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AmCham Chairman Emeritus Says Georgia’s Economic Outlook is PromisingDavid

Published: June 24, 2013 | 9:23 am
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David Lee: “when we look at third and fourth quarters we see a rise again.”
The COMMERCIAL TIMES
Georgia’s economic outlook, investor confidence, investment funds, agriculture development- David Lee, AmCham Chairman Emeritus, President of MagtiCom, Vice-President of EU-Georgia Business Council (EUGBC), speaks about these and a number of important issues during an interview with The COMMERCIAL TIMES.
- International financial institution and rating agencies have downgraded Georgia’s economic growth forecast. Would you say this will have a direct impact on the local investment climate?
- No, when you have a downgrade it does not affect investments immediately; people are looking when they’re making investments usually to two to five year term minimum. Of course, there has been some downgrade but when we look at third and fourth quarters we see a rise again. So, hopefully it is temporary blip. I think, if you look at the long term economic outlook for Georgia it’s excellent. We s should not forget that at that moment we’ re planning to sign a deep and comprehensive trade agreement with the European Union, we’re also planning to sign an association agreement and that is set for the end of the year. If that happens it will be dramatic, it will show the whole world that Georgia’s direction is clearly towards Europe and we’ll take away a lot of this negative press we’ve been receiving lately about whether or not Georgia is making a step back with these democratic and economic reforms. So, this is a small inconvenience and it is not a big problem.
Certainly, when we look at the economy in general, it’s not growing as fast as we want, but remember that the whole of Europe is actually going the other way-negative. So, I think, at the moment I’m quite comfortable with the situation.
- What changes do you see in regards to business sector since the government change in the country? They say there’s a communication problem.
- I understand the question and I can clearly say that no, there is not a problem between business community and the new government, quite the opposite. Just today was the election of a couple of new positions on the board of the American Chamber of Commerce and in the report that the president was telling that the relationship between AmCham and the government has never been better. For example, AmCham and other business associations were regularly consulted on the new labor code and the changes on the competition law. What businesses want is stability and they want to know that their voices are being heard and the new government is demonstrating that that’s exactly what is happening.
- Georgian government has created billion value fund for agriculture funding. Do you believe such funds really work? How reasonably do the project participant banks issue loans?
- This is quite a complicated story. First of all, the government is giving three times of help to farmers today: there’re giving help for small-scale purchases, large-scale purchases and-projects. If, for example, you want to borrow up to one million Lari, they will give you a loan that is heavily subsidized, about 3%. My understanding now is that the funds are flowing and anyone who has a business, an established business and a good project will get funding. So, I think this is very positive. In terms of an agricultural fund, I think it’s early to say what the funds will be used for. In fact, in general, the concept of these funds is still a bit unclear within the business community. It’s unfortunate that there have been some changes in the Ministry of Agriculture, but in general I’m very positive that the government is embracing the agriculture sector, they understand the potential of the agriculture sector and they are doing something positive about this. So, this is a good story.
- What’s your view regarding Georgia’s agriculture potential? Is it really promising?
- We have to remember the half of the active population in the county are registered as having involved with farming. Over 150 000 farms exist and the vast majority of them are of a very small scale, less than half of the land in this country is actively used for agriculture. It’s clear that if we look back to the times before 1990, this is one sector where we had a continual decline through many elections, different governments; this sector has been ignored for more than twenty years. One of the natural resources of Georgia is its climate and its soil and its general position in the world and agriculture is a huge bonus for the country and it’s simply not exploiting it yet. So, I’m very pleased that the new government has finally accepted that agriculture is a sector that offers enormous potential and I think that this initiative will take time. We’re not suddenly going to see Georgia becoming a major exporter; it could take from two to five years. But we started and that’s the main thing. This process has started.
- You’re personally involved in agriculture business. How successful has your farm in west Georgia appeared to be? When did you start this business and what’s been your major motivation by then?
- Well, five years ago I realized that agriculture in Georgia was underfunded and had a huge potential and in a very small way I started to experiment with some land in western Georgia, initially buying just a few hectares and it’s now up to 250 hectares. In the period time when I’ve been working I’ve proven on that particular area that wheat and grain in general can be commercial. There are a lots of problems with the process of agriculture because there’s a lack of expertise and training and equipment in general. But now I’m already confident that I have a business that can be expanded and will be successful.
One of the issues in Georgia is that registration of land is somewhat complicated, there’s still a debate about whether or not we shall allow foreigners like myself to invest in Georgian agriculture. But I’ve managed to resolve all these problems. So, I think that the decision to get involved in agriculture was a good one and it also reflects MagtiCom point of view. Here in MagtiCom we believe in Georgia, we believe that Georgia has future and we like to get in with it and we actually like to invest and get on with the business and perhaps not worry too much about what is going to go but to just build up the expertise and build the business and help Georgia to achieve this potential.

Sandro Vepkhvadze

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