Free tourist zones hand-in-hand with gambling business
16 December, 2010
Free tourist zones hand-in-hand with gambling business

To attract investors to Georgian free tourist zones, Government boosts gambling business there. Soon another free tourist zone exempted from property and income taxes will be deployed in Anaklia, Samegrelo region.
Anaklia, one of the most beautiful resorts of Georgian Black Sea littorals, is a potential Free Tourist Zone (FTZ) site. Shortly after the creation of free tourist zone in Kobuleti this November, Georgian government announced another tourist zone in Anaklia last week and appealed to

the parliament to approve the initiative in an accelerated way. Georgian government does not rule out announcing of free tourist zones throughout Georgia if the two said projects become successful. Mestia, in Svaneti [Caucasian highland resort] is named as one of the potential free tourist zones.
Anaklia is supposed to enjoy similar taxation preferences as Kobuleti FTZ: Businessmen, who will invest at least GEL 1 million in hotel construction in Kobuleti/Anaklia and sustain the hotel profile during 15 years, will be exempted from the property and income taxes for the same period. The construction sites will be handed to such investors for the symbolic price of GEL 1. Government will ensure organization of the adequate infrastructure for the hotels and leisure complexes with the purpose of fostering development of corresponding projects.
Contracts with investors concerned will be concluded by the end of January 2011, and construction works of hotels must be completed in 18 months.
The controversial issue is that according to the governmental initiative, entrepreneurs will enjoy the tax-exemption only if they manage to get through with construction works in Kobuleti and Anaklia till August of 2011 and 2012 respectively. On the other hand, government offers to investors who fail to save timetables to inform Georgian government beforehand and the project implementation period can be prolonged by 3 months. However, some experts still fear that these timetables can be a trap for the investors.
Levan Kalandadze, Director Executive of Georgian Association of Small and medium Business, likes the FTZ project in its essence but fears that it lacks a clear strategy and legal basis that may lead to the violation of investors’ rights ultimately.
“The preferences granted by the FTZ project remain on verbal level and are not built in any law as of yet. Who can guarantee that government does not change its mind? And why they fix that short construction deadlines for investors, where do we speed up, what’s all for? Uncertainty makes me alert, were I an investor I would never have invested under such unclear circumstances,” He said.   
Davit Narmania, Executive Director of the Institute of Caucasus Economic and Social Research, thinks that Georgian FTZ investments are long-term projects as they cannot be paid-back in short period.
“Georgia is a small market and cannot compete with neighboring huge Turkish market by price and service, therefore hotels built in Kobuleti and Anaklia can bring profit not earlier than 3-5 years. They will be profitable but only in long-term prospect,” he elaborated.
However to rival with the neighboring tourist market Georgian government decided via boosting gambling business. According to the recent amendment made to the law on Licenses and Permission Tolls, gambling business operated with the newly constructed hotels [accommodating at least 100 rooms] is exempted from tolls imposed on gambling permission for 10 years. The amendment covers only hotels constructed in Ajara seaside including Batumi, Kobuleti and Khelvachauri districts, as well as Anaklia in Samegrelo.
The point is that gambling business is prohibited in neighboring Russia, Azerbaijan, Armenia and Turkey. And according to Narmania, government uses its regional advantage quite dexterously to attract tourist to Georgia.

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