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Regional Service Hub

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  • 1. www.investingeorgia.org 1REGIONAL SERVICE HU B HUB (Retail/Healthcare/BPO/Financial Services/Education) Georgian National Investment Agency 2013
  • 2. REGIONAL SERVICES HUB• Georgia’s service sector achieves leading ranks IN among regional economies in terms of value added and trade• Services have 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 IN GEO 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 shoppingwww.investingeorgia.org 2
  • 3. www.investingeorgia.org 3 OVERVIEW OF GEORGIA’S SERVICE SECTOR • Service accounts for 43% of GDP, 14% of exports, 7% of imports and ~ 10 % of employment (plus another ~ 20% in the form of informal V VEST employment) • Georgia’s service sector achieves leading ranks among regional economies in terms of value added and trade Large share of GDP and employment • High fixed asset investment share (26% - USD 466 million in 2010) • Major share of FDI inflow of 45% in 2011 with USD 500 millionORGIA R Leading investment engine • 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 only started to receive FDI in 2010 but 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 Several sub-sectors with high growth • FDI inflows in healthcare/social work have grown at 146% p.a. since investment potentials 2007 • Several medium size projects placed by Middle East investors (Abu Dhabi Group USD 42 million, Grand Cinema USD 30 million) Few projects placed except for real estate
  • 4. OVERALL SECTOR TRANSPARENCY CONTRIBUTION TO THE ECONOMYIn percent USD mn or ‘000 FTE IN100% 43 10 14 7 1 1 2 GDP Employment Exports Imports2 40 166 443 438 IN GEO INVESTMENT % of total Investment in fixed FDI inflow2 assets, USD mn USD mn Top projects Investor Project Volume 466 690 USD mn RAKIA (UAE) Imedi TV 42 299 (90% stake) 393 Abu Dhabi Standard Not Group (UAE) Bank JSC disclosed Grand Entertainment 30.2 Cinema (UAE) 2009 2010 2009 2010 Dentsu Inc Social Thinker Not (Japan) GmbH disclosed 23% 26% 60% 62% 1 2011 data; additional 20% of employment in the form of informal employment 2 2010 datawww.investingeorgia.org 4
  • 5. www.investingeorgia.org 5 SUB-SECTOR TRANSPARENCY SECTOR DETAILS VEST GDP contribution of service sub-sectors 2009-2011 CAGR 2011, percent, USD mn Percent 100% 6,340 Retail trade of motor fuel 2 11 2 3 11 Repair of motor vehicles, -3 9 personal and household goods 6 19 Other construction work 7 9 Financial intermediation 8 11 Post and telecommunicationsORGIA General construction 10 3 Education 11 9 Other service activities Health and social work 14 2 Wholesale, except motor vehicles 17 11 Retail trade, including motor vehicles 19 11 2011
  • 6. GEORGIA HAS A VIBRANT SERVICE SECTOR WHICHCONTRIBUTES SIGNIFICANTLY TO THE ECONOMY REGIONAL BENCHMARK OF SERVICE SECTOR CONTRIBUTION INService value added/GDP2 Trade in services/GDP32011, percent 2011, percentGeorgia 75 Kyrgyz Republic1 c 38Turkey 64 Bahrain 26Ukraine 60 Georgia 23Tajikistan 60Kyrgyz Republic 51 Ukraine 21Kazakhstan 50 Armenia 19 IN GEOSyria1 46 Syria1 18Iran1 45 Saudi Arabia 16Uzbekistan 45 Azerbaijan 13UAE1 44Armenia 42 Oman 13Saudi Arabia 38 Tajikistan1 11Turkmenistan 34 Kazakhstan 8Azerbaijan 27 Turkey 81 Estimate based on 2010 data2 Include ISIC item 50-99. Value added is the net output of a sector after adding up all outputs and subtracting intermediate inputs. It is calculated without making deductions for depreciation of fabricated assets or depletion and degradation of natural resources.3 Include ISIC item 50-99. Trade in services is the sum of service exports and imports divided by the value of GDP, all in current U.S. dollars.www.investingeorgia.org 6
