Preface

The textile and garment industries of Georgia enjoy favourable conditions for investment. This is due to an appropriate legislative framework, a cheap and skilful labour force, well developed marketing facilities and relatively free access to both the EU and CIS markets, as well as North America. Georgia is a country with a variety of natural and material resources with a favourable geo-political location at the cross-roads of Europe and Asia, making the country attractive for investment activities.

Georgia has taken remarkable steps towards creating better conditions for investors, as part of which a new legislative policy framework for investment has been put in place. The Government's main policy target is expressed in terms of the measures aimed at facilitating the establishment of an open economy in Georgia. Georgia's hopes for speedy recovery and rapid growth naturally depend upon trade and investments.

At present, Georgia has agreements on trade and economic co-operation with 20 countries; agreements on promotion and mutual protection of investments are also in place with 16 countries, including the USA, Great Britain, Germany, China, Greece, Israel, Russia, Ukraine, Kazakhstan and Turkmenistan.

In 1996 the European Union and Georgia signed a partnership and co-operation agreement. Georgia became an associate member of the European Commission in the same year. Also in 1996, the World Trade Organisation (WTO)granted Georgia observer status. Georgia has been a member of the multilateral investment guarantee agency (MIGA) since December 1992.

Inflation in Georgia is modest, the currency is stable and fully convertible and profits can be repatriated abroad with no limitations. Georgia's successful economic reforms have been recognised by the International Monetary Fund (IMF), the World Bank, donor countries and donor organisations.

The Georgian textile and garment industries

Georgia had built up significant capability in the textile and garment industry sectors prior to the collapse of the Soviet Union. Fabric is produced from natural and synthetic yarns which are primarily woven from imported silk and wool. The enterprises in the textile and garment industry produce silk, woollen and cotton fabrics, finished clothing and knitted garments, ladies and mens outfits and suits, textile haberdashery, half-finished products and carpets.

Almost 85 per cent of the companies in this sector are privatised. They are either joint-stock companies or companies with limited liability. At present, some of the enterprises are making raincoats, jackets, suits and upper knitted garments for German, Korean and Italian companies. The materials are provided by the customers. Some of the companies in the sector are equipped with modern technological machinery of Japanese, German, Swiss, Italian, English and Hungarian production such as Puff, Juki, Savio, Interplastic, Remoldi, Jumburka, Tiss, Textima, Otto-Gali etc. Major equipment upgrades in most factories in the sector took place between 1989 and 1991.

The volume of orders to Georgian textile and garment companies is increasing. The average profitability comes to between 22 and 25 per cent. At present, the enterprises in the textile and garment sector are in a position to carry out any order for the manufacturing of clothing of any specifications and leisure wear. All the products can be made according to the samples and patterns of the customer, along with the provision of the necessary materials.

The forms of co-operation may be different. Foreign companies may have orders fulfilled on contract, they may buy into local facilities or organise and own 100 per cent of a business. This light industry will enable investors to produce high quality products at low unit costs and achieve high rates of return on investments.

Advantages of investing in the Georgian textile and garment industries

One of the most important advantages of the Georgian textile and garment industry is the low costs of labour involved in manufacturing. The labour force in Georgia is friendly, co-operative, hard working and non-union. In cases of emergency deadlines, there are no legal overtime wage rate requirements. For all types of business in Georgia, corporate profit tax is 20 per cent.

The European Union does not impose quotas on imports of textiles and clothing from Georgia, so the products enjoy auspicious conditions for penetrating into the European market as stipulated by the bilateral agreement between the European Union and Georgia concluded in November 1993.

Custom duties for the textile exported from Georgia to the EU, the Czech Republic, Slovakia, Japan, Canada and the USA are as low as 15 per cent, due to the Generalised System of Preferences (GSP). Georgia recently received 'most favoured nation trading status' with the USA. Georgia has a duty free tariff regime with the CIS countries, a market of 210 million consumers.

Advantages for investors in Georgia

The advantages which Georgia offers investors are the following:

• stable democratic government;
• solid legal framework;
• low corporate tax;
• duty free access to CIS market of 210 million consumers;
• Europe-Asia gateway - Georgia is situated on the shortest transport route from Europe to Azerbaijan, Armenia, Iran and the Central Asian countries, as well as the shortest gas and oil pipeline route to the west from the new fields of Azerbaijan and Central Asia;
• unlimited rights for immediate repatriation of profit and capital;
• excellent entrepreneurial tradition, with a well-educated, skilled and low-cost labour force.

1. Law of Georgia 'On Promotion and Guarantees of Investment'
2. Law 'On Entrepreneurship'

For more information contact:
The Georgian Investment Centre
16, Zandukeli Street,
380008 Tbilisi,
Georgia
Tel: +995 32 921839, 933118
Fax: +995 32 921840
Email: gic@access.sanet.ge