KUTAISI: Standing amidst a wasteland of abandoned and rusting factories, Mohammed Refat represents the new, and unlikely, face of foreign investment in ex-Soviet Georgia. As he watched over workers renovating an enormous space in a disused car factory in Georgia s western city of Kutaisi, Refat gushed about his Egyptian firm s plans in this tiny republic. Within a year-and-a-half, 3,000 people will be working here, said Refat, vice-president of Cairo-based home appliances maker Fresh, as he laid out ambitious plans for assembly lines and offices. Fresh is the latest in a string of Arab companies flocking to invest in Georgia, in defiance of the global economic downturn, lingering concerns over last year s Georgia-Russia war and a domestic political crisis. With overall foreign investment in Georgia plummeting, companies from Arab countries - despite having few historical or cultural links with the country - are bucking the trend. Total foreign direct investment in Georgia fell by nearly 80 percent in the first quarter of 2009 compared with the same period last year, to $124.7 million (?89.4 million), the statistics office said this month. The government admits that the war and more than two months of opposition protests this year have badly damaged investor confidence and it predicts Georgia s economy will contract by 1.5 percent in 2009. But the situation would be far worse were it not for Arab investment. The United Arab Emirates - ranking as the top foreign investor in Georgia - accounted for more than 40 percent of to the total in the first quarter. The key for Arab companies like Fresh, Refat said, is Georgia s location at the crossroads of Europe, Asia and the Middle East, making it an ideal export hub. Georgia s location is very important, he said as he drew out a map with lines reaching from Georgia to Turkey, eastern Europe and Central Asia. We studied Georgia s geography and its history and found a lot of advantages. Refat said the project in Kutaisi will see $1.2 billion (?860 million) invested in transforming parts of the derelict Kutaisi Automotive Plant, which once employed 20,000 workers but was shut down after the collapse of the Soviet Union, by the end of 2010. Fresh will use the plant to assemble home appliances for export and has lined up three or four other Egyptian companies to set up shop in the factory in order to feed it with materials, Refat said. A local subsidiary, Fresh Georgia, will be set up with a Georgian partner and production is due to start in August. The Kutaisi project will be designated a free industrial zone, meaning Fresh and other companies operating there will pay neither taxes nor customs duties on exports. The Fresh project follows on a series of enormous investment announcements by companies from the UAE. The investment arm of one of the emirates, the Ras Al Khaimah Investment Authority (RAKIA), announced plans in February to invest about $2 billion (?1.4 billion) in Georgia over the next five years. Other Emirati companies, such as the Abu Dhabi Group and Dubai-based Vtel Holdings, have also announced multi-million-dollar investments in Georgia. In Kutaisi, Georgia s second-largest city, the Fresh investment is being heartily welcomed after the collapse of the city s industrial base and nearly 20 years of decay. People here want to work but there are no jobs, said Gia Jorjoliani, an unemployed local resident. It will never be like it was in Soviet times but I hope this project happens because a few thousand jobs will change a lot of people s lives. Still, the increasing level of Arab investment in Georgia is not without controversy. Some analysts have raised concerns about a lack of transparency in some of the deals involving Arab companies and questioned whether investment amounts are being exaggerated. RAKIA in particular has come under fire, with Georgia s opposition accusing it of interfering in domestic politics and colluding with the government. In February, the company s local unit RAK Georgia Holding bought a television station, Imedi, that was once the country s leading pro-opposition channel. The opposition says it no longer features reports critical of the government. The kind of capital that does not require stability in the country can be shady, controversial money, Tbilisi-based economic analyst Lado Papava said. Nobody has comprehensive information about some of these Arab investors.
