Tag Archives: business

The circle of trust improves between business and government in Georgia

In addition to writing about Poti’s port upgrades in the summer issue of Investor.ge, I also took a look at the government’s attempts to regain the business community’s trust after a period of aggressive raids by tax authorities left Georgia’s big businesses feeling besieged.

While the Georgian government has tried to get back in business’ good graces, the perceptions of the general public has also gradually become more positive towards the economic elite. But why?

Despite a rocky relationship with business in the past, the government is working hard to create better ties with the private sector.

New state intiatives – including a business ombudsman to advocate for tax-payer rights and a business council in parliament – are easing tensions between the government and business.

Last December, President Mikheil Saakashvili said in a speech that there were “many deficiencies” in the relationship between the government and the private sector, admitting that business leaders felt that “the State does not listen to them appropriately and treats them unfairly”.

The speech marked a step in the president’s year-long campaign to repair the frayed relations – damaged, in large part, by a period of increasingly aggressive raids and hefty punishments for tax crimes at the hands of Georgia’s Financial Police.

Giorgi Pertaia

Lawrence Sheets, International Crisis Group’s Caucasus project manager, said in an interview with Investor.ge that the government’s ballooning foreign debt, which is projected to reach 43.2 percent of GDP in 2011, put pressure on the authorities to increase tax collections, resulting in a soar in both the frequency of tax raids and amounts of the eventual fines. Georgia’s economy also contracted by 3.9 percent in 2009 following its 2008 war with Russia, further straining tax revenues.

The government responded to the growing gulf of distrust between the public and private sectors by first hiring former AmCham customs specialist Giorgi Pertaia to advise the prime minister’s office and serve as a “bridge” between business interests and government authorities.

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Corporate social responsibility in Georgia

Hey all, just to toot my own horn a bit more, I thought I should point out that I got a piece in the Februrary-March issue of Investor.ge that is now up on their website.

Corporate social responsibility (CSR) is an amorphous term, but several organizations and businesses are now trying to make it a concrete reality in Georgia.

According to Michael Cowgill, president of the Georgian American University, CSR is a business mentality of self-regulation on three levels – economic, legal/ethical and philanthropic. In other words, being profitable while being fair to clients and employees, and spreading the wealth.

Cowgill, a vice president on the AmCham Georgia board of directors, is also a member of the steering committee of the Georgia chapter of the Global Compact, a worldwide grouping of UN agencies, private businesses and civil society groups promoting responsible corporate citizenship — something Cowgill said is often lacking in Georgia.

“When I teach, it’s all in threes. The most successful companies treat employees, clients and owners all with some equal priority,” he said. “Georgia has been known for placingthe emphasis on owners rather than clients, with staff even further down the list.”

The Eurasia Foundation has sponsored CSR classes at five Georgian universities and Global Compact Georgia is currently focused on educating Georgian companies on the benefits of such policies; awards are planned for corporations that take such advice to heart.AmCham Georgia is hosting the Global Compact Georgia Network this year.

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Despite tensions, Georgian exporters anxious for trade with Russia

Four years of embargo, war and a perceived annexation of Georgian territory have not soured the excitement of Georgian entrepreneurs over the prospect of once again selling in the Russian market.

Russians and others in the former Soviet space that have been glugging down Georgian wine and mineral water for centuries represent Georgia’s best customers, and the companies producing these products have not been able to replace the Russian market since Russia slapped bans on all Georgian products in March 2006.

Georgia’s wine and mineral water producers now recognize that they relied too heavily on the Russian market, but they say they have now diversified and spread to new markets over the last four years, and most welcome a return to their old stomping ground.

One notable exception is Natakhtari, Georgia’s leading beer producer. Natakhtari, which was bought by Turkish beer maker, Efes, two years ago, still holds a grudge against Russia.

