This interview will appear in the 4Q Y2013 (January 2014) issue of the Sovereign Wealth Quarterly.
This is a deep dive with Irakli Kovzanadze, CEO of Georgia’s JSC Partnership Fund.
1. How does Georgia plan on improving its investment climate?
Through the past decade, Georgia has experienced significant positive changes that were reflected in several indicators and ratings, such as the “Ease of Doing Business” survey, conducted by the World Bank: Georgia moved from 112th place in 2005 to 8th in 2014. In addition, Georgia has been considered as one of the “top reformer” countries.
Georgia has a simplified tax and customs legislation and a favorable market environment. During the past decade the number of taxes was reduced from 21 to 6, and today Georgia is one of the lowest-tax countries in Europe. Moreover, the Government has successfully implemented deep deregulation reforms (limiting state intervention). Due to its strategic location, Georgia is a logistic corridor for the region connecting Europe to Asia.
Georgia has a Free Trade Agreement with CIS [Commonwealth of Independent States] countries and with Turkey. It also enjoys GSP+ [Generalised Scheme of Preferences Plus] with the EU and the U.S. Georgia has recently signed a Deep and Comprehensive Free Trade Agreement with the EU to further simplify trade and export opportunities. The DCFTA will be enforced in 2014.
Further, to improve the investment climate, Georgia plans to reduce state intervention even more and to promote the development of SMEs [Small and Medium Enterprises].
We’ve made tremendous progress in deregulation and the liberalization of the national economy. Currently, the major challenge is to achieve proper utilization of all the abovementioned and to exploit the comparative advantages of our country. This should in turn ensure a new wave of potential investors to solidify Georgia’s superior position as an investment hub relative to other regional economies.
2. Can you please illustrate the reasons for creating the JSC Partnership Fund?
The goal of creating the Partnership Fund (PF) was to promote investment in Georgia by providing the financial instruments (such as equity co-investment, mezzanine financing, etc.) to the market where private equity was at its initial stages of development.
The PF target sectors are energy & infrastructure, manufacturing, agriculture, and real estate/tourism.
The government of Georgia established the JSC Partnership Fund in mid-2011. The fund is 100% state owned. It is overseen by a supervisory board, which is headed by the Prime Minister of Georgia, Irakli Garibashvili.
The PF has several strategically important assets under management: Georgian Railway (100%), Georgian Oil and Gas Corporation (100%), Georgian State Electrosystem (100%), Electricity System Commercial Operator (100%) and JSC Telasi (24.5%). It’s assets under management total roughly US$ 3 billion.
The current strategy of the PF is to attract and to support private investors by complementing the equity with co-investments in profitable and attractive projects.
Georgia’s tourism advantages include an excellent location, a diverse climate, culture, hospitality and a variety of protected areas and destinations (winter and summer resorts) in the region.
3. Is the partnership fund alone a large enough catalyst to jumpstart private investment into Georgia?
The PF is one of the largest companies in Georgia; however, no single entity (despite its size) can catalyze investment by itself. The key catalyst of investments is a business-friendly environment enabled through liberal economic policies and a high degree of economic freedom; the PF is one of the components required to address the almost non-existent private equity market in Georgia.
4. When selecting co-investors for the JSC Partnership Fund, what sort of traits do you look for in partners and investors? Is there a minimum capital commitment amount?[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
The People’s Bank of China (PBOC) created a new department to oversee and attempt to eliminate financial risks to the system. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
Legg Mason Inc., a Baltimore-based asset manager, has announced a reduction in workforce as is prepares to streamline operations and save money. Legg Mason’s leadership commented that assets under management fell 5 % year-on-year. Legg Mason currently manages US$ 727.2 billion (as of December 31, 2018), which is down from the previous US$ 767.2 billion. CEO Joseph A. Sullivan noted that a global operating platform will centralize fund administration, IT, and other departments that work with affiliates. Sullivan did not discuss the number of layoffs expected, or specify which areas would be impacted. Legg Mason disclosed they planned to close a quarter of its exchange-traded funds in March 2019. These three ETFs include a U.S. strategy, emerging markets, and a developed markets strategy outside the U.S. However, these funds run around US$ 28 million in assets under management.
[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]
On February 12, 2019, the Monetary Authority of Singapore (MAS) revealed the creation of a Corporate Governance Advisory Committee (CGAC). CGAC was formed to advocate for good corporate governance practices among listed companies in Singapore. Bobby Chin, Director of Singapore Telecommunications Limited, will be the Chair of CGAC. According to a MAS press release, “CGAC will identify current and potential risks to the quality of corporate governance in Singapore.”
MAS formed the Corporate Governance Council (Council) in February 2017. The Council was dissolved after it pushed out a publication of its final recommendations on August 6, 2018.
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