Manufacturing in Georgia
Hossam Afifi
Hossam Afifi
I'm a lawyer and an overseas entrepreneur who help people to invest overseas, grow their wealth, and reduce their tax.

The future of manufacturing in Georgia [Indicators of development]

Georgia is a small country surrounded by mountains located in the Caucasus region alongside with its neighbors Armenia and Azerbaijan. It is highly ranked among international ratings for the ease of doing business. Businesses of course aren’t for free and companies here have to pay taxes but it has the most flexible and favorable tax law in Europe.

The country produces and exports Georgian production to the other countries and mostly to the European ones which helps the country to keep its average level of economics stable.

Manufacturing in general and in Georgia

Manufacturing means creating or transforming materials into something physical that can be sold or exported on a market. Everything you see around you was produced and manufactured somewhere.

There are many kinds of manufacturing in general including: clothing and textiles, petroleum, chemicals, plastics, electronics, energy, power, transportation, food production, metal manufacturing, wood, leather, paper etc. In Georgia the list of manufacturing fields isn’t very long, but the country still remains valuable because of the different aspects and fields of manufacturing and producing like: automotive and aerospace parts, electronics, pharmaceuticals, wine, mineral waters, footwear, bags and agricultural products.

Agricultural manufacturing in Georgia and its export

Georgia is the country which is more agricultural rather than industrial as it doesn’t have enough sources or infrastructure. Many people’s everyday lives and income depend on products they produce taking into consideration that number of population is quite high for such a small country. More than 50% of the total workforce is employed in agriculture. We may even say that self-employment in agriculture is the only way for a large part of Georgian people to earn money. A man can have a job but at the same time he can have a farm and a winery.

Agriculture in Georgia wouldn’t develop without good climatic zones that exist in this country. Climate supports growth and development of big volume of agricultural production which is used to export to other countries. Such production can be:

  1. Dried fruit which is mainly produced from plums, apples, figs
  2. kiwi which grows on territories of Poti, Zugdidi, Gali, Ochamchire where the climate is the best for growing kiwis
  3. pomegranate which is highly demanded by European market
  4. rose and carrot seed oil
  5. nuts and walnuts. Georgia is among 5 nuts-exporting countries
  6. honey which is also being exported to EU due to its high demand as Europeans are the main honey consumers.
  7. Tea — Georgia has high potential to produce natural tea, especially in some regions like Guria, Samegrelo, Achara and Imereti
  8. alcoholic beverage and spirits. Among alcohol the wine is the bestseller. This is the most important and main Georgian production demanded not only by Europe but also beyond overseas.

The big percent of Georgian wine varieties and especially natural wine are exported to different countries. The demand on an international market becomes higher and higher every year which helps the country to make a good profit. Wine manufacturers are the most respected community as wine is the part of Georgian history and the country is the oldest wine making region in the world. Annual capacity of produced wine is about 122 676,86 tons which is about from 2 to 5 thousand tons a day.

Industrial manufacturing in Georgia

Industries that produce goods, services or anything else that can bring income to the country are usually a group of enterprises or organizations. Any existing industry has a big influence on country’s economics. 

Georgia mainly exports transport equipment, chemical products, mechanical parts, machinery and appliances. 

For example automotive business plays an important in Georgia’s economy. Though the country doesn’t manufacture cars itself it imports them from foreign countries and then exports them to neighbor ones. But before exporting them it provides each car with good repair service fixing and changing auto parts which has now turned into a domestic automotive business causing manufacturing small details.

Georgia has rich history of manufacturing of auto and aircraft as we can see from the Soviet Union period. But since the Soviet Union’s collapse, the enterprises producing auto and air crafts started manufacturing various machinery like railroads, mining products, military products etc.

Electronics manufacturing sector in Georgia is trying to reach high indicators of development. Along with some Georgian companies which produce electrics many other famous foreign companies have made investments.

