Investor Tour to Abkhazia

Last week several investors, Mitch Hancock of Canada and an American representing several deep pocket and institutional investors, joined me on a tour of Abkhazia.  We met with officials from the government, including Prime Minister Shamba.  

First, we spent a few days in Moscow before heading to Sochi and Abkhazia.  Moscow was full of people for the Victory Day holiday weekend.  The streets in the center were blocked off to vehicular traffic on May 9 and with warm and sunny weather, millions of people were out to enjoy the day.  My guests were really impressed with the parades and the spectacle of Moscow on Victory Day.

May 10, we flew to Sochi and traveled to Abkhazia.  We drove down to Sukhum from the border. Both visitors were impressed with the beautiful coastline northwest of Gagra.  We stopped several times to take photos. On the way, we stopped at Pitsunda where I showed them the resort.  We spent about an hour walkng the grounds and beach of the resort.  The comments were very positive about the prospects for development at Pitsunda and nearby.  We had a long talk about how to draw in large investors for what appears to be mutliple resorts at the grounds of the current resort. 

After we arrived in Sukhum, we had dinner at Aqvafurta and talked about what we had seen in Abkhazia.  The next afternoon, I showed Novy Afon Monastery and Stalin's dacha to my guests.  The views from the dacha of the central coastline are very dramatic and both of my guests remarked on the beauty and development potential of the location.  

Later that day, we met with Prime Minister Shamba and his advisors in his office.  Tim Post traveled from Krasnodar for the meeting and he and I spoke about the English language tourist application that we have developed for Abkhazia.  Then the American investor spoke about the lack of credit and debit card processing and potential solutions in Abkhazia.  He also said that there was a dearth of English language information on the investment projects in the Republic of Abkhazia.  Then Mitch Hancock made a presentation on Canadian playground equipment.  Earlier, he read about President Bagapsh's interest in acquiring quality playground equipment for Abkhazia's children.  Mr. Hancock believes there are multiple opportunities to pursue in Abkhazia and said that if the government was prepared, he would put together proposals for modernizing the port facility.  Mr. Hancock has a long international track record working with transportation and shipping.

We planned on a helicopter trip to see Abkhazia's coastline and mountains, but weather did not permit. Still we spent several days in Abkhazia and everyone was impressed with the opportunities there.  Both of my North American guests felt that there is tremendous potential for development in Abkhazia.  There were favorable comments about the leadership "They plainly understand the issues and want their country to develop" and about individual projects "this is a winner" (on Pitsunda).  The spectacular beauty also impressed both visitors. After we visited Novy Afon, favorable comparisons to the southern California coastline were made.  All three of us believe there was the potential for a 5 star resort there.

I have spoken to both parties since they departed several days ago.  Mr. Hancock is interested in pursuing opportunities in import/export,shipping, port redevelopment and air service.  His American counterpart is talking to  investors in the US about real estate development projects in Abkhazia.

Abkhazia Projects

The Republic of Abkhazia needs investment to develop economically.  I am hearing that academics, journalists and foreign policy experts recognize that there shouldbe a dialogue with Abkhazia and that business and political ties need to be fostered.  Without this Abkhazia, remains isolated and this is does not promote peace, prosperity and stability in the region.  There is no question that Russia and Russian investors recognize what is obvious to me:  Abkhazia is ripe for development.  However, if the only outside investors are Russian, Abkhazia will not develop as quickly.  There needs to be money from a larger universe of investors and the Abkhaz authorities recognize this.

I see a number of great opportunities in Abkhazia.  A large, international infrastructure investment group contacted me last year.  They pointed out that the airport in Sukhum has an excellent geographic location and with the longest runway in the Caucasus it would be ideal for an international "hub and spoke" airport with flights on to Central Asia, the Persian Gulf and Russia.  

The port in Sukhum needs to be redeveloped also.  Currently, there are only Turkish merchant vessels docking there.  However, as Abkhazia grows ( reportedly the economy nearly doubled in 2009), there will be more trade and the small, out-dated facility needs to be rebuilt.

Abkhazia sits just across the border from the site of the 2014 Winter Olympics in Sochi, Russia.  Sochi will also host Formula 1 Racing starting in 2014 and World Cup football matches will be played there in 2018.  Sochi will be an international destination because of this and because of the appeal to beach-goers and skiers.  Because of its proximity to Sochi and the large number of Russian tourists who view it as the a subtropical vacation paradise, Abkhazia needs many hotels to replace the aged Soviet built structure on its beaches.   One of the most intriguing locations is Pitsunda, a few miles from Gagra.  The Soviet-era resort there sits on about 82 acres of beachfront property and with nearly 3,000 rooms is the largest resort in the country.  Views from the property include not only the beaches, but the spectacular snow-covered (even in hot summer) Caucasus Mountains.  

Abkhazia is also considering allowing Russian citizens the right to buy apartments.  When that happens, a lot of people will view it as an attractive place to own a vacation home.  There are good locations available to buy and build.

In the border zone, there are great locations available to build hotels.  Russia is planning to rebuild the border crossing to accommodate more cross border traffic and trade.  This will  make these locations that are only a few kilometers for the Olympic Village and the Formula ! course very attractive.

The mountains are a big draw for summertime tourism, but the winter potential of the Caucasus is even greater with skiing.  At this moment, there are no ski resorts in Abkhazia.  However, the mountains reach from the sea to altitudes of over 13,000 feet.  There are several potential ski resort locations close to the border with Russia and further down the coast.

Abkhazia shares the hydroelectric power station at Inguri with Georgia.  This provides the electricity for the country and about 40% of Georgia's electricity.  There is significant untapped potential in Abkhazia's rivers.  The Russian oil company, Rosneft,which recently sold a state to BP, is working on a site on Abkhazia's coastal shelft that is supposed to be significant.  The impact to Abkhazia s unknown, but probably significant.

This is only a small sample of the projects in the Republic of Abkhazia.

Media Attention

I recently was interviewed by a journalist who reports on the Caucasus.  The article about me and development in Abkhazia is to appear in a prestigious American magazine.  Yesterday I received another interview request and it appears there is growing international interest from journalists as well as investors.

Inside Abkhazia, I was interviewed on national television.  The program drew enough attention that it was aired several times.  Abkhazians are very interested in the new "languages" of finance and development.  Much of this is new information to them, but they can see the value in learning and integrating. I am to be interviewed again when I return next week to Abkhazia.

What exactly does this mean?  It is intriguing on two fronts.  First, I am finding journalistic interest in Abkhazia's potential is high.  Second, Abkhazia and the Abkhaz are clearly interested in the possibilities of development and how risk is assessed, managed and what forms investment may take.  The leaderships knows it has tremendous natural assets to leverage for the economic growth that will lift the country from the poverty many needlessly suffer in.