Market of the Month – Georgia
Recent Commerce Event Bolsters Trade and Investment Ties with Georgia
Promising Sectors and Potential Projects in the Republic of Georgia
Georgia is a nation with a small transitional economy that is undergoing rapid and positive change. While it is itself a small market of 4.5 million people, with a gross domestic product (GDP) per capita of $3,400 at purchasing power parity, it is located at the crossroads between Europe and Central Asia.
The World Bank recognized Georgia as the world’s fastest reforming economy and as a leader in the fight against corruption, following the 2003 Rose Revolution. Also ranked 37th in the world by the World Bank in 2007 for ease of doing business, Georgia can offer a platform for trade and investment in the Caucasus, Central Asia and Russia.
The Department of Statistics of Georgia reports that the nation’s annual GDP growth rate was 9.4 percent in 2006 and 12.4 percent in 2007. Overall, the Georgian economy is experiencing rapid growth despite restrictions on key Georgian exports imposed by Russia, which has traditionally been Georgia’s largest trading partner.
Recent Commerce Event Bolsters Trade and Investment Ties with Georgia
In late October, the U.S. Department of Commerce held a business summit in Georgia with the intent of shoring up investor confidence in the nation and increasing bilateral commercial ties following the August invasion by Russia. Commerce Deputy Secretary John Sullivan brought a message of support and friendship to the Republic of Georgia, leading a delegation of senior U.S. officials to the summit in T’bilisi and also participating in a certified trade mission that week.
“This Summit is about … the unbreakable ties between our two countries,” said Sullivan upon opening the Summit event.
Following the opening remarks, Robert Mosbacher, Jr., president and CEO of the Overseas Private Investment Corporation (OPIC) announced $176 million in new financing for seven new projects in Georgia, and several agreements were signed.
“In these new projects, OPIC has carefully identified sectors—finance, construction, tourism and manufacturing—that can best catalyze Georgia’s economic growth,” said Mosbacher.
Event speakers then highlighted U.S. resources for expanding trade with Georgia, as well as investment opportunities in the country’s growth sectors. Summit attendees numbered more than 200 from a large cross-section of local companies and government officials, as well as U.S. company representatives and members of the U.S. trade mission.
The trade mission, which was organized by the America-Georgia Business Council and the American Chamber of Commerce in Georgia and certified by the U.S. Department of Commerce, included 18 U.S. companies in the communications, infrastructure, energy, agribusiness, finance, and medical sectors. More than 155 one-on-one meetings were arranged between the trade mission companies and potential Georgian partners. Many mission participants praised these one-on-ones as the most valuable part of the mission, and as a jump-start into the Georgian market.
Georgian Landscape
In Georgia, most inputs must be imported.
The tourism and agriculture sectors are receiving special attention from the government and from international donors, such as the Millennium Challenge Corporation. Furnishings and equipment for these sectors will be in demand.
Construction of roads, energy distribution infrastructure, water systems, hotels and office space is booming across Georgia. This is presenting opportunities for producers of building equipment and materials and for providers of architectural and engineering services.
While consumers’ spending power is somewhat constrained, they are interested in processed foodstuffs, automobiles and aftermarket accessories, and security equipment.
Information technology, systems and software are needed to support new business growth.
International organizations and foreign governments also have procurement needs that can be filled by U.S. exporters. These agencies include the International Monetary Fund (IMF), the World Bank, European Bank for Reconstruction and Development, United States Agency for International Development (USAID), and the Millennium Challenge Corporation.
Because of difficulties with Russia, its main trading partner, Georgia is trying to re-orient its trade patterns and find new trading partners in Europe, North America and Asia.
The government of Georgia has no control over the separatist regions of Abkhazia and South Ossetia. However, tensions in those regions have little impact on peace and security in the rest of the country.
The Georgian government has committed itself to further reducing obstacles to doing business in Georgia. It has already reduced all but a few tariffs to a zero rate and has stated its intention to abolish tariffs altogether.
The main practical challenges to doing business in Georgia stem from linguistic and cultural differences. Most business is conducted in Georgian, official laws and regulations are printed in Georgian, and products must be labeled in Georgian, which in many ways is a unique language. Many Georgians involved in international business know English, however, and its use is becoming more widespread.
Communications and marketing skills are still developing, and personal connections are of great importance.
Laws and regulations, especially in the areas of tax and customs, are subject to uneven and arbitrary interpretation and enforcement by bureaucrats and courts. A good local attorney is indispensable for other than simple transactions.
Enforcement of intellectual property rights is weak.
The development of personal rapport is an important part of business relationships in
Georgia. Business meetings tend to be relatively relaxed affairs. Although tardiness does not necessarily reflect a lack of respect, foreign visitors should be punctual.
Business lunches are less common than in the U.S. and Europe. Elaborate dinners—known as "Georgian tables" or "Supras"—are generally long affairs, at which numerous, informal and impromptu toasts are often required of both the host and honored guests. Wine is an important part of Georgian culture and is a part of any meal. Georgians take great pride in their reputation as gracious hosts.
Promising Sectors and Potential Projects in the Republic of Georgia
Infrastructure - (Note: Historically, Georgia has been a major transit point for the Silk Road linking Europe and Central Asia.)
 | Railroad expansion/upgrade: The Georgian railroad infrastructure needs a complete overhaul. The government has considered privatization. |
| Poti Sea Port expansion project: More than $100 million is being sought for a major addition to the Poti Sea Port. |
| Airport logistics center: This is a project that is being originated by the T’bilisi Aircraft Factory. |
Energy - (Note: Georgia is a major transit point for natural gas flowing from Baku to Europe.
| Promising sector: Natural gas underground storage |
| Promising sector: Oil/gas refinery |
| Major hydroelectric dam: With an estimated cost of $500 million, this project will provide energy for Georgia, as well as neighboring Turkey. |
Other
| Copper mine modernization: Western investment is sought to upgrade equipment for mines with large copper deposits. |
| Agribusiness project: The USAID has packaged 100 mid-sized farms into a large potential agribusiness investment project. |
| Regional hospital: A feasibility study has been completed that examines building a Western-run hospital to provide services to patients throughout the Caucasus. |
| Location: Southwestern Asia, bordering the Black Sea, between Turkey and Russia |
| Population: 4,630,841 (July 2008 est.) |
| Nationality: Noun: Georgian(s); adjective: Georgian |
| Ethnic Groups: Georgian: 83.8 percent; Azeri: 6.5 percent; Armenian: 5.7 percent; Russian: 1.5 percent; other: 2.5 percent (2002 census) |
| Languages: Georgian: 71 percent (official); Russian: 9 percent; Armenian: 7 percent; Azeri: 6 percent; other: 7 percent |
| Government Type: Republic |
| Capital: T'bilisi |
| GDP (official exchange rate): $10.29 billion (2007 est.) |
| GDP Composition by Sector: Agriculture: 13 percent; industry: 28.7 percent; services: 58.3 percent (2007 est.) |
| Export Commodities: Scrap metal, wine, mineral water, ores, vehicles, fruits and nuts |
| Import Commodities: Fuels, vehicles, machinery and parts, grain and other foods, and pharmaceuticals |
Plan your market entry the right way. Use U.S. Commercial Service market research to learn about your product’s potential in Georgia, the best prospects for success, and the market’s business practices before you export. For more information, visit the Market Research Library.
In addition to obtaining U.S. Commercial Service market research, you can visit the following organizations’ Web sites to learn more about Georgia:
| American Chamber of Commerce in Georgia |
| America Georgia Business Council |
| U.S. Embassy in Tbilisi, Georgia |