The FINANCIAL — Q. Why is Georgia attractive for American investors and especially which fields are the most attractive? How did the tendency change during last years?
A. Georgia’s free market economy, strategic location, and record of fighting corruption make it an attractive place for American investors. The people are friendly, the food is delicious, and the strong history of hospitality makes Americans feel welcome.
U.S. Companies invest across a wide array of sectors, and are often interested in using Georgia as a base to expand to the region. This tendency has not changed much, but the continued economic slowdown in the U.S. and Europe means there is less investment capital in the world that could come to Georgia.
The United States Agency for International Development currently implements a 40 million USD Economic Prosperity Initiative project that will improve enterprise, industry, and country-level competitiveness in Georgia. Local and foreign investors have already begun to exploit Georgia’s platform for growth, and despite the trauma of invasion, occupation, and a global financial crisis, the country has made some strides since 2008. EPI is here to turn these foundations into vibrant platforms for export expansion, for while local markets can develop further, Georgia must ultimately look outward to accelerate growth. EPI has identified hazelnuts, mandarins, and open field and greenhouse vegetables as value chains with high potential return in investment value. Additionally, EPI also singled out wine tourism, ICT, apparel, transport and logistics, Meetings, Incentive, Conference Exhibitions tourism, and paper/corrugated packaging. EPI’s assessments point that investments in the above-mentioned sectors have a great potential on Georgian market.
In addition, there are some potential investment opportunities in the US Government supported hydropower promotion projects, which entail 400MW of power throughout Georgia ranging from 10 – 120MW each. The Ministry of Energy and Natural Resources is continuously posting new opportunities on their website.
The Embassy views the role of public engagement in Georgia’s development, including its economic path, as very important. In that connection, on November 4 U.S. Ambassador John R. Bass opened the first of ten Centers for Civic Engagement in Guria. There will be Centers in ten cities offing the public a place to gather and engage on issues of public concern, including economic development. The Embassy hopes that the Centers will bring together NGO leaders, community members, elected officials, party leaders, and independent media to encourage dialogue, build consensus and and improve transparency.
During a second event in Guria, Ambassador Bass opened a local machinery service center funded by USAID’s Access to Mechanization Project (AMP). AMP selected a local partner through a competitive process to establish a machinery service center in the village of Natanebi, Ozurgeti district. USAID’s support, along with the local partner’s matching funds, facilitated the purchase of seven tractors and seven agriculture implements. This cooperation created 12 new jobs and will benefit at least 400 farmers. AMP is a $5.1 million project addressed to the shortage of agricultural machinery, particularly among Georgia’s small farmers, whose inability to acquire machinery is a serious constraint to agricultural development.
Q. How many American businesses are operating currently in Georgia? And which is the largest U.S. private investment in Georgia?
A. Quite a few American businesses are operating in Georgia, and the American Chamber of Commerce in Georgia is associated with up to 150 companies, but not all of them American.
There are several significant U.S. investments in the country, including the GMT group (Marriott hotels and Sante dairy), MobiPay, Frontera, American Monolith, Magti, and others. We hope to see even more in the years to come.
Q. In your opinion, What can be done to boost US-Georgian trade?
A. Many American companies are not familiar with the trade opportunities in Georgia, and many Georgian companies do not know how to source products from the U.S. or to find buyers for their products in the U.S. Getting American companies to trade shows in Georgia, and Georgians to trade shows in the U.S. would help build trade. The U.S. Embassy in Tbilisi can also help – Georgian companies interested in sourcing products from the U.S. or American companies who want to find buyers in Georgia can contact TbilisiCommerce@state.gov.
Q. What kind of obstacles do American businesses face in Georgia?
A. Georgia has made great strides in improving the business climate over the past few years, including fighting corruption, and making it easier to start a business. The Embassy puts out an investment climate statement every year, with detailed guidance on the opportunities and obstacles in Georgia’s investment.
Some of the obstacles we mention in that report are enforcement of property rights, intellectual property rights protection, and commercial dispute resolution.
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. Investors ask about political stability as part of their due diligence before committing to invest in Georgia, but most do not view it as a major concern.
