2. Content
• GNIA - Who we are
• Why to invest in Georgia
• Investment opportunities in Georgia
• What you can get from GNIA
www.investingeorgia.org 2
3. GNIA – Who we are
• “One-stop-shop” for investors
• Moderator between Investors
Investors, Government and Local
Companies Local GNIA
Companies Government
• State agency
– Promoting Georgia internationally
– Supporting foreign investments and investors
Mission - Attracting Greenfield and
before, during & after investment process M&A Investments
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4. Why Georgia is different
Georgia’s transformation into the Rapidly Developing Economy implied several key sets of reforms
Business friendly environment with low levels of taxation, simple and fair tax administration
Efficient, pro-business and corruption-free government
No criminal
Solid sovereign balance sheet
Stable and conservatively managed banking sector
Multi-modal maritime, land and air access infrastructure for trade, logistics and
manufacturing
Stable and competitively priced energy supply
Flexible labor legislation
Real Political Will - It took us 8 years – 2004-2011 to tick all boxes on the checklist. Reforms have
been implemented and institutionalized to preclude policy drifts and to anchor Georgia’s liberal
economic paradigm to the solid set of legal norms, values and principles.
Number 1 Reformer in the world over the past 5 years – World Bank
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5. Georgia - Sovereign Credit Ratings
BB- Stable BB- Stable Ba3 Stable
(Upgraded from B+ (Upgraded from B+ (Affirmed in August
Positive in November Positive in December 2012)
2011) 2011)
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6. Doing Business in Georgia
Country's impressive progress in improving business climate has been well
documented in a number of international indices.
Ease of Doing Business Index Of Economic Freedom
Singapore 1 Hong Kong 1
4 9
United… 7 Up from 112 in 2005 United Kingdom 16 Up from 99 in 2005
16 20
Germany 19 Germany 23
24 29
France 29 Armenia 36
47
33 France 64
Armenia 55 67
66 Azerbaijan 92
Turkey 71 124
91 China 135
Russia 120 143
Source: World Bank, 2012 (Rank out of 183 countries) Source: The Heritage Foundation, 2011(Rank out of 183 countries)
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7. Corruption Free Country
Global Corruption Barometer
Georgia Western Balkans+Turkey EU Denmark 0%
1%
% of survyed who UK 1%
77% Percentage of users paying
assess their current 2%
government's 35% Netherlands 2% a bribe to receive attention
action as effective 2% from in the past 12 months
26%
in the fight… Germany 2%
3%
% of survyed who United States 5%
claim that the level 78% 7%
of corruption has Austria 9%
16%
9%
decreased in the 3% Armenia 22%
past three years 26%
Source: Transparency International, 2011 (Rank out of 183 countries)
Georgia today is essentially a corruption-free investment destination where rule of law
have been given the right way
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8. Economic Structure and Trends
GDP: strong rebound in 2010 after a relatively small contraction in
2009, robust growth potential
Rapidly growing GDP per capita – PPP and Nominal
Nominal GDP (US$bln) Real GDP growth, y-o-y (%) GDP per capita (PPP) Nominal GDP per capita (US$)
18 12.3% 15% 7,000 6,388
16 11.1% 5,929
9.6% 17.9 12% 6,000 5,491
14 4,677 4,906 4,767
5,064
12 9.4% 11.6 14.4 15.9 9% 5,000 4,040
10 12.8 6.5% 6% 3,644
8 5.9% 10.8 6.3% 7.0% 6.0% 4,000 2,966 3,242
US$
10.2 3%
6 7.8 0% 3,000 4,007
4 6.4 2.3% -3.8%
-3% 2,000 2,921 3,215 3,549
2 4.0 5.1 2,455 2,623
0 -6% 1,000 2,315
1,484 1,764
2003 2004 2005 2006 2007 2008 2009 2010 2011P 2012F 2013F
0 919 1,188
2003 2004 2005 2006 2007 2008 2009 2010 2011P 2012F 2013F
Source: Geostat, MOF Source: Geostat, MOF, IMF
Broad-based and diversified nominal GDP structure 2011 Steeper Than Expected Growth Trajectory
Initially planned at 5.5%, Georgia’s real GDP growth for 2011 was
Other sectors Manufacturing
16.9% 17.3% 7%, driven by strong real and financial sector activity, robust tax
Education 4.5%
Construction intake, and reassuring proxy indicators to economic activity
6.2% Trade 17.3%
Healthcare & 2011 outcomes:
Social Tax collection increased 26% y-o-y
Assistance 6.1% Transport & Public
Agriculture 9.3% Communication Administration
VAT turnover increased 26% y-o-y
