The FINANCIAL -- AmCham Georgia members do not feel there has been any notable improvement of the Georgian investment climate since the new government came into power in 2012, said Sarah Williamson, President of the American Chamber of Commerce in Georgia. The recent changes on the ownership of agricultural land and the new immigration policies have left many foreigners questioning whether or not they are actually welcome in Georgia. In addition, some potential changes in the law on the postal service have caused serious concern among many AmCham members.
"There is a fear that post service will be monopolized by the Government. This would send an extremely negative image of Georgia as a free market economy. We are working with our counterparts in the Ministry of Economy, and elsewhere, to try and see this come out in an acceptable compromise without placing unfair restrictions on international parcel service companies and others,” Sarah Williamson, President of the American Chamber of Commerce in Georgia (AmCham Georgia), told The FINANCIAL.
US FDI amounted to USD 33 million during the first half of 2014, down from USD 0.6 million from prior-year periods. “There is very little difference and there aren’t many specific reasons, though the law on ownership of agricultural land has been mentioned as part of the problem,” Williamson explained.
“Still, US investments remain one of the largest at 15% of all FDI in Georgia. We are expecting to see more US investment at the end of 2014,” she added.
Q. The Georgian Dream Party is celebrating its two year anniversary this year. Which are the main steps you would underline that have improved the Georgian investment climate?
A. The new government, both before and after the elections, has stressed the importance of attracting more investments into Georgia. Investment funds have been created with government participation, which I think has the potential to interest investors. However, overall, we are still looking and hoping for significant improvement in the investment sphere. I cannot say that my members feel there has been any notable improvement. According to the last figures from the Ministry of Economy and Sustainable Development, the increase of FDI in Georgia was just 0.3% in 2013. This is simply not enough for Georgia to grow and prosper as we all want and need.
Q. What have been the main steps that have caused dissatisfaction among American businessmen established in Georgia?
A. There are several legislative initiatives from the Government that raise concerns not only from American business but also from almost all businesses, both foreign and domestic. Some of those include the moratorium on ownership of agricultural land, as well as the current proposed changes that would become permanent if passed by parliament. The very restrictive visa regime has been a nightmare for many foreigners as well as Georgian businesses who employ foreigners. The implementation has been very poor with conflicting answers coming from various ministries and departments of the Government. The Government claimed to have given foreigners many months to prepare for this when in fact several regulations and clarifications were not announced until days before the September 1, 2014 enactment. Taken together, the changes on ownership of agricultural land and the new immigration policies have left many foreigners questioning whether or not they are actually welcome in Georgia, which is not the feeling they have ever experienced here before. Personally, I do not believe that the Government intended for this to be the case, and I do not feel unwelcome in Georgia myself, but I do believe that they need to better understand the dangerous perception that many do have based on the recent changes and the negative way those changes are being implemented. On the positive side, while these are the problems that answer your question, we are also pleased that we have the opportunity to engage with government and try to reach suitable compromises. In both cases mentioned above, we are engaging with the Ministry of Justice, Ombudsman, National Investment Agency, and others, and we highly appreciate the opportunity to do so. Also, many of our members have expressed serious concern over some potential changes in the law on the postal service. There is a fear that post service will be monopolized by the Government. This would send an extremely negative image of Georgia as a free market economy. We are working with our counterparts in the Ministry of Economy, and elsewhere, to try and see this come out in an acceptable compromise without placing unfair restrictions on international parcel service companies and others.
Q. In September Georgia received a special package from NATO. In accordance, a NATO training center is going to be opened in the country. Is this decision bringing a greater sense of protection for US businesses in Georgia, or is it raising more fear in line with Russia’s dissatisfaction?
A. AmCham fully supports Georgia’s NATO aspirations and is proud that the US Government remains Georgia’s strongest supporter on this track. Therefore we were pleased to hear of NATO’s positive steps at the September summit, including the training center. As for Russia’s dissatisfaction, Georgia has already repeatedly declared its strong will to become a member of the alliance and to maintain its course on a pathway towards Europe. Therefore, the threat from Russia remains with or without the NATO training center and as such, I believe most of us here on the ground will be glad to have the added support.
Q. How much confidence do you have in the new Georgian leadership’s ability to support US business?
A. I feel very confident in the Prime Minister’s and Minister of Economy and Sustainable Development’s desire to attract and support US businesses. During their visits in the USA, both mentioned the importance of attracting the larger, more brand-recognizable, US businesses to Georgia. Doing so will be very difficult, in the best of circumstances, but we are very happy to hear that there is going to be a strong effort to do so.
AmCham firmly believes that the best advertisers of Georgia as a place to invest are those companies and individuals who have already invested in Georgia, and therefore it is imperative that the Government take excellent care of the loyal investors the country has simultaneously with its efforts to bring in new companies. We have regular meetings with government representatives and we are able to deliver this message, along with other more specific ones. We appreciate their will of cooperation and hope the Government will remain opened for further discussions on supporting current and future US businesses, and all businesses, in Georgia.
Q. How risky is investing in Georgia?
A. As we all know, Georgia remains ranked among the best places for “Ease of Doing Business”. The signing of the DCFTA and Association Agreement with the EU will also have a very positive effect on portraying Georgia as a positive investment environment. The main risk remains Georgia’s political situation, including internal and external factors.
Q. Where is the place for Georgia vis-à-vis US policy on Russia and Eurasia?
A. Georgia is a very important partner for the USA and with good reason. Georgia is a regional hub and one of Asia’s main gateways to Europe. In such a diverse region as the Caucasus, it is important to have a reliable and close partner like Georgia. Particularly, the role Georgia plays in getting oil and gas to Europe without relying on Russia should be hugely important for the US as it gives our closest allies, the EU countries, the ability to be less dependent on Russia and to hopefully, eventually, make better geopolitical decisions of their own without having to have so much fear of retaliation from Russia by means of cutting off energy supplies.
Q. Which new US businesses have been established in Georgia during the current year?
A. I can mention the project of the new American hospital in Tbilisi, which will be co-financed by American and Georgian businesses. The amount of investment will be USD 60 million. It is planned to employ 400 persons. While not only from the US, the new gas pipeline that BP is building is fantastic for Georgia. There are several new US franchises: Wendy’s, Subway, Precision Auto Tune, and others that I can’t yet mention. There are new hotels coming in various parts of the country which have US shareholders and brands.
Q. Are there any big American companies interested in entering the Georgian market?
A. It is not an easy task to attract big businesses from the USA in such a small country. An FTA with the United States would be a strong incentive for foreign investors to move or open production centers in Georgia, since only products manufactured in the country will be eligible for a low or no tariff regime.
Q. Economically, what will Georgia need to do to move ahead from where it is today to where it wants to go in the next several years?
A. First and foremost, Georgia must show its commitment to maintaining a pro-business environment (legislative framework, improved education systems, SME development & support, etc). We must all work together to see that businesses in Georgia are healthy and are therefore attractive partners and competitors for their foreign colleagues so that Georgia can attract more FDI into the country. Strengthening ties with the EU will be helpful, and Georgia needs to be aware of protecting its own interest and integrity in doing so. More government support through a higher level inclusive dialog with the business community is essential in achieving these goals.