Before the August 2008 Russia-Georgia war, Natakhtari packaged its delicious beer at two bottling plants — one in the town that bears the company’s name, and the other in the disputed city of Akhalgori. In the aftermath of the war, Russia sat by as separatist Ossetian militiamen expelled thousands of Georgians from their homes in Akhalgori before burning, looting and taking control of the area.

That left the plant responsible for much of their overall production deep behind enemy lines, and it remains unclear who really controls it. Dr. Ina Verstl, who chronicles the international brewing industry in her blog, Beer Monopoly, looked into the issue a few months after the war.

Efes have resigned themselves to the fact that the plant has been lost even though they have the brewery guarded by security guys. Still, no one really knows when (or if ever) the South Ossetians will retreat from the area and how much of the brewery will be left. Scrap metal is Georgia’s (and South Ossetia’s) major export.

Efes’ executives have decided to put on a brave face: They say that this year their Alkhagori brewery contributed 3 percent to [Natakhtari parent company Lomisi]’s beer volumes. This must be small consolation: after all, Efes paid for the brewery. And more importantly, the Alkhagori brewery provided much needed jobs. In Georgia, unemployment is high.

I hoped to get an update on the situation but when speaking with an Efes representative a couple of weeks ago, the conversation ended abruptly as soon as “Russia” came up. They don’t even want to talk about it.

Anyways, here’s the story I wrote for the Asia Times that looks at the issue a little closer and also Georgian companies’ slow move towards growing markets in Asia.

TBILISI, Georgia – Exporters of Georgian goods to Russia, who had to seek new markets in Asia during a near four-year closure of the country’s border with their northern neighbor, are looking to a sales boost from the scheduled reopening of border crossings this month.

Despite lingering tensions between the two countries, Russia is due to allow imports of Georgian goods for the first time since 2006, when it was Georgia’s number one trading partner. It had cited impurities and health risks when it closed the border and initiated an embargo of Georgia’s main exports, wine and mineral water. The Georgian economy was flattened and companies exporting to Russia have yet to fully recover, a process further delayed by the brief war between the two countries in August 2008, which caused an estimated US$1 billion in damage.

Today, although Georgians remain highly suspicious of their huge northern neighbor, Vladimir Papava, senior fellow at the Georgian Foundation for Strategic and International Studies, said the benefits of reinitiating trade with Russia cannot be ignored.

“The Russian market is so huge, it’s really impossible for Georgian wine producers to replace the Russian market with other countries,” he said. “So, if the Russian market will be open for Georgian goods, it’s perfect for our business, for our economy.”

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Georgian wine flourishes under Russian embargo

This was by far the most fun I’ve had reporting so far, and doing the article inspired a couple of other ideas for stories on Georgian wine so keep tuning in!

Georgians stomp grapes at a harvest celebration in Telavi in Eastern Georgia

TBILISI, Georgia | When Russia boycotted Georgian wine in 2006, Georgia lost 80 percent of its export market for wine overnight. Now, Georgian winemakers look back at the ban as a blessing in disguise.

Grapes dangle from the balconies of Sighnaghi, a picturesque town in the Kakheti region of Georgia.

Wine is a central element in Georgian culture, and for hundreds of years, Georgia was the primary supplier of wine to the Russian and Soviet empires. Owing to massive demand and Soviet production quotas, the volume of Georgian wine production soared while quality plummeted.

But, according to Shota Kobelia, commercial director of Georgian wine producer Teliani Valley, when relations between the Kremlin and Georgia’s pro-Western government soured to the point of an embargo, many winemakers saw an opportunity.

Gela Patalishvili, co-owner of Pheasant's Tears winery, stands in front of purple sludge dumped from the bottom of amphora -- large clay pots used to ferment wine in.

Gela Patalishvili, co-owner of Pheasant's Tears winery, stands in front of purple sludge dumped from the bottom of amphora -- large clay pots used to ferment wine in.

“Sure, the ban hurt us because we lost our biggest customer. But during this time there was no competition. Now we have an opportunity to sell to more-profitable markets, and we have been pushed to create a much better product,” Mr. Kobelia said.

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