Georgia, located at the crossroads of Western Asia and Eastern Europe, is a small but open market that derives benefits from international trade, tourism, and transportation. While it is susceptible to global and regional shocks, the country has made sweeping economic reforms since 1991 that have produced a relatively well-functioning and stable market economy. It ranks seventh in the 2020 World Bank’s Ease of Doing Business index and twelfth in the Heritage Foundation’s 2020 Economic Freedom Index. Fiscal and monetary policy are focused on low deficits, low inflation, and a floating real exchange rate, although the latter has been affected by regional developments, including sanctions on Russia, and other external factors, such as a stronger dollar. Public debt and budget deficits remain under control. However, global challenges posed by COVID-19 and measures needed to mitigate the spread of the virus have placed significant pressure on the domestic currency and the local economy.
The Georgian government’s “Georgia 2020” economic strategy, initially published in 2014, outlines economic policy priorities. It stresses the government’s commitment to business-friendly policies, such as low taxes, but also pledges to invest in human capital and to strive for inclusive growth across the country. The strategy also emphasizes Georgia’s geographic potential as a trade and logistics hub along the New Silk Road linking Asia and Europe via the Caucasus.
Overall, business and investment conditions are sound. However, some companies have expressed an increasing lack of confidence in the judicial sector’s ability to adjudicate commercial cases independently or in a timely, competent manner, with some business dispute cases languishing in the court system for years. Other companies complain of inefficient decision-making processes at the municipal level, shortcomings in the enforcement of intellectual property rights, lack of effective anti-trust policies, selective enforcement of economic laws, and difficulties resolving disputes over property rights. The Georgian government continues to work to address these issues and, despite these remaining challenges, Georgia ranks high in the region as a good place to do business.
The United States and Georgia work to increase bilateral trade and investment through a High-Level Dialogue on Trade and Investment and through the U.S.-Georgia Strategic Partnership Commission’s Economic Working Group. Both countries signed a Bilateral Investment Treaty in 1994, and Georgia is eligible to export many products duty-free to the United States under the Generalized System of Preferences (GSP) program.
Georgia suffered considerable instability in the immediate post-Soviet period. After regaining independence in 1991, civil war and separatist conflicts flared up along the Russian border in the Georgian territories of Abkhazia and South Ossetia. In August 2008, tensions in the region of South Ossetia culminated in a brief war between Georgia and Russia. Russia invaded and occupied areas of undisputed Georgian territory. Russia continues to occupy these Georgian regions, and the central government in Tbilisi does not have effective control over these areas. The United States supports Georgia’s sovereignty and territorial integrity within its internationally recognized borders and does not recognize Abkhazia and South Ossetia regions of Georgia as independent. Tensions still exist both inside the occupied regions and near the administrative boundary lines, but other parts of Georgia, including Tbilisi, are not directly affected.
Transit and logistics are a priority sector as Georgia seeks to benefit from increased East/West trade through the country. The Baku-Tbilisi-Kars railroad has boosted Georgia’s transit prospects. The Anaklia Deep Sea Port project, however, has faced multiple delays and extensions since its initial contract in 2016. The government terminated its contract with the Anaklia Development Consortium in 2020, asserting the consortium did not mobilize the capital necessary to implement the project. However, the government said it remained committed to the construction of a deep sea port in Anaklia and planned to retender the project. Logistics and port management companies in Poti have started development and expansion of Poti Port, currently the largest port in Georgia. Pace Group launched a $120 million project to develop a new port terminal at the site of the former Poti Shipbuilding Factory. Additionally, APM Terminals announced plans in 2019 to create a deep-sea port in Poti.
|TI Corruption Perceptions Index||2019||44 of 180||https://www.transparency.org/
|World Bank’s Doing Business Report||2020||7 of 190||https://www.doingbusiness.org/
|Global Innovation Index||2019||48 of 149||https://www.globalinnovationindex.org/
|U.S. FDI in partner country ($M USD, historical stock positions)||2018||35 million USD||https://apps.bea.gov/international/
|World Bank GNI per capita||2018||4,440 USD||https://data.worldbank.org/indicator/
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
Georgia is open to foreign investment. Legislation establishes favorable conditions for foreign investment, but not preferential treatment for foreign investors. The Law on Promotion and Guarantee of Investment Activity protects foreign investors from subsequent legislation that alters the condition of their investments for a period of ten years. Investment promotion authority is vested in the Investment Division of Enterprise Georgia, a legal entity of public law under the Ministry of Economic and Sustainable Development. The Investment Division’s primary role is to attract, promote, and develop foreign direct investment in Georgia. For this purpose, it acts as the moderator between foreign investors and the Georgian government, ensures access to updated information, provides a means of communication with government bodies, and serves as a “one-stop-shop” to support investors throughout the investment process. ( ).
