Georgian National Investment Agency (GNIA) 2012
May 24, 2015
Georgian National Investment Agency(GNIA)
2012
www.investingeorgia.org 2
Content
• GNIA - Who we are
• Why to invest in Georgia
• Investment opportunities in Georgia
• What you can get from GNIA
www.investingeorgia.org 3
GNIA – Who we are
• “One-stop-shop” for investors
• Moderator between Investors,
Government and Local Companies
• State agency
– Promoting Georgia internationally
– Supporting foreign investments and investors
before, during & after investment process
LocalCompanies
Investors
GovernmentGNIA
Mission - Attracting Greenfield and M&A Investments
Why Georgia is differentGeorgia’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(Upgraded from B+
Positive in November 2011)
BB- Stable(Upgraded from B+
Positive in December 2011)
Ba3 Stable(Affirmed in August
2012)
www.investingeorgia.org 5
Doing Business in Georgia
Ease of Doing Business Index Of Economic Freedom
Singapore
United Kingdom
Germany
France
Armenia
Turkey
Russia
147
1619
2429
3355
6671
91120
Source: World Bank, 2012 (Rank out of 183 countries)
Hong Kong
United Kingdom
Germany
Armenia
France
Azerbaijan
China
19
162023
2936
476467
92124
135143
Source: The Heritage Foundation, 2011(Rank out of 183 countries)
Up from 112 in 2005 Up from 99 in 2005
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Country's impressive progress in improving business climate has been well
documented in a number of international indices.
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Corruption Free CountryGlobal Corruption Barometer
Denmark
UK
Netherlands
Germany
United States
Austria
Armenia
0%1%1%
2%2%2%2%
3%5%
7%9%9%
22%26%
Source: Transparency International, 2011 (Rank out of 183 countries)
Percentage of users paying a bribe to receive attention from in the past 12 months
Georgia today is essentially a corruption-free investment destination where rule of law have been given the right way
% of survyed who claim that the level of corruption has decreased in the past three years
% of survyed who assess their current government's action as effective in the fight against corruption
3%
26%
16%
35%
78%
77%
Georgia Western Balkans+Turkey EU
2003 2004 2005 2006 2007 2008 2009 2010 2011P 2012F 2013F0
1,0002,0003,0004,0005,0006,0007,000
2,966 3,242 3,644 4,0404,677 4,906 4,767 5,064 5,491 5,929 6,388
919 1,188 1,484 1,7642,315
2,921 2,455 2,6233,215 3,549 4,007
GDP per capita (PPP) Nominal GDP per capita (US$)
US$
2003 2004 2005 2006 2007 2008 2009 2010 2011P 2012F 2013F0
4
8
12
16
-6%-3%0%3%6%9%12%
4.0 5.1 6.47.8
10.212.8
10.811.6 14.4
15.917.911.1%
5.9%
9.6%9.4%
12.3%
2.3%-3.8%
6.3% 7.0% 6.0% 6.5%
Nominal GDP (US$bln) Real GDP growth, y-o-y (%)
Steeper Than Expected Growth TrajectoryBroad-based and diversified nominal GDP structure 2011Source: Geostat, MOF, IMF
Source: Geostat
Source: Geostat, MOF
Economic Structure and TrendsRapidly growing GDP per capita – PPP and NominalGDP: strong rebound in 2010 after a relatively small contraction
in 2009, robust growth potential
Initially planned at 5.5%, Georgia’s real GDP growth for 2011 was 7%, driven by strong real and financial sector activity, robust tax intake, and reassuring proxy indicators to economic activity
2011 outcomes: Tax collection increased 26% y-o-y VAT turnover increased 26% y-o-y Commercial bank lending to the real sector increased 24% y-o-y Trade turnover increased 36% y-o-y
Manufacturing 17.3%
Trade 17.3%
Public Administration 11.7%Transport & Communications
10.6%
Agriculture 9.3%
Healthcare & Social Assistance 6.1%
Construction 6.2%
Education 4.5%
Other sectors 16.9%
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• Highly diversified trade structure
• Preferential Trade Regimes: FTA with CIS countries: Ukraine, Belarus, Azerbaijan, Armenia, Russia, Moldova, Kazakhstan,
Kyrgyzstan, Tajikistan, Uzbekistan, Turkmenistan FTA with Turkey DCFTA with EU will be signed next yearNegotiation on FTA with USA is in progressGSP+ with EU - 7200 products to the EU market duty freeGSP 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
