Pivotally located Georgia waits for foreign investors

A Georgian WWII veteran visits WWII memorial during Victory Day celebration in Tbilisi, Thursday, May 9, 2013. Georgia celebrates the 68th anniversary of the Soviet Union's victory over Nazi Germany on May 9. <AP Photo/ Shakh Aivazov>

Celebrating Independence Day of Georgia

Georgia celebrates its Independence Day on May 26, the date commemorating declaration of the first Democratic Republic of Georgia in 1918, when the country was liberated after more than 100 years of subjugation under the Russian Empire. Throughout the centuries Georgia has seen numerous invasions and subjugations by the greater powers.

Nevertheless, Georgians always managed to liberate their homeland, maintaining their strong national identity and culture. After being annexed by the red army in 1921, and forcefully incorporated into the USSR, Georgia had to wait for another 70 years for its chance to regain independence, which came in 1991 with the collapse of the Soviet Union. Subsequently, in 1992, Georgia was internationally recognized as a sovereign state and became the 179th member of the United Nations.

Its strategic location on the cross-road of European and Asian civilizations, along with its fertile lands, beautiful nature and access to the Black Sea, always made Georgia a lucrative target for the major powers (which unfortunately continues even now). However, the same factors have long been the driving force of the country’s cultural and economic development. Georgia’s history dates back more than 4000 years and is described in ancient Greek (Strabo, Herodotus, Plutarch, Homer, etc.) and Roman chronicles as rich lands with developed agriculture and crafts.

Archaeological research demonstrates that Georgia has been involved in commerce with many lands and empires since ancient times, largely due its location on the Black Sea and later on the historical Silk Road. Gold, silver, copper and iron have been mined in the Caucasus Mountains. Having strong alliance with the Eastern Roman Empire for nearly 400 years, Georgia was among the first nations to accept and introduce Christianity. Declared by King Mirian as the state religion in AD 337, Orthodox Christianity gave a great stimulus to the development of literature and arts, and ultimately played a key role in the formation of a unified Georgian nation. Georgia has its own unique language and alphabet originated in 4th century BC.

At present, Georgia is a dynamically developing state with a clearly shaped economic and political agenda. Complex economic reforms started in 2004, were aimed at fighting corruption, minimizing bureaucracy, eradicating poverty and creating business friendly environment. Changes in fiscal policy reflected in fewer and lower taxes (from 21 in 2004 to only 6 flat taxes today), lead to a revival of economic activities, and a steady GDP growth of 7% at average throughout 2004-2008 (6.1% in 2012). Creation of Free Industrial Zones and a massive privatization process contributed to a significant foreign capital inflow (USD 2.2 billion in 2007, USD 814.5 million in 2010, USD 1.1 billion in 2011, USD 865 million in 2012).

Georgia’s impressive reforms in terms of business facilitation are well-reflected in the country’s global ratings:

● The World Bank hailed Georgia’s commitment to reforms over the past four years as the country rose from the 112th to 16th place in the world in the WB Doing Business 2012 survey.
● Doing Business Reformer Club awarded Georgia as “Top Reformer”, according to a five-year measure of cumulative change in Ease of Doing Business between DB2006 and DB2011.
● FITCH updated Georgia’s rating to ‘BB-‘ in December 2011 due to a turnaround in its public finances and strong economic growth.
● According to Heritage Foundation’s Index of Economic Freedom 2011, Georgia ranks 29th out of 183 countries in the world, surpassing such highly developed European countries as Norway, Belgium, France, etc.
● According to Transparency International Global Corruption Barometer 2011 Georgia scored 3%, (Germany – 2%, US – 5%, France – 7%, Austria – 9%).

The path of reforms steadily followed by Georgia since 2004 brought inter alia to significant infrastructural developments. The modernization of the main highway connecting Georgia’s western and eastern borders (with Turkey and Azerbaijan respectively) resulted in increased capacity and decreased transportation costs. Most of the main and secondary roads have also been upgraded.

The Georgian Black sea ports of Poti, Batumi, Supsa and Anaklia efficiently handle container, dry cargo and fuel transportation, annually increasing their capacities and turnover. Free Industrial Zone developed by Ras-Al Khaimah Investment Authorities (RAKIA) at the Black Sea coast, just beside the Poti port, provides the companies located in the zone with favorable treatment and logistical advantages.

The Akhalkalaki (Georgia) – Kars (Turkey) railway project initiated by Georgia, Azerbaijan and Turkey, has finally shaped down from political ideas to implementation phase. Connecting Georgian and Turkish railway systems will soon create another time and cost-efficient transportation route extending European railway network further to the east.

