Natia Turnava: We Are Going to Make Georgia a Regional Hub with Huge Potentials for Business Success

Ms. Natia Turnava, the Minister of Economy and Sustainable Development of Georgia clearly highlighted the progress recorded in Georgia’s efforts to create a sustainable and attractive environment for businesses,and a significant trade route between Europe and Asia. In this interview with Diplomat Magazine, Ms. Turnava expressed immense confidence in Georgia’s current business environment while expressing bright hopes for the future.

How would you rate this year’s Tbilisi Silk Road Forum and what are the key messages you would particularly highlight?

This year, we successfully hosted the Tbilisi Silk Road Forum for the third time and we are pleased to see that interest in the forum is picking up every year. This year’s forum was attended by well over 2000 participants from more than 60 countries, which is a record high, and so I think we can safely say that the Tbilisi Silk Road Forum has already become a true brand.

The forum allowed participants to discuss topics such as the development of the middle corridor and its future, and how to make it more competitive for both freight and passengers. Participants also discussed the deepening and expanding of investment relations between countries. The focus among participants also centered on new technologies and the role of artificial intelligence in the development of the economy and other sectors.

I would like to point out that unlike previous forums, this year presented us with a different picture. If the government had been making efforts to convince players in the business sector to make profitable investments in Georgia, this year, we recorded the real impact of these efforts at this year’s forum. Businesses focused on Georgia’s investment attractiveness and the success of businesses in Georgia. So, I think this is one of the major achievements of the concept of the Silk Road Forum.

What is the significance of Georgia’s involvement in the New Silk Road initiative? In general, how would you evaluate the One Belt One Road initiative? What would you say about how it works, and the visibility of any tangible results for Georgia?

When we speak of concrete results, the first thing to note is the deepening of relations between Georgia and China in many ways such as the signing of a free trade agreement, the development of freight traffic, and so on. We are also working on an action plan to coordinate the work of the two countries in a much organized way, within a single road initiative so, we can identify key directions and priorities.

There is a growing interest from China towards the middle corridor (which passes through Georgia), through which rail transport from China has been running since 2015. The number of containers shipped in this corridor has increased significantly e.g. in 2018 it yielded a five times increase compared to its 2015 volumes (from 228 TEU to 1338 TEU). The One Belt One Road initiative allows us gain better insights and understand the importance of Georgia as a transit country, and to attract additional freight in our corridor, as well as enhance the country’s logistics potential. We are actively working to develop regular rail traffic from China, not only to Turkey but also to European countries. I would also like to point out that the first container train recently passed through the Baku-Tbilisi-Kars railway in test mode from China to the Czech Republic. We hope that in the future it will have an established face. At the same time, we are developing traffic on the Black Sea route to provide access to the European market and to further enhance the attractiveness of the routes to Georgia. Feeder traffic between Georgia and Ukraine commenced in October 2019. An agreement has also been signed between Romania and the Georgian ports (Batumi-Constanta) to launch regular traffic. This will significantly contribute to the development of the multimodal rail transport.

Also, an intergovernmental agreement on road transport with China was signed in April 2019, to create additional opportunities for the development of freight traffic between the two countries.

As for the overall initiative, it is an ambitious project involving more than 60 countries. At this stage, it is difficult to talk about its effectiveness on a regional scale, but in the case of Georgia we can see some positive changes. Our goal is to make the most of the opportunities that this initiative provides for the development of trade-transport links both with China and with other Asian countries, while considering the risks and challenges.

You often say that the attraction of foreign investment is your priority, but we have witnessed a decline in foreign investment in 2018-2019. How do you plan to work on this issue?

When it comes to foreign direct investment, it should be well understood that investors are not only making decisions based on the country’s attractiveness, but also from observing the processes taking place in the region and in the world at large. It is noteworthy that since 2016, there has been a decrease in FDI flows globally, largely due to geopolitical processes and increased risks of trade tensions. As a result, there has been a decline in investment flows globally. In addition to this, the main gas line project (a gigantic project) was completed in 2018, and this contributed significantly to the inflow of foreign direct investment. Despite the decline, FDI in Georgia is at a sustainable level with respect to GDP. According to the data for 2018, FDI accounts for 7.2% of GDP, and that is significantly higher when compared with other countries in the region, and is on the level of Eastern and Central European countries.

According to the rating company “S&P”, total foreign direct investment, and net foreign direct investment in the Georgia exceeds the average of BB category countries.

Today, Georgia is one of the leading countries in the region and around the world, in terms of ease of doing business and investment attractiveness. An attractive investment and business environment creates favorable conditions for foreign investors to operate in Georgia. The Government of Georgia also offers full support to investors at various stages of their investment, including after-investment services. Macroeconomic stability, institutional strengths, and economic reforms are at the heart of Georgia’s investment attractiveness.

