More Russian Capital in Georgia than in Azerbaijan. In Armenia, All is Clear

Direct foreign investment into Azerbaijan’s economy is more than $3 billion; in Armenia, $1 billion; and in Georgia, $981 million (keeping in mind, however, that the data for Georgia has not been fully confirmed), according to analyst Tamar Nergadze, who reported the figures for Newcaucasus.com.

It is believed that one of the most important factors influencing the amount of foreign investment is the investment climate in the country. Practice, however, shows that other factors may have a stronger influence. In 2011, Georgia ranked first among the former Soviet Union and 11th in the world in the ease of doing business. Azerbaijan and Armenia were left behind, but this didn’t prevent them from getting ahead of Georgia in the amount of investment. Among the countries of the South Caucasus, Azerbaijan is the undisputed leader in foreign investment — and this, despite its relatively high degree of corruption and generally not very favorable investment climate: the solid hydrocarbon reserves are doing their job, writes Nergadze.

In geopolitical terms, it is interesting to trace the geography of investments in Azerbaijan. Foreign investments in the country in 2011 increased by 3.2% over the previous year. Of these, almost half ($1.4 billion) came from the UK. Second place went to the United States and third, to Japan ($290 million). Then, Norway ($161 million), Turkey ($130 million), the Czech Republic ($125 million), and France ($56 million). International financial organizations accounting for solid investment include the World Bank, European Bank for Reconstruction and Development, Asian Development Bank for Reconstruction, and the Islamic Bank for Reconstruction. Interestingly, lacking among the “group leaders” is Russia.

While the volume of investment in Azerbaijan increased b 3.2%, Armenia announced an increase of 15%. RA Minister of Economy Tigran Davtyan said that the increase in foreign investment is due to the improved investment environment in the country.

Unlike in Azerbaijan, Russian capital has a significant place in Armenia’s investment market. Whereas in Georgia, $377 million of foreign direct investment comes from the US, according to Georgian Minister of Economy and Sustainable Development Vera Kobalia. According to her, the business environment has improved due to increasing investment.

After the US, the greatest foreign investors in Georgia are the Netherlands ($213.4 million) and Denmark ($99.9 million), followed by international organizations. Also among major investors are Cyprus, Turkey, Russia and Azerbaijan.

However, in Georgia, a contradictory situation has emerged. According to the World Bank, in 2010, Georgia was 82nd among 132 countries in terms of investment, but was 12th in terms of a favorable business environment. Compare this with Russia, which is in 120th place, meaning doing business here is associated with greater risks. Nevertheless, Russia is well ahead of Georgia on investment. It’s clear that huge reserves of raw materials attract foreign investors, despite the risks. If Moscow was able to create a more attractive business environment, Russia could multiply the investment.