July 2017

By Tamar Gegechkori


Georgia, located in the South Caucasus region on the East Coast of the Black Sea, has been steadily emerging on the international stage. The country is becoming more and more attractive to outside investors due to its strategic location at the crossroads of Europe and Asia and the potential to become a unique regional hub for both East-West and North-South transits.

The EU/Georgia Association Agreement, which went into force in July 2016 helped propel this development further and has increasingly introduced Georgia as a strong destination for large foreign investments. The agreement provided foreign access not only to Georgia’s internal market of four million residents but also to a wider regional reach as a direct result of the new absence of customs and import tariffs. Since withdrawing from the Commonwealth of Independent States in 2008, Georgia now has access to a market of 900 million people through a number of bilateral and regional Free Trade Agreements (FTAs) and Generalized Trade Preferences (GSP) regimes, including with the United States, Canada, Japan, Norway, and Switzerland.

As international investors consider their market entry strategies in Georgia, four key sectors are seen as being of particular interest due to their recent reform and development as well as the Georgian government’s efforts to facilitate their growth:

Energy

The Ministry of Energy of Georgia is making concerted efforts to transform the country’s energy sector. Not only is Georgia on a path to becoming an energy exporter, but it is also on track to establish itself as a hub of transmission in the South Caucasus. Seventy-five percent of the country’s energy potential remains underutilized, creating a huge market that with an abundance of untapped hydro resources.

Local consumption has been growing hand in hand with increasing GDP, and with a well-developed transmission grid now in place, the Ministry of Energy is on a constant lookout for foreign investments in hydro, thermal, and wind power plants.

Hospitality

In a country internationally renowned for its generosity towards visitors and where every guest is considered to be a ‘gift from God’, it only makes sense that the hospitality and real estate sectors would become among the leading markets in the economy. The number of annual international visitors has increased six-fold over the past decade leading up to 2015 and is projected to grow by eight to 10 percent by 2020. Georgia has a visa free regime with citizens of 94 countries.

Twenty-two different micro-climates within the country provide an ample opportunity for a wide range of infrastructure and real estate investment–from beach developments to ski resorts and four season retreats. Gaming is also legal in Georgia and the country’s location attracts visitors for these activities, including tourists from Turkey, Russia, Azerbaijan, Armenia, and the Middle East.

Manufacturing

Georgia offers competitive labor and energy costs and with its Deep and Comprehensive Free Trade Area agreement (DCFTA) with the EU as well as its trade agreements with Turkey and post-Soviet countries, the potential for export is considered limitless. The country’s relatively high domestic unemployment rate keeps labor costs low and is extremely attractive to foreign investors, while an abundance of new hydro power plant (HPPs) construction guarantees that electricity prices remain competitive.

Agriculture and food processing

Due to its particular climate, Georgia has a long harvesting season and a wide range of agricultural conditions. This has made Georgia a historically agricultural society with a majority of its population living in rural areas. The country has a strong reputation as a source of healthy and quality produce and consumer goods.

Agribusiness accounts for 9.2 percent of domestic GDP and 17.5 percent of trade volumes. The Georgian government encourages investment through grants of up to $USD 250,000 (maximum 40 percent of project value) through the Georgia National Agriculture Projects Management Agency (APMA).

Opportunities for investment in Georgia span a wide range of market sectors. In particular, energy, hospitality, manufacturing, and agriculture have enjoyed a strategic importance for this developing country with high hopes for closer relations with the West. With strong support and encouragement by the Georgian government for foreign investment, global firms are increasingly considering opportunities to enter the Georgian market.