Georgia has a huge size of water electric capacity, which is the main source that supplies the country with energy and its hydro resources give high potential to become dominant on regional hydroelectric markets in the Caucasus region. It is also a partner country of the EU INOGATE energy program supporting sustainability of energy development and attracting investors for energy project. The Ministry of Energy estimates that out of the all rivers on Georgian territory, there are approximately 300 that have significance in terms of energy production. 

Georgia has a history of manufacturing leather products like shoes, bags etc. Therefore, manufacturing of leather apparel is developed quite well in Georgia. There are factories and private designers who produce their own production in order to sell it inside the country and abroad as well.

Pharmaceutical manufacturing with thousands employees in the sector. Export of pharmaceuticals from Georgia has been increasing for the last few years helping the country’s economy.

Metallurgy in Georgia

Metallurgy has a long-time history in Georgia starting from VII-VI centuries B.C. Today there are several factories producing metal productions, most of them located in one of the cities of the country which is called Rustavi also known as a city of metallurgy. Also, not to forget to mention Zestaponi Ferroalloy Plant which is one of the largest ferrous metallurgy enterprises in Georgia. Such companies and industries cause air and ecosystem pollution.

Shipping Georgian production to European Union countries

Georgia has been a part of the European Union’s Free Trade Area since 2014 and still remains country’s largest trading partner, which counts about over a quarter of Georgia’s total trade turnover. According to the terms and conditions of the free trade agreement which is called Deep and Comprehensive Free Trade Area (DCFTA), both sides Georgia and European Union have access on each other’s markets making it easy to export and import the goods especially those produced in this small country. Shipping Georgian production happens through Turkey.

Georgia’s trade partners

According to the latest trade statistics published in January 2021, Georgia’s most valuable partners are: Russia, Azerbaijan, China, Bulgaria, Turkey and other countries including Ukraine, Switzerland, Spain, Belarus, Iran, America etc. The EU still takes the first place in importing the goods from Georgia, the second place take CIS countries. EBRD (European Bank of Reconstruction and Development) is investing in agricultural business and makes investments to support exporters in an innovative and sufficient way.

Investment opportunities in manufacturing

Georgia is attracting a lot of investors as the country offers wide range of opportunities. Making investment in any manufacturing sphere is an incredible step as the country itself has a very business friendly environment. It’s very important that utility costs like gas, electricity are quite affordable and favorable which means you can produce more and pay less for the energy.

Though Georgia is a very small country with a small market but its production and producing in Georgia generally means not only having access to local market but also very small tariffs on duty. Also, customs procedures are very simplified. Georgia has some free industrial Zones where companies have an exemption from all taxes: in Poti which has a sea port and terminal, Kutaisi the third largest city in Georgia and Tbilisi capital city of the country. Two more sea ports are located in Batumi and Supsa which have their own logistics and shipping agency offering shipment services and transporting cargo using container from Georgia even to China. Georgian social media has also declared some time ago that the Chinese and Georgian companies have reached an agreement regarding development of the water port.

Labor in Georgia

The country offers strong, reliable and skilled labor force consisting of many young and workaholic people to execute any kind of job in the most efficient way. According to the Heritage Foundation statistics, it is believed that Georgia has one of the highest labor indicators which ranks 22nd globally on the Labor Freedom Index. As mentioned above, nearly half of country’s society is self-employed workers involved in farm work and in agricultural businesses.

Conclusion

Manufacturing, producing, exporting and importing of course, play a great role in every country’s economic development and growth, especially when we talk about Georgia. Not to forget to mention, the country has a great geopolitical location on a map and is strategically located between East and West offering eastern, western and many other countries’ accessibility on its production via land or mainly via the sea port located on a Black Sea bank.

The global pandemic Covid-19 affected Georgia’s economics and GDP and there has been no progress for the last year. Many industries that usually supply the population with necessary goods have stopped functioning which caused employing reduction because of the Government regulations that decreased the speed of moving forward and the level of economy has dropped beyond average. With hope, effective solutions will be found in the near future and the hard times will soon come to an end with success and efficiency.

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