Looking west to Romania
Georgia is targeting Romania as an investment partner in its development plan for agriculture, energy and tourism - Levan Metreveli, Ambassador of Georgia to Bucharest tells Michael Bird
Romanian businesses looking to invest have few choices. West and central Europe is too competitive and Ukraine and Russia are culturally distant from Bucharest. While Bulgaria, Macedonia and Albania may be options, the three countries Romanian-based investors cite as investment targets tend to be the Republic of Moldova, Serbia and Georgia – nations with whom Romania enjoys strong political ties.
Now Georgia is gearing up to prove its stability following the 2008 Russia-Georgia war and despite continuing tensions over its breakaway ‘republics’ of Southern Ossetia and Abkhazia.
In energy, the country is proposing the joint Azeri-Georgian-Romanian Interconnector (AGRI) project with Liquefied Natural Gas Terminals on either side of the Black Sea at Constanta and Georgia’s Poti or Kulevi.
Levan Metreveli, Ambassador of Georgia to Bucharest says the project is feasible from a technical, geographic and political standpoint and is a logical course, especially as it follows a continuous route between the gas source of Azerbaijan’s Shah Deniz field and the market of central Europe. “One thing we can be sure of,” he says, “is that the shortest distance between A and B will always be a straight line.”
Georgia also has vast resources of hydro power supported by its Caucasus mountains. “Ten years ago Georgia saw a shortage in energy and in six years’ time we expect to export electric energy,” says Metreveli. “There are options for Romania to invest in hydro.”
The bulk of Romania’s hydro power stations are owned by two state-controlled companies now being established – Electra and Hidroenergetica. Romania’s long-term ambition is for these privately managed ‘champions’ to make regional investments – which could include the west Balkans, the Republic of Moldova and possibly Georgia.
However a problem is the Russian “occupation” of Abkhazia and Southern Ossetia, so how can Georgia assure investors security in light of this political situation? “One of the goals of Russia in the Russian-Georgian war was exactly that - to keep investors out of the country,” says Metreveli.
Russia has issued its own national passports to Georgian citizens in Abkhazia and Southern Ossetia in a move to dilute the citizenship and blur the boundaries between the breakaway republics and Russia.
The solution to the country’s frozen conflicts, according to Metreveli is “democracy and liberalisation”. Georgia aims to lead by example to those by providing its own citizens with social benefits and functioning state institutions, such as decent healthcare. Metreveli says there is a huge disparity between the low degree of the rule of law, corruption and poverty in the north of Abkhazia under Russian influence and in the south under Georgia.
After 2003’s Rose Revolution brought the western ally Mihail Saakashvili to power, Georgia became a keen student of World Bank statecraft of business transparency, including launching a combined low income tax and social contribution tax of 20 per cent. “One can start a business in Georgia in under two days, regardless if one is a foreigner or Georgian,” says the Ambassador.
The FDI was boosted in 2007 and 2008, but dropped following the war, when the Russians made incursions deep into Georgian territory. The big neighbour has since retained a troop presence in Southern Ossetia and Abkhazia. In 2009, Georgian GDP declined by seven per cent, but the Ambassador says this will rise again by four to five per cent in 2010.
The most significant Romanian investment in Georgia comes from the country’s richest man, Dinu Patriciu, the ex-owned of oil and gas group Rompetrol. In September 2009, together with the ex-Prime Minister of Georgia, Lado Gurgenidze, Patriciu bought the seventh largest bank in Georgia, the People’s Bank of Georgia, for about ten million Euro, and has since changed its name to Liberty Bank.
Now Georgia is keen to promote its tourist industry on the Black Sea. The resort of Batumi boasts a five-star Sheraton, a Hilton and a Radisson are under construction and a Kempinski is a rumoured to be opening in the resort – a roster of high-class names that the Romanian seaside cannot rival. Recently Romanian owner of the Athenee Palace Hilton Hotel and Ana Hotels Group George Copos visited Georgia to check out the tourist potential. The country is also planning an ambitious investment project to bring sand to the south of the Georgian coast.
From Georgia’s 4.1 million people, 55 per cent of the population are employed in agriculture and the country has a cheap labour force with an average salary of 150 USD per month. In farming, Romanian agriculturalists could expand into an area overlapping with the same parallel as Romania – including corn, wheat, sugar beet and grapes – while the south of the country grows tea and oranges.
There is potential in wine and mineral water. Russia unleashed a trade ban on Georgian wine and mineral water and, since this embargo, Georgia has been targeting western and American tipplers. “The Russian market prefers semi-sweet wine and Europe is more oriented towards dry wine - which means changing grape varieties for the long-term,” says Metreveli.