Download Investment Opportunities in Apparel and Textile

Investment Opportunities in Apparel
and Textile industry of Georgia
Georgian National Investment Agency
(GNIA)
2016
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GEORGIA - COUNTRY OVERVIEW
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Area:
69,700 sq km
Population:
3.7 mln
Life expectancy:
75 years
Official language:
Georgian
Literacy:
100%
Capital:
Tbilisi
Currency (code):
Lari (GEL)
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GDP 2015 (E):
USD 14 billions
GDP real growth rate 2015 (E):
2.8%
GDP CAGR 2010-2015 (GEL) (E):
5.6%
GDP per capita 2015 :
US$ 3743
Inflation rate 2015 :
4%
Total Public Debt to Nominal
GDP (%) 2014 :
35.5%
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GEORGIA OFFERS INVESTORS:
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A politically stable investment destination
Efficient, pro-business and corruption-free government
BB- Stable
Enlargement of market size by Free Trade Agreements
Competitive cost of labor and energy
Entry gate in the region
BB- Stable
Solid sovereign balance sheet
Stable banking sector
16th most secured country in the world
(Global Competitiveness Index -2015/2016)
Ba3 Positive
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ECONOMIC STRUCTURE AND TRENDS
GDP: Strong rebound after a relatively small contraction in 2009
Growing GDP per capita (USD)
Real GDP growth, y-o-y (%)
14.0%
12.0%
5.8%
6.4%
6.0%
4.0%
2.4%
4.6%
2.8%
3743
2012
2013
2014
2015
2623
1484
1188
1000
0.0%
-2.0%
1500
3676
1764
2000
2.0%
2455
2315
2500
3.4%
6.2%
3600
2921
3000
7.2%
3523
3231
3500
9.4%
9.6%
10.0%
8.0%
4000
12.6%
2004
2005
2006
2007
-3.7%
2008
2009
2010
2011
2012
2013
2014
2015
500
0
-4.0%
2004
-6.0%
2005
2006
2007
2008
2009
2010
2011
Source: Geostat, MOF
Source: Geostat, MOF
Favorable public debt situation
Diversified nominal GDP structure in 2015
Health and
social work
6.0%
Education
4.9%
Other sectors
10.0%
80%
Industry
16.5%
Construction
8.0%
Transport and
Communication
10.7%
External Public Debt to Nominal GDP (%)
60%
Public administration
9.3%
Real estate,
renting and
business
activities
6.6%
Total Public Debt to Nominal GDP (%)
Agriculture,
forestry and
fishing
9.2%
Hotels and
restaurants
2.5%
Trade; Repair of goods
16.6%
40.0%
40%
25.5%
20% 26.8%
21.1%
0%
2005
Source: Geostat, MOF
32.2%
2006
41.0%
42.4%
31.7%
33.6%
2009
2010
31.2%
23.5%
36.5%
34.9%
34.7%
35.5%
28.8%
27.6%
27.2%
26.8%
2011
2012
2013
2014
16.8%
2007
2008
Source: Geostat, MOF
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LIBERAL TRADE REGIMES
* Very simple and service oriented customs policy and administration – customs clearance in 15 minutes
* ~80% of goods free from import tariffs
* No quantitative restrictions
PREFERENTIAL TRADE REGIMES:
* FTA with Turkey and CIS countries (Russia,
Ukraine, Kazakhstan etc.)
