Bsef2012 session1  investment_climate_pertaia
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GIORGI PERTAIA, First Deputy Director of the Georgian National Investment Agency - Georgian National Investment Agency

GIORGI PERTAIA, First Deputy Director of the Georgian National Investment Agency - Georgian National Investment Agency

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  • 1. Georgian National Investment Agency (GNIA) 2012
  • 2. Content• GNIA - Who we are• Why to invest in Georgia• Investment opportunities in Georgia• What you can get from GNIA www.investingeorgia.org 2
  • 3. GNIA – Who we are• “One-stop-shop” for investors• Moderator between Investors Investors, Government and Local Companies Local GNIA Companies Government• State agency – Promoting Georgia internationally – Supporting foreign investments and investors Mission - Attracting Greenfield and before, during & after investment process M&A Investments www.investingeorgia.org 3
  • 4. 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 legislationReal Political Will - It took us 8 years – 2004-2011 to tick all boxes on the checklist. Reforms havebeen implemented and institutionalized to preclude policy drifts and to anchor Georgia’s liberaleconomic 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
  • 5. Georgia - Sovereign Credit Ratings BB- Stable BB- Stable Ba3 Stable (Upgraded from B+ (Upgraded from B+ (Affirmed in August Positive in November Positive in December 2012) 2011) 2011) www.investingeorgia.org 5
  • 6. Doing Business in GeorgiaCountrys impressive progress in improving business climate has been welldocumented in a number of international indices.Ease of Doing Business Index Of Economic Freedom Singapore 1 Hong Kong 1 4 9 United… 7 Up from 112 in 2005 United Kingdom 16 Up from 99 in 2005 16 20 Germany 19 Germany 23 24 29 France 29 Armenia 36 47 33 France 64 Armenia 55 67 66 Azerbaijan 92 Turkey 71 124 91 China 135 Russia 120 143 Source: World Bank, 2012 (Rank out of 183 countries) Source: The Heritage Foundation, 2011(Rank out of 183 countries) www.investingeorgia.org 6
  • 7. Corruption Free Country Global Corruption Barometer Georgia Western Balkans+Turkey EU Denmark 0% 1% % of survyed who UK 1% 77% Percentage of users payingassess their current 2% governments 35% Netherlands 2% a bribe to receive attention action as effective 2% from in the past 12 months 26% in the fight… Germany 2% 3% % of survyed who United States 5%claim that the level 78% 7% of corruption has Austria 9% 16% 9% decreased in the 3% Armenia 22% past three years 26% Source: Transparency International, 2011 (Rank out of 183 countries)Georgia today is essentially a corruption-free investment destination where rule of law have been given the right way www.investingeorgia.org 7
  • 8. Economic Structure and TrendsGDP: strong rebound in 2010 after a relatively small contraction in 2009, robust growth potential Rapidly growing GDP per capita – PPP and Nominal Nominal GDP (US$bln) Real GDP growth, y-o-y (%) GDP per capita (PPP) Nominal GDP per capita (US$)18 12.3% 15% 7,000 6,38816 11.1% 5,929 9.6% 17.9 12% 6,000 5,49114 4,677 4,906 4,767 5,06412 9.4% 11.6 14.4 15.9 9% 5,000 4,04010 12.8 6.5% 6% 3,644 8 5.9% 10.8 6.3% 7.0% 6.0% 4,000 2,966 3,242 US$ 10.2 3% 6 7.8 0% 3,000 4,007 4 6.4 2.3% -3.8% -3% 2,000 2,921 3,215 3,549 2 4.0 5.1 2,455 2,623 0 -6% 1,000 2,315 1,484 1,764 2003 2004 2005 2006 2007 2008 2009 2010 2011P 2012F 2013F 0 919 1,188 2003 2004 2005 2006 2007 2008 2009 2010 2011P 2012F 2013F Source: Geostat, MOF Source: Geostat, MOF, IMF Broad-based and diversified nominal GDP structure 2011 Steeper Than Expected Growth Trajectory Initially planned at 5.5%, Georgia’s real GDP growth for 2011 was Other sectors Manufacturing 16.9% 17.3% 7%, driven by strong real and financial sector activity, robust tax Education 4.5% Construction intake, and reassuring proxy indicators to economic activity 6.2% Trade 17.3% Healthcare & 2011 outcomes: Social  Tax collection increased 26% y-o-y Assistance 6.1% Transport & Public Agriculture 9.3% Communication Administration  VAT turnover increased 26% y-o-y s 10.6% 11.7%  Commercial bank lending to the real sector increased 24% y-o-y Source: Geostat  Trade turnover increased 36% y-o-y www.investingeorgia.org 8
  • 9. Trade: liberal regimes & diversified structure• Highly diversified trade structure• Preferential Trade Regimes:  FTA with CIS countries: Ukraine, Belarus, Azerbaijan, Armenia, Russia, Moldova, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbe kistan, Turkmenistan  FTA with Turkey  DCFTA with EU will be signed next year  Negotiation on FTA with USA is in progress  GSP+ with EU - 7200 products to the EU market duty free  GSP 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 www.investingeorgia.org 9
