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Summary: In accordance with the three-quarter data for 2019, foreign direct investments amounted to USD 909 million which is USD 185 million (16.9%) less as compared to the same period of the previous year.

In regard to a yearly analysis, the most significant drop in foreign direct investments as compared to the previous year was registered in 2018 (-35.5%). In addition, foreign direct investments shrank in 2015 (-9%) and 2016 (-4.6%). Giorgi Kandelaki’s figure on the decline rate of foreign direct investments is bloated as compared to the actual number. However, in the past years, there is a clear trend of a sharp decrease in foreign direct investments which constitutes a significant problem.

Analysis

European Georgia – Movement for Freedom MP, Giorgi Kandelaki, on air on the TV broadcast Ghamis Mtavari stated: “Foreign direct investments are declining at a catastrophic rate, by 50-60% annually.”

A foreign direct investment (FDI) implies a resident of one country owning a share in a foreign-based enterprise and carrying out different types of economic operations related to that enterprise. An investor is considered to be a direct one if he has at least a 10% ownership stake in a foreign-based enterprise’s shares or the equivalent of such participation.

Statistics for the first three quarters of 2019 are currently available. According to these data, the total amount of foreign investments in Georgia amounted to USD 909 million. The combined FDI figure for all three quarters is USD 185 million (16.9%) less as compared to the same period of the previous year.

Table 1: Yearly Percentage Changes in Foreign Direct Investments in 2014-2019 (USD Million)

Year

2014

2015

2016

2017

2018

2019(3Q)

FDI

1,837

1,729.1

1,650.3

1,962.6

1,265.2

909

Yearly Changes

76.8%

-5.9%

-4.6%

18.9%

-35.5%

-16.9%

Source: National Statistics Office of Georgia

In regard to a yearly analysis, the most significant drop in foreign direct investments as compared to the previous year was registered in 2018 (-35.5%). In addition, foreign direct investments shrank in 2015 (-9%) and 2016 (-4.6%) as well. As clarified by the National Statistics Office of Georgia, the main reasons behind the decreased foreign direct investments are the completion of the gas pipeline construction project and moving several enterprises under the ownership of Georgian residents. In addition, the reasons also include decreased obligations (that is, serving debts) vis-à-vis non-resident direct investors. In spite of that technical clarification, of important note is that a partial outflow of investments also used to happen in the past (debts were served, companies were sold) but that outflow was counterbalanced by other inflows which were not able to be achieved in the past years. Therefore, the drop in foreign direct investment should be given an outright negative assessment and providing technical reasons as an explanation will not change the reality on the ground.