Azerbaijan is largerst investor in Georgia's economy

Giorgi Kalatozishvili, Tbilisi. Exclusively for Vestnik Kavkaza
Azerbaijan is largerst investor in Georgia's economy

According to the government statistics agency Geostat, the volume of direct foreign investments in Georgia's economy in the second quarter of this year significantly decreased compared to the same period of last year. If in April-June of 2016 total investments in various sectors of the economy amounted to $404,268 million, this year - only 346,6. Recession is around 14%. Investments also decreased in the first half of this year. $751 million were invested in Georgia during this period, which is 5,5% less compared to January-June of 2016. This slowdown is significant enough to say about trend of recession in foreign investments. Georgia risks to lose positive trend of constant growth in foreign investments. Last year, foreign investments amounted to $1,565 billion. It was more than in 2015 but not by much.

The reason for this is not entirely clear even for most competent experts. Of course, investment climate has been somewhat damaged by the decision to prohibit foreigners from buying agricultural lands, but investments in this sector were not very significant. In addition, there are no changes in the tax legislation, and political atmosphere in the country and Georgia international position remain more or less stable. These factors affected the flow of investments. True, investors are more influenced by the example of "colleagues." It is known that large investments show usefulness and profitability of investments in the economy of a particular country, and the decisions of authoritative figures in the financial world show prospects of investing in the economy of this state.

In this sense, Georgia is completely fine. One of the richest people in the world - billionaire Bidzina Ivanishvili - actively invests in the development of tourist cluster of the country. Panorama-Tbilisi complex construction project in the Georgian capital is estimated at one billion dollars. But still, Ivanishvili lives in Georgia and is considered to be an informal leader of the government, and the party founded by him "Georgian Dream", remains the ruling party. Other investors may not have such privileges and motivations.

However, neighboring countries are also interested in the development of Georgian economy. They support Georgia in the positive trend of investment growth. Azerbaijan is largerst investor in Georgia's economy. In 2015, neighboring country invested $549,575 million in Georgia, and in 2016 - $557,883 million. In the first half of 2017, Azerbaijan invested in Georgian economy more than any other country - $224,187 million.

It is important to note that above-mentioned investments don't include a loan for the construction of Baku-Tbilisi-Kars strategic railway. In recent years, Baku allocated two loans, which amount of $775 million. 

Javid Gurbanov, head of Azerbaijan Railways, stated that the official opening ceremony of Baku-Tbilisi-Kars is scheduled for October 28. Earlier, Minister of Transport, Shipping and Communications of Turkey Ahmet Arslan said that the railway could potentially transport 34-35 million tons of cargo per year. "At the initial stage, it is expected to transport up to 1 million passengers and 6,5 million tons of cargo. Our medium-term goal is to reach the transportation level of 20-22 million tons of cargo per year," Arslan said.

Azerbaijani investors pour their money not only into agriculture and tourism, but also into technical industry, for example Georgian-Azerbaijani enterprise for the production of complex electronics AG telecom. The largest Azerbaijani investor, of course, is SOCAR energy corporation, which has carried out a number of large-scale projects in several regions of the country in recent years.

Before Geostat's alarming reports was published, international rating company Moody's improved Georgia's credit rating from Ba3 to Ba2 for the first time in recent years. In a special statement Moody's said that Georgia coped well with economic shock that arose throughout the region in 2014, and stressed that against this background, the strength of financial sector of the country and state financial institutions was revealed.

According to Georgian Finance Minister Dmitry Kumsishvili, improvement of credit rating became "a positive signal for foreign partners and will help to attract foreign investments and international capital into the country." However, as former Finance Minister David Iakobidze said in an interview with Vestnik Kavkaza, no matter how important credit rating is, it is not directly associated with investment climate. According to Iakobidze, the ban on selling agricultural land to foreigners, the absence of a pension fund and the termination of development projects for environmental reasons affected the reduction of investments.