The FINANCIAL — Georgian American Alloys expects the following year to be more positive than the previous two ones and therefore plans to put investment of more than 20 million US Dollars into the construction of a mining factory in Chiatura.
The low level of competence and independence of the judicial system is one of the main problems which needs to be addressed urgently by the Government, said Mr. Volodymyr Lozynskyy, General Director of Georgian Manganese and Head of Georgian Assets at Georgian American Alloys, to The FINANCIAL in an exclusive interview.
“Despite the complexity of the dispute, officials of the revenue service or judges should have exact competence, in order to eliminate the need to use international courts, which will make the local business investing area much more desirable. Unfortunately, we find a low level of competence both in the revenue service as well as in the courts,” mentioned Mr. Lozynskyy.
There may be a conflict between the announced changes in the taxation system and the will to attract more foreign direct investments, and this needs further discussion, Mr. Lozynskyy told The FINANCIAL.
Q. 2016, like 2015, was quite hard for the global economy, including the drop in oil and raw material prices. How would you evaluate the year for the company?
A. Georgian Manganese is a member organization of Industrial Group “Georgian American Alloys” and therefore global economic changes have a significant impact on us. Frankly speaking, the last two years were not promising for the industry of metallurgy, so we were forced to maintain productivity by optimizing our resources.
The very first unpleasant decision was made at the beginning of the year, when on 20 January we announced a special regime for working; we fired 3200 employees, but simultaneously our company provided an unprecedented social security package, which meant that all workers would maintain their jobs with 60% of their wages and full medical insurance. As it was promised, on 20 May, all restrictions were abolished and the amount of ore processing started growing. In this period we managed to rehabilitate mines, in order to make them much safer for the environment as well as our employees, which ultimately translated into much higher productivity. We aim to conduct the same process in all our mines, which we do believe will influence the competitiveness of the price of ore.
The crisis was encouragement for our team to find a market for surplus ore. For the first time, after 25 years, 80 thousand tonnes of concentrated ore was exported to China, which gave us the opportunity to avoid having to announce a special working regime again.
Positive dynamics for manganese alloys gives us a reason to have corresponding expectations towards modernization of production, as well as realization of investment projects in the following year.
Q. Due to bureaucratic reasons, construction of the mining factory in Chiatura was postponed. What level is the factory at now? Has there been any progress or change in the project?
A. Constructing a new mining factory is a huge and complex project, which needs plenty of designing effort, including architectural, geological, environmental or social-infrastructural planning. Therefore, we have held many public discussions on the subject for all interested sides where they had an equal chance to express their opinions and positions.
For now we have already fixed points of cooperation and all the important aspects are agreed on, which means that all sides will be mostly satisfied by the factory. Now we are as close to making a final agreement with state officials as we’ve ever been, and after which we will be able to launch a project with 20 million investment potential.
Q. What are the outstanding achievements and failures of 2016 that you would highlight?
A. Installation of a new air filtering system in the Zestaphoni alloys factory can be considered one of the biggest achievements of the ongoing year. The result is really fascinating and can be approved by an air pollution monitoring system. According to 4 specific parameters, the pollution level is much lower than the traditional norm.
1.5 years ago a contract was signed with Indian company Ghalsasi, concerning a project to launch a 25.5 MgW new ore alloy oven in the 4th department of the factory. The oven fully meets with standards of the 21st century in terms of energy efficiency as well as environmental tasks and working conditions of employees. A type of change like this has not been made to one of the main departments of the Zestaphoni Alloy factory for the last 40 years.
Q. What is the export rate for 2016 and which countries are the biggest partners for GAA?
A. Almost 90% of our production is exported and together with other producers alloys have one of the biggest shares and hold a leading position in the country’s export. The main consumers are steel producers in the US and fewer customers from the EU.
Q. How could the new taxation system impact the business?
A. In our opinion, the announced amendments to the tax system collide with the will to increase attractiveness for FDIs. We do believe that before taking a final decision, the topic needs further discussions, in order to guarantee proper operation.
Q. What are the reforms you would like to recommend to the Government to attract more FDIs?
A. Together with a flexible tax system and decreasing level of bureaucracy, the existence of a truly independent judiciary, where high-qualified judges will have an opportunity to deal with business cases, is crucially important for attracting FDIs. Despite the complexity of the dispute, officials of the revenue service or judges should have exact competence, in order to eliminate the need to use international courts, which will make the local business investing area much more desirable. Unfortunately, we find we have both a low level of competence in the revenue service as well as in the courts.
Q. What are the plans for GAA in the nearest future?
A. Optimization of production, improving working and social conditions for employees and environmental tasks still remain the main priorities for the administration of GAA, as they have been since the very first day. To achieve these goals more that 57 million US dollars were invested in our Georgian assets.
Author: Nikoloz Charkviani