regional service hub

www.investi ngeorgia.org 1

REGIONAL SERVICE HUBREGIONAL SERVICE HUB(Retail/Healthcare/BPO/Financial Services/Educati on)(Retail/Healthcare/BPO/Financial Services/Educati on)

Georgian National Investment Agency 2013


IN IN GEO

REGIONAL SERVICES HUB

• Georgia’s service sector achieves leading ranks among regional economies in terms of value added and trade

• Services have major share of FDI infl ow of 45% in 2011 with USD 500 million:

• OPPORTUNITY TO CAPITALIZE:OPPORTUNITY TO CAPITALIZE:

» Financial services/headquarters » Retail hub as the desti nati on-of-choice for shopping

» Financial services have grown at 19% p.a. since 2009 and is the leading service sub-sector for FDI att racti on with 15% of total infl ows in 2011

» Consultancy services att racted 12% of total FDI infl ows in 2011

» Wholesale/retail trade accounts for 40% of service GDP, and strong FDI infl ows rebound at 48% p.a. since 2009

» FDI infl ows in healthcare/social work have grown at 146% p.a. since 2007

VESTORGIA


VR

OVERVIEW OF GEORGIA’S SERVICE SECTOR

• Service accounts for 43% of GDP, 14% of exports, 7% of imports and ~ 10 % of employment (plus another ~ 20% in the form of informal employment)

• Georgia’s service sector achieves leading ranks among regional economies in terms of value added and trade

Large share of GDP and employment

• High fi xed asset investment share (26% - USD 466 million in 2010)• Major share of FDI infl ow of 45% in 2011 with USD 500 million

Leading investment engine

• Financial services have grown at 19% p.a. since 2009 and is the leading service sub-sector for FDI att racti on with 15% of total infl ows in 2011

• Consultancy services only started to receive FDI in 2010 but att racted 12% of total FDI infl ows in 2011

• Wholesale/retail trade accounts for 40% of service GDP, and strong FDI infl ows rebound at 48% p.a. since 2009

• FDI infl ows in healthcare/social work have grown at 146% p.a. since 2007

Several sub-sectors with high growth investment potenti als

• Several medium size projects placed by Middle East investors (Abu Dhabi Group USD 42 million, Grand Cinema USD 30 million)

Few projects placed except for real estate


IN IN GEO IN

INOVERALL SECTOR TRANSPARENCY

CONTRIBUTION TO THE ECONOMYCONTRIBUTION TO THE ECONOMY

INVESTMENTINVESTMENT

Investment in fi xed assets, USD mn

FDI infl ow2

USD mn Top projects

Investor

RAKIA (UAE)

Abu Dhabi Group (UAE)

Grand Cinema (UAE)

1 2011 data; additi onal 20% of employment in the form of informal employment2 2010 data

Dentsu Inc (Japan)

Project

Imedi TV (90% stake)

