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Georgian National Investment Agency
              (GNIA)

               2012
Content

• GNIA - Who we are

• Why to invest in Georgia

• Investment opportunities in Georgia

• What you can get from GNIA

                       www.investingeorgia.org   2
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

                                    www.investingeorgia.org                             3
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

                                         www.investingeorgia.org                              4
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)




                          www.investingeorgia.org                  5
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)


                                                www.investingeorgia.org                                                    6
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
                                             www.investingeorgia.org                                                    7
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

                                                             www.investingeorgia.org                                                                   8
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
                                         www.investingeorgia.org                              9
Market Access

Total ~ 0.9 billion
DCFTA + 0,5billion
Existing FTA +350 million
Population - Georgia 4,5 million




                                   www.investingeorgia.org   10
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

                                                      www.investingeorgia.org                                              11
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%




                                            www.investingeorgia.org                                  12
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


                                            www.investingeorgia.org                                         13
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


                                                        www.investingeorgia.org                                             14
Investment Opportunities in Georgia
              Hydro Power Hub
              Tourism
              Industries
              Regional Logistics Corridor
              Agriculture and Agribusiness
              Regional Services Hub
                www.investingeorgia.org      15
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.
                                                 www.investingeorgia.org                                  16
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


                                 www.investingeorgia.org                                           17
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




                                                     www.investingeorgia.org                                         18
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
                                               www.investingeorgia.org        19
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
                                          www.investingeorgia.org                             20
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
                                             www.investingeorgia.org              21
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
                                           www.investingeorgia.org    22
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

                                        www.investingeorgia.org                                23
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

                                     www.investingeorgia.org        24
Giorgi Pertaia

     www.investingeorgia.org
     GEORGIAN NATIONAL INVESTMENT AGENCY


          8, Rustaveli avenue, 0118 Tbilisi, Georgia
          Tel/Fax: (+995 32) 2 433 433
          E-mail: enquiry@investingeorgia.org
25

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BSEF 2013 tourism Beka Jakeli
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BSEF 2013 infrastructure Andriy Shkliar
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BSEF 2013 infrastructure Tatiana Korotka
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BSEF 2013 energy Stanislav_Pavlov
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BSEF 2013 energy Okan Yardimci
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BSEF 2013 agriculture Elena Voloshina
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BSEF 2013 agriculture Aaron Schapper
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BSEF 2013 invest Iryna Starodubova
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BSEF 2013 invest Giorgi_Pertaia
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BSEF 2013 macroeconomy David Dalton
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BSEF 2013 macroeconomy Oleg Ustenko
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BSEF 2013 macroeconomic Mustafa_Sever
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Bsef2012 session7 cities_andregions_yavuz
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Bsef2012 session6 infrastructure_andtrade_drone
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Bsef2012 session1 investment_climate_pertaia

  • 1. Georgian National Investment Agency (GNIA) 2012
  • 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 www.investingeorgia.org 3
  • 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 www.investingeorgia.org 4
  • 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) www.investingeorgia.org 5
  • 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) www.investingeorgia.org 6
  • 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 www.investingeorgia.org 7
  • 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 www.investingeorgia.org 8
  • 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 www.investingeorgia.org 9
  • 10. Market Access Total ~ 0.9 billion DCFTA + 0,5billion Existing FTA +350 million Population - Georgia 4,5 million www.investingeorgia.org 10
  • 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 www.investingeorgia.org 11
  • 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% www.investingeorgia.org 12
  • 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 www.investingeorgia.org 13
  • 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 www.investingeorgia.org 14
  • 15. Investment Opportunities in Georgia Hydro Power Hub Tourism Industries Regional Logistics Corridor Agriculture and Agribusiness Regional Services Hub www.investingeorgia.org 15
  • 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. www.investingeorgia.org 16
  • 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 www.investingeorgia.org 17
  • 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 www.investingeorgia.org 18
  • 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 www.investingeorgia.org 19
  • 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 www.investingeorgia.org 20
  • 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 www.investingeorgia.org 21
  • 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 www.investingeorgia.org 22
  • 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 www.investingeorgia.org 23
  • 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 www.investingeorgia.org 24
  • 25. Giorgi Pertaia www.investingeorgia.org GEORGIAN NATIONAL INVESTMENT AGENCY 8, Rustaveli avenue, 0118 Tbilisi, Georgia Tel/Fax: (+995 32) 2 433 433 E-mail: enquiry@investingeorgia.org 25