INTERVIEW: Sir Suma: ready, steady, reform!

By bne IntelliNews May 14, 2015

Liam Halligan in Tbilisi -


Georgia has “enormous potential” and its success “is being closely watched” by other post-Soviet economies, according to EBRD President Sir Suma Chakrabarti.

Praising Georgia’s “clear progress” and “proven ability to attract foreign investment”, Sir Suma suggests that the country “could become a benchmark for other emerging markets” if the reform effort of the last decade is sustained.

“In a quarter of a century, students at Harvard Business School could be reading about the case study that is Georgia,” Sir Suma tells bne IntelliNews in an exclusive interview ahead of the EBRD’s 24th Annual Meeting.


“We’re not there yet, but that’s the next leap Georgia needs to make, where it is regarded not just as a 10-year success story, but a success story that is locked in across political parties and different administrations – and I think that could happen,” he says.

Georgia’s economy grew by 4.7% in 2014, with the impact of geopolitical tensions relatively contained given limited trade links with Russia. Between 2004 and 2014, GDP annual growth averaged 4.4%, as successive governments cut red tape, pared back the state, and improved the predictability and transparency of business regulation.

The country ranked 15th in the World Bank’s “Doing Business” survey for 2015, ahead of stalwart reformers such as Poland, Estonia, Latvia and Lithuania. Per-capita income remains low though, at $ 3,699 according to International Monetary Fund figures for 2014, compared with $4,781 in Albania and $14,378 in Poland. Unemployment in Georgia is still high, at 14%.

Yet Sir Suma remains upbeat when outlining why Georgia was this year chosen to host the annual meeting, with the most important event in the EBRD’s calendar coming to the Caucasus for the first time. “It’s very important to showcase what has been achieved here in Georgia,” he says. “This success story is being closely watched elsewhere – in Ukraine, for instance, where the Kyiv government is thinking what it can do to emulate Georgia in terms of turning around an investment climate and tackling corruption.”

The EBRD’s total investment in Georgia now stands at €2.6bn, which includes a 2014 inflow of €214mn across various sectors, from energy to small and medium-sized businesses. “Georgia is one of the most innovative of the 30 or more countries where the EBRD supports transition to free and open markets, which has allowed us to introduce new investment instruments here before taking them elsewhere,” says Sir Suma, citing equity investments for small corporates and risk-sharing facilities allowing banks to lend in local currencies.

“While Georgia doesn’t have oil, it does have water – and its use of hydroelectric power to export energy to Turkey and elsewhere has been very successful,” Sir Suma says. “Now we have a new EBRD project which has brought us together with the International Finance Corporation, the Asian Development Bank and Tata Power of India, to create a fantastic hydropower facility at Shuakhevi [in south-west Georgia] that will also export energy.”

New capital

Countries within the EBRD region have “recently attracted significant capital” from other emerging markets, according to Sir Suma. “Georgia has won investment not just from Tata, but also form Jindal Steel & Power of India,” he says. “Across the Balkans area, from Slovenia down to Greece, many of our member states are now receiving inflows not just from Western Europe and North America, as they should, but also from the Gulf, India and China.”

“When I talk to investors not just across Europe, but in India and across Southeast Asia, they regard Georgia as a small country, but a country that’s definitely going in the right direction,” says Sir Suma. He added that he wants to see “considerably more such South-South capital flows, from other emerging markets” into the EBRD region.

“South Korea, for instance, has made investments totalling €1.3bn over the last 24 years into our countries of operation – well, I went to Seoul and said that’s not enough,” says the EBRD President. “India has invested only €800mn with us – again, that’s a good start, but remains way underweight for the size of the Indian economy, especially given that Prime Minister [Narendra] Modi is now encouraging overseas investment.”

The EBRD is to do “much more marketing across Asia as part of our medium-term strategy,” says Sir Suma. “My colleagues and I have been doing workshops in Seoul, in Mumbai, in Singapore, and we now have a representative office in Tokyo – there is clearly considerable interest in our region,” he says.

“Investors from the Far East have already entered places like Russia, Turkey and Egypt with us, countries they know something about and often have historic ties with,” says Sir Suma. “The next step is to get them interested in countries they don’t know so much about, but where there are still great opportunities – Tajikistan, for instance.”

Global Mittelstand

Going beyond large foreign corporations, the EBRD is now trying to encourage smaller overseas companies to invest. “It is relatively easy for us to engage with the big conglomerates in places like Singapore, South Korea and Japan – and there are, of course, already large business houses from these countries operating in our region,” he says.

“What I’d really like to do now is what we’ve already been successfully doing in Germany, convincing the Mittelstand – the medium-sized companies – to expand into our region” he says. “It would be great to get the Asian Mittelstand more involved in our part of the world, but these smaller companies need a lot more political comfort than their larger counterparties when it comes to investing, so it’s our job to give them the information they need.”

During this two-day annual meeting, the EBRD’s economists will publish new economic forecasts for numerous countries from Central and Southeast Europe, through to the Caucasus, Central Asia and the southern and eastern Mediterranean. They will show that a return to growth across the region as a whole “remains elusive”, with economic weakness in Russia continuing to have an impact well beyond that country’s borders – even if the Georgian economy has so far remained relatively insulated from the slowdown of its giant neighbour.

When asked what he wanted the central message of this annual meeting to be, Sir Suma launches a clarion cry for further reforms. “Our region covers such a range of countries, from Casablanca to Vladivostok, that it is difficult to generalise,” he says. “But I’d argue that in a world where countries and companies are competing for scarce investment resources, it’s those who reform fastest, who get their investment climates right, who get their governance right, that are most likely to win that race.”

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