John Pennell recently joined USAID/Caucasus as its new mission director. He is a career diplomat and served as Mission Director for USAID/Libya from 2019 to 2022, as well as Deputy Mission Director for Ukraine and Belarus from 2015 to 2019. Investor.ge recently spoke with Mission Director Pennell about Georgia – U.S. relations, the country’s economic development, and USAID’s priorities in Georgia for the coming year.
We would like to start by offering you a belated welcome to Georgia and thank you for taking the time to speak with Investor.ge. You have been in Georgia serving as the Mission Director for USAID/Caucasus for a couple of months now. What are your first impressions of the country and how does this posting compare to previous ones?
John Pennell: First, thank you for the opportunity to answer your questions. USAID and AmCham have been natural partners for a long time. We have been – and still are – working together for a more prosperous Georgia that is increasingly linked to diverse international markets.
I have found Georgia to be welcoming – very much living up to its reputation for superb hospitality and friendliness. I have been impressed by the creativity and innovation people throughout Georgia demonstrate. This is not limited to art, culture, agriculture, etc. for which Georgia is famous. Georgians are exceedingly talented in developing IT start-ups, tapping into international creative industries, and developing modern tourist experiences.
And, everywhere I have been, I hear a desire for more cooperation with the United States and stories of how USAID’s work has made a positive difference in the lives of people throughout the country.
Georgia has come a long way since its independence. USAID is proud of our cooperation with Georgia during that time, but we are also at a critical juncture in Georgia’s trajectory. The European Commission’s recommendations for Georgia to implement for its potential to achieve European Union member candidate status are clear; there is still a lot the government must accomplish to keep its stated commitment to the people of Georgia that it will achieve Euro-Atlantic integration.
Regarding previous posts, each country where I have worked is different and has its own challenges as well as its opportunities. I have benefited from having the opportunity to work in every region where USAID is present. I try to draw insights and lessons from each as appropriate. Not long ago I served in Ukraine: there are parallels between the two countries in terms of Ukraine’s own Euro-Atlantic aspirations that are relevant here. Certainly, dealing with active Russian aggression is another.
This year marks 30 years of cooperation between Georgia and the United States. Throughout those 30 years, Georgia’s economy and business environment have undergone a major transformation. What has USAID’s role been in this process and how have its development objectives adapted to keep pace with these changes?
Pennell: USAID started by working with Georgians to create a stable, secure economy that can support growth that benefits people throughout the country. In the first decades of our work here, we provided commodities and equipment so that people could obtain necessities and the economy could find a solid footing.
USAID adapted that approach as Georgia’s economy matured and modernized. We’re focused on creating high-value jobs in modern, in-demand areas. We’re focused on protecting those jobs from international economic downturns by connecting key economic sectors, including agriculture and light manufacturing, to diverse international markets. We’re connecting talented Georgian tech and other entrepreneurs with international investors. Our partnerships are strengthening a tourism industry geared toward visitors interested in longer stays and high-value experiences such as gastro-tourism and adventure tourism.
And, we’re helping to put Georgia on the map as a partner for Hollywood and other creative industry centers. Look for Georgia as a filming destination, but also watch the credits for Georgian companies contributing sound design, animation, and other services.
That’s a huge change compared to what USAID was doing here 30, 20, or even 10 years ago. It’s really exciting to think where these trends are taking Georgia’s people and its economy.
We also recognize the continued importance of agriculture to the livelihoods of so many throughout Georgia. We’re focused on a modern approach that places Georgian produce in diverse international markets. Through our cooperation with agricultural associations, high-value agriculture like berries and nuts now meet the standards of EU and Gulf markets, with great results for farmers. For example, one crop we’re focused on is hazelnuts. Georgia exported $115 million worth of hazelnuts in 2021/2022, with 60% going to the EU.
Political developments over the past year have presented challenges to U.S. – Georgia relations that have been concerning for both civil society and the private sector. What role do you think businesses can play in maintaining and strengthening this relationship?
Pennell: The short answer is that Georgia’s business sector can keep doing what it has been doing: remain a strong partner with the U.S. as together we seek to create prosperity for Georgia’s people through inclusive economic growth. In addition, the business community can use its networks and outreach to further advocate to the government, at national and local levels, to strengthen the enabling environment for domestic as well as foreign investment. Business associations, as a key element of civil society, are essential to this effort.
Georgia’s businesses are great partners because they, too, recognize that the best path to success lies in continuing the reforms we’ve worked so hard to achieve alongside partners in government and civil society. Those reforms seek to create a fair, business-friendly environment where hard work and smart investments pay off.
Through partnerships with USAID in the last two years alone, more than $21 million in private sector contributions toward Georgia’s development goals has been mobilized, nearly $10 million in new private investment facilitated, and more than 4,700 jobs created.
The entire U.S. presence in Georgia – USAID included – is firmly committed to Georgia’s increased wealth and maintaining security so people can live happy and productive lives. We support the people of Georgia who overwhelmingly recognize Euro-Atlantic integration as the best way toward those goals.
As Georgia’s economy continues to grow, it still faces several challenges, some of which include accessing foreign investment, developing a highly skilled workforce, and creating a business-friendly regulatory environment. How is USAID helping to address these issues?
Pennell: These challenges shape how USAID designs and delivers assistance. Here are just a few of the many examples of how we are helping to address them.