Trade: liberal regimes & diversified structure
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Market Access
Population - Georgia 4,5 millionExisting FTA +350 millionDCFTA + 0,5billionTotal ~ 0.9 billion
‘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%
Income Tax 12-20% 12% flat 12% flat 12% flatSocial Tax + Income
Tax 32% 25%
Social Tax + Income Tax
20%20% 20% 20%
Social Tax 33% 20% 20% 20% - - - - -
Corporate Income Tax 20% 20% 20% 20% 15% 15% 15% 15% 15%
Dividend & InterestIncome Tax 10% 10% 10% 10% 10% 5% 5% 5% 5%
No payroll tax or social insurance taxNo capital gains taxNo wealth tax, inheritance tax or stamp dutyForeign-source income of individuals fully exemptedTax rates reduction timetable was further accelerated in 2008Very strong political commitment to low and simple taxation and improvement of servicesDouble taxation avoidance treaties with 40 countries
Taxation is simple, low, efficient and fair
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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%
Forbes Tax Misery & Reform Index
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World's leader in labor freedom
2005 2006 2007 2008 2009 2010 2011 201260.0
70.0
80.0
90.0
100.0
110.0
Georgia - one of the most liberal labor environments (3rd best globally), according to the Heritage Foundation, 2012
Frontier Markets avg
GeorgiaGreater Labor Freedom
Source: MOF and Heritage Foundation, 2012
• No minimum wage regulations
• Young labor – 50% of unemployed population are aged between 20-34
• Average monthly salary – 410 USD
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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)
Energy; 18%
Other sectors; 17%
Financial sector; 15%
Consultancy; 12%
Manufacturing; 11%
Transport and Communication;
11%
Real Estate; 8%
Construction; 4% Mining; 4%
2003 2004 2005 2006 2007 2008 2009 2010 20110
500
1000
1500
2000
2500
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
340 499 450
1190
20151564
658 8141117
8.5%9.7%
7.0%
15.3%
19.8%
12.2%
6.1% 7.0%
7.8%
FDI FDI as % of Nominal GDPFDI/GDP ratio compares favorably with peersFDI Breakdown by sectors 2011
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Investment Opportunities in Georgia
Hydro Power Hub
Tourism
Industries
Regional Logistics Corridor
Agriculture and Agribusiness
Regional Services Hub
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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
Poti
Batumi
ArmeniaAzerbaijan
Russia
Turkey
Black Sea
Kutaisi
MRNRailway
Kulevi
Tbilisi
FIZFIZ
2 Free Industrial Zones (FIZ)Opportunities:• Food processing
• Construction materials
• Wood and Furniture
• Household goods
• Etc.Success stories:
Knauf , Embawood, Fresh, Caparol, Effes, Heidelbercement, etc.
Mestia
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2005 2006 2007 2008 2009 2010 2011 2012 20130
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
560983 1,051
1,2901,500
2,033
2,822
3,600
4,500
0.355333333333333
0.388096409247418
0.275690999291283
0.25
Tourism
Number of visitors are increasing rapidly and it will reach 3.6 mln in 2012
www.investingeorgia.org 18
TourismFast 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 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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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
Hydro Power Hub
www.investingeorgia.org 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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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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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 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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GEORGIAN NATIONAL INVESTMENT AGENCY
8, Rustaveli avenue, 0118 Tbilisi, Georgia
Tel/Fax: (+995 32) 2 433 433
E-mail: [email protected]
Giorgi Pertaia
www.investingeorgia.org