  • 7. www.investingeorgia.org 7 GEORGIA HAS HIGH AVAILABILITY OF PHYSICIANS YET NEEDS IMPROVEMENTS IN HEALTHCARE INFRASTRUCTURE REGIONAL BENCHMARK OF HEALTHCARE ECOSYSTEM VEST ST Number of physicians Number of hospital beds per 1000 population, 2011 per 1000 population, 2011 Georgia 4,2 Ukraine Belarus Kazakhstan 3,8 Bulgaria Kazakhstan 3,8 Tajikistan Bulgaria 3,7 Azerbaijan Ukraine 3,5 Uzbekistan Azerbaijan 3,4 Turkmenistan Armenia 2,8 ArmeniaORGIA GIA Uzbekistan 2,6 Georgia 2,91 Turkmenistan 2,3 Albania Romania 2,4 Turkey Tajikistan 1,9 Saudi Arabia United Arab Emirates 1,9 Kuwait Turkey 1,7 United Arab Emirates Bahrain Syria 1,5 Oman Saudi Arabia 1,5 Iran Albania 1,1 Syrian Arab Republic Iran 1,1 Iraq Pakistan 0,8 Qatar Iraq 0,7 Pakistan 1 Despite number of hospital increased from 229 to 241 from 2000-2009, number of beds declined sharply from 21,200 to 13,600; Bed utilization rate was low at 30% due to outdated facilities; By 2013-end, 8,000 beds will be privatized to improve facilities and use efficiency
  • 8. GEORGIA HAS STRONG FOUNDATION TO DEVELOPA REGIONAL FINANCIAL CENTER REGIONAL BENCHMARK OF HEALTHCARE ECOSYSTEM IN Strength of legal rights in financial Credit depth of information2 sector1, 2011, 0= lowest; 10=highest 2011, 0= lowest; 6=highest Ukraine 9 Georgia 6 Georgia 8 Armenia 6 Armenia 6 Saudi Arabia 6 Azerbaijan 6 Azerbaijan 5 Saudi Arabia 5 Kazakhstan 5 Bahrain 4 Turkey 5 IN GEO EO Iran 4 United Arab Emirates 5 Kazakhstan 4 Iran 4 Oman 4 Kyrgyz Republic 4 4 Oman 4 Qatar Qatar 4 Turkey 4 Ukraine 4 United Arab Emirates 4 Bahrain 3 Tajikistan 2 Uzbekistan 3 Uzbekistan 2 Syria 2 Syria 1 Tajikistan 01 Strength of legal rights index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending; 2 Credit depth of information index measures rules affecting the scope, accessibility, and quality of credit information available through public or private credit registrieswww.investingeorgia.org 8
  • 9. www.investingeorgia.org 9 GEORGIA’S POTENTIAL REGIONAL SERVICE HUB CAN BE BASED ON THREE COMPLEMENTARY COMPONENTS VEST A regional lifestyle and service hub Connectivity and Regional head- Regional traffic hub quarters and service platform expatriate hubORGIA Financial Airline + Airport Regional Headquarters Retail services • Financial • Non financial Tourism Health-care Education Hospitality Expatriates hub BPO Entertainment Key assets Attractiveness Connectivity Fiscal policies
  • 10. OPPORTUNITY TO POSITION TBILISI AS A FINANCIAL CENTER FORCAUCASUS, WEST ASIA AND EASTERN EUROPE AROUND 4 SERVICE PILLARS GEOGRAPHIC DEPTH: CAUCASUS, HUBBING AROUND KEY FINANCIAL EASTERN EUROPE AND WEST ASIA AND PROFESSIONAL SERVICES IN Regional HQ’s (MNC’s, Banks) IN GEO Wholesale Tbilisi Multiservice hub Banking Financial City Capital markets Caucasus West Asia Eastern Europe+www.investingeorgia.org 10
  • 11. www.investingeorgia.org 11 OPPORTUNITY TO POSITION GEORGIA AS A REGIONAL RETAIL DESTINATION VISION IS TO DEVELOP MEGA MALLS IN KEY LOCATIONS TO TRANSFORM GEORGIA INTO THE REGIONAL VEST RETAIL HUB LEVERAGING HIGH TRAFFIC OF FOREIGN TOURISTS AND STRATEGIC GEOGRAPHYORGIA RGIA BATUMI TBILISI Benefits of destination mega mall development Tbilisi and Batumi as most potential locations • Complement overall tourism strategy with solid retail • Established tourist destinations with 80% of foreign value proposition tourist traffic in Georgia • Retail magnet for foreign tourists and affluent local with • Accessible with existing international airports and longer duration of visit (1/2 to 1 day), higher share of major transnational highway/ railway wallet, and repeated visits • Solid retail, hospitality and other supporting services • Presence of flagship brands will drive retail brand infrastructure cluster growth • Integration with other tourism offerings e.g. sun & beach, casino • Easier to drive investments
