Issue 1, 2014. February-March

   

BUSINESS REFORMS BRING ARMENIAN INVESTMENT

From retail branches to hotels and construction businesses, Armenian entrepreneurs are coming to Georgia to open up shop.

Roza Hovhannisyan

Lower taxes and a more competitive market are attracting a growing number of Armenian investors to Georgia. In addition to extending retail branches to Tbilisi, Armenian entrepreneurs are slowly returning to other business sectors.

After five years of steady decline, Armenian investment in Georgia was up in 2012 - a trend that has continued in 2013. Armenia is still far from Georgia's largest investor - last year Armenian businesses spent $5.93 million in Georgia, compared to $42.03 million from Luxemburg, one of Georgia's largest investors.

The interest of Armenia's businesspeople in the investment field of neighboring Georgia has significantly grown since 2010 when Armenian entrepreneurs, one after another, began a new wave of establishing businesses in Georgia.

While the exact number of Armenian investors is unclear - the Georgian Public Registry reports 100 Armenian businesses registered -Gagik Makaryan, the chairman of Armenia's Republican Union of Employers, said closer to 200 Armenian entrepreneurs have started a business in Georgia.

"small-sized business think the conditions in Armenia are not satisfactory for it yet. Reforms are under way but still there are a lot of unsolved issues, unequal competitiveness, market consumption problems," Makaryan said, adding that Georgia is quite a convenient place with respect to its close location to Armenia which makes it easy to travel back and forth between the two countries..

"[C]orruption risks have been reduced in Georgia which has greatly attracted Armenian businessmen."

Gagik Aghajanyan, executive director of Apaven, an international cargo transport company working in Georgia for many years, said it is normal that Armenian businesspeople are starting businesses in Georgia.

"Today, Armenia's business circles are able to make investments in Georgia. This country is quite acceptable and available, Armenia and Georgia are countries having normal relations," Aghajanyan said.

According to Armenia's Republican Union of Employers (Union), Armenian business people have particularly invested in Georgia's hotel sector, services, juices, canned food, meat production and other spheres. Many Armenians are also engaged in the construction sphere as well.

Makaryan, the chairman of the Republican Union of Employers,said that the companies that made investments in Georgia have succeeded in business. These companies ran businesses in Armenia for many years and are quite experienced. "I have information that these are companies with four-five years' working experience," he noted.

The Next clothing stores in Tbilisi are part of an Armenian owned franchise, as is, reportedly, Brioche Doree, the French bistro chain.

Low real estate prices in Georgia - reportedly three times cheaper than similar land plots in Armenia - are also attracting investors. Lower taxes are also an incentive: a Georgian government tax break exists for foreign investors for the first five years of their business activity in the country.

However, the Deputy Chairman of Armenia's State Revenue Committee, Armen Alaverdyan, however, said the perception of Armenian business's interest in Georgia is exaggerated.

He admitted, however, that it is natural that businesspeopleseekto expand their businesses and are starting businesses in their neighboring country as well.

"The attitude toward business in Armenia is not favorable.Very often they appear in force majeure situations.The businessmen are tired of constant legislative changes and checking.Self-willingness dominates here. In spite of this, I do not think that Armenian businessmen will stay in Georgia for a long time," he said, noting that there had been some reports that corruption is slowly returning.

Aghajanyan, however, countered that the Georgian market is even more liberated today than under the previous government. He noted that drastic reform was a way of survival for the Georgian economy. "It was necessary to sharply change the situation and they did it. It was the first phase, today the situation has changed a bit, now they are trying to gradually regulate it," he said.