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Why Investors do not Show Interest in Regions of Georgia?

The turnover of the business sector in Georgia is growing from year to year, but Tbilisi accounts for 70% of all investments, and the regions – only the remaining 30% .

According to the Statistics Service, in the 3rd quarter of 2014, even the most successful region of Adjara accounts only 6.6% of the country’s business turnover, not to mention other parts of the country where investments are not virtually made.

Why such a disparity is observed in the country? Why both local and foreign investors invest in the capital, and how can this situation  be remedied?

According to Irene Guruli, a representative of the Economic Policy Research Center (EPRC), one of the reasons for the uneven distribution of investment is infrastructure lagging of regions compared with the capital. In addition, the region’s main activity is concentrated in agriculture, despite the fact that 70% of the land is not registered.

 “In general, in order to clarify the complexity of reasons preventing investment in the region, it is necessary to conduct a serious and detailed study. In particular, it will be useful to know how interconnected are public spending on infrastructure and growth of economic activity “- she notes.

In her words,  the uneven distribution of business in general is a problem for all developing countries, where economic activity is mainly concentrated in the capital. With the development of the countries, a gradual transition to a more uniform distribution of business activity takes place.

A founder at the Investors’ Club Vakhtang Mumlauri says that there are several reasons for which Tbilisi is more  preferred option for investing.

“In particular, a real estate market is much better developed in the capital, respectively; in Tbilisi it’s profitable to invest in construction, since a considerable part of the population lives in the capital. The fact that in Tbilisi investors can easier sell real estate is one of the factors increasing interest in investing in Tbilisi, “- he explains.

According to Ramaz Gerliani, President of  the Center for Economic Policy, statistics are not surprising, since in recent years the population of the region is actively migrating  to the capital, and one reason for this is that in regions there are  far less opportunities for business.

“However, the situation can be improved  if the government pursues a consistent and correct economic policies in order to equalize the economic opportunities of the capital and regions,”- he adds.

In his words, today the government owns  about 300 000 hectares of arable land.

“While the privatization process is not completed, and the price of land has not increased, the owners of the impaired land will not be able to attract funds, and if they can – only on onerous terms. After that, another problem arises – the inability to cover outstanding loans,”- Ramaz Gerliani says.