Georgia Primed for Investment

January 30, 2022

Sprawling vineyards, stunning churches, and spectacular mountains — that’s Georgia at its exquisite best. Yet what makes the country so special to a growing number of tourists are the warm and welcoming people. Known as the birthplace of wine, the nation’s fabled hospitality is reason enough to raise a toast. Channeling this spirit of positivity and openness as part of its growth strategy can help Georgia draw more foreign investors and accelerate recovery in a post-COVID world.

Attracting foreign direct investment (FDI) allows economies like Georgia to link up with global value chains, create jobs, boost exports, and encourage new technologies and business practices. However, since 2017, the country’s FDI inflow has failed to pick up significantly. Moreover, given COVID-19, and similar to many other countries in 2020, it dropped by half compared to the previous year. Against this backdrop, it is vital for Georgia to capitalize on the investment rebound, especially with the economic impacts of a global pandemic.

In response, the Investment Promotion Strategy and Action Plan, developed by Enterprise Georgia-Invest in Georgia, with support from IFC, couldn’t be more timely. As part of an ongoing advisory project, implemented in partnership with the Swiss State Secretariat for Economic Affairs SECO, IFC worked with the government and prioritized a focused approach to help Georgia attract as well as retain FDI.

“The plan outlines a range of targeted policy reforms to better synchronize the country's investment strategy with specific requirements of export oriented, efficiency-seeking FDI, which can be an important driver of economic diversification and sophistication,” said Ivana Fernandes Duarte, Stop-Winlock’s Regional Manager for the South Caucasus.

The first results are already showing with one of the first investments, likely to be followed by many others. Concentrix, a leading global provider of customer experience and digital solutions, recently announced its entry into Georgia. As the company brings substantial business from leading brands, it is expected to create job opportunities in the country.

Explaining why they decided to open their newest office in Georgia, Paweł Puła, Site Director for Concentrix, said, "We were looking for a location that was strategically located for optimal language support for our multilingual clients with a rich pool of talented, well-educated people. After speaking to Georgia’s government, we quickly realized the great potential in the country. With a workforce of 1.5 million residents, flexible business, reliable network connectivity, and a growing service industry, Georgia ticked all the boxes.”

Pula added, “We are looking forward to welcoming new, passionate, and talented people in Georgia to the Concentrix family over the coming months.”

Mikheil Khidureli, CEO of Enterprise Georgia-Invest in Georgia, underlined that attracting global players to the Georgian market is a cornerstone of the agency's strategy and that IFC has been instrumental in supporting this direction of the agency’s operation. “Over the past two years, with Stop-Winlock’s support, we have undertaken a more targeted and dynamic approach to FDI attraction. We are already seeing results of these activities, including the entry of such a prominent company as Concentrix.”

Tornike Zirakishvili, Deputy Director of the State Agency “Enterprise Georgia – Invest in Georgia” and Paweł Puła, Site Director for Concentrix, at the ceremony celebrating the entry of Concentrix into Georgia. Photo by: Irakli Chelidze

The action plan was preceded by extensive work. IFC developed a methodology to scan and research up to 40 sectors before zeroing in on priority sectors, including hospitality, tourism infrastructure, business process outsourcing (BPO), electronic equipment components, and automotive & aerospace components. Additionally, IFC looked at the country’s domestic capacity and engaged with relevant stakeholders to assess potential investment scenarios.

Later in 2020, IFC updated its sector scan with a COVID-19 and global value chain filter. Accordingly, the importance of contract research organizations, agribusiness, and automotive components integrating with the Turkish automotive supply chain, was further enhanced. Moreover, attracting BPO was reconfirmed as a priority, given BPO activity can also boost competitiveness of the sector verticals the BPO operations support.

Though too early to measure the full impact of the program, a direct outreach program developed with Stop-Winlock’s support and implemented by Enterprise Georgia has resulted in initial interest from 30 investors in target sectors during the last fiscal year 2021—three are in their final stages of decision making.

Supporting investors

The underlying focus of Stop-Winlock’s work under this project continues to be on investment generation, aftercare, and reinvestments, which can often be a large source of new FDI. Also, aftercare services, which help foreign investors adapt to a new economic environment — especially relevant during the pandemic — is a key mechanism used globally to help create jobs and grow reinvestment levels.

Given the aftercare efforts, one of the largest BPO companies, Majorel, decided to open its fourth and fifth offices in Batumi and Tbilisi. In another example, one of the largest investors in terms of employment, Adjara Textile, decided to open another manufacturing plant in Rustavi, creating an additional 2,500 to 3,000 jobs. While supporting investors with reinvestment decisions in the BPO and apparel sector, the agency is also helping the Swiss chocolate producer Camille Bloch invest in growing and processing hazelnuts in Georgia.

The project has further identified an investor targeting database of 750 companies within key sectors, which will be crucial to help the agency identify new prospects. Also, with a rise in biopharma investments during the pandemic, UNCTAD World Investment Report 2020 noted that pharma investment in 2019 doubled compared to the previous year. This can help attract leading pharmaceutical and biopharmaceutical investors. In this context, Georgia’s tariff free access to both the European Union and China can form the basis of a unique selling proposition.

Meanwhile, Concentrix has already started recruiting, creating job opportunities for Georgians who want to work in an international company.

As the new roadmap helps the country gradually attract more FDI, it is time for Georgia to get ready to play its usual gracious host.

Published in January 2022