WIth a highly liberated regulatory environment and an illustrious track record in attracting FDI, Georgia offers a unique mix of investment opportunities across sectors.
Aliberal regulatory environment, low taxes, low corruption and easy access to the U.S., EU, CIS and Turkey markets are the prime factors attracting investors to Georgia. Thanks largely to these advantages, the country managed to garner over USD2bn in foreign direct investments (FDI) in 2007 alone. With total FDI reserves of USD5.2bn or 51.1% of the GDP, Georgia had the second highest FDI-to-GDP ratio in the FSU region in the same year.
Real Estate and Construction: Real estate and construction represent one of the fastest growing sectors in Georgia. The attention paid to this sector is evident from the government’s aggressive reforms, one of which has seen the total number of permits and licences involved with the construction industry fall by an astonishing 84%. According to the World Bank/IFC Doing Business Report 2010, Georgia ranks 7th in the world in the issuance of construction permits.
The prices of residential real estate have increased more than fourfold since 2003, and demand is still on the upswing. Further, the influx of global entities and tourists has perked up the demand for office space and hotel accommodation. Corresponding to these developments, the Georgian capital Tbilisi has emerged as one of the most robust retail markets in Europe, with affordable rentals and high demand relative to peer cities. With an increase in per capita GDP and disposable income, Tbilisi is expected to add at least 150,000 sq m of shopping space in the next three to four years.
With more and more Western companies showing interest in Eastern European markets, the country is also expected to become an increasingly important connector in the North- South and East-West transport corridors. This will likely result in significant growth in another subsector that has a lot of latent potential, namely, warehousing facilities.
Energy: Georgia’s energy sector offers significant investment opportunities, ranging from hydropower, wind and solar resources and oil and gas to the development of energy transmission and distribution infrastructure. For instance, to meet the rapidly growing domestic demand for electricity, the Ministry of Energy has announced a Greenfield hydro power development programme, soliciting interest from private parties on a build-and- operate basis.
As regards hydrocarbon resources, Georgia has 11 oilfields with confirmed reserves of 28m tonnes yet to be explored. The potential of the Black Sea shelf alone is estimated at up to 1.3 billion barrels. Both domestic and foreign companies are present in the Georgian oil and gas sector.
On account of its highly liberalised market and strategic location, Georgia has already seen energy-sector investments from a number of large companies such as British Petroleum, the Czech JSC “Energo Pro,” the Russian JSC “Energy Invest,” and the Azeri SOCAR Energy Georgia.
Agriculture: Georgia is a traditional agrarian powerhouse, thanks to its enviable climatic features and skilled human resource base. The country straddles nine climatic zones, making its fertile soil fit for almost all varieties of crops.
Arable land and woods occupy 85% of its land area. In addition, government reforms have made the agricultural sector lucrative for FDI by ensuring zero property tax on small plots of land (less than 5 hectares) and property transaction, zero VAT on primary supply of agricultural products and zero import duty on equipment. Georgia also follows a ‘Generalized System of Preferences’ (GSP) with the US, GSP+ with the EU and a free trade agreement with Turkey and the CIS countries. In 2009, the World Bank’s Investment Climate Advisory Services named the following agricultural sub-sectors in Georgia among the most competitive worldwide: wine, nuts, tea, vegetables, fruit, meat and dairy, fish and sea products and grains and pulses.
Tourism: Georgia is often considered Europe’s undiscovered secret, delighting visitors with a heritage spanning over 4,000 years, stunning landscapes, legendary hospitality and culinary riches. With no visa requirements for the citizens of 67 countries and zero VAT liability on tour operators for revenues from incoming tourists, the sector remains one of the most promising investment avenues in Georgia.
In 2008, international tourist arrivals reached an all-time high of 1.3million,drivingoccupancyrates at the Marriott, for instance, to as high as 85%. Apart from Marriott, Sheraton and Radisson SAS, which are already present in the hotel sector, Intercontinental, Kempinski and Hilton are in the process of constructing their first hotels. Two- and three-star and budget hotels are also witnessing significant buzz in investor circles.
The international airport at Tbilisi, with direct connections to 32 cities, another aiport at Batumi and the slew of roads and highways under construction also augur well for Georgian tourism.