GEORGIA
* DCFTA (Deep and Comprehensive Free
Trade Agreement) with EU was singed on
June 27, 2014
* GSP agreement with USA, Norway,
Switzerland, Canada, Japan
* Member of WTO
Free Trade Agreements with
~ 900 million market
and access without Customs Duty
TAXATION - SIMPLE, LOW, EFFICIENT AND FAIR
Number of Taxes
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No payroll tax or social security tax
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No capital gains tax
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No wealth tax and inheritance tax
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Personal income tax for interest, dividend, royalty – 5%
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Foreign-source income of individuals fully exempted
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Accelerated depreciation on capital assets
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Loss carry forward for corporate profit tax purposes (10 years)
Depends on goods
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No restrictions on currency convertibility or repatriation of
capital & profit
Up to 1%
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Double taxation avoidance treaties with 52 countries
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Corporate Profit Tax
15%
Personal Income Tax
20%
VAT
Customs/Import Tax
Excise Tax
Property Tax
18%
0%, 5% or 12%
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WHY GEORGIA
* Competitive Labor Cost
* Availability of Skilled Workforce and Customized Trainings
* Free Trade Agreement with Turkey and CIS countries
* Deep and Comprehensive Free Trade Agreement (DCFTA) with EU
* Low Production Costs
* Good Transportation Links to CIS Countries, Europe and Asia
* Rich History in the Apparel and Textile Sectors
APPAREL PRODUCTION FACTORIES IN GEORGIA
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SECTOR OVERVIEW
Historical Background
* Georgia has a rich history in the apparel and textile sectors, dating back to Soviet times
* Georgia produced high quality silk and wool blend fabrics
* After the collapse of the Soviet Union, Georgia’s textile and apparel sectors fell on difficult economic times
* The sector emerged in 2004. Turkish investors, interested in the skilled and competitive labor cost, cheap land, low
energy costs, good transportation links, attractive business environment found in Georgia, began investing in
apparel sector
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APPAREL SECTOR OVERVIEW
* Seven large Turkish manufacturers
Industry Size
* Ten large Georgian manufacturers
* More than 200 micro enterprises
Turkey, CIS and the EU
Georgia is currently producing apparel for international
Key Markets
Served
brands including Tommy Hilfiger, Zara, Moncler, Marks &
Spencer, Koton, Puma, Mexx, Next, George, Miss Etam,
Lotto, Per Una, Autograph, Lebek, Hawes & Curtis,
Dainese, Primark etc
Key Processes
Cut, Make, Trim (CMT), made to order, boutique and
high-end fashion
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TRADE AND PRODUCTION OF APPAREL IN GEORGIA
Import of apparel, USD millions
200
180
160
140
120
100
80
60
40
20
0
Export of apparel, USD millions
179.4
158.3 164.8 165.2
133.7
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89.2
76.9
67.1
policy
and
administration
– customs clearance in 15 minutes
77.5
60.2
14.9
19.8
24.0
28.0
42.2
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26.1
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Production of apparel, GEL millions
No quantitative restrictions on import
and export
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
No customs tariff on export and
Production of apparel, USD millions
re-export
100
86.6
80
60
54.4
18.5
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22.6
15.2
23.1
30.5
79.9
90.2
60.6
52.4
38.6
40
20
Very simple and service oriented
customs
120.5
88.5
11.6
145.9
MAIN FEATURES OF TRADE
48.1
2008
2009
No VAT on export
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Preferential trade regimes with major
51.1
35.9
trade partners
0
2007
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2010
2011
2012
2013
2014
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LABOR AVAILABILITY
Higher Education System of Georgia
* Average monthly salary in apparel industry for blue-collar workers - 265 USD/month
* Unemployment rate – 12.4%
* Young labor – 50% of unemployed population are aged between 20-34
* Flexible Labor Code
* According to Heritage Foundation, Georgia ranks 26th on Labor Freedom Index
* All ILO core conventions are ratified by Georgia
* There are five state owned Vocational Education Training Centers around Georgia
(Tbilisi, Kutaisi, Poti, Ozurgeti and Batumi) providing professional courses in cutting,
sewing, constructing cloth, technical fashion design and other practical subjects used
in the apparel/textile Industry. Most of the course’s fees is financed by the
Government of Georgia. In case of investor’s request, customized training is available
for new companies/factories
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UTILITY COSTS
Electricity:
* Government of Georgia has determined maximum rates of electricity in
Georgian Lari (GEL). The rates are different according to regions of Georgia and
voltages
* Factories consuming more than 1 million kwh per year (1 kwh per year from
2017) can be registered as direct consumers. They can purchase electricity
directly from energy producers and negotiate on any price
* Connection fee is abolished, if the company needs 35-110 kv voltage level
Gas:
* Gas rates (for industrial use) are deregulated by Government, which means
private company can choose the supplier of gas (currently there are 37 gas
supplier companies) and negotiate tariffs with them. Approximate average gas
costs are 0.37 – 0.42 USD/m3 (including VAT).
