The FINANCIAL — While some members of the U.S. congress question Bush administration policy toward Tbilisi, as Eurasia net reports, The FINANCIAL asked American Chamber of Commerce in Georgia’s (Amcham Georgia) President David Lee to estimate the economic and political situation in the country. David Lee considers Georgia to be in much better state than he expected after the war.
“The general situation is much better than I expected. During and after the war we have seen certain companies developing, TBC Bank and Bank of Georgia are working on new product lines and all that is promising.
The most impressive thing that I’ve seen since the war is that the very large construction project being managed by Rakeen Group is being continued and so is Poti Port, the free economic zone again in Poti, and the Uptown Tbilisi project, they are all going ahead.
This shows that investors who are already here are continuing their work is confident, they understand Georgians. Georgian people have not been knocked down, they have been just pushed back a little bit for a while and this is all much better than we expected. The problem is that investors who were thinking of coming to Georgia, having seen on CNN on the TV that the country was invaded by Russia of course became very concerned. That’s why we AmCham must be active to provide reassurance; we need to work closely with the American Government. We also need to work closely with the European Governments, Chinese and all these different people we need to show them “Look, it will be OK”. We are saying to potential investors“Look at how even though Georgia just experienced a war, the economy continues to function”.
Mr. Lee says one of the reasons behind the European Union’s conference was Georgia’s desire to become a member of the EU. ”It is the first time in my life that I have seen the EU speak with one voice and in the same way and in the same meaning as the American President. So we see these two groups coming together”.
“I think that Georgia will become a member of the EU. I can’t influence that but I believe it is going to happen. The conference is going to show the rest of the world that businessmen are still coming to Georgia; they are still interested in what is happening here.
“It is not only about money, of course international support from the U.S and Europe with money is very important in this difficult time, but more important is a physical show of support, that they’re physically going to be here, to start investing funds, to bring additional companies, additional products and that’s important.
“When you have these problems, I think you suddenly understand who your friends are. And it was clear for me as a European and the President of AmCham that when Georgia needed help I was proud to be the President of AmCham because of the American support and I was proud to be European because I saw Europe stand up and react very quickly, saying “STOP, we are with Georgia!”
“Of course it is a fact that some projects have been interrupted, some customers have stopped their work and you are going to report it, but if you ask me what I see as a President of AmCham in this situation, of course some projects have been delayed but I don’t see any country turning around and saying “we are done with Georgia for good”. Also in good time when there is no more effect of the war we will see numerous new projects.
“There is a long process before making the decision of investing in a country. Everyone takes time before making a decision but just because you did not make one thing today it does not mean you are never going to do it. It does not mean that every project is being cancelled at the moment. Don’t pay attention only to negative news, most of it is just printed because it sells better. Some things that are happening in this country are unbelievably positive. We just had a war and the country was invaded but when you walk in the street, when you talk to businessmen, things are returning to normal.
“This is a very positive and encouraging development. Everyone now is focused on the future, keeping up the atmosphere of confidence in Georgia. For example if you visit the MagtiCom offices and walk through their corridors you will never feel that they are of a company that is depressed or that they had recently been in a terrible situation. If you look around you see a company with the highest standards continuing to develop and grow. And Magticom is not alone.
“Most of our members feel the same. My advice in this situation to all our members is to make their own decisions. We had 140 members and it’s just good business sometimes to wait a little bit before jumping to any conclusions or immediate plans of action. Some people will delay, but not all. The fact is this – that a lot don’t delay, a lot go on. I can tell that from the example of MagtiCom of course, but also from others at AmCham, many of its members in fact will go ahead with high value investment projects. And they have not stopped because of the war. I almost expected they would, but they took the same position as MagtiCom, Rakeen and TBC Bank, Bank of Georgia and others. Many of our other members are continuing as usual, despite having to make accommodations. Anyway the general direction, the motivation, the intention, and the whole forward movement of foreign investment should continue as before. I’m also very confident in the conference at which U.S. and EU representations will be presented, but the conference is just an additional step.
“Of course what Russia did damaged the economy, but the point is that even though they did it, the banks still work, businesses are still investing, you can buy petrol, you can still work mobile phones, you can still go on holiday to Batumi, you can still go to Poti and see ships coming and going; you can see hundreds and hundreds of businesses going on as usual.
“However it of course mattered, but it didn’t stop the economy. Russia is on the border of Georgia, and that will always be the case and in the future, hopefully, there will be a return to normal relationships. The thing that this situation showed to everybody is that Georgia does not need Russia to survive as a progressive and democratic country. Everyone understands it; no one talks any more about Georgia being involved with Russia. Georgia is no longer a country considered alongside other CIS countries”.
According to Mr. Lee it’s clear that Russia has its own problems right now; with the financial and stock market collapse in the rest of the world.
“I’ve no idea what investors now think about Russia. All I know is that investors have seen Georgia in a new light and we have an opportunity to show to the whole world that Georgia is not only an interesting place to do business, but even when Georgia faces a catastrophe its economy survives and does not crash and stop. We don’t see all businesses closing down; we don’t see the world becoming empty. Even in a state of emergency, Georgia goes on. So how will it be in Russia, I don’t know”.
AmCham Georgia joined the live-chain rally on September 1 and once again showed its support to Georgia.
“I remember that day, being in freedom square; seeing the flags and realizing that this was a demonstration that could not have been expected. People just needed to do it on the spur of the moment. This protesting rally aired on CNN and other international channels, the whole world watched it and saw Georgia’s position. I think it was important to show, that all the people were joining together to protest against an assailant’s aggressive action. I know that some people think it was not good but for me it was important. It was a useful message to the world”.
Why should Americans invest in Georgia?
