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Davit Songhulashvili: “In the seven-year period of their rule, GEL 2.525 billion more in investment was made under the Georgian Dream. In addition, in these seven years under the Georgian Dream’s rule, investments are GEL 1.580 billion more as compared to the nine-year period of 2004-2012.”

Verdict: FactCheck concludes that Davit Songhulashvili’s statement is a MANIPULATION.

Resume

In the first part of his statement, Davit Songhulashvili did not specify which seven-year period he was referring to (the first or the last seven years of the party’s rule). In both cases, the volume of investments was higher under the Georgian Dream’s rule as compared to that of the United National Movement, although not by USD 2.5 billion as claimed by the MP. In regard to the second part of the statement, USD 1.7 billion more in investments were made in Georgia in the first seven years of the Georgian Dream’s rule as compared to the investments made during nine years under the United National Movement’s rule. In this case, the figures in Mr Songhulashvili’s statement more or less match the actual numbers.

Of note is that an analysis of the investments to the GDP ratio is important whilst making a comparison. In this component, the figures under the Georgian Dream’s rule are definitely not better and this contradicts the spirit of Davit Songhulashvili’s statement. In addition, the MP brings large seven-year-long periods for comparison and the dynamic of the pre-pandemic 2018-2019 years when the shrinking FDI trend was clear-cut and problematic is overlooked vis-à-vis the relatively successful 2013-2017 period. Therefore, FactCheck concludes that Davit Songhulashvili’s statement is a MANIPULATION.

Analysis

The Chair of the Sector Economy and Economic Policy Committee of the Parliament of Georgia, Davit Songhulashvili, at the plenary session of the Parliament of Georgia, cited accomplishments in different fields under the Georgian Dream’s rule in comparison to those under the United National Movement’s rule, including FDI statistics. As stated by Mr Songhulashvili: “In the seven-year period of rule, GEL 2.525 billion more in investment was made under the Georgian Dream. In addition, in the seven years under the Georgian Dream’s rule, investments are GEL 1.580 billion more as compared to the nine-year period of 2004-2012.”

Foreign direct investment 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. shares or the equivalent of such participation.

The issue of foreign direct investments (FDI) has always been a matter of serious discussion for Georgia. For developing and transitional economies like Georgia, which need resources and the experience of investors to gain ground on the international market and develop and expand their economies, FDI bears critical importance. FDI facilitates not only the inflow of foreign capital per se but helps deepening humanitarian ties, technological sophistication and gaining experience which is vital for a country’s development.

Graph 1 shows the dynamic of foreign direct investments. In 2013-2021, total FDI in Georgia was USD 12.6 billion whilst in 2004-2012 it was USD 9.2 billion. Therefore, USD 3.4 billion more in FDI was made in Georgia under the Georgian Dream’s rule as compared to period when the United National Movement was in power.

In 2013-2019, approximately USD 10.8 billion in FDI was made in Georgia whilst that figure was USD 7 billion in 2004-2010. Therefore, if we take the first seven years of being in power, investments under the Georgian Dream’s rule were nearly USD 3.9 billion more. In the last seven years of being in power (2006-2012 vs 2015-2021), FDI under the United National Movement’s rule was USD 8.2 billion and USD 9.7 billion under the Georgian Dream’s rule. Therefore, USD 1.5 billion more in FDI was made under the Georgian Dream’s rule. It is obvious that in both cases more investments came under the Georgian Dream’s rule, although the periods which Davit Songhulashvili compares when he speaks about a USD 2.5 billion difference in the seven-year-long periods are vague.

In regard to the second part of the statement, USD 1.7 billion more in investments were made in the first seven years of the Georgian Dream’s rule as compared to the nine years when the United National Movement was in power. In this case, Davit Songhulashvili’s figure (USD 1.5 billion) more or less matches the factual number. Of note is that severe crises took place under both governments – the Russia-Georgia war and the world economic crisis (2008-2012) under the United National Movement’s rule and the COVID-19 pandemic (2020-2021) under the Georgian Dream’s rule.

Graph 1: Foreign Direct Investment Dynamic in 2004-2021, USD Million; Secondary Axis: % of GDP

Source: National Statistics Office of Georgia

On the other hand, an analysis of the dynamic of relative figures is more important for comparison because a specific amount of resources can be sufficiently large for a smaller economy and small for a larger economy. Under an economy of a specific size, the “success” of FDI attraction should be judged in comparison to the size of the economy. Furthermore, the economic legacy that the United National Movement inherited was worse as compared to the economy that the Georgian Dream inherited and attracting investments as well as the growth of the economy and the budget under the United National Movement’s rule are attributable to radical reforms implemented by the United National Movement.

In 2004-2012, the average FDI to the GDP ratio was 9.7% whilst it was 8.4% in 2013-2021. In the first seven years of being in power, the average FDI to the GDP ratio was 9.4% under the Georgian Dream’s rule and 10.6% under the United National Movement’s rule. Therefore, based on relative numbers FDI figures were higher under the United National Movement’s rule. On the other hand, GDP comparisons prior to 2010 and after 2010 can only be tentative because the National Statistics Office of Georgia has been using a new methodology to measure the GDP since 2010 and this has resulted in a higher GDP figure in that period. Therefore, the relative figures can be similar under the both governments, although the Georgian Dream does not have a clear advantage.

Presumably, Davit Songhulashvili refers to the seven-year dynamic in order not to take the impact of 2020-2021 into consideration since the pandemic strongly harmed the investment environment. However, on the other hand, an analysis of a larger interval of time fails to notice the clear-cut trend of the shrinking FDI as early as 2018-2019 prior to the pandemic. It is unfortunate that Georgia failed to implement a number of investment projects both in the pre-pandemic and the pandemic periods, including the Anaklia seaport, the Namakhvani HPP and other HPPs of strategic importance. On top of very tangible economic losses, this also harmed the country’s investment image and climate. This context is not visible whilst comparing larger periods of time during the rule of the previous and the incumbent governments. At the same time, it is more appropriate to compare relevant figures instead of absolute figures where the Georgian Dream does not have an advantage over the United National Movement. Therefore, FactCheck concludes that Davit Songhulashvili’s statement is a MANIPULATION.