Water:
* Maximum rates of drinkable water and water for sewerage system are also
determined by Government
Upper marginal rates of power
GEL kwh including USD kwh including
VAT (18%)
VAT (18%)
Category
Tbilisi:
220/380 volt (average)
6–10 kv
35 – 110 kv
Kakheti region
220/380 volt (average)
6–10 kv
35 – 110 kv
Other parts of Georgia:
220/380 volt (average)
6–10 kv
35 – 110 kv
0.198
0.153
0.140
0.087
0.067
0.062
0.175
0.165
0.130
0.077
0.073
0.057
0.199
0.142
0.136
0.088
0.063
0.060
Maximum rates of water
Category
Tbilisi:
Drinkable water
Sewerage system water
Other parts of Georgia (there
are few exemptions):
Drinkable water
Sewerage system water
GEL/m3
including VAT
USD/m3
including VAT
4.400
3.555
0.845
1.938
1.566
0.372
4.307
1.897
3.375
0.932
1.487
0.411
Exchange rate in 2015: 1 USD = 2.2702 GEL
LARGE TURKISH INVESTORS IN APPAREL SECTOR OF GEORGIA
BTM Textile
Adjara Textile
* Production range: women's coats, skirts, trousers,
shirts, short coats, knitted shirts and children's
clothes
* Production range: sports & leisure wear,
sweaters, shorts, underwear, t-shirts
* End buyers: Tommy Hilfiger, Marks & Spencer, Zara,
George
* Number of employees: 2000
* Number of employees: 750
* End buyers: Puma, Lotto, Erima, Adidas, Nike
* Parent Company: Milteks Group
* Parent Company: ATK Textile
Batumi Tex
Georgian Textile
* Production range: sweaters , shorts, underwear, tshirts
* Production range: sports & leisure wear
* End buyers: Marks & Spencer, Howes & Curtis
* End buyers: Kik, Libra, Primark
* Number of employees: 700
* Number of employees: 500
* Parent Company: Low Profile & Greenoak Group
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INCENTIVES AND ACCESS TO FINANCE
PRODUCE IN GEORGIA
FREE INDUSTRIAL ZONES
Mission: supporting of manufacture and agriculture industries
Four Free Industrial Zones (FIZs) operate in Poti (sea port), Kutaisi
(second largest city) and Tbilisi (capital city)
Government offers:
– Subsidies for loan interest payment
– Free lands/buildings for factory construction
If a company produces goods for export in FIZ, it is exempted
from all taxes except Personal Income Tax (20%), which is paid
from employees’ salaries
PARTNERSHIP FUND
GEORGIAN CO-INVESTMENT FUND
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100% state owned fund
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USD 6 billion private equity fund
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Operating fields: Energy; Hospitality & Real Estate,
Manufacturing, Agribusiness
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Investment sectors: Energy & Infrastructure, Hospitality &
Real Estate, Manufacturing, Agriculture, Logistics
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Finances up to 49% of equity in new investment projects
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Minimum Project Size: USD 5 M
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GCF equity stake in projects: 25%-75%
Successful Cooperation with International Financial Institutions
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GEORGIAN NATIONAL INVESTMENT AGENCY
01.
STATE AGENCY
Investors
* Promoting Georgia internationally
* Supporting foreign investments and investors
before, during & after investment process
0 2.
Local
Companies
GNIA
“One-stop-shop” for investors
Government
0 3.
Moderator between Investors, Government and Local
Companies
Mission - Attracting Greenfield and M&A Investments
WHAT YOU CAN GET FROM GNIA
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INFORMATION - General data, statistics, sector researches
COMMUNICATION - Access to Government at all levels/Local partners
ORGANIZATION - Organization of site visits & Accompanying investors
AFTTERCARE - Legal advising & Supporting services
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THANK YOU !
www.investingeorgia.org
Giorgi Pertaia, Director
[email protected]
GEORGIAN NATIONAL INVESTMENT AGENCY
7 Bambis Rigi, Business Center Mantashevi, II floor 0105, Tbilisi, Georgia
Tel: (+995 32) 2 473 696
E-mail: [email protected]