The FINANCIAL — Georgia’s CNN week, initiated by the Georgian National Investment Agency, which reported on Georgia’s growth to economic and political maturity, has been, in my view, an outstanding success.
The FINANCIAL — Georgia’s CNN week, initiated by the Georgian National Investment Agency, which reported on Georgia’s growth to economic and political maturity, has been, in my view, an outstanding success.
Interspersed with the clips on Georgia’s economic reform being rated No.1 by the World Bank, its GDP touching a 7% and forecast to go higher, it’s beautiful Freedom Square, the beaches and resorts of Batumi – they all presented Georgia as a young, vibrant, dynamic and forward moving nation.
The fact is that it is true and not necessarily a CNN promotion. The greater and more compelling fact however is that Georgia is a gem in the Caucuses and is indeed a very attractive country for investments. There are a number of areas that are more specifically attractive for investment, especially in Agriculture and agro industry.
The current economic and investment climate is somewhat dull on a global basis, but the same dull climate for large investments indeed opens many windows for smaller investments as the big players hold back, creating a certain momentum for smaller players to go for undervalued assets, low labour costs, lower level of investments, lower level of risks and higher yields. There is always a deep appetite for investments, but the scale of investments, category of investments, investment targets and destinations are all driven by what the investor perceives as a sustainable, trouble-free and lucrative investment. Politics, stability, levels of ease of doing business, levels of corruption, law and order and the mobility of funds all contribute to an investment decision. Georgia stands tall on all counts and is most certainly a very attractive destination for private investors who want a low cost entry level with higher profits.
My own assessment of the average scale of targetable investment by foreign investors is in the million dollar range. It may appear a small time investment by international investor standards, but bringing in 1000 of those investors a year would have a different dynamics than brining in one very large investor with one big billion. The small investors will probably target specific rural based projects, mainly in agriculture and agro industry which will increase rural employment and rural income. They will also bring with them a number of support staff, specialists and technicians who will require rented homes and apartments, whose children may have to go private schools, who will buy cars and other appliances, who will pay taxes and who will continuously consume more than the average household. Apart from the direct investment related income to the nation at large, the spin-offs are extremely attractive.
The increased investments, the flow of foreigners in and out, also creates a new and exciting social dynamics, more openness to the world and perhaps shaping of a new mindset among the youth that the world out there is vastly different from what we may generally imagine it to be from the comforts and safety of our own homes and families. Most countries that have been successful in attracting a large number of investors have also evolved a different cultural, social and intellectual space which generates more energy and momentum and triggers innovation, enterprise and upward mobility. Societies which have remained highly protective have all been sluggish, controlled and their civilisations have been in a constant and continuing decay. North Korea is a classic example of this degeneration.
Georgia has been relatively unknown to the outside world, and still it is. I have however experienced a greater awareness of Georgia among a number of countries, although the shadow of the 2008 war with Russia still hangs and questions are constantly asked about the continuing state of political and economic stability. Serious and informed investors will understand that there are issues such as Abkhazia and South Ossetia which need to be resolved at some point in time, but that Georgia has been proactive in reaching out toward a more fundamental solution to the problems.
CNN’s Georgia week reportage touched on this issue by talking to growers vegetable, fruits and wine on the difficulties they have in not being able to export to Russia. Obviously, the prices have dipped and farmers are finding it difficult to make ends meet. On the other hand, it is indeed possible for Georgia to innovatively look for niche markets, brand certain agricultural products and sell them to Europe with the right certifications.
CNN report brought out one major aspect of Georgian agriculture. It is about the fact that all farming in Georgia for years, and still, is organic where no fertiliser is used or whatever fertiliser that is used is organic.
Even in the big agro countries of China, India and Brazil, one hardly finds organic farming. They are all intensively cultivated with chemical fertiliser. Organic farming gives Georgia a clear edge in the agro produce exports area. But this aspect of organic farming needs to be professionally presented to the world. Everyone in Georgia repeatedly praise their tomatoes and cucumbers to be superior to those imported from Turkey. It is because of the soil conditions and the traditional organic farming.
If Georgia simply brands its tomatoes as “Georgian Gem”, gets the right certifications to enter Europe and airfreights them into Germany, Georgia could possibly make some $500m each year from tomatoes alone. If there is a nation-wide program for families to grow chicken in their backyards, collect millions of organic eggs and have them transported to Europe, it would be yet another $500m. One may brand it “Georgian Gold”. Branding products is also branding a nation. There is a massive upsurge momentum that comes with brands. It will not only sell products and enlarge the economy, but give the country a very special niche in the Causes. Georgia, with all its reforms on all fronts, deserves to be ranked as a gem in the Caucuses.
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