To enhance relations with investors, in 2015 Georgia’s then-Prime Minister created an Investors Council, an independent advisory body aimed at promoting dialogue among the private business community, international organizations, donors, and the Georgian government for the development of a favorable, non-discriminatory, transparent, and fair business and investment climate in Georgia ( ). The Business Ombudsman, who is a member of the Investors Council, is another tool for protecting investors’ rights in Georgia ( ).
Limits on Foreign Control and Right to Private Ownership and Establishment
Georgia does not have an established interagency process to screen foreign investment, but relevant ministries or agencies may have the right to review investments for national security concerns in certain circumstances, as outlined below. Foreign investors have participated in most major privatizations of state-owned property. Transparency of privatization has been an issue at times. No law or regulation authorizes private firms to adopt articles of incorporation or association that limit or prohibit foreign investment, participation, or control. Cross-shareholder or stable-shareholder arrangements are not used by private firms in Georgia. Georgian legislation does not protect private firms from takeovers. There are no regulations authorizing private firms to restrict foreign partners’ investment activity or limit foreign partners’ ability to gain control over domestic enterprises.
There are no specific licensing requirements for foreign investment other than those that apply to all companies. The government requires licenses for activities that affect public health, national security, and the financial sector: weapons and explosives production, narcotics, poisonous and pharmaceutical substances, exploration and exploitation of renewable or non-renewable substances, exploitation of natural resource deposits, establishment of casinos and gambling houses and the organization of games and lotteries, banking, insurance, securities trading, wireless communication services, and the establishment of radio and television channels. The law requires the state to retain a controlling interest in air traffic control, shipping traffic control, railroad control systems, defense and weapons industries, and nuclear energy. For investment projects requiring licenses or permits, the relevant government ministries and agencies have the right to review the project for national security concerns. By law, the government has 30 days to make a decision on licenses, and if the licensing authority does not state a reasonable ground for rejection within that period, the government must approve the license or permit for issuance. Per Georgian law, it is illegal to undertake any type of economic activity in Abkhazia or South Ossetia if such activities require permits, licenses, or registration in accordance with Georgian legislation. Laws also ban mineral exploration, money transfers, and international transit via Abkhazia or South Ossetia. Only the state may issue currency, banknotes, and certificates for goods made from precious metals, import narcotics for medical purposes, and produce control systems for the energy sector.
Other Investment Policy Reviews
In January 2016, the World Trade Organization (WTO) concluded its second Trade Policy Review of Georgia. In this review, WTO members reiterated their approval of Georgia’s broadly open, transparent, and predictable trade and investment regimes. Members noted that, during the review period, Georgia undertook an impressive range of reform initiatives aimed at streamlining, liberalizing, and simplifying trade regulations and their implementation. The review lauded Georgia’s trade openness and its commitment to the multilateral system through its responsible contribution to the work of the WTO.
WTO members commended Georgia for ratifying the WTO’s Trade Facilitation Agreement and the related notification to the WTO of Category A, B and C commitments. Members also noted that Georgia was an observer to the Government Procurement Agreement and was assessing the prospects for joining the Agreement. Members welcomed the announcement that Georgia was considering joining the expanded Information Technology Agreement, which would constitute a significant step forward for attracting further investment. See more at:
Registering a business in Georgia is relatively quick and streamlined, and Georgia ranks second in registering property among countries assessed in the World Bank’s 2020 Doing Business Report. Registration takes one day to complete through Georgia’s single window registration process. The National Agency of Public Registry (NAPR) ( – webpage is in Georgian only), located in Public Service Halls (PSH) under the Ministry of Justice of Georgia, carries out company registration. The web page of the PSH ( ) outlines procedures and requirements for business registration in English. For registration purposes, the law does not require a document verifying the amount or existence of charter capital. A company is not required to complete a separate tax registration as the initial registration includes both the revenue service and national business registration. The following information is required to register a business in Georgia: bio data for the founder and principal officers, articles of incorporation, and the company’s area of business activity. Other required documents depend on the type of entity to be established.
To register a business, the potential owner must first pay the registration fee, register the company with the Entrepreneurial Register, and obtain an identification number and certificate of state and tax registration. Registration fees are: GEL100 (around USD35) for regular registration, GEL200 (USD70) for expedited registration, plus GEL1 (bank fees). Second, the owner must open a bank account (free).