Standard Bank JSC

Entertainment

Social Thinker GmbH

VolumeUSD mn

42

Not disclosed

30.2

Not disclosed

USD mn or ‘000 FTE

% of total

In percent

100%

43

GDP1 Employment1 Exports2 Imports2

10 14 7

43844316640

23% 60%26% 62%

299

2009 20092010 2010

466 690

393

VESTORGIA


SUB-SECTOR TRANSPARENCY

SECTOR DETAILSSECTOR DETAILS

GDP contributi on of service sub-sectors2011, percent, USD mn

Retail trade of motor fuel

Repair of motor vehicles,personal and household goods

Other constructi on work

Financial intermediati on

Post and telecommunicati ons

General constructi on

Educati on

Other service acti viti es

Health and social work

Wholesale, except motor vehicles

Retail trade, including motor vehicles

2009-2011 CAGRPercent

14

76

3

100% 6,34022

-3

8

10

11

17

19

2011

11119

19

9

11

3

9

11

2

11


IN IN GEO

REGIONAL BENCHMARK OF SERVICE SECTOR CONTRIBUTIONREGIONAL BENCHMARK OF SERVICE SECTOR CONTRIBUTION

GEORGIA HAS A VIBRANT SERVICE SECTOR WHICH CONTRIBUTES SIGNIFICANTLY TO THE ECONOMY

Service value added/GDP2

2011, percent

Georgia Kyrgyz Republic1

TurkeyBahrain

UkraineGeorgia

TajikistanUkraineKyrgyz Republic

Kazakhstan Armenia

UzbekistanAzerbaijan

Armenia

Tajikistan1Saudi Arabia

KazakhstanTurkmenistan

TurkeyAzerbaijan

UAE1

Oman

Syria1 Syria1

Iran1

Saudi Arabia

Trade in services/GDP3

2011, percent

IN27

3438

4244454546

5051

606064

75 INGEO

c1

8

811

13

1316

18

19

2123

26

38

1 Esti mate based on 2010 data2 Include ISIC item 50-99. Value added is the net output of a sector aft er adding up all outputs and subtracti ng

intermediate inputs. It is calculated without making deducti ons for depreciati on of fabricated assets or depleti on and degradati on of natural resources.

3 Include ISIC item 50-99. Trade in services is the sum of service exports and imports divided by the value of GDP, all in current U.S. dollars.

VESTORGIA


GEORGIA HAS HIGH AVAILABILITY OF PHYSICIANS YET NEEDS IMPROVEMENTS IN HEALTHCARE INFRASTRUCTURE

REGIONAL BENCHMARK OF HEALTHCARE ECOSYSTEMREGIONAL BENCHMARK OF HEALTHCARE ECOSYSTEM

Number of physicians per 1000 populati on, 2011

Number of hospital bedsper 1000 populati on, 2011

STGIA

0,70,8

1,11,1

1,51,51,71,91,9

2,42,32,6

2,83,43,53,73,83,8

4,2Georgia

1 Despite number of hospital increased from 229 to 241 from 2000-2009, number of beds declined sharply from 21,200 to 13,600; Bed uti lizati on rate was low at 30% due to outdated faciliti es; By 2013-end, 8,000 beds will be privati zed to improve faciliti es and use effi ciency

Ukraine

Belarus Kazakhstan

KazakhstanBulgaria

BulgariaTajikistan

UkraineAzerbaijan

AzerbaijanUzbekistan

TurkmenistanGeorgia

Tajikistan

Turkey

United Arab Emirates

Saudi Arabia

Turkey

Kuwait

Syria

United Arab Emirates

Saudi Arabia

Bahrain

Albania

Oman

Iran

Iran

Pakistan

Syrian Arab Republic

QatarIraq

Iraq

Pakistan

RomaniaAlbania

ArmeniaTurkmenistan

2,91UzbekistanArmenia


IN IN GEO

GEORGIA HAS STRONG FOUNDATION TO DEVELOP A REGIONAL FINANCIAL CENTER

REGIONAL BENCHMARK OF HEALTHCARE ECOSYSTEMREGIONAL BENCHMARK OF HEALTHCARE ECOSYSTEM

Strength of legal rights in fi nancial sector1, 2011, 0= lowest; 10=highest

Credit depth of informati on2

2011, 0= lowest; 6=highest

Ukraine Georgia

1 Strength of legal rights index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending; 2 Credit depth of informati on index measures rules aff ecti ng the scope, accessibility, and quality of credit informati on available through public or private credit registries

