Investment Environment in Georgia
For countries that are as small as Georgia and have a transition economy, direct foreign investments are vital, especially as the capital is being invested in the real sector economy.
Macroeconomic stability that has been established in our country, should serve as an important signal for the investors. One should emphasize the financial system stability , liminal loan pressure, small and controlled budget deficit, law level of inflation, small government body, healthy banking system and resistance towards external shocks.
Throughout the last couple of years, a number of important reforms have been carried out due to which, our country has become more attractive for international investors. Stable economic growth , liberal and free-market economic policy , deflated taxes, Estonian profit tax model, a small number of business licenses and permits, simple administrative procedures, intensive privatisation policy- this is just a small list of factors that establish a firm ground for starting and successfully developing business in Georgia.
Importantly, Georgia has already signed a free trade agreement with several EU countries, China, members of CIS (except Russia and Uzbekistan), Hong Kong, and EFTA (Iceland, Norway, Sweden and Liechtenstein). Moreover, in the nearest future, the agreement will also be signed with Great Britain, which will make Georgia, the first country in the region that has free trade agreement both with Great Britain and the European Union. Free trade agreements are key to economic stability as they provide access to wider consumer markets, and give the local economy a better prospect of selling its goods and services, making Georgia’s investment potential even more attractive to international investors.
The data from different international rating organizations, which foreign investors constantly track, also underline that Georgia is an appealing country to invest in. Ratings of the governments and the bonds issued by them are based on complex financial models. countries are evaluated based on their institutional stability, their management of internal or external risks, and the probability of long-term sustainable economic growth. These rankings are established by impartial international rating companies like Fitch, Standard & Poor’s or Moody.
Fitch has announced the sovereign credit ranking of Georgia to stand at the BB level . Fitch has also confirmed that Georgia’s rating , against the median rating of other countries in the same category, has been strengthened due to the high quality of governance, appealing investment and business environments, and strong aversion of regional influences through macroeconomic stability. Additionally, Georgian economic policy is supported by the International Monetary Fund. Based on the rating company report , Georgia holds a significant place in the ratings due to its resistance to external factors and a stronger economic growth in 2019 than expected.
Throughout the last several years, Georgia has been a front-runner in other international rankings as well. According to Ease of Doing Business ranking, Georgia belongs to the top 10 successful countries for improving the business environment, holding 7th place among 190 countries as of 2020. Based on the Heritage Foundation’s 2019 The Index of Economic Freedom, last year Georgia moved one rank up within the region. Hence, Georgia holds the 8th place among 44 countries of Europe and 16th place among 180 countries of the world, having the status of “mostly free” country. According to Index of Corruption 2019 research, Georgia holds 44th position among 180 countries and is first among 19 countries of Eastern Europe and Asia.
Furthermore, Global Finance has nominated Georgia among the most attractive countries for investors based on its economic stability, quality of governance and few business regulations. Global Finance’s evaluation is grounded on five economic components: 1) GDP growth projections, 2) direct foreign injections, 3) perception of corruption, 4) ease of doing business and 5) relative competitiveness of the country. In addition, Georgia is among the top 10 most successful countries in two components: 1) ease of doing business and 2) perception of corruption.
In terms of foreign investments to Georgia, in 2017, the sum of the direct foreign investments has reached a record amount of $1962.6M. However, the sum of the investments was $1265. 2M in 2018. Fall in foreign investments is mostly determined by two factors: completion of the main gas pipeline construction, and the lowering of liabilities of non-resident direct inventors. We do not yet hold the full data of 2019; However, 909 million dollars have been invested during the first three quarters.