The FINANCIAL -- Fady Asly, Chairman of the International Chamber of Commerce (ICC) Georgia, believes the optimism and confidence of Georgian business leaders is growing following the new approach of Georgia’s recently-appointed Prime Minister, who is actively reforming the business climate and improving the investment environment in Georgia.
Meanwhile, the number one impediment to doing business in the country is the Revenue Service, claims Asly. In his words Georgia’s reputation is still bad and is not improving.
As of today, the most attractive sectors in Georgia for investors are tourism and real estate. Asly believes these two sectors will remain the most attractive ones for some time.
Besides talking about the Georgian business environment, Fady Asly told The FINANCIAL that one of ICC’s major objectives for 2017 was to establish a branch of ICC Paris’s Arbitration Court in Georgia.
“This will give investors the necessary level of confidence to commit to the country considering that this Court will be a seriously credible alternative to the Georgian courts that are perceived to be easily influenced,” Asly said.
Q. World Bank group has recently praised the Government’s four-point reform agenda. What is your impression of it?
A. For the first time in almost four years the Government came up with a clearly articulated agenda and we can only support the initiative. Georgia was run for years by tactical moves with no strategy and this nebulous approach has backfired very negatively on the image of the country and gave a perception that the Government didn’t know what they were doing and where they were going.
Q. The four-point reform plan, which includes new tax benefits, infrastructure plans, governance reforms and an overhaul of the education system, was the Georgian Prime Minister’s plan to increase economic development. Could you please discuss each direction and tell us their advantages or disadvantages?
A. Regarding the tax benefits and mainly the abolishment of profit tax for re-invested profits (Estonian Model), we believe that it is a good initiative that needs some fine tuning though.
The Estonian Model is like a final polish to make the business climate more attractive but it will remain totally insufficient to improve the business climate if the current practices of the Revenue Service are not solved once and for all.
Development of infrastructure is crucial for Georgia and this government has not done much for the past three years. It is absolutely vital at this stage to develop Public Private Partnership (PPP) and to modernise in the shortest period the legislation pertaining to PPP.
Circumstances are incredibly good to develop PPP for infrastructure projects for the following reasons: prices of commodities are at their lowest; price of oil is very low; interest rates of international financial places are extremely low; and cost of labour in Georgia is very low.
Government reform is crucial but by the same token I believe that the Government needs to be very light with few ministries; it is very important to decrease bureaucracy to a minimum level.
The Prime Minister is well aware of the shortfalls of the education system in Georgia that needs to be on a par with European standards, and therefore an overhaul of the system will help build a new generation that will integrate easily in the Western family.
Q. A recent report showed confidence within Georgia’s business society had grown in the first few months of 2016. They called it the “Kvirikashvili effect”. Do you agree with this idea and if so, why?
A. The Business Confidence Index is a report that is prepared jointly by the International School of Economics (ISET) and by ICC, and yes it has shown a sensible increase in the confidence of businesses in the future and this is due to the appointment of Giorgi Kvirikashvili as Prime Minister.
The Prime Minister enjoys a high level of confidence within the business community. As a matter of fact during the very difficult past three years and in his capacity as Minister of Economic Development, Giorgi Kvirikashvili listened attentively to our reservations regarding several negative legislations that were adopted by the Government and helped reverse those legislations in a way not to impact the business and investment climate.
As a matter of fact, Giorgi Kvirikashvili was the only official in the Government to understand business and to realise the negative impact of all the counter-productive legislation that was passed by his colleagues. He was the only minister who listened attentively to the issues brought to him and who took concrete steps to solve those issues; based on that he enjoys very high credibility and confidence within the business community; as a matter of fact he is the one giving credibility to this government.
Q. Kvirikashvili has big plans for economic growth - six percent growth in 2017 despite the oil, currency crisis. Do you agree with this forecast? Will the Government achieve such economic growth next year? And how do you project this year’s economic growth?
A. It is very difficult to predict a six percent growth for 2017, let us remember that the outcome of the October 2016 legislative elections can be very unpredictable. If Giorgi Kvirikashvili remains Prime Minister after October 2016 and if he surrounds himself with ministers of his own level of competence and vision, and provided he will have free hands to run the country, then a six percent economic growth will be very feasible. However, if we get the same incompetent officials that we have today back in power, I will be very surprised if we reach even two percent economic growth.
