2020 - bags manufacturing sector

GEORGIA - A PLEASURE DOING BUSINESSAPPAREL, FOOTWEAR AND BAGS MANUFACTURING SECTOR

WHY GEORGIA

Strategically located linking Europe with Asia, apparel, footwear and bags manufacturing companies in Georgia find that the combination of tariff-free access to the major markets with low overheads enhance cost efficiencies, while skilled and inexpensive labor pool and exceptional business environment sustains competitiveness

Proximity to strategic markets andopportunity to reduce lead time

Contract manufacturing is well developed in Georgia

7th Easiest Country to do Business(World Bank’s Ease of Doing Business Report 2020)

3rd Least Tax Burden Country, with 9.9% Total Tax Rate(World Bank Group)

Experienced, productive andcompetitively priced labor force

Free Trade Agreements with 2.3 Billion Market (Including EU, EFTA, CIS and China)

GEORGIA - A PLEASURE DOING BUSINESS APPAREL, FOOTWEAR AND BAGS MANUFACTURING SECTOR2

GEORGIA

THE COUNTRY AT A GLANCE

Region: EuropePopulation: 3.7 MillionCapital: Tbilisi Government type: Parliamentary systemGDP Per Capita (2019): USD 4763.5Inflation (2019): 4.9% Currency: Georgian Lari

GEORGIA - A PLEASURE DOING BUSINESSAPPAREL, FOOTWEAR AND BAGS MANUFACTURING SECTOR 3

Poti

Batumi

Armenia Azerbaijan

Russian Federation

Turkey

Upcoming Anaklia port

1 FIZ

2 FIZ1 FIZ

Kutaisi

Tbilisi

The Black Sea

Share of Reinvestments (2015-2019 average)

28.5%

FDI to GDP Ratio(2015-2019 average)

9.78%17.7 bln USD

GDP in 2019 Real GDP Growth Rate (2015-2019 average)

4.1 %FDI Over Last 5 Years

(2015-2019)

7.9 bln USD

Source: Geostat

Free Industrial Zones

International Airports

Main RoadsRailway

FIZ

Ports

GEORGIASTANDING OUT

OECD FDI Regulatory Restrictiveness Index 2019

Georgia Ranks 4th in the Eastern Europe and Central Asia Region

8th

TRACE Matrix 2019Interaction: Contact with

government

Georgia Ranks 27th in overall standings out of 200 countries

1st

Safety Index 2020

Georgia Ranks 1st in Europe in Safety index

4th

Georgia has the Association Agreement, DCFTA and

Visa-free regime with European Union

“Deep reforms in economic management and governance have earned Georgia a reputation as star reformer” - World Bank Group Georgia


Index of Economic Freedom 2020

Georgia Ranks 7th and 11th in Trade Freedom and Business Freedom

Respectively

12th

WJP Rule of Law Index 2020

Eastern Europe & Central Asia Region

Georgia Ranks 7th in the group of Upper Middle Income counties and

42nd in overall ranking

1st

SECTOROVERVIEW

Contract manufacturing of apparel is well developed in Georgia. Footwear and bags manufacturing sector has emerged recently as local manufacturers started to export their products to different international markets

Most of the companies are located in western Georgia, another cluster being in Tbilisi

Leather production is also developing in Georgia and currently Georgian leather is exported to Italy and Turkey

10 large foreign investors and 13 Georgian companies

Key processes: Cut, Make, Trim (CMT), made to order, boutique and high-end fashion

R U SSI A Existing clusters

B L AC KS E A

Anaklia Poti

Batumi

Zugdidi

Samtredia

Kutaisi

Mestia

Ozurgeti

Fast Growing cluster locations

Main Roads

TU R K E Y

AZ ERBAIJANARMMENIA

TBILISI


INTERNATIONAL BRANDS PRODUCED IN GEORGIAExisting factories produce apparel for famous international brands, such as Moncler, Nike, Adidas, Mexx, Zara, Puma, Autograph, Lebek, Hawes & Curtis, M&S, H&M, etc along with production for local market of work and specialized garments

‘Georgia is the best place in terms of reliable tax policy. Georgia also offers suitable labor costs, low energy costs

and preferential access to the EU market, all of which create a fertile environment for production’

