No Match Found
As part of pandemic recovery, companies may look to make investments in new countries to shorten their global value chains and widen their portfolios. Recognising this opportunity, the Government of Georgia has focused on foreign direct investment (FDI) as an important component of its economic recovery.
PwC supported the Government of Georgia to understand the pandemic’s impact on priority economic sectors and made recommendations for how the Government can attract more FDI in Georgia.
By the initiative of the European Bank for Reconstruction and Development (EBRD) - supported by the Investors Council, the project was contracted by the EBRD with the financial support of the UK Government under the Good Governance Fund (GGF) programme.
PwC assessed the impact of COVID-19 on the Georgian economy and prepared a medium-term strategy for the recovery. This assessment covered development of the FDI attraction policy recommendations to support the Government in effectively targeting FDI sources.
Compared to 2019, foreign direct investment (FDI) flows worldwide decreased by 42% in 2020 as a result of the pandemic. Georgia’s economy was also hit hard: FDI inflows dropped by 52.9% year-on-year and GDP fell by approximarely 5.9% (on a seasonally adjusted basis; raw data showed a 6.2% contraction), compared to 3% globally.
Before the pandemic, the Georgian Government had already made great strides to boost their economic advantage. Georgia was ranked as the 7th easiest country to do business in (World Bank’s Ease of Doing Business Report 2020), 12th in Index of Economic Freedom ranking (Heritage Foundation, 2021) and the 14th in PwC Paying Taxes ranking (PwC, 2021). As part of their pandemic recovery strategy, the Government of Georgia wants to build on this progress.
The European Bank for Reconstruction and Development (EBRD), through the Investors’ Council Secretariat, sought support to conduct a comprehensive economic impact assessment that would enable the Government to understand the extent of the pandemic’s impact on the economy. Based on these findings, the EBRD and Government of Georgia wanted to identify medium and long-term initiatives to mitigate the negative impact of COVID-19 on the economy, boost private sector resilience and investor confidence, and support Georgia’s economic recovery.
The economic impact assessment model is particularly important for the Government, as it provides us with additional clarity in terms of actions to be taken going forward. Increasing FDI is a priority for the Government. The report presented several meaningful insights highlighting the key obstacles for attracting FDI. The Ministry has already started to lead an active process based on the recommendations.
From January 2021 through May 2021, PwC offices (Georgia, Poland and India) worked with the EBRD and the Investors Council to support the economic recovery process in Georgia.
Throughout the project, the PwC team also cooperated with various stakeholders such as the Prime Minister’s Office, the Ministry of Economy and Sustainable Development of Georgia, Ministry of Finance of Georgia, Enterprise Georgia and National Statistics Office of Georgia.
Supporting FDI attraction was one of the most important parts of the work that PwC performed. To support the Government in effectively targeting FDI sources and to provide policy recommendations, PwC conducted a comprehensive analysis that included reaching out to existing and potential FDI partners to understand their experience and needs.
The analysis found that the overall investor journey in Georgia is positive and, as one of the investors indicated, that “Georgia is a hidden gem for investors.” To complement the existing offering, the findings suggest dedicating efforts to increase access to the skilled labor force and raising awareness among investors about the value proposition that the country brings could further enhance their FDI attraction. The key findings of the analysis performed showed that possible FDI sources were interested in reaching highly skilled technical workers with good language skills surrounded by a good high-tech infrastructure.
PwC developed a list of policy recommendations that were tested in the economic model developed and provided indication of the potential impact on the percentage point of GDP growth. Such quantitative assessments enable the prioritisation of certain policies, including those in education, civil servant upskilling, and technological and social media development.
The high quality and timeliness of the study was recognized by all stakeholders including the Government representatives.
Our world economy is suffering as a result of the pandemic. Small and medium-sized enterprises are facing an increased risk of insolvency and policymakers face significant challenges in the times of uncertainty, both politically and economically. As an outcome of the project, PwC produced recommendations to support the Government to effectively target FDI sources, stimulate priority economic sectors, and model revenue and tax scenarios. The team also developed two comprehensive economic models as an additional analysis tool to conduct comprehensive policy testing activities throughout the current and potential future economic crisis.
As a result, the project outcomes can enable the Georgian Government to mitigate the negative impact of COVID-19 on the economy by identifying supply chain disruptions resulting from the pandemic, assess current and potential future impacts of the pandemic on key sectors of the economy, target foreign direct investments, and foster the economic recovery of the country.
Supporting Georgia’s economic recovery from COVID-19 is a priority for EBRD through our ongoing support to enhance the competitiveness of Georgia’s private sector, enhance Georgia’s connectivity within and beyond the region, and support its transition towards a green economy. Enabling the Government to understand how different sectors have been impacted by the pandemic and potential actions that can be taken to help boost their recovery, increase FDI and enhance Georgia’s economic resilience for the future is central to this approach, and we are grateful to the UK Good Governance Fund for providing the financial support to do this.
CEE Public Sector & Infrastructure Leader, Partner
Director, PwC Georgia
Senior Manager, PwC Georgia
Manager, PwC Poland