  • 10. Market AccessTotal ~ 0.9 billionDCFTA + 0,5billionExisting FTA +350 millionPopulation - Georgia 4,5 million www.investingeorgia.org 10
  • 11. Taxation is simple, low, efficient and fair ‘04 ‘05 ‘06 ‘07 ’08 ‘09 ’10 ‘11 ‘12Number of Taxes 21 7 7 7 6 6 6 6 6VAT 20% 20% 18% 18% 18% 18% 18% 18% 18% Social Tax + Income Social Tax + IncomeIncome Tax 12-20% 12% flat 12% flat 12% flat Tax Tax 20% 20% 20% 32% 25% 20%Social Tax 33% 20% 20% 20% - - - - -Corporate Income Tax 20% 20% 20% 20% 15% 15% 15% 15% 15%Dividend & Interest 10% 10% 10% 10% 10% 5% 5% 5% 5%Income TaxNo payroll tax or social insurance taxNo capital gains taxNo wealth tax, inheritance tax or stamp dutyForeign-source income of individuals fully exemptedTax rates reduction timetable was further accelerated in 2008Very strong political commitment to low and simple taxation and improvement of servicesDouble taxation avoidance treaties with 40 countries www.investingeorgia.org 11
  • 12. Forbes Tax Misery & Reform IndexAccording to 2009 Tax Misery & Reform Index, released by Forbes Business & Financial News, Georgia is thefourth least tax burden country after Qatar, UAE and Hong Kong Since 1 January 2009, income tax declined to 20% from 25% www.investingeorgia.org 12
  • 13. Worlds leader in labor freedom • No minimum wage regulations • Young labor – 50% of unemployed population are aged between 20-34 • Average monthly salary – 410 USD Georgia - one of the most liberal labor environments (3rd best globally), according to the Heritage Foundation, 2012 110.0 100.0 Greater Labor Freedom Georgia 90.0 80.0 Frontier Markets avg 70.0 60.0 2005 2006 2007 2008 2009 2010 2011 2012 Source: MOF and Heritage Foundation, 2012 www.investingeorgia.org 13
  • 14. 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) FDI Breakdown by sectors 2011 FDI/GDP ratio compares favorably with peers 2500 25.0% Construction FDI FDI as % of Nominal GDP Mining, 4% 19.8% , 4% Energy, 18% Real 2000 20.0% Estate, 8% 15.3% 12.2% Transport 1500 15.0% and 7.8% Communicati 9.7% 1000 8.5% 2015 10.0% on, 11% 7.0% 7.0% Other 1564 6.1% sectors, 17% 500 1190 1117 5.0% Manufacturi 814 ng, 11% 499 658 340 450 0 0.0% Consultancy, Financial 12% sector, 15% 2003 2004 2005 2006 2007 2008 2009 2010 2011 www.investingeorgia.org 14
  • 15. Investment Opportunities in Georgia Hydro Power Hub Tourism Industries Regional Logistics Corridor Agriculture and Agribusiness Regional Services Hub www.investingeorgia.org 15
  • 16. 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 TaxOpportunities: 2 Free Industrial Zones (FIZ)• Food processing Russia• Construction materials Mestia• Wood and Furniture Kulevi FIZ FIZ• Household goods Black Sea Poti Kutaisi• Etc. Batumi TbilisiSuccess stories: Knauf MRN Turkey Railway , Embawood, Fresh, Caparo Armenia Azerbaijan l, Effes, Heidelbercement, e tc. www.investingeorgia.org 16
  • 17. TourismNumber of visitors are increasing rapidly and it will reach 3.6 mln in 2012 5000 4,500 4500 4000 3,600 3500 2,822 25% 3000 2500 2,033 28% 2000 1,500 39% 1500 1,290 983 1,051 1000 36% 560 500 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 www.investingeorgia.org 17
  • 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 roomsPotential▪ 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 18
  • 19. Regional Logistics CorridorTrans-Caucasian route• Latent gateway between Europe and Central Asia• Around 80% of port cargo and 60% of freight rail are transitsTransport 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 infrastructureOpportunities• Deep-sea port of Lazika with PanaMax vessel• Baku-Tbilisi-Kars railway – direct connection between EU and Central Asia• Logistical centers www.investingeorgia.org 19
  • 20. Hydro Power HubSignificant 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 TurkeyExport 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 2013Opportunities• ~ 70 small/medium projects (< 100 MW)• large scale projects (> 200 MW) - Oni cascade, Khaishi HPP, Nenskra HPP, Namakhvani HPP, Khudoni HPP www.investingeorgia.org 20
  • 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 exportsOpportunity:• 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 206Success stories: Ferrero, WimmBill Dann, HIPP, SchuchmannWines, Chateau Mukhrani, GWS www.investingeorgia.org 21
  • 22. 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 www.investingeorgia.org 22
  • 23. No Policy DriftThe 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 23
  • 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 www.investingeorgia.org 24
  • 25. Giorgi Pertaia www.investingeorgia.org GEORGIAN NATIONAL INVESTMENT AGENCY 8, Rustaveli avenue, 0118 Tbilisi, Georgia Tel/Fax: (+995 32) 2 433 433 E-mail: enquiry@investingeorgia.org25