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org

MANUFACTURING
GEORGIAN NATIONAL INVESTMENT AGENCY
2016

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Daguestan
ek
RUSSIA

Ter

Soulak
GEORGIA - COUNTRY OVERVIEW
Sokhumi
Mestia

Zugdidi
Gudauri
BLACK Anaklia Senaki Kutaisi
Tskhinvali
Poti Rioni
SEA Mtkvari
Kobuleti GEORGIA Gori
Batumi Telavi
Goderdzi Bakuriani
Gonio Akhaltsikhe TBILISI
Akhalkalaki

TURKEY
ARMENIA AZERBAIJAN

GEORGIA

Area: 69,700 sq km GDP 2015 (E) : USD 14 billions


Population: 3.7 mln GDP real growth rate 2015 (E): 2.8%
Life expectancy: 75 years
GDP CAGR 2010-2015 (GEL) (E): 4.9%
Official language: Georgian
GDP per capita 2015: USD 3743
Literacy: 100%
Inflation rate 2015: 4%
Capital: Tbilisi
Total Public Debt to Nominal GDP (%) 35.5%
Currency (code): Lari (GEL) 2014 :

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OVERVIEW OF GEORGIA’S MANUFACTURING SECTOR

■■ Growing regional market - Companies operating in Georgia can benefit from the growing regional
market and various regional import substitution opportunities

■■ Access to 900 million markets without Customs Duty - Georgia has Free Trade Agreements (FTA) with
Turkey and post-soviet countries, and Deep and Comprehensive Free Trade Agreement (DCFTA) with EU

■■ Competitive labor costs - the average


Russia
monthly salary in manufacturing industry
was 355 USD (2015) including white and Mestia

blue-collar workers
Anaklia FIZ FIZ

■■ Low utility costs - currently up to 80% of Poti


Kutaisi FIZ
power is generated via hydropower plants, Tbilisi
Batumi
leading to cheaper energy cost. Standard
cost for 1 kWh is 6 USD cents for 30-110 kV
high voltage electricity Turkey
Main Roads
Railway Armenia Azerbaijan

■■ 4 Free Industrial Zones (FIZ) - In FIZ,


businesses are exempt from all taxes except Personal Income Tax (20%), which is paid from
employees’ salaries

OPPORTUNITIES:
■■ Large import overhang on goods that are not usually traded extensively between the countries,
provides regional import substitution potential in food processing, paints and coatings, construction
materials, washing and polishing preparations, household goods etc.
■■ Georgia’s current advantages in terms of handling large transshipment flows, business stability, low
cost of power generation, existing raw materials and intermediate products provide opportunities for
large industrial projects, such as production of iron, aluminum and steel products.

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PREFERENTIAL TRADE REGIMES

■■ Free Trade Agreement (FTA) with Turkey and CIS ■■ Very simple and service oriented customs
countries (Russia, Ukraine, Kazakhstan etc.) policy and administration – customs
■■ Deep and Comprehensive Free Trade clearance in 15 minutes
Agreement (DCFTA) with EU was singed on
June 27, 2014 ■■ 80% of goods are free from import tariffs
■■ Generalized System of Preferences (GSP)
■■ No quantitative restrictions
agreement with USA, Norway, Switzerland,
Canada, Japan
■■ Member of WTO

