Sponsored by Invest in Georgia
By Donna Clapp
From the November/December 2022 Issue
As more 21st century corporations are looking to expand their reach eastward, the country of Georgia, in the South Caucasus should be in consideration for expansion and relocation projects. Long a part of the Silk Road running between Europe and Asia, the country is perfectly situated at the crossroads of these two continents.
“While we may not have caravans of camels going through our country, there is certainly that same Silk Road in existence in terms of trade between the East and West,” says David Tavlalashvili, Investment Department Head at Invest in Georgia. “We are part of a project called Belt and Road Initiative, which includes a railway project connecting China with Europe, with Georgia right in the middle of that network. This is reviving the old Silk Road and providing a much shorter supply-chain route, making it easier to transport high value-added goods than taking the traditional sea routes. For example, for goods going from Shanghai to Germany, it would take 40 days by sea, but it is only 20 days via rail.”
The Baku-Tbilisi-Kars (BTK) rail project that links Turkey and the European rail network to the Caspian Sea had the first train carry goods from Turkey to China through Georgia in December 2021 and is still in the testing phase but will soon be fully operational. It is an important leap forward in terms of logistics, by providing a route into Europe for landlocked Central Asian countries looking to trade minerals, machinery, and transport equipment with the rest of the world. Given the supply chain issues that affected countries worldwide during the pandemic in 2020 and 2021, this new railway has great economic potential. Georgia has already experienced, at times upwards of 300%, an increase in high value-added goods going through the country in the past year.
Adding to its enviable position as a location for foreign investment, Georgia has access to more than 2.3 billion population markets throughout the East and the West through its vast network of 14 international free trade agreements (FTAs), with four more in the works. Georgia has an Association Agreement (AA), which includes a Deep and Comprehensive Free Trade Agreement (DCFTA) with the European Union. The country has an FTA with EFTA countries such as Iceland, Liechtenstein, Norway, and Switzerland giving Georgian products free duty access. In terms of the Far East, Georgia has FTAs with China, including Hong Kong. And they also have General Schemes of Preference for the U.S. and Canada, which lowers tariffs on 3,400 goods exported from Georgia. Georgia is a member of the World Trade Organization, and there is almost no customs duty for 80% of goods imported. The country is considered to have one of the fastest and most efficient customs clearance times in the world at about 15 minutes average for clearance of goods.
Highly Educated Workforce for IT and Advanced Manufacturing
Georgia boasts a young, highly educated workforce consisting of a population that is 55% under the age of 45. Over 120,000 of the country’s population has graduated from higher education institutions in the last five years, providing the country with an abundance of well-educated workers and priming it to become a regional cluster for information technology, engineering and design, and business services sectors such as customer contact centers.
“We are a small country, but for the size of the country we have quite a large number of higher education institutes and vocational education centers,” says Tavlalashvili. “There are more than 60 universities and around the same number of technical schools. At least half of them provide courses related to engineering, manufacturing, and different STEM (science, technology, engineering, and math) fields. On top of that, we have the flexibility to provide very tailored programs for any particular needs companies might have. So those vocational education centers can partner up with business, and they can provide very specific training related to a company’s needs and financed by the government.”
The country also recently created the Skills Agency, which is jointly established by the Government of Georgia and the Georgian Chamber of Commerce and Industry. The main goal of the Skills Agency is development of a flexible vocational education system through strengthening public-private partnership. The Agency is managed by seven major employers’ associations together with the representatives of public sector, and the governing body of the Agency is a Supervisory Board. The Agency itself fulfills its functions through sectoral skills organizations/professional associations and creates incentives for professional associations in different sectors to unite under a common goal for better cooperation. Through this, private sector oversees creating curriculum and setting the standards of vocational education according to business needs, eliminating the gap between what the educational systems provide and what businesses currently need in terms of skills, giving students a better chance at getting jobs right out of college that match their skill set.
“The addition of Georgia to the Concentrix family is a key part of our growth strategy and supports us in extending our global footprint.”
— Darryl Hill, SVP EMEA Delivery & Operations, Concentrix
California-based Concentrix, a global provider of business services for customer experience, recently expanded into Georgia due to the abundance of highly educated workers.
“Georgia was chosen as the newest Concentrix location due to its solid, highly educated, and multilingual workforce, as well as its focus on the services sector and reliable network connectivity,” said Darryl Hill, SVP EMEA Delivery & Operations for Concentrix. “The addition of Georgia to the Concentrix family is a key part of our growth strategy and supports us in extending our global footprint.”
Unique Energy Footprint Lowers Business Costs
As energy prices around the globe have skyrocketed in costs, businesses with high energy usage will want to consider Georgia’s low-cost renewable energy sources as a unique advantage the country has in a region where many of its surrounding countries have renewable electricity deficits. Georgia produces 70% of its energy needs through hydropower that utilizes the fast-flowing waters of 300 rivers, which are part of a 26,000-river network that runs through the country.
“Most of our electricity is generated through hydroelectric,” says Tavlalashvili. “The rest is wind power, and gas-powered thermal plants. This mix of generation has allowed us to remain largely energy independent. Because of this, with everything going on in Europe right now, we have been able to maintain the same costs for energy here. Even our natural gas usage, which we do not produce here in Georgia, it comes to us from Azerbaijan, has a stable price due to the fact that the pipeline that brings the natural gas to Turkey crosses through Georgia.”
Georgia has truly transformed its economy over the past two decades, implementing broad economic reforms, and improving the living standards for its citizens. As such the country’s energy consumption has almost doubled since 2000 driven by growth in advanced manufacturing industry sectors and logistics. According to the European Bank for Reconstruction and Development, which has invested around $5.2 billion in more than 260 projects country wide, the increase in energy consumption signals strong economic growth in Georgia with no signs of weakening. So, now is a great time to consider this country as a location for corporate expansion into both Europe and Asia.