Three modern international airports (Tbilisi, Batumi, Kutaisi) and two domestic airports offer their services to domestic and foreign passengers, highly contributing to increase the tourist flow (over 4.4 million in 2012).

Along with economic modernization, Georgia’s political agenda includes strengthening of its democratic institutions, improvement of human rights, the rule of law, and government transparency. The main but not yet achieved objective of both our internal and external policy remains the issue of territorial integrity.

In August 2008, Russian military aggression resulted in occupation of the inalienable Georgian territories of Abkhazia and Tskhinvali region/South Ossetia. Moreover, Russia has recognized their non-existent “independence” and still continues its “recognition” campaign, though unsuccessfully. Nevertheless, Georgia puts efforts to normalize its relations with Russia through economic and cultural exchange. However, Georgia’s territorial integrity is of supreme importance. Our request is legitimate and therefore firm: Russia should fulfill the 6-point Ceasefire Agreement signed on August 12, 2008, and withdraw its troops from Georgia’s occupied regions.

Georgia has always strived to become a full-fledged member of the European family. Our foreign policy priorities are based on the will and choice of our people. They are firm and clear – full integration into EU and NATO.

In October 2012, Georgia held parliamentary elections, which were internationally recognized as the most transparent and democratic elections since Georgia re-gained its independence. The new government’s agenda has its emphasis on social, healthcare, education, and human rights issues. It intends to achieve greater decentralization of executive powers and higher level of democracy. Its ambitious economic plan includes creation of special funds to finance prioritized fields.

Though the views of the ruling and the opposition parties differ on a number of internal policy issues, the Parliament of Georgia unanimously adopted a special resolution on Foreign Policy directions, re-affirming Georgia’s adherence to the Euro-Atlantic integration. The negotiations on Deep and Comprehensive Free Trade Agreement with the EU are almost completed. Georgia cooperates closely with NATO through partnership for peace program, taking part in peacekeeping operations in Iraq and Afghanistan.

Another goal of Georgia’s foreign policy is to diversify its international ties, establishing economic cooperation and political partnerships. Georgia attaches great importance to its relations with the Asia-Pacific region, and the Republic of Korea in particular. The opening of Georgian Embassy in Seoul in 2011 started a new phase in our bilateral relations. In the last couple of years, a number of high-level Georgian delegations visited Korea. 2012 marked the 20th Anniversary of establishing diplomatic relations, followed by a Korean movie festival and a photo exhibition in Tbilisi. We believe that the opening of Korean embassy in Tbilisi will make the relations even more dynamic.

The potential for economic cooperation between Georgia and Korea is huge. Georgia offers unique and diverse investment opportunities and business-friendly environment. The country’s liberal trade regimes with its neighbors (FTA), Free Economic Zones, skilled labor and numerous other favorable factors make Georgia an attractive business destination. The steadily growing trade turnover (USD 55 million in 2011, over USD 150 million in 2012), indicates that our relations are on the right path. Therefore, Korean companies are welcome to take part in any economic activity corresponding to their particular fields of expertise and interests.

Following the path of continuous reforms, the new Georgian government has already announced its economic plans: further develop the energy sector by attracting more FDI; support individual farmers and SME’s operating in the agricultural field through government aid and development programs; implement infrastructure development projects (development and/or modernization of highways, secondary roads, bridges, tunnels etc.); support export oriented industries (e.g. oil refining, manufacturing); develop the logistics sector (e.g. ports, cargo and warehouse terminals); and promote tourism (construct hotel chains, organize travel tours). As mentioned, several funds have already been set in place to provide investors with risk sharing opportunities, also supplying readily available local capital for long term projects that might not be financed by the local banking sector:

● Agriculture Development Fund – will finance projects in primary agricultural production, processing and related logistics (warehouses etc.). The fund will also provide aid to Georgian small and micro-farmers.
● Sovereign fund – will operate under the Georgian Partnership Fund and finance commercially feasible large projects, related to energy, infrastructure etc. both through debt and equity, but only with minority stakes.
● Private investment fund – will provide financing to commercially feasible projects in all sectors.

Given all of the above factors and constant improvements, we believe we have created one of the most business friendly environments in the world. Therefore, we would like to invite Korean businesses and tourists to visit and discover Georgia. In its turn, our Embassy will strive to further promote our bilateral ties, and will be happy to guide interested Korean businesses on their way to Georgia.