China is the largest bilateral creditor to low- and middle-income countries (LMICs) presently. China’s lending mainly targets infrastructure, transport, energy, and mining sectors in developing countries that are of strategic importance to the Chinese government. Sub-Saharan Africa and South Asia have observed the most substantial increases in borrowing. Chinese financing to LMICs is facilitated through state entities, offering concessional and non-concessional loans, with a significant portion of lending cloaked in confidentiality.

The recent amendment to Georgia’s tax code, known as the “offshores law,” has sparked significant concern regarding the integrity of Georgia’s financial system. This policy brief examines the implications of this amendment in the context of Georgia’s recent political and regulatory developments, which have raised alarms about the potential risks of money laundering and sanctions evasion.

The policy brief presents a Computable General Equilibrium (CGE) model designed for Georgia by the ISET Policy Institute to evaluate the impact of potential new Free Trade Agreements (FTAs) with the USA, India, and South Korea.

This policy brief addresses risks tied to Russian business ownership in Georgia. The concentration of this ownership in critical sectors such as electricity and communications makes Georgia vulnerable to risks of political influence, corruption, economic manipulation, espionage, sabotage, and sanctions evasion. To minimize these risks, it is recommended to establish a Foreign Direct Investment (FDI) screening mechanism for Russia-originating investments, acknowledge the risks in national security documents, and implement a critical infrastructure reform.