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Negative Externalities not Reflected in the Foreign Investment

According to the Statistics Service, in the 4th quarter of 2014, as well as throughout the year, investments grew despite external factors named by  the government as the main cause of economic difficulties.

In this case, it is  important  what kind of investment we are talking about – the continuation of ongoing projects or the influx of new investments?

In addition to the so-called “old investor”, in 2014 appeared new investors such as  the “Old City Development” company which is implementing the project “Panorama – Tbilisi” whose  main investor  is the former Prime Minister Bidzina Ivanishvili.

The top five investors includes several companies, whose names say nothing and  their activity is also unknown.

In 2014, in total  59 new foreign companies were registered in Georgia which invested about $ 60 million in the country’s economy.

However, “Old City Development” says that in 2014 the company invested $ 60- 65 million in development of its  business, so it turns out that other companies have invested nothing and exist only on paper.

Among the biggest investors are the  Azerbaijani “BP Group”, the Chinese “Hualing international”, which is building the Olympic Village in Tbilisi, “Ajaristskali” and “IDS Borjomi”. “Old City Development”, the only major new investor, finishes the top five.

By sectors of the economy, transport and communication is in the first place , the second is the construction, the third – the processing industry. Investment in energy decreased 2.5 times, although, according to the Minister of Energy, there is nothing to worry, as energy projects are increasingly funded by  Georgian commercial banks.

At the same time investments are not almost made in agriculture and health care, despite the fact that the government heavily finances the development of these sectors.

According to the Minister of Finance of Georgia Nodar Khaduri, there is nothing strange, as investors prefer to invest in the sectors where one can faster make larger profits.

“Foreign investors invest in the sectors where the profit is greater and lead in terms of attracting investment. We are focused on export development, and we spend our money primarily in this direction, “- he says.

Over the past 10 years, 2014 can be compared only to 2007 and 2008 in terms of investment. It’s good  that  old investors continue to work in the country, but it is desirable to increase the number of companies that began to invest in 2013-2014.