The FINANCIAL — Starting on November 16th Georgia will host a Medef (Movement of French Enterprises Patrons) delegation. “We want this event to be the start of a new period of investments but at this stage it is not yet possible to say what the exact number of new French investments to Georgia will be. However I know that many French companies are working hard on catching the opportunity to invest in Georgia,” Gilbert Hie, President of French Business Council (FBC) Georgia and CEO of Bank Republic, SocGen Group, told The FINANCIAL.
As Mr. Hie says, Georgia is not yet at the end of the economical downturn and 2010 will be another difficult year for the economy. However Mr. Hie is optimistic that if political stability reigns in 2010 Georgia will manage to see a return of foreign investors. The President of FBC believes that the construction of free industrial zones is a key point for the country’s further development. “I am already in talks with various people who are interested in investing money in the free industrial zone in Poti,” Mr. Hie says.
The French delegation will meet various ministers and bodies, after that they will visit Azerbaijan, as it is a joint visit to the two neighbouring countries. The initiator of the French entrepreneurs’ visit was the Ambassador of France to Georgia, Mr. Eric Fournier, together with Medef members. The decision was taken in the summer of 2009 when Mr. Fournier presented the situation of Georgia to Medef members.
FBC Georgia is a member of this delegation. “We found it important that French businessmen already present in Georgia should be communicating closely with potential partners from France,” Mr. Hie says.
“The role of FBC, as well as of other Chambers or Councils, is more difficult now in such a difficult period to attract investors, customers and suppliers in order to boost Georgian export. It is a real challenge and it is very important that all business organizations are even more active now than before to sustain Georgian industry,” Mr. Hie says.
During 2008-2009 French investors in Georgia did not pull out. “They usually have sustainable investment policies and I think they will continue to remain in Georgia if the recession does not last too long,” Mr. Hie says.
But still he does not believe that we have seen the end of the downturn in Georgia..” I’m afraid that unfortunately we will have another difficult year in 2010, “Expectations of recovery from the global recession will be much more significant in 2011” states Mr. Hie.
The representatives of 20 French companies from various sectors and industries will pay a visit to Georgia. The representatives are mainly from the sectors of energy, transportation, construction, environment, waste water and hospital. There will also be a few representatives of companies providing services in infrastructure and financial services.
According to Mr. Hie, “Unfortunately French investments in Georgia have been limited in the past. French investments in Georgia do not represent more than 2% of the total number of investments in the country. Historically other countries like Germany and Russia have been closer to Georgia especially during the cold war period. France was traditionally more oriented on Africa and other regions than on Eastern Europe”.
The largest French investment was probably made in Georgia in 2006, when Societe Generale Group took the control of Bank Republic. However even before this date the largest French investments were done when Pernod Ricard started cooperation with GWS and Castel Group sat up a brewery Company.
Georgia did not manage to attract any new French investments to Georgia in 2008/2009. “It has been very difficult for Georgia to attract new investments since the events of August 2008. I think that the recent conflict with Russia was the most important recent factor responsible for reduced investments. Foreign investments are always attracted by the stability of a country. The second most significant factor was the international financial crisis. International groups had less money available to invest in various countries so instead of ten countries they were investing in, they kept only two or three countries and Georgia had little chance of being amongst those countries given its problems with external political stability. The third factor being the internal political and social problems which the country had in 2009,” Mr. Hie notes.
As Mr. Hie says, all the members of FBC Georgia have suffered from a global decrease of activity, mainly since the beginning of 2009. “I don’t see any sector which has not been affected by the decrease of profitability. Many Georgian companies had to let people go and reduce staff numbers due to the hard times.”
“There are many sectors in Georgia that can be attractive for French investors where they indeed have a real competitive edge. Among the delegation’s members we have people specialized in energy, in hydro power plants, transportation, especially in railway transportation, environmental business which is also a high level of specialty of French business, together with high technologies, electricity and so on. I think that the wide selection of French companies has much to offer and can play an important role in the future of Georgia.”
From Mr. Hie’s point of view, the main risk that foreign investors face in Georgia is the instability of the country. “Since 2008 we have had internal instability fuelled by the Russia conflict and international financial crisis, also worsened by various elections and street demonstrations. It is very important that stability is constant, which is the case at the moment and is crucial for a return of trust of foreign investors.”
“We can definitely see that most investors are hesitating before investing money in this kind of country. This period of recovery will have to be long enough to convince them to come back. If political stability also lasts in 2010 then I think that by the second part of 2010 or the beginning of 2011 we will certainly see new foreign investments coming in,” he says.
The main message of the FBC President for the Medef members will be to measure the strategic importance and potential of this country, and its orientation towards the western world which is unique in the region. “Georgia is an open country, with many open regulations for investors and a lot of reforms that have been implemented by the Government over the last few years. Georgia is benefiting from significant international support since the conference of Brussels in 2008. The country is developing the free zone concept and I think that it is important for Georgia that Poti becomes a gateway of the Black Sea not only for Georgia, but also for Armenia and Azerbaijan. This is really a strategic position. Free industrial zones will become the main tools for attracting foreign investors,” he notes.
“Recently investments in Georgia have been mainly coming from the Middle East, as the global recession has affected Europe and the US more heavily. This is caused by the reason that the Middle East has a surplus of money to invest abroad. Their requirements are also more complimentary to Georgia offer. But still I do not have any doubt that the US and Western European countries will come to Georgia again,” Mr. Hie says.
Mr. Hie agrees that the total direct foreign investments volume in Georgia before 2008 was higher from western and US countries than it is now, but it was not one of the biggest shares. “US and Western Europe have a choice to invest in the best positioned and most competitive countries. The Georgian Government has been working on improving the investment environment for a long time but still we should not forget that this country has been converted to capitalist system only recently. So it is still a young country in terms of foreign investments.”
“In order to attract foreign investments we need to run open and transparent tender processes. It is important not to incurr regulatory burdens or too much tax pressure,” Mr. Hie says.
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