As for 2016, my own assumptions are that the economic growth will be below three percent.
Q. The Government is strengthening dialogue with business, sharing all new ideas and plans with them. How would you assess this process - is the Government deepening ties with business? Is the cooperation between them at a satisfying level?
A. Since the appointment of the new Prime Minister we are having much better and more open relations with the Government. Prime Minister Kvirikashvili has set the pace and given clear instructions to his government to listen carefully to the private sector.
We feel a complete change in attitude, as a matter of fact I am sure that The FINANCIAL has noticed the same as well; for the first time since 2012 the Golden Brand Awards ceremony was attended by government officials at the rank of ministers and deputy ministers. This is a clear sign of the new direction that the Government has taken under the leadership of the Prime Minister.
Several of our members have been struggling a lot with the Revenue Service since 2013; some of them were even driven to bankruptcy! After we brought the issue to Prime Minister Kvirikashvili he personally supervised the process and the problems of several of our members have been finally resolved and we are promised that the remaining struggling members will see their problems resolved as well.
I would underline the great work that has been done by the Business Ombudsman and Advisor to the PM, Giorgi Gakharia, who has been following personally every single issue and reverting to us on a regular basis. For the first time in almost four years we feel optimistic.
Q. What is the number one impediment to doing business in the country currently?
A. Hands down the number one impediment to doing business in Georgia is the Revenue Service (RS); The RS and the other financial controlling bodies have systematically undermined the image of Georgia as a good place for business since the mid ‘90s.
There are not enough adjectives in the English language to describe how bad the Revenue Service and the Financial Police are! They are the number one enemy of the country and have totally destroyed the reputation of Georgia.
They act like thugs and racketeers, and belong to a breed of repressive bodies inherited from the Soviet Union.
Georgia will never become an attractive place for investors as long as the structure of the Revenue Service remains as it is currently. No matter how many candies and lures the Government adds to the legislation, investors will still avoid Georgia till the gangster methods of the Revenue Service are stopped.
Q. What are the recent developments at ICC, and what are its future plans?
A. ICC is the most dynamically-growing business organisation in the country; we currently count close to two hundred corporate members, about thirty business and professional organisations and close to one hundred and fifty youths.
ICC is the most vocal business organisation in Georgia, the most outspoken and the most courageous at bringing up the shortfalls of the Government.
Yes we do disturb and we do annoy the Government but we get things done. In addition to that, ICC is the only business organisation in Georgia that fights for the rights of its individual members when they are attacked or unfairly treated and we are very proud of that.
I always say that if you want to make an omelette you need to break some eggs, and we do break eggs when it comes to improving the business climate.
Q. Can you also tell us about ICC-Youth Board? Who are the youths participating in improving Georgia’s future?
A. ICC-Youth Board is the body that supervises the activities of ICC-Youth that counts about one hundred and fifty brilliant young Georgians between eighteen and twenty six years of age.
The Board sets the agenda and activities for the youths that include trainings and seminars in business matters that cover subjects that are not taught at university such as the Incoterms, Commercial Contracts, and Banking regulations on Letter of Credits or Bank Guarantees.
The Board also organises meetings between the youths and business and government leaders as well as internships and job fairs.
I am always very impressed by the level of education, culture and commitment of those young people.
Q. Let’s talk about ICC-Golden Brand cooperation. What was your impression of this year’s Business Brand Awards Ceremony?
A. The Golden Brand Awards Ceremony was very successful this year; I was glad to notice that there were more awards than usual and that sectors of the economy that were previously sidelined were covered this year.
Businesses in Georgia are operating in a difficult environment and face many challenges; it is only fair that those businesses that are creating jobs and wealth despite the situation are awarded and recognised for their efforts.
As mentioned earlier, I was very pleased to see for the first time since 2012 that high level government officials attended the ceremony; this is a clear indication of the new business-friendly policy of Prime Minister Kvirikashvili.
I will take this opportunity to extend ICC thanks to The FINANCIAL and to Global Idea who did a fantastic job putting together this amazing ceremony.