By developing Georgia’s infrastructure and positioning it as a link country, David Tkeshelashvili has put the country on the global investment map.
Successful global businesses are sustained by the movement of capitaltorewardingdestinations. The Ministry of Regional Development and Infrastructure, under Mr. David Tkeshelashvili, has managed to propel Georgia as one such destination.
In a country that has increased the world’s expectations at a dramatic pace, this ministry is an extremely important portfolio to manage, and Mr. Tkeshelashvili, with nearly fifteen years in the business, is inarguably the best man for the job.
Mr. Tkeshelashvili’s commitment to the nation began when he joined the ‘Young Reformers’, a group of individuals dedicated to steering Georgia onto the path of development and transforming the country into a modern and liberal democracy.
This idea began to gain strength and support from the people of Georgia, and in 2003, the bloodless Rose Revolution toppled the Eduard Shevardnadze government and elected Mikheil Saakashvili as the head of state. Since then, Mr. Tkeshelashvili has held various prestigious posts in the government, having served as Minister of Environment Protection and Natural Resources and Minister of Labour, Healthcare and Social Protection. He has also been a member of parliament for three terms.
These experiences, along with his days as a Young Reformer, have given Mr. Tkeshelashvili well-informed insights into and awareness of the challenges of his current office.
Adding and attesting to his centrality in Georgia’s socio-political scheme, Mr. Tkeshelashvili was appointed Vice-Premier of the country on 16 February 2009.
Mr. Tkeshelashvili joined office in the newly-formed Ministry of Regional Development and Infrastructure in 2009, in the wake of the global financial meltdown. This, and the Russian conflict that preceded it, had considerably decreased foreign investment in the country. The challenge was to effect a turnabout in this trend and stimulate investor confidence in Georgian markets.
Strategy for regional Development
To begin with, Mr. Tkeshelashvili and his team planned out a Regional Development Strategy, with clearly defined priorities. The strategic objective of the ministry was to create a healthy and profitable environment for competitive and sustainable business activities, conducive to investment generation. This would actuate efficient management and financing, employment generation, infrastructural development, pervasive innovation and interregional cooperation.
As a primary step for activating development, the ministry directed budgetary resources to focus on regional investments, combat the dropping employment rate and boost the overall infrastructure and economy of the country. As a part of this agenda, it undertook the optimisation, coordination and management of infrastructural expenditure.
Regional development and improved living standards are at the heart of Georgian policies.
Today, Mr. Tkeshelashvili regards the progress made at the regional level and the improvement in the living conditions of the people as his most significant achievements. The ministry has invested nearly USD3m in road construction and rehabilitation, village development programmes, provision of potable water, etc. A further USD238m has been invested in municipal development, including projects for the rehabilitation of schools.
As a result of the ministry’s vision and its constant search for new areas of Georgian life requiring attention, the country has seen a surge in industrial efficiency and productivity.
‘Link Country’ Advantage: Transport InfraStruCture
One of the basic requirements for the creation and sustenance of a successful investment climate is the hassle-free movement of capital into and within ‘safe’ countries. Mr. Tkeshelashvili credits the all-encompassing reforms by the Saakashvili government with making Georgia an investment haven. With minimal governmental regulation in business activities, one of the most liberal tax systems in the world, preferential treaties signed with many countries, free transfer of goods and service delivery, protection of property rights and treaties with countries to avoid double taxation, Georgia has created an enviable financial superstructure that has made the work of all component ministries much simpler.
In its march ahead, the country’s geopolitical position has also come as a strategic benefit. Located at the crossroads between two continents, Georgia is a key link in the shortest transit route between Western Europe and Central Asia. The state has very astutely realised the business possibilities that could open up as a result of its location and has gone full steam in exploring them. To promote Georgia as a gateway between the East and the West, the Ministry of Regional Development and Infrastructure has injected a vast amount of funding in an extensive development drive. In particular, the progress made in the transport sector has been remarkable.
Roads and highways are the arteries that connect a country and are vital for its economy. In 2009, the ministry spent approximately USD234m to improve Georgia’s transportation backbone: the standard international motorway area was increased, and 12 new routes were introduced. The ministry also initiated car transport checks in Batumi and Poti, in addition to the checkpoint at Tbilisi, to ease entry into the country. In addition, it authorised several projects to rehabilitate the road network, both national and international. Noteworthy among these projects is the construction and improvement of the East-West Highway, which connects the Black Sea Coast and Turkey to Azerbaijan and farther on to Central Asia. Already, approximately 100 km of the highway has been constructed, and loan agreements have been signed for its extension by another 170 km.
Waterways account for 41% of the total cargo imported in Georgia, from the ports of Poti and Batumi on the Black Sea. These ports have rail ferry links with Ukraine, Romania, Russia and Bulgaria, and are also key links on the Transport Corridor Europe-Caucasus-Asia (TRACECA) trade route. Poti is estimated to carry 15.5m tonnes of cargo by 2010 and 19m tonnes by 2015. Georgia is also developing a free economic zone on the territory of Poti and surrounding areas to allow investors to leverage its strategic location.
The Ministry of Regional Development and Infrastructure also has achievements in the air travel sector to its credit: negotiations on a common aviation area between the European Union and Georgia are underway. This will lift market barriers from Georgia, which will now be connected to the inner aviation market of the European Union. In 2009, Georgia became the 42nd country to be recognised by the European Aviation Safety Agency (EASA). Special attention will now be paid to aviation security. Georgia has also signed an agreement over lifting restrictions on flight frequency on the Tbilisi-Baku-Tbilisi air route. Similarly, airline companies are now allowed to fly passengers and transport cargo to Great Britain without a limit on the flight frequency.
Relations with GCC
In consonance with the general mood of cooperation between Georgia and the GCC, the latter has acted as an important ally in Georgia’s infrastructure projects as well. Many important projects have been funded by Arab investors, including the construction of the Poti FIZ, the trade centre near Tbilisi, the new terminal at Poti port, and hotels across the country. Currently, Arab investors have invested approximately USD2bn in Georgia.
Arabian investors are mainly interested in tourism, technology, immovable property, hospitality, banking, port infrastructure, etc., and it helps that Georgia has a lot to bring to the table in each of these sectors.
Georgia has both micro- and macro- economic qualities to attract investors.
Not only are foreign investments critical to the growth of an economy, but they also serve as a measure of whether the world considers it a safe place to park market-moving resources. Going by this tenet, Georgia has done wonderfully well: in 2007, FDI inflow alone accounted for half the Georgian budget.
After the global crisis and the Russian conflict, FDI inflow into the country reduced considerably. However, the Georgian government has managed to turn the tide and project Georgia as a country with the resources, facilities and support needed to establish a business. As part of its plan to encourage foreign investment in Georgia, the government provides potential investors a realistic picture of its systems and capabilities. This information is available in the form of easily accessible guidebooks that contain information on the resources, infrastructure, business environment and investment opportunities in the country and has gone a long away in impressing upon investors the professionalism of all government departments.
Mr. Tkeshelashvili feels that the measures taken by the government have made both the “macro- and micro- economic environments attractive for doing business”. His recommendations to potential investors scouting for opportunities in Georgia include power engineering (energy), industry, tourism, sport, leisure, agro complexes, transport and communication, trade, construction of industrial and social infrastructure, etc.
In the minister’s opinion, investments lead to closer interaction between communities and nations, enabling a deeper understanding of different cultures. “Business will serve as a powerful tool, which will pave the way for the development of firmer political and cultural cooperation between countries”, he observes, capturing a slice of the optimism sweeping modern Georgia.