How Georgia Became a Trusted Destination for Business and Investment

After two decades in which the world’s economic center of gravity has steadily shifted eastward, this macrotrend of the early 21st century faces new complexities, including supply chains challenged by lockdowns and an energy crisis. But among this uncertainty lies Georgia’s renewed opportunity.

Situated on the ancient Silk Road between East and West, this nation in the South Caucasus has spent several years revitalizing its historic trading position through extensive economic reforms that have slashed bureaucracy and made Georgia one of the easiest places in the world to do business.

An easy place to do business

Ease of doing business in Georgia is founded on a liberal tax system and labor code. According to the World Bank, its total business tax and contribution rate is just 9.9% of profits—the world’s third-lowest rate—with retained and reinvested profits being exempt from tax. There is no social security tax and personal income tax is set at a flat 20%.

Registering a company can take as little as one day. Nowhere in the world, other than New Zealand, can match Georgia’s regulatory performance for starting a business, according to the World Bank.

S&P’s recent BB rating, prompted by Georgia’s GDP growth of 10.4% in 2021, noted the potential for 4%–5.5% annual growth “for 2022 and 2023.” The country sits at the heart of a market of 2.3 billion consumers, thanks to a network of free trade agreements (FTAs) that connect it to the EU, China (including Hong Kong, China), the UK, EFTA countries, CIS, Turkey, and several other countries. Its strategic location makes it a business-friendly gateway to Central Asia and a transit point between Europe and the East.

This advantageous position has generated clear investment opportunities in the logistics sector, boosted by the Baku-Tbilisi-Kars (BTK) rail project that links Turkey and the European rail network to the Caspian Sea. Georgia provides a route into Europe for landlocked Central Asian countries trading minerals, machinery and transport equipment. The first train carrying goods from Turkey to China began operating on the new BTK railway in December 2021.

Georgia has free industrial zones (FIZs) in major centers including the capital, Tbilisi, Kutaisi, the country’s third-largest city, and Poti, which is just two kilometers from the country’s largest seaport. These zones offer low-tax environments to support investors and companies in the manufacturing sector.

With well-organized and business-friendly approach of the government, low levels of bureaucracy and a simple taxation system, Georgia’s business environment is also bolstered by its access to talent. Over the past five years, more than 120,000 of the country’s students have graduated from tertiary education and 55% of its working population is under 45 years old. Leveraging this predominantly young, literate, well-educated workforce, Georgia’s business process and IT sectors are establishing themselves as regional hubs for customer contact centers and architecture, design and engineering services.

A significant part of this success is due to companies like Majorel, a European-based customer experience management company that employs around 73,000 people across 36 countries. When it established an office in Georgia, the expectation was for an operation employing 300–400 people, but six years later, the office has 10 times that number.

“Right now, we have over 3,000 employees. Ninety percent are Georgian nationals; 80% have or are in pursuit of higher education; and a lot of our key departments are led by a female workforce. And we’re still growing,” says Alexander Mironenko, Country Director of Majorel Georgia.

“Georgia is a relatively young country, but it has matured a lot in the past decade or two,” he adds. “There’s very little bureaucracy, very little red tape. That simplicity of doing business brings the trust for investors.”

Harnessing free-flowing power

With more than 20,000 rivers, and nearly 300 of them fast-flowing, Georgia already produces 70% of its energy needs from hydropower. Yet only 25% of Georgia’s natural energy resources are currently exploited, despite it being surrounded by countries with renewable electricity deficits.

The country can help make up some of that shortfall by realizing its estimated wind power potential of 1.45 GW. Georgia’s leading wind project is the Qartli wind farm in the Caucasus Mountains, with installed capacity of 20.7 MW. The potential for solar power is also substantial, with some regions enjoying more than 2,000 hours of sunshine per year.

Since 2021, AIONRISE, a US-owned manufacturer of solar photovoltaic (PV) panels, has owned a manufacturing plant in Georgia, with a production output of 500 MW, “making it one of the largest in Europe,” according to Shokhrukh Baratov, AIONRISE’s Chief Business Development Officer. “Everything is perfectly located, logistically. We have the access to the Black Sea, so we can ship to any country, and we have the biggest suppliers nearby like the European Union.”

Driven by the growing demand for residential and commercial rooftop solar installations in the US and Europe, AIONRISE’s success is buoyed by Georgia’s FTAs and implementation of EU codes and labor rules. “Everything here is done by European standards,” says Baratov. “That’s a perfect match for us and that’s why we are here.”

As AIONRISE’s solar business continues to expand, the company has begun fundraising talks with potential investors to secure the supply of raw materials it needs to expand the manufacture of its PV cells in Georgia. “The price of solar has dropped dramatically almost five times in 15 years,” explains Baratov. “So, when you compare the economics, there is no other choice for human beings on this planet than to utilize the sun, the world’s biggest energy source.”

Investing in the future

Encouraged by Georgia’s reforms and infrastructure spending, the European Bank for Reconstruction and Development (EBRD) has invested €4.6 billion ($4.79 billion) in 270 projects across the country. Odile Renaud-Basso, President of the EBRD, who recently praised Georgia’s efforts in tackling the Covid-19 crisis, said the bank’s investment in the country—which reached a record €618 million ($643 million) in 2020—was “focused on promoting a green economy, social equality and digitalization.”

“Renewable projects have huge potential for both domestic and foreign investment in Georgia,” explains Catarina Bjorlin Hansen, EBRD’s Regional Director for the Caucasus. “We’re also looking at greening manufacturing and agribusiness, and are also putting green aspects into projects we do with the commercial banks here.”

By implementing wide-ranging reforms, Georgia has worked hard to transform its economy, increase its growth rate and improve living standards. Energy consumption has almost doubled since 2000, primarily driven by growth in the transport and industry sectors; according to the EBRD, electricity consumption correlates strongly with Georgia’s economic growth “and it’s not showing signs of decoupling.”

Alongside integration with global markets through its FTAs, Georgia is also welcoming more visitors: In 2010, it received about 2 million international travelers; in 2019, that number increased to 9.4 million. Tourism revenues rose from $1.94 billion in 2015 to $3.27 billion in 2019, accounting for 8.1% of the economy.

“Georgia is a very good location for investments because of its accessibility. You have access to all the authorities, to the decision makers. You have access to finance; the banking system here is very well developed,” says Hansen. “But it’s very important to get a feel for how your company would work here. It’s very important to come and experience it yourself.”