Georgia’s small, open economy left it exposed to last year’s drop in global capital flows. Preliminary data from the National Statistics Office of Georgia suggests foreign direct investment (FDI) slumped 53% from 2019, which is more than the global average — according to Unctad, global FDI fell by 42% in 2020 from the previous year. But a supportive business environment combined with strong reinvestment levels make Invest in Georgia’s chief Mikheil Khidureli confident that the country’s key sectors are on the brink of a rebound.
Q: For investors not familiar with Georgia, what are its key merits?
A: The past decade of Georgia’s development, particularly its economic development, shows the government has done everything possible to make it an attractive investment destination. We understand we are a small country, which may not be that appealing as a consumer market, so we’ve made it an accommodating hub from which investors can reach the world. We have a very liberal trade regime and are working towards free trade agreements with the US, Israel and India. We are one of the easiest places in the world to do business — the tax burden and operational costs are low and we have a flexible labour code.
Q: Where are the most promising investment opportunities?
A: Every year, we scan new sectors to find areas with the most potential and identify priority sectors that are feasible to develop. These are electronics manufacturing, production of automotive and aerospace components, pharmaceuticals, IT and business-process outsourcing, which has seen many new entrants in recent years. There’s also hospitality and real estate, which were boosted by a wave of international visitors before Covid-19 and will definitely regain momentum. We see huge potential in logistics, given we are a hub between Europe and Asia.
Q: From which countries do you see the most interest?
A: Logically, our neighbours are among the biggest investors — especially considering the financial strength of Turkey and Azerbaijan. But the UK has been the biggest source of FDI over the past five years. There are also several German success stories and we see increasing interest from elsewhere in Europe, plus more companies from Japan, China and India. The government’s liberal approach to FDI is generating opportunities from everywhere.
Q: How do you help connect foreign investors on the ground?
A: We act as a one-stop shop by dealing with different government stakeholders and acting like a business consultant. As FDI is a major government priority, there is huge support coming directly from the prime minister’s office. On top of investment promotion, we are also a business development agency, so we have very good access to local entrepreneurs. Foreign investors are often looking for a local partner, and we facilitate this easily because we have a detailed picture of all businesses in their sector.
Q: FDI fell from $1.3bn in 2019 to $617m in 2020. When will it rebound to pre-pandemic levels?
A: The decrease was expected amid the global uncertainty, and it was partially caused by loan repayments to parent companies and a large project being transferred from a foreign entity to a local entity, which counted as negative FDI. However, we are encouraged by the fact Georgia attracted almost half a billion US dollars in reinvestments in 2020. That represents a huge percentage of total investment, and shows the confidence and trust of those already operating here.
Considering these factors, we expect FDI this year to be higher than last year. We are already observing increased levels of interest from potential investors, and through our aftercare programme we are hearing very positive things from existing investors. A rebound to pre-Covid-19 levels could be achieved as soon as 2022.
In association with Invest in Georgia. Writing and editing were carried out independently by fDi Intelligence.