“My message to American investors at the summit is – “Invest!” If you look around the world now, there are very few countries which have the combination of a developing economy and very liberal environment. It’s simply the truth that Georgia is getting stronger. It’s simply the truth that the taxation system is good; corruption is low and when you try to open a new business, the government helps you.
“There are few countries in the world where you can find these combinations together. You really can’t find that. You can’t say: it’s a good economy, it’s low taxation, it’s not corrupt and the government helps you.. So you put all these things together and I can show you the results, like MagtiCom’s example. There are 1.5 million subscribers here, the very latest technologies in the world, not just in the region. They are as good as in London, or Japan, or in New York. We have been through a shock, through a revolution, war and still my company is one of the best places to invest. Enormous sums of money are invested in our company every year to update and install innovative technologies and we are continuing this process. When American companies come here and see these examples, when they see foreign investors coming from Abu Dhabi, from Europe, when they see energy in these places, I think they will be surprised.
“My message at the summit will be: come, look, feel and decide. It’s great that they are coming and we need to encourage them. The best way to advertise Georgia is to bring someone here. Georgia is something that everyone should experience. You can’t do it with slideshows. You need to meet Georgian people, taste Georgian fruit, see Georgian culture and its landscapes. Many people with power, money and influence are coming here, so we must do what Georgians do very well – create an attractive and comfortable economical and social environment for them”.
Q. Are you in any way involved in consultations with the Georgian Government on how and where financial aid should go to?
A. As chief of a chamber I have frequent talks with the U.S. embassy, with USAID, and with the government. I think there are a lot of systems and places. There are a lot of people with experience in this field – the Millennium fund, USAID, Eurasia Partnership Foundation – who know how to make sure that this money is allocated in a correct way. I think that there is no reason to worry that this aid will be used in a bad way. I am confident that this government won’t do it. As the president of AmCham I can give an assurance that your money will be used for the development of Georgia.
“We had numerous facts and precedents of developing Georgia in the past four years. Maybe one will argue whether it’s enough, but nobody can argue that during these four years a lot of things weren’t changed for the better. You can see that roads are better, the railways are better, the airport is better, power is better, communications are better, the cities are cleaner and the police are excellent. You look at this progress and see additional support coming in, which encourages me. I mean, Georgia can do it. You see it’s good that Georgia has such good friends as the U.S. and Europe, but friends are just friends and in the end you have to do things yourself. The company-members of AmCham, Georgian companies, will all look forward to getting stronger. They will pick up the economy. I run one of the biggest, most profitable company in Georgia and I know that it can be done.
“When investors see real help coming from Europe, Ireland, the USA, of course it is positive. It’s clear that the whole world: Europe, the USA, and IMF are standing with us. It’s obvious. I don’t watch only Georgian TV, I watch international channels as well and it’s clear that Georgia has enormous support from international organizations and the whole world. This is a huge thing. This is going to be noticed. In the end it will help to encourage investors. Georgia can do it, it can satisfy their demands. The countries’ largest international business association is Amcham and we are working hard. Members of the U.S. Government, vice-presidents, presidents and congressmen and even presidential candidates are coming to pay a visit to this country. We must use this opportunity to show Georgia’s potential”.
“All the aid agencies in this country are together. I know a lot of people who work in Millennium Challenge, USAID and so on. These organizations were started by very experienced and highly educated people from both Georgian and foreign members. These agencies are always willing to find ways of working together”.
Q. Russia has recognized the independence of Georgia’s two breakaway regions: Abkhazia and South Ossetia and is eager to attract investments in this region. What would your advice to potential investors be? Would their property there be legal and what are the risks investors might face?
A. AmCham is not a political organization and it can’t directly influence investors in these regions. We can’t make any statements. But if you ask me if I will support foreign investors in South Ossetia and Abkhazia, my answer is “no”. I won’t. I really don’t know what the positions are of investors about the occupied territory. But it’s clear that the risk factor will be extremely high. I won’t invite any member to invest in those region, but I’m not a lawyer and so can’t answer if it will be legal or illegal to invest money there.
Q. Foreign investment in Georgia has doubled year after year for the past 3 years. What was the overall amount of FDI in Georgia in 2008 and what is expected for the next years?
A. We watched a high growth of investments in Georgia in 2007-2008. According to this sum, and current investment period it’s the best thing that the American Chamber will use for further attraction.
We can presume and be sure that in 2010 we’ll have new investments already here, not just reviewing, but already here. The attention of AmCham at the conference will be focused on investing as much money as we can. A big flow of investments will help us to grow the economy. Our aim is to get people here, show them that our country and economy has survived, that the atmosphere is positive.
Q. Who or what can serve as the guarantor of American investment in Georgia? There were reports about a U.S. fleet in Black Sea that should protect foreign business. Is it an option?
A. The businessmen are not looking for military support. Of course, Georgia doesn’t expect to be invaded in the 21st century. But still, I don’t think that someone could be considering such support. It’s ridiculous. The guarantees that businessmen are looking for are that we don’t have a corrupt regime; the taxation is fair and the government will support businesses to development.- this is what businessmen are looking for and thinking about.
Q. Prior to becoming the president of AmCham, you’ve been elected to the board twice already in 2004 and in 2006. How would you evaluate the chamber’s development story over the last 4 years? And what’s the prediction for the next four years?
A. AmCham is continuing as it was before. Our mission is to develop the economy of Georgia. AmCham is the largest international business organization and my desire is to attract and support investors, not only for U.S. investors, but for anyone who wants to put money in Georgia. We’ll be as supportive, as we can. Whether you are American, whether you are European, from the Middle East, China or Japan, I don’t care. If you are reputable businessmen and want to invest in Georgia, we’ll help you.
Interviewed by Madona Gasanova, The FINANCIAL