Jemal Inaishvili, President of GCCI, thinks that Russian investors will become interested in the free economic zone in Poti. “In future perspectives, if the situation with Russia stabilizes then it will increase the importance of the region,” Inaishvili said. He believes that business relations with Russia do not influence U.S.-Georgia relations. “The main advantage of attracting foreign investors to Georgia is political stability,” Inaishvili says.
Mr. Jemal Inaishvili, President of GCCI, talked with Madona Gasanova, The FINANCIAL, about the situation in Georgia, prospects of Georgian businesses and the investment climate.
Q. At the awards ceremony organized by the Georgian Chamber of Commerce and Industry President Mikheil Saakashvili stated that small and medium sized businesses should play a key role in the employment of our citizens. You have mentioned many times the importance of developing these business sector. What’s the situation today and how convenient are the conditions for SMEs?
A. Medium and small sized businesses are the main forces for developing a country’s economy. In the USA 80% of the economy is taken up by small and medium sized businesses. In Italy they hold 99%, in Japan – 85%. By these figures we can conclude how important small and medium sized businesses are for economic success. Unfortunately, small and medium sized businesses’
share in the Georgian economy is not so big. More attention should be paid to SME development; in fact these businesses are on average the largest employers and tax payers.
Q. Because of the world economic crisis commercial banks have restricted the giving out of business credits. How will this fact influence the development of small and medium sized businesses in Georgia and how can this problem be solved?
A. The banking sector has faced some problems of liquidity because of the Russian-Georgian war and world financial crisis. Currently most banks have limited loans. In addition, interest rates currently are very high. Such a situation will of course harm the development of small and middle sized businesses. I hope that situation will be stabilized soon and it will be feasible again for the banks to credit SMEs.
Q. The August war in Georgia and further crisis has affected the investment environment in our country. Lots of countries stopped financing or completed ceased already-existing projects. There are two reasons for this; the first is the non-stable political environment and the other – the global economical crisis. In your opinion what should be done to solve this problem?
A. Russian aggression and the world economic crisis started at the same time and so we have faced a dual negative effect. The conflict and economic crisis complicated the attraction of foreign investors in Georgia, and in addition the number of on-going projects had to be frozen or postponed. At this stage efforts must be concentrated on keeping the situation relatively stable, and the government is implementing the plan that includes state investments in infrastructure projects, keeping stable exchange rate, etc. I think there must be more efforts to help the growth of exports and import substitution that would in turn help to fight the growth of unemployment that is connected with economic crisis.
Q. What advantages can Georgia offer to foreign investors?
A. In general, the main advantage of attracting foreign investors is political stability. Another important issue for foreign business people is the taxation system. The level of taxes not always plays as important role as administration of tax collection. There still are problems related to customs administration that are to be solved gradually taking into consideration the interests of business development.
Q. Rakia Georgia presented the project of the free economical zone in Poti last week; although this project was started some ten years ago. You were the leader of the Poti Port project and are well aware of the potential of this region. You have visited the United Arab Emirates many times in order to attract supporters of the free economical zone. Please, estimate the importance and future of Rakia Georgia’s project. How will it influence the political and economical situation in Georgia?
A. I was the one of initiator of creating the free economic zone in Poti, when I was a CEO of Poti Port. In 1998 we hired a special consulting company from the USA to study the feasibility of the project. Only in 2004 was the situation in our country ready to execute this project. The free economic zone of Poti has very good perspectives if the management of the project is done in the right way. The project will very positively affect volumes of investments, production as well as employment and other economic and social problems.
Q. How attractive will the project of the free economical zone be for Georgian businessmen?
The concept of free economic zones must be attractive both for foreign and local businesses.
Q. Ten years ago government officials paid big attention to the Baku-Ceyhan project. The participants of the project declared that it would become profitable for our country both politically and economically. Has it exceeded expectations at all?
A. This project is very important for our country. If it was not feasible this project wouldn’t be implemented. There was only the Baku-Supsa project at first. The next one was the BTC project, the third – Baku-Tbilisi-Erzerum and now the Nabuko project is under the concrete consideration. It is very important to be involved in these projects for our country both in terms of investments and future economic development. It is equally important for the country to play significant role in energy supplies to Europe.
Q. The Russo-Georgian conflict strained the conditions of companies that were directly connected with the Russian market. Besides this the amount of Russian investments in Georgia has not been reduced. A few days ago President Saakashvili stated that Georgia is leaving the door open for Russian investments, but not for tanks. How realistic is the return of Georgian products to the Russian market?
A. Considering current relations with Russia it’s hard to talk about the return of Georgian products on the Russian market in the near future. I think that the emphasis at this stage must be made on how to diversify our exports both in terms of exported items and geography of exports and what to do to achieve growth of exports in general.
Q. Do you expect Russian businessmen’s interest to grow regarding the free economical zone of Poti?
A. I think that FEZ as a long-term project and it will attract a lot of investors and it should be our policy to keep it open for any businesses that want to operate there in compliance with existing regulations.
Q. How realistic does it seem to you to attract Russian tourists to Georgia?
A. Of course it will depend on the normalization of our relation in the future. In general, the door of our country is wide open for Russian tourists.
Q. Which of the spheres are the most important for the country’s economy?
A. We don’t have prioritized economic sectors but at this stage more attention should be paid to agriculture and food processing because these sectors have big potential and their development will largely contribute to growth of employment. Investments in energy sectors is also important for our economy.
Q. You are actively participating in trade development with member countries of the EU. In this direction, several projects have been implemented by the country’s government and non-governmental organizations but the result haven’t been very satisfying. We still have no information about Georgian companies which export their products to European countries. What are the obstacles that Georgian entrepreneurs face in this direction? What are the results needed to solve this problem?
A. First of all Georgia has to start producing its own goods so as to reduce the number of imported products. Another issue is then exporting them abroad. But our companies have to work hard to meet the requirements of foreign markets. We should invest in quality infrastructure and improvement of management skills in our enterprises. Attraction of strategic foreign investors is very important because apart from capital they bring the necessary knowledge as well and without it will be impossible to achieve competitiveness in the European market. As the chamber of commerce and industry we are trying to play our role. For example within our partnership agreement with CBI, a Dutch agency of promotion of imports from developing countries to EU, a special program is starting to help selected wine producers in entering to EU market.
Q. What is the forecast for the year 2009?
A. The expectations for 2009 are quite pessimistic. Current recessio worldwide will also influence our country. But the current situation makes us hope for a better future.
Written By Madona Gasanova