The FINANCIAL — On 4 February, the German Business Association in Georgia (DWVG) is holding its Fifth Economic Forum on recent tax and customs regulations changes in Georgia.
The Forum is being organized for DWVG members as well as other key actors and interested parties in the German-Georgian business community. Speakers include experts from KPMG, MKD Law Firm and the Ministry of Finance. On 16 February DWVG will offer a 1 day Master Class on logistics optimization, together with DWVG member companies DHL and Polzug Intermodal. This workshop is to be held in the Georgian language and target import and export managers as well as logistics experts in Georgia.
Ms. Uta Beyer, newly appointed Executive Director of DWVG last week talked with The FINANCIAL about the activities of the German Business Association and Georgia’s potential in terms of economic development.
After her studies of national economics and sociology at the University of Cologne, Ms. Beyer for many years worked in the fields of market research and international economic cooperation. Most recently she was partner and COO in a German-Turkish consulting firm in Istanbul, where she counselled and advised numerous European companies in their market entry in Turkey. Uta Beyer works for the DWVG as an Integrated Expert of the Centre for International Migration and Development (CIM).
DWVG, which provides support for German businesses in Georgia and represents German business interests locally, plans to hold several activities in 2010, like seminars, an exhibition of German companies in Georgia, as well as delegation visits from Germany. The Association is, in addition, working on different PR materials in the German language, to promote Georgia as a business location. The Association is also active in contacting potential investors directly, making suggestions about concrete investment opportunities.
“Georgia is regarded a small market, but as a market that is, together with Azerbaijan and Armenia, part of the larger Caucasian market, and as a country that connects Europe and Central Asia. Georgia has the image of being an attractive, or the most attractive, business location in the Caucasus, where investors receive strong government support by means of little bureaucracy, low taxes and a liberal economic policy. Georgia is well known for its high economic growth in the years before the war, and Georgia is famous for its wine and high potential in the tourism sector.”
“In bilateral development cooperation Germany is even Georgia’s second-largest partner after the United States. Regarding German direct investments, the number was 83 in 2007, which is the latest available figure as far as I know. Some of our member companies have been doing and continue to do some large investments Georgia. For example: with assets of 430 million USD ProCredit Bank is probably the largest German investor in Georgia. The Bank is currently building their new head offices in Tbilisi for approximately 20 million USD.
Another leading German investor is HeidelbergCement, which has purchased two cement plants in Georgia and continuously invests in these plants. The baby food producer Hipp put an apple processing plant into operation in Shida Kartli last year, with an investment volume of 10 million USD.
Q. Most recently you were partner and COO in a German-Turkish consulting firm in Istanbul, where you counselled and advised numerous European companies in their market entry in Turkey. What about Georgia, in future perspectives how optimistic are you in terms of attracting German businesses to Georgia?
A. Right now we already have more than 100 German companies that are active in Georgia. Also, we as an association have many requests from German companies on how to do business in Georgia. In addition to that, many of the planned Georgian investments are in fields where German companies have a high level of expertise and proficiency – new hotel projects, road construction, power plant construction, other infrastructure projects, wine production etc. The kind of tenders that are out in the public currently are highly attractive to German companies. So as a result I am very optimistic.
Q. Georgia is much dependent on Turkey’s economy as the country is one of the biggest trade partners for Georgia. But recent years have proved that trade with Turkey is limited, as the country is developing its export to Georgia, while Georgia is failing to sell its products in Turkey. What could be changed in regards to the country’s relations with Turkey?
A. Turkey has a much longer history of industrialisation, and was able to modernise production and align to world standards in many sectors over the past 30 years. Turkish companies are often highly competitive on a worldwide scale; the quality of their products is often very high, as is the price-performance ratio. Turkish producers are not only serious competitors for Georgian companies, but for many companies all over the world. So to answer your question, it is, in my opinion, not a question of relations, but of market economy and competitive viability.
Q. Turkey is a great example of how rapidly tourism can be developed, creating one of the main means of income for the state. Germany is broadly presented in Turkey’s tourism sector, while in Georgia it is limited to giving advice and consulting. Tell us about Germany’s shares in Turkish travel business and draw any parallels with Georgia. What should Georgia do in order to attract German investments in the tourism sector?
A. “The guest is king.” This is a German proverb, but it could be Turkish in fact. One of the secrets, in my opinion, of the Turkish tourism sector is the extremely high service mentality and customer orientation. But there are many other factors. Tourism is a very delicate business; it’s about the professionalism of tourism managers, quality of infrastructure, accessibility, flight schedules, airports, the availability of sports and leisure offers, quality, service, offer of restaurants, shops, hotels, and last but not least – prices – compared to other destinations worldwide.
Tourist resorts in Turkey compete with tourist resorts in Thailand, the Canary Islands, Dominican Republic or Tunisia for example. So the question of the overall price-performance ratio of a touristic destination, compared to others around the world, is crucial in my opinion. Tourism is only marginally a matter of nice landscapes; it’s most of all a matter of competitiveness worldwide, competitiveness regarding quality and prices.
I think German investors are very interested in the Georgian tourism sector, and are willing to invest, if there is a clear support, will and commitment, also financially, by the Georgian Government as well as municipalities, villages and people to bring the Georgian tourism industry to a competitive world standard.
Q. How active were German business investments in Georgia in 2009? Has the number of investments and investment amount changed over the last year?
A. As I mentioned earlier, German companies have been quite active in terms of investments. Of course the economic crisis did not have a positive affect on this issue. The official figure for German FDI amounted to 2.7 million USD in 2009 only, compared to 32.8 million USD in the previous year, but I am not sure about the reliability of these figures.
As you can see from the previous number, the investments have decreased dramatically in 2009.
Q. How do you forecast the year 2010 in terms of attracting German business to Georgia?
A. Last week the new Ifo-Institute “Business Climate Index” was published in Germany, and with 95.8 points it is higher than it has been over the last year. Also, from the activity we observe in our office, there is high interest of German businesses in Georgia. So I would forecast a good year. On the other hand of course the framework conditions are always an issue, like political stability and legal security. The slightest changes, or even “rumours of changes”, in these fields can have negative effects.
Q. Mostly which regions of Georgia are most demanded among German investors and why?
A. All our member companies’ headquarters are located in Tbilisi, as Tbilisi is the main business centre in Georgia, with suitable infrastructure and labour reserve. For resources, logistical, historical or other reasons some companies have facilities outside of Tbilisi, like Hipp in Shida Kartli, HeidelbergCement in Rustavi and Kaspi, or the logistics company Polzug Intermodal in Poti. I think that also in the coming years Tbilisi will be a priority number one location for German investors, for the above mentioned reasons.
Q. How do the Georgian Government and DWVG cooperate?
A. Last year the DWVG signed a “Cooperation Charter” with the Ministry of Finance, which enables us to receive relevant legal and finance information directly from the Ministry and to keep up a dialogue with the Ministry. Also we cooperate closely with the Agency “Invest in Georgia”, and are developing several projects with them this year.
Q. what was your first activity in DWVG for the development of attracting business to Georgia?
A. Apart from basics like creating a website, we launched a newsletter on current economic, legal and political developments in Georgia. Our newsletter is published monthly, free of charge, in the German language, and aims at giving an overview of the business environment and climate in Georgia today. Target groups are German companies in Georgia and Germany as well as all the relevant multipliers in this process. This newsletter has proved a very successful tool, we have had some great response since our first newsletter in December 2009.
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