The FINANCIAL -- “Georgia offers a number of overall competitive advantages for the
manufacturing sector,” Keti Bochorishvili, Director of Georgian National
Investment Agency, told The FINANCIAL. “First and foremost are
its cost advantages. Labour costs are significantly lower than in most
surrounding countries.”
Georgia is the Number 1 Country in Eastern Europe and Central Asia in terms of Ease of Doing Business according to the World Bank Survey of 2012. The Bank hailed the Georgian Government’s commitment to reforms over the past few years as unprecedented.
The Government of Georgia has identified and targeted the manufacturing sector as one of its main economic priorities for investment and growth. Manufacturing in Georgia may be more profitable for foreign companies than in other countries due to several factors.
Currently the largest group of unemployed, 50 percent, is aged between 20-34 years, which confirms the availability of a young labour force. In 2009-10 31 percent of the population in the 20-24 age group were enrolled in tertiary education courses.
“We have a competent group of young managers, accountants, finance experts, economists, lawyers etc. that with the proper mentoring could eventually take over the operations of a growing manufacturing sector,” said R. Michael Cowgill, President and co-founder of Georgian American University’s business and law schools in Tbilisi as well as Vice-President and Treasurer of the American Chamber of Commerce in Georgia. “We do have many highly trainable workers that are unemployed just waiting for such opportunities. Manufacturing is one of the areas which could help us so much in reducing unemployment.”
“Low salaries are another important benefit for manufacturing in Georgia,” Bochorishvili claims.
The average gross monthly salary is lower than European equivalents - 616 GEL (346 USD) in 2010.”
Salary levels differ across Georgia’s regions. The highest average salary is in Tbilisi where 25 percent of the population resides. This was 760 GEL in 2010 which is 25% above the national average. Regions with other significant cities have below average salary levels, for example Adjara with Batumi - 460 GEL (258 USD) and Imereti with Kutaisi - 383 GEL (214 USD), which are 25 and 33 percent less respectively compared to the capital.
“Electricity costs, which are a major input for manufacturing business, are also very low due to Georgia’s vast hydropower resources,” GNIA’s Director added. “Georgia’s open, simple and transparent business environment allows for competitively low time and cost to market.”
“As well as low wages, stable energy supplies, rail, road and port infrastructure, better IT & communications technology, business-friendly Governmental policies, effective patrol providing a safe and secure environment, better educational programmes and more English language fluency support a high increase of manufacturing in Georgia. Further there are so many buildings and sites available throughout all of Georgia which are ideal for manufacturing facilities. Some manufacturing processes also rely on water resources, which of course is one of Georgia’s strengths. Our geographical location is also a huge benefit in that we can more easily import from and export to both Asia and Europe,” Cowgill stated.
“Low labour costs, access to key customers and end markets in the region and ease of doing business represent strong competitive advantages that Georgia can offer to potential investors, Bochorishvili said. “Georgia has set up three Free Industrial Zones (of which one is still under construction) that will allow companies to operate their business and trade efficiently, while enjoying tax free status.”
Currently GNIA offers an investment project portfolio which is the main tool for potential investors to get basic information about different sectors. The Agency, in cooperation with PWC, has created a sector study and investment proposal in the light manufacturing sector.
“More than 4,600 companies have been established by foreign investors in Georgia,” Bochorishvili said. “These firms have capitalized upon an affordable yet skilled and talented Georgian multi-lingual labour force.”
“In line with the overall high degree of economic liberty in Georgia, the textile and apparel industry has become one of the most attractive investment landscapes over the last few years. In addition, proximity of the Turkish market presents highly attractive export opportunities.”
“Georgia is already benefitting from the manufacturing of building materials. There is current growth in the production of textiles. As more progress is made in agricultural production, food processing is then an ideal area for manufacturing growth. But I also believe we can benefit from our strategic location by not just manufacturing products where we have the raw materials available - but assembling major equipment by importing various component parts. Once we have a few major foreign manufacturers putting plants in Georgia, I think others will follow,” Cowgill said.
“It is an ideal time to invest and enter the pharmaceutical market in Georgia,” Bochorishvili added.
In pharmaceutical R&D and production, Georgia has a special niche in the area of bacteriophages and herbal medicine production. Over 40 varieties of medicinal herbs and berries are growing wild in the country’s high mountainous regions, and there has been focus on and knowledge of herbal medicines dating back many centuries in Georgia.
Also the manufacturers of household appliances, furniture and other intensive production as well as light manufacturing field players will benefit from the growing agriculture sector for products such as irrigation pipes, greenhouses, agriculture machinery and processing lines.
“A good example of starting successful production is the Georgian-Swiss company Berta,” Bochorishvili stated. “This is the first and the largest manufacturer of household and personal care products in the whole Caucasus region who entered the Georgian market with 35 million USD investment. The company soon took advantage of the country’s liberal export regulations and started exporting its products first to Azerbaijan, later planning to move to Russia, Ukraine , Armenia, Uzbekistan and Kazakhstan.
There are also other successful foreign companies in Georgia: Fresh - production of household appliances; Embawood - furniture production; Geoplast - plastic pipes extrusion; Mina - glass bottle packaging; Caparol - production of paints, enamels materials for facades; Caucasian PET - PET bottle packaging.
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