Kazakhstan is one of Georgia's largest economic partners, with a trade turnover of approximately $ 1.5 billion over the past 10 years, of which more than $ 800 million was the volume of export from Georgia. This is quite an effective and important indicator, especially for the countries like Georgia and Kazakhstan.
Kazakh-Georgian economic relations: How the pandemic and limited air traffic affected the Georgian-Kazakh investment market and what potential the two countries have for further strengthening economic or cultural ties, - we discussed these issues with Giorgi Jakhutashvili, the Honorary Consul of the Republic of Kazakhstan in Georgia.
- How would you assess the role of Kazakh investments in the Georgian economy, what are the potential and future plans of this cooperation?
- There is no alternative to foreign investment for the development of the Georgian economy, and the crisis of 2020 has emphasized this even more. All countries across the world have become competitors of investment markets to rebuild their economies, and in my opinion, in the short term, the effective use of existing investors and related opportunities in Georgia has become much more real than attracting new investors from new markets. Kazakh investments have started in Georgia since 2006 and its figure, according to the Department of Statistics, is around 240 million. At present, this argument alone is sufficient to assess the role of Kazakh investments in the development of Georgia, however, inflow of additional funds through various channels is to be considered as well, which in total exceeds half a billion dollars.
Today, Kazakh capital is represented in Georgia by bank, port, oil company and airlines, which over the years have brought in many private entities that invested money mainly in real estate or the other medium-sized firms, employed quite a lot of people and want to develop these businesses. All of these represent a resource that, with our support, can be further developed, becoming at the same time a channel for attracting additional investment, as there are potential and resources that are still underutilized. It is very important to be focused on such a market in order to be able to use its potential in our country.
- I wonder how attractive is Georgia for them, or are there any plans for new investments from Kazakhstan in the future?
- Georgia is a very important and interesting country for Kazakhstan, first of all, because of the logistics capacity of our country. In addition, Georgia is attractive to Kazakh investors in terms of taxation, low corruption index and comfort of doing business, which, in my opinion, is no less important factor. Under the comfort of doing business I do not mean the ease of business registration or the bureaucracy beyond electronic public services, we can talk about this later. Cultural similarity between nations and absence of language barriers are to be noted, which simplify cooperation between investors and local employees. In addition, it should be noted that investing in another country is the basis for medium-term business trips. This, in turn, may become a prerequisite for attracting new investment, as in many cases the Georgian environment is desirable and interesting for Kazakh families.
These factors are noteworthy and can even be used as a counterweight to geopolitical risks in Georgia, as there are very few countries in the world that can do business with each other and enjoy doing so at the same time. The fact that Georgia is an important partner for Kazakhstan is evidenced by the investment of $ 500 million, which is the largest volume of investments in the Post-Soviet space, between non-neighboring countries. The fact is that today Kazakh capital is significantly represented in the Georgian economy and only with simple support, this figure may even triple.
- Your major role and a goal as a Honorary Consul of the Republic of Kazakhstan is to develop and deepen economic relations between the two countries. In addition to the problems caused by the pandemic, what specific challenges do Kazakh investments face today, and in general, what is the insurmountable issue, perhaps even a problem that investors have in Georgia?
- The increase in investments from year to year has also led to the accumulation of problems in Georgia. First of all, the initial period coincided with the 2008 war and the financial crisis of 2009, which, of course, put many entities in trouble, as reflected in their activities. However, this is a general factor, and there are many instances in the Kazakh-Georgian business experience in particular, where the Kazakh private sector has made emotional investments in Georgia, through verbal agreements that are equally common to us, leading to some problems. We can not always blame the government for the business problems, the consistency of the business activity itself is very important. In this case, the experience is needed to conduct business in the Georgian market, because like the other countries, Georgia also has its specific features. There are too many accumulated problems at this stage, some of which are protracted due to the judiciary, some due to government bureaucracy and etc. The main reasons for the delay are the peculiarity and complexity of the communication in my opinion, which requires a mediator, who is well acquainted with both parties and will help to improve the communication. The platform of the Honorary Consul indeed serves such purpose. It formally represents the recognized status between the two countries, and its main mission is to promote the relations between them. This status gives me the opportunity to help the Georgian government overcome the problems with Kazakh business and help attract new investments. It should be emphasized that all countries have the potential for economic development with Georgia. There are quite a few countries where trade, investment and tourism destinations are untapped, which requires focused and careful work.