GEORGIA
FREE TRADE
AGREEMENTS WITH
900 MILLION MARKETS
AND ACCESS WITHOUT
CUSTOMS DUTY

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UTILITY COSTS

ELECTRICITY: UPPER MARGINAL RATES OF POWER


■■ Government of Georgia has determined GEL kWh including USD kWh including
Category
maximum rates of electricity in Georgian Lari VAT (18%) VAT (18%)
(GEL). The rates are different according to Tbilisi
regions of Georgia and voltages 220/380 volt (average) 0.198 0.087
■■ Factories consuming more than 1 million kWh 6–10 kV 0.153 0.067
per year (1 kWh per year from 2017) can be 35 – 110 kV 0.140 0.062
Kakheti region
registered as direct consumers. They can
220/380 volt (average) 0.175 0.077
purchase electricity directly from energy
6–10 kV 0.165 0.073
producers and negotiate on any price 35 – 110 kV 0.130 0.057
■■ Connection fee is abolished, if the company Other parts of Georgia
needs 35-110 kV voltage level 220/380 volt (average) 0.199 0.088
6–10 kV 0.142 0.063
35 – 110 kV 0.136 0.060
GAS:
■■ Gas rates (for industrial use) are deregulated by
Government, which means private company MAXIMUM RATES OF WATER
can choose the supplier of gas (currently there GEL/m3 USD/ m3
Category
are 37 gas supplier companies) and negotiate including VAT including VAT
tariffs with them. Approximate average gas Tbilisi: 4.400 1.938
costs are 0.37 – 0.42 USD/m3 (including VAT). Drinkable water 3.555 1.566
Sewerage system water 0.845 0.372
Other parts of Georgia (there
4.307 1.897
WATER: are few exemptions):
Drinkable water 3.375 1.487
■■ Maximum rates of drinkable water and water Sewerage system water 0.932 0.411
for sewerage system are also determined by
Government
Exchange rate in 2015: 1 USD = 2.2702 GEL

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YOUNG, SKILLED AND COMPETITIVELY PRICED
LABOR FORCE
■■ Average monthly salary in manufacturing industry
COMPETITIVE LABOR amounts to USD 355 (2015) including white and blue-
collar workers, as well as C-suite employees
COSTS
■■ According to Heritage Foundation, Georgia ranks 26th
globally on Labor Freedom Index

■■ The only tax payable based on the salary is personal


NO SOCIAL SECURITY income tax, which is flat 20%
TAX ■■ Georgia doesn’t have the Social Security Tax and
insurance isn’t mandatory

■■ 50% of the unemployed population is in the 20-34 age


category
YOUNG LABOR FORCE
■■ Unemployment rate is 12.4%

■■ The country doesn’t have minimum wage regulations


FAVORABLE LABOR and compensation for labor depends on the
CODE agreement between employee and employer 
■■ All ILO core conventions are ratified by Georgia

■■ No working permits are required


FLEXIBLE ■■ Citizens of 94 countries can stay in Georgia without visa
REGULATIONS during whole 1 year, which helps attracting professional
employees from other countries in the wider region

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EDUCATION SYSTEM AND SKILLS

■■ Georgia has 72 higher educational institutions and over 100 professional education centers

■■ Higher education in Georgia consists of three stages:


√√ Bachelor program (4 years)
√√ Master program (2 years) HIGHER EDUCATION SYSTEM OF GEORGIA
√√ Doctorate program (3 years)
ACADEMIC EDUCATION

■■ 127,950 students (59% - women, 41% -men) Doctoral Degree


graduated from bachelor, master and
professional programs during last 5 years

Dental Medicine Education


Master’s Degree

Medical Education
■■ According to KPMG Research and Analysis:
VOCATIONAL EDUCATION
√√ Around 60% of young population and Bachelor’s Degree AND TRAINING
40% of overall population know English Intermediate
Qualification
V Level of VET
√√ Vast majority of the population have
some knowledge of Russian IV Level of VET

X-XII Secondary Education III Level of VET


■■ Government promotes vocational education
and Vocational Education Training Centers II Level of VET
around Georgia provide professional courses
in different types of practical subjects and I Level of VET
most of the course’s fees are financed by
the Government of Georgia VII-IX Basic Education

I-VI Primary Education

Pre-school Education

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MANUFACTURING SECTOR

VALUE ADD PRODUCTION VALUE TOP 3 PRODUCTS TOP 3 COMPANIES


INDUSTRY TOP 3 EXPORTS
(USD MILLIONS, 2014) (VALUE ADD) BY PRODUCTION

▪ Mineral waters & soft drinks (133) ▪ Nuts (183) ▪ IDS Borjomi Georgia
Food & ▪ Wine (101) ▪ Wine (181) ▪ Coca-Cola Bottlers
beverages 515 1756 ▪ Bread, fresh pastry goods and ▪ Mineral waters & soft drinks Georgia
cakes (46) (166) ▪ Agara company

▪ Ferro-alloys (40) ▪ Ferro-alloys (286) ▪ Georgian Manganese


Metals ▪ Tubes (24) ▪ Copper ores (248) ▪ GeoSteel
108 637 ▪ Precious and non-ferrous metals ▪ Bars and rods (64) ▪ Rustavi Steel
(15)

Non-metallic ▪ Cement (40) ▪ Cement (15)


