ADB’s Werner E. Liepach on Georgia’s Improving Investment Climate

Exclusive Interview

Werner E. Liepach Director General Central and West Asia Department at the Asian Development Bank (ADB), was one of the 2000 investors who visited Georgia last month to attend the 2019 Tbilisi Silk Road Forum. GEORGIA TODAY caught up with him there to quiz him about Georgia’s investment climate and ADB’s vision of the country’s future.

What is your advice for increasing the foreign direct investment coming into Georgia?

For investments, you can be very attractive but if investors have problems at home then it's difficult and I think this is the hindering factor right now. If you look at the immediate neighborhood as well as the larger neighborhood, the global investment environment is actually not that positive and if you listen to the IMF’s recent prognostics, they are cautious of global expansion overall. So, in that rather difficult context, Georgia is not doing so badly. I think what needs to be improved is domestic investment and not just foreign investment. We at the ADB are quite confident that things are going well; we're seeing four and a half to five percent growth, and though some say this is very low, most of the developed world would be very happy with even that.

If we were to disregard external factors and influences for a moment- what’s our homework? What can be improved or changed to make Georgia more attractive?

Doing business in a regulatory environment overall is quite good. Access to credit is something entrepreneurs may be struggling with a little bit; so efficiency in the banking system and credit access could be improved. Education is very important, that you have the skills of the people in the market, and also infrastructure, and that's an area the government is actively working on right now and I can see much improvement in the last five years and we will see more improvement in the next five.

Your organization has very strict pre-conditions when giving out loans and considering investment scenarios; Georgia less so. Is there a risk of a dangerous offer that might look too good to refuse?

There is the challenge of temptation and I think it’s up to the government to have prudent fiscal requirements and internally the right criteria. One of the good things of their working with ADB is that they are basically shown how it can be done and are able to use our processes, procedures and standards as a benchmark.

From an ADB perspective, what is the long-term vision for Georgia?

The long-term vision for Georgia is prosperity. I do think you have the luxury of long-term vision and despite this being a difficult neighborhood, Georgia has a lot going for it; it is blessed with many things that other countries do not have: incredible geographic variety in a very small territory; you have literally all the climatic zones, you have all solid soil conditions; you have natural beauty, you have a stable workforce, I mean not too much population growth; a good strategic location, a climatically temperate environment. So, it's actually a pretty good location and it's not overpopulated and investment sentiment is positive. The government has created a lot of good groundwork; so I definitely believe that Georgia is in a much better position than many other countries in the world today.

How does the Russia factor affect investments?

As Russia is a neighboring country, and it's always good to have good relations with the neighbors, I think this is also in Georgia's interests. Russia is economically more powerful so I see Russia more as an opportunity than as a threat.

You don't think it scares off potential investors?

The decisions of potential investors will be assessed differently depending where the investor comes from. We may have investors from Russia and they won’t be scared off as compared to an American investor; so I think investors will draw their own conclusions: some may see it black, others may see it white. It can't be answered unilaterally. The situation is certainly not ideal but it’s a challenge that has to be overcome.

There are some Western scholars who openly debate the fact that investments from Russia might be used as political and diplomatic leverage.

I understand that there are political considerations that go beyond economic considerations and the political considerations can't really disconnect from what the economic realities are, but I'm probably not qualified enough to make a good statement on this on behalf of ADB.

By Vazha Tavberidze