s 10.6% 11.7% Commercial bank lending to the real sector increased 24% y-o-y
Source: Geostat Trade turnover increased 36% y-o-y
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9. Trade: liberal regimes & diversified structure
• Highly diversified trade structure
• Preferential Trade Regimes:
FTA with CIS countries:
Ukraine, Belarus, Azerbaijan, Armenia, Russia, Moldova, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbe
kistan, Turkmenistan
FTA with Turkey
DCFTA with EU will be signed next year
Negotiation on FTA with USA is in progress
GSP+ with EU - 7200 products to the EU market duty free
GSP with USA, Norway, Switzerland, Canada, Japan - lower tariffs are applied on 3400 goods
exported from Georgia to these countries
• Very simple and service oriented customs policy and administration – Custom clearance in 15 min
• Almost no custom duty - 90 percent of goods free from import tariffs
• No quantitative restrictions
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10. Market Access
Total ~ 0.9 billion
DCFTA + 0,5billion
Existing FTA +350 million
Population - Georgia 4,5 million
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11. Taxation is simple, low, efficient and fair
‘04 ‘05 ‘06 ‘07 ’08 ‘09 ’10 ‘11 ‘12
Number of Taxes 21 7 7 7 6 6 6 6 6
VAT 20% 20% 18% 18% 18% 18% 18% 18% 18%
Social Tax + Income Social Tax + Income
Income Tax 12-20% 12% flat 12% flat 12% flat Tax Tax 20% 20% 20%
32% 25% 20%
Social Tax 33% 20% 20% 20% - - - - -
Corporate Income Tax 20% 20% 20% 20% 15% 15% 15% 15% 15%
Dividend & Interest
10% 10% 10% 10% 10% 5% 5% 5% 5%
Income Tax
No payroll tax or social insurance tax
No capital gains tax
No wealth tax, inheritance tax or stamp duty
Foreign-source income of individuals fully exempted
Tax rates reduction timetable was further accelerated in 2008
Very strong political commitment to low and simple taxation and improvement of services
Double taxation avoidance treaties with 40 countries
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12. Forbes Tax Misery & Reform Index
According to 2009 Tax Misery & Reform Index, released by Forbes Business & Financial News, Georgia is the
fourth least tax burden country after Qatar, UAE and Hong Kong
Since 1
January
2009, income
tax declined
to 20% from
25%
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13. World's leader in labor freedom
• No minimum wage regulations
• Young labor – 50% of unemployed population are aged between 20-34
• Average monthly salary – 410 USD
Georgia - one of the most liberal labor environments (3rd best globally), according to
the Heritage Foundation, 2012
110.0
100.0 Greater Labor Freedom Georgia
90.0
80.0
Frontier Markets avg
70.0
60.0
2005 2006 2007 2008 2009 2010 2011 2012
Source: MOF and Heritage Foundation, 2012
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14. Foreign Direct Investment
• Strong and Rising FDI Stimulates Economic Prosperity
• Key Industries Benefit from FDI
• Reinvestment 30% (2011)
• Georgia has bilateral treaties on investment promotion and protection with the 32 countries
(negotiations launched with 24 countries)
FDI Breakdown by sectors 2011 FDI/GDP ratio compares favorably with peers
2500 25.0%
Construction
FDI FDI as % of Nominal GDP
Mining, 4% 19.8%
, 4% Energy, 18%
Real 2000 20.0%
Estate, 8% 15.3% 12.2%
Transport 1500 15.0%
and 7.8%
Communicati 9.7%
1000 8.5% 2015 10.0%
on, 11% 7.0% 7.0%
Other 1564 6.1%
sectors, 17% 500 1190 1117 5.0%
Manufacturi 814
ng, 11% 499 658
340 450
0 0.0%
Consultancy, Financial
12% sector, 15% 2003 2004 2005 2006 2007 2008 2009 2010 2011
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15. Investment Opportunities in Georgia
Hydro Power Hub
Tourism
Industries
Regional Logistics Corridor
Agriculture and Agribusiness
Regional Services Hub
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16. Industries
• Largest industries are food and beverages (23%) and metal products (19%)
• Advantage to process goods - competitive cost of power, labor and strategic location
• 2 Free Industrial Zones - In FIZ, businesses are exempted from all tax charges except Personal
Income Tax
Opportunities:
2 Free Industrial Zones (FIZ)
• Food processing Russia
• Construction materials Mestia
• Wood and Furniture Kulevi FIZ FIZ
• Household goods Black Sea
Poti
Kutaisi
• Etc. Batumi
Tbilisi
Success stories:
Knauf MRN
Turkey
Railway
, Embawood, Fresh, Caparo Armenia
Azerbaijan
l, Effes, Heidelbercement, e
tc.
