The legends of the Caucasus: Economic transformation of Armenia and Georgia

Abstract

Considered peripheral in economic terms the structurally fragile Armenia and Georgia with obvious limitations are open to international business. This article constructs a compact analytical synthesis of the duo's potential across macroeconomic, industrial, external exposure risk, institutional, and the Diaspora (dispersion) effects within the five forces model of the social and economic transformation. Post-Great Recession dynamic analysis, sketching sectoral and business trends, tackles issues of market entry and foreign investor strategy. Armenia's impressive pre-crisis pattern has yet to be recovered, while Georgia's post-crisis record has been more consistent with earlier years. Armenia's entrepreneurial and innovative capacity, vital to new business accommodation, ranks above Georgia's, where traditional sectors are dominant. All in all there is a need for an individual, not “bulk”, analysis of the post-socialist periphery. Foreign firms’ managers are suited to gain if acquire local context and local (or Diaspora-) based partner (public or private) prior to regional or standalone entry. Despite multiple headwinds, both economies retain strong international business potential and hope for an economic and social resurrection.