Personally leading his country’s delegation at the Annual Investment Meeting, a large international conference held in Dubai in April, Georgia’s prime minister Giorgi Kvirikashvili demonstrated through his presence the high priority his government puts on courting investment from the Middle East. It is a gambit that makes sense, as the United Arab Emirates in particular is rising up the ranks as a source of outbound FDI and the deep pockets to be found in the Gulf are no secret – even if they have becoming slightly more shallow thanks to decreasing oil prices. More than that, Mr Kvirikashvili thinks there is scope to build on initial investment flows already coming from the region.
“We’ve set our target of $1.5bn FDI for this year, which will be about 12% to 15% up from last year’s figures, and it’s particularly from the UAE that we’re attracting investments in the retail and the hospitality sectors. We already have some investments but we see more potential here, and this was evident also during our meetings with investors [at the Annual Investment Meeting],” he told fDi following a closed-door meeting with UAE representatives.
In office since December 30, 2015, Mr Kvirikashvili became prime minister when the Georgian Dream coalition chose him to succeed Irakli Garibashvili on his resignation. His cabinet won a vote of confidence, although new parliamentary elections loom in October. In his as-yet brief time in office, Mr Kvirikashvili has put economic growth, entrepreneurship and FDI near the top of his agenda.
Among the sectors the Georgia delegation pitched for investment in Dubai were tourism resorts, transportation, ports and other hard infrastructure projects. “As we are surrounded by the oil countries, and as oil prices went down, investment appetite in all countries went down too, so we need to be outstanding in our internal efforts to make our country attractive in the region, which I think we are doing successfully,” says Mr Kvirikashvili.
“In the past several years we’ve made important reforms to minimise bureaucracy in the country and eradicate corruption. We are now launching further liberal reforms in tax administration: abolishing profit tax and introducing the Estonian model to tax only distributive earnings.”
Reforms are a central part of Georgia’s FDI pitch. The country has already established itself as one of the world's fastest reforming economies in recent years, and its rapid movement up the ladder of the World Bank’s annual Doing Business rankings pays testament to these efforts. It now ranks number 24 globally for its business environment. But geopolitics ensure that nothing is straightforward for a small former Soviet republic located in a fractious region and buffeted by Armenia, Azerbaijan, Turkey and Russia, so potential investors will continue to need reassurance.
A 2008 war with Russia over the disputed territories of South Ossetia and Abkhazia along with the global financial crisis sent Georgian FDI into decline, and the country is still climbing back, at least in terms of greenfield investments. As reported in the Financial Times’ EM Squared emerging markets news service on May 10, fDi Markets’ greenfield investment data shows a decline in inbound greenfield projects as well as estimated capital investment on these projects. fDi Markets – a data service that is affiliated with fDi Magazine – tracked 14 greenfield projects totalling an estimated $600m in 2015, compared with 21 projects at $900m the previous year and down from a peak of 53 projects at $2.5bn in 2008.
But Mr Kvirikashvili remains optimistic about FDI prospects for this year, and stresses that improvements to infrastructure along with the continued reforms should bear fruit in increased investment from the UAE, among other sources. “We are making important improvements in the physical modernisation of our infrastructure,” he says. “So there will be many upcoming projects, especially related to Georgia’s transit potential. That is yet another area where we expect investment from the UAE.”