Georgia Armenia

Armenia Saudi Arabia

Azerbaijan Azerbaijan

Saudi Arabia Kazakhstan

Bahrain Turkey

OmanKyrgyz Republic

TurkeyQatar

United Arab EmiratesUkraine

TajikistanBahrain

UzbekistanUzbekistan

SyriaSyria

Tajikistan

QatarOman

Iran United Arab Emirates

KazakhstanIran

IN1

22

4444444

566

89 IN

EO0

233

44444

5555

666

VESTORGIA


GEORGIA’S POTENTIAL REGIONAL SERVICE HUB CAN BE BASED ON THREE COMPLEMENTARY COMPONENTS

A regional lifestyleA regional lifestyleand service huband service hub

Connectivity andConnectivity andtraffic hubtraffic hub

Airline + Airport

Tourism

Hospitality

Entertainment

Att racti veness Connecti vity Fiscal policies

Regional head-Regional head-quarters and quarters and

expatriate hubexpatriate hub

RegionalRegionalservice platformservice platform

Regional Headquarters• Financial• Non fi nancial

Expatriates hub

Retail

Health-care

Financial services

Educati on

BPO

Key assetsKey assets


IN IN GEO

OPPORTUNITY TO POSITION TBILISI AS A FINANCIAL CENTER FOR CAUCASUS, WEST ASIA AND EASTERN EUROPE AROUND 4 SERVICE PILLARS

Regional HQ’s (MNC’s, Banks)

Capital markets

Multi service hubWholesale

Banking

Caucasus

West Asia

Eastern Europe+

Tbilisi Financial City

GEOGRAPHIC DEPTH: CAUCASUS, GEOGRAPHIC DEPTH: CAUCASUS, EASTERN EUROPE AND WEST ASIAEASTERN EUROPE AND WEST ASIA

HUBBING AROUND KEY FINANCIAL HUBBING AROUND KEY FINANCIAL AND PROFESSIONAL SERVICESAND PROFESSIONAL SERVICES

IN

VESTORGIA


OPPORTUNITY TO POSITION GEORGIA AS A REGIONAL RETAIL DESTINATION

VISION IS TO DEVELOP MEGA MALLS IN KEY LOCATIONS TO TRANSFORM GEORGIA INTO THE REGIONAL VISION IS TO DEVELOP MEGA MALLS IN KEY LOCATIONS TO TRANSFORM GEORGIA INTO THE REGIONAL RETAIL HUB LEVERAGING HIGH TRAFFIC OF FOREIGN TOURISTS AND STRATEGIC GEOGRAPHYRETAIL HUB LEVERAGING HIGH TRAFFIC OF FOREIGN TOURISTS AND STRATEGIC GEOGRAPHY

VESTRGIA

Benefi ts of desti nati on mega mall developmentBenefi ts of desti nati on mega mall development

• • Complement overall tourism strategy with solid retail Complement overall tourism strategy with solid retail value propositi onvalue propositi on

• • Retail magnet for foreign tourists and affl uent local with Retail magnet for foreign tourists and affl uent local with longer durati on of visit (1/2 to 1 day), higher share of longer durati on of visit (1/2 to 1 day), higher share of wallet, and repeated visitswallet, and repeated visits

• • Presence of fl agship brands will drive retail brand Presence of fl agship brands will drive retail brand cluster growthcluster growth

Tbilisi and Batumi as most potenti al locati onsTbilisi and Batumi as most potenti al locati ons

• • Established tourist desti nati ons with 80% of foreign Established tourist desti nati ons with 80% of foreign tourist traffi c in Georgiatourist traffi c in Georgia

• • Accessible with existi ng internati onal airports and Accessible with existi ng internati onal airports and major transnati onal highway/ railwaymajor transnati onal highway/ railway

• • Solid retail, hospitality and other supporti ng services Solid retail, hospitality and other supporti ng services infrastructureinfrastructure

• • Integrati on with other tourism off erings e.g. sun & Integrati on with other tourism off erings e.g. sun & beach, casinobeach, casino

• • Easier to drive investmentsEasier to drive investments

BATUMIBATUMI TBILISITBILISI


IN IN GEO

LeisureLeisure

Food and BeveragesFood and Beverages

RetailRetail

Services and transportServices and transport

• Att racti ons and acti viti es

• Shows and entertainment

• Themed setti ng and atmosphere

• Culture

• Themed restaurants, bars, clubs

• Dinner shows

• Souvenir stores• Concept stores• Everyday stores• Services

• Transport systems• Roads• Connecti vity

GEORGIA NEEDS TO DEVELOP DESTINATION MALLS WITH CLEAR OVERARCHING CONCEPTS AROUND 4 PILLARS

Clear positioning (target segment, value proposition) reflected in all activities through the overall Clear positioning (target segment, value proposition) reflected in all activities through the overall atmosphere, architecture, music, décor, and materials, and offering a unique experienceatmosphere, architecture, music, décor, and materials, and offering a unique experience

