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Author: Khatia Shamanari, writer of traits
Only four years ago, in 2020, there were only 1,971 IT companies operating in the small white breed country in Georgia, with 79% of them belonging to local property. Quick advance until 2024, and the landscape changed considerably. Official data reveal that the number of IT companies has increased to 24,117, 84% being now international.
A recent study by Galt & Taggart, the main Investment Bank and Investment Management Company of Georgia, highlights the information and communication technology sector (ICT) as an industry faster from the country since 2022. This growth has been largely motivated by the IT subsector, which, which, the fastest has registered a 2.4 billion gel turnover (816 million dollars ) In 2023 – a significant boost of the economic landscape of Georgia.
International companies are moving more and more in Georgia, many moving all of their operations. Currently, 72 companies are classified as large or medium, while the majority of remaining companies are unique foreign owners. The growth of the sector was initially stimulated by tax incentives introduced in 2020. To strengthen the attraction of Georgia as a regional center and attract multinational companies, the government has lowered income tax rates to five percent For companies with international status.
However, it was not only the fiscal policy that stimulated this growth. According to Kakha Samkurashvili, head of research on the sector in Galt & Taggart, while tax incentives were vital, the war in Ukraine reshaped the global computer landscape, creating unforeseen opportunities for Georgia. “After the war in Ukraine, many IT companies and developers moved to Georgia, mainly from Belarus and Russia. The increase in code production and the number of developers in the country have aligned themselves directly on the maximum influx of migrants, ”explains Samkurashvili. According to various studies, the peak of emigration in Georgia – totaling around 100,000 people – was recorded during the first and second quarters of 2023. Samkurashvili notes that during this period that the IT sector experienced its most growth rate pupil.
A new strategic location in the middle of the war
The invasion of Russia on a large scale of Ukraine had an impact on one of the main international companies, Exadel. The war transformed the newly open Georgian office of the company into one of its main strategic locations.
“We had our offices in Belarus and Ukraine, but the war has made significant changes and challenges. Although we have managed to keep our offices open, the situation of developers working in Ukraine is far from easy; Periodic power outages and other disturbances make work difficult. In addition, there is an emotional impact on everyone, “said George Khoshtaria, a marketing specialist in Exadel.
The arrival of international companies played a crucial role in the country’s economy
Exadel, an international technology company with more than 25 years of experience in the digital market, entered Georgia in 2021. According to Khoshtaria, there were some reasons why Exadel initially decided to enter the Georgian market.
“One of the main reasons is the tax incentives offered to international companies. The second is the great mastery of English among the developers, who are generally considered to be among the strongest, ”explains Khoshtaria. “Our customers are American and European companies who need highly qualified developers for international projects, and we can find such a talent in Georgia. This is why Exadel operates in the country, ”he adds.
However, the war in Ukraine quickly stressed the strategic importance of the Georgian office, as it has become essential to move certain operations in Ukraine and Bélarus. Georgia, beyond being a basis for companies like Exadel, has also become a new house for thousands of foreign developers in Bélarus. Once a center is prosperous for him, the Belarus has seen his technological industry paralyze by a repression against the demonstrations following the fake elections and the complicity of the government in the aggression of Russia against Ukraine, leading to an exodus of talent.
A similar scheme has emerged in Russia, where the order of mobilization of President Putin led thousands of developers to flee to neighboring Georgia, reshaping the local computer landscape.
For the future, Khoshtaria believes that Georgia has an important potential for developing its IT industry and becoming an even more attractive place for international companies and foreign developers.
“It is only the beginning, and subsequent development is essential. We aim to contribute by offering free training and mentoring programs, our developers providing free instruction to beginners. In addition, we collaborate with universities and participate in their projects, ”said Khoshtaria.
Emerging opportunities for the inhabitants
International companies have created many opportunities in a developing country such as Georgia, where the average nominal annual salary is 24,000 freezing ($ 8,750) and the unemployment rate is 13.7%.
