Wednesday, 09 May 2001

THE GEORGIAN RIVIERA: DREAM OR REALITY?

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By Archil Kekelia (5/9/2001 issue of the CACI Analyst)

BACKGROUND: Tourism in Georgia, as pretty much all sectors, is experiencing severe hardships. Probably, tourism is the only sector which was affected by collapse of other sectors altogether – agriculture, transportation, energy sector, as well as factors like finances, customs, international relations, environment, etc. As a result, the tourism industry, which once was the country’s most developed sector, is hardly breathing.

BACKGROUND: Tourism in Georgia, as pretty much all sectors, is experiencing severe hardships. Probably, tourism is the only sector which was affected by collapse of other sectors altogether – agriculture, transportation, energy sector, as well as factors like finances, customs, international relations, environment, etc. As a result, the tourism industry, which once was the country’s most developed sector, is hardly breathing.

During the Soviet period, Georgia with a population of less than five million and a territory of less than 70 thousand square kilometers (slightly smaller than South Carolina) ranked third by number of tourist resorts in the former Soviet Union, after Ukraine and Russia. Georgia’s potential for tourism is obvious. Its splendid nature, diverse landscape, Black Sea subtropical zone, mineral resources, ever snow-covered mountains of the Caucasus gorges, and numerous cultural and historic monuments were the foundation of its thriving development and should become a prerequisite for its future development too. In 1980, 6.4 million tourists, including 170,000 from abroad, visited the country. In 1999, only 387,000 tourists came to Georgia, and in 2000 this number was even smaller. This radical decrease is due primarily to instability in the country and the region, the high crime rate, which is related to the first factor; poor infrastructure; the small number and bad quality of hotels, especially in the provinces; corruption; and lack of funds – a crucial factor.

IMPLICATIONS: Large amounts of foreign investments are necessary for Georgia’s tourism industry to develop to international standards. However, certain problems need to be solved before this issue can be addressed. Several crucial elements for potential investors are not satisfied. Investors are looking for Information about the country, which may exist, but is definitely not very attractive to the investor: wars, corruption, economic slump, etc; Guarantees for normal functioning of the business, which the government of Georgia is unable to provide, despite its promises; Infrastructure, the lack of which, again, is another proof of Georgia’s economic weakness.

If at least the above-mentioned provisions are warranted, and proper management is implemented, the tourism sector should start bringing profit in merely 5-10 years, much faster than would be the case in other industries, like heavy industry, which needs decades to be profitable. In terms of global national incomes, tourism is second only to the oil industry. Georgia is neither Kuwait, nor Azerbaijan, and hence should look for income precisely in tourism. However, investments should not be allocated quasi-purposefully, as has been the case in numerous sectors, including tourism. Particularly, several special state-owned tourism development funds have been investing state money in their dachas or start-up of their own private businesses.   

Although far from desirable, quite large investments have already been made in Georgian tourism. “Hotel Tbilisi”, a Georgian-American venture, has invested $50 mln. in building two Marriott hotels in the capital – “Marriott Tbilisi” and “Courtyard by Marriott”, upon executing the agreement with Marriott Hotels International. In the period of construction, $4 mln will go to the state budget, and about $2 mln. annually after the completion of construction works.  So far, Tbilisi has been the center of investments, while the country’s current situation unconditionally requires allocating more investments in the provinces. But Tbilisi’s importance as the nation’s capital and a potential future center of the Caucasus should not be underestimated: the past is the prove - it can successfully serve as a transportation, tourism and cultural center of the region. The air connections to Tbilisi have been quite efficient in the last couple of years, and its airport can become a major hub connecting Europe, Russia, Central Asia, the Middle East, Turkey, etc. The potential of Black Sea ports of Poti, Batumi, Sukhumi should also be taken into account.   

CONCLUSIONS: Besides needed revenues, an increase in tourism will produce a large number of employment opportunities, benefit the development of infrastructure, and stimulate national production and service, as well as science, technology and healthcare. Georgian environment will also be taken care of. The world’s powerful nations will be interested in keeping Georgia stable and the country will have all the conditions for rapid growth. Today, an average tourist from a developed country brings about $1,550 per week. By the forecasted data of the Department of Tourism, the country can attract at least a million tourists by 2005, which will bring revenue of $1.5 billion to the country. For a small state like Georgia, this is an immense amount. Georgia should follow the Israeli example: about 20 years ago, the country borrowed some $ 20 mln. from the World Bank and spent it purposefully. The results of this are clearly visible in Israel. Georgia, with its well-known President Shevardnadze, could easily borrow a similar amount. And in case of the purposeful allocation of this money, Georgia should not be facing a problem of repayment, as it does, for example, in the energy sector. And perhaps, as soon as in 10 years from now, Georgians and tourists alike will be enjoying cocktails on the balcony of a 5-star hotel on any of the beaches of the Georgian Riviera.      

AUTHOR BIO: Archil Kekelia is a Senior at the Department of Economics, Tbilisi State University. 

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The Central Asia-Caucasus Analyst is a biweekly publication of the Central Asia-Caucasus Institute & Silk Road Studies Program, a Joint Transatlantic Research and Policy Center affiliated with the American Foreign Policy Council, Washington DC., and the Institute for Security and Development Policy, Stockholm. For 15 years, the Analyst has brought cutting edge analysis of the region geared toward a practitioner audience.

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