treatment of waste water, treatment of water, plastic processing firms (plastic processing with moulds), and importer and distributor for veterinary products.
“Agriculture is at a very weak point in Georgia at the moment and especially if we are talking about classical agriculture for grain farming, animal farming has also been going down over the past years. Moreover, wine – where Georgia was very strong, is also in a state of crisis,” declared Patrick Jung, Project Manager at DWVG.
“We are seeing that only a small part of agriculture is achieving success at present. These are special cultures like nuts, certain berries or wild fruits which are exported. There are also some successful projects concerning cooking oil.
Germans mostly want to supply technology for Georgian companies that want to go into the primary production of agricultural products in order to make the sector again a profitable business here, which is difficult at the moment. However Georgia has some possibilities and Germany is actually a supplier of the technology as well as the buyer of those products,” Jung added.
Hipp, which is producing baby and toddler foods, is already actively buying apples from Shida Kartli in very high quantities and exporting apple juice to the European Union.
The second issue German businessmen will be cooperating on is in the field of construction.
“We have been seeing positive trends in the construction sector since the beginning of the year, the construction sides which were stopped for a long time have been taken up again, we are seeing many driven construction companies taking an interest again in the Georgian market, coming to Georgia and getting new orders even,” declared Beyer.
“Financing was a big problem in the construction sector during the post war period and the financial crisis. It was very difficult for customers as well as for the companies who were already building to keep the financing going.
Unfortunately financing is very expensive in Georgia, and this is not something the Government can really help. They can only help by creating long term stability in order that people lend money and have trust in the companies and the economy, so there is no short term answer that could change the situation fundamentally, but to develop the real estate sector and therefore the construction sector long term security must be created,” said Jung.
“Constructions are always long term or at least medium term investments for the buyer and for the developers, we need cheaper money and this can only be achieved if the banks can supply money cheaper, therefore stability must be created in the longer term, this should not be going too fast,” added Jung.
There are already a couple of strong German investments in Georgia from the construction materials side including HeidelbergCement, Knauf doing gypsum in Tbilisi, Caparol doing colours and Renokol.
As Jung declares German companies have trust in the construction sector, investing in materials in order to supply the south Caucasian market.
However, As Beyer declares trade within the region is pretty challenging for some companies as many still complain about the huge problem of exporting with Azerbaijan.
“Doing business in Georgia is much easier compared to the other countries in the region.
In the business community everybody would prefer to be located in Georgia, if the Georgian Government could help ensure the success of doing business and exporting from Georgia as everybody is complaining about the problems in Azerbaijan.
HeidelbergCement had many problems in exporting to Azerbaijan for a couple of months.
If a company had the choice and would be guaranteed availability to export to Azerbaijan easily it would really help companies to come to Georgia,” said Beyer.
“Azerbaijan is a much bigger market compared to Georgia, for example if you look at the use of cement Azerbaijan takes about 4 million tons of cement while Georgia uses only 1 million. Azerbaijan is a much bigger market because they had a really significant building boom in Baku,” declared Jung.
More than 100 companies from Germany are directly involved in doing business in Georgia at present. The most invested sectors by Germans are probably the financial sector, represented by ProCredit Bank, construction sector represented by HeidelbergCement, Knauf and Caparol, and the agriculture sector including Hipp and Schuchmann Wines.
Schuchmann Wines has invested 6 million EUR in the Kakheti region near Telavi. The company owns a vineyard and sells exclusively made in Georgia wine to some of the leading hotels and wine shops in Germany.
“Georgian wine is considered a niche product in Germany as prices are relatively high because the German market is a special market in terms of prices for food being extremely low.
You can buy a bottle of good wine starting from 2 EUR in Germany while Georgian wine has been traded for 5-15 EUR which is quite a high price. However, I think Georgian wine has the image of special and good wine, and this is a good strategy for wines,” declared Beyer.
Jung declares that in the near future Georgia will definitely see much higher visitor numbers from Germany. However he states that the fact that there are no direct, cheap flight connections to the country and no resorts where you can send a lot of German tourists is not helping the situation.
“There is huge price competition in the tourism sector in Georgia. The country is competing with Turkey which has a fully developed infrastructure for tourism, but if Georgia does not intend to compete with turkey then the price will be even higher. If the prices are higher then there will be less tourists, which is one strategy.
However, Georgia should decide which strategy to focus on when attracting tourists. There will be certain tourists who are able to pay more and mass tourists who intend to save money when going for holiday deals,” said Beyer.