The FINANCIAL -- Georgia will return to its pre-war position next year, David Lee, President of American Chamber in Georgia told The FINANCIAL in exclusive interview. Mr. Lee believes that foreigners are not facing any kind of risks by coming here. “The American Government cannot tell its businesses to invest here. The businesses have to want to come here”.

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“The US Embassy and AmCham are doing their best in order to increase the visibility of Georgia in the international business community, but that does not mean that you should sit down in your house, shop or factory in Georgia and expect people to come to you. Every business has a responsibility to do this, every person, every student. Every person at university or in chatrooms, email or facebook has the responsibility to be a salesperson of their country,” Mr. Lee says.

 

Throughout 2009 the American Chamber of Commerce in Georgia had one sole challenge: “We found it almost impossible to get new companies interested in investment. This was not because investors were not interested in Georgia, but because no one was really investing in the first half of this year all around the world. Everyone was waiting to see what would happen,” David Lee, President of AmCham Georgia, told The FINANCIAL. 

 

Q. “Invest in Georgia” was your main message for all US investors in 2008. Was your appeal responded to by the people that you addressed?

 

A. In October 2008 we had a trade delegation from the USA that came with about 20 US companies from the state department. At that meeting we signed up USD 270 million from OPIC loans. OPIC is the investment arm of the state department and that went to TBC Bank , Bank of Georgia , and GMT. Another deal we signed for power. So last year was very successful. This year foreign investment has clearly proved to be a problem.

Less people are coming to Georgia because of the war, because of the financial downturn and political demonstrations on the streets. All of those factors together have turned out to be bad for business. I am going to go to New York with some businessmen, including representatives from HSBC Bank. This is going to be a conference about Georgian investment held on December 2.

 

I think that the PM will be speaking there as well. AmCham’s point of view is that the worse of the recession is definitely over in most countries, we are seeing that in Georgia many of our members, banks, telephone companies are reporting that their revenues have started to rise again. Between May and July deposits rose in banks. It looks as though the recovery has started in Georgia as well. This is a recovery in people spending money. It is not necessarily a recovery in jobs and it is not a recovery in new investments. What we now need to focus on, for American businesses, is getting more American investors to come here and invest. This is a number one priority of Amcham. We also want any companies from any country to come join us in Georgia. Specifically we are interested in the USA as it has the world’s largest economy.

 

Q. Please name the investments made by US companies in 2009 or since the August war?

 

A. I do not have that information. It has not been a good year for new companies. What has been positive is that new and existing companies have stayed. The only good thing about the last year has been that we have not seen any companies leaving Georgia. So the majority of companies are still here. We also see that some of the powerful companies are continuing to invest. Magticom is the biggest American investment in Georgia. We have already invested over USD 400 million in Georgia. This year we will invest over USD 100 million again. I think that if you look at the chains like GMT, Radisson, BP, all these companies are continuing their operations. We are not in terrible shape, it is ok but as for running good news about new investments, no. That is why I think that it is very good for the Government to be doing this conference. Amcham continues to talk to as many people as we can to get new investments. The US Embassy together with Amcham was with the head of Georgia’s autonomous region Adjara a month ago and with the mayor of Batumi. We are going to try to put together another investment conference in the first half of next year. I think that it is a good time to get new investments to come back to Georgia.

 

Q. What were the main challenges for Amcham in 2009?

 

A. Amcham increased its membership in 2009. Actually Amcham did not really have challenges except for we found it almost impossible to get new companies interested in investment. This was not because they were not interested in Georgia, but because no one was really investing in the first half of this year anywhere in the world. Everyone was waiting to see what would happen. So the main challenges were a complete lack of investments anywhere and specific problems to Georgia like post war issues and demonstrations.

 

Q. How has the economical downturn affected the businesses of Amcham members?  

 

A. The main problem for Amcham members’ businesses has been the economical downturn. The reduction of revenues was a big problem. People in Georgia spent less. People simply stopped buying. Even telecommunication companies faced a reduction of revenues, people just made less phone calls. The problem is that when companies reduced revenues, they reduced costs. Many businesses had to cut their workforces; many businesses stopped investing, many businesses stopped even buying products to sell. The fall of demand was a similarly large problem for all of the business sectors.

