Real estate was, is, and always will be a consistently predictable, low-risk industry. It will therefore always be attractive to invest in real estate” – Giorgi Jakhutashvili, The Honorary Consul of the Republic of Kazakhstan in Georgia

Kazakhstan is one of Georgia’s most important partners in the region. The cooperation between the two countries is developing and deepening each year, which is reflected in the growth of Kazakh investment in Georgia. What does the economic window to Kazakhstan mean in practice, and what type of investment can we expect in the near future? How big is the interest towards the real estate sector? Property Georgia discussed these and other interesting issues with the Honorary Consul of the Republic of Kazakhstan in Georgia, Giorgi Jakhutashvili. Boasting many years of experience, he graduated from the European School of Management (ESM) in 2006 and went on to head the Agricultural Projects Management Agency. He is currently managing the diverse investment portfolio of Kazakh investors, including the investments in the real estate sector.

 - Diplomatic relations between countries can take many different forms. Based on your experience, how would you assess the role of diplomacy and its impact on business relations and investment activities?

- Diplomatic relations between countries are built on trust. The goal is to attain the format and level of cooperation that benefits both sides. In the end, the economy and business are most important. Countries prioritise two issues in their relations: first, security, mutual assistance and cooperation on international stage, and secondly, economic ties that are established by businesses beyond the diplomatic arena. Diplomacy can identify artificial barriers that hinder economic relations, while businesses must take advantage of the results achieved through diplomacy.

- What can you tell us about Kazakh investment in Georgia today, the mood of the investors and the future prospects?

- As you know, Kazakhstan started to conduct private and state investment in Georgia in 2006, when our country was positioning itself as the premier economic reformer in the region. Since then, Georgia has remained a place of interest for Kazakhstan from a logistical point of view. The then-President of Kazakhstan instructed public companies to start investing in Georgia, which resulted in significant investments: the Batumi terminal, Rompetrol, investment in the banking sector, renovation of the Likani Hotel, and restoration of air travel between the two countries. Naturally, the private sector also became interested in Georgia. However, then came the setbacks in the form of the 2008 Georgia-Russia conflict and the global financial crisis. This was followed by a change in government and in numerous approaches. The Kazakh side expected business to be a priority, but direct communication deteriorated. At the same time, many countries beyond Georgia saw the need for reforms. One example is Uzbekistan, which imitated Kazakstan in creating many alternatives. That is the historical background. As for the situation today, I can see good prospects for changing and reversing the current attitudes. The Kazakh-Georgian capital is definitely interesting, if only to diversify the investment portfolio. A private investor can conduct investment in several countries, and our goal must be to ensure that Georgia is part of these investment packages.

All foreign representatives and investors are looking for high-quality service in other countries, the same way that ordinary tourists are looking for quality service in hotels. We currently do not have five-star service for investors in Georgia. We cannot afford to like or dislike someone. We must be open for everyone, while considering risks and insuring ourselves against them.  

- What areas of real estate are Kazakh investors interested in?

- Real estate was, is, and always will be a consistently predictable, low-risk industry. It will therefore always be attractive to invest in real estate. I would say that interest is higher in the medium and low-level investment segment. Large investments in traditional real estate, apartment construction, shopping malls, business centres and similar projects are rare in Georgia. Investors are looking for a stable return, and they are mainly interested in small and medium-scale real estate: flats, apartments and boutique hotels which they individually purchase and operate. This creates a heightened sense of ownership. Naturally, this stems from the attitude towards private ownership in post-Soviet space.

- You mentioned in one of the interviews that Kazakh investment worth USD 70 million is being prepared, including the balneological project in Shovi. Can you tell us more about this and other planned projects?

- The story of the Kazakh investor becoming involved in Shovi also starts in 2006. Private businesses began investing in Georgia and purchasing various properties, including the balneological resort in Shovi. However, the war and the financial crisis delayed this process. In 2016, we jointly began working towards developing the Shovi resort, which is one of the few untouched resorts in Georgia that has not yet been spoiled by chaotic construction. We prepared a concept for developing the resort with help from the international auditing and consulting firm Ernst & Young. We also brought in an Austrian company with a lengthy experience in planning highland resorts. It is worth noting that although the Kazakh investor owns 60% of the resort, we planned 100% of the project as a joint system. We also settled on the recommendations for developing the area beyond the resort. We then analysed the Shovi mineral water with the help of German specialists and found that it is possible to establish a balneological resort here.

The goodwill and positive mood of the Kazakh investors are very important. They have already invested more than a million Lari in restarting a halted project, which is no small sum to invest in Georgia today, especially against the background of the pandemic. Moreover, the resort is located in one of Georgia’s low-income areas. This project can bring in substantial direct and indirect revenues and create jobs.

The status of the Honorary Consul plays an important role in establishing trust in this particular case, too. The Kazakh investors did not fully trust the country’s institutions, while the government did not expect a project that had been shelved for 10 years to still be attractive for any specific investor. We plan to start construction in Shovi in 2022 and welcome tourists stage by stage.

- Is the embassy planning any additional activities to attract Kazakh investors?

- As you know, the embassy and the honorary consulate are separate institutions. Our joint initiative is to create a Kazakh-Georgian economic union that will work in four key directions – investment, commercial relations, supporting tourism and enhancing cultural relations.

- If Property Georgia, the international hub for local real estate, was to share Georgian investment projects with you, would this be of interest to the Embassy of Georgia in Kazakhstan?

- Well-packaged, low-risk and predictable investment offers are always interesting for investors. I believe that in the current environment, it would be worthwhile to consider projects in the 5-10 million range.

Author: Nikoloz Skhirtladze