- What fields and industries do you mean and in what direction is your work, as well as your involvement and support needed?
- Traditional industries are obvious: energy, real estate, tourism, minerals and logistics. In general, Georgia has great potential as a transit country, especially as free trade agreements allow it. For example, we want and need to position ourselves in the context of an international logistics hub, moving from a corridor function to a hub one, which is probably interesting for Kazakhstan. As you know, Kazakhstan is a participant in the Silk Road, which runs from China to Europe. We want to transit Asian and Chinese companies through Georgia to Europe and vice versa. Both Europe and Asia are excellent growing markets and therefore it is impossible and not expedient to do so without Kazakhstan, Azerbaijan and the countries participating in this whole chain. Therefore, it is quite important to deepen the partnership, which requires constant work and refinement.
- The conditions of the one-year pandemic have left some negative traces on foreign trade or relations, and yet, what has been its impact on the deepening of Georgian-Kazakh cooperation and what is the solution for problems caused by COVID-19, whether it is resumption of flights or any other important activity, that will help us to return to the state that used to be before the pandemic?
- We often say that the main characteristic of this crisis is the fact that it is for everyone - for every country, industry or field. Also, we all need to resume economic activity and hence we are all motivated to be active. It just needs maximum alleviation of barriers and a more predictable environment. Today, it is quite difficult to make even a one-week forecast, because the promised lift of the restrictions may be uncertain, as it depends on the epidemic situation in the country.
You mentioned air travel, which is often associated only with traditional tourism, but business tourism should also be considered here, as Georgia has accumulated foreign investments, which also need the attention of their owners. In addition, there are new negotiations that will not take place unless traffic is restored, or entry barriers are convenient. It would be a modest recommendation to the authorities that, in addition to the targeted alleviation of restrictions, the protocol for the entry of foreign air passengers into Georgia is treated differently in respect of individual countries, as not all countries are really at the same risk. In this case, I will talk about Kazakhstan, because I represent it. I think it is possible to ease the entry protocol for incoming passengers from Kazakhstan, since it is not really an epidemiologically risky country. Actually, more infected people are detected in Georgia every day than in Kazakhstan, but on the other hand, a large flow of passengers is not expected either, while winter resorts are closed. Besides the number of Kazakh air tourists before the pandemic did not exceed 2 percent of the total air flow. Business traffic is expected from Kazakhstan, which is needed to take care of a half a billion dollar investment, as well as attract new investment and trade relations. Simply, all opportunities will be shifted until entry into the country becomes easier, no one will arrive in Georgia with 3 connecting flights, or in anticipation of a 1-week quarantine. Therefore, to overcome the crisis, it is important to restore comfortable air traffic. This will require minimum preparation period.
- I agree, that the resumption of air travel is especially necessary for business relationships, because doing business online is out of the question, there is no alternative to handshake - it is a factor of trust and promise. Against this background, I would like to ask about your plans ...
- My functions include the development and promotion of cultural and economic relations between these two countries. I will try to use my status to search for systemic solutions. This relationship requires the existence of a unified platform where the ground will be prepared for the necessary decisions for these two countries. We have planned and will register the Kazakh-Georgian economic union in the shortest time. The union brings together Kazakh companies in Georgia, including individuals, as well as Georgian companies interested in the Kazakh market. The goals of the organization will be presented in 4 main directions, such as the development of trade, investment, tourism and cultural relations. It is necessary to focus on research and solve the existing problems in these areas.