The FINANCIAL — In January 1998, the America-Georgia Business Development Council was formed on the initiative of several companies and individuals who were dedicated to improving the economic condition of Georgia.
“I was the founding Executive Director for the Council between 1998 and 2009, and became its President in 2009,” said Mamuka Tsereteli, President of the America-Georgia Business Council. “On behalf of its members the America-Georgia Business Council (AGBC) promotes investment opportunities in Georgia and provides support for Georgian companies seeking export opportunities and international partnerships. AGBC relies on a deep understanding of the Georgian political and business landscape, direct access to high-level government officials and agencies, and diversified business contacts to deliver value and maximize opportunities in Georgia for our members.”
Mamuka Tsereteli was the founding Executive Director for the Council between 1998 and 2009, and became President in 2009. Besides being President of the Council, he teaches International Economic Policy and Energy Security classes at American University in Washington, DC. For the last several years he has been President of the Georgian Association in the USA, the oldest Georgian Diaspora group, established in 1932. Finally, Tsereteli is the founder of the Georgian Wine House.
Q. What are the best current business opportunities in Georgia?
A. I think that the best investment opportunities in Georgia are in transportation and logistical business, hydro power development, agribusiness, including wine and wine tourism, as well as the financial sector.
Q. Why is Georgia attractive for American investors?
A. For any investor Georgia is attractive because many assets in Georgia are undervalued and have potential for high return on investments. Georgia also has some of the simplest regulations in the region, and has a location that allows having access to the markets and raw materials in Europe, Middle East, Central Asia etc. Therefore the combination of factors makes Georgia attractive for investors.
Q. How does the Georgian economic environment and legislation fit Americans’ requirements?
A. Some of the elements of the Georgian business environment are very attractive to Americans. That includes the simple regulations for setting up a business, getting properties registered, or getting construction permits. The macro-economic environment is relatively stable, and it is easier to get to Georgia, or to repatriate profits. At the same time, there are still substantial challenges for US based investors. They include cultural differences, weak judiciary system, and informal interventions in business activities by government officials, which are in most of the cases unacceptable for US investors.
Q. How does the USA benefit from investing in Georgia?
A. If US based companies invest in Georgia, and if they are successful, they will have larger profits that benefit them. If we talk about the US Government, it also benefits from higher revenues through taxes if US businesses are successful abroad. In addition, the presence of US companies in Georgia advances US foreign policy interests as well.
Q. What are the most important current American investments in Georgia?
A. There are several successful Georgian companies with sizable US investments or ownership, that include Bank of Georgia, GMT Group (owner of the Marriott Hotels), Magticom, Betsy’s Hotel, Teliani Valley etc. There are also representative offices, distribution businesses etc.
Q. How many American businesses are operating in Georgia?
A. The American Chamber of Commerce in Georgia probably knows the exact number. I think there are a large number of US companies that are involved in distribution of their goods or services, but a relatively smaller number of actual investors, who invest money in manufacturing or services.
Q. The US is considered Georgia’s partner country. Georgia is much advertised in the US as well. However the amount of American investments in Georgia isn’t much. Why?
A. General awareness about Georgia in the US is limited, and Georgia with its small market size and almost constant political tensions doesn’t have an image of attractive investment destination among the broader public in the US. If you look at the press reports about Georgia, they are mostly about external threats, or internal tensions, and only a few stories about investments, tourism, wine etc. I think the country needs a well thought out, comprehensive marketing strategy, supported by some internal reforms in the areas of property rights enforcement, business dispute resolution (including with the tax authorities), and judiciary. With this approach the current investments in infrastructure development will bring greater results and increased investments in other sectors.
Q. In your opinion why do Americans generally invest in small and medium sized business in Georgia?
A. I think that a larger number of Americans can afford to invest in smaller and medium size business based on their own risk, without leveraging funds with large institutional investors. Georgia is too small for large banks or investment funds and the size of the investment projects are generally small as well. At the same time, transaction cost is the same for small or large projects, so large financial groups prefer to invest in larger projects in other countries.