USAID works closely with the U.S. Development Finance Corporation (DFC) to advance deals that create jobs and spur investment. We’ve had some recent successes. Your readers may know that DFC recently signed an agreement with Adjara Group to provide $8.6 million in financing to establish a Rooms Hotel in Abastumani. USAID worked with Adjara Group to ensure the project met DFC’s fire safety requirements. DFC and USAID also recently announced a $30 million loan portfolio guarantee with TBC Bank to increase access to finance for micro- and small to medium enterprises with a focus on women borrowers, startups, and rural enterprises. Both of these deals with DFC focus on getting economic development and jobs to parts of Georgia where they are most needed.
USAID is also working in fields with high investment potential such as renewable energy. We’re cooperating with the Georgian government to establish a competitive power trading market that will make possible government incentives for green energy production. This will not only expand Georgia’s energy generation capacity, but has obvious benefits for fighting climate change and making Georgia energy independent.
Developing a skilled workforce is a global challenge that USAID seeks to address worldwide. In Georgia we partner with businesses and educational institutions to develop lasting programs that bridge gaps in the skills needed for growth. This effort is creating high-paying jobs and mobilizing substantial co-investment from the private sector.
Such partnerships are creating job opportunities throughout the country – 4,000 are expected in the next few years alone. For example, with Transford and Prime Concrete, we are training port workers in Poti to ensure the port can operate at full capacity. Together with GeoHospitals we’ve started a training program for nurses that will train future healthcare providers to EU standards – this program is in Marneuli and Kakheti. We recently started a training academy with Tegeta Motors in Tbilisi for heavy equipment operators. The training programs equip Georgians to be successful in jobs that pay well, allowing them to support their families. These partnerships are a model we are sharing with other USAID missions around the world.
We also are helping to create a friendlier business environment; here is one example: USAID’s work with Parliament to create effective insolvency laws helped keep Georgian Airways operating – and 250 people kept their jobs–because it could negotiate with its creditors.
These issues are of particular importance to AmCham and its members given the direct impact they have on business operations. How can AmCham and USAID work together to combat these issues more effectively?
Pennell: We appreciate the close partnership we have with AmCham. Many of USAID’s activities coordinate closely with AmCham and its membership. A recent example was the graduation of 45 young hospitality workers that is strengthening service standards and bridging workforce gaps in the hospitality and tourism sector. This first-of-its-kind collaboration reinforces Georgia’s strategy for attracting high-value tourism, attracts young people to pursue career paths in hospitality, and creates lasting jobs.
We appreciate AmCham’s leadership on the USAID Industry-Led Skills Program’s Business Leaders Council. It plays an important role ensuring USAID’s programming aligns with market needs. We believe it could serve as a model for how we can work effectively together to address other shared interests.
I look forward to periodically attending AmCham meetings. It will be a good opportunity to discuss what USAID is doing to address the issues you outlined and hear from members what challenges they face in doing business – and how we can better address them.
There will be a lot to discuss, too! USAID looks forward to engaging with AmCham and its committees on energy, workforce issues, and strengthening and deepening capital markets. We look forward to engaging with AmCham and its members as we work more in support of Georgia’s positioning as a regional hub for transport and logistics.
In a few weeks, families around Georgia will be gathering for their New Year’s supra to welcome 2023. Looking ahead, can you tell us what USAID’s priorities look like for the coming year?
Pennell: First, to families in Georgia, I wish you a successful and happy New Year.
USAID’s priorities are detailed in our 2020-2025 strategy and will remain the same. This coming year we will continue to support Georgia’s efforts to move closer to EU candidacy status. We’ll also continue cooperation that mitigates the impact of regional conflict, particularly stemming from Russia’s re-invasion of Ukraine. Mitigating climate change is one area we’ll likely place more emphasis on.
Attaining EU candidacy status is within reach as long as Georgians work together to meet the EU’s recommendations. An inclusive process that brings together diverse voices within Georgia–including civil society and business leaders–will be most likely to yield success. USAID’s work in Georgia for the past 30 years has progressively aligned Georgia with EU membership. Our work strengthening Georgia’s democratic systems helped Georgians get to the point where candidacy status is possible. When one reflects on what Georgia and USAID have accomplished together, it’s clear that we can–if we continue to work hard–make sure that Georgia’s future generation is solidly a European generation.
Similarly, what Georgians and USAID accomplished in growing a stronger, diversified economy helped ensure Georgia was not severely impacted by the shocks created by Russia’s war in Ukraine. We’ll continue to enhance Georgia’s energy independence so that it does not rely on electricity imports from Russia. We’ll also continue to jointly identify export markets where Georgian products and services receive the best prices so Georgia is not reliant on Russia’s economy.
Climate change is a U.S. priority and it’s something we’ve worked on with Georgian partners for several years. Water resource management is something that we are increasingly working on – and this affects the daily lives of everyone in Georgia.
As I noted above we’re working with Georgia’s government to make green energy investing more profitable – and therefore a reality. We’re also working with the government to develop its National Energy Policy.
That will address how Georgia meets some of its climate change goals. Climate change poses additional challenges, but USAID is standing with Georgians to face these challenges, just as we have for the past 30 years.
Let me close by again thanking Investor.ge for this opportunity to discuss USAID’s work in Georgia. We have a lot to celebrate from our 30 years of partnership and during my tenure here I look forward to many more successes.