The FINANCIAL — In interview with FINANCIAL Mr. Gilbert Hie, President of the French Business Council and CEO of Bank Republic, Societe Generale Group, reviews the developing steps of France and Georgia.
No French investments were cancelled because of the Russo-Georgian war, nor postponed, Mr. Gilbert Hie, President of the FBC and CEO of Bank Republic, Societe Generale Group told FINANCIAL. He says that the Georgian market has not lost its attraction for investors and that all negotiations with French businessmen are continuing. “One of the most attractive businesses is agribusiness, where we can see some developments in the export of nuts and the import of cows. We also have expectations from French investments in the sector of tourism and car distribution. Other interest from French businessmen is in textiles”, Mr. Hie says.
Q. The French Business Council – Georgia (FBC) took part in its first international economic forum in Paris on April 10. The Vice Minister of Economic Development gave a convincing speech regarding the “great economic potential of Georgia”. This vision was relayed as well by the Economic Counsellor Alexandre Troubetzkoy, who made an interesting parallel in his speech between the middle ages chivalry battles and the contemporary booming economic developments taking place in Georgia, in which he would like to see more “capitaines d’industries” getting involved. What has been done since that period? What were the expectations and did you get those results?
A. When the French Business Council (FBC) was presented to the Senate of France, we discussed a lot of things. Since then, it’s true that the French cooperation with Georgia has been unfortunately, more in a political way, because of the war. The main directions of our talk included also cultural relations between these countries. We had already planned to show an exhibition of Pirosmani in France. As for the economic part and FBC it has been fruitful. Today we gathered 40 members and were happy with the outcome. The total target was 50 for 2008. We also have recruited Camille Marquette who is now the director of FBC and he’ll act permanently in establishing a business contract between France and Georgia.
Q. In an interview with The FINANCIAL (March 2008) you said that FBC will be very active in the fields of agribusiness, tourism, health and foreign trade in general as well as in attracting French investors to invest in Georgia. What was made in this regard?
A. A few initiatives have been worked out especially in the field of health. The French Yonne region has collaborated in a medical diagnostic centre and also a programme of medical training. In the direction of our joint trading there were a few developments in car distribution, especially the brand Peugeot.
We also worked at some initiatives in the agriculture business.(Cow breeding and wheat farming). The strongest links of Georgia and France’s dual collaboration is fastened to the banking system. This collaboration is not only just now founded but has already reached a high level and is considered to soon improve even further.
Q. You said that “One of the most important missions of the French Business Council is to assist small and medium-sized businesses in opening the door to exports to other countries, which will be crucial for the Georgian economy in 2008.” Can you specify what exact problems Georgian companies face when exporting their products to the EU, or just in looking for partners in Europe?
A. As president of FBC I’ve been invited to GSP + and EU Free Trade Agreement discussions. It’s true that these two elements are strategic steps for Georgian development and trade. A company getting ready to enter a new market needs to build up important steps to start developing its export. First of all they need contacts, then right products and financing.
FBC is in charge of establishing contacts with French suppliers, customers and French investors. At a joint summit with the EU, which will be held in November, we hope to contribute to opening the door for Georgian companies to Europe and also, to help in offering competitive products. This must also be supported by the government. Georgian goods need to become competitive in the European market.
It’s important that everybody has common approaches for getting benefits of a trade agreement.
Q. You are CEO of Bank Republic, Societe Generale Group. Can you tell us about the effects of the 5 day conflict between Russia and Georgia on the banking sector?
A. The negative effect of the war on the Georgian banking system was amplified by the international liquidity crisis created by European and U.S. banks’ loan problems. The main subject is the confidence level of the international community into Georgia and the Georgian banking system.
Last week we heard very good news from the international donor’s conference. It was announced that USD 4,5 billion will be apportioned for Georgia for next three years, which will be aimed at economical rehabilitation.
It’s very important that the Georgian banking sector can find necessary resources from international financial institutions, to restore quickly and efficiently credit distribution in this country. The second problem is the cost. It’s obvious that Georgian banks will suffer of higher liquidity costs.