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17. Tourism
Number of visitors are increasing rapidly and it will reach 3.6 mln in 2012
5000
4,500
4500
4000 3,600
3500
2,822 25%
3000
2500
2,033 28%
2000
1,500 39%
1500 1,290
983 1,051
1000 36%
560
500
0
2005 2006 2007 2008 2009 2010 2011 2012 2013
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18. Tourism
Fast growing sector
▪ Georgia attracts visitors mainly from neighbors: Turkey (26%), Azerbaijan (25%), Armenia (25%), Russia (10%)
▪ Average stay ~ 5 nights / Average spend of USD 1,500
▪ Already operating hotels - Sheraton, Radisson, Marriot, Holliday Inn, (under construction - Cempinski, Hillton) etc.
▪ Overall capacity of < 10,000 rooms
Potential
▪ Youth Olympics in 2015
▪ Free tourism zones – Free land, master plan and tax exemptions
▪ Availability of gambling business – gaming is partially or completely banned in
Russia, Ukraine, Azerbaijan, Kazakhstan, Turkey, Israel, Iran, Iraq
▪ 8 national parks
▪ 2400 springs of mineral waters – Borjomi, Nabeghlavi, etc.
Summer Resorts Winter Resorts Casinos Eco Tourism
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19. Regional Logistics Corridor
Trans-Caucasian route
• Latent gateway between Europe and Central Asia
• Around 80% of port cargo and 60% of freight rail are transits
Transport Infrastructure
• Rapidly developing road infrastructure
• Cargo airport in Poti
• Ports are cost-competitive vs. alternative routes
• FDI inflows in the logistics sector have primarily targeted transport
infrastructure
Opportunities
• Deep-sea port of Lazika with PanaMax vessel
• Baku-Tbilisi-Kars railway – direct connection between EU and Central Asia
• Logistical centers
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20. Hydro Power Hub
Significant Hydro Power Potential
Installed capacity of >2,500 MW
Additional potential >4,500 MW
• 2/3 of HPPs are dams and reservoirs
• 78% of power generated via HPP – 22% via thermal
• Generation cost (6 USD Ct) among the lowest in the region,
~50% lower than target market Turkey
Export Capacity
• The only net electricity exporter in the region, with rapidly growing consumption rates
• Construction of 500/400 KV power transmission line from Georgia to Turkey to be completed in 2013
Opportunities
• ~ 70 small/medium projects (< 100 MW)
• large scale projects (> 200 MW) - Oni cascade, Khaishi HPP,
Nenskra HPP, Namakhvani HPP, Khudoni HPP
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21. Agriculture and Agribusiness
• Over 21 micro-climates - a wide range of grain, vegetables, hard and soft
fruits, meat and dairy could be farmed
• Agriculture accounts for 9% of GDP. It contributes ~53% of employment
mostly in subsistence farming (average farm size of 1.22 ha)
• Traditionally Georgia has strengths in wine, nuts, fruits which account for
more than 60% of agriculture exports
Opportunity:
• Import substitution - USD 180 million of wheat and USD 140 million of
meat and dairy imports in 2011
• State owned land is being privatized – simplified, transparently and at a
good price.
• The average gross monthly salary in the agricultural sector in Georgia is
USD 206
Success stories: Ferrero, WimmBill Dann, HIPP, Schuchmann
Wines, Chateau Mukhrani, GWS
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22. Regional Services Hub
• Georgia’s service sector achieves leading ranks among regional
economies in terms of value added and trade
• Major share of FDI inflow of 45% in 2011 with USD 500
million:
Financial services have grown at 19% p.a. since 2009 and
is the leading service sub-sector for FDI attraction with
15% of total inflows in 2011
Consultancy services attracted 12% of total FDI inflows in
2011
Wholesale/retail trade accounts for 40% of service
GDP, and strong FDI inflows rebound at 48% p.a. since
2009
FDI inflows in healthcare/social work have grown at 146%
p.a. since 2007
• Opportunity to capitalize:
Financial services/headquarters
Retail hub as the destination-of-choice for shopping
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23. No Policy Drift
The Economic Liberty Act
• The Liberty Act contains a coherent package of bold measures to constitutionally enshrine our
basic policies, reassuring investors that no policy reversal or policy drift is possible
• Returning to citizens to the power to tax – no new taxes or tax rate increases without a
nationwide referendum
• Fiscal responsibility
– Government expenditure capped at 30% of GDP
– Budget deficit capped at 3% of GDP
– Government debt capped at 60% of GDP
• No restrictions on currency convertibility or repatriation of capital & profit
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24. What you can get from GNIA
Information
• General data
• Statistics
• Sector Researches
Communication
• Access to Government of Georgia at all levels
• Local partners (Business Associations, private companies)
After care
• Legal advising
• Supporting services
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