Georgia looks to youth to attract investors

By bne IntelliNews May 12, 2011

Molly Corso in Tbilisi -

After two years of falling foreign investment, the Georgian government is betting on a team of business students to reenergise its push to attract investors.

Past attempts at promotion - Georgia as the birthplace of wine, the heart of the Silk Road, the paragon of liberalisation - fell flat in the face of the global recession and the increased competition for fewer investment dollars. So with annual foreign direct investment (FDI) down 16% in 2010 - dropping from $658.4m to $553.1m - the government is looking for new ideas, Deputy Economic Minister Irakli Matkava tells bne. "We understand that today competition for FDI is tough," he says. "There is a noise screen we have to break through. In that sense, it is very important to have a very clear message, to have the right differentiation strategy, to stand out, to attract attention."

Attracting investment is a key priority for the government, and Tbilisi - through a startling number of economic ministers and investment gurus - has created a dizzying history of efforts to entice investors to choose Georgia, ranging from large-scale privatisation to radical market liberalisation and a presidential push for surf-ski tour packages.

The latest wheeze is to pay MBA students from the Haas School of Business at the University of California at Berkley a mere $30,000 to zero in on the country's strengths that will strike a chord with investors and push them to pick Georgia. Matkava, the former head of Georgia's National Investment Agency, says the government is working on the same thing, but hopes the students will bring fresh insight for policymakers.

Matkava says the idea to hire the students came from a meeting between representatives from the school and Economic Minister Vera Kobalia during a conference in California last year. "The major value we see in this [is a] group of people who can take a look from outside, who can see things in a new light, a fresh light, who can find things unexpected to us, which is quite important," he says. "We are working toward strengthening certain things, working toward certain aims. So it might happen that we don't see some of the new things that might be out there."

Trump power

The government's most recent incentives revolve around free industrial and tourism zones. Over the past year, the government has created two free tourism zones along the country's strip of Black Sea coastal land. The zones include creating a new resort in Anaklia - a few kilometres from the Georgia-Abkhaz conflict zone - and a laundry list of tax benefits to entice investors to build hotels and casinos.

In addition, government officials are pushing investment in the country's hydroelectric power potential as a green energy source for investors, as well as its underdeveloped agricultural sector.

And it appears that they are having some success. In April, Prime Minister Nika Gilauri announced a contract with an Indian-based development company for a $1bn investment to build a new hydro plant in Georgia's northern mountainous region Svaneti. And reportedly five new hotels are slated to open in 2012 in the new free tourism zone at Anaklia. A new Trump-brand hotel in Batumi is also on the books, and the country's second Radisson hotel is opening this summer.

But officials like Matkava believe there is room for improvement - especially in how the country gets its "message" out to investors.

The students, who are arriving in Georgia in May to conduct interviews on the ground, are expected to compare how other countries are analysing their own strengths and weaknesses, and how that impacts their marketing techniques.

Georgia has advertised, with mixed success, on CNN and other large media outlets. Now the focus is on "direct contact" with businesses to target decision makers and ease the influence of lingering images of the country at war in 2008 - an event Matkava delicately refers to as the "Russian issue". "Especially with the Russian issue two years ago etc., the perception problem should reasonably be there in certain parts in the world and among certain groups of people," he says.

However, he believes that it's a lot easier for the countries that are closer to Georgia and the businesses that have more direct links to Georgia to have the right perception, "but then you have to get the message beyond them as well," he says.

And that's where the students come in.

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