 

Q. Several weeks ago a US-Georgian business council was held. What was the main message that you and this conference delivered to the public?

 

A. Under that meeting, we passed on the message that the economy in Georgia has rebounded and is coming back as one. We are no longer in a negative situation. Even our political situation is getting better. Now is the time to start thinking about investing in Georgia. It is actually a very good time to invest in Georgia because of various reasons. The first is that we are now in a period of political calm. It seems a less aggressive picture and one that is good for investments. The second reason is that property prices are low. If you want to invest in Georgia for the first time, now it is a very good time to either buy or rent your factory, retail or office space. It is a perfect time to come in.

 

Q. Can Georgia assure foreigners that the current political calm is not just temporary?

 

A. I think that Georgia has a problem with convincing investors. I hope and I believe that it is understood now.

When I talked to politicians, both from the Government and from the opposition parties they indicated that they do not want to create a situation in which investments and businesses are affected. During each meeting of AmCham’s with politicians, we received the same message that it is very important for them to keep business in Georgia working and get new investments coming in. I think that is a very positive sign when both sides of the political arguments seem to be agreed that it is in nobody’s interest to create a business environment where you cannot do business, or where new investors are concerned about that situation. Therefore I am positive about that.

AmCham can do its job much easier than it could in the first part of 2009. They say that they are interested in a good business environment and they believe that Georgia needs to develop economically. That is very good for us when we talk to our potential investors. We do not have any serious political party in Georgia saying that they want to restrict business.

 

Q. Georgia is often targeted for its pro-American orientation. Against this background, do you not think that the US should be more active in regard to investments? We can all see that the US did much supporting and lobbying of Georgia, but does the country not need more than this?

 

A. If you look at the US’s relationship with Georgia, I think it is extremely difficult to criticize what the American Government has done for Georgia in the last five years. It is clear that the promised USD billion to Georgia in August last year has been delivered.

Georgia hosted the Vice President of the new administration of the US just over two months ago. We see that the US is making all its commitments to Georgia on a political level. If we focus on a business level, the American Government cannot tell its businesses to invest here. The businesses have to want to come here. In this case, we cannot expect the US Government to do very much.

What can encourage the entrance of businessmen are the conferences and the work of Amcham. The best message that we can deliver is to suggest investing in Georgia. In the end, the individual investors need to come here themselves. On that basis, are there enough American businesses in Georgia? Who’s fault is that? - Our fault. The business community here needs to be more active in encouraging investors to come. The bodies of the Government can help us but we have to do those things ourselves.

 

Q. We still read on the official website of the US Embassy to Georgia that “the Department of State continues to warn US citizens of the risks of travel to Georgia. Is Georgia safe for US citizens?
 
A. I do not know why that is said on that website. I do not believe that the risk in Georgia is high. It was high when we had Russian tanks in our cities; when we had Russian tanks coming towards Tbilisi . Now I think that Georgia is not a dangerous place for people or tourists or businessmen to visit. I think that this is something that the American Embassy needs to decide itself but I would recommend any tourists who plan to visit Georgia to come here. Those dangers are now over.

 

Q. Can the US guarantee the safety of Georgia?

 

A. I do not know, I am a businessmen not a politician. I just do not know what the security situation is between the US, Georgia and Russia. What I am much more focused on is Amcham. I believe that now is the time to get the business sector working and return to the level that we were at before the war and to continue this work for the next five years.

 

There is really nothing now that can stop Georgia from doubling its GDP in a very short time. I think it is the right time for Georgian businessmen and politicians to start rebuilding Georgia. It is time to stop focusing too much on any level, security, economical etc.

 

Q. When will Georgia return to its pre-war economical situation?

 

A. I think that Georgia will return to its pre war position next year. To do that we need to start attracting investors again. We have to get this cycle flowing. We need to get as large investments as possible. We need to get a cycle of new investment coming in all the time. It is not all gloomy though. If you go down to the west of the country now, you will see the massive road works taking place there. When you get to Batumi, you see huge development taking place as well, the construction of new hotels, a new container port, and container terminal at Poti. We have already got all this going on. Good projects are ongoing. On Friday for example Magticom will release its Blackberry service. Magti is selling thousands of telephones every day.

