Is Ajara Prospective Investors’ Haunt?
07 March, 2013
Is Ajara Prospective Investors’ Haunt?
Ajara with the its USD 40 billion investment expectations in coming 10-15 years seems to be the region of nvestors’ haunt in Georgia. President of Georgia appears skeptical over the idea while economic analysts find the forecast completely realistic if Georgian business climate becomes healthier. Ajara, an Autonomous Republic of Georgia, collecting slightly over USD 1.1 billion investments totally within 2004-2011, looks forward to almost 3900% growth of the investment inflow in near decade. According to Giorgi Tavartkiladze, Minister
of Finances of Ajara, the recently boosted interest in Ajara region makes local government hope for around USD 40 billion of Foreign Direct Investments (FDIs) to come in 10-15 years.
The FDIs inflow in Ajara will start from the second half of this year and at average USD 2.6 billion will enter it each year, Tavartkiladze said. What is already clear is that SOCAR, Azeri State Oil and Gas Company, plans to invest USD 1 billion in oil processing factory near Batumi, the Black Sea Outlet of Ajara. Negotiations with other investors are still on and names of the interested investors will be disclosed as soon as agreements are reached, government promises.
Ajara’s investment prognosis five-fold exceeds the total FDIs inflow in Georgia over the last decade making around USD 8.3 billion within 2004-2011 and looks hardly believable against the backdrop of upcoming second tide of global economic crisis and dwindling investments statistics of Georgia hardly collecting around a billion per year since 2008 crisis.
Mikheil Saakashvili, President of Georgia and member of ex-ruling power of National Movement, who always held Ajara as his pet project, stands as a top skeptical figure in this case.
“USD 40 billion will be invested in Ajara they say - this is derision of the Ajara population. It took USD 2 billion to make Batumi [the Black sea outlet of Ajara] flourish. With USD 40 billion it would be triple as equal as Dubai,” Saakashvili said on February 26, 2013 adding that USD 40 billion project seems ridiculous takeing into account that the budget of Ajara is cut down and construction of social houses suspended.
Ditrikh Muller, a co-founder of Georgian Investment Group, finds Ajara completely capable to make the targeted investments forecast true in 10-15 years if new government improves Georgian business climate at large and restores the lost trust of investors toward Georgian authorities. The political importance of Ajara region, its favorable geographic location and underdeveloped hotel infrastructure potential plus agriculture industry development opportunities make Muller to be optimistic over Ajara’s future. He believes the Free Industrial Zone (FIZ) projects initiated by ex-power in Ajara [in 2010] and failed due to unfair business climate may flourish and promote the region into economic prosperity if the blemishes of the ex-power will be streamlined.
According to him, Ajara bordering with Turkey on the Black Sea side, has always been a stumbling block between the Christian and Muslim worlds. Turkey and Russia competing for the regional influence historically has always been striving to increase their influence in Ajara. Only thanks to Russian-Turkish war Georgia got Ajara [seized for 300 years by Turkey] back by end of 19th century. Even up to Rose Revolution of 2003 Ajara’s government enjoyed the Kremlin’s exclusive patronage. Turkish capital thanks to benevolent relationships established between Georgia and Turkey by end of the past century [after Georgia and Turkey became partners in international energy transit projects] is already significantly represented in hotel and industrial sector in Ajara. Turkey supplanted Russia as a top trade partner to Georgia after political relations between Tbilisi and Moscow were tensed [for Russia’s interference in Georgia’s territorial conflicts] and Russia imposed trade embargo on Georgia in 2006. As the political power changed in Georgia in 2012 trade relationships between Georgia and Russia are believed to be restored this year, Muller expects inflow of Russian capital in Ajara and increased economic competition of Russian and Turkish capital.
On the other hand, the vector of European interest seems to move from the Turkish Black Sea littoral to Ajara as hotel infrastructure in Turkish part as well as in Europe is pretty saturated while the underdeveloped hotel infrastructure in Ajara offers plenty of business opportunities. Recent endeavourers of Turkey inclined to be more integrated with the Muslim rather than the EU community pushes EU interest toward Ajara of Georgia with strong aspiration toward the EU integration. Besides, gambling business either prohibited or strongly restricted in Georgia’s neighboring countries including Turkey, Russia, Azerbaijan and Armenia appears an important lure to Ajara hotels and economy. There already is a big turnover of Turkish, Azeri and Armenian tourists in Ajara looking for gambling opportunities. Although new authorities appears intent to bar gambling in Georgia economic analysts strongly oppose the idea. Muller presumes gambling will be flung to peripheries and the to-be-developed FIZ territories in Ajara will embrace casinos and related profits.
“Ajara has beautiful landscape for hotel infrastructure development; it produces tasty fruits and vegetables as well as rare subtropical herbs used for distilling expensive scent-oils that may lure investors into construction and processing industry. But first and foremost, the new government must eliminate the vicious practice of the previous government who used to violate rights of investors for 8 years in favor to businesses lobbied by ex-powers that be. The new government should create guarantees, which will protect the property rights and equally treat all investors so that investors would trust the authorities and they won’t fear that they may be ousted if political will changes,” Muller said.
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