Tomasz Telma is Director for Europe and Central Asia at the International Finance Corporation (IFC). He is responsible for managing IFC’s activities in this region, including a significant investment program (US$2.7 billion of long-term finance and an average outstanding balance of US$463 million of trade finance guarantees in FY16) and portfolio (US$11 billion committed including mobilization), and an advisory program consisting of over 70 projects in 20 countries.
Tomasz has been with IFC since 1995 with most of his career focused on developing and executing IFC’s investment transactions. Prior to his current assignment, he was based in Almaty, Kazakhstan, as Associate Director for Central Asia and Azerbaijan, and earlier in Moscow as Chief Investment Officer responsible for IFC’s new financial sector investments in the region.
Before joining IFC, Tomasz worked for PlanEcon, Inc., a private US-based consulting and investment advisory firm focusing on Eastern Europe and the former Soviet Union. He studied International Economics and Finance in the Warsaw School of Economics and holds a Master’s Degree in International Business from Georgetown University in Washington, DC.
GEORGIA TODAY sat down with Mr. Telma at IFC’s Tbilisi office to discuss IFC’s history, projects, and visions for the country.
Give us a summary of IFC’s two-decade presence in Georgia and what you’ve achieved here
Georgia is one of those countries where it is easy to talk about achievements due its very strong track record. Over the last decade the country has made very consistent moves in improving the business environment. As you know, IFC’s job is to support private-sector development and growth. Especially in the past ten years, progress in that regard in Georgia has been very concrete. Consequently, when we talk about our presence and our results, it’s actually a very positive story to tell because there are a lot of things that IFC, together with Georgia, has been able to accomplish.
We are just completing a four-year strategy period together with the World Bank; the so-called “Country-Partnership Strategy,” during which we have achieved record results regarding the overall amount of investments that IFC, together with its partners, has been able to make: the amount we invested over the past four years is $1.3 billion, including mobilization. So, relative to the overall size of IFC’s engagement over the past 20 plus years, which is $1.8 billion, it’s really a very significant increase in what IFC has been able to do together with its partners.
In the financial sector, we are working with a number of very successful banks, like Bank of Georgia and TBC Bank. We have a number of engagements in the finance sector that helped allocate financing to small and medium sized enterprises, which represent the bulk of the Georgian economy. The second big direction is what’s been happening on the infrastructure front; especially the power infrastructure: IFC has had a very significant engagement in the hydropower sector over the past half a decade, with an intensification in the last two-three years. Three: working with a number of companies in the agribusiness sector has been able to bring both capital, new technologies, and investments in a number of areas. Four: the health sector. This venture is somewhat newer in our experience, but basically it has overseen the development of private health care provision in the country, taking advantage of what’s happened on universal healthcare access in Georgia, working with companies that actually provide services to the population.
We have also supported bond issuances. Some of these we can call “big firsts”: for example, the first offshore local currency bond issuance by a Georgian corporate, Bank of Georgia; one of the first risk-management transactions some time ago with TBC Bank: these are a few among other things on the investment side that represent our claims to fame in Georgia.
On the advisory side, there has been a very consistent level of support towards developing and strengthening the investment climate for companies; a number of improvements in the regulations for Georgian businesses have been accomplished with IFC’s assistance. One of the outcomes of the focus on business regulation is Georgia’s ‘Doing Business ranking’ at number 16 in the world, among the highest ranked countries in the Europe and Central Asia Region, with Macedonia being the highest ranked (10th).
Is maintaining Georgia’s upwards trajectory going to be a result of leadership from the top or initiatives from the population?
In any environment, it’s both. The job of the top is to create the environment for the so-called ‘bottom’ to flourish and take the initiative. This government has a very clear idea of the things that need to be done and that goes to the fiscal stability of the business environment, but they also have ideas how to make certain reforms in order to make Georgia more attractive, how to increase domestic saving rates, how to build a bit more of a domestic capital market, how to strengthen the level of exports out of the country. There is analysis saying that in order for Georgia to keep increasing its income and rates of growth, the level of exports, which is already quite high, needs to be even higher. So, what are the opportunities for exports of goods and services that are not completely tapped? What are the opportunities for Georgia to increase the productivity of its economy? Those are the types of things that need to be discovered, and identified by the top so that the entrepreneurial spirit can flourish amongst the population, and the most effective and favorable business conditions can be made use of. There is a lot of dialogue going on between the World Bank Group and especially our colleagues at the World Bank, with the Georgian authorities on the things that need to be addressed to enhance today’s growth model for the country. From our perspective, the focus is what kind of investors we can actually bring into Georgia and the kinds of projects and sectors that are most interesting.
