Ben Aris in Tbilisi -

bne IntelliNews interviewed President Giorgi Margvelashvili, who was elected Georgia’s head of state in 2013 on the Georgian Dream ticket, in his presidential office ahead of the EBRD meeting.

TRANSCRIPT:

bne IntelliNews: How has Georgia been affected by the regional economic slowdown and what are the economic prospects for the country?

Giorgi Margvelashvili: We have been facing problems and our economic growth has been decreasing. At the same time, falling remittances have also caused problems – especially because of the Ukraine crisis. The prediction that we will have 5% economic growth has been reduced to 2%. Of course we are not happy about it, as last year we had 4.7% growth, yet the potential of the country is enormous.

And we have added to this potential. We signed the Deep and Comprehensive Free Trade Area (DCFTA) with the EU, which opens up a market of 500mn high-income consumers to Georgia.

This is an enormous market if you combine it with the 400mn consumers we already had due to other free trade agreements with Turkey and the other countries in the region. Add to this the very low taxation rates, the low crime and local corruption, and one of the highest levels of ease of doing business in the world according to the World Bank survey. Taken together, Georgia is one of the most attractive countries for investment and development.

bne IntelliNews: To what extent is Georgia re-orienting to the European markets versus maintaining its traditional regional markets?

GM: Georgia has a strategic location in the region. Looking at the map you see we are between the Caspian and Black Seas. Georgia is a gateway through which all the assets around the Caspian can pass on their way to European markets.

We have been developing very interesting relationships even with the regions beyond, especially our Chinese friends, and we are very active in developing the whole concept of the “New Silk Road”. An enormous contribution to this project will be a railway that will be opening at the end of this year running from Baku through Georgia to Kars [in Turkey] and linking the major communication systems of Asia with Europe.

bne IntelliNews: Regional relationships between George and its neighbours Azerbaijan and Turkey have been developing especially fast: is a regional bloc emerging?

GM: Georgia has been developing these relationships from the very start. A month ago we launched a joint project that shows the content of our partnership: the three presidents – myself, [Azerbaijan's Ilham] Aliyev and [Turkey's Recep Tayyip] Erdogan – signed an agreement to transport Azerbaijani gas to Italy. The content of our partnership is to secure and deliver stable energy supplies to European markets.

bne IntelliNews: How are you coping with the Ukrainian crisis?

GM: We have had a complicated history with Russia. The main message we are trying to set at this point is that Russia should look at Georgia as an equal partner and try to work with Georgia for our mutual benefit. But of course any relationship must be based on the return of occupied territories to Georgia so the country's territorial integrity is restored.

We believe at some point the politicians in Russia would understand that having a friendly, stable and economically developed Georgia is an advantage, as having prosperous and stable neighbours is an advantage for every country.

bne IntelliNews: Despite the political tensions, economic ties remain strong and the Russian market has reopened to Georgian goods.

GM: The market has reopened and we are happy for this improvement in our relationships. We are working to improve the economic and cultural ties, and hopefully that process will lead to the reconciliation of some of the most difficult issues we are facing.

bne IntelliNews: Do the sanctions on Russia and the counter Russian sanctions on Europe create an opportunity for Georgia?

GM: Sanctions are a method of sending a message in the context of the Ukrainian crisis and the Russian annexation of Crimea. But to be frank our policy is not to try to benefit from other people's problems. Those benefits are always shortlived. What we're looking for is sustainable stability in the region that will create opportunity for the enrichment and the deepening of ties with Russia

bne IntelliNews: The EBRD annual meeting is an opportunity to showcase Georgia; what in particular would you like to draw delegates’ attention to?

GM: We have made a good start, but there is much more to be developed in Georgia. Our energy resources – and I am not just talking about the transit of energy but the endemic potential energy output of Georgia's hydroelectric production - has huge potential. In addition to domestic [electricity] consumption, we can supply energy-hungry south Russia and energy-hungry north Turkey.

The tourism sector is growing fast and we are starting to develop traditional healthcare capacity. There is also great potential in agriculture. But maybe the most interesting is the logistics business. If you look at all the lines of communication passing through the country and you can imagine the logistic capacities that could be developed here.

bne IntelliNews: Moving towards Europe means adopting European values as much as it means lowering import tariffs. Given the country's history and location, is that going to be hard?

GM: Georgia has been constantly European from its very foundation. Georgia has a long tradition of statehood. It has been built on the values that European society developed. I'm talking about values of individualism, respect for differences and religious diversity. And it has been a society that has been able to protect those values in a very complicated environment – much more complicated than in Europe.

There is a challenge to transform the cultural Europeanism character of Georgia into state institutions and traditions, to create what we would call a contemporary liberal democracy. That is the challenge for a country which has a Soviet past.

However, we already have a great record in this respect, because we have been able to change one government with one political party to another with a different political party through peaceful free and fair elections. We have already started to develop and consolidate the democratic process in Georgia.