BAKU, Azerbaijan, Dec.16
By Tamilla Mammadova – Trend:
The Organization for Economic Co-operation and Development (OECD) has presented an overview of investment trends and policies in Georgia which highlights the progress the country has made and gives recommendations to overcome the challenges Georgia faces today, Trend reports via the OECD.
The Investment Policy Review of Georgia discusses why the 'successive structural, regulatory and economic reforms' of the two decades have not facilitated more broad-based economic growth in the country.
"Despite important progress, productivity and exports remain low, and unemployment and poverty are still high, particularly in rural areas. Most FDI has gone to non-tradable sectors, including transport infrastructure, real estate, construction and financial services. These sectors are important contributors to economic growth, but have not sufficiently advanced job creation or productivity, and may be limited by Georgia’s relatively small domestic market”, reads the summary of the review.
Head of Investment and Sustainable Development Unit of OECD Stephen Thomsen said at a presentation of the review today that Georgia is one of the best performers in the international rankings, but improvements in rankings do not always lead to increased FDIs.
Thomsen said that Georgia's reforms have been impressive but need to be deepened.
Georgia's reform experience is commendable and is in many ways an example to which other countries look for inspiration. When discussing FDI trends in Georgia Thomsen said that the share of re-investment is higher in the total volume of the FDIs than the share of new investments.
"That is an equally important investment in terms of the impact it might have on the economy and of course keeping existing investors happy is as important as promoting new investment. But if you do not get new investments you are not contributing into the diversification of the FDI. FDI is likely to further contract in the near-time as a result of the COVID-19 pandemic, global supply and demand disruptions and the pessimistic outlook of economic actors", he said.
"Georgia is now, like much of the world, facing the health and economic consequences of the Covid-19 pandemic. The government took swift monetary and fiscal measures to support healthcare provision and liquidity and assist at-risk firms and individuals. Disruptions to business, travel, remittances and investment are nonetheless likely to have a severe impact on the economy," said the review.
The review suggests private investment, both foreign and domestic, will be essential for Georgia’s economic recovery.
The review said the government’s unparalleled success in removing many of the obstacles to doing business is commendable. But such reforms by themselves will neither assure a steady inflow of FDI nor maximize the potential gains from investment.
"Further reforms will need to address gaps in infrastructure and connectivity within the country, and upgrade the skills of the workforce. Improving not only regulatory constraints but the whole investment climate – including the wider legal framework, investment promotion strategy and institutions, policies to promote responsible business conduct, and impediments to growth of priority sectors – will help Georgia attract FDI that can have a positive impact on productivity and inclusive, sustainable growth", reads the overview.
The Investment Policy Review of Georgia reads that attracting investment in Georgia’s agricultural and food value chain – collectively accounting for 10 percent of GDP and 44 percent of employment – has the potential to generate substantial benefits for key sectors.
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