Real Ways to Attract Investors

Real Ways to Attract Investors - Recounting 25 Years of Pragmatic Experience

The inflow of foreign capital is never an easy process but, no one can dispute the vital importance of foreign investment for the economies of developing countries. Any potential investor is always interested in finding new markets, but this is not without risks. Georgia remains an attractive country due to its geographical location and investment environment. In fact, Georgia’s investment rating continues to look impressive but the investment activity in Georgia is not favorable. The reasons for Georgia’s unfavorable investment activity may be many, including objective ones, but all of them pose serious obstacles to the sustainable and irreversible development of the country’s economy. Georgia is not the only country that is going through this difficult path, but, this situation cannot linger further. This is why it is important to share more international experience and, most importantly, to find a mechanism within Georgia that will facilitate the inflow of foreign capital. The conditions for attracting foreign investors need to be derived from the international situation, and then, the conditions can serve as the main measure of assessing the business environment by any investor.

The Israel-Georgia Chamber of Business has been working for 25 years now to deepen economic relations between Israel and Georgia. The Israel-Georgia Chamber of Business has been providing professional recommendations to both countries for years in respect to their economies, and especially in the area of investment. Through the Chamber of Business, more than $ 500 million has already been invested in Georgia from Israel, and the total contribution from Israel to Georgia inclusive of tourism is estimated to be $ 1 billion. While most of the projects are still underway, completing them will further attract investments of up to $1 billion.

The President of the Israel-Georgia Chamber of Business, Itsik Moshe, says that the state willing investments must have satisfied investors. He points out that this requirement is the prerequisite for new capital investments. Attracting investors happens in two ways: the government informs potential investors about the country through special forums and offers an optimal business environment; the government is actively involved in solving the problems facing foreign investors, which then serves as an incentive for the investors to continue operations. By solving the problems, the country’s credibility also increases.

Business, of course, is regulated by local law, although due to the priority needs of the state, it is important to prevent foreign investors from facing local problems that are considered to be the norm. The choice made by any investor is primarily determined by better taxation, freedom of business or other simplified bureaucratic conditions. It is necessary for the state to have a good understanding of the importance of foreign direct investment because it usually brings a fresh model of leading technologies and management to the fore. In this regard, investments from Israel, which are accompanied by a modern, leading business culture and style, are of special importance to Georgia. On Israel’s side, it is important to note that Israel as a leading economy country creates greenhouse conditions for foreign investment, which leads to a significant boom in economic growth. It is a recognized principle of open economy that creates the desired investment environment and competitive economy sectors.

Introducing the Georgian investment environment to the Israeli business sector has been one of the main topics of the 20 business forums that has been organized by the Israel-Georgia Chamber of Business till date. This issue and the potentials of tourism were addressed by a business forum organized by the Business Chamber on September 30 with the participation of 120 guests from Israel. Among them were parliamentarians, businessmen, and potential investors. This year, the business forum was held in a different format for the first time. The participants, who were divided into two groups, mainly got acquainted with the new investment opportunities of Georgia. Being able to successfully organize such a large-scale business event during a pandemic was both unprecedented and timely.

Itsik Moshe notes that this was the purpose that motivated them to create a Chamber of Business and not a Chamber of Commerce. “The word ‘commerce’ had a bad connotation at that time. It was associated with buying and selling and it could only fit a narrow profile. Creating a chamber of commerce would have meant that we would focus on the sale of products, despite the fact that Georgia was then connected to the largest “Elbit Systems” and similar companies through the business Chamber, without any financial benefits. Our initiative was also to start negotiating a bilateral free trade agreement between Georgia and Israel,” Moshe explains while adding that – “In the 90s of the last century, as the first representative of the World Jewish Agency in the Soviet Union, my official task was to establish and strengthen multilateral relations with the countries. Working in a business chamber or non-governmental format has become a natural continuation of this activity. The organization was named the Israel-Georgia Chamber of Business, which cemented the establishment of bilateral ties between Israel and Georgia. This appeared to be successful but Expanding the format proved to be even more effective, even though it was more difficult to take the first steps in direct Georgia-Israel and world Jewry relations.”

The Israel-Georgia Chamber of Business has earned the trust of both countries. It is recognized by governments and the business elite. Representatives of the governments of both countries, including the Prime Ministers of Georgia, participated in the business forums held by the organization. Former Israeli Minister of Economy, Amir Peretz, called the Israel-Georgia Chamber of Business a bridge between the two countries – “The Israel-Georgia Chamber of Business has created one of the most important and influential economic channels which works for the benefit of both countries. I was in Georgia and I personally saw a lot of work in the economy and in other important issues for the benefit of both countries. This activity is impressive and important, and there are no analogues, “ Peretz remarked in one of the congratulatory letters sent.

Itsik Moshe has always highlighted that the purpose of the Chamber of Business is to attract investment on the one hand, and to overcome barriers to Israeli investors on the other. The latter is possible only through active communication and cooperation with the Government of Georgia.

The Israel-Georgia Chamber of Business also offers the government an innovative way to attract investment, including through the institution of honorary consuls. Itsik Moshe says it is inconceivable that the country should have more than 100 ambassadors and honorary consuls and not have an investment boom. At the initiative of the Chamber of Business, if the ambassador or honorary consul cannot ensure the entry of one investor once in 3 months, he should be deprived of this status. It is with the status of an honorary consul that millions of dollars can be invested. With effective management, it is possible to bring in $ 1 billion a year, and this does not require any money from Georgia.

Itsik Moshe emphasizes the importance of the Chamber of Business’s cooperation with the International Chamber of Commerce (ICC), an organization that he regards as the largest international platform. “We are going to raise the issue of creating a special agency within the ICC, together with other business organizations, to protect investments. This is in Georgia’s interest,” says Itsik Moshe who also is The Chair of the Trade and Investment Committee in ICC Georgia.

Another issue that Itsik Moshe focuses on is the role of foreign diplomats. The head of the Chamber of Business says that relations between the countries are not only the prerogative of the Ministries of Foreign Affairs and the Embassies. These are the connections of countries, nations and societies.

There is an ineffective practice of involving foreign ambassadors in the process of attracting investments in Georgia, which is actually an illusion, because the foreign ambassador in Georgia naturally represents the other side and he has no right or obligation to take care of your investment in the country. On the contrary, they are prohibited from facilitating the outflow of investment from their country. Therefore, the activities of a binary business chamber follow a format that can give the right direction for relationships between two countries.

With his 32 years of experience working outside of Israel, Itsik Moshe says that without a deep knowledge of the country, a foreigner would find it difficult to perceive and understand the whole picture. Georgia is often measured through foreign parameters, which does no good but lead to a stalemate in business. It is therefore important to work closely with the government to address all issues or problems. The key word in this case still belongs to the government, and the government has the key to investment flow in its hands. Solving existing problems would open the door to new investments.

The problem may exist in developed countries as well, but any country is judged based on their degree of problem solving. Overcoming each artificial barrier is an incentive for any investor to attract new investment.

Itsik Moshe, the President of the Israel-Georgia Chamber of Business, believes that Georgia can attract as much investment as it wants. “It depends on the scale of the activity, the recognition of reality and the protection of incoming investments,” Moshe explains further. “The Chamber of Business is ready to support such approaches, but not just by words of mouth, but by taking action, holding monthly meetings with the Heads of government and the binational business organizations that are willing to work together to attract investment.”