By 2023, the number of employees in the IT sector of Georgia reached 30,200,200, a strong increase compared to only 5,000 in 2021. Meanwhile, the average annual salary of industry has doubled, now $ 83,280 ($ 30,400). Nika Kapanadze, economist of the Policy and Management Consulting Group (PMCG), said that the arrival of international companies has played a crucial role in the country’s economy.
“International IT companies serving customers on different continents hire Georgian staff and conduct operations locally. This actually acts as an export of work, and it is crucial that these individuals are physically present in Georgia. The money generated remains in the country’s economy, contributing significantly to its growth, “said Kapanadze.
Samkurashvili believes that very paid developers have created a training effect in various sectors such as retail and real estate, where they have become key consumers. “In addition, the IT sector, which employs most of these high wages, stimulated the economy by exporting services and providing foreign currencies. This influx of dollars has reinforced the frost, contributing to its appreciation, ”he notes. Lineate is another international software development company that entered the Georgian market in 2022, establishing a regional center to extend its activities across Europe. With an investment of $ 14 million, the company has contributed to the country’s technological development by creating 200 new jobs. Beyond the job creation, Lineate also launched the Lineate School of Development to support the aspiring developers. The company collaborates with schools and headed Georgian universities to promote education in the field. Giorgi Tsikolia, vice-president of Lineate, describes several reasons why the company has created its regional office in Georgia.
“The company has found the hiring of qualified personnel in Georgia very attractive. In addition, the tax system is quite flexible, in particular with regard to technology. In addition, the geography of Georgia offers the possibility of accessing European and Asian markets, “said Tsikolia.
However, Tsikolia also notes the importance of monitoring geopolitical risks. “We, like all international companies engaged in the region, are concerned with the escalation of hostilities through wider geography. Likewise, the company actively monitors political developments in Georgia, ”explains Tsikolia.
Political turbulence threatens industry
In March 2024, the Georgian Dream Party in power reintroduced a Russian style bill on the transparency of foreign influence. This law obliges non -governmental organizations receiving more than 20% of their funding from foreign sources to register with the Ministry of Justice as organizations in the service of interests of a foreign power.
After the war in Ukraine, many IT companies and developers moved to Georgia
Although President Salome Zourabichvili has opposed the law to the law, the Parliament has canceled its decision. Despite generalized demonstrations and an international conviction, the president of the Parliament signed the law on June 3, 2024.
The demonstrations, which have seen tens of thousands of demonstrators, lasted almost two months and frequently encountered excessive force by the Georgian security forces. The repression, combined with the adoption of the law, seriously stretched the relations of Georgia with the West. The country’s EU membership process is in a standstill and the EU has understood 30 million euros in financial aid.
Meanwhile, the United States has imposed sanctions on two senior Georgian officials – the head of the Ministry of Internal Affairs, the head of the special task department, Zviad ‘Khareba’ Kharazishvili and his assistant, Mileri Lagazauri – for their involvement in human rights abuses during the violent abolition of protests. The US State Department has also introduced visa restrictions on more than 60 people and their families, invoking their role in saper democracy in Georgia. Secretary of State Antony Blinken warned that other actions could follow if the situation does not improve.
During the October legislative elections, the power party Georgian Dream Party declared the victory, according to the Central Electoral Commission, triggering other protests across the country and a general condemnation on alleged electoral fraud.
These developments have aroused generalized concerns in Georgia, fearing that the impact extends beyond politics, affecting the commercial environment and the general well-being of the population.
Kapanadze is convinced that the global political environment must remain stable, unambiguously concerning the Western orientation of Georgia. “I would not say that companies already established here are leaving, but the real concern is that talent can start to leave the country because they no longer feel comfortable. We are talking about high -income people looking for a comfortable lifestyle. Now, with discussions on the cancellation of the regime without visa with Europe, this could bring a significant blow to the entire economy, in particular the IT sector, ”explains Kapanadze. He also underlines that maintaining the reputation of Georgia is essential to become a regional computer center. “We are the connection link between West and East. If this connection is cut on each side, the potential to prosper as a center will disappear. »»