U.S.A, Europe, Asia, – David Saganelidze has established strong partnership ties with top decision-makers from all around the world. CEO of Partnership Fund befriended Georgia with international investors. With over $1.5 billion financing allocated for 17 projects, the Fund aims higher. From Start-Ups to giant corporations, – partnership deals are on the table.
International relations are on you top agenda. Let’s talk about the U.S.A where you’ve recently had an official visit as the Head of the Partnership Fund. How promising would you say U.S-Georgian business relations are?
The United States of America is Georgia’s strategic partner and the projects supported by our American friends have always worked out for the best interests of both countries. My recent official visit, conducted in Washington DC, New York and Chicago, has been a succession of this mutually beneficial cooperation practice. I’ve returned in Georgia with a significant feedback, one of them being the start of the new partnership era with the Overseas Private Investment Corporation (OPIC). During the meeting held with the top management of the U.S. government’s development finance institution, we discussed the funding options for carrying out new projects in Georgia. Up to now, the Overseas Private Investment Corporation has invested over half a billion dollars in 50 projects in our country. The meeting was also attended by the representatives from Gazzele Foundation and we’ve agreed on implementing a very useful project that will, in the first place, benefit SMEs in Georgia. My visit in the United States included business-oriented meetings with American politicians, congressmen and representatives of State Department-I made friends with during my 16-year career as a Georgian MP. Advice given by the leaders of this superpower country, is considerable for Georgia’s economic development, which is my major concern. Attracting new investments has been my main subject of care while meeting representatives from financial sectors of Chicago as well. I also met with the students and professors of the University of Chicago.
Speaking about Georgia’s economic perspectives on international markets, how well is the country performing in terms of already signed DCFTA with EU and how realistic do pending FTAs with other countries look?
Georgian market is developing gradually to meet EU standards. What Europeans and business representatives from other countries from all around the world admit is that Georgia offers a favorable investment climate: safe business environment, well-performing tax system, free industrial zones, DCFTA with Europe.
As for trade relations with other countries, Georgia’s signing FTA with China is of paramount importance, meaning that Europe will have additional interest in Georgian market to move production in our country so that to get eligible for free trade benefits with People’s Republic of China-this makes Georgia a unique country in the region.
I get my hopes up that FTA with the U.S.A will also be agreed in near future. This, after EU and China, will be another breakthrough for Georgia’s economy.
Partnership Fund has active relations with China. Based on your constant meetings with Chinese officials and business representatives, would you say Georgia should further expect large Chinese investors like Hualing Group coming?
During the last three years I’ve been personally negotiating tea and silk production in Georgia with Chinese high officials. These are the fields that People’s Republic of China considers as part of its culture and commercial aspect is of a secondary importance. I convinced Chinese authorities that Georgia has a big potential to develop these businesses properly. Our country was once known for tea production and we can regain the fame. This is where I see job creation in regions. Imagine the number of human resources tea plantations cultivated on 12 000 hectares will require. What’s most important, it’s a long-term project targeted at Georgia’s economic development.
To sum up, as the CEO of Partnership Fund, the organization that is a partner of businesses, how would you assess Georgia as a partner country?
Georgia is becoming a better partner country. There was always a question mark regarding political stability issue.
During the last two and a half decades we’ve witnessed the worst, the hardest being the Civil war and the war with the northern neighbor. Here, let me also add that previous government was not the best experience for our population either. Today, we’ve left all that behind and have learned a good lesson, upcoming elections will once again confirm it.
What’s your view of investor-behavior during the preelection period in our country?
With elections coming up investors get cautious and it’s natural. However, in Georgia today we see no reason for concern in this regards. I dare say our country is doing perfect when it comes to doing business. The four projects only, signed by Partnership Fund recently, can serve as an ample example of how favorable Georgia’s business climate truly is. Radisson in Tisnandali was given a new life and the first international brand hotel will enter Kakheti region. The other grand project signed is Gino Green City at Tbilisi Sea. Another important news is an agreement with Ytong-the company producing energy-efficient construction materials. Last but not least, we’ve signed a project of national importance with Spanish company DeRaza Iberico on raising pigs of Georgian breed and their commercialization on international markets. Apparently, these pigs are very rare and few, around 100-150 and are found only in mountainous regions of Racha, Svaneti and Kakheti.