▪ Heidelbergcement Georgia
▪ Ready -mixed concrete (38) ▪ Cyanides, cyanide oxides
▪ Heidelbergbeton Georgia
mineral 121 444 ▪ Concrete products for and complex cyanides (10)
products construction purposes (16) ▪ Glassware (4)
▪ Mina

▪ Basic chemicals (74) ▪ Fertilisers (138)


▪ Rustavi Azot
Chemicals ▪ Pharmaceuticals (32) ▪ Pharmaceuticals (92)

112 269 ▪ Beauty, perfumes, make - up
GMP
▪ Coloring materials (3) ▪ Aversi
preparations etc. (19)

▪ Furniture (27) ▪ Machinery and mechanical


Machinery,
▪ Machinery and equipment (12) appliances (41) ▪ Fresh Georgia
Equipment & 60 209 ▪ Electrical machinery and ▪ Furniture (8) ▪ OGT
Others apparatus (8) ▪ Electric instantaneous or storage ▪ Embawood Georgia
water heaters (5)

▪ Printing (21) ▪ Wood (22)


▪ Star RG
Wood &
169 ▪ Publishing (14) ▪ Paper (4)

Paper 65 ▪ Articles of paper and paperboard (12) ▪ Books, Pictures,
Sharavandi
Magazines (1)
▪ Palitra L

▪ Plastic products (30) ▪ Rubber products (20) ▪ Caucasian PET company


Rubber and ▪ Alfa PET
30 128 ▪ Rubber products (1) ▪ Plastics (15)
Plastics ▪ Polymer 1

Textile, ▪ Apparel (18) ▪ Apparel (91) ▪ AjaraTextile


Apparel 26 72 ▪ Textiles (5) ▪ Leather (6) ▪ BTM textile
& Leather ▪ Tanning and dressing of leather(2) ▪ Footwear (4) ▪ Batumitex

▪ Manufacture of other transport ▪ Rail locomotives (22) ▪ Elmavalmshenebeli


Transport equipment (16) ▪ Parts of aircrafts (13) ▪ Vagonmshenebeli
Equipment 17 61 ▪ Manufacture of motor vehicles, ▪ Self -propelled railway or ▪ Train Repair Factory
trailers and semi -trailers (1) tramway coaches (3)

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MANUFACTURING SECTOR

GROWTH OF SECTOR (value add)


CAGR, 2009 - 2014

40%
Non-metallic
35,3% mineral
products
30% Rubber and
Plastics 28,4%
26,2%
23,5% Machinery,
Chemicals Food &
20% Equipment &
Others beverages
15,6% 14,5%
Textile, Apparel
10% & Leather
10,2% Wood &
Paper

0%
0 50
50 100
100 -2,2% 150
150 250
200 500
250

Metals
-10%

-20%
Transport
-24,7% equipment

-30%

SIZE OF SECTOR (value add)


2014, USD million

The food and non-metallic mineral products industries provide the largest industrial base for Georgia,
while non-metallic mineral products, chemicals and food are the fastest growing industries

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SEVERAL HIGHLY ATTRACTIVE REGIONAL PRODUCTION
OPPORTUNITIES
CHEMICALS
■■ Paints, varnishes and other coatings
■■ Washing, cleaning and polishing preparations
■■ Nitrogen fertilizers
■■ Perfumery and cosmetics

PLASTICS
■■ Packaging materials
■■ Tubes, pipes and hoses
■■ Other articles of plastics

CONSTRUCTION MATERIALS
■■ Articles of stone, plaster, cement, asbestos,
concrete and similar materials
■■ Glass fibres and articles thereof

OTHER SECTORS
■■ Ceramic products - tiles, sanitary ware,
refractory bricks
■■ Glass - windows and glassware
■■ Furniture

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NITROGEN FERTILIZERS
OVERVIEW POTENTIAL FOR GEORGIA
■■ In 2014, Georgia exported nitrogenous ■■ There is a high level of consumption and import in the
fertilizers (USD 138 million) to Poland, neighboring countries and wider region
Bulgaria, Armenia, India, USA, Greece, ■■ Considering the South Caucasus Pipeline (SCP) and
France etc. Georgia was the only exporter The North South Main Gas Pipeline (NSMGP), natural
from South Caucasus gas, important input for nitrogen fertilizer, can be easily
obtained from neighboring countries Azerbaijan and
■■ Demand and import of nitrogen fertilizers
are increasing in neighboring and EU Russia
countries - In 2014, total volume of import
of nitrogen fertilizers in the EU countries, INVESTMENT PROPOSAL
Turkey, Ukraine, Russia, Southern Caucasus ■■ Optimal capacity of the production: 150 000 - 200 000
and Central Asia was USD 9,564 million tons per year
■■ Among the target markets, except for ■■ IRR : 15.05 %
the EU countries, Turkey has especially ■■ Approximate investment amount: USD 119 -159 million
significant gap (USD 959 million in 2014) ■■ Financial calculations are based on KPMG sector
between the import and export. In research and investment proposal. Full version of the
2014 trade deficit in South Caucasus report is available
accounted USD 58 million

