Bruno Balvanera: Georgia needs to be integrated within the regional neighbors

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Mr. Bruno Balvanera, director for Caucasus, Moldova and Belarus, European Bank for Reconstruction and Development talks about the Bank ’s priorities in Georgia.

Annual Meeting: what does it  mean for Georgia?

The 2015 EBRD Annual Meeting and Business Forum that took place on 13-15th May was a great success that has put Georgia on the map of global investors. It was attended by more than 2000 guests, bringing together government, business, media and civil society representatives from more than 60 countries.

It provided an excellent opportunity for participants to gain further insight into the economic climate of the region, especially with regard to investment opportunities in Georgia. It provided a fruitful opportunity for the participants to discuss important economic and investment issues affecting the EBRD’s region of operations.

In particular it was an important event to showcase the many developments and wide-scale reforms within Georgia and the significant opportunities they represent for further investment. It helped the country to develop existing ties and establish new links with international investors. Winning the attention of the international media for three days offered a priceless opportunity for Georgia to promote itself as an attractive business destination capitalizing on Georgia’s key position as a regional hub.

During the Annual Meeting, EBRD signed 4 investment projects with the total sum of $55 million and two very important initiatives – Investors Council and Women in Business.

What other projects EBRD finances in Georgia? How many projects are there and what is the total amount of financing? 

We have many projects in the pipeline. We work with local banking sector, we finance large and medium hydro projects in the country, Currently we are doing feasibility study on the first wind-farm project in Gori. This will be a very important project in the reneawable energy sector for Georgia. We are working with some health providers to finance rehabilitation of clinics and pharmacies, we are working also with some electronic companies to develop warehouses and logistics centers. We are also working with large petrochemical projects . We are very active in Georgia with a very healthy pipeline of investments. What we have done this year, is that we have financed Embawood the new store in Dighomi, hotel Intercontinental. We signed the small but very important transaction to help the Georgian Public Broadcaster to switch to digital programming.

The last year we financed 15 project with 215 million euro investments and  this  year  we  going to  do the  same or probably a little bit more.  On accumulative basis we have financed about 2.3 billion euro in Georgia, since we started operations here 22 years ago.

We are the largest institutional investor in Georgia and are committed to do even more years to come. Throughout these years EBRD has been a critical partner for the development of the banking sector, infrastructure, and renewable energy, SMEs including property and tourism as well as agribusiness sectors. The Bank is very keen to encourage and support Georgia on its path towards the EU, while helping the SMEs to develop further to comply with the DCFTA requirements.

Which sectors of economy does EBRD finance  and how do you choose the companies and their projects? 

We finance companies in any sectors of economy apart from  production of hard spirits, gambling, tobacco. The company needs to have a solid project of investment plan with all the financial information. In addition the company needs to comply with our environmental and social standards. And last but not least, we need to be comfortable with the background of the shareholders. Once the due diligence is completed we then  proceed with the decision  to finance or not. We have three criteria. One – we need to make sure that the project is bankable. Second – that this project is brings innovation to. And third  – there is a reason why EBRD finances it, and not the local banks.  Maybe it required a longer maturity or it’s a bit too risky or it’s in a more specific sector where EBRD has better expertise. Hence, we are not competing with the local banks.

What the country should do to reduce the impact of external shocks and stabilize the economy and bring in FDI?

It’s very difficult to think that Georgia is going to be isolated from external shocks, because Georgia is a small country, and it needs to be integrated within the regional neighbors. So rather to be isolated, I think it needs to enhance its competitive advantage. It needs to be part of the region, and of the expanded region, because the size of the market of Georgia is too small. Georgia has to access other markets to have volume of production.

Once Georgia finds its competitive advantage, it will have a particular niche to fill and able to attract investors. For example, hydro sector is a niche. Investors are keen to invest in this sector, But this is not enough, other niches, investment opportunities need to be offered to the investors around the world. Maybe it’s hospitality, agriculture. For example, Partnership fund announced the Israeli investments in aviation. To attract Georgia need to identify the niches where Georgia has something competitive to offer.

Tell us about the partnership of EBRD with the Georgian banks and how it is developing? 

The role of EBRD is to support the companies when they need our support to develop and expand further. Once they evolved and matured we exit so we can use our resources for other new companies that require our support . We try not to stay more 12 years in the company .For example, in the specific case of Bank of Georgia and TBC, we capitalized them with the view of exiting when they are well development and stable entities. We  exited Bank of Georgia once they were listed on the London Stock Exchange  In the case of TBC we also sold part of our shares after their IPO, we still have some, but we’ll be exiting.

 

Lika Jorjoliani for newcaucasus.com

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