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Resume: The sharpest drop in foreign direct investments (FDI) as compared to the previous year was registered in 2018 when FDI decreased by 35.5%. Therefore, a 50% drop in FDI, as stated by Aleksandre Elisashvili, is exaggeration and makes the audience believe that the situation is more dramatic than it actually is. However, there is a clear-cut trend of a drop in FDI in the past years and it is a significant problem.

Of additional note is that as clarified by the National Statistics Office of Georgia, among the primary causes behind the decrease in FDI in 2018 was the completion of the BP ‘magistral’ pipeline. The construction of the pipeline took place over the previous years and positively affected the volume of investments during this period. At the same time, several large enterprises changed ownership and are now in the hands of Georgian residents. Therefore, investments in such enterprises are no longer categorised as FDI which is a technical change by nature. However, this is only a technical explanation behind the aforementioned drop in FDI and cannot make the negative trend of the depletion of investment acceptable. Certain investment projects finished in the past as well as there were changes in the ownership in some of them although these drops in FDI were offset by other inflows.

Analysis

A former member of the Tbilisi City Council and founder of the Civic Movement, Aleksandre Elisashvili, on air on TV Mtavari, stated (from 32:00): “Foreign direct investments have dropped by 50%.” 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.

The National Statistics Office of Georgia publishes FDI data.

Table 1:Foreign Direct Investments in 2013-2019

2013

2014

2015

2016

2017

2018

2019*

FDI (USD Million)

1,039.2

1,837.0

1,729.1

1,650.3

1,962.6

1,265.2

1,267.7

GDP %

6.0

10.4

11.6

10.9

12.1

7.2

7.1

Change as compared to the previous year %

-0.1

76.8

-5.9

-4.6

18.9

-35.5

0.2

Source: National Statistics Office of Georgia

The sharpest drop in foreign direct investments (FDI) as compared to the previous year was registered in 2018 when FDI decreased by 35.5%. In addition, FDI dropped in 2013 (-0.1%), in 2015 (-5.9%) and in 2016 (-4.6%). In the case of 2019, FDI growth was marginal and only amounted to USD 2.5 million. In 2018-2019, the FDI to GDP ratio also declined by 40% in 2018 and by 0.6% in 2019. Therefore, a 50% drop in FDI, as stated by MrElisashvili, is an exaggeration and makes the audience believe that the situation is more dramatic than it actually is. However, there is a clear-cut trend of a drop in FDI in the past years and it is a significant problem.

Of additional note is that as clarified by the National Statistics Office of Georgia, among the primary causes behind the decrease in FDI in 2018 was the completion of the BP ‘magistral’ pipeline. The construction of the pipeline took place over the previous years and positively affected the volume of investments during this period. At the same time, several large enterprises changed ownership and are now in the hands of Georgian residents. Therefore, investments in such enterprises are no longer categorised as FDI which is a technical change by nature. However, this is only a technical explanation behind the aforementioned drop in FDI and cannot make the negative trend of the depletion of investment acceptable. Certain investment projects finished in the past as well as there were changes in ownership of some of them although these drops in FDI were offset by other inflows.