Foreign Direct Investment in Georgia Decreased by 35% in 2018
Preliminary data released by the National Statistics Office of Georgia, Geostat, on March 11 has revealed $1.2 bln of Foreign Direct Investment (FDI) in Georgia in 2018. The figure represents a 34.9% decrease compared to the same period in 2017.
The financial sector in Georgia received the highest amount of FDI totaling $277.9 mln. Transport benefited from the second highest FDI share with $209.9 mln, followed by the energy ($157.2 mln), manufacturing ($142.3 mln) and construction ($103.6 mln) sectors.
Other industries to receive substantial FDI were real estate ($90 mln), hotels and restaurants ($72.3 mln), mining ($66.7 mln), agriculture and fishing ($15.9 mln) and health and social work ($13.2 mln).
FDI came from various countries around the world. Azerbaijan remained the highest investor with $240 mln, followed by the UK ($203.7 mln), the Netherlands ($167.9 mln) and the United States ($103.7 mln). Substantial amounts of FDI also came from Panama ($74.7 mln), the Czech Republic ($72.3 mln), China ($65.4 mln), South Korea ($63.2 mln), and Russia ($60.1 mln).
FDI is an investment made by a company or individual in one country into a business located in another country. The National Statistics Office of Georgia considers investments to be direct if the share of the investment exceeds 10 percent of the company’s stock capital.
Due to the vital role FDI plays in the economic growth of a country, FDI is important to Georgia and the economy. Offering ease of doing business to foreign companies helps to attract FDI. Additionally, political stability, low taxes, few regulations, a cheap or highly-qualified workforce, strategic location, free trade, low levels of corruption, economic openness, and good infrastructure can attract investors.
Considering the World Bank ranked Georgia on 6th place among the 190 economies where it is the easiest to do business in the world, it is perhaps surprising that the percentage of FDI in Georgia dropped in 2018.
Various factors may have impacted the 2018 preliminary figures. For example, Georgia has a low level of education which, in turn, leads to a lack of qualified workers. In addition, there is a shortage of English language skills among the Georgian workforce.
Moreover, Georgia’s lack of infrastructure, insufficient natural resources, low level of democracy, and illegally-occupied zones make it less attractive to investors.
Nonetheless, current projects are underway that should help Georgia to increase its FDI. For example, the EU recently pledged €233 mln to the construction of the Anaklia Deep Sea Port which will enable goods to move more freely between Europe and Georgia, improving transport links for future investors.
In order to achieve double-digit economic growth, FDI in Georgia must reach at least $3 bln annually, reported Forbes magazine. Politicians must ensure that they continue to improve the ease of doing business in Georgia, whilst ensuring predictability and stability for potential investors.
By Amy Jones
Photo source: The Financial