Since regaining its independence in the early 1990s, Georgia has become the regional champion in terms of reform, economic development and progress regarding democratic institutions. Striving to succeed on its path of Euro-Atlantic integration, Georgia is positioning itself as a hub for doing business in the region and is developing an advanced international business environment and relations.
Located at the crossroads of Europe and Asia, and being the shortest transportation route between the two regions, Georgia is uniquely positioned to capitalize on increasing trade flows between Europe, the Caspian region, Central Asia and East Asia. It has one of the lowest and most manageable tax regimes in the world, an improving and more stable political and business climate, relatively low operating costs and an increasingly supportive government. These factors have made Georgia an attractive investment destination.
After signing the Deep and Comprehensive Fee Trade Agreement with the EU (enacted on September 1, 2014), Georgia embarked on its journey towards European integration.
Key Economic Sectorial Overview
Industrial Manufacturing and Processing
Georgia provides significant investment opportunities in the manufacturing sector, which attracted more than USD 0.5 billion of foreign direct investment between 2010 and 2014. New opportunities are expected to be taken by greenfield investments in export-oriented manufacturing sectors, for which access to the European market would be attractive. The share of the industrial sector in Georgia’s GDP was 17.1% in 2014.
There are significant business opportunities processing primary agricultural goods into higher value-added product and supplying equipment and services (greenhouses, storage, deep-freeze facilities, packaging, etc.). Georgian agriculture offers foreign businesses the opportunity to invest in areas with unmet market demand, significant cost efficiencies and strong profit potential.
Tourism and Retail Sector
Tourism is another field that has witnessed significant growth in recent years and is considered to be an important driver of economic development and job creation, as well as a revenue generator. The industry offers wide diversification in terms of its sub-industries: summer sea resorts, year-round mountain resorts (including skiing), spa-wellness, gaming and more. In fact, from 2003 to 2014, the number of international visitors to Georgia has increased from 300,000 to 5.5 million.
According to a Hotel Mmarket Rreport prepared by Colliers International, the highest average occupancy rates in Tbilisi are in international midrange brand hotels (75%) and in international upscale brand hotels (74%). In addition, the ADR (average daily rate) for international upscale hotels is 203 USD.
At 17.4% of national GDP in 2014, retail is one of the largest economic sectors in Georgia. Annual per capita retail expenditure has doubled over the past decade. More than 9% of the country’s international visitors in 2013 stated that they were there for shopping purposes.
The energy sector is attractive from the perspective of both existing natural resources and developing infrastructure, as the country possesses huge hydro resources and offers untapped investment potential. In recent years, Georgia has become a net exporter of electricity and currently utilizes only 18% of its vast hydro resources. The Georgian power grid is connected to the grids of all of its neighboring countries, which are faced with either a structural power deficit or expensive power generation. From 2010 to 2014, the Georgian energy sector attracted almost USD 750 million.
Transport and Logistics
Georgia is in a highly strategic location: It serves as a gateway to the Caucasus and Central Asia. Going through the country is the shortest route between the Black Sea and the Caspian Sea region. Construction of the new Baku-Tbilisi-Kars railway line is in the final stages and will further advance trading in the whole region. The government is investing heavily in the development of road infrastructure, mainly highways, as well as local roads. It is also currently negotiating with potential investors to build a new deep sea port in Anaklia on the Black Sea, with the ability to receive vessels with a capacity of at least 6,500 TEU. The new port will bring Georgia’s logistical capabilities to a new level. Therefore, Georgia strives and has the potential to be the best place for regional offices , and to become part of various value chains.