Electricity is hope : A case study of FDI in Georgia's hydropower sector

Abstract

Georgia has since independence struggled with the issue of stable energy supply. After the Rose Revolution in 2003, the Georgian society went through significant changes where many challenges were successfully dealt with, including an evident reduction in corruption. Nevertheless, the issue of energy supply continued to be troublesome. An important part of the new energy policy introduced in 2006 was the utilising of domestic hydropower resources. Having one of Europe's largest untapped hydropower potential the Georgian politicians wanted to maximise this opportunity, however, the country did not have the human resources and finances to do so. Following a neoliberal approach where FDI is considered unquestionably beneficial, it was decided to attract FDI so that greenfield hydropower plants would be constructed.

This thesis analyses the impacts of FDI in the hydropower sector after 2006, and the main question is in what ways the Georgian government’s search for FDI in the hydropower sector have had an impact on social and environmental aspects of the society. This thesis is a case study of two foreign companies that will construct greenfield hydropower plants in the Autonomous Republic of Ajara. The analysis is mainly based on 18 interviews with different stakeholders in the Georgian hydropower sector in November 2012, but also utilises secondary literature. By looking beyond the quantitative numbers of FDI, this thesis aims at shedding light on how the different stakeholders evaluate the greenfield hydropower development and its challenges. If properly managed, FDI may contribute to development both for the country and the affected population. The purpose is to find out how the two cases fit in to the development after 2006, and how they affect in terms of the environmental, economic and social aspects.