Prompted by the Georgian Government's recent decision to select a Chinese company for the implementation of the Anaklia Deep Sea Port project, ISET-PI’s recent policy note (July 11, 2024) provides useful insights into China's ascent as the largest bilateral creditor for low- and middle-income countries (LMICs), its lending practices and case studies, with that background analyses the risks associated with the Anaklia project and provides recommendations. Here is a summary of the main findings.

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.

Before the current insolvency reform, Georgia’s legislative framework regulating insolvency proceedings fell short of meeting international standards – it did not meet either creditors’ or debtors’ needs and failed to offer incentives to the insolvent companies to choose rehabilitation as their optimal strategy for resolving financial difficulties.

Georgia’s new insolvency law – the Law of Georgia on rehabilitation and the collective satisfaction of creditors’ claims – became effective on 1 April 2021. Under which, if a business operating in Georgia has reached a low ebb and is no longer able to meet its financial obligations, it has the opportunity to regulate relations with creditors based on new legislative instruments – effectively, it is able to rehabilitate and return to the market in a viable manner, or, if necessary, it might declare bankruptcy and exit the market.

Under ISET affiliation Luc Leruth, the Lead Economist in the Policy Institute’s Governance and Social Policy Research Center, has recently been appointed a co-editor of The Open-Access, Open-Assessment Journal Economics. As a new form of the academic journal, the publication incorporates a large research community with an open and innovative peer review process; where critically the research is seen as a cooperative enterprise between authors, editors, referees, and readers.