Investment Climate in Georgia and Attracting Foreign Direct Investment

Abstract

This paper focuses on the levels of foreign direct investments coming
to Georgia. The main areas addressed by this study include: how to
create a favorable investment climate in Georgia and on the possible
means of encouragement of FDI inflows in the Georgian economy.
This paper aims to fill the knowledge gap in the area of foreign direct
investment (FDI) research in Georgia. Various dimensions of FDI
were analyzed from a comparative perspective drawing on the case
studies of investors in Georgia. The analysis first focused on major
obstacles that investors face while performing. Then, attractive features
of business climate of Georgia were investigated. Finally, performance
issues confronting FDI firms were analyzed. The study
results indicated that reasons to invest in Georgia are geopolitical situation
and having empty market, and incentives to improve the
investment climate of Georgia were State guaranties, tax holidays,
political stability, development of infrastructure and advertisement.
Another result of the study was that Georgian Government does
everything to have free market conditions and do not intervene to the
economy. Although the issue of safety affects foreign investors, it does
not act as a major deterrent of FDI inflows. The most serious problem
influencing the performance of FDI firms were found to be not
enough skilled and educated local labor force, economic and political
uncertainty. In general, however, it was found that foreign investors
have been satisfied with their performance largely due to the relatively
smooth competition and the availability of several market niches in
country market.