Issue 5, 2018. October-November

   

Untapped Potential for Made in Georgia Apparel

A recent study by KPMG found Georgia has significant competitive advantages for foreign investors interested in manufacturing footwear and bags, especially for export products destined for the EU.

Lika Jorjoliani

A recent report by KPMG for the government's Enterprise Georgia agency found that Georgia offers definite benefits for manufacturers producing footwear and bags: competitive wages, a low-tax base, and attractive trade agreements with one of the largest consumer markets in the world.

"We see Georgia as a country where whole cycles of production may be organized, starting from design and ending with finished products," KPMG's Tamar Kavtaradze told Investor.ge.

She added that the study also identified Poland, Romania, Turkey, Vietnam and Ukraine.

"It was revealed that we have many advantages, mainly comparatively cheap labor, low electricity and water costs and inexpensive land. For example, while a minimal salary in Georgia is $365 a month, the average salary in Turkey is $1,864 a month, whereas in Vietnam it is $234 a month."

Exporting to Europe and Beyond

Kavtaradze said the assessment showed that the consumption and production of footwear in Georgia has increased by 10 percent over the past several years, and 35 percent of the total volume of this production is exported.

Mikhail Khidureli, the Head of the Enterprise Georgia agency, noted that there are already production plants manufacturing clothing under contracts with major international brands, including Nike, Zara, Puma and M&C. He added that the free trade plans with the EU and China are providing more opportunities for Georgian factories to export clothing and footwear abroad.

"Georgia has concluded an Association Agreement and Deep and Comprehensive Free Trade Area agreement with the EU, a free trade regime with CIS countries, Turkey, and the Association of Free Trade of Europe (EFTA). In addition, the free trade agreement with China and Hong Kong will enter into force [by the end of the year], and that will enable companies operating in Georgia to gain access to markets with billions of consumers without paying customs taxes," Khidureli told Investor.ge.

Enterprise Georgia is also trying to connect potential investors and Georgian companies.

In March, it helped local businesses send representatives to an exhibition of leather-made goods in Hong Kong. As a result, a Georgian company, Geferin, and InterBlock Hong Kong Limited signed a contract for Georgian-made products to be sold in Hong Kong.

Locally Sourced Raw Material

Alexandre Gotsiridze, the founder of the company Alexander Gotsi, told Investor.ge that his company has been producing handmade leather bags and accessories from locally sourced materials for the past two years.

"We use local raw materials, mainly leather from the local cattle, produced at local factories. These factories have been working since the Soviet period [. . .] It is a high quality leather," he said.

Gotsiridze noted that a large volume of raw Georgian materials, including leather, is exported, but it is usually semi-finished, with the finishing production done abroad.

He added, however, that his company has obtained a production facility in Rustavi that has the capacity to produce finished, high-quality products.

Gotsiridze said Alexander Gotsi products are largely exported to markets in the West and in the CIS region.

"Currently, we have support from the German development agency, GIZ, to find a German partner to handle internet sales for our products," he said. His company is currently using the Georgian Post to sell its products in e-commerce.

Elselema, a Georgian production plant, is producing uniforms for a Czech company, according to the owner of the plant, Elguja Mamasakhlisi.

The company, which opened in Tbilisi 27 years ago, employs 300 people and has expanded to include a production facility in western Georgia, in Lanchkhuti.

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