New Business Support Program and OPIC

Nino Arveladze

Investment Risk Management Agency and Overseas Private Investment Corporation (OPIC) held a workshop concerning Enterprise Development Network (EDN) in Courtyard Marriott, on Nov-02.

August war of last year and financial crisis raging in whole world were resulted in sharp decrease of foreign investments in Georgia. The volume of direct foreign investments decreased by $124.7 million in the first quarter of 2009, compared with the figure of similar period last year – $537.6 million (source: For the purpose of encouraging business in Georgia and attracting foreign investments, Ministry of Finances of Georgia has established Investment Risk Management Agency that became a member of EDN (Enterprise Development Network) in Nov.

OPIC was founded in 1971Y. It is governmental agency of USA and helps American business to invest in foreign countries, encourages economic development of new and developing markets, helps private sector in risk management connected with direct foreign investments and supports US foreign policy. At present, eleven OPIC supported projects are working in Georgia (TBC Bank ($40 million); Bank of Georgia ($40 million); Park Hyatt Tbilisi ($30 million); GMT Real Estate ($40 million); GMT Mtatsminda ($10 million). The portfolio of financing amounts $167 million. Agreement with Georgia has been concluded within the framework of Georgia-USA business summit, in Oct-2008.
Representative of OPIC in Georgia, Steven Johnston declared that they are interested in financing both small and major projects in Georgia; the volume of credited loans might be from $100,000 to $250,000. American party should be presented by 25 percent in each project; OPIC originators will help Georgian entrepreneurs to find American business partners. Steven Johnston called on Georgian businessmen not to retreat due to small size of their projects as this is not a determining factor for OPIC, relevant planning and organization of a project is more important. OPIC is interested to develop following sectors of economy in Georgia:
· Financial sector;
· Tourism;
· Mining industry
· SMEs (small and medium enterprises)
· Real estate sector;
Steven Johnston spoke about importance of EDN and declared that it is an originator of OPIC; in other words, EDN helps businessmen to refine presented projects so that to satisfy OPIC required criteria and receive financing. Businessmen must address the web-site of EDN –, where they can find corresponding partners, improve projects and pass this complicated procedure required by OPIC.
EDN representative Faruk Kakhravan declared that network covers South-Eastern European countries, Balkans, Turkey, Caspian Sea basin countries, including Georgia, Israel and Kazakhstan. He added that region should be unified on the basis of common inheritance.
What is the Enterprise Development Network?
The Enterprise Development Network is a strategic alliance between the OPIC, an agency of the U.S. government, and the private sector. EDN covers various sectors of economy (financial institutions, legal firms, investments agencies) and assists U.S. companies by providing financing, political risk insurance, and investment funds. OPIC complements the private sector in managing risks associated with foreign direct investment (
How Does EDN Help Micro, Small and Medium-Sized Enterprises?
As the primary U.S. government agency focused on supporting private sector investment in the developing world, OPIC recognizes that MSMEs are increasingly looking to grow through overseas investment. But MSMEs launching overseas projects often find it difficult to obtain support and encounter unique challenges.
To help meet these needs, EDN increases access to OPIC products and services through a network of financial institutions, business consultants, associations, law firms and regional investment promotion agencies. EDN will also help MSMEs by offering a more efficient, cost-effective delivery of services through EDN service providers. EDN Advisors are specialists in particular business sectors and geographic areas throughout the world and assist OPIC in credit underwriting for specific projects. Coming out from this, persons interested can contact originators or originator established in Georgia – Investment Risk Management Agency founded by Ministry of Finances of Georgia. Agency provides free assistance for Georgian businessmen to gain the knowledge necessary for getting financing and insurance.
The head of Investment Risk Management Agency, Mr. Zurab Svimonia, spoke with us:
– Mr. Zurab, when and why the Investment Risk Management Agency has been founded?
– Agency was founded by Ministry of Finances in Mar-28-2009. Its main aim is encouraging foreign investments in risk management issues. Agency is a mediator or some kind of originator between American investor and country’s state or international development agency. OPIC is operating for American investors; MIGA is operating for investors from World Bank member countries. We cooperate with Israeli Ashara – export-crediting Insurance Corporation. We are planning to broaden the list of partners and cooperate with Europe’s state insurance and private companies. Negotiations with France are in the process. We want to start partnership with Great Britain’s export crediting insurance department and at current stage, negotiations are held with China. The more partners the agency has, the broader spectrum of investors it can serve. The main direction of agency is political risk insurance. Naturally, investors were concerned in after war period and therefore, agency is offering its service for increasing their confidence.
– What types of political risks are we talking about?
