Germans on Doing Business in Georgia

Germans on Doing Business in Georgia

The FINANCIAL -- “When I first began it was not an easy time to start an agro business in Georgia, especially wine production,” Burkhard Schuchmann, of Schuchmann Wines, told The FINANCIAL.

“This was in the shock period following the Russian Embargo in 2006, but in the long run the challenge became a positive for Georgian wine producers and the wine sector as a whole. The diversification of markets and penetration in the global wine world was for Georgia the greatest achievement and success, and which still continues today. We all, our competitors as well as actors in the Georgian wine sector, should come together in pursuing the same idea and compete with world wines, establish and promote the country’s identity and the exclusiveness of Georgian wine. The Government has implemented a very interesting and effective project to support agro businesses and production.”

“Schuchmann Wines Georgia was the beneficiary of an agricultural cheap loan project and based on our example we have significantly increased our production. Also, what is very important and valuable is that Georgian wine producers have become very active on international markets towards global society, which will increase awareness of Georgian wine greatly. 2014 was a very successful year for the agriculture sector in Georgia, the ongoing trend is promising and this is one of the most interesting developing sectors in the Georgian economy,” he said.

“In Georgia, wine has its own philosophy, approach and method of production and wine aging. It is these golden recipes and rules which make Georgian wine unique and exclusive. This conclusion is based on the example of Schuchmann Wines - our wines are sold successfully in Western and Eastern Europe, in the Baltic countries, China, Russia, Kazakhstan and Mongolia,” he said.

“Schuchmann Wines are sold in France as well. This is a unique case, as there was never any history of exporting Georgian wines to France before; wine producers tend to avoid exporting wines to those countries which are big wine producers themselves and exporters at the same time. That was quite a bold decision on our part therefore, but we can say that our wine has been quite liked by French consumers. This is an achievement not only for our company, but also for Georgia as a whole.”

“The issue of the moratorium regarding land is a real problem for investors operating in the country and even for any interested foreign parties. It stops development and investment activity. I do hope that the Government will act accordingly and change this legal uncertainty.”

“From the very day of our entrance into the market the procedures for starting a business were very easy to understand and what’s more, easy to meet,” Michael Hampel, General Director at HeidelbergCement, told The FINANCIAL. “HeidelbergCement always felt welcome in Georgia and the authorities showed the will to provide us with a business environment that helped us to start up successfully.”

HeidelbergCement’s activity in the Georgian cement market began in May 2006 following the acquisition of a 51% stake in the Georgian cement grinding plant Kartuli Cementi Ltd. This was HeidelbergCement’s first investment in the Caucasus region. Later, the company’s share in Kartuli Cementi increased up to 100%. At the end of 2006 HeidelbergCement acquired a stake of 75% in SaqCementi, the largest cement producer in the Caucasus region. Later on, in 2008 the company started concrete production and established HeidelbergBeton Georgia. Today HeidelbergCement runs 4 cement and 9 concrete plants in Georgia and the investment process is continuing for its expansion and capacity increase.

“It is very easy doing business in Georgia because the hurdles are really low in comparison to other countries. To start up one needs a good lawyer who knows the legal framework. The rest is a question of days or a maximum of 2 weeks. We had no problems except for the fact that the cement plants that we bought were in a bad state and had to be renovated - but we had identified that before buying them - so it was simply a matter of following a pre-planned process of investing in newer technology,” he said.

“The main risk is that the cement market will not develop in a positive way as expected - but since 2008 the market volumes have followed an expected, upward trend - a very positive one with slow but constant development. The well-needed infrastructural projects in Georgia like the highway from Tbilisi to Poti and Batumi together with future projects like the hydropower plants are fuel for the country’s development - and for our positive view on Georgia as well,” Hampel added.

“We export to Azerbaijan at the moment - but the Georgian market is gaining more and more momentum so that the percentage of exports is decreasing slightly. As we have a production capacity of 2.2 million tonnes a year and the total market in Georgia is around 1.6 million tonnes at the moment, we have enough cement to serve all current and future projects. Nevertheless we are continuing to invest in the plants and in new technology. We have started the projecting of a new cement line in Kaspi that will cost around GEL 200 million and that will further increase our cost leadership on the Georgian market. As the importers of cement from Turkey, Armenia, Iran and Azerbaijan are hard competitors we have to be careful when it comes to cost leadership,” Hampel said.

“Of course quality is a major factor when a company wants to export to the EU. The transport costs are a huge factor so products with a large weight and without the possibility to differentiate themselves from currently offered products will have problems. The best are those products that are unique and have a certain quality that cannot be met by European competitors. Wine is a very good example of such a product. I do not speak of low quality wines but about the kinds of grapes that do not exist in Europe. I recently had a white wine made of Kisi - it was extraordinarily good and so different from all the white wines that I have had before in my life,” he added.

“It’s straightforward and easy to start a business and to go through the paperwork in Georgia, our country does not pose any bureaucratic barriers in this regard,” Giorgi Mshvildadze, Commercial Director at Tegeta Motors, told The FINANCIAL. “To start your business, first of all you need to have a business idea, implement market research and of course have the necessary financial resources. The conditions for starting a business in Georgia are simple, both for local and foreign investors. There are no special privileges for Georgians, neither for foreigners; the conditions are equal and the same for everyone. Businessmen from neighbouring countries point out that doing business in Georgia is quite easy for them.”

Tegeta Motors is a holding that offers a full range of auto products and services to corporate and retail customers; the company, with 100% Georgian investment, is the official representative of a number of German world famous brands. Tegeta Motors has five daughter companies: “Tegeta Truck and Bus” LLC (official representative of “MAN Nutzfahrzeuge AG”), “Tegeta Construction Equipment” LLC (JCB official representative), Tegeta Premium Vehicles (official representative of Porsche and Mazda), Transcaucasia Distribution Company (official representative of Shell Lubricants) and Toyota Centre Tegeta (official dealer of Toyota). Tegeta Motors also established a joint venture with Gebruder Weiss, Austrian forwarding and logistics company, and constructed a premium class logistics centre equipped with modern technologies.

“There are no risks related to business in Georgia. Once again, I would like to note that businessmen from Armenia, Azerbaijan and Turkey feel more comfortable here rather than in their own countries. Due to the transparent business environment, no double accounting and no bribery and corruption, our country is becoming more and more attractive for investors. In countries with problematic bureaucracy and corruption local businesses feel more comfortable than foreign ones. In this regard Georgia is more loyal, in that it encourages investors,” he said.

“The important thing for large investors is to see the potential of the market. Having more than enough financial resources for investment, they look at the market and the perspective of market development. Georgia is a developing country with a growing market and large investors may see the prospective development of businesses not yet represented on our market, those that may prove to be in demand and necessary in the future. They may therefore establish businesses that will become profitable in 5-10 years, not immediately.

As for Tegeta Motors, the secret of our success lies in a constant focus on development, taking new challenges and pursuing new tasks, which is very well depicted in the driving principle of our company “never stop at the achieved”.