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With Caucasian hospitality: how Georgia meets investors and why it is profitable for them to invest in Adjara
Ekaterina Bakhtadze, the head of the Economic Development Department of the Ministry of Finance and Economy of Adjara AR (Georgia) gave an exclusive interview to International Investment magazine about the investment climate, niches and prospects of Adjara. Why does Adjara attract investors so much? In which sectors is it better to invest? How will the region develop in the coming years? Find out answers to these questions and many other things in our interview.
Marina Mitaishvili a representative of the international analytical magazine International Investment in Batumi interviewed Ekaterina Bakhtadze.
Adjara: Autonomous Republic of Georgia. It is located in the south-west of the country. It occupies a territory of 2,899 km2. The population is 337,000 as for 2016. The main Georgian seaside resorts are located on the territory of the autonomy: Batumi, Kobuleti, Gonio, Kvariati, Sarpi, etc. Also, there are the mountain resort of Goderdzi, as well as mountain health resorts in the territory of Adjara. The capital of Adjara is the city called Batumi, Georgia's second most important city. Batumi is on a par with Tbilisi one of the centers of tourism in Georgia, demonstrating the intensive pace of economic development.
Georgia has been occupied high positions in world ratings, attracting investors and tourists from the European Union, the countries of the former USSR, Turkey, Israel, the United Arab Emirates and other countries for more than a decade. In the World Bank's rating of ease of doing business, Georgia took the 16th place in 2017, and in the year of 2018, it was the 9th. As previously reported by International Investment in 2017, the influx of growth in the number of foreign tourists in Georgia was 18.8%, which is one of the highest results in Europe. In the TOP-4 steadily gaining popularity among Russian tourists, Georgia ranked first. The level of foreign investment in Georgia has also grown, and the growth in transactions in the real estate market has determined the results of most European countries in terms of its indicators.
Ekaterina Bakhtadze graduated from the Batumi State University Shota Rustaveli, as a professor she taught at the faculty of social sciences, business and law, conducted classes at the Higher School of Business at the University. Since 2006, Ekaterina started working at the Ministry of Finance and Economy of the Adjara Autonomous Republic of Georgia, first as a chief specialist in the economic development department, then as an assistant to the minister, and then headed the Economic Policy Department of the Ministry of Finance and Economy of Adjara AR (Georgia).
-Most countries in the world are trying to attract investors. The number of tourists visiting Georgia is increasing every day, and some even stay to live in the country. What specific advantages does Georgia have in attracting investment?
-The investors are very interested in Georgia due to such factors as a suitable climate for investment and business, low taxes, liberal economic legislation, an association agreement with the European Union, which in turn makes it possible for Georgian goods to enter the European market, cheap labor and strategic location of the country. The above confirms the fact that in 2018, according to the World Bank's rating on "ease of doing business," Georgia is the 9th in the world from 190 countries. Georgia was once again named among the leaders on the reforms. The rating "Business conditions" is based on such indicators as business registration (Georgia is on the 4th place), building permit (Georgia is on the 29th place), protection of the investor's rights (Georgia is on the 2nd place), property registration (Georgia is on the 4th place), enforcement of contracts (Georgia is on the 7th place), etc. On taxation, Georgia ranks 22nd, outstripping most of the countries of the European Union, not to mention the countries of the former USSR. The number of taxes in Georgia is strictly limited by the norms of the Constitution, they can not be raised without a national referendum.
-At the moment, construction, gambling, and restaurant businesses are intensively developing in Adjara. At the same time, some branches of the service sector are still very poorly developed. This is an opportunity to start a new business. What industry can you identify as the most necessary for investment?