These are all good indicators, but as the President of Amcham what I really want to see is that new businesses are coming in as well. It is about building what we have, getting back to last year’s level as quickly as we can. I am positive about next year’s forecast.

I think that the last six months have been good for Georgia. We are seeing changes in many things, in both the economical and political situation, it all looks much better than it did six months ago and it is ten times better than it was a year ago.

 

Q. What amount have you invested in implementing the Blackberry service and what will the cost of it be? 

 

A. Actually I can’t name an exact price as it depends on the model but we will be very competitive. Our Blackberry service, the Magti service, is now officially on the Blackberry website. I am quite excited about the Blackberry project. I think that the Blackberry is something that says a lot about where Magticom believes this economy is going.

This year we have invested about USD 100 million. We see huge growth in the demand of fixed line phones. We hope to be the main players in the fixed line market. We believe we have got the superior product. The Blackberry is a compliment to the Magti brand. When people buy Magti they know that they will be getting quality. Blackberry is not a cheap product. Already many businessmen in Georgia can’t work without access to the internet and email. You cannot run any business, except for a very small one, without email. You have to have this basic service. When you get a Blackberry from Magti you know that the quality will be as good as Magti, the coverage will be as good as Magti, and customer service will be as good as Magti. So I think we will do very well with this product. I believe it will be a popular product.

 

Q. What are the main risks investors face in Georgia?

 

A. There are three things that investors look at before making a commitment.

The first and most important thing, without which there is no point in investing, is the market. You have got to be able to see that you can create a successful business. Georgia has single exceptions of potential in telecom, tourism and agriculture directions. We are importing food products from Turkey when we could be producing them here. There is a huge opportunity for making money in this sphere.

The second and most important thing is corruption. Georgia did a great job in this area and has made it easy to start a business. Businessmen are always looking for political stability and now we have a much positive picture than what it was like just six months ago. Risks for investors who are coming to Georgia for the purpose of starting a business have probably been identified and Georgia actually has a good environment for doing business. It is impressive when you look at how foreign and local businesses have developed over the past five years. Georgia is a relatively ideal place for doing business.

 

Q. Georgia gets its financing mainly from IMF, OPIC, World Bank . These are huge financial resources but they are still credits. This is not an investment in Georgian business. Unfortunately, US businesses are not so widely presented in the Georgian economy. Do you think that the US administration can be more active in supporting companies interested in doing business in Georgia?

 

A. The main reason for the lack of US businesses in Georgia is that US businesses, since the financial crash, were focused on loan survival. We have seen major American companies fail, including banks. It really was unexpected. We understood a long ago that would not manage to get any new investments in Georgia for some time. The best we can hope for is to keep the companies that are presented here and continuing to invest. And we have seen that Magti is the best example of this.

In 2009, Magticom invested in Georgia more than we did in 2007 or 2008. We are continuing to invest and other companies are doing the same thing, HSBC , the Hilton in Batumi. This lack of investments from the USA was expected.

Georgia is a small country. Most people in Europe and America, unfortunately, do not even know where Georgia is and would not be able to point to it on the map. We just have to be realistic about this. Georgia is roughly the size of Scotland or Ireland but does not yet have the visibility in the business community of those countries.

The US Embassy and AmCham are doing their best in order to increase the visibility of Georgia in the international business community but that does not mean that you should just sit down in your house, shop or factory in Georgia and expect people to come to you. The only way to find a customer or an investor is to go out, talk to them, and show them what you have - in essence to sell Georgia.

As the head of Magticom, we know how to sell and all those kinds of skills that we display in Magticom will make sure that together with our members of Amcham we sell Georgia at every opportunity we have. However, every business has a responsibility to do this, every person, every student. At university or in chatrooms, on email or facebook, every person has the responsibility and potential to be a salesperson of their country. Every educated person in the country, every businessperson, when going out of the country are selling Georgia and if we do that effectively then that is the only way that we will really attract interest from countries like the US.

We should think about Georgia first and need to talk the average person sitting in NY, saying “come start business in Georgia”. Every single Georgian, particularly those who are in foreign colleges, universities, who have business, who have contact with foreigners, should try to sell Georgia. If everyone does it all the time it would not be the same as just holding two or three conferences a year. There would be thousands of conversations taking place every day, on chat lines, telephone lines, face-to-face.