IMPORT OF NITROGEN FERTILIZERS IN THE TARGET IMPORT OF NITROGEN FERTILIZERS BY EU COUNTRIES


MARKETS BY COUNTRIES EXCEPT FOR THE (2014)
EU COUNTRIES (2014)

1%
1%
1%
Turkey
3%
3% France
Ukraine 21% 21%
5%
Germany
Kazakhstan
United Kingdom
13% Kyrgyzstan 3% Belgium
USD 1, 376 Million Azerbaijan 3% USD 8, 189 Million
Spain
14%
4%
Armenia Italy
4%
72%
Turkmenistan 5% Ireland
10%
Russian Federation 8%
7% Netherlands

Source: ITC, KPMG research Source: ITC, KPMG research

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PAINTS, VARNISHES AND OTHER COATINGS
OVERVIEW POTENTIAL FOR GEORGIA
■■ Paint, varnish and other coating is one of ■■ Investment in the sector is attractive due to the significant
the fastest growing industry globally, mainly size of local and regional consumption and import
due to the huge demand in the construction ■■ The production levels in the close region and in Georgia
industry are not high, which creates place for a new producer to
■■ Europe is the second largest paint, varnish enter the market
and other coatings consumer taking 24% of ■■ There is high availability of raw materials in the region
the world volume and 29% of the world value
in 2013 INVESTMENT PROPOSAL
■■ Faster growth rates are forecasted for Turkey ■■ Optimal capacity of the production per year: paint and
and other Eastern European countries varnish – 15 000 tons; pigment and other coloring matter
– 12 000 - 13 000 tons; inks – 2000 – 3000 tons
■■ In 2014, South Caucasus countries imported
USD 107 Million of paint, varnish and other ■■ IRR: paint and varnish – 34.3%; pigment and other
coloring matter – 15%; inks – 23%
coatings
■■ Approximate investment amount: paint and varnish –
■■ Global sales of paint, varnish and other USD 10.1 mln; Pigment and other coloring matter – USD
coating increased by 3.9% In 2014, 19.3 - 20.9 mln; Inks – USD 2.6 - 3.9 mln
comprising about USD 132.3 billion (43.38
■■ Financial calculations are based on KPMG sector
million tons). The forecasted average annual research and investment proposal. Full version of the
growth for paint and varnish industry is 5% report is available
rate up to 2018

PAINT, VARNISH AND OTHER COATING SALES AND PAINT, VARNISH AND OTHER COATING CONSUMPTION
GROWTH RATE, 2011-2014 PER REGION IN 2013

150 15,0%

12,5% Sales volume 48% 24% 16% 8% 4%


11,0%
Growth rate ,%
Billion USD

100 10,0%

6,3%
50 6,1% 5,0% Sales value 38% 29% 20% 8% 5%
3,9%

106,7 120 127,3 132,3


0 - 0% 20% 40% 60% 80% 100%
2011 2012 2013 2014
Sales value (billion USD) (left hand axis) Asia-Pacific Europe North America Latin America Other
Sales value growth rate