Source: Ajara Textile


EXPORT ANDPRODUCTION

89 86 80 86 82 107

56 57 56 68 80

-

50

100

150

2014 2015 2016 2017 2018 2019

Apparel, mln USD

Export Production

4.0

2.1 2.1 1.4

2.2

4.63.2 2.9 2.7 2.8 2.5

-

2.0

4.0

6.0

2014 2015 2016 2017 2018 2019

Footwear, mln USD

Export Production

1.7 1.3 0.6 0.8 0.6 0.8

7 7 4.8

3.3 2.4

-

5.0

10.0

2014 2015 2016 2017 2018 2019

Bags and accessories, mln USD

Export Production


YOUNG, SKILLED AND INEXPENSIVE LABOR POOLAverage Monthly Salary in Manufacturing(including social security)

EGY UKR GEO MAR SRB TUR ROU HUN

208$ 221$ 227$ 397$ 400$ 449$ 572$ 635$

YOUNG LABOR FORCE

Unemployment rate is 12.3% and half of the unemployed population is in the 20-45 age group

LABOR PRODUCTIVITYProductivity is forecasted to

grow at 4.7% annually (ILOSTAT)

FLEXIBLE REGULATIONSThe country doesn’t have minimum wage

regulations and compensation depends on the agreement between employee and employer

Source: fDi Benchmark from the Financial Times Ltd 2020

FAVORABLE LABOR CODEAccording to Heritage Foundation,

Georgia ranks 22nd globally on Labor Freedom Index


ACCESS TO FRESH TALENT POOLVET Schools

BREAKDOWN OF VET GRADUATES BY FACULTIES, 2019

12 State-owned Vocational Educational Institutions providing professional courses in cutting, sewing, shoemaking and other practical subjects used in the industry

Most of the fees for courses are financed by the Government, and in case of investor’s request, customized training is available for new factories

Agricultural Sciences15.60%

Business Administration

16.50%

Engineering28.60%

Interdisciplinary Programs

10.30%

Art7.80%

Healthcare

Source: Geostat, 2020

15.70%

Other5.50%

Literacy Rate99.4 %

Population with Secondary Education

92 %

64 HEIs and 66 VETs


YOUR NEARSHORINGDESTINATION

Well Connected Location at the Heart Of Eurasia

Simple and service-oriented customs policy and administration

80% of goods free from import tariff

Member of Middle Corridor and TRACECA

Connected to the EU’s Trans-European Transport Networks

EU - DCFTA

EFTA - FTA

CIS - FTA

Turkey - FTA

Ukraine – FTA

China (incl. Hong Kong) -FTA


FREE TRADE AGREEMENTS WITH 2.3 BLN MARKET

Spain

Russia

Kazakhstan

Iran

Turkey China3 Days by Train 5 Days 8 Days

6 Days 4 Days 2 Days by Truck3 Days 2 Days 1 Day by Plane

France

German

y

LARGE INVESTORS IN GEORGIA

Ajara TextileProduction range: sports & leisure wear, shorts, t-shirts

End buyers: Puma, Adidas, Nike

Number of employees: 3500

Parent Company: Milteks Group

Fast Track TextileProduction range: Sports & leisure wear

End buyers: VF Corporation


Parent Company: Imteks

Georgian Textile Production range: Sports & leisure wear

End buyers: Mavi, Colin's, Primark



LARGEGEORGIAN FACTORIES

ELSELEMAProduction range: uniforms/work wear, water proof clothing (Gore-Tex), caps, cloaks, winter clothes and knitwear for men, women and childrenEnd buyers: Moncler, Damat TweenNumber of employees: 100

MOVIProduction range: jackets and trousers for women, men and children End buyers: Equiline, Dainese, Silusi, Iceberg, IL Gufo, Designer ArtworksNumber of employees: 300

MPT GeorgiaProduction range: dresses, t-shirts, pants, skirts, blouses, jumpsuits, etc. End buyers : B.young, ICHI, Cream, Saint Tropez, In Wear, Fransa, Kaffe, Bon A parte Number of employees: 100Certificates: BSCI, Level A

ImeriProduction range: coats, skirts, blazers, shirts, short coats, trousersEnd buyers: Lebek, MonclerNumber of employees: 400WRAP-gold certificate of compliance


COMPETITIVEUTILITY COSTS

Electricity (per kWh)

EGYGEO MARTUR HUN

6.4¢ 6.6¢ 9.2¢ 9.7¢ 10.7¢ 12.4¢8.9¢ 18¢

UKR ROU SRB

Industrial Gas (per c/m)

EGY GEO MARTUR HUN

32.9¢23¢ 32.8¢18¢ 39.9¢37.3¢23.9¢ 37.8¢

UKRROU SRB

EGYGEO MARTUR HUN

57.9¢8.5¢ 104¢9.9¢ 59.2¢ 66.1¢63.7¢ 94¢

UKR ROUSRB

Water (per c/m)

*all utility costs are given in USD Cents Source: fDi Benchmark from the Financial Times Ltd 2020


INDUSTRIALAND WAREHOUSE SPACE

The total volume of industrial and logistics space in Georgia amounts to approximately 2.5 million sq. m., most of the properties located in Tbilisi, Kutaisi, Rustavi, Batumi and Poti

The weighted average rent for dry storages varies between USD 2-3 per sq. m.

