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New factory a signal for other investors

By Salome Modebadze
Wednesday, July 7
The German Knauf cardboard pile manufacturing factory, well known for its drywall gypsum boards, opened its factory in Tbilisi on July 6 as part of the Mayor's '120-day programme'. Vera Kobalia, Minister of Economy and Sustainable Development, expressed her absolute confidence in Georgia’s economic prosperity and prospects of attracting more investments. “Today’s event is very important for our country, because it’s the right approach for attracting more international investors as it provides them with another example. What’s more 160 people have already been employed and production will soon be exported to Armenia, Azerbaijan and hopefully other countries as well as being sold domestically,” Kobalia stated.

Mayor of Tbilisi Gigi Ugulava stressed that each new day, full of innovations aimed at employing Tbilisi citizens, is a special date for the country. “Maybe a particular opening ceremony lasts just half an hour but the entire cycle preceding and following it is an industrial process which needs hard work,” Ugulava said, explaining how difficult it is to attract new investors' attention due to the present world economic situation.

Knauf is an international company originally founded in 1932. It produces building materials and construction systems including materials for drywall construction, plasterboard, cement boards, mineral fibre acoustic boards, dry mortars with gypsum for internal plaster. It also produces cement-based external plaster and insulating materials, glass wool, stone wool and other insulation materials. It has more than 150 production sites worldwide and is one of the seven producers who hold approximately 81% of the worldwide wallboard market.

Knauf is the biggest investor in the construction sector in Russia, Ukraine, Kazakhstan and the former Soviet Union in general. The Knauf factories in the CIS, Mongolia and Georgia send their production to the market in the form of complex systems. The Knauf production manufactured in these countries corresponds to international construction standards and provides the opportunity for facing jobs to be done at less expense and better working or living environments to be created by instilling the appropriate microclimate in the rooms.

“Despite the global economic crisis Knauf has retained its leading position in the field of building material production. We actually madeour first investments in Georgia two years ago and now the factory will be able to produce 60 million square kilometres of Knauf paper. The factory has been modernised and equipped with all the relevant technologies. These are ideal conditions for industrial development and I’m absolutely sure of our company’s success in Georgia,” Gerd Lenga, General Director CIS Knauf Group, told the Georgian media.

Knauf purchased a cardboard pile factory in Tbilisi on December 29, 2008 and reconstructed it. More than 20 million Euros were invested in the purchase and reconstruction. A gypsum factory is also under construction at a cost of EUR 9 million which according to the Government of Georgia will create more jobs and will give unemployed Georgians a wonderful chance to begin their careers.

Georgian analysts definitely welcome the international investor interest, saying that Georgia’s advantageous geopolitical and economical location has interest investors for ages. “Knauf is a serious company with wise management and large financial sources. Such companies have great importance for our country, where most investments are made on the Asian basis,” Davit Narmania told The Messenger. “Georgia is the wonderful source for developing capital for Central Asia, Turkey and other regions. The Caucasus has always been the route by which things are transported between China and Europe, and Georgia can have the same function for South or East Asian countries nowadays. Investments made in Georgia don’t only have local but international importance,” Ramaz Sakvarelidze added. The analysts admitted however that local industry can rarely develop properly in Georgia and local businessmen still need foreign partners to prosper, at least when they need to make large investments.

Meanwhile on the same day Davit Bakradze, Speaker of the Parliament of Georgia, met the Georgian Business Association and spoke about the importance of cooperation. “Our main aim is to encourage the development of the Georgian economy but this goal won’t be achieved without cooperation with the business sector. Thus our continual negotiations are crucial for creating more jobs and employing our citizens,” Bakradze stated. Cooperation between the business sector and the Government will be based on bilateral access to information on the details of reforms discussed by the legislative body.

According to information released by Nikoloz Mchedlishvili, spokesman of Prime Minister Nika Gilauri, the state-owned Georgian Railway is about to issue eurobonds worth USD 250 million. This will be discussed during Gilauri’s visit to London on July 7-8 to compere a roadshow for the eurobond issue, organised by JP Morgan. The exact terms of this have yet to be defined, but it is most likely that five to seven-year eurobonds will be offered, with the funds raised by the issue being defrayed on the Tbilisi bypass railway project. EBRD has provided a EUR 100 million loan to co-finance this new double track railway route 10 km north of Tbilisi, which will divert rail traffic from the centre of the city. This section of railway is part of the main freight route on Georgia's east-west transport corridor.