The FINANCIAL — Since Georgia’s Rose Revolution in 2003, the investment climate has improved dramatically: doing business has become much simpler, and stability has increased.
The country has witnessed especially massive investments by International Financial Institutions (IFIs), such as the European Bank for Reconstruction and Development, the Overseas Private Investment Corporation, and the World Bank.
These institutions are often able to provide financing where private investors cannot or don’t want to: they have a higher tolerance for risk, because they are not necessarily looking for profit for their investors, usually fulfill political or social objectives set by their funders or shareholders. They often co-invest with private investors, because investors know that governments are less likely to interfere in projects that are backed by IFIs.
However, as the economy becomes more developed, Georgia needs to make the transition from depending on capital provided by multilateral institutions to seeking more private capital.
For Georgia, one of the biggest barriers to foreign private investment is the perception of risk that is present among members of the investment community. “Didn’t the Russians invade them three years ago?” “Wasn’t Georgia part of the Soviet Union? No thanks.” These perceptions prevent many foreign investors from even considering the possibility of investing in Georgia. They simply think there is too much risk.
No matter how safe Georgia actually is, and how much opportunity there is, unless the country manages to change some of these perceptions, it will be difficult to attract significant private investment. The fact is that many foreign-owned businesses in Georgia have operated in Georgia with relative ease, and have been able to profit from the abundance of opportunities that can be found in this country. We at GeoCapital have been doing business in Georgia for almost two years, and have found the business climate to be conducive to foreign investment: regulations are generally business-friendly, and government services are often very streamlined.
After the elections, investor confidence in Georgia suffered a temporary setback. While the relatively democratic transition of power is certainly positive, the investor community is still holding back slightly to see who the “new guy on the block” is, and what his government will do. Reputational damage has been done during the election campaign, but hopefully the new government will be able to show that they will continue the business-friendly policies of the past years and maintain stability.
Georgia has benefited enormously from the investments of IFIs over the years, but now is the time to show the world how much it has achieved in terms of improving the business climate, and how many investment opportunities there still are. Georgia is not scary, and the world needs to know it: we are LONG Georgia.
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