Recently, noisy developments have been swirling around the RMG Copper company. Initially, the company was accused of environmental pollution and creating health problems in its surrounding region.
Later, the company was attacked using political schemes, and a state auction was thwarted. Politicians did not cede a nearby land plot to the company. The land had been put up for auction for an annual 15,000 GEL leasing fee. Politicians paid 5 million GEL for the land instead. However, time has passed and nobody has signed a land-leasing agreement with the government. At this stage, the same politicians object to a new investment project worth several million dollars. Both private experts and government groups have released statements on these developments. RMG managers have also commented on the issue. Joni Shubitidze, the executive director of RMG, talked in detail about the company’s current situation.
How would you appraise the current investment environment in Georgia? In many cases, various groups stage direct and indirect pressure on businesses. Your opinion, as the head of a major investment group, is of crucial importance. How would you judge the fact that political parties recently participated in auctions?
I would like to note that Georgia has shaped its normal investment environment around state regulations. Therefore, today we are able to make investments in the mining field. Serious work has been made to foster the business sector and entrepreneurship, and this tendency is reflected in all fields. It is important for any government to create a free environment for business and production. However, a group of people does not cooperate with the government, because they prefer to follow only their own interests. Regretfully, some politicians have shown the same position. There are groups that use the current liberal environment of the country to make any effort to frustrate both the state and economy on their own behalf, and this tendency damages companies and the reputation of the country. They should remember that the international community and financial institutions are supervising these developments.
You have met with the Business Ombudsman regarding developments at RMG. It is interesting what points were made at the meeting and, in general: how do you appraise the role of government in relation to business?
This was the first contact our group had with the Business Ombudsman’s Institute, and I would like to note that the communications were held in a very good, professional and constructive environment. Irakli Lekvinadze appraised the situation from the standpoint of both business and state interest. He clearly said that a valuable environment is required for business development. We talked about the past and current situation at the company. Naturally, we talked about future projects and plans too. To be brief, the Business Ombudsman received full information about our production process. At the meeting we noted that the company has launched large-scale modernization and introduced modern technology. RMG management has made this decision and changes have started. Similar development is necessary for the harmonized co-existence of people, the environment and business. It is very important for us that the company resolves historically existing problems. We take efficient steps in daily to get the results of the world’s developed countries.
Recently Georgia has improved its position on various international rating systems. In terms of the simplicity of doing business, our country almost leads the list. It is interesting how the business sector perceives the business environment in the country. How simple is it to do business in Georgia? What is your position, as an investor, on these ratings? Does the business sector believe these international ratings are important?
On the whole, ratings are interesting for us, both as general indicators of the country and as economic indicators. We know that strong business means a strong country, and that a strong company signifies a strong Georgia. Doing business in Georgia is so simple that even many European countries would envy us. But there is another extreme, when simplicity and liberalism are used by our opponents and groups that have rushed into business from politics. Key actors in the economy, which should be the backbone of the country, face serious obstacles because of these attacks.
Let’s look to the power sector and mining field for examples. This is a manipulated process and these groups frustrate business and the economy of the country. A number of nongovernmental organizations are also very interesting, as they fulfill unclear jobs and are financed from sources mysterious to me. They frequently operate on behalf of specific private groups. Representatives of this group always assert that they are top experts and that they know everything when it comes to mining, geology, archeology, the power sector, peculiarities of mining ore, art and cultural heritage issues. It seems that they have the absolute right to accuse everybody without substantiation. In this case, they think another party has no rights. I apologize to many professionals in the nongovernmental sector, but I would like to say to these self-proclaimed experts that we represent a team of professionals in our field. I personally, and a lot of workers at our company, have worked in the mining industry for decades and have international experience. Therefore, we will not only defend ourselves legally, but also implement all our plans.
How do you appraise the role of the government? Should the authorities be more careful when various groups object to projects worth tens of millions of dollars?
To be frank, the government carries out the policies that it should. I regret that part of our society is not ready for free and democratic values. A group of certain persons strives for the old times, and they try to benefit in this way. These groups benefit from this situation and they try to keep society under ideological pressure. Fortunately, people have learned to distinguish truth and fiction. We think similar situations require strict regulations for the law and authorities to protect the investment environment and businesses. I think the authorities will have to carry out certain measures anyway to provide additional regulations in this respect.