Georgia’s business facilitation mechanism provides for equitable treatment of women and men. There are a variety of state-run and donor-supported projects that aim to promote women entrepreneurs through specific training or other programs, including access to financing and business training.
The Georgian government does not have any specific policy on promoting or restricting domestic investors from investing abroad and Georgia’s outward investment is insignificant.
4. Industrial Policies
The Georgian government has created several tools to support investment in the country’s economy. The JSC Partnership Fund is a state-owned investment fund, established in 2011. The fund owns the largest Georgian state-owned enterprises operating in the transportation, energy, and infrastructure sectors. The Fund’s main objective is to promote domestic and foreign investment in Georgia by providing co-financing (equity, mezzanine, etc.) in projects at their initial stage of development, with a focus on tourism, manufacturing, energy, and agriculture. ( )
In 2013, the government launched the Georgian Co-Investment Fund (GCF) to promote foreign and domestic investments. According to the government, the GCF is a six billion USD private investment fund with a mandate of providing investors with unique access, through a private equity structure, to opportunities in Georgia’s fastest growing industries and sectors. ( )
The government’s “Produce in Georgia” program is another tool for jointly financing foreign investment under which investors establish limited liability companies in Georgia. The program aims to develop and support entrepreneurship, encourage creation of new enterprises, and increase export potential and investment in the country. Coordinated by the Ministry of Economy and Sustainable Development through its Entrepreneurship Development Agency, National Agency of State Property, and Technology and Innovation Agency of Georgia, the project provides access to finance, access to real property, and technical assistant to entrepreneurs
The National Agency of State Property is in charge of the Physical Infrastructure Transfer Component, i.e., the free-of-charge transfer of government-owned real property to an entrepreneur under certain investment obligations.
Low labor costs contribute to the attractiveness of Georgia as a foreign investment destination. Georgia is also increasingly recognized as a regional transportation hub that links Asia and Europe. Georgia’s free trade regimes provide easy access for companies to export goods produced in Georgia to foreign markets. In some cases, foreign investors can benefit from these agreements by producing goods that target these markets.
In October 2018, Georgia’s Prime Minister introduced the concept of electronic residency, allowing citizens of 34 countries to register their companies electronically and open bank accounts in Georgia while not having a physical presence in the country.
Foreign Trade Zones/Free Ports/Trade Facilitation
In June 2007, the Parliament of Georgia adopted the Law on Free Industrial Zones, which defines the form and function of free industrial/economic zones. Financial operations in such zones may be performed in any currency. Foreign companies operating in free industrial zones are exempt from taxes on profit, property, and VAT. Currently, there are four free industrial zones (FIZ) in Georgia:
Poti Free Industrial Zone (FIZ): This is the first free industrial zone in the Caucasus region, established in 2008. UAE-based RAK Investment Authority (Rakia) initially developed the zone, but in 2017, CEFC China Energy Company Limited purchased 75 percent of shares, and the Georgian government holds the remaining 25 percent. Poti FIZ, a 300-hectare area, benefits from its close proximity to the Poti Sea Port. .
A 27-hectare plot in Kutaisi is home to the Egyptian company Fresh Electric, which constructed a kitchen appliances factory in 2009. The company has committed to building about one dozen textile, ceramics, and home appliances factories in the zone, and announced its intention to invest over USD two billion.
Chinese private corporation “Hualing Group,” based in Urumqi, China, developed another FIZ in Kutaisi in 2015. This FIZ is a 36-hectare area that houses businesses focused on sales of wood, furniture, stone, building materials, pharmaceuticals, auto spare parts, electric vehicles, and beverages: .
The Tbilisi Free Zone (TFZ) in Tbilisi occupies 17 hectares divided into 28 plots. TFZ has access to the main cargo transportation highway, Tbilisi International Airport (30 km), and the Tbilisi city center (17 km). For more information, visit: .
Performance and Data Localization Requirements
Performance requirements are not a condition of establishing, maintaining, or expanding an investment, but the government has imposed requirements on a case-by-case basis in some privatizations of large state assets, such as commitments to maintain employment levels or to make additional investments within a specified period of time. Performance requirements such as the scope and time limit on licenses to extract natural resources or production sharing agreements have triggered complaints from some companies that transactions lacked transparency. The U.S.-Georgia BIT prohibits certain performance requirements.
Georgia’s Law on Promotion and Guarantees of Investment Activity prohibits setting the required minimum number of Georgian citizens to be elected or appointed in leading bodies of enterprises.