Is the current government showing the necessary leadership to achieve this environment?
One or two things that are clear indications of the government being on the right track is what is happening on the fiscal side. If you remember there were a lot of concerns in the past two years about the direction that Georgia is headed; in terms of the level of fiscal deficit, how that may impact the longer-term sustainability of the growth rate. I think the government spent quite a lot of time with the International Monetary Fund (IMF) and our colleagues at the World Bank to see how some of these challenges can be addressed, and today the story is much stronger with a clear indication that Georgia actually is on the right path. Not without challenges, of course, but definitely on the right track. As I said already, rating agencies have picked it up, which is something that is really positive.
I believe that the government has an idea how to tap into Georgia’s potential. However, these things take time; it’s more complicated than just issuing a simple directive. Improving the productivity of rural Georgia, with agribusiness contributing relatively little to the GDP; finding areas of the economy that can effectively increase exports to both help the current account and increase value-added in manufacturing or processing sectors; increasing the level of formal employment and creating more jobs- these things don’t happen overnight.
No one seems to like this question, but what, if any, effect does Russia’s, often unpredictable, foreign policy in this region have on your plans?
That’s a fair question. As an international financial institution, which is owned by many countries, we have a different approach to the issue of geopolitics compared to a purely commercial investor. Our job is to focus on the development needs of a country and on achieving those development objectives. So, clearly for us, the period of the post 2008-2009, both the financial crisis, and specifically, in the case of Georgia, the geopolitical crisis, has been a period when obviously not all investors were comfortable in coming into Georgia. Part of our role is to help mitigate the risks that the investors see from the standpoint of business environment, political context, future stability, stability of policies. Frankly, in that dimension, Georgia has done relatively well in terms of attracting FDI. Relative to other countries, it is a leader in many respects. Of course, we do not make investments ourselves; we rely on our partners, the sponsors of projects that come in. So, if their perception of the market is such that the market is difficult, unstable, or the geopolitical risks are too high, they are not going to come. The best indication of the fact that the markets are actually reasonably comfortable with what’s going on is Georgia’s recent upgrade from Moody’s. I think the other rating agencies are reviewing Georgia’s status, but on Moody’s scale, Georgia is only one notch below investment grade, and given what’s going on in the world, and this region, and some of the challenges that the markets are going through, this is a very significant achievement. From our perspective, it’s a signal that this government and this country is doing something right, creating an environment that is attractive to investors, but also for us it is a sign that other investors whom we can support are likely to come and benefit from this environment.
What are your visions for future operations in Georgia?
We see Georgia as one of the countries where we would like to continue our very strong engagement. As Georgia focuses on slightly different areas of priorities in its growth model and tries to increase its level of integration with the regional and global economy, I think our role, beyond access to finance and infrastructure (that we would like to continue), is going to be supporting Georgia’s efforts to increase exports; basically the areas which can help the balance of payments and current accounts of the country. Specific areas of engagement in addition to access to finance and infrastructure would be: agribusiness, manufacturing, and tourism.
Thank you, any final remarks?
I believe that Georgia has reached the point where the current, very successful, growth model needs to be enhanced by looking for opportunities to improve the overall productivity of the economy. Nonetheless, it is important to understand that on the whole, the country is a success story, especially in the past decade. In the 1990s, when IFC first arrived, we were making investments of $5-10 million per year (in Georgia); today that number has increased ten-fold for IFC’s own account, i.e. excluding what we have mobilized from other investors. So, from our own, very particular, perspective as an international institution that supports the private sector, the increased FDI, the increased support to domestic entrepreneurs, the increased access to finance, et cetera; these are all big indicators of the success that the country has enjoyed.