Posted: 3 years ago

Foreign Direct Investment See 5 Years’ Bottom

According to preliminary indicators, foreign direct investments (FDI) in 2018 was listed at 1,232.4 million USD, down 34.9% year on year.

The contraction in FDI is related to completion regarding gas pipeline construction. Moreover, several companies were moved their ownership to Georgian residents, and loan liabilities were paid off to nonresident direct investors.

According to the existing indicators, in 2018, foreign direct investments was at a 5 year minimum. The lower figure was registered in 2013 – 1,020.6 million USD. In the following years, FDI inflows were recorded as growing.

“I would like to explain that the completion of the main gas pipeline has caused a contraction in FDI inflow. At the same time, a significant transaction was carried out in the telecommunications sector in 2018, when domestic residents bought stakes from foreign resident. Thirdly, loan liabilities were paid off to nonresident investors, and all these factors were reflected in the statistics. It is very important that financial liabilities were covered before nonresidents. We also welcome the fact that that our resident companies actively make investments in the telecommunications sector. Therefore, yesterday’s statements regarding FDI inflow declined because of fundamentals factors are untrue”, Prime Minister Mamuka Bakhtadze said.

“We should make progress in terms of general investments and 20% upturn is an evident example of this,” the Prime Minister noted.

“It is clear that potential investments became one of the key arguments for FITCH, as it increased our sovereign rating”, Mamuka Bakhtadze said.

The ratio of the three major investor countries in total FDI inflows to Georgia made up 49.6%, according to the early report. Azerbaijan ranks first with 19.5%, the United Kingdom is second at 16.5%, and the Netherlands is third with 13.6%. It should be noted that investment inflows declined in 6 of 10 investments sectors, including:

The power sector (-30%) – only 3.7 million USD was invested in the Georgian power sector in the fourth quarter of 2018, down 96% year on year. A total of 157 million USD was invested in the sector in 2018, down 30% year on year. The decline may signify that  international interest in the Georgian power sector is decreasing.

The development sector (-63%).  A total of 103 million USD was invested in Georgia’s development sector in 2018, down 63% compared to 2017 (283 million USD).

Transport and communications (-64%). A total of 489 million USD was invested in Georgia’s transport and communications sector, while the figure was 174 million USD in 2018, down 64%.

Construction of pipelines is a part of the transportation sector, not power sector. The investment contraction in the sector is genuinely related to the completion of the Shah Deniz pipeline.

Real Estate (-50%). According to Geostat, the national statistics service of Georgia, total FDI inflows in 2018 made up 90 million USD, down 50% year on year.

Finance Sector (-8%). FDI inflows declined in the financial sector, too. According to Geostat, the year on year contraction represented 8% (-24 million USD), and the 2018 FDI inflow in this sector amounted to 277 million USD.

Other sectors (-30% – 52 million USD).