Q. How have the strategies of US businesses changed in the Georgian-Russian war period?
A. U.S. business strategies have not changed significantly since the war.
Q. The embassy of America made USD 20.5 million four-year New Economic Opportunities (NEO) project. Government program designed to improve rural incomes, reduce poverty levels etc. Is four years enough to solve all these problems and how will rural places look like after four years?
A. NEO will reduce poverty levels; improve living standards for vulnerable populations, and increase citizens’ participation in addressing local needs in 84 communities in 10 municipalities – Dusheti, Stepantsminda (Mtskheta-Mtianeti), Kareli, Gori, Khashuri (Shida Kartli), Oni, Lentekhi, Tsageri (Racha), and Zugdidi and Tsalenjikha (Samegrelo). In these communities, NEO will support up to 70,000 households with the result of at least 25 percent increase in the average value of household production and at least 25 percent of targeted vulnerable households and individuals will be raised to the official subsistence level. NEO is a community mobilization project focused on economic improvements selected by the community so the critical assumption is that chosen communities will actively participate in planning sustainable, economic activities, including small infrastructure.
USAID designed NEO’s economic strengthening activities to address the needs of highly vulnerable segments of the population. Working on the bottom of the value chain within sectors and crops identified by the communities, NEO will provide targeted assistance to facilitate market linkages, increase access to finance and provide market driven training. Market demands, economic principles and best practices will drive these activities. USAID expects that rural places in the 84 assisted communities will have improved infrastructure, increased household incomes and a greater send of civic awareness and responsibility for their own development.
Q. How does the USA benefit from investing in Georgia?
A. U.S. investment in Georgia can lead to U.S. exports and therefore more jobs for Americans. Some of the income earned from investment in Georgia goes back to the U.S., and gets spent in the U.S. economy. These are only the direct economic benefits. Indirectly, more U.S. investment in Georgia is good for the relationship between our two nations because it brings more Americans to see Georgia, and provides an economic as well as political basis for our relationship.
Q. US is considered Georgia’s partner country. But still American investments in Georgia aren’t much. Why?
A. The bilateral partnership is based on shared values and interests, but investments are made based on potential for profit. Georgia remains a small market, and in these tough economic times, there are not that many U.S. investors able to commit funds here.
Q. Since 2005, Georgia has moved up to 12th place from 112th among 181 countries surveyed on the World Bank’s annual Doing Business ranking. What was the role of USAID in these processes?
A. The USAID’s Georgia Business Climate Reform (BCR) project, implemented 2005-2009 directly supported 18 of the 23 reforms in eight out of 10 Doing Business (DB) key areas. USAID’s project assisted the Government of Georgia in policies related to starting business, paying taxes, trading across borders, dealing with licenses, registering property and developing e-government services. Implementation of these policies helped Georgia to change its rating from 112th place in DB 2006 to 11thDB 2010.
Q. In your opinion, which American franchises might be successful in Georgia?
A. There are many opportunities for franchising in Georgia, and it is up to the companies in the U.S. and their potential Georgian partners to work out arrangements to bring more U.S. franchises to Georgia. Many companies are not expanding right now due to global economic conditions, but there is no reason more American franchises will not be in Georgia in the future.
Q. What are the differences and similarities of American and Georgian business sector?
A. The markets, history, business culture, and other aspects are very different, but Americans and Georgians work well together. Both countries believe in free markets, and have a growing trade and investment relationship.
Q. In your opinion, what procedures should foreign business guide in today conditions to operate properly and successfully?
A. We recommend that American businesses in Georgia make sure they understand the market before choosing to operate here, and also recommend they work with a knowledgeable Georgian partner. Talking to many other foreign companies in Georgia, to get a sense of the business environment, is essential to any potential investor.
Q.In your opinion, how attractive is Georgia as a tourism destination for US tourists?
A. It could be a very attractive destination for wealthier American tourists, who can afford to travel here and spend a week or more in the country. The wine, food, culture, and nature are all exceptional. Americans who live and work here really enjoy it.
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