A special system should be put in place to pull down the cost of international liquidity and ruling risk. The banking system will restore its confidence with new economical environment. It’s also important that international public contribution will substitute the missing flow of private direct investments. This will help to avoid economical and financial shock and to ensure all employees that they won’t loose jobs, incomes, to ensure that most of corporates will resist to crisis.
The restoration of the banking system would sustain the real estate business, which takes one of the most important parts of the Georgian economy. What we need is a combination of financial solutions, economic programmes and social projects to restore the financial expectations of our customers in the banking system, which is directly connected with stabilization of the country’s economy as a whole.
Q. An official dinner was hosted by GWS – one of the members of FBC – recently. Today GWS stock is entirely owned by one of Pernod Ricard’s biggest French groups. Give us your personal thoughts about the prospects of the Georgian wine business in Europe.
A. It’s true that Georgia has globally good resistance to the shocks; we can remember the Russian embargo. But the fact is that the Georgian wine sector was much affected by this embargo and started looking for new customers in other countries.
I’m sure that GWS will be competitive and easily find its place on an international market as being a member of the leading wines and spirits group. Wine’s manufactoring needs to be equipped with new technology for reaching the highest quality and for being accepted by European and other modern markets.
Having experienced an important success in most of eastern European countries such as Ukraine, Byelorussia, Baltic States, etc., gives the wine producers an additional motivation on drastically increase of the quality of their wines targeting new countries, screwing the market boundaries to the West by offering high quality of wine, produced by unique type of grapes, like has done G.W.S. now present in such countries like France, Germany and UK, one of the most sophisticated country for wine development. The quality of product accompanied with the efficient marketing researches and effective investments on commercial field should definitely support the development of Georgian wines in Europe.
Q. Which sector seems to be the most attractive for investment in Georgia?
A. One of the most attractive businesses for investment is agribusiness, which show a high potential and where we can see some developments. We also have expectations from French investments in the sector of tourism, hotels, textile and car distribution.
Q. FRANCE has a great influence on the EU, and it is also conditioned by the French presidency. Do you think that France can do much more for Georgia’s development?
A. I am not a politician, only a businessman. The fact is that for Russia and Georgia’s conflict stabilization huge things were done by the French president. If we talk about economical relations, I see further development and prospects in their collaboration. France is participating actively in the Donor’s action.
The partnership between France and Georgia is strengthening day by day. Besides economical relations huge steps have been done in culture. Bank Republic is contributing with the French Cultural Centre to translate French books in to the Georgian language.
Q. What’s the total amount of French investments in Georgia in 2008?
A. In 2007 the total amount of French investments reached more than USD 50 million (2% of total FDI’s). In 2008 it was shortened because of August’s events. And we hope to raise this number in 2009.
The total trade turnover between France and Georgia in 2008 was around USD 100 million. 1/3 is represented in Georgian export and 2/3 – in import.
Q. Could you please name the two biggest French investments in Georgia in 2007/2008?
A. Recently the biggest investments in Georgia from French companies were made in GWS and Georgian Properties (Intercontinental hotel project) and also a few regional size companies which invested in different sectors of the Georgian economy.
Q. Bank Republic was planning big investment in Western Georgia. Did you change your strategy? What are BR’s plans for 2009?
A. The plans of Bank Republic are still in force not only in the west part of Georgia, but all around this country. We have eight projects of opening new branches, in: Batumi, Poti, Gori, Zestaphoni, Borjomi, Khashuri, Akhalcixe and Kobuleti. They will be opened in 2009 and these will be added to Tbilisi and Kakheti’s ones.
Q. Russia has recognized the independence of Georgia’s two breakaway regions: Abkhazia and South Ossetia and is eager to attract investments to the regions. What would your advice to potential investors be? Would their property there be legal and what are the risks investors might face?
A. The fact is that investing in Abkhazia and South Ossetia was not easy because of its problematic and destabilization before and after August’s events. Societe Generale never planned to enter into these two regions and we still aren’t considering investing money there. As for international markets, I don’t have information about other foreign countries investments but I believe that the biggest amount of money in these two regions would be probably put in by Russians themselves.
Interviewed by Madona Gasanova