– There are two types of risk categories. One is connected with the country and another with the government. In case of state related risks, political violence is meant here, e.g. external aggression that Georgia experience in 2008; internal political disturbances that might damage some specific businessman – concrete assets and prospects of generating investment project incomes. Political sabotage, terrorist acts of political aims are considered as political risks. Government related risks, illegal action of government, for instance confiscation, expropriation, capital repatriation difficulties etc. Here are meant illegal actions and not the cases when some rule is changed legally or devaluation takes place that is a macroeconomic event. So, such type of risks is not considered as political. Agency is working on insurance of the listed risks.
– There is an opinion in the society that establishment of the agency emphasizes instability of Georgia.
– There is nothing to worry about. In after war period, investors were expecting state to start political risk management. Products of political risk management are becoming current and naturally this concerns developing countries where foreign investors are mainly operating. This is additional service that government of Georgia offers to foreign investors for the purpose of improving investment climate. Agency has become a member of Enterprise Development Network; at this stage, agency is the first economic entity that joined the alliance. We hope that other originators will appear in Georgia. Several consulting companies expressed their will to join alliance. We hope that this encourages Georgian business to operate at western markets and attract even more investments in Georgia.
– How your agency and other originators might help Georgian businessmen?
– EDN works in two main directions. First, availability of OPIC products is increasing. The main function of an originator is to collaborate with Georgian businessmen and help them in attracting foreign investors (actual chances of co-participating in a project are increasing) and support them in political risk management issues. Originator can provide businessman with highly qualified service that considers supporting a businessmen to comply with OPIC requirements. At first sight it seems that mediation is simple, but actually this is a very complicated process as the application procedure is quite complex. Business must satisfy specific criteria such as good financial condition, absence of any legal problems; presenting of auditor’s conclusion is obligatory; both investor and project must comply with financial criteria. Capital co-participation and volume of loan must be defined. Project is being structured and originators are paid for this. Our agency is working without any payments. This is a political order that is aimed to increase foreign and local business activity at Georgian market. Georgian businessmen have the opportunity to contact various providers of financial resources. Network enables both to attract financial resources and insure from political risks. Agency is working on factors of foreign investment inflow. Therefore, we cooperate with foreign or international development institutions. As a rule, foreign investor enters local business by means of local capital or businessmen with some co-participation. We help local businessmen in finding foreign investors. Georgia received international aid after the August war and financial resources are being appropriated. However, it is of common knowledge that main driving power of economic development is private sector and investments. Foreign investments will be followed by new technologies, human capital; it encourages increasing of employment rate and improving of macroeconomic parameters. Therefore, agency functions are not limited to insuring of political risks, it works on attraction of financial resources and any type of issues that consider coordination of private sector and Ministry of Finances.
– Are your partners paying special attention to any sector of economy? And, are there any limits in an amount of loan?
– Agency does not have such type of priorities. Project just should comply with the criteria of insurance, financial companies such as OPIC, MIGA, Ashra etc. EDN is mainly orientated toward support of small and medium-sized businesses. Loan amount might be $100,000 or $250 million. In case of energy projects, such as gas and oil, loan might even amount $400 million. Infrastructural projects are of special importance for the development of a country. State should pay due regard to them. Energy, hydro power station projects have big potential as we might start exporting electricity in spring. Agriculture is another important and high-priority sector of economy. Government has some economic priorities: small and medium sized business, agriculture, energy, healthcare and education, but agency does not separate priorities and works on any type of projects. Function of the agency is preparation of investment package that satisfy criteria of concrete insurance or financial corporation. Every country has its comparative advantages and it is oriented toward development of those sectors of economy that it is experienced in. Agriculture and medicine are the sectors that should be paid attention in cooperation with Israel, while small and medium sized business is a foreground for OPIC. Investment service is one of the serious components of investment climate improvement policy. Attraction of financial resources and insurance of investments from political risks are the main tasks of the policy. Establishment of Investment Risk Management Agency, initiated by Ministry of Finances, is a serious step for revival of investment market of Georgia. It gives an opportunity to Georgian businessmen to attract investors for accomplishment of various projects. Entrepreneurs desiring to receive financing should address DN website first of all ( They should familiarize themselves with rules of the game and try to attract funds with the support of originators. This is possible.