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A special edition for the EBRD AGM May 14, 2015 www.bne.eu
bne IntelliNews Daily
Georgia president: challenge is to create modern liberal democracy
bne IntelliNews interviewed President Giorgi Margvelashvili, who was elected Georgia’s head of state in 2013 on the Georgian Dream ticket, in his presidential office ahead of the EBRD meeting.
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bne: How has Georgia been affected by the regional economic slowdown and what are the economic prospects for the country?
Giorgi Margvelashvili: We have been facing problems and our economic growth has been decreasing. At the same time, falling remittances have also caused prob- lems – especially because of the Ukraine crisis. The prediction that we will have 5% economic growth has been reduced to 2%. Of course we are not happy about it, as last year we had 4.7% growth, yet the potential of the country is enormous.
And we have added to this potential. We signed the Deep and Comprehensive Free Trade Area (DCFTA) with the EU, which opens up a market of 500mn high-income consumers to Georgia.
This is an enormous market if you com- bine it with the 400mn consumers we al- ready had due to other free trade agree- ments with Turkey and the other countries in the region. Add to this the very low taxa-
Sir Suma: ready, steady, reform! Liam Halligan in Tbilisi
tion rates, the low crime and local corrup- tion, and one of the highest levels of ease of doing business in the world according to the World Bank survey. Taken together, Georgia is one of the most attractive countries for investment and development.
bne: To what extent is Georgia re-orient- ing to the European markets versus main- taining its traditional regional markets?
GM: Georgia has a strategic location in the region. Looking at the map you see we are between the Caspian and Black Seas. Georgia is a gateway through which all the assets around the Caspian can pass on their way to European markets.
We have been developing very interest- ing relationships even with the regions be- yond, especially our Chinese friends, and we are very active in developing the whole concept of the “New Silk Road”. An enor- mous contribution to this project will be a railway that will be opening at the end
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Yet Sir Suma remains upbeat when out- lining why Georgia was this year chosen to host the annual meeting, with the most im- portant event in the EBRD’s calendar com- ing to the Caucasus for the first time. “It’s very important to showcase what has been achieved here in Georgia,” he says. “This success story is being closely watched elsewhere – in Ukraine, for instance, where the Kyiv government is thinking what it can do to emulate Georgia in terms of turning around an investment climate and tackling corruption.”
The EBRD’s total investment in Geor- gia now stands at €2.6bn, which includes a 2014 inflow of €214mn across various sectors, from energy to small and medi- um-sized businesses. “Georgia is one of the most innovative of the 30 or more countries
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Georgia has “enormous potential” and its success “is being closely watched” by other post-Soviet economies, according to EBRD President Sir Suma Chakrabarti.
Praising Georgia’s “clear progress” and “proven ability to attract foreign invest- ment”, Sir Suma suggests that the coun- try “could become a benchmark for other emerging markets” if the reform effort of the last decade is sustained.
“In a quarter of a century, students at Har- vard Business School could be reading about the case study that is Georgia,” Sir Suma
tells bne IntelliNews in an exclusive interview ahead of the EBRD’s 24th annual meeting.
“We’re not there yet, but that’s the next leap Georgia needs to make, where it is regarded not just as a 10-year success story, but a success story that is locked in across political parties and different administrations – and I think that could happen,” he says.
Georgia’s economy grew by 4.7% in 2014, with the impact of geopolitical tensions rel- atively contained given limited trade links with Russia. Between 2004 and 2014, GDP
annual growth averaged 4.4%, as succes- sive governments cut red tape, pared back the state, and improved the predictability and transparency of business regulation.
The country ranked 15th in the World Bank’s “Doing Business” survey for 2015, ahead of stalwart reformers such as Poland, Estonia, Latvia and Lithuania. Per-cap- ita income remains low though, at $3,699 according to International Monetary Fund figures for 2014, compared with $4,781 in Albania and $14,378 in Poland. Unemploy- ment in Georgia is still high, at 14%.
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