Foreign Investment in Georgia
Georgia borders one of the richest countries in energy in the Caucasus region Azerbaijan, which makes it difficult for Georgia to dominate the said region. Nevertheless, its close ties to Azerbaijan had brought the country many benefits like Foreign Direct Investment (FDI) opportunities.
However, FDIs have slowed down thanks to the recent military events and political disputes with Russia. Georgia was long ruled by President Mikhail Saakashvili who was extraordinarily popular among the nation, and one of his biggest achievements was the increase of GDP growth to over $26 billion from 14 billion. Still, he never truly wanted to mend fences with Russia and contributed to the tight atmosphere between the two. Another setback was that he never showed sincere interest in fighting corruption which also cost him the support of many.
That resulted in a change of government in the 2012 elections when a democratic Georgian party took over the steering wheel. Their goals were to eradicate corruption and stabilize the relationship with Russia. This again attracted many FDIs in Georgia, and the country is on a god way toward stabilization and economic growth.
The World Bank ranks Georgia the 9th state in its Ease of Doing Business list. Coutnries whose economies were mostly run by the state for a long period rarely rank so high on this list, which only proves that Georgia is developing very fast.
One of the strongest features that keep foreign investors coming is Georgia’s protection of investors policy, which guarantees security to investors.
The Georgian Dream Party and Investment Policy
Many doubted that the leader of the Dream party, Ivanishvili, would keep his promise regarding an open market economy due to his ties to Russia. Despite that, he and his Party are acting in the best economic interest of Georgia so far by establishing relationships with western investors. It seems that the Georgian government has turned more to the west than Russia. This does not mean that Ivanishvili is neglecting Russia, since for an economic point of view, Russia is a large country with a large population and setting up mutual trade agreements can only benefit both of them.
The satisfying political and economic situation in Georgia is also driven by the Georgians who look up to western economies and way of life and aspire to similar goals. If the Georgian political leadership would threaten now such a western-oriented goal, they would probably be replaced in the next elections. Georgians seem very determined to keep up with the healthy economic practices.
Future Investment Plans
The current Georgian Government has shown real devotion to attract FDI by establishing a national authority to govern investments and to achieve a very ambitious goal, i.e. increase the FDI in Georgia to $2 billion, which would double it. The government believes that FDI will not lack this year in Georgia since they have many interested parties. Moreover, Georgia plays safe by offering only the best of Georgia like investing in the energy sector, agriculture, transportation, etc. all of these sectors have a good success rate.
The hydroelectric sector has been privatized, but still, Georgia seems to lack adequate policies to maximize the utilization of hydroelectric plants. Its neighbor Turkey could also make some use of it apart from Georgians, which only makes this sector more attractive to investors. There are several potential investors who would like to take over.
Georgia’s Energy Sector
Georgia was once a top energy producer 20,000 barrels/day, but inappropriate leadership and lack of political will, especially during its Soviet days, Georgia decreased its production of oil tremendously. Investors are also very interested in taking over parts of this sector, especially because they are now willing to deal with the complex geological formations in Georgia and are ready to conduct drill experiments. Such an optimistic hope was triggered by other successful drilling sites in the Baltics where a similar geological structure is in place.
Agriculture and Investment Opportunities
Georgia hopes to make use of its vast agricultural potential since it is one of the strongest sectors Georgia has. How serious they are is also indicated by incentives that investors will receive for agricultural investments. What ranks very high for increased export is wine production. Georgia also wants to increase meat production on its soil in order to launch it in international markets.
Georgia’s wine production goes way back, and the tradition has been going on for the past 8000 years. The wine production is expected to grow since the Government undertook secured permits for exports to Russia.
The Transportation Sector
Thanks to its geographical position, and an inherited modern transportation system from the Soviet days, Georgia shows great potential to be one of the main routes for Asian-European trades and exchange of goods. Many investors see an opportunity for profit since the trade between Asia and Europe keeps growing.