Source: World paint and coatings industry association


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GLAZIERS PUTTY, GRAFTING PUTTY, RESIN CEMENTS AND


PAINTERS FILLINGS
OVERVIEW POTENTIAL FOR GEORGIA
■■ Construction industry is growing rapidly ■■ The demand of these products exceeds supply in
in the South Caucasus, Turkey and other neighbor and Central Asian countries, and there
is a big gap between the import and export in the
regional countries, therefore demand on
regional countries
chemicals used in the construction is also
■■ Since these kind of chemicals have quite significant
growing rapidly transportation cost compared to total value of product
■■ The global trade of the glaziers putty, and these products aren’t traded extensively between
grafting putty, resin cements and painters distant countries, Georgia has excellent location for
regional import substitution
fillings reached USD 8.3 Billion in 2014 and
it grew by CAGR 6.3% from 2010 INVESTMENT PROPOSAL
■■ CIS countries imported USD 807 Million of ■■ Optimal capacity of the production: 40 000 - 45 000
these products in 2014 and trade gap tons per year
accounted USD 744 Million, while Turkey ■■ IRR : 15.9 %
imported USD 184 million ■■ Approximate investment amount: USD 23.5 - 24.3
million
■■ In 2014 South Caucasus countries imported
■■ Financial calculations are based on KPMG sector
USD 34 Million glaziers putty, grafting putty,
research and investment proposal. Full version of the
resin cements and painters fillings report is available

GLAZIERS PUTTY, GRAFTING PUTTY, RESIN CEMENTS AND GLAZIERS PUTTY, GRAFTING PUTTY, RESIN CEMENTS
PAINTERS FILLINGS WORLD IMPORT AND GROWTH RATE, AND PAINTERS FILLINGS IMPORT/EXPORT GAP IN
2010-2014 TARGET COUNTRIES, 2014

9 000 8 305 20% Turkey


7 938 4
8 000 7 558 7 468
6 512 16,1%
7 000 15% Armenia 6
13,4% USD Million
6 000
10% Azerbaijan 8
5 000
6,3%
4 000
4,6% 5% Ukraine 79
3 000
2 000 0% Central Asia 84
1 000 -1,2%
0 -5% Russia 512
2010 2011 2012 2013 2014
0 100 200 300 400 500 600
trade growth
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BEAUTY, MAKE-UP, HAIR AND SKIN CARE
PREPARATIONS
OVERVIEW POTENTIAL FOR GEORGIA
■■ World import of perfumery and ■■ The production levels in the close region and in
cosmetics grew by 3.7% in 2014 to Georgia are not high, which together with high level of
consumption and availability of raw materials create
reach 112 Billion USD. Trade of perfumery
opportunities for new entrants
and cosmetics grew with CAGR of 6.8%
■■ There are no significant projects in the pipeline in the
from 2010 till 2014 close region
■■ Import in South Caucasus countries was
212 Million USD in 2014 and Georgia INVESTMENT PROPOSAL
accounted 53% of it ■■ Optimal capacity of the production per year: hair
preparations - 10 000 -15 000 tons; beauty, make-up
■■ According to L’Oreal, world’s biggest and skin care preparations - 7 000 - 9 000 tons
cosmetic firm by sales, the value of ■■ IRR: hair preparations - 20.42%; beauty, make-up and
global cosmetics market will double to skin care preparations - 26.65%
USD 800 Billion over the next 10-15 years ■■ Approximate investment amount: hair preparations -
■■ According to KPMG Research, during USD 15 - 22.5 Million, beauty, make-up and skin care
the period between 2010 and 2013 preparations - USD 28 - 36 Million
average import price for perfumery and ■■ Financial calculations are based on KPMG sector
research and investment proposal. Full version of the
cosmetics increased for CIS and EU report is available

PERFUME AND COSMETICS PERFUME AND COSMETICS


WORLD IMPORT AND GROWTH RATE, SOUTH CAUCASUS IMPORT AND GROWTH RATE,
2010-2014 2010-2014

120 108 112 14,0% 250 20,0%


209 212
97 13,0% 100 12,0% 17,9%
100 11,9% 187
86 200 178
10,0% 157 15,0%
80 13,6%
USD Million
USD Billion

8,3% 8,0% 150 11,7%


60 10,0%
6,0% 100
40
3,7% 4,0% 5,0% 5,0%
2,6% 50
20 2,0%
1,2%
0 0,0% 0 0,0%
2010 2011 2012 2013 2014 2010 2011 2012 2013 2014

trade growth trade trade growth trade

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WASHING AND CLEANING PREPARATIONS

