Donald Trump to the rescue in ex-Soviet Georgia?

A modern glass-fronted hotel rises high over the ruins of old buildings at the Rose Revolution Square in central Tbilisi.Photo: AFP

A modern glass-fronted hotel rises high over Rose Revolution Square in central Tbilisi, but the cracked pavements and grimy concrete underpasses beneath it show how much Georgia still needs investment.
The square may soon be getting another landmark building, after larger-than-life US property tycoon Donald Trump signed an agreement this month to help develop one of his signature towers there, plus another in the coastal resort of Batumi.
The deal was a PR boost for the ex-Soviet state which is struggling to lure back foreign investors following its war with Russia in 2008 and the global financial crisis.
But statistics published the day after the agreement suggested that Georgia needs more help than the flamboyantly-coiffured US magnate has to offer.
Foreign direct investment decreased by 16 percent in 2010 to $553 million (397 million euros), following an even more dramatic fall of 58 percent the previous year, according to preliminary figures from the state statistics office.
"Investors see risks here and the Russian invasion damaged Georgia as an attractive place for investment," said Giorgi Gaganidze, an economist at Tbilisi University.
"We had good figures for economic growth before the war so we have to show there is no risk of another conflict and give investors confidence."
Georgian President Mikheil Saakashvili says he wants to turn a country with a recent history of violent turmoil into a vibrant ex-Soviet version of Singapore.
His reformist, pro-Western administration has won praise from the World Bank for liberalising the business environment, and its efforts to combat institutional corruption have also been acclaimed.
"We are a small country of 4.4 million people with a small market, so we need to bring in foreign investors," explained Economy Minister Vera Kobalia.
"We have eliminated all unnecessary laws and regulations related to doing business, hired people who have Western educations and stopped corruption."
On the cusp of Europe and Asia, Georgia can offer foreign companies a gateway to energy-rich Caspian Sea and Central Asian markets, suggested Fady Asly, the head of the International Chamber of Commerce in Tbilisi.
"Georgia has real advantages because it is modern and competitive and gives you a springboard to do business in the region," said Asly, a Lebanese businessman who has relocated to Georgia.
But critics accuse the authorities of awarding lucrative contracts to government-linked firms and imposing punitive fines on small businesses to boost state revenues.
They also point to the controversial case of two Israeli businessmen currently on trial in Tbilisi for trying to bribe a deputy minister.
The businessmen claim that they were entrapped by officials and allege that their prosecution highlights the perils of investment in Georgia.
"This country is heaven for foreign investors as long as they play by the rules, but when you don't have an independent judiciary or a market without government interference, they can have problems," said Tina Khidasheli, a leader of the opposition Republican Party.
International credit rating agencies have suggested that political risks have eased as renewed fighting with Russia has become less likely and opposition protests have failed to destabilise the Saakashvili administration.
The Georgian economy was propped up by $4.5 billion (3.23 billion euros) of US and EU aid and loans after the 2008 conflict, which maintained stability during the global crisis and enabled a post-war return to growth.
Inflation, poverty and unemployment remain critical problems, however.
"Georgia is located in a troubled region," said independent economic analyst Demur Giorkhelidze.
"Investors need a predictable government with a well-considered economic policy which makes calculated political steps."
Local critics were quick to note that although Trump signed a deal to allow the proposed luxury towers to be branded with his name and help raise financing for construction, he didn't actually commit any of his own funds to the estimated $250 million (180 million euro) project.
But despite this, the government is optimistic that the US tycoon's celebrity allure could act as an advertisement.
"When someone like Trump decides that Georgia is the right place to put his brand name, a lot of other companies will feel comfortable following in his footsteps," said economy minister Kobalia.