-Tourism in Adjara is one of the priority directions. Compared to other industries, I would recommend investing in tourism first. From all investments, 42% is tourism, which is about $ 138 million. We are actively working to develop other related sectors, such as the light industry (furniture manufacturing, food processing, and so on, along with tourism), as well as agriculture and the entertainment industry. Diversification of tourism products should also occur, which will lead to the extension of the holiday season and the positioning of Adjara as a place where all four resort seasons are developed. To achieve this, we implement many large-scale infrastructure projects, which will determine an even deeper development of tourism and will enable us to raise the quality of services.
The volume of investments in Adjara is led by the energy sector, the projects of large hydropower plants that are built by Norwegian and Indian companies. They are very important for the economy of our region, as well as because of budget revenues, and because of the employment of the population. These projects are almost completed.
Quite a large part of tourists is located in the private sector, therefore, close to high-class hotel brands, it is desirable to build three-star, four-star hotels, which for a small price will provide tourists with quality service. In the non-resort season, tourists are attracted by the gambling industry, which creates a fill of branded hotels.
The government is always ready to provide appropriate support to the investor concerned, the Department of Investments operates in the ministry, whose functions include supplying the necessary information to the investor. Various information materials are prepared for them, the investor can use the website www.investinbatumi.ge., and can offer investment proposals and obtain information about the privatization of objects.
There is always cooperation and dialogue between the state and the investor. Any information can be obtained without delay. People can tell about their investment projects and concepts on the website, and with live communication - to come to the ministry personally. In addition, investment forums are held for communication between representatives of business, a cooperation of Georgian and international companies. Programs that are conducted throughout the country are very important. For example, the program "Producing in Georgia", which allows the implementation of large investment projects involving government funding.
-Does it mean that foreign investors can get state co-financing as well?
-For sure. They have to register the company in Georgia, start a business here and participate in the project, this applies to all areas of activity. There are projects for the development of infrastructure, gasification, the development of high-altitude tourism (from this point of view, it means the mountain resort of Goderdzi), the development of new resort areas (for example, Mount Gomi).
Note. Ed: Goderdzi is a ski resort in Adjara, located 100 km from the seaside city of Batumi.
-Georgia has a low crime rate. However, despite this, unscrupulous and criminal situations, as in any other country (to take at least the same US and the Netherlands), are possible here. What specific support, protection, an investor can get, who decided to invest his money in Adjara. Where can he get support besides the police and the court?
-The rights of the investor in Georgia are protected, as our place in the international rating indicates. And, of course, in a specific case, the Ministry of Finance and Economy is ready to mediate in the relevant authorities.
-Among the countries of the Black Sea coast, Adjara offers one of the best options for investment in real estate if you compare prices and quality. How is the situation in the sphere of development of construction of residential real estate in Batumi changing?
-Foreigners are interested in buying real estate in Adjara, as indicated by the so-called "construction boom" of recent years. In addition to interest in hotels, investors have an increased interest in housing construction. Much attention is paid to the correct urban development of the city. For example, on the territory adjacent to the Alley of Heroes, the concept of single development. This concept has already shown results, in the process of implementing 12 investment projects, with a total cost of 600 million lari. At this stage, 1,500 people are employed. The territory of the new boulevard Batumi is also developing, where an investment project with a volume of 520 million lari is realized, 2,600 jobs are created, the number of hotel rooms reaches 1,700.
-Ministry of Finance and Economy of Adjara realizes a lot of investment projects. The so-called free zones are of interest. Tell us about them, what is their advantage? If possible, tell us in detail about the project by the free tourist zone of Kobuleti, under what condition can the investor obtain land for use? What should I commit to? What advantages will it have? How is the implementation of this project? Are there any precedents for transferring land to investors?
-According to the law on free tourist zones, the zone in the north of the sea resort of Kobuleti possesses the status of such zone, where until 2026 the investor will be exempted from paying taxes on profits and real estate if he invests at least 1 million lari. He will be given a land plot of 0.2 hectares at a symbolic price of 1 GEL in 140 meters from the seashore. The investor will receive a free project and building permit for free, as well as a master plan for the hotel for 42, 52 and 60 rooms to choose from. The state will provide him access roads and connection of electricity, gas and water supply, will ensure the repair of access roads.
