The FINANCIAL — Restoring investor confidence still remains the primary job of the Government of Georgia, now the focus is on the United Kingdom. As well as 30 large British companies, like BP and HSBC which successfully operate on the Georgian market, there are plenty of others who might be willing to expand to Georgia, an investment-driven economy.
For this purpose Nigel Peters, Director of the Central Asia & Trans Caucasus Business Information Group (CATBIG) visited Georgia last week. Having had a good overview of the country’s business environment, he’ll be returning to the UK presenting investment opportunities to over 800 companies (members of CATBIG) interested in expanding in the region.
In addition, Kakha Baindurashvili, the Minister of Finance of Georgia, was visiting the UK last week to present Poti Free Industrial Zone investment opportunities to interested large UK investors. Over 100 members of the British Georgian Chamber of Commerce participated in the event.
The level of investment from the UK to Georgia drastically fell during 2010 and amounted to only 8 560,6 (thousand USD) – 1% of total investments whilst in 2009 it hit 72 313,2 (thousand USD) – 10% of overall investments in Georgia, according to the national statistics office of Georgia.
As said by Mr. Peters, Georgia has been in the news since 2008 war and it has more often been bad news which has got into the papers rather than good news, but now the situation is stable with a better environment for businesses.
It is not the first time that Mr. Peters has been in Georgia as he was here in 1998 too, working for the UK government with similar goals. He knows the region very well and the opportunities, thus he will be ensuring that business people in the UK understand them too.
In the longer term he’ll be focusing on tourism, agribusiness. He also visited Kutaisi to identify the investment opportunities there.
The FINANCIAL talked with Mr. Peters last week.
“CATBIG is a business to business network for UK based companies,” Nigel Peters. Currently we have a database of over 800 businesses in CATBIG (Central Asia & Trans Caucasus Business Information Group) which are companies interested in all the countries of the regions including Armenia, Azerbaijan and Georgia; Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan. The scale of companies range from small to large, we’ve a series of meetings in the UK with British Ambassadors and others concerned with these issues. We make them aware of the opportunities in the region.
Overall the number of British businesses registered in Georgia is about 30, mainly large ones like BP, HSBC and many smaller once and others are involved in infrastructure projects. In addition there are British companies involved in supplying goods and services although they don’t have a physical presence here.”
Q. How would you evaluate the challenges that British businesses are facing in Georgia?
A. Well it’s not so difficult, really, to work in any economy which is in transition, obviously in Georgia there has been created a more liberal environment in addition to new tax code. So this is the case of British companies understanding the way the laws are being managed. Many British companies have experience working in transition countries in the region, so they’re accustomed to it. And this is part of my job – to help them understand the opportunities in Georgia.
Q. What about the business environment in general? How would you compare it to its neighbour countries’ and what is Georgia’s best asset, as well as the state’s relations with businesses?
A. I think regionally, of course, the bigger market is Azerbaijan because it has the oil and gas reserves. But a country like Georgia has natural resources on hand, coastline of the Black Sea which has good tourism potential, a good climate, fertile soil and because of the mountainous nature of the country, you’ve got hydro power potential.
But in any country, it’s the people who are, in many ways, the best natural resource and obviously there’s a good level of education here (100% literacy) and Georgians are keen to develop their links with western countries,
As for the state policies, I believe that the liberal environment is attractive for foreign investors. Hence companies understand that the Government is keen to attract foreign investment. Obviously, it’s important for businessmen to understand how laws are actually applied and how it affects the business. It’s one thing for the Government to issue a law and it’s another thing for the law to be implemented.
Q. Is it the regulation that attracts investors or perhaps the location of the country?
A. It’s both, a mixture really, obviously in any economy companies will be attracted, as I understand it, certainly there is a free trade zone being developed in Poti around the port, and the Finance Minister of Georgia being on negotiations in London will be in charge of making people aware of the opportunities in Georgia.
So part of it is regulation and part of it is obviously that companies understand that the situation in the country is stable now. Currently the situation is much more stable than it was before.
Georgia has been in the news for the wrong reason in 2008 and it is more often bad news that get into the papers rather than good news so it’s a welcome fact that there is now a stable and much better environment. It is part of my job to tell companies that the situation has changed since that time.
