This paper provides a summary of findings and policy recommendation based on a series of eight case studies that document foreign direct investment in Georgia’s agriculture and food processing sectors. The investors are in a variety of industries, including grape and wine production, hazelnuts, poultry, cereals and medicinal herbs, pickled fruit and vegetables, and apple concentrate and aroma. Each study includes a detailed discussion of factors concerned with the general policy and business environment, such as protection of property rights, taxation, access to finance, land, labor and other production factors, the range and quality of suppliers and service provider networks, and quality of infrastructure. The analysis focuses on the strategies investors employed, and the effectiveness of those strategies, in dealing with shortcomings in the business enabling environment and other challenges they faced investing in Georgia.
The studies also look at the positive impact of these investments on the Georgian economy, examining qualitative benefits like job creation, workforce development, and the introduction of new products or processes (including technology spillovers) that might positively affect suppliers, competing agribusinesses, and smallholder farmers. The studies also look at how these investments affect the range and quality of products available to Georgian consumers, including substitution of imports. Addressed to both government and investors, the recommendations drawn from the case studies and summarized in this report are focused on addressing deficiencies in the business enabling environment and, for investors, strategies to overcome these deficiencies.
Given the significant positive contribution that foreign-capitalized and -managed agribusinesses make to Georgia’s economic development, current and proposed policies that damage the business investment climate should be reviewed and amended or repealed. This includes potentially excessive bureaucratization as part of the drive to approximate EU anti-trust legislation, labor market regulations and immigration laws. It also includes the moratorium on farmland purchase by foreign-invested entities and the seemingly arbitrary enforcement of visa restrictions upon existing farmland investors from abroad. Georgia has been attractive to foreign investors because of a relatively liberal regulatory and investment environment. For domestic and foreign investors to risk their capital in Georgia’s agricultural sector, the Georgian government should continue to support (and improve) a business friendly policy and enabling environment, including protection of investors’ property rights.
The eight case studies also offer numerous lessons learned for investors. Investors should seek reliable Georgian partners to help them navigate the environment. Recognizing the cost and pitfalls of early missteps with local populations, investors should perform rigorous due diligence to avoid conflicts with the community and proactively engage in targeted CSR and extension activities. Even with constructive outreach and engagement, investors should also invest in security and theft prevention. Finally, investors should invest in their human resources, both in terms of bringing the right expertise to bear on business challenges, but also in building up the capacities and capabilities of local staff. Not only will investors discover that they can unlock a great deal of potential in Georgian employees, but foreign investors increase their positive ties to the community.