Investment in Georgia is, in practice, a PR campaign07.04.2009 | 17:43
The Georgian government and the Egyptian company FRESH signed a memorandum on 6th April providing for mutually beneficial cooperation. In order to carry out the grandiose project for establishing a free industrial zone in Kutaisi, the Egyptian investors are apparently intending to invest an unprecedented amount of money in the country's economy.
Is it realistic to carry out such a grandiose and too brave - considering the political situation - a project during this global economic crisis? For the authorities this is a demonstration of economic success and their fight against the crisis, and yet another opportunity to earn themselves some political points: after all, it would mean that even in the current situation investors trust in Saakashvili's team. Hence Minister for the Economy Lasha Zhvania declared: "The Egyptian Fresh Electric company is investing up to $2 billion in developing the Georgian economy. It is the largest project for 2009. There has not been such investment in the country before."
The memorandum provides for the creation of a free industrial zone (FIZ) covering 27 hectares at the Kutaisi Car Factory. A series of multi-functional factories manufacturing everyday items - furniture, textiles, ceramics - will be built there. Finished products will start to be released as early as June 2009. Because the Egyptians are willing to invest $1.2 billion this year. By the end of the year, more than 2000 Georgian citizens will apparently find work at the FIZ. "Moreover, the free industrial zone will guarantee certain injections into the service infrastructure through transportation and communications, as well as commercial establishments involved in services for the staff working at the FIZ," reported Lasha Zhvania.
According to media reports, Mikheil Tigishvili, head of the Georgian International Holding company, helped to bring the Egyptian investors to Georgia. For the last 15 years he has lived and worked in the USA, and even obtained a certificate from the US Senate allowing him to develop the economy of New York state. However, as nregion.com writes, in Georgia itself nobody had heard about Mikheil Tigishvili's business achievements before.
According to information available on the Fresh Electric Company's official website (www.fresh.com.eg), the company was founded in Egypt in 1987. It started with just one small factory, whereas now it is the local market leader in everyday electronic equipment.
The company's manufacturing output is concentrated in Egypt, from where finished products are then exported to 25 countries in Europe, Africa and South-East Asia. The manufacturing and office space occupied by the company's buildings comes to about 80 hectares, and it employs 2500 people in total. The company has produced three hundred different models of air-conditioners, televisions, washing machines and dishwashers, food processors, irons, hairdryers, gas cookers and other electronic household appliances. Its annual turnover is more than $95 million, and its total market capitalization is about $44 million.
Meanwhile, quite different statistics are being published in the Georgian media. It is being written that the Egyptian company's pure profits come to $950 million, which is 10 times more than its official annual turnover. It is unclear how a company with a capitalization of approximately $44 million can invest up to $2 billion in the creation of a free industrial zone. Moreover, it is unclear why only 2500 people are employed at the Fresh Electric Company's manufacturing plants in Egypt, which take up 80 hectares, when in Georgia 12-15,000 people will be employed in an area of 27 hectares.
The Georgian expert Emzar Djgerenia thinks that the construction of a free industrial zone in Kutaisi is simply an illusion. "It is doubtful that the Egyptian businessmen concerned will carry out investment of $1.2 billion," he told the Georgian radio station Kommersant. And many of his colleagues have greeted this unprecedented investment activity from the Egyptians with some concern. If the Arabic investor Rakeen Development feels free-and-easy in Georgia, there is every reason for this. Representatives of the opposition, as well as several economists such as Gia Khukhashvili and Niko Orvelashvili, are sure that Georgian officials are behind this company. Otherwise it is impossible to explain why assets previously belonging to the late oligarch Badri Patarkatsishvili (TV and Radio Imedi, Standartbank, the Mtastsminda park etc.), passed into the hands of this company.