Recently ads about Georgia were launched on international TV channels and I think that that was a great idea. Articles in Time magazine are also a great idea. Whenever we get the opportunity to talk to The NY Times, The Telegraph or any other publication, it’s all good. The Government is doing the right things and Amcham is doing the right thing, the US embassy is also doing an incredible job.

I really want to just motivate all my members and anybody who agrees with this idea: let us sell Georgia as a good place to do business, as a good place to buy products even if you cannot come and invest. Without this development will never happen. No one is going to pick up the map, look at Georgia and say: I am going to invest a USD million in Georgia. What will happen is that when people hear about Georgia, they will be interested and we members of Amcham will talk to them. If we can increase the number of people who know about Georgia we will get ten times more investments than we currently have.     

 

Q. Several years ago Russia was the main market for Georgian products. After the Russian embargo Georgian exporters started occupying new markets but they failed to fully recover from the loss of their main market. Do you think that potentially the US could replace the Russian market for Georgian produce in the future?

 

A. Georgia ideally would manage to sell its products anywhere on the market. The Russian embargo was just a cruel act by a very unfriendly neighbour. In some ways it was positive in that it made Georgia have to go out and find new markets. Russia is not even one of the largest markets. I do not believe that when we see the Black Sea we then need to look North. It would be nice if the market was open but we are a part of Europe, we see our nearest border as Turkey. We have the USA and China with the largest markets worldwide. So we do not have a problem with markets, we have plenty of them to choose from, we just need to enter them first. We do not have a problem with finding customers who can buy products from us. As a business strategy, if you said to me that the border with Russia was open and gave me the option of a good relationship with Russia or a good relationship with the USA and EU, I would rather have the second one. Russia does not have such a big market and it is not critical for the success of Georgia. We need to get into Europe and we need to get into US markets. That should be our focus. Losing Russia was not ideal, but gaining Europe will compensate our loss. The problem is that we are not addressing those markets well enough.

 

Q. Are Americans interested in doing business in the Free Industrial Zone in Poti? What are your suggestions for them in this regard?

 

A. I think that the Free Industrial zone is a great idea. It is clear that Georgia has an opportunity to develop that business model. I am pleased to see that Rakeen group is already involved in it. Having been in Baku, Yerevan and Istanbul, I will say that Tbilisi is the better place for a foreigner to live. Any foreigners that come to Tbilisi find it very nice. Free economics zones, ports, transport systems, railways, airports, all these areas that the Government is helping to develop are very important for the country. Eventually we will get more and more people coming here, to adjust the Georgian market and Europe. If you travel to Georgia, you will realize what a beautiful country it is and what a strategic position it has.

 

Q. What should Georgia do to attract US businesses, to become as much attractive as Singapore or the United Arab Emirates? 

 

A. I think that Georgia is fundamentally attractive to foreigners. It is on the eleventh level according to the World Bank ’s rates for doing business. Culturally, it is European. Any European or American would be very comfortable here. It is a European oriented society. It is not strange being here, it is very a welcoming place. So I do not think Georgia has to do anything, I think it has done much already. They just have to go on being European-oriented and that takes care of itself. Everything is now in place. The law, the infrastructure - and all that is almost developed now. The tax regime is good, corruption is low, there is a huge market here, it is all in place. What we need to do now is sell it and hope that nothing unfortunate happens again, like the financial crisis, war or more street demonstrations. All we can do now is wait and see. 

 

Q. What are the main challenges for Georgia and the American Chamber of Commerce in Georgia in 2010?

 

A. Attracting new investments will be the biggest challenges for 2010. We have a new war and need to win it. We need to get new investments flowing again. We need this. We need not only to make already existing investors feel satisfied and successful but attract the entrance of new investors again. That is a big challenge for AmCham and for Georgia. All the people whom I meet have one goal to focus on - attracting new investments. We are on a flight of steps where we are looking up and are no longer falling down. How quickly can we get the economy moving, how quickly can we get new investments coming, those are the steps we need to climb. We are constantly negotiating with foreigners and I am hopeful about the NY conference and other conferences planned for next year. I think the advertising campaign will be successful and I am sure that it will work in the country’s favour.

 

 

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