Foreign direct investment to Georgia slightly recovered from the subdued levels in 2020, rising close to $300mn in the second and the third quarters of 2021, but, overall, it remains at a comparatively low level of 3.6% of GDP ($594mn) in the rolling four quarters as of the end of September.
Detailed data revealed by the statistics office Geostat suggest that a large part of the FDI was actually retained earnings generated by the two major banks TBC and Bank of Georgia, controlled by UK-registered holdings. In the second quarter alone, the overall FDI was revised upwards by $64mn as the result of supplementary profits reported by “the financial sector”.
In 2019, before the crisis, the FDI reached $1.34bn, or 7.% of GDP.
Furthermore, most of the FDI in recent quarters was generated by reinvested earnings, as opposed to new equity investments. Thus, the equity investments accounted for minus 25% of the total FDI in the last four quarters as of September and only $17mn in Q3. More precisely, the foreign investors have reduced their equity contribution in the Georgian companies.
In contrast, the reinvested earnings – namely, profits generated by existing FDI companies and not distributed as dividends – accounted for 125% of the FDI for the period.