OVERVIEW POTENTIAL FOR GEORGIA


■■ The global household products market is ■■ High level of import in Georgia and in close region
expected to increase by 17.5% compared creates import substitution opportunities for local
production. The biggest opportunity arises from the
with 2013 and reach a value of USD 208.7
manufacturing of textile washing products
Billion (the expected market CAGR for the
■■ Main raw materials for washing and cleaning
period 2013-2018 is around 3.3%) preparations are oleo chemicals, crude oil and
■■ In 2014 import of washing and cleaning solvents, which can be easily obtained from
preparations around the world accounted neighboring countries
30.5 Billion USD INVESTMENT PROPOSAL
■■ European Union imported 46% of the ■■ Optimal capacity of the production: 20 000 - 25 000
global import value tons per year
■■ South Caucasus countries imported ■■ IRR : 21.79%
158 million USD washing and cleaning ■■ Approximate investment amount: USD 20 - 25 Million
preparations in 2014 , while Azerbaijan was ■■ Financial calculations are based on KPMG sector
the biggest importer with 87 Million USD research and investment proposal. Full version of the
import value report is available

GLOBAL HOUSEHOLD PRODUCTS GROUP VALUE IN WASHING AND CLEANING PREPARATIONS


2009-2013 SOUTH CAUCASUS IMPORT AND GROWTH RATE,
2010-2014

180 180 20%


175 178 10% 160 18,3% 18%
9% 16,4% 157 158 16%
170 172 140
8% 14,1% 14%
7% 120 133
Million USD

165 167
Billion USD

11,7% 116 12%


6% 100
160
161 100 10%
5% 80
155 3,6% 3,5%
3,3% 4% 8%
155 3,1% 60 6%
150 3%
2% 40 4%
145 20
1% 2%
140 0% 0 0,7% 0%
2009 2010 2011 2012 2013
2010 2011 2012 2013 2014
Global Household Products Group Sales Growth rate
trade growth rate
Source: MarketLine
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PHARMACEUTICALS
OVERVIEW POTENTIAL FOR GEORGIA
■■ Georgia already produces different ■■ Emerging markets widely considered to be focal
types of pharmaceuticals and exports point for growth in the global pharmaceutical
some of them in regional countries: market over the coming decade, and Georgia
Uzbekistan, Azerbaijan, Armenia and and the surrounding region have significant room
etc. for growth
■■ Production of pharmaceuticals was USD ■■ Georgia has the state owned laboratory (biosafety
78 Million In 2014 level 2 and 3 laboratories and vivarium) established
■■ Domestic consumption of in 2011 (investment amount USD 200 million), which
pharmaceuticals was approximately is ready to cooperate with private sector in R&D
USD 338 million in 2014 from which and product testing
only 23% was covered by domestic ■■ Georgia has skilled & qualified labor in the
production pharmaceutical industry
■■ CAGR of Georgia’s export amounted to INVESTMENT PROPOSAL
30% during 2010-2014 years ■■ Opportunities to invest in manufacturing, regional
■■ CAGR of import in Georgia was 13% distribution hub, R&D and clinical testing
during 2010-2014 years ■■ Pharmaceuticals niche sub-sectors -
bacteriophages and natural/herbal medicine

IMPORT OF PHARMACEUTICALS IN GEORGIA, GEORGIA’S EXPORT OF PHARMACEUTICALS,


2010-2014 2010-2014

400 365 120


105
350 318 100
300 265
228 80
250 221
USD Million

USD Million

55 59
200 60
44
150 37
40
100
20
50
0 0
2010 2011 2012 2013 2014 2010 2011 2012 2013 2014

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PLASTICS MANUFACTURING
OVERVIEW POTENTIAL FOR GEORGIA
■■ Domestic consumption of plastic products was ■■ Considering the growing target market and
approximately USD 396 million in 2014 from which high level of import not only in Georgia, but in
only 32% was covered by domestic production other South Caucasus countries as well, there is a
■■ Georgia imports plastic products mainly from Turkey significant opportunity
(USD 157 million), China (USD 30 million) and Iran ■■ Raw materials can be easily obtained from Iran,
(USD (13 million) Azerbaijan and other nearby countries
■■ In 2014 export of plastic products from Georgia
accounted 15 Million INVESTMENT PROPOSAL
■■ Transportation cost of plastics, especially packaging
materials is very high compared to total product ■■ Opportunity to invest in manufacturing of plastic
price and for that reason these materials are not packaging materials such as closures, stoppers,
usually traded extensively between the countries. lids, caps etc. The initial production capacity
However in 2014 import of plastics amounted to could be 6,500 tons which will substitute 30% of
USD 286 million in Georgia import quantity
■■ In 2014 Georgia imported USD 9.3 Million High- ■■ Construction of a High-density polyethylene
Density Polyethylene Pipes (HDPE) and the import (HDPE) factory with production capacity of
has increased by by CAGR of 25% since 2005. 4,200 tons per year. The optimal initial investment
Azerbaijan (CAGR 17%) and Armenia (CAGR 27%) amount is USD 6 Million
imported a total of USD 5.3 Million HDPEs

