manufacturing
DESCRIPTION
TRANSCRIPT
IN IN GEO
MANUFACTURING SECTOR
OVERVIEW:OVERVIEW:
• Manufacturing and industries account for around 14% of GDP and ~ 5% of employment
• Largest industries are food and beverages (3% of total GDP) and metal products (2.5%)
• Advantage to process goods - competi ti ve cost of power, labor and strategic locati on
• 2 Free Industrial Zones - In FIZ, businesses are exempted from all tax charges except Personal Income Tax
OPPORTUNITIES:OPPORTUNITIES:
• Large import overhang in goods that are usually not traded extensively provides regional import substi tuti on potenti al in food processing, constructi on materials, household gods etc
• Georgia’s current advantages in terms of handling large transshipment fl ows, business stability, low cost of power generati on and existi ng raw materials/intermediate products provide opportuniti es for large industrial bets, like producti on of iron and steel products, aluminum etc
Poti
Batumi
Armenia Azerbaijan
Russia
Turkey
Black Sea
Kutaisi
MRN Railway
Kulevi
Tbilisi
FIZ FIZ
Mestia
www.investi ngeorgia.org 1
VESTORGIA
www.investi ngeorgia.org 2
MANUFACTURING SECTOR
INDUSTRYINDUSTRY PRODUCTION VALUE PRODUCTION VALUE AND VALUE ADDAND VALUE ADD
TOP 3 PRODUCTS TOP 3 PRODUCTS (VALUE ADD)(VALUE ADD)
TOP 3TOP 3 EXPORTS EXPORTS
TOP 3 TOP 3 COMPANIESCOMPANIES
Producti on value
VESTRGIA
297
260
90
47
170
47
43
▪ ▪ ▪
▪ ▪ ▪
▪ ▪ ▪
▪ ▪
▪
▪ ▪ ▪
▪ ▪ ▪
▪ ▪
▪
▪ ▪
▪
▪ ▪ ▪
▪ ▪ ▪
▪ ▪ ▪
▪ ▪ ▪
▪
▪ ▪
▪ ▪ ▪
▪ ▪ ▪
▪ ▪ ▪ ▪ ▪
▪ ▪ ▪
▪ ▪ ▪
▪ ▪ ▪
▪ ▪ ▪
▪ ▪ ▪
▪ ▪ ▪
▪ ▪
▪
▪ ▪
▪
▪ ▪ ▪
Value addUSD milions, 2011
IN IN GEO
N IN GEOIN GEO
www.investi ngeorgia.org 3
MANUFACTURING SECTOR
GROWTH OF SECTOR VALUE ADDCAGR,2006 - 10
CURRENT INDUSTRIAL BASE
Food and metals industry provide the largest industrial base for Georgia, while textile industry, Food and metals industry provide the largest industrial base for Georgia, while textile industry, transport equipment and metals growing strongesttransport equipment and metals growing strongest
1,000
SIZE OF SECTOR VALUE ADD USD mn
10010N G
Textile & Leather
Transport equipment
Wood products
Mineral products
Chemicals
Machinery & equipment
Plastics
Paper & pulp
Food & beverages
Metals
VESTORGIA
www.investi ngeorgia.org 4
TRADE BALANCE IN GEORGIA AND IN THE REGION
IMPORT OVERHANG, USD IMPORT OVERHANG, USD mlnmln, 2011 , 2011 TRANSPORTATION TRANSPORTATION COSTCOST
VESTRGIA
IN IN GEO
www.investi ngeorgia.org 5
SEVERAL HIGHLY ATTRACTIVE IMPORT SUBSTITUTION OPPORTUNITIES
Constructi on - Building materials
Constructi on - Finishing elements
Food processing
Packaging
SECTOR PRODUCT GROUP PRODUCTS SECTOR PRODUCT GROUP PRODUCTS
• Arti cles of cement and steel
• Arti cles of wood
• Ceramic products
• Glass & glassware
• Furniture
• Beverages and spirits
• Preparati ons of fruits and vegetables
• Dairy and eggs
• Meat
• Plasti c packaging• Paper packaging
• Prefabs
• Ready-mix concrete
• Bricks
• Finished arti cles of steel
• Plywood and laminated wood
• Tiles • Sanitary ware
• Windows • Glassware
• Doors • Living furniture
• Bott ling
• Fruit juices • Jams• Vegetable oils
• Milk • Cheese • Butt er • Yogurt• Poultry/Beef/Pork/Lamb
VESTORGIA
www.investi ngeorgia.org 6
SEVERAL OPPORTUNITIES ARISING FROM GEORGIA’S TRANS-SHIPMENT FLOWS AND RESOURCES
OPPORTUNITY CURRENT ADVANTAGES TO BE LEVERAGED POTENTIAL FOR GEORGIAOPPORTUNITY CURRENT ADVANTAGES TO BE LEVERAGED POTENTIAL FOR GEORGIA
ALUMINIUMALUMINIUMINDUSTRYINDUSTRY
IRON AND STEEL IRON AND STEEL PRODUCTIONPRODUCTION
COPPERCOPPER
POLYMERS & POLYMERS & OTHER PLASTICSOTHER PLASTICS
• Large transshipment fl ows of raw materials/input (Bauxite) and aluminium cross Georgia to/from Tajikistan (largest aluminium plant in Central Asia)• A lot of water recourses and large hydropower plants in the pipeline
• Georgia mines Manganese ore• Georgia produces ferro alloys, largely for export (USD ~250 mn)• Large imports of iron and steel products to Georgia (USD ~300 mn) and neighboring countries