Partnership Fund works in two main directions: co-financing of projects at their initial stage of development and asset management of state-owned companies. Regarding the first, if we look at the last 5-years activities, how would you evaluate the Fund’s activities?
It’s a great honor for me to head the organization that owns Georgia’s top important strategic assets. Partnership Fund is the implementer of government’s vision; the organization provides financing for the projects that are of no or little interest for financial institutions. Such projects, as usual, are start-ups or regional businesses that do not bring much profit. Job creation, export-focus, import replacement policy-all the three aspects are of high importance for the country’s economic development and when a project is economically-driven, we’re in. Partnership Fund provides equity financing, mezzanine and in some cases subordinated loan. The Fund’s participation in projects is limited to minority share (up to 50%). When the company performs well enough to continue doing business on its own, it can buy back the share owned by Partnership Fund for the same initial price that the Fund has invested in it. This is the main attraction for local businesses, who are short of finances and are willing to push business forward. As for foreigners, Partnership Fund as a government organization is what matters; this way they get more safety and a good partner or a business guide you may as well say.
Honestly, since we’re talking about the five years of the Fund’s activities, I’ll say that there have been ups and downs. I personally joined Partnership Fund a year ago where I was welcomed by the team of professionals doing their job with diligence. However, I saw there was lack of projects and intensified activities in this direction. As a result, today we are proud with doubled or even almost tripled number of multi-million dollar deals on our investment portfolio.
While on the one hand we’re working on attracting more projects, on the other hand we’re looking at right sectors for our activities and agriculture is the top priority for Partnership Fund as well as industry, tourism and education.
In all this we’re not alone, international financial organizations are always there to give a hand. We have very good relationships with: The Eurasian Foundation, Asian Infrastructure Bank, International Financial Corporation (IFC), European Bank for Reconstruction and Development (EBRD) and Overseas Private Investment Corporation (OPIC).
Greenfield and Brownfield financing, which of the two is more attractive for Partnership Fund?
Indeed, Brownfield is more attractive since companies with experience are more reliable and less risk-carrying. In order to level up, business may need additional lines for development, which means raised demand for extra financing and this is when they refer to Partnership Fund. As for Greenfield, Start-Ups are big risk-carriers, we certainly provide financing for them, however, this is never a large-scale funding.
Talking about Greenfield, how would you assess the 1st phase of Strat-Up Georgia and what do you expect from the second phase of this grand project?
Start-Up Georgia, initiated by Georgian Prime Minister Giorgi Kvirikashvili, is an unprecedented project targeted at youth. The goal of this grand mission is to bring fresh blood in business, give young people chance to let the world share their achievements in the fields of innovation and technology. GEL 11 million was allocated for Start- Up Georgia’s 1st phase, out of which Up to GEL 3 million will be spent in innovative projects and GEL 2 million-in technological start-ups. The project budget will reach GEL 35 million for the next phase. Experts from Silicon Valley already confirmed their readiness to get involved in the second phase as well. In the first phase, we had 726 applications reviewed and in regards to technological direction 51 got shortlisted, in the end 20 winners were awarded GEL 100 000 each. In terms of innovative competition, we have 36 winners. My only concern about the first phase is that Tbilisi was the main driver of the competition and regions were not active enough. Hope, second phase will attract more projects from outside the capital. It should be stressed that Partnership Fund will continue working with the applicants whose projects didn’t succeed, together with invited field experts we’ll be organizing thematic seminars and workshops for them.
Start-Up Georgia is truly a unique opportunity to take a chance on. Co-financing by Partnership Fund makes 90%, which is almost a grant offer.
The Fund was created on the basis of consolidating the ownership of the largest Georgian state owned enterprises operating in transportation, energy and infrastructure sectors (Georgian Railway, Georgian Oil and Gas Corporation (GOGC), Georgian State Electrosystem, Electricity System Commercial Operator, JSC Telasi). There are constant talks about the management system of state-owned companies. What’s your view, is there anything that has to be changed?
Yes, Partnership Fund is in charge of financial asset management of the above-mentioned state enterprises, but we do not interfere in direct management process. The only income of the Fund is the dividends received from these enterprises, plus the possible investment return from the daughter companies we’ve founded. I must admit that I’ve always been having a different view on the management policy of the state-owned companies. There are talks ongoing regarding this subject with German government-owned development bank (KfW) and International Monetary Fund (IMF). My point is that state interest should be considered but certain structural changes within the Fund have to be made. U.S.A, Great Britain, France, Japan, China, Russia, Turkey, Romania, Hungary, Azerbaijan-all these countries operate the institution of a Development Bank and in Georgia we have Partnership Fund instead. What I say, again, is that the Fund needs structural refreshment and it’s up to the economic team of the government to approve.
