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Manufacturing

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  • 1. MANUFACTURINGM A NUFACTU RINGGeorgian National Investment Agency 2013
  • 2. MANUFACTURING SECTOROVERVIEW: OPPORTUNITIES: IN• Manufacturing and industries account for around 14% • Large import overhang in goods that are usually of GDP and ~ 5% of employment not traded extensively provides regional import• Largest industries are food and beverages (3% of total substitution potential in food processing, construction GDP) and metal products (2.5%) materials, household gods etc• Advantage to process goods - competitive cost of • Georgia’s current advantages in terms of handling power, labor and strategic location large transshipment flows, business stability, low• 2 Free Industrial Zones - In FIZ, businesses are cost of power generation and existing raw materials/ exempted from all tax charges except Personal intermediate products provide opportunities for Income Tax large industrial bets, like production of iron and steel products, aluminum etc IN GEO Russia Mestia Kulevi FIZ FIZ Black Sea Poti Kutaisi Tbilisi Batumi Turkey MRN Azerbaijan Railway Armenia www.investingeorgia.org 1
  • 3. www.investingeorgia.org 2 MANUFACTURING SECTOR USD milions, 2011 Value add Production value VEST INDUSTRY PRODUCTION VALUE TOP 3 PRODUCTS TOP 3 TOP 3 AND VALUE ADD (VALUE ADD) EXPORTS COMPANIES ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  297 ▪ ORGIA RGIA ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  260 ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  90 ▪  ▪  ▪  ▪  ▪  ▪  47 ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  170 ▪  ▪  ▪  ▪  ▪  ▪  47 ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  ▪  43 ▪  ▪  ▪  ▪  ▪  ▪ 
  • 4. MANUFACTURING SECTORGROWTH OF SECTOR VALUE ADD CURRENT INDUSTRIAL BASECAGR,2006 - 10 Textile & Leather IN N Transport equipment Paper & pulp Metals Food & IN G N GEO Wood Machinery & beverages products equipment Plastics Chemicals Mineral products 10 100 1,000 SIZE OF SECTOR VALUE ADD USD mn Food and metals industry provide the largest industrial base for Georgia, while textile industry, transport equipment and metals growing strongestwww.investingeorgia.org 3
  • 5. www.investingeorgia.org 4 TRADE BALANCE IN GEORGIA AND IN THE REGION IMPORT OVERHANG, USD mln, 2011 mln, TRANSPORTATION VEST COSTORGIA RGIA
  • 6. SEVERAL HIGHLY ATTRACTIVE IMPORTSUBSTITUTION OPPORTUNITIESSECTOR PRODUCT GROUP PRODUCTS IN • Articles of cement and steel • PrefabsConstruction • Ready-mix concrete- Building • Bricksmaterials • Finished articles of steel • Articles of wood • Plywood and laminated wood • Tiles • Sanitary wareConstruction • Ceramic products • Windows IN GEO- Finishingelements • Glass & glassware • Glassware • Doors • Furniture • Living furniture • BottlingFood • Beverages and spiritsprocessing • Fruit juices • Preparations of fruits and vegetables • Jams • Vegetable oils • Dairy and eggs • Milk • Cheese • Butter • Meat • Yogurt • Poultry/Beef/Pork/Lamb • Plastic packagingPackaging • Paper packagingwww.investingeorgia.org 5
  • 7. www.investingeorgia.org 6 SEVERAL OPPORTUNITIES ARISING FROM GEORGIA’S TRANS-SHIPMENT FLOWS AND RESOURCES OPPORTUNITY CURRENT ADVANTAGES TO BE LEVERAGED POTENTIAL FOR GEORGIA VEST ALUMINIUM INDUSTRY • Large transshipment flows of raw • Value chain integration materials/input (Bauxite) and aluminium - Production of aluminium cross Georgia to/from Tajikistan (largest - Production of aluminium aluminium plant in Central Asia) products (fabricated or end • A lot of water recourses and large products) hydropower plants in the pipeline IRON AND STEEL • Vertical integration of value chain • Georgia mines Manganese ore PRODUCTION by adding production of iron and • Georgia produces ferro alloys, largely for export (USD ~250 mn) steel and related