The government does not follow a forced localization policy though recent legislative changes have created difficulties in acquiring residence permits for foreign employees working for VAT exempt entities. The government is aware of this oversight and Parliament plans to address this issue summer 2020. Foreign investors have no obligation to use domestic content in goods or technology. In addition, there are no requirements for foreign IT providers to turn over source codes and/or provide access to surveillance.
Customer- and business-related data transfer is not restricted in Georgia, neither within nor outside the country, unless it concerns personal or national security matters, which are protected by the law.
The Data Exchange Agency (DEA), under the Ministry of Justice, coordinates e-governance development, data exchange infrastructure, unified governmental networks, informational and communication standards, and cybersecurity policy. The DEA requires any company managing critical data to implement a number of security protocols to protect that information ( ).
6. Financial Sector
Capital Markets and Portfolio Investment
The National Bank of Georgia regulates the securities market. All market participants submit their reports in line with international standards. All listed companies must make public filings, which are then uploaded to the National Bank’s website, allowing investors to evaluate a company’s financial standing. The Georgian securities market includes the following licensed participants: a Stock Exchange, a Central Securities Depository, nine brokerage companies, and six registrars.
The Georgian Stock Exchange (GSE) is the only organized securities market in Georgia. Designed and established with the help of USAID and operating under a legal framework drafted with the assistance of American experts, the GSE complies with global best practices in securities trading and offers an efficient investment facility to both local and foreign investors. The GSE’s automated trading system can accommodate thousands of securities that can be traded by brokers from workstations on the GSE floor or remotely from their offices:
No law or regulation authorizes private firms to adopt articles of incorporation or association that limit or prohibit foreign investment, participation or control. Cross-shareholder or stable-shareholder arrangements are not used by private firms in Georgia. Georgian legislation does not protect private firms from takeovers. There are no regulations authorizing private firms to restrict the investment activity of foreign partners or to limit the ability of foreign partners to gain control over domestic enterprises.
The government and Central Bank (National Bank of Georgia) respect IMF Article VIII and do not impose any restrictions on payments and transfers in current international transactions.
Credit from commercial banks is available to foreign investors as well as domestic clients, although interest rates are high. Banks continue offering business, consumer, and mortgage loans.
The government adopted a new law in 2018 that introduced an accumulative pension scheme, which became effective on January 1, 2019. The pension scheme is mandatory for legally employed people under 40. For the self-employed and those above the age of 40, enrolment in the program is voluntary. The pension savings system applies to Georgian citizens, foreign citizens living in Georgia with permanent residency in the country, and stateless persons who are employed or self-employed and receive an income.
The government expects that that the new system will boost domestic capital market, as the pension funds will be invested within Georgia. The Pension Agency of Georgia made its first large scale investment in March 2020, when it invested 560 million GEL (around USD 200 million) in deposit certificates of high-rated Georgian commercial banks.
Money and Banking System
Banking is one of the fastest growing sectors in the Georgian economy. The banking sector is well-regulated and capitalized despite regional and global challenges faced in many neighboring countries. As of March 1, 2020, Georgia’s banking sector consists of 15 commercial banks, including 14 foreign-controlled banks, with 154 commercial bank branches and 830 service centers throughout the country. In January 2019, Georgian commercial banks held GEL 46.2 billion (around USD 15.5 billion) in total assets. As of early 2020, there were 17 insurance companies and 45 microfinance (MFI) organizations operating in Georgia. MFIs held GEL 500 million (USD155.5 million) in total assets as of January 1, 2020. Two Georgian banks are listed on the London Stock Exchange: TBC Bank (listed in 2014) and the Bank of Georgia (2006).
The National Bank of Georgia (NBG) is Georgia’s central bank, as defined by the Constitution. The rights and obligations of the NBG as the central bank, the principles of its activity, and the guarantee of its independence are defined in the Organic Law of Georgia on the National Bank of Georgia. The National Bank supervises the financial sector to facilitate the financial stability and transparency of the financial system, as well as to protect the rights of the sector’s consumers and investors. Through the Financial Monitoring Service of Georgia, a separate legal entity, the NBG undertakes measures against illicit income legalization and terrorism financing. In addition, the NBG is the government’s banker and fiscal agent. ( ).
The International Finance Corporation (IFC), the European Bank for Reconstruction and Development (EBRD), the U.S. International Development Finance Corporation (DFC), the Asian Development Bank (ABD), and other international development agencies have a variety of lending programs making credit available to large and small businesses in Georgia. Georgia’s two largest banks – TBC and Bank of Georgia – have correspondent banking relationships with the United States through Citibank, N.A.
