As we increasingly learn to live with Covid, the global economy is bouncing back strongly. But make no mistake: the pandemic’s economic upheaval – altered trade patterns, adapted consumer behaviours, changes to how we work and travel – has reshaped our world.
In this transformed landscape, many existing investment trends have accelerated, and new investment opportunities have arisen. Long seen as a country with immense potential, Georgia has emerged as one of the most attractive markets for foreign capital in our post-pandemic world.
Georgian banks have traditionally been successful in raising capital in international markets. Now, Georgian businesses must get ready to become partners for international investors to attract the foreign investment the country’s development requires.
That Georgia stands out in the Caucuses is itself not news. It ranks seventh in the world in Ease of Doing Business, and 12th in Economic Freedom
That Georgia stands out in the Caucuses is itself not news. It ranks seventh in the world in Ease of Doing Business, and 12th in Economic Freedom. The fifteen years since the Rose Revolution has created an investor-friendly environment, with an open economy, no capital controls, a relatively stable currency supported by an efficiently managed central bank. It’s a strong list of credentials for intrigued international investors.
What boosts Georgia’s post-Covid attraction is its location as a gateway between East and West. Chinese commercial interests, supported by its Belt and Road initiative, have been balanced by growing investment from the West. As a result, even pandemic-ravaged 2020 saw FDI inflows in most sectors, from manufacturing to telecommunications. Foreign investment in real estate rose by over 900% and the financial sector saw an almost 50% increase. Only hospitality has seen an inevitable outflow. Even then, the rapid recovery of tourist numbers, whenever travel restrictions have been lifted, indicates the enduring attractiveness of Georgia’s tourism industry.
The tourism, construction, and energy sectors have particular potential for foreign investors. Many hospitality providers, Silk Hospitality included, have used the past year and a half to invest in new developments, renovations, and training. The real estate market is coming back strongly. The renewable energy market, particularly in hydropower, where the Caucasus Mountains provide a natural advantage, also remains highly attractive for investors who are increasingly under pressure to invest greener.
Unlike many of its neighbours, Georgia does not possess many extractive resources, instead being dependent on its human resource, with a culture of working intelligently, innovating, and partnering. This has been supported by a growing number of technical schools creating an increasingly skilled workforce. Further boosting Georgia’s human capital is essential if the country is to hit new, sustainable FDI heights.
Challenges do remain in drawing international investors into more direct partnerships with local businesses. Building personal trust is essential for many Georgians when establishing commercial relationships. As a result, most investors instead go via the banks, seeking to avoid the need to understand local customs. For Georgia’s FDI success to be maintained, this has to change and Georgian businesses themselves must embrace a more global perspective.
Foreign direct investment must be at the heart of Georgia’s economic recovery, for the country to develop the highly productive, flourishing economy we all believe it can
On the Georgian side, businesses must improve corporate governance as the basis for partnerships. Beyond the equity they bring, these new management practices will help alleviate concerns about corporate responsibility. New skills, business models, and technologies add essential value to projects. Progress is required here to show potential foreign investors that they know what they’re doing, and that Georgia’s business climate continues to mature.
It's clear the fundamentals that made Georgia attractive for international investors in the first place remain strong: a well-educated, outward-looking population, stable political and regulatory environment, business-friendly governance and a strategic location between East and West. In a post-Covid world, this solid framework and latent potential is of even greater importance.
But potential counts for nothing unless it is fulfilled. Foreign direct investment must be at the heart of Georgia’s economic recovery, for the country to develop the highly productive, flourishing economy we all believe it can. It is ultimately up to Georgian businesses to live up to expectations of international investors by upskilling their workforce, adopting good governance, and creating sound commercial strategies.
This article reflects the views of the author and not the views of The Parliament Magazine or of the Dods Group