Note. Ed: Kobuleti is a resort town in Adjara (Georgia). Located on the Black Sea coast, 21 km north of Batumi.
According to the estimates of International Investment experts on the Black Sea coast of Adjara, the projects related to the construction of large hotel complexes with a full package of all-inclusive services have prospects for high profitability and relevance. Against the backdrop of the high growth in tourism attendance in Georgia and the relatively low cost of recreation in this country, there is a deficit of such a proposal. At the same time, the experts' evaluation of demand demonstrates the demand for such a service in the holiday season at the level of 90% -98% of the likely occupancy rate.
-What can you say about the Gonio resort project? What is planned in this case? What kind of territory will this area take after the project is implemented?
-At this stage, the government of Georgia has identified 314 hectares of the Black Sea coast in the southern part of Batumi (Gonio district). This territory has a unique potential to develop into an upscale seaside resort, with the appropriate tourist infrastructure. Investor interest in Gonio is quite high. The concept of the development of this territory and its technical and economic research was conducted and prepared by Colliers International. It is in accordance with this document that the investment potential of Gonio will be developed.
Note. Ed .: Gonio - a resort zone, which is part of the seaside city of Batumi, is located 15 minutes drive from the city center. It is distinguished by the cleanliness of the sea and beautiful ecology.
-How has the volume of investments in Adjara changed in recent years? In which industries? The dynamics of investments in recent years would be interesting for investors who are ready to invest in the region.
-I want to note that investments in Adjara continue to grow. Growth continues in the tourism and construction sectors. Compared to 2015, in 2016, investments increased by 17% and amounted to 428 million US dollars. The update of data for 2017 continues, although we can already say that there is a significant increase in investment in tourism and construction. The indicators were $ 138 million and $ 90.3 million, respectively.
-Will a new bridge be built across the Chorokhi River? They say that in this case the communication between Batumi on the one hand, and Gonio, Kvariati, Sarpi on the other hand, will improve. This will increase interest in these territories. Is this project frozen or will it be implemented? What will its implementation bring to the city and Adjara?
-The government is working on the development of the Gonio territory together with foreign experts, an appropriate development plan is being developed, and on the basis of this strategic plan a decision will be made to build the bridge.
-We heard that it is planned to build a garbage processing plant in the territory of Batumi, near the airport, which will solve the problem of landfill. Is this true? If so, at what stage is the project? When is it expected to be implemented?
- The Ministry of Finance and Economy of Adjara is developing a significant project "Recycling of solid waste in Adjara", its total investment volume is € 7 million. Of these, € 3 million is a low-interest loan from the European Bank for Reconstruction and Development, and € 4 million is a grant from the Swedish Agency development. Within the framework of this project, it is planned to build a European-type garbage dump in the village of Tsetskhlauri in Kobuleti municipality, as well as to preserve the old landfill. This is a very significant socio-economic project, which, on the one hand, will help preserve the ecosystem, on the other hand, it will improve the living conditions of the population. The draft provides for the provision of work for the population and the improvement of their economic situation.
-What are other interesting projects envisaged in Adjara? What to expect for tourists and investors?
-I would like to highlight the construction of the mountain ski resort of Goderdzi. The Goderdzi resort is the first resort in Georgia, where both a general development plan and a regular building plan have been developed. To date, 10 investment projects are being implemented in the highland Ajara, with a total investment of 100 million lari. The resort is designed for 7000 tourists.
I would like to single out the following from the state investment projects: the development of mountain resorts (the territory of the Green Lake and Goma Mountain), the construction of an international football stadium in Batumi, the construction of a sports complex, and the construction of a multidisciplinary clinical hospital.
-What do you like to wish our readers?
-I wish your readers success in business, development, and a lot of interesting and profitable investment projects.