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Georgia: FDI drops in Q1 2018 despite the country's rank in WB's Doing Business Report

posted onJune 11, 2018
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The total amount of foreign direct investments (FDI) in the first quarter of 2018 in Georgia amounted to $ 279.3 million. This number has decreased by 32.9% compared with the same period last year, according to preliminary data published by the National Statistics Office of Georgia (GEOSTAT). 

The main reasons for decreasing the FDI are transferring of ownership in some companies from non-resident to a resident units and reduction of debt liabilities to non-resident direct investors (mostly payment of loans), GEOSTAT said.

Major investor countries were the UK (29.6%), Azerbaijan (18.2%) and China (14.9%) and Netherlands (11.6%). Share of FDI by three major economic sectors reached 78.7 percent in Q1 2018, according to GEOSTAT, which  has been calculating the volume of FDI to Georgia since 1997. 

Most investments were made in the financial sector, reaching $110.6 million. Second was the construction sector with $69.1 million, followed by the manufacturing sector with $ 40.2 million and mining (8%). 

FDI in Georgia averaged $ 318.53 million from 2005 until 2017, reaching an all time high of $740.60 million in the third quarter of 2014 and a record low of $ 79.60 million in the third quarter of 2005, according to Trading Economics.

GEORGIA FDI

Despite the disappointing figures in FDI so far this year, Georgia is ranked as the 9th easiest place in the world to do business according to the World Bank's 2018 Doing Business Report, an improvement over its 16th place in the 2017 report. 

The annual report finds Georgia a top performing economy among the countries of Europe and Central Asia (ECA), where it takes two procedures and two days to register a new business, compared with nine procedures and 25 days in 2003. 

Fifteen years ago, it took an average of 43 days to register a new business in the region, compared with 10 days now. This is half the global average of 20 days.  

Georgia’s positions have improved in: Starting business: 4th place (8th in 2017), Getting electricity: 30th place (39th in 2017), Protecting minority investors: 2nd place (7th in 2017), Enforcing contracts: 7th place (16th in 2017), Resolving insolvency: 57th place (106th in 2017).

“With tangible reforms implemented in three key areas this year – making electricity more affordable, strengthening minority investor protections, and making resolving insolvency easier – Georgia continues to be a top reformer in the Europe and Central Asia region, and is poised to accelerate inclusive and sustainable growth,” said Mercy Tembon, World Bank Regional Director for the South Caucasus. 

“It should be noted that the Doing Business rating encompasses 190 countries, and Georgia is among the leading 10, which objectively reflects the results of the economic reforms of the Georgian Government," said Giorgi Gakharia, Minister of Economy and Sustainable Development of Georgia.  

Georgia has implemented the most reforms in the past 15 years, totaling 47, followed by Kazakhstan and the Former Yugoslav Republic of Macedonia, with 41 each.

Georgia is a member of the World Trade Organization (WTO) since 2000. The country of 3.7 million residents has signed free trade agreements (FTAs) with the Commonwealth of Independent States (CIS) that include Ukraine, Belarus, Moldova, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan and Turkmenistan, as well as its neighbours, Turkey, Azerbaijan and Armenia.

The Association Agreement (“AA”) with EU was signed and ratified in 2014, including Deep and Comprehensive Free Trade Agreement (“DCFTA”). Additionally on 27th of June 2016 Georgia signed FTA with European Free Trade Association (EFTA) countries, giving Georgian products duty free access to markets of Iceland, Liechtenstein, Norway and Switzerland. 

There is almost no custom duty, with 90% of goods being exempt from import tariffs, with no quantitative restrictions. The average time for customs clearance is currently about 15 minutes – one of the fastest and most efficient in the CIS, according to the Georgian National Investment Agency. 

Doing Business 2018 top ten countries are: 1. New Zealand, 2. Singapore, 3. Denmark, 4. Korea, 5. Hong-Kong, China, 6. USA, 7. Great Britain, 8. Norway, 9. Georgia, 10. Sweden