Four Free Industrial Zones operate in three Georgian cities: the Tbilisi Free Industrial Zone, the Kutaisi Free Industrial Zone, the Hualing Free Industrial Zone (in Kutaisi), and the Poti Free Industrial Zone

Free Industrial Zones provide land plots and/or industrial properties that can be leased for up to 50 years

Construction cost per sq. m. of White Frame

Sandwich - Panel Construction USD 263 net of VAT

Reinforced Concrete Construction USD 143 net of VAT

Metal Construction USD 68 net of VAT

Source: Colliers International Georgia


BENEFIT FROM THE MOST ATTRACTIVE TAX SYSTEM

0% Tax on Retained Profit

Pension contribution* – 2% paid by Employer, 2% paid by Employee

Personal Income taxes for interest, dividends and royalties are just 5%

Double Taxation avoidance Treaties with 56 countries

*up to 2% paid by Government until savings reach 60,000 GEL

0% or 15 %Corporate Profit Tax

20 %Personal Income Tax

18 %Value Added Tax

Select ItemsExcise Tax

0%, 5%, or 12%Import Tax (depending ongoods imported)

<1%Property Tax

4Free Industrial ZonesAll located in strategic locations

3rd Least Tax Burden Country in the World by Total Tax Rate (% of profit)

Taxation System


SPEND LESS TIME ON PAPERWORKGeorgia Ranks 7th in Ease of Doing Business Ranking, Here's Why:

Starting a Business

Registering a Property

Getting Construction Permit

Getting Electricity

Number of Tax Payments (per year)

Time to Export (Border compliance)

Georgia OECD High Income - Average

1 Day 9.2 Days

5 10.3

6 Hours 12 Hours

Source: World Bank, Ease of Doing Business 2020

1 Day

63 Days

23.6 Days

152.3 Days

71 Days 74.8 Days


Great Location State Support Program – “Produce in Georgia”

Tbilisi (capital city)

Poti (sea port)

Kutaisi

FREE INDUSTRIAL ZONES INCENTIVES

Free Land & Building for a FactoryThe state owned property can be transferred to investor for free of charge for the manufacturing project (with certain investment obligations)

Subsidies for Loan Interest Payment The program co-finances bank loan interest rate for the first 36 months for hotels and manufacturing projects - currently 11% co-financing

Loan amount should be in the range of GEL 50,000 – 10,000,000

Collateral Guarantee Co-financing Within the program, a security is provided for up to 90% of the principal amount for each loan disbursed by commer-cial bank (hotels and manufacturing projects)

Loan amount should be in the range of GEL 50,000 – 5,000,000

The maximum loan warranty period is 10 years

Special Tax RegimeExemption from all taxes except Personal Income Tax (20%), which is paid from employees’ salaries (goods produced for export)

In case of import, the company has to pay VAT and 4% of revenue from national sales

Simplified Procedures

Available Facilities

WE ARE HERE TOSUPPORT YOUR BUSINESS


BUSINESS DEVELOPMENT

EXPORT SUPPORT

INVESTMENT ATTRACTION

Aftercare

o Support in further expansiono Constant feedback

o General statistics and data about business-operating costs

o Sector researches

Informationi

Communication

o Access to Government at all levelso Connection to local partners

(consulting, education, real estate)

Facilitation

o Assistance in location selectiono Organization of site visits

ENTERPRISE GEORGIA“Enterprise Georgia” is an economic development agency under the Ministry of Economy and Sustainable DevelopmentThe Investment Division of the agency serves as a “One-stop-shop” for investors to support companies before, during & after investment process


18 Uznadze str. 0102 Tbilisi, GeorgiaTel: (+995 32) 2 960 010E-mail: [email protected]

i n v e s t i n g e o r g i a . o r g

CONTACT INFORMATION

2020 - bags manufacturing sector

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