Armenian business eyes Georgian business land
21 April, 2011
Armenian business eyes Georgian business land

Starting past year, Armenian business finds Georgia as a favorable business venue. Economic analysts say governmental crackdown in Armenia is its key reason. Some experts presume they want to hit Azeri market through Georgia.
Business registration statistics bespeaks of two trends: Georgian business climate is favorable for starting business, but to develop business is quite difficult. Irrespective of this controversy Georgian business climate is much more attractive than the ones in Armenia and Azerbaijan, economic analysts say. Heavy corruption and

governmental crackdown on business strangles business there even worse than in Georgia.
Based on official statistics, by today about 195 Armenian businesses were registered in Georgia starting 1995 and 105 out of this figure were registered in 2010 alone. However, none of them [105 businesses] is big business and is made up of 27 individual entrepreneurs and 73 small companies of limited responsibilities.  Some Russian and Georgian media publications have been trumpeting the statistics as a token that Armenian business flees to Georgia to escape governmental crackdown.
According to Andranik Tevanyan, an Armenian-based economic analyst with the Research Institute, in Armenia country’s main economic malfunction lies in the strong interrelation between business and political interests which resulted in bad governance, artificial monopolies and anti-market price formation mechanism. As a result GDP of Armenia having reached its peak in growth in 2007 [13.7%] reduced to 6.8% in 2008 and fell by 14.4% in 2009.
According to Irakli Lekvinadze, an economic analyst, Armenian capital inflows in Georgia is obvious lately, mainly in middle sized business including real estate, tourism and trade.
“This inflow is outlined by hard business climate in Armenia,” Lekvinadze told GJ. “Armenian businessmen in informal talks say that local businessmen seek to take their capital out of the country, and Georgia is very comfortable for them for it has no bureaucratic barriers and corruption. While Russian capital prevails in Armenia in any sector and state crackdown on business makes hard predicaments to doing business.”
Some media publications spread information that certain big Armenian businesses were moving to Georgia, but none of them were proved in fact. Actually no pure Armenian-based business exists in Georgia, Armenian embassy reported to Georgian Journal, Armenians mainly enter in co-partnership with local partners. Big Armenian diaspora in Georgia as well as century-carved close neighboring relationships between Georgian and Armenian nations, visa-free regime laid ground for developing business connections easily. 
“They actually do not refer to the embassy that’s why we cannot provide with detailed information,” a spokesperson of Armenian Embassy in Georgia, told GJ, but he shied to put his name. “Georgian barriers-free business climate and visa regime are so easy that nobody needs our help. They find partners in Georgia without help of embassy, some have friend, some relatives here…”
Indeed, based on personal contacts of Armenian business registered at Geostat, Georgian Journal could not find any single Armenian citizen. Contact persons are either Georgian partners reporting that Armenian partner is in Armenia, or Georgian citizens of Armenian nationality. All refuse to provide with contacts of Armenian partner however. This kind of Georgian-Armenian co-partnership practice makes some confusion on how much of Armenian capital is invested in Georgia. According to official statistics, USD 150 thousand was invested in Georgia in 2010,  while USD 5.3 million and USD 14.8 million flew to Armenia [from Georgia] in 2009 and 2010 respectively.
“These figure are a result of the practice that Armenian businessmen register their businesses on Georgian citizens mainly therefore Foreign Direct Investments made by Armenians in fact are considered as domestic,” Lekvinadze elaborates.
The high registration statistics is somewhat chilled out by reality. The number of actually operational businesses is a matter of surmise as official statistics cannot provide with comprehensive statistics, researching individual entrepreneurs is quite expensive and needs bigger human resources, Geostat source explained to GJ. What Geostat affords is the research of legal entities. Based on this survey only 16 out of the registered Armenian 73 Ltds are operational in fact that bespeaks that not everything is as smooth in Georgian business climate as government touts.
Registration of business in Georgia costs just GEL 100 therefore some people register themselves in Georgia just in case to get a foothold for future, some are wholesale importers and register themselves to ease customs clearance procedures and import of goods.
“Therefore registration statistics is high, but the figure that only 16 out of 73 companies operate indicates at problems in Georgian business climate,” Demur Giorkhelidze, an economic analyst, said.
This problem creates setbacks to Georgia to become a regional economic hub in the region, Ditrikh Muller, an economic analyst with Georgian Investment Group, thinks. According to him, one of the reasons Armenian businessmen enter Georgian enterprises as co-founders is they want to hit Azeri market that is closed for them due to political reasons.
Political tension of Armenia with Azerbaijan and Turkey on the one hand, and low trust of the developed West toward Muslim countries [caused by recent political crisis in Arabian countries] on the other hand, plus liberal business climate pictures Georgia as the most favorable meeting venue for Christian and Muslim businessmen in the region, Muller thinks, and Georgia can enjoy huge economic profit of this situation if government undertakes prudent steps.
“Government has to adopt kind of Monaco model where each investor has an obligation to have a local co-founder in the business. And thanks to this obligation you cannot find a poor person in Monaco. Georgia must adopt this kind of obligation [and of course remove problems related with property right protection and taxation] as far as it has a unique chance today to attract investors from both Muslim and Christian countries. But government ignores this chance as of yet,” he told GJ.

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