IMPORT OF PLASTICS IN GEORGIA, IMPORT OF PLASTICS IN SOUTH CAUCASUS,


2010-2014 2010-2014

350 748
800
286 655 656
300 267 700 649
253
250 230 600
USD Million
USD Million

500 460
200 171
400
150
300
100 200
50 100
0
0
2010 2011 2012 2013 2014
2010 2011 2012 2013 2014
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APPAREL AND TEXTILE

OVERVIEW POTENTIAL FOR GEORGIA


■■ Georgia has a rich history of apparel and textile ■■ Georgia benefits from numerous Free Trade
production dating back to Soviet times. Georgia Agreements and proximity to the large export
markets including EU, Turkey, Russia, Ukraine, etc.
produced high quality apparel/clothes, silk and
wool blend fabrics ■■ Average monthly salary in apparel industry is 265
USD per month
■■ The sector emerged in 2000s after Turkish ■■ There are five state owned Vocational Education
investors and Georgian entrepreneurs began Training Centers around Georgia providing
refurbishing old factories and engaging in cut, professional courses in cutting, sewing,
make, trim (CMT) activities for the local and constructing cloth, technical fashion design and
export markets other practical subjects used in the apparel/
textile Industry. Most of the course’s fees are
■■ Approximately 95% of apparel produced by financed by the Government of Georgia
investor companies is exported to Turkey and/or
to the EU markets
INVESTMENT PROPOSAL
■■ Biggest companies in the industry are engaged
in Cut, Make, Trim (CMT) operations ■■ Opportunities to invest in cut, make, trim (CMT)
activities for export markets and high-end fashion
■■ In 2015 Georgia exported USD 91 Million value for local market
of apparel, footwear and bags, while imported
USD 303 Million value of them (preliminary data)

BRANDS CURRENTLY PRODUCED IN GEORGIA

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CONSTRUCTION MATERIALS
OVERVIEW INVESTMENT PROPOSAL FOR GEORGIA
■■ South Caucasus countries are developing ■■ There are nine marble mines in Georgia, holding
with fast pace and demand for construction 24.5 million m3 reserves. The availability of raw
materials enables production capacity of 8 800
materials is growing yearly
tons per year to substitute import and create
■■ Global imports of worked Marble, Travertine export potential mainly to neighbor countries. The
and Alabaster amounted to 1.9 Billion USD in optimal initial investment is USD 3.5 Million
2014. Georgia imported 2 Million USD of these ■■ Georgia has ceramic tiles production capacity
products in 2014 and import grew by CAGR of of 132 000 tones per year thanks to clay deposits.
Domestic production has a potential to replace
21% since 2010
40% of imports and the remaining can be
■■ Georgia imported 54.3 million USD ceramic exported to Armenia and Azerbaijan. The optimal
tiles in 2014, while Azerbaijan and Armenia initial investment is USD 5.5 Million
imported 33 and 17 million USD respectively ■■ Additionally, Georgia has a good opportunity
for production of refractory bricks, which has the
■■ Glass wool insulation is one of the most widely robust import growth rate in South Caucasus.
used forms of insulation. The total value of Georgia has 36.4 million tons reserves of fireproof
import in Georgia, Armenia, Azerbaijan and clay, the main raw material for the production.
Kazakhstan amounted to 12 million USD in 2014 The optimal initial investment is USD 3 Million
with 35% CAGR and 15% CAGR for Georgia ■■ Georgia has several mines of glass sand, the
and Kazakhstan respectively main raw material for glass wool production, with
the total reserves of 132.9 million m3. The optimal
■■ Georgia has construction materials and facing initial investment is USD 6 Million for production
stones small and medium sized deposits, 312 capacity of 2 000 tons per year
and 107 respectively

MARBLE CERAMIC TILES REFRACTORY BRICKS GLASS WOOL

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OPPORTUNITIES ARISING FROM GEORGIA’S TRANS-SHIPMENT
FLOWS AND RESOURCES

ALUMINIUM PRODUCTION OVERVIEW


■■ Currently Georgia transships raw materials (alumina and
bauxite) for aluminum production from west (USA, Brazil,
Jamaica etc.) to Central Asia. After smelting process,
ready aluminum goes through Georgia to Europe, Turkey,
USA etc.
■■ The country has one of the biggest freshwater resources per
capita, which gives Georgia possibility to have clean and
cheap energy - standard cost for 1 kWh is 6 USD cents for
30-110 kV high voltage electricity
POTENTIAL FOR GEORGIA
■■ Opportunity to produce aluminum and aluminum
products such as cans and other packaging materials,
construction materials, wires and cables etc.

