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Recession? War? Gulf developer continues massive Georgia luxury project.

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Until the economy was chilled by the war, foreign direct investment had fueled robust growth in Georgia. Although the United States and European Union have been Georgia's largest political supporters, most foreign direct investment in Georgia comes from the Middle East, Russia, and Kazakhstan.

In 2007, foreign direct investment accounted for more than 15 percent of Georgia's GDP. After the war, projected foreign investment dropped by nearly half to $1.2 billion. Economic growth also hit the skids, plunging from 12 percent the year before the war to less than 2 percent.

Not surprisingly, the war halted most construction in Georgia – cranes and equipment now sit untouched beside gaping holes in the ground and naked building frames.

Mr. Mikadze says the slowdown raises the specter of domestic political instability or renewed conflict with Russia, not to mention separatists in Abkhazia and South Ossetia.

The global economic crisis has hurt developers in the UAE and across the world, but will not seriously affect Rakeen's projects, Mikadze added. The company expects to invest $2 billion in the country in the next five years, according to Bahrain's Gulf Daily News newspaper.

Flooded with high oil profits and surrounded by emerging markets, UAE investors in recent years eagerly poured money into projects in Central Asia, India, Africa, and even Latin America. But many UAE investors were hard hit by the economic crisis, says Kaleil Isaza Tuzman, a venture capitalist in Dubai.

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