In Georgia, there has been a concerted effort in recent years to create a more favorable business environment, for both small business owners and investors.
Whether Georgia is a place that you should invest in is the question and the answer is not a simple yes or no. The primary factor in making this decision is how fast and how much you want to make as a return on your investment. The primary reason for mentioning the return on investment is because the economy of Georgia is not as high powered or fast-paced as many people from other countries are accustomed to. On the bright side, it is surprisingly easy to register a company here and open a bank account. If you already have a business to link to this company, then this will be very beneficial to you.
Here are the factors you should take into consideration before making any monetary decisions:
Post-Soviet Georgia is an intriguing country with an architecture characterized by a diverse combination of structures. There are giant dinosaur-like relic apartment buildings, some even with bones showing through! Then come the charming tree lined streets with actual sidewalks to walk on. For someone who has spent a great deal of time in Southeast Asia, this is a real pleasure. Add to this assortment the new architectural designs like the Government House of Justice, known as the ‘mushroom building’ and the ultra-modern King David Residences and you have quite an eclectic mixture.
A friend of mine calls Rustaveli Boulevard the Champs-Élysées of Tbilisi.
These things combine to give Tbilisi a very European feel. Considering how low overall costs are here, it surprises me how prosperous the city looks and feels. The streets and parks are generally very clean and orderly unlike many Southeast Asian countries. I for one greatly appreciate this aspect of Georgian society.
The approach people take to renovate and upgrade their old dilapidated apartments here continues to amaze me. There much not be a very stringent requirement for building permits considering some of the more unusual additions that I’ve witnessed. This is understandable since people usually own these units. Eventually, the newer construction will spell their downfall, literally.
Real Estate and Tourism
Two of the brightest spots in the Georgian Economy that are experiencing greater growth and are attracting more attention and investment are Tourism and Real Estate/Construction. Since most of the real estate market is dominated by Georgians, that has tended to dampen its growth. With a population estimated to reach 4 million in 2019, there is only so much product that can be absorbed.
Foreign investment has been growing in recent years, yet surprisingly Russians are still the number 1 buyers here. It seems likely that this will continue to be the manner in which Russian interest is manifested in Georgia, rather than militarily, particularly with the state the Russian economy is in. Their government (Putin) may have issues with the Georgian government, but their people still love to visit and even live here!
At the same time, this does present some opportunity, especially for those who are not looking to get rich quick. There are many properties throughout Georgia whose total sales price is equal to what the down payment would be in many other places. For an owner/user this would be a dream come true.
Like in most countries, the people in the rural areas are often farmers and have much lower average incomes. Those wishing to find higher paying jobs tend to migrate to the city. This most often is the capital, Tbilisi, or the second largest city, Batumi. This can create a vacuum in the small towns they leave behind. For the right person who prefers a quieter rural setting over the city that means a large selection of properties at sometimes incredibly low prices.
It also means that there is an increasing demand for apartments in the city, which is why you see new buildings going up everywhere. Since this is one of the most popular investments for locals and foreigners alike, this has also created some appreciation in the market but it appears currently that supply is outpacing demand. Of course, the standard of location, location, location applies here like everywhere.
Frequently you find real estate listings in Georgia where the photos show an unfinished building on site. These are usually called ‘black frame’, a term unique to this country in my experience. Black frame loosely means that only the main structure is constructed. There seems to be no set standard as to how far construction needs to have progressed. It appears to be up to the owner. Previously, in Thailand for example, this would have most likely signified that it was started at some time during the financial crisis and they ran out of money from the bank, but here, I’m not so sure if that’s the reason.
What is sure is that most foreign buyers don’t want to inherit someone else’s building concept and potential mess. It would probably be better to simply tear down such a structure and then start from scratch. Once again, a potential opportunity if approached in the right way.
Georgian society is very family oriented. This is probably a fairly common statement made about many cultures, but here, it seems to be deeply rooted. Families often live together under one roof until much later in life than may be customary elsewhere. This can be financially motivated, but it’s also due to the close-knit family structure. These same concerns: financial and family, no doubt contribute to the fact that Georgians don’t tend to eat out as often as people do in other countries. Restaurants here tend to congregate around the tourist areas where people are accustomed to eating out more. This can make starting or operating a restaurant more challenging in Georgia.
Georgians also tend to be a bit on the conservative side. Although they like owning a new car like most people, they don’t seem to pursue the mass purchasing consumerism that is emblematic of the United States and has spread to many other cultures.
Personally, I rather like this aspect of Georgian culture but it does mean that opening a small boutique shop can be more difficult to succeed than in places where people spend more freely. Fads are less likely to generate a frenzied sales response here and it’s probably wiser to focus on more practical items that can improve the quality of life. Focusing on tourist-related sales may also be a good move.
The transportation situation in Georgia is as important as it is in any place. If people can’t conveniently get to your place of business, then it will negatively impact your sales. There is a fairly robust public transportation system in Tbilisi, which includes an underground metro and an extensive bus system.
The original metro lines were opened in 1966 and constructed when Georgia was still part of the former Soviet Union. It has been expanded since then and is an extremely fast and convenient way to get to and from the major centers in Tbilisi. If a business seeks to have a lot of walk-in traffic, then being located near one of these transportation hubs can add greatly to their success.
While car ownership is on the increase, unfortunately, the number of parking lots is not increasing at the same pace. This means that the parking situation in Tbilisi is particularly bad. Anyone thinking of starting a new enterprise here should take this into account when identifying what your target market is and how they will be able to reach you. If you are able to make arrangements that allow people to park conveniently, then it would surely help your marketing and sales.
One area of Georgian culture that could use improvement, in terms of its application to business, is customer service. This is most likely a by-product of the Soviet era influence and will no doubt change with time, but at the moment, it does present some occasional aggravation. Consider that this also could represent new opportunities. Even Georgians, although normally more reticent themselves, seem to appreciate when someone makes an effort to smile and be helpful. This can be invaluable in virtually every business concept. For someone who has a good business concept and knows how to provide superior customer service, Georgia is ripe for the picking.
While it may be difficult to find a worthwhile investment in Georgia straight away, one approach that could maximize your chances would be to combine the two dominant growth industries: Tourism and Real Estate. Someone with the foresight to anticipate where the market is heading would be able to take advantage of the opportunities.
The travel market is constantly changing. Who would have thought that Airbnb could even work not so long ago? And yet today, there are Georgians who are renovating their old family country house and turning it into a successful Airbnb unit. I have my own idea for an eco-friendly accommodation that doesn’t exist yet locally but I’m not going to share it here! The point is simply that new ideas can succeed everywhere, as long as they are innovative and implemented with a good business plan and support.