COPPER OVERVIEW
■■ Georgia and Armenia export copper ores, copper waste
and scrap
■■ Trade deficit of copper products (alloys and final products
e.g. wire, tubes, pipes) amounts to USD ~50 mln in the
South Caucasus countries
POTENTIAL FOR GEORGIA
■■ Potential for the production of copper alloys and end
products (copper wires, tubes etc.) for regional import
substitution

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www.investingeorgia.org

STEEL PRODUCTION OPPORTUNITIES

OVERVIEW
■■ Georgia mines manganese and copper ores
■■ Georgia and neighboring countries export waste and scrap metals
■■ Georgia produces ferro alloys, largely for export (USD ~195 mln)
■■ Georgia (USD ~290 mln) and neighboring countries import large quantity of semi-finished and
finished iron and steel products
■■ Currently there are 4 big smelters in Georgia
■■ Standard cost for 1 kWh is 6 USD cents for 30-110 kV high voltage electricity
■■ Factories consuming more than 1 million kWh per year (1 kWh per year from 2017) can purchase
electricity directly from energy producers and negotiate on prices

POTENTIAL FOR GEORGIA CURRENT STEEL PRODUCTION VALUE


CHAIN IN GEORGIA

■■ Existing production offers opportunity for


further value chain integration: Mining (copper Smelting, refining & Conversion/
and manganese) shaping of steel fabrication
√√ Internal consumption / import substi-
tution of iron and steel products
(structures, electricity masts, tubes, Export
pipes, bars, rods, angles etc.) of waste Metallurgical Chiatura
& scrap plant in Kutaisi Manga-nese ore
√√ Export of iron & steel products and mine
regional import substitution
■■ Recommended locations close to Poti
Import of
port: Maglaki, Senaki, Samtredia iron & steel Smelter in
Zestafoni
products Poti port
■■ State owned available lands are next to Ferroalloy plant Metallurgical and
electricity sub-stations and railway fabrication plants
in Rustavi

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INCENTIVES AND ACCESS TO FINANCE

PRODUCE IN GEORGIA
Mission: supporting of manufacture and agriculture industries
Government offers:
■ Subsidies for loan interest payment
■ Free lands/buildings for factory construction

FREE INDUSTRIAL ZONES


■ Four Free Industrial Zones (FIZs) operate in Poti (sea port), Kutaisi (second largest city) and
Tbilisi (capital city)
■ If a company produces goods for export in FIZ, it is exempt from all taxes except
Personal Income Tax (20%), which is paid from employees’ salaries

PARTNERSHIP FUND
■ 100% state owned investment fund
■ Operating fields: Energy, Hospitality & Real Estate, Manufacturing, Agribusiness
■ Finances up to 49% of equity in new investment projects

GEORGIAN CO-INVESTMENT FUND


■ USD 6 billion private equity fund
■ Investment sectors: Energy & Infrastructure, Hospitality & Real Estate, Manufacturing,
Agriculture, Logistics
■ Minimum Project Size: USD 5 M
■ GCF equity stake in projects: 25%-75%

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www.investingeorgia.org

GEORGIAN NATIONAL INVESTMENT AGENCY

The investment promotion agency under the


direct supervision of the Prime Minister of Georgia

“One-stop-shop” for investors to support


companies before, during & after investment
process
INVESTORS
Moderator between investors, government
and local companies

OUR SERVICES
GNIA
LOCAL
INFORMATION COMPANIES
General data, statistics, sector researches GOVERNMENT

COMMUNICATION
Access to Government at all levels/Local partners

ORGANIZATION
Organization of site visits & accompanying of investors

AFTERCARE
Legal advising & Supporting services

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GEORGIAN NATIONAL INVESTMENT AGENCY 2016
Contact Person: Mr. Bachana Shengelia
E-mail: bshengelia@investingeorgia.org
Tel: +995 322 473 696 (107)

WWW.INVESTINGEORGIA.ORG

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