Politics has been a battlefield for David Saganelidze for 16 long years. It was a year ago that you were appointed the CEO of the Partnership Fund. Would you say your today’s position is where you belong or do you still have an eye on politics?
Decision was made by the government, I agreed and took responsibility over Partnership Fund, but before I left the Parliament. In regards to my political career, what I’d like to say is that I’ve always worked for the country’s best interests. Back in 2011 I left my political party that I founded together with my friends in 2000, the reason being that I saw the party was taking a wrong turn. Afterwards, during the pre-election period in 2012 I decided to join Georgian Dream-the team that I believed was Georgia’s right choice. Partnership Fund, for me, as for a successful business person of early 90s moved to politics in the beginning of 2000 s, is far more suitable workplace. As I already mentioned, here I’m dealing with a team of professionals who I trust and have confidence in. Every team needs a leader to move the job well done to the right direction and that means moving forward as always. With my leadership and the great team, the Fund has all of it.
I have grand plans within Partnership Fund for future, intentions are ambitious and some may take time, but will eventually succeed and work for Georgia’s better future.
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COMPLETED PROJECTS
Rukhi Multifunctional Trade Center
Location: Zugdidi, Rukhi village,
Samegrelo region
Total investment: Gel 15 million
Opening Date: February, 2016
Vanrik Agro
Blueberry Plantation and Processing
Plant-Vanrik Agro
Location: Laituri, Ozurgeti, Guria region
Total investment: $ 6.7 million
Opening Date: June, 2015
Panex
Construction Material Factory-Panex
Location: Rustavi, Kvemo Kartli region
Total investment: $6 million
Opening Date: July, 2015
Combined Cycle Thermal Power Plant
Location: Gardabani,
Kvemo Karti region
Installed capacity: 230 MW
Opening Date: August, 2015
5 Star Hotel Rixos Borjomi
Location: Borjomi,
Samtskhe-Javakheti region
Number of rooms: 151
Total investment: $48 million
Opening Date: January, 2015
Sairme Resort
150 room Hotel and Spa Center
Location: Sairme, Imereti region
Total investment: $10 million
Opening Date: 2012
Hotel Gino Wellness Spa
38 Room Hotel Gino Wellness Spa
Location: Akhaltsikhe, Samtskhe-
Javakheti region
Total investment: $5 million
Opening Date: April, 2013
Kalanda
Hog Farm Kalanda
Location: Koda, Kvemo Kartli region
Total investment: $5 million
Opening Date: June, 2013
Hotel Royal Batoni
32 Room Hotel Royal Batoni
Location: Kvareli, Kakheti region
Total investment: $2.5 million
Opening Date: June, 2013
ONGOING PROJECTS
Kasleti 2
Hydropower Plant on the river Kasleti
Location: Khaishi, Svaneti region
Installed capacity: 10 MW
Total investment: $12million
Opening Date: 2017
Lukhuni 2
Hydropower Plant on the Lukhuni River
Location: Ambrolauri, Uravi village,
Racha region
Installed capacity: 17 MW
Total investment: $26 million
Opening Date: 2018
Hotel Hyatt Regency
Five Star Upscale Hotel Hyatt Regency
Location: Tbilisi
Number of rooms: 170
Total investment: $65 million
Opening Date: 2018
Composite Materials’ Production
Factory for Civil Aviation
Location: Tbilisi
Total investment: $85 million
Opening Date: 2017
Imerety Greenery
Greenhouse complex
Location: Samtredia, Imereti region
Total investment: $4.6 million
Opening Date: June, 2016
Hotel Best Western
Three Star Hotel Best Western
Location: Kutaisi, Imereti region
Number of rooms: 45
Total investment: $3 million
Opening Date: March, 2016
Nenskra HPP
Hydropower Plant Nenskra
Location: Mestia, Chuberi,
Svaneti region
Installed capacity: 280 MW
Total investment: $1 billion
Opening Date: 2021
Hotel Radisson Tsinandali
Five Star Hotel Radisson Tsinandali
Location: Tsinandali, Kakheti Region
Number of rooms: 104 room
Total investment: $30 million
Opening Date: 2017