Q. What are the opportunities for UK businesses expanding to Georgia?
A. There are both short-term and long-term opportunities here. I’ve already had a meeting with donor organizations like World Bank, Asian Development Bank, and they’re funding a lot of interesting projects in the infrastructure sector. So that’s developing roads, railways, ports and also water supply, and all those are areas which British companies have good experience in.
Indeed two British engineering companies have been working on road projects for Millennium Challenge Corporation, the US government organization – and they’ve had a good experience there. So I’m very interested in the development programmes such as infrastructural ones. Infrastructure is where the immediate opportunity is.
In the medium term I see the opportunities in tourism, and areas of agribusiness. In addition I see some other good opportunities.
Infrastructure areas, many of them have funding in consultancy and equipment in the short term. obviously investment cycles are a bit longer for hotels, there are areas that we call management consultancy where we specialize in good governance areas, training the judiciary and also introducing public private partnerships (PPP) – all of which the UK has a huge experience in.
Q. The new tax code which is stated (by British Ambassador to Georgia, Judith Gough) to be unclear for large businesses, can it have an impact on British investors?
A. It’s not an area I’m an expert in. I understand the issue, the way companies understand implementation of the tax code and how it’s applied. I understand from the Ambassador that some British companies here have dealt with the issue of the tax code not having been put into place, in the way that it should be.
Q. Which companies should be interested in investing in Georgia?
A. My visit is an initial visit, although the last time I was in Georgia was in 1998, 13 years ago. So obviously there have been a lot of changes in Georgia since then. My visit this time is relatively short but I want to have a good overview of the country’s business environment.
I’m not negotiating with individual companies, but my task is to look at the opportunities as a whole and then to write a report and give a presentation back in London together with Judith Gough, the British Ambassador to Georgia.
Q. Is the size of the country also a determining factor for investors to make a decision about investing in the country?
A. Georgia is a relatively small country by international standards although I’m a great fan of small countries as sometimes there are better business opportunities, with perhaps not so much competition there.
In this region, lots of companies are going to Azerbaijan, because it has oil and gas, but Georgia has opportunities in other sectors and there’s not that amount of competition either.
British companies are active in all the countries in the wider Caucasus region. But the reality today in the immediate region is that the hub for business is Baku due to the above-mentioned reasons.
Q. What are the opportunities for Georgian companies expanding to the UK?
A. I’m sure there are opportunities; when I was talking to Economy Minister Vera Kobalia, there are opportunities in the wine industry. I understand that Georgia has been unable to sell its wine to the Russian market. But the side effect of this had been to improve the quality/branding of the product in order to sell to the Western market.
It is more the responsibility of the Georgian Embassy in London in addition to the British Georgian Chamber of Commerce in London.
Q. What will the next steps of yours once getting back to the UK?
A. Hopefully on 12 May we’ll have a seminar in London with Judith Gough, the British Ambassador to Georgia and me presenting business opportunities in Georgia to over 800 companies. Also the commercial section in the UK Embassy of Georgia is very actively promoting business opportunities in the country. We will work to ensure that more British companies become aware of business opportunities here in Georgia.
Q. What about tourism development in Georgia, as it’s known only a small number of British citizens travel to Georgia.
A. Certainly, being involved in feasibility studies of new hotels and development, the UK has a very strong consultancy in this industry.
Quite recently travelchannel.com has put together a documentary on Georgian wine, and as I’ve talked to the Minister of the Economy she’s going to use that to promote Georgia as a tourist destination.
In the short term I’m keen to identify funded projects which offer opportunities for consultancy, for companies supplying equipment and mainly these all will be infrastructure areas by WB, and ADB and others.
In the longer term I’ll be focusing on tourism and agribusiness which have long term opportunities. I’m also going to visit Kutaisi. I understand that the Parliament is moving to Kutaisi as well as some other developments going on there, so I’m sure that will open up investment opportunities in Kutaisi.
Q. What other areas could those over 800 companies be interested in?
One area that I should have mentioned is technical vocational education, Georgians in general are well-educated but perhaps the gap is in technical education for which demand is quite high, and unfortunately it’s what Georgia is lacking. People need technical vocational skills, the UK has lots of colleges and education opportunities in this area hence I’m sure there will be investment opportunities in this area as well.
There had been many cases when British companies, like BP, investing in Georgia couldn’t find technical skilled labour here in the country. Although BP is big enough to find such staff, then smaller companies will need the Government to prioritize the technical education sector in addition to English language teaching.
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