2. MANUFACTURING SECTOR
OVERVIEW: 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
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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
▪ ▪ ▪
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▪
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297 ▪
ORGIA
RGIA
▪ ▪
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260 ▪ ▪ ▪
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90 ▪ ▪ ▪
▪
▪
▪
47 ▪ ▪ ▪
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170 ▪ ▪ ▪
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47 ▪ ▪ ▪
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43 ▪ ▪ ▪
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4. MANUFACTURING SECTOR
GROWTH OF SECTOR VALUE ADD CURRENT INDUSTRIAL BASE
CAGR,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 strongest
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TRADE BALANCE IN GEORGIA AND IN THE REGION
IMPORT OVERHANG, USD mln, 2011
mln, TRANSPORTATION
VEST
COST
ORGIA
RGIA
6. SEVERAL HIGHLY ATTRACTIVE IMPORT
SUBSTITUTION OPPORTUNITIES
SECTOR PRODUCT GROUP PRODUCTS
IN
• Articles of cement and steel • Prefabs
Construction • Ready-mix concrete
- Building • Bricks
materials
• Finished articles of steel
• Articles of wood • Plywood and laminated wood
• Tiles
• Sanitary ware
Construction • Ceramic products
• Windows
IN GEO
- Finishing
elements • Glass & glassware • Glassware
• Doors
• Furniture • Living furniture
• Bottling
Food • Beverages and spirits
processing • Fruit juices
• Preparations of fruits and vegetables • Jams
• Vegetable oils
• Dairy and eggs • Milk
• Cheese
• Butter
• Meat • Yogurt
• Poultry/Beef/Pork/Lamb
• Plastic packaging
Packaging
• Paper packaging
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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 products
ORGIA
• 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-SHIPMENT
FLOWS AND RESOURCES - ALUMINUM EXAMPLE
LEVERAGING TRANSSHIPMENT FLOWS, GEORGIA CAN INTEGRATE INTO A
IN
GLOBAL VALUE CHAIN OF ALUMINUM PRODUCTION.
Current value chains in aluminium production
use 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
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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 economies
ORGIA
- 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-SHIPMENT
FLOWS AND RESOURCES – EXAMPLE OF IRON AND STEEL PRODUCTION
Despite hosting some of the crucial resources, Existing production offers
IN
Georgia currently only integrates the first step of opportunity for further value
the iron & steel value chain … chain integration
Ferro alloy Iron and Iron and steel Iron and Iron and steel
Mining steel Mining Ferro alloy
production end product steel end product
production production
production production production
Current 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
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11. INVEST
IN
IN GEORGIA
IN GEO
GEORGIAN NATIONAL
INVESTMENT AGENCY
www.investingeorgia.org
E-mail: enquiry@investingeorgia.org
Portfolio Manager: Kristine Meparishvili
E-mail: kristinem@investingeorgia.org