The FINANCIAL -- Georgia plans to establish more than ten large-scale projects in 2015. The country currently relies on its neighbouring countries as its main donors of FDI. Meanwhile there will be an inevitable impact of the ongoing crisis in the region on Georgia. Having aEuropean political system and institutions in placeis the main strategy of the Georgian Government for neutralizing these foreign risks.
“We are going to implement several huge projects thisyear. Artificial lakes will be constructed together with a biathlon track in line with ski resorts. Together with private investors the Government will be developingthe Kokhta-Mitarbi Alpine village. The introduction of artificial snowwill be carried out in Svaneti. This requires advance and accurate study and will start in 2015. Investment from the state will be provided for summer attractions as well. The selection process atAnakliaPort will be completed this year. The selected investors will then begin work from the spring or summer of 2016. Works on the Baku-Tbilisi-Kars railway will continue. The main works are to be completed by the end of 2015.The remaining large-scale projects will be in infrastructure. Competitions will be announced for the construction of a controlled-access highway at Rikoti Pass. It will be a shared project between the Government and private sector. Feasibility of the Mleta-Kobi tunnel will also be announced. And there will be additional projects in the tourism and public transportation directions,” Giorgi Kvirikashvili, Vice-PM and Minister of Economy and Sustainable Development of Georgia, told The FINANCIAL.
“It is hard to name the exact volume of the portfolio of the projects. A total of GEL 1 billion has been issued for infrastructure alone. The Government plans to represent a minority of the projects invested by the Partnership Fund. In addition to ‘Produce in Georgia’ we will develop the second direction which includes development of large-scale enterprises together with the private sector,” Kvirikashvili said.
In the first half of January 2015, five-star luxury hotel chain Rixos was opened in the health and spa resort area of Likani, in the Borjomi district of south-central Georgia. The total cost of the project is USD 48 million. The investor companies behind the Rixos Hotel project are Georgia’s JSC Partnership Fund (PF), a state-owned shareholding company, and Kazmunaigaz Service Ltd which provides oil and gas exploration and production services. The parties announced they had signed a deal to allocate the final fund - USD 18,300 - to closing the construction works.
In Kvirikashvili’s words, there is big activity and interest from Kazakh, Azerbaijani, Chinese, and Turkish investors towards Georgia. These have traditionally been the dominant investors in Georgia up until and including in 2014. “We hope that it will continue in this way in 2015.” However, the crisis that has beendeveloping in the region will reflect on Georgia said the Vice-PM. He sees the duty of the office as negating these risks.
“Georgia should have a European political system and institutions toneutralize the existing foreign risks. However, unlike a typical European country we should have more flexibility and less bureaucracy in order to attract Eastern investments. This will be our strategy and model on which we will work,” said Kvirikashvili.
According to Giorgi Pertaia, Director at Invest in Georgia, Georgian National Investment Agency, Georgia is expected to attract higher foreign direct investment in 2015 compared to in 2014. FDI may increase by USD 200-300 million to a total of 1.5 billion.
Contrary to Pertaia, Kvirikashvili found it difficult to predict the volume of FDI to be issued in Georgia this year. “It is an incorrect question. For our part, we should not stop the development and will see how much it will amount to.”
The Vice-PM admitted that the visa restrictions implemented by the Georgian Government in 2014 interrupted the natural arrival of foreign tourists as well as foreign workforces to Georgia.“We will soon make legislative changes with significant adjustments on the administrative side which had flaws,” Kvirikashvili promised.
“The bill of the migration and visa policy is ready. We are currently going through consultations with the European side. It should not hamper the visa liberalization process,” he added.
Kvirikashvili optimistically views getting a Free Trade Agreement with the U.S. In January 2012 Presidents Barack Obama and MikhaelSaakashvili kicked off Free Trade Agreement negotiations. Although at that time U.S. trade agreements with Colombia, Panama, and South Korea took more than five years to implement, James M. Roberts, Research Fellow for Economic Freedom and Growth at The Heritage Foundation, said that “there was no reason why the U.S.-Georgia FTA cannot be done in a fraction of that time. Both countries are already relatively open to international trade and investment, and the volume of trade between the two is relatively small.”
“We are cooperating with the representatives of theU.S. trade department in line with reforms that are being conducted with the quality of infrastructure and regulations provided by the DCFTA. After fulfilling these reforms we will see further development of the current negotiations. Unfortunately,at present there is no readiness to start cooperation from tomorrow. We are trying to provide assurance for the U.S. side while implementing internal regulations in line with the DCFTA. On the expert level we have quite positive results. This makes me optimistic about stating that the FTA with the U.S. will be reached,” said Kvirikashvili.
Kvirikashvili condemned Russia’s policy towards Georgia in line with Abkhazia and South Ossetia. However, he said that the Government’s policy to further develop trade and tourism relations with Russia will continue.
“The processes that are taking place on the political landscape with Russia, in terms of the signed agreement with Abkhazia and the one planned for South Ossetia are totally unacceptable and outrageous. However, we should do our best not to provoke such events which could lead to irreparable results. Our efforts for further development of trade and tourism with Russia should continue,” Kvirikashvili said.
At the end of 2014 Russian Rosneft, sanctioned by the EU and U.S., purchased the shares of the Georgian Poti Port Oil Terminal and Gulf stations. Rosneft purchased 49% of Petrocas Energy shares owned by Georgian businessman Davit Jakobashvili.
The sides have already signed documents in regard to which joint companies will be set up to carry out Rosneft’s projects inTranscaucasia.
“We have not been involved in this transaction, so I cannot take any responsibility. I gave instructions and now the Ministries of Economy, Justice and Foreign Affairs are jointly studying the legal issues of the case. We have to study whether there is some leverage against it,” Kvirikashvili told The FINANCIAL.
During the whole 2014 representatives of international Chambers of commerce in Georgia have been negatively estimating the visa and migration policy of Georgia.
“Georgia closes its doors to investors” – said Chinese Chamber. According to AmCham President“restrictive visa regime has been a nightmare for many foreigners” and Iranian Chamber stated that “long term activities became pointless in Georgia”.