Issue 2, 2014. April-May

   

GEORGIAN ENTREPRENEURS: AN INTERVIEW WITH LASHA PAPASHVILI

Investor.ge has launched a series of interviews exploring the biggest trends in Georgian business innovation and entrepreneurialism. In each issue, the best and brightest minds in Georgian business will discuss their ideas, market trends, and the obstacles that face Georgian entrepreneurs today. In the fourth interview of the series, Maia Edilashvili speaks with Lasha Papashvili, the general director of Redix, one of the largest development companies in Georgia.

A stable political and economic environment with a strong legal system is vital for entrepreneurialism and investment to flourish, LashaPapashvilisaid in an interview with Investor.ge.

A graduate of Ivane Javakhishvili Tbilisi State University, Papashviliworked as the general director of Bank Republic - Societe General Group in 1998-2004 and later until 2014, he served as Chairman of the bank's Supervisory Board. Now General Director of Redix, his diversified business portfolio includes35 large and medium-sized projects worth $15 million.

Redix was launched in 2007, when construction and the overall economic growth of Georgia was booming. Although many competitors crumbled in the face of the economic crisis and the real estate market crash, Redix refocused, and sought out a niche: finished apartments.

In a market more accustomed to black carcass and unfinished apartment projects, Redix became one of the first to offer ready to live modern residential apartments and office/commercial space on the Georgian market. Home buyers were offered apartments with kitchen furniture and equipment, central heating and air conditioning.

Today, Papashvili is optimistic the real estate sector is making a comeback.

"There is a clear vitalization on the market and the situation is returning back to what was in the first half of 2008," he said, predicting that both the demand and supply is likely to surge in all directions - residential, office, commercial, and hospitality service.

The challenge in the construction field, Papashvili believes, is issuing permits without tough regulations since there are no laws and standards. Another concern for him is that the country is not divided into special areas such as urban, industrial, agricultural, and recreational or other types of zones. "Local self-government agencies both in the cities and villages have no development policy," he complained.

On a positive note, however, Papashvili hailed the changes over the recent years when bureaucratic requirements from the procedures of registering private property were streamlined and removed. If new investors decide to come to the Georgian market they would find "by far friendlier"business environment, he says.

Redix itself is taking advantage of these favorable conditions by expanding: currently the company is intensively developing the HoReCa (Hotel/Restaurant/Café) model. The company opened Hotel Kabadoni in Signagi in 2012. A new apartment-hotel in Batumi is scheduled to open in May, and there is also a plan to open Hotel Samzeo in the mountainous region of Tusheti. "Also, intensive construction works are underway for a 165-room hotel on Chavchavadze Avenue in Tbilisi, which will be operated by Hilton Garden Inn of Hilton Worldwide," Papashvili told Investor.ge.

Papashvili has also ventured into agriculture - process, he describes as "difficult." However, he adds, a new wine brand Kvarlis Maraniis already available on the market. "Last year we opened a dairy farm Kvarlis Baga with a daily capacity of three tons of milk which is fully sold on the local market. In total, $10 million in investment has been put in these two projects," he explained.

Even though the latest statistics for foreign direct investment does not show an upward trend - FDI was $ 217 million in the fourth quarter of 2013, an annual decline of 7% - the government remains optimistic. According to the official prognosis, this year economic growth will accelerate and stand at 5%, an increase from 3.2% in 2013.

For solid growth to take place, "a long-term action plan with clear priorities," is needed, says Papashvili. Yet, in his view, equally important is maintaining a low crime rate. "If the state guarantees all of these, that will serve as a guarantor of attracting [more] FDI," he noted.

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