Investment Environment: Risks, Challenges and Development Opportunities for Georgia

Abstract

Investments are one of the important components of the modern economic system. It determines both the economic and social development of countries. Investment is directly related to capital accumulation, employment growth, and technological progress. The implementation of large-scale projects is a prerequisite for strengthening the economy for a small country. Due to Georgia's geopolitical location, there is a great potential for the development of sectors such as logistics, tourism, and agriculture. The attractiveness of Georgia's investment environment is confirmed by international ratings. They evaluate the flexible tax system in the country, investment promotion programs, and the investment climate in general. Therefore, the priority of the Georgian state is to create a favorable environment for investors. This article offers an analysis of risk factors that hinder investment activity in the country. Such risk factors include global economic and political instability, a need to improve the legislative framework, lack of infrastructure with international standards, bureaucratic procedures, less access to finance, rapidly growing technological progress, etc. The study is based on international ratings and confirms that despite the presence of negative risk factors, Georgia has taken significant steps to improve the business environment, however, the conclusion states that foreign investors in Georgia face systemic and institutional difficulties, which include administrative, structural and political factors. Problems with accessing foreign markets, compliance with international standards, logistical costs, and inefficiency of export promotion instruments are the risk factors analyzed in the study. The process of managing these risks requires the state to refine its policies, ensure regulatory stability, and increase institutional support. All of this will lead to a strengthening of the country's investment attractiveness in the long-term and will contribute to sustainable economic development.