Accordingly, smaller projects have better chances to be invested in by individuals and smaller companies from the US. Georgia needs to attract more of those investments. If we had thousands of those smaller investments, we could have billions of dollars of US investments and that could be a substantial boost for employment and growth, but we have only a limited number of investments and there are two major reasons for that: 1. not enough publicity about concrete investment opportunities with concrete commercial details; 2. challenges that existing companies are facing in their activities, mostly related to tax authorities and judiciary.
Q. In your opinion, which American franchises might be successful in Georgia?
A. I think that fast food chains have potential in Georgia, but we have to keep in mind that the purchasing power of Georgians is limited, income level is not growing, and the employment situation is not improving, which does not help increase the purchasing power of Georgians.
Q. How have the strategies of American investors changed since the Georgian-Russian war?
A. The war increased the country risk of Georgia, and in the midst of the financial crisis companies had little appetite for investments in Georgia. I see change of the investment landscape in the US now: because of the internal problems, more people are looking at attractive opportunities abroad. There are between 2 and 3 trillion dollars of investment capital available in the US now sitting idle and expecting destination for investments. With effort focusing on a marketing campaign and internal reforms some of this money may end up in Georgia.
Q. How often are issues related to political stability and security raised in negotiations with US investors and businesses interested in dealing with Georgian companies?
A. These issues come up all the time. Physical security is the primary pre-condition of any business decisions. For example, it is hard to make Georgia a large scale logistical hub and attract investments in that area if the temperature in Georgian-Russian relationships is high. The same is true for the internal stability. Companies want to see stable, predictable business and political environment.
Q. You recently said in an interview that several years ago Georgia wasn’t interested in attracting US business. What has changed since then and why?
A. What I said was that in 2004-2007 the world economy experienced an unprecedented boom caused by easy access to capital. This was the case with Georgia as well. The monetary value of investment was a priority – not the quality of the investments, technology or management culture. That was particularly visible during the privatization tenders, As a result, we ended up awarding financial investors from former Soviet states and the Middle East, and not US companies with better business expertise.
Q. In your opinion, how attractive is Georgia as a tourism destination for US tourists?
A. Georgia is an attractive tourist destination in general, but for US tourists to travel to Georgia only, they need to be offered a very unique experience. I think wine tourism with elements of cultural adventure through polyphonic music, food and sightseeing, offers such an experience. But Georgia still needs to develop the necessary infrastructure to receive a sizable number of tourists. I just had group of fourteen American friends in Kakheti for a wine tasting experience and we couldn’t find accommodation in Telavi since all the hotel rooms were booked. If we had 200 Americans in Kakheti at the same time during the harvest season, we would have a huge problem with accommodation.
Q. In your opinion, what are the perspectives of Georgian products in the US?
A. Wines, preserves, dry fruits and vegetables, and Tkemali sauce have great potential, but again, the country needs the right marketing strategy. For many years I have been trying to promote Georgian wines on the US market and we have had some success in the DC area. But we are dealing with competition with other wine countries, like France, Chile, Argentina, Australia and Italy, who have better known brands and grape varieties, plus huge marketing support from the state, while the limited number of Georgian wine importers are left on their own. Enthusiasm is important in this business, but not sufficient. It will be difficult to see rapid success without government support.
Q. Tell us more about the activities of the agency. What tools and means do you use to bring in more investments?
A. The America-Georgia Business Council is a membership organization of companies who share interest of doing business in Georgia. We encourage transatlantic dialogue between companies to help forge business partnerships, seek opportunities for our members and advocate their interests, and facilitate communication between our members and governments of the United States and Georgia.
We encourage companies to explore trade and investment opportunities in Georgia.
We participate in, or organize ourselves promotional events for Georgia. We also invite companies to visit Georgia to see the success stories of investments in Georgia.
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