ISET

ISET Economist Blog

A blog about economics in the South Caucasus.

The Post-COVID Foreign Direct Investment in Georgia: go clean, or don’t go!

Governments around the world are racing against the clock to help communities damaged by the economic fallout of COVID-19. Eager to bring good news to their constituents, they are brokering deals likely to bring employment and much needed international investments. Georgia, of course, is no exception. Recent FDI projects include a plastics processing plant with a stated capacity to employ 400 local workers in plastic waste recycling jobs and the associated sections of the supply chain. In crises years, creation of jobs via FDI sounds absolutely great. But is attracting FDI in plastic waste recycling a good idea for Georgia? The answer is maybe yes – but if and only if this investment has strong environmental protection guarantees, and Georgia uses its own, rather than imported plastic waste in the recycling process.


THE GLOBAL WASTE TRADE

To see the “big picture” it becomes important to understand trends in the global waste trade and recycling business. Over the last few decades China has become the world leader in both plastic production and recycling; with cheap labor, few regulations, and increasing demand making China the center of the global recycling trade. The country now receives two-thirds of global imported waste plastic and 90% of EU plastic waste exports. Despite the direct economic benefits from maintaining a global recycling trade, the country’s environment has been seriously damaged from the flood of imported waste. Consequently, citing environmental reasons, surprising the rest of the world, China banned the import of 24 types of waste, including scrap plastic (low quality waste), at the beginning of 2018.

China’s plastic import ban created chaos on the global plastic waste market – waste prices fell, while export prices increased dramatically; more plastic ended up in local landfills and stockpiles, and the volume of trade sank. In just months the global plastic trade was redirected to Southeast Asia: Malaysia, Thailand, Vietnam, Indonesia, and India – countries with fewer regulations and cheap labor. While Chinese recyclers also relocated their factories to the south.

During the same period, Turkey also started to become a “dumping ground” for European waste. Between 2017 and 2019, the import of plastic waste to Turkey (by weight) from Germany and the UK tripled, increased eightfold from Italy, and tenfold from the Netherlands (UN Comtrade). Turkey is now the sixth biggest importer of plastic waste worldwide, despite having more than sufficient plastic waste of their own. In fact, research estimates that, after Russia and Germany, Turkey is the largest plastic waste generator in Europe.


THE RISKS FOR GEORGIA

Recent examples of creating devastating landfills from the world’s waste in Southeast Asia and Turkey have exposed risks that Georgia may yet meet. The country’s valuable location, low income levels, existing free trade agreements, and the government’s desire to attract more foreign investment only exacerbate these prevailing risks.

Regarding the FDI in recycling business in Georgia, a strategic environmental assessment (SEA) published by the Ministry of Environmental Protection and Agriculture of Georgia in April 2020, notes that one of the planned factories would recycle approximately 73,000 tons of imported plastic waste per year (142 times more than Georgia imported in 2019); imported primarily from the USA and the EU. Concerning employment, during the operational phase up to 150 people will be employed, out of which 90 (60%) will be locals. As such activities largely require cheap labor, local workers will likely be engaged in the manual sorting and carrying of waste plastic. This hardly sounds like the decent paying jobs the country is hoping for.

Considering the environmental impact plastic waste import has already had on Southeast Asia and Turkey, Georgia should be selective when attracting foreign investment. Without a comprehensive analysis it is impossible to estimate the net economic benefits or costs (considering the environmental impact) each individual project will have on the country. However, even without conducting such deep research, a scheme in which foreign investors use Georgian land and cheap labor for processing imported plastics to export recycled products to third parties appears not to be economically or environmentally attractive. Even the process of recycling is itself not environmentally friendly and plastic waste is not fully recyclable, thus it creates additional pollution. Simply put, the unprocessed parts of “dirty” waste are likely to remain in Georgian landfills, seeping into the environment and creating further damage.

Moreover, as developed countries typically ban “low quality” plastic imports, alongside the recent examples of China, Turkey, and Southeast Asian countries banning or limiting such imports, each highlight that Georgia should not seek its fortune in IMPORTED waste.


DOES GEORGIA HAVE A BETTER ALTERNATIVE?

One clear reason to step back from importing plastic waste is that Georgia already generates around 900,000 tons of municipal waste annually (the generation of industrial waste is unknown), out of which 10% (about 90,000 tons) is plastic waste. Consequently, Georgia in theory has enough waste resources of its own to recycle, however, this would be impossible under current waste management practices. Therefore, policy-makers should focus on the main areas of improving waste management infrastructure, and introducing Collective Producer Responsibility and waste separation. Importing plastics from abroad is surely cheaper and more expedient than developing an entire waste management infrastructure, nevertheless the effort will be worthwhile in the long-term – in relation to jobs, economic opportunities, and - most importantly – our health.


See our article usage guidelines

Rate this blog entry:
0 Comments

Related Posts

Comments

 
No comments yet
Already Registered? Login Here
Register
Guest
Wednesday, 28 October 2020

Captcha Image

Our Partners