We are actively working to further improve the investment environment and to attract potential investors. We have commenced work to streamline business processes, with the Ministry of Economy and Sustainable Development offering investors a one-stop shop with easier access for companies in need of public services.

Six roadshows and international events were organized in 2019 to promote Georgia’s investment potential in identified target markets. We also arranged meetings with 110 companies in five priority areas, which includes hospitality business, footwear and apparel manufacturing, furniture manufacturing, auto and air vehicle parts manufacturing, business process outsourcing, and shipbuilding. Four roadshows and international events are billed to happen by the end of 2019. For 2020, we already have 18 investment roadshows and International events in the works. During these events, we will organize meetings with up to 300 target companies from priority sectors.

All of the plans highlighted above shows our readiness in attracting more potential investors to the Georgian market.

What are the main challenges/obstacles currently being faced by foreign investors and how are you going to solve them?

We currently face the challenges of attracting investment through preferential/free trade agreements but we have a unique competitive edge because Georgian companies can access 2.3 billion markets. Our vision is to form a regional hub in all areas, both in terms of transportation, as well as in high technology and entrepreneurial opportunities. We want to help international companies achieve success within a short time and we want to offer more profit potentials to these markets from Georgia.

In addition, to raising further awareness, we are going to conduct important events in Georgia and in the target markets, as I explained earlier.

We just received a recent report that Georgia is one of the top 10 open countries in the OECD ranking of the FDI Regulatory

Restrictiveness Index in terms of investment attractiveness and performance.

The case of Kazakhstan is one of particular interest. The country showed a growing trend in terms of investment years ago, and in recent years, Kazakh investors have been leaving Georgia and there is almost no sign of new investments from Kazakhstan. How would you describe this situation?

Kazakhstan is an important and reliable economic partner for Georgia. Closer cooperation between both countries in the economic field can be seen as a clear example of what a partnership between sovereign countries should look like.

Bilateral relations between Georgia and Kazakhstan are currently being developed on various fronts and formats of dialogue and cooperation. One of the successful functioning format is the bilateral intergovernmental commission on trade-economic format which, is a good tool for the development of transport, energy, cultural and humanitarian spheres, and many other sectors that has enabled us to gain a lot of important and mutually beneficial decisions.

How do you see think Georgia-Kazakhstan economic relations can be strengthened generally, and in which sectors do you see a better outlook?

At present, Georgia and Kazakhstan are stable trading partners, but it is important to note that bilateral trade turnover does not fully reflect the true potential of a country especially as

regards the economic potential of both countries. We believe that with our joint efforts, we can strive to realize this potential and capability in the best interest of both parties. The main export products of Georgia to Kazakhstan are:

• Mineral and non-alcoholic carbonated waters;

• Wine and spirits;

• Hazelnut;

• Canned fruits and vegetables;

• Rail freight wagons;

• Ferroalloys;

• Medicines, etc.

Kazakhstan’s main imports from Georgia are products such as:

• Wheat and wheat flour;

• Onions;

• Pasta products and cereals;

• Frozen fish;

• Rubber and plastic processing equipment;

• Coal coke and semi-coke;

• Flat rolled carbon steel; Metal constructions from ferrous metals, etc.

At present, the close trade and economic relations between Georgia and the Republic of Kazakhstan provides us with the opportunity to explore many new ways to further deepen our cooperation and to implement many successful joint projects for the benefit of both countries.

Finally, what would you say to Kazakh investors who are interested in investing in Georgia, but are still reluctant?

Our message to any country, including Kazakh investors, is very brief and clear: Georgia is the country that is open to your business. This is evidenced by many international ratings, including the World Bank’s Doing Business ranking, where Georgia ranks 7th out of 190 countries in the region. Also, investor confidence is supported by Georgia’s improved position in sovereign credit ratings.

Recently, the international rating company Standard & Poor’s (S&P) upgraded Georgia’s sovereign credit rating by one point to “BB”, predicting it to be “stable”.

An increase in Georgia’s sovereign credit rating (which first happened in 2011) by one of the leading rating agencies, is a very clear recognition of the successful economic reforms that our government has undertaken over the years. It is also a recognition of Georgia’s economic rapid and steady developments across the region.

Finally, I would like to highlight Georgia’s free trade agreements with various countries, including the EU and EFTA countries, as well as with China and others. So, I think all of these things speak for itself about Georgia’s investment policy and I would like to encourage all foreign investors once again that Georgia is a safe and attractive business environment.