end productsORGIA • Large imports of iron and steel products to • Regional import substitution Georgia (USD ~300 mn) and neighboring countries COPPER • Georgia and Armenia export copper ores, • Production of copper alloys copper waste and scrap and end products (regional import • Import overhang of copper products substitution) (alloys and final products e.g. wire, tubes, pipes) amounts to USD ~200 mn in the region POLYMERS & • Import overhang of plastic products • Plastics and petrochemicals OTHER PLASTICS amounts to 230 mn in Georgia and 8 bln in production (regional import the region substitution for plastics/rubber) • Georgia transships large flows of petroleum products
  • 8. OPPORTUNITIES ARISING FROM GEORGIA’S TRANS-SHIPMENTFLOWS AND RESOURCES - ALUMINUM EXAMPLELEVERAGING TRANSSHIPMENT FLOWS, GEORGIA CAN INTEGRATE INTO A INGLOBAL VALUE CHAIN OF ALUMINUM PRODUCTION.Current value chains in aluminium productionuse Georgia as transit country … … offering opportunity for integration upstream IN GEO +use/create complementarities … or downstream with transport &• Tajikistan Aluminium Company (TALCO) is l power sectors argest aluminium manufacturer in Central Asia- Total production 300-400 k tons, ~1% of global production- Using ~40% of Tajikistan’s power generation (largely hydropower)• No domestic bauxite/alumina, all imported (mostly from Ukraine, Azerbaijan, Kazakhstan)• Export of raw aluminium to Europe, Turkey, CIS, China, accounting for ~40% of all exports of Tajikistan www.investingeorgia.org 7
  • 9. www.investingeorgia.org 8 OPPORTUNITIES ARISING FROM GEORGIA’S TRANS-SHIPMENT FLOWS AND RESOURCES - ALUMINUM EXAMPLE VEST OPPORTUNITY EVALUATION AND SIZING Upstream integration (aluminium production) • Production capacity: ~300 k tons aluminium • Investment size: USD 250-500 million • Power consumption: 4-5 TWh (~15,000 kWh/t), current generation in Georgia ~11 TWh • Market assessment - Globally growing demand mainly from emerging economiesORGIA - Current surplus capacity utilized by 2016 - Target market with cost advantage: Europe/Turkey Downstream integration (production of aluminium products) • Production of - Foundred and fabricated aluminium - End-user products for import substitution (e.g. construction material, packaging) - End-user products with complementarities to other sectors (e.g. containers for transportation) • Production capacity and investment size depending on selected products
  • 10. SEVERAL OPPORTUNITIES ARISING FROM GEORGIA’S TRANS-SHIPMENTFLOWS AND RESOURCES – EXAMPLE OF IRON AND STEEL PRODUCTIONDespite hosting some of the crucial resources, Existing production offers INGeorgia currently only integrates the first step of opportunity for further valuethe iron & steel value chain … chain integration Ferro alloy Iron and Iron and steel Iron and Iron and steelMining steel Mining Ferro alloy production end product steel end product production production production production productionCurrent value chain 1 2 IN GEO Chiatura Manganese ore mines • Mining 1.18 mn tons of manganese ore • Extracting 400 k tons of concentrate Zestafoni Ferroalloy plant • Producing ~180 k tons of Ferrosilicomanganese (FeSiMn) and Ferromanganese (MC FeMn) • Own power supply from Vartzikha HPP (55 MW) Vertical integration of value chain 3 4a Production of iron and steel and related end products Internal consumption/ regional import substitution 3 Export of ferro alloys, amounting to USD ~250 mn 4b Export of iron & steel products Imports of iron and steel products to Georgia, amounting to 4 USD ~300 mn, but also to neighboring countries www.investingeorgia.org 9
  • 11. INVEST ININ GEORGIA IN GEO GEORGIAN NATIONAL INVESTMENT AGENCY www.investingeorgia.org E-mail: enquiry@investingeorgia.org Portfolio Manager: Kristine Meparishvili E-mail: kristinem@investingeorgia.org

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