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Georgia is open for business

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Zurab Nogaideli, Georgia's Prime Minister

Olivier Descamps, EBRD Business Group Director

Irakli Chogovadze, Georgia's Minister of Economy

New government, new rules of the game, new country and new reality. That is how Georgia branded its country presentation during the 2006 EBRD Annual Meeting in London.

The room was crowded not just because of the trade row with Russia over Georgia’s wine and famed Borjomi mineral water but also because Georgian Prime Minister Zurab Nogaideli addressed the participants himself. He told them that Georgia is now open to all and is open for business. 

Olivier Descamps, the EBRD Business Group Director whose responsibilities include Georgia, acknowledged that much has changed in Georgia since the 2003 ‘Rose Revolution’. “It is a different economy and a different business climate,” he added.

EBRD investment in Georgia has increased from €15 million in 2000 to €85 million in 2005. Georgia is part of the Bank’s Early Transition Countries initiative. This initiative was launched in 2004 to encourage market activity in Armenia, Azerbaijan, Georgia, Kyrgyz Republic, Moldova, Tajikistan and Uzbekistan.

Charming the investors

Foreign and local investors attended the presentation. The Prime Minister and the Minister of Economy of Georgia listed more than one reason to prove that their country has moved towards democracy and deserves foreign investment.

Said the Prime Minister: “Judicial reform, liberalisation of trade policy and the fight against corruption are the top priorities of my government.”

He added that a new tax code was approved in 2005 and the number of business taxes had been reduced from 22 to eight.

“The goal is to transform Georgia into a liberalised and open economy. The focus is on privatisation. It is not up to the state to run businesses,” said Irakli Chogovadze, Minister of Economy.

According to Mr Chogovadze, privatisation receipts are expected to compensate for any reduction that might occur to Georgia’s GDP growth following Russia’s ban of Borjomi mineral water and Georgian wine.

“This year, we plan to privatise major enterprises in the energy sector and we invite all potential investors to start thinking of doing business in Georgia,” said Lasha Gotsiridze, Deputy Minister of Finance.

Recently-privatised enterprises in Georgia include United Telecommunications of Georgia and the Batumi oil port. A gas pipeline and a power system are also to be privatised this year.

A new customs code, a new labour code and simplification of construction procedures were added to the long list of reasons for investors to do business in Georgia.

“Georgia’s banking sector has improved thanks to the EBRD’s involvement,” added Roman Gotsiridze, President of the National Bank. “Loans have more than doubled and Georgian banks have a wide portfolio and a high return rate on equity.”

Investors ask

Georgia’s famous wine was the team’s last treat for participants before the investors fired away with questions.

The reform of the civil service and corruption seemed to be common concerns. The Prime Minister assured the audience that the government wants to decrease mid-level bureaucracy.

There was interest in bringing budget airlines to Georgia, to which Georgia’s team responded that effort is being put into developing the country’s infrastructure. With two new airports to be built by end of 2006, Georgia will then be able to attract budget airlines.

Another investor was concerned that support goes mainly to big businesses whereas Georgian society is built on small and medium-sized enterprises. Mr Descamps pointed out that the EBRD’s role in strengthening the private sector in Georgia extends from support for foreign investors as well as for local micro, small and medium-sized enterprises to improving the country’s infrastructure.

Written by EBRD Communications Adviser Marjola Xhunga.

Photos: Design Unit

23 May 2006