The FINANCIAL — As a result of the Russo-Georgian war Georgia’s once-blossoming tourism industry has been severely hit. The country’s pristine forests were burned by Russian incendiary bombs; its scenic resorts on the Black Sea – which have long attracted rich Russians – sit largely empty.
“After the war the loss in Adjara made around USD 25,000,000,” Temur Diasamidze, Head of the Department of Tourism and Resorts, told The FINANCIAL.
In his words, as of August 6, 2008, in other words before Russian aggression, a total of 169,165 tourists arrived in Adjara, which compared to the figure of August 6, 2007, was 25% more. Among the tourists 110,850 were local tourists and 58,315 were foreigners, which compared to the same period in 2007 is 30, 2 and 17, 1% more. If there had been no war, the number of tourists in Adjara until the end of 2008 would have exceeded the forecasted figure 450,000 and reached 500,000.
Between January and September 2008 a total of 241,955 tourists visited Adjara, among them 176,394 local tourists and 65,561 foreigners. In January-September 2007 a total of 314,034 tourists arrived in Adjara, where 208,505 were local tourists and 105,529 foreigners. Compared to the same period of 2007, the number of tourists has decreased by 23% in January-September 2008.
After the war the number of tourists in Adjara in September has been increased by 30% compared to the previous month.
The interest of foreign tourists in Adjara is still the same. A good example of this is that the cruise ship Spirit of Adventure arrived in Batumi Port on 23 September, there were 440 European tourists onboard. They are also expecting the cruise ship Black Watch.
The Check Posts of Batumi Port, Airport and Sarpi Customs kept working, from where the tourists from various countries were regularly arriving.
The loss of Adjara was accordingly shared between the Black Sea resorts. The loss was due to the decrease of number of tourists.
“As far as the high mountainous resort Beshumi is concerned, here we have had an unprecedented figure of tourists, making up 12,570,” said the Head of the Department of Tourism and Resorts.
Troops of the Russian occupation army blew up a key railway bridge in the Kaspi region, disrupting oil exports to Georgia’s Black Sea ports, on August 16. As a result of this subversive terrorist act, railway traffic between eastern and western Georgia and the railway link with Georgia’s maritime ports were cut for some days.
“As a result of the war the loss of the Georgian Railway totally amounted to USD 40 million 600 thousand. Among them 4 million was spent in damaged property, 35 million was unreceptive income and approximately 2 million – other losses,” Irakli Ezugbaia, Head of the state-run Georgian Railway, told The FINANCIAL.
“Total losses included restoration of Grakal Bridge involving funding of GEL 1 million; also the oil loaded in 3 railway cars which was spilled during the explosion of the key railway bridge. We provided the compensation for it,” Ezugbaia added.
The bridge was blown up on 16 August and rail movement stopped. Cargo trains resumed travel from 24 August and passenger trains from 1 September.
Lado Gurgenidze, Georgia’s Prime Minister and a former investment banker who worked in London, said Georgia had suffered about USD 1 billion in infrastructure damage from the war – damage that could be more than offset by USD 2 billion in combined aid from the United States and the European Union.
Mr. Gurgenidze also emphasized that in a region known for coups and revolutions, Georgia had not been consumed by lawlessness and disorder, even as Russian tanks rolled a mere half-hour from the capital. “We are experiencing the unpleasant consequences of a shock to the system,” he said, “but we have not seen panic buying or hoarding, and we have not seen a widespread investment flight.”
“As a result of the war Caucasus Online had GEL 1,320,000 losses,” Eka Machitidze, PR Manager of Caucasus Online, told The FINANCIAL.
According to Machitidze, during the recent war between Georgia and Russia Russian occupants damaged masts in Gori, where the hardware of Georgia’s largest Internet provider Caucasus Online was installed and therefore the speed of internet was very low and internet was inaccessible for two million people across the country.
Some regions were as a result without internet for 50 days. During this period engineers of Caucasus Online and the Georgian Railway were working to restore the service.
Caucasus Online was starting to build a giant telecommunications network stretching to Western Europe. But this project is yet to start.
“We are waiting for American engineers to start the new project in approximately two weeks. This project was stopped because of the war. It was impossible to work in Poti,” Machitidze noted.
As the New York Times reported, more than a month later, the company Caucasus Online is still struggling with the economic fallout. The company’s managing director, Mamia Sanadiradze, said that having restored internet access to clients at a cost of USD 50 million, he now risks defaulting on plans to build a giant telecommunications network stretching to Western Europe.
The project was to be completed by October, but has been set back because American engineers hired to install an underwater cable are said to be too worried about the security risk of returning to Georgia and to the field. Mr. Sanadiradze estimated he would lose USD 1 million for every month the project was delayed.
The New York Times took a snap picture of the local businesses in the aftermath of the war.
The Kazakh state oil and natural gas company, KazMunaiGas, announced that it had dropped plans to build a USD 1 billion oil refinery in the Georgian port of Batumi, saying it was not economically viable. The Kazakh government, an important foreign investor in Georgia, has also withdrawn from plans to build a USD 10 million grain terminal in Poti, citing concerns raised by the war.
Other businesses are retrenching as well. The Ofer Group, an Israeli shipping and property development company, said it would forge ahead with a shopping centre project in Tbilisi on which it had already broken ground. But it delayed development of a four-star hotel.
The war may also have stymied Georgia’s aspirations to become an alternative supply route for energy consumed by the European Union, which seeks to offset its vulnerability to Moscow’s pipeline politics. The United States and the European Union have pressed for the construction of a pipeline called Nabucco to bring natural gas to Europe from Central Asian countries like Turkmenistan, with Georgia as an important part of the route.
“Everyone said the Russian embargo would be an economic disaster, yet for the last two years Georgia has had double-digit growth,” said Nicholas Enukidze, Chairman of the Bank of Georgia.
Perhaps no one knows better the necessity of offsetting dependence on Russia than Badri Japaridze. He is chief executive of Borjomi, the largest Georgian beverage company, whose celebrated spring water was once the preferred refreshment of Russian Tsars. When Russia embargoed Georgian goods, Borjomi, then the No. 1 bottled water brand in Russia, had to withdraw 180 million bottles of water from 30,000 stores, which Mr. Japaridze said cost the company USD 50 million in lost sales.
Valeri Pantsulaia, a spokesman for Telasi, a Russian-owned utility that distributes electricity in Tbilisi, said that Telasi had experienced no disruptions during the war and that the Georgian Government had assured the company it will not nationalize Russian assets in Georgia.
“I don’t think people think about whether we are Russian or not,” Mr. Pantsulaia said. “Business is business. Georgians want electricity, regardless of whether it is a Russian or Georgian company that is keeping the lights on.” He added that Telasi was nevertheless wondering whether to re-hang its Russian flag outside its Tbilisi office.
Written By Sopho Kheladze
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