Some nongovernmental organizations say that pollution scales are terrible in the region, and that the company does nothing to reduce environmental damage. They refer to the Health Ministry statement that RMG will finance research works, but that this work has not yet been finished. What would you say to these people, and will the company finance research?
I have not heard that anyone applied to RMG for conducting joint research work. I openly declare in the name of the company stakeholders and the whole group that we are ready to participate in such research. As for the health problems in the region, if these problems were caused by our company, we have different information regarding this issue. For example: Kvemo Kartli region ranks fifth in the number of residents with cancer, according to official statistics. What data do our opponents use when making ungrounded statements? Do they think that official statistics do not exist? The Kvemo Kartli region does not differ from other regions. On the contrary, this region is behind many regions in this regard. Are there fewer problems in Tbilisi, or in other regions? I do not think that, despite our activities being related to certain serious health risks, that our company damages nature or human health.
I have been in this business my entire life, as has my whole family. We were taught this field and we are professionals in this field. We know how to do our work and we will not harm ourselves or other people. We know the value of working, and our company unites 3,000 persons who serve a real business and create a real economy. I repeat that all affairs should be done by professionals and all business should be done properly. Neither business nor the country will be developed without this principle.
The land that a group of opposition parties bought by auction has an approach road and it crosses your territory. Will you concede this approach road to the new investor?
We needed this land for waste, because there is no ore there. This land is unfit for even sowing cereals. To put simply, this land is useless, however, they are able to plant a tree that they bought at another auction. If they paid 5 million GEL to plant trees, we will assist them in this affair, but I think they had other goals. They thought we would be afraid and they would receive personal benefits, but when they guessed that this trick would not work, they resorted to direct attacks and now threaten to suspend our production process. As for the road, this is like a neighbor asking me to enter his house through my balcony. To put simply, when buying land, you should arrange infrastructure, too. We have acted this way in all our projects, and we have done everything ourselves. Moreover, we do everything ourselves in all our new projects – we arrange roads that will be used by village residents, too, and we build infrastructure in Bneli Khevi.
We frequently hear that RMG company receives huge profits every year. What would you say about the company’s financial situation, and what amount has the state budget received from this company?
First of all, I would like to note that the company has overcome a lot of difficulties since 2011, because our group manages a company with a 40-year history. The company has fulfilled a huge job since its inception, to be a leader in this field in terms of labor and production safety, mining through unique technologies, and introducing energy-efficient technologies. We, as an investment group, have spent considerable money searching for a new deposit. We have found three similar deposits. We have spent 70 million GEL on only geological research work. On the whole, the company has put 500 million GEL into the state budget since 2011. The company has paid more than 200 million GEL for licenses alone. From licensed territories, the local budget received 74 million GEL from 2012 to 2017, in the form of fees. Property tax contributions made up 4 million GEL, profits tax constituted 47 million GEL, income tax marked 62 million GEL, and the total amount of regulation taxes made up 49 million GEL.
Moreover, we participate in social projects. For example, in Martkopi we will plant 1,000 trees. We rehabilitate public schools, kindergartens, sponsor sports clubs and repair stadiums, conduct archaeological research work and rehabilitate cultural heritage monuments. The company has allocated 12 million GEL for these projects. At this stage, our company employs more than 3,000 persons, 90% of whom are local residents. Each employee has an insurance package and free food. The average salary at the company is 1,400 GEL.
Exports from Georgia grow yearly, and nonferrous metals occupy a significant ratio of total exports. Do you keep statistics about the ratio that RMG products are of the total export?
I can assure you that this ratio exceeds 5%, which is proved by the fact that in 2017, RMG Group’s ratio of total exports amounted to 145 million USD.
Recently you have talked about the renovation and modernization of your production process. What do you mean by these statements? What changes and innovations are expected in this respect?
Frequently our supporters, personnel, representatives and all other interested bodies who know RMG, say that it depends on us to resolve problems accumulated over the past 40 years, and this is true. Thirty million GEL is spent on reducing the of environment damage inflicted decades ago, through new technologies and new standards. We have pledged to minimize these risks and historical problems as far as we can.