Georgia does not restrict foreigners from establishing a bank account in Georgia.
Foreign Exchange and Remittances
Georgian law guarantees the right of an investor to convert and repatriate income after payment of all required taxes. The investor is also entitled to convert and repatriate any compensation received for expropriated property. Georgia has accepted the obligations of Article VIII, Sections 2, 3, and 4 of the IMF Articles of Agreement, effective as of December 20, 1996, to refrain from imposing restrictions on payments and transfers for current international transactions and from engaging in discriminatory currency arrangements or multiple currency practices without IMF approval. Parliament’s 2011 adoption of the Act of Economic Freedom further reinforced this provision.
Under the U.S.-Georgia BIT, the Georgian government guarantees that all money transfers relating to a covered investment by a U.S. investor can be made freely and without delay into and out of Georgia.
Foreign investors have the right to hold foreign currency accounts with authorized local banks. The sole legal tender in Georgia is the lari (GEL), which is traded on the Tbilisi Interbank Currency Exchange and in the foreign exchange bureau market.
The GEL’s official exchange rate is calculated based on transactions secured on the Interbank Foreign Exchange Market. Interbank trading with foreign currencies is organized via an international trading system (Bloomberg). Taking into consideration secured transactions, the weighted average exchange rate of the GEL against the USD is calculated and announced as the official exchange rate for the following day. The official exchange rate of the GEL against other foreign currencies is determined according to the rate on international markets or the issuer country’s domestic interbank currency market on the basis of cross-currency exchange rates. The cross-currency rates are acquired from the Reuters and Bloomberg information systems, and the corresponding webpages of central banks. The information is automatically received, calculated, and disseminated from these systems.
Georgia has a floating exchange rate. The National Bank of Georgia does not intend to peg the exchange rate and does not generally intervene in the foreign exchange market, except under certain circumstances when the GEL’s fluctuation has a high magnitude, such as during the COVID-19 pandemic.
There are no restrictions, limitations, or delays involved remittances from overseas. Several Georgian banks participate in the SWIFT and Western Union interbank communication networks. Businesses report that it takes a maximum of three days for money transferred abroad from Georgia to reach a beneficiary’s account, unless otherwise provided by a customer’s order. There is no indication that remittance policies will be altered in the future. Travelers must declare at the border currency and securities in their possession valued at more than GEL 30,000 (around USD10,000).
Sovereign Wealth Funds
Georgia does not have a Sovereign Wealth Fund.
10. Political and Security Environment
The United States established diplomatic relations with Georgia in 1992, following Georgia’s independence from the Soviet Union in 1991. Since independence, Georgia has made impressive progress fighting corruption, developing modern state institutions, and enhancing global security. The United States is committed to helping Georgia deepen Euro-Atlantic ties and strengthen its democratic institutions.
In August 2008, tensions in the region of South Ossetia culminated in a brief war between Georgia and Russia. Russia invaded and occupied areas of undisputed Georgian territory. Russia continues to occupy these Georgian regions, and the central government in Tbilisi does not have effective control over these areas. The United States supports Georgia’s sovereignty and territorial integrity within its internationally recognized borders and does not recognize the Abkhazia and South Ossetia regions of Georgia as independent. While South Ossetia and Abkhazia – which Russian troops and border guards have long occupied without Georgia’s consent – have declared independence, only Russia, Nauru, Nicaragua, Syria, and Venezuela recognize them as independent states. Tensions still exist both inside the occupied territories and near the administrative boundary lines (ABL). A Russian military build-up along the South Ossetia ABL dramatically escalated tensions in August 2019. In addition, Russian “border” guards regularly patrol the ABLs and have increasingly detained people trying to cross the ABLs. A number of attacks, criminal incidents, and kidnappings have occurred in and around the ABLs as well. While none of the activity has been anti-American in nature, there is a high risk of travelers finding themselves in a wrong place/wrong time situation. In addition, unexploded ordnance from previous conflicts poses a danger near the ABL of South Ossetia. However, other parts of Georgia, including Tbilisi, are not directly affected.
Per Georgian law, it is illegal to undertake any type of economic activity in Abkhazia or South Ossetia if such activities require permits, licenses, or registration in accordance with Georgian legislation. Laws also ban mineral exploration, money transfers, and international transit via Abkhazia or South Ossetia.
Violent street protests are uncommon, but there were significant clashes in June 2019 when protesters attempted to enter Parliament. Hundreds were injured, including some who suffered severe eye injuries due to police use of rubber bullets. Generally, police have fulfilled their duty to maintain order even in cases of unannounced protests.