  • 12. GEORGIA NEEDS TO DEVELOP DESTINATION MALLS WITHCLEAR OVERARCHING CONCEPTS AROUND 4 PILLARS OVERARCHING CONCEPT INClear positioning (target segment, value proposition) reflected in all activities through the overallatmosphere, architecture, music, décor, and materials, and offering a unique experience Leisure Retail • Attractions and • Souvenir stores activities • Concept stores • Shows and • Everyday stores IN GEO entertainment • Services • Themed setting and atmosphere • Culture Food and Beverages Services and transport • Themed restaurants, • Transport systems bars, clubs • Roads • Dinner shows • Connectivitywww.investingeorgia.org 12
  • 13. www.investingeorgia.org 13 OPPORTUNITIES TO TRANSFORM GEORGIA INTO A REGIONAL HEALTHCARE HUB KEY PILLARS OF HEALTHCARE STRATEGY DEVELOPMENT VEST 3 Urban plan How to integrate healthcare city into the city? Operating model 2 How does Developer position itself to maximize value from Sector (e.g., engaging 3rd party operator?) Vision is to develop Healthcare city toORGIA transform Georgia 2A 2B 2C into the regional healthcare hub Tenant strategy Real estate strategy Financial and leveraging high traffic of foreign Which anchor How to create investment strategy tourists, existing tenants to attract maximum value from How to invest to qualified low-cost and how? the land? maximize returns? physicians Healthcare sector strategy and industry value proposition definition 1 • What is the aspiration and optimisation function for the developer/creator of City? • What are key supply/demand gaps within healthcare sector that City should target? • What are the key elements of a value proposition for each targeted industry?
  • 14. O&O ENCOMPASSES USD 1.6 TRILLION ADDRESSABLE MARKET BY 2020; NEWUNTAPPED SEGMENTS WILL DRIVE 75% OF FUTURE INCREMENTAL GROWTHTOTAL ADDRESSABLE MARKET FOR GLOBAL SOURCING INAND DOMESTIC OUTSOURCING, 2020, USD BILLIONS 380-420 1,500-1,640 200-220 ESO/ R&DO 230-250 405-440 ITO 190-220 200-250 IN GEO 500 895 BPO 150 130 220 Core Growth New verti- New Domestic Total ad- markets in core cals in customer outsourcing dressable 2008 markets developed segments mkt. in new market in countries geographies 2020 • BFSI, telecom, • Public retail, pharma, • Brazil sector manufacturing, • EE • Health SMBs travel • India • Media • NA, WE, Japan • China • Utilities • Large enterpriseswww.investingeorgia.org 14
  • 15. www.investingeorgia.org 15 OPPORTUNITIES TO TRANSFORM GEORGIA INTO A REGIONAL BPO HUB SERVING EU MARKETS +5 years 0-5 years VE VEST Advanced transactional services/ Basic transactional services basic knowledge services Positioning Transaction center primarily for EU/global center for core Western European markets competencies • Deep talent pool • Low-cost labor • Engaged workforce Drivers • Building career modelsORGIA RG • Finance & accounting BPO • Employee services & payroll • Business analytics • Selected vertical processes in • Mathematical modeling banking, financial services and • Business research Potential plays insurance (e.g. CRM, mortgage, • Market research for Georgia investment) and logistics • Data management services management “Dedicated BPO center” • Advanced CAD/CAM ITO/ESO • Basic CAD/CAM services programming Destination of choice for (e.g., reformatting) companies operating in • IT infrastructure services the field of BPO/ITO for EU markets Non-voice back-office services model
  • 16. INVESTIN GEORGIA A GEORGIAN NATIONAL INVESTMENT AGENCY www.investingeorgia.org E-mail: enquiry@investingeorgia.org Portfolio Manager: Mamuka Chikhladze E-mail: mchikhladze@investingeorgia.org

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