• Georgia and Armenia export copper ores, copper waste and scrap• Import overhang of copper products (alloys and fi nal products e.g. wire, tubes, pipes) amounts to USD ~200 mn in the region
• Import overhang of plasti c products amounts to 230 mn in Georgia and 8 bln in the region• Georgia transships large fl ows of petroleum products
• Value chain integrati on- Producti on of aluminium- Producti on of aluminium products (fabricated or end products)
• Verti cal integrati on of value chain by adding producti on of iron and steel and related end products• Regional import substi tuti on
• Producti on of copper alloys and end products (regional import substi tuti on)
• Plasti cs and petrochemicals producti on (regional import substi tuti on for plasti cs/rubber)
IN IN GEO
www.investi ngeorgia.org 7
OPPORTUNITIES ARISING FROM GEORGIA’S TRANS-SHIPMENT FLOWS AND RESOURCES - ALUMINUM EXAMPLE
LEVERAGING TRANSSHIPMENT FLOWS, GEORGIA CAN INTEGRATE INTO A LEVERAGING TRANSSHIPMENT FLOWS, GEORGIA CAN INTEGRATE INTO A GLOBAL VALUE CHAIN OF ALUMINUM PRODUCTION.GLOBAL VALUE CHAIN OF ALUMINUM PRODUCTION.
• Tajikistan Aluminium Company (TALCO) is l argest aluminium manufacturer in Central Asia- Total producti on 300-400 k tons, ~1% of global producti on- Using ~40% of Tajikistan’s power generati on (largely hydropower)• No domesti c bauxite/alumina, all imported (mostly from Ukraine, Azerbaijan, Kazakhstan)• Export of raw aluminium to Europe, Turkey, CIS, China, accounti ng for ~40% of all exports of Tajikistan
+use/create+use/createcomplementariti escomplementariti eswith transport & with transport &
power sectorspower sectors
Current value chains in aluminium production use Georgia as transit country … … offering opportunity for integration upstream
… or downstream
VESTORGIA
www.investi ngeorgia.org 8
OPPORTUNITIES ARISING FROM GEORGIA’S TRANS-SHIPMENT FLOWS AND RESOURCES - ALUMINUM EXAMPLE
• Producti on of - Foundred and fabricated aluminium - End-user products for import substi tuti on (e.g. constructi on material, packaging) - End-user products with complementariti es to other sectors (e.g. containers for transportati on)• Producti on capacity and investment size depending on selected products
• Producti on capacity: ~300 k tons aluminium• Investment size: USD 250-500 million• Power consumpti on: 4-5 TWh (~15,000 kWh/t), current generati on in Georgia ~11 TWh• Market assessment - Globally growing demand mainly from emerging economies - Current surplus capacity uti lized by 2016 - Target market with cost advantage: Europe/Turkey
Upstream integration (aluminium production)
Downstream integration (production of aluminium products)
OPPORTUNITY EVALUATION AND SIZING OPPORTUNITY EVALUATION AND SIZING
IN IN GEO
www.investi ngeorgia.org 9
Despite hosti ng some of the crucial resources, Georgia currently only integrates the fi rst step of the iron & steel value chain …
Existi ng producti on off ers opportunity for further value chain integrati on
SEVERAL OPPORTUNITIES ARISING FROM GEORGIA’S TRANS-SHIPMENTFLOWS AND RESOURCES – EXAMPLE OF IRON AND STEEL PRODUCTION
Current value chain Verti cal integrati on of value chain
Chiatura Manganese ore mines• Mining 1.18 mn tons of manganese ore• Extracti ng 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)
Export of ferro alloys, amounti ng to USD ~250 mn
Imports of iron and steel products to Georgia, amounti ng to USD ~300 mn, but also to neighboring countries
Producti on of iron and steel and related end products
Internal consumpti on/regional import substi tuti on
Export of iron & steel products4b
1
2
3
4
3
4a
Mining Ferro alloy producti on
Iron and steel
producti on
Iron and steel end product producti on
MiningFerro alloy producti on
Iron and steel
producti on
Iron and steel end product producti on