OVERARCHING CONCEPTOVERARCHING CONCEPT

VESTORGIA


Retail

OPPORTUNITIES TO TRANSFORM GEORGIA INTO A REGIONAL HEALTHCARE HUB

KEY PILLARS OF HEALTHCARE STRATEGY DEVELOPMENTKEY PILLARS OF HEALTHCARE STRATEGY DEVELOPMENT

Urban planUrban planHow to integrate healthcare city into the city?How to integrate healthcare city into the city?

Operating modelOperating modelHow does Developer position itself to maximize value from How does Developer position itself to maximize value from

Sector (e.g., engaging 3rd party operator?)Sector (e.g., engaging 3rd party operator?)

Healthcare sector strategy and industry value proposition definitionHealthcare sector strategy and industry value proposition definition• • What is the aspiration and optimisation function for the developer/creator of City?What is the aspiration and optimisation function for the developer/creator of City?• • What are key supply/demand gaps within healthcare sector that City should target?What are key supply/demand gaps within healthcare sector that City should target?• • What are the key elements of a value proposition for each targeted industry?What are the key elements of a value proposition for each targeted industry?

Tenant strategyTenant strategyWhich anchor Which anchor tenants to attract tenants to attract and how?and how?

Vision is to develop Vision is to develop Healthcare city to Healthcare city to transform Georgia transform Georgia into the regional into the regional healthcare hub healthcare hub leveraging high leveraging high traffi c of foreign traffi c of foreign tourists, existi ng tourists, existi ng qualifi ed low-cost qualifi ed low-cost physiciansphysicians

Real estate strategyReal estate strategyHow to create How to create maximum value from maximum value from the land?the land?

Financial and Financial and investment strategyinvestment strategyHow to invest to How to invest to maximize returns?maximize returns?

1

2A2A 2B2B 2C2C

2

3


IN IN GEO

ININ GEO

130

TOTAL ADDRESSABLE MARKET FOR GLOBAL SOURCING TOTAL ADDRESSABLE MARKET FOR GLOBAL SOURCING AND DOMESTIC OUTSOURCING, 2020, USD BILLIONSAND DOMESTIC OUTSOURCING, 2020, USD BILLIONS

Core markets 2008

500

200-250190-220

230-250

380-420 1,500-1,640ESO/R&DO

ITO

BPO

405-440

200-220

895150

220

• • BFSI, telecom, BFSI, telecom, retail, pharma, retail, pharma, manufacturing, manufacturing, traveltravel

• • NA, WE, JapanNA, WE, Japan• • Large enterprisesLarge enterprises

• • Public Public sectorsector

• • HealthHealth• • MediaMedia• • Uti liti esUti liti es

• • BrazilBrazil• • EEEE• • IndiaIndia• • ChinaChina

SMBsSMBs

Growth in core markets

New verti -cals in developed countries

New customer segments

Domesti c outsourcing mkt. in new geographies

Total ad-dressable market in 2020

O&O ENCOMPASSES USD 1.6 TRILLION ADDRESSABLE MARKET BY 2020; NEW UNTAPPED SEGMENTS WILL DRIVE 75% OF FUTURE INCREMENTAL GROWTH

VESTORGIA


“Dedicated BPO center”

Positi o

ning

Basic transacti onal services

0-5 years

+5 years

Advanced transacti onal services/basic knowledge services

Dri

vers

Pote

nti a

l pla

ys

for

Geo

rgia

BPO

ITO

/ESO

OPPORTUNITIES TO TRANSFORM GEORGIA INTO A REGIONAL BPO HUB SERVING EU MARKETS

VERGDesti nati on of choice for

companies operati ng in the fi eld of BPO/ITO for

EU markets

Transacti on center primarily for Transacti on center primarily for Western European marketsWestern European markets

Non-voice back-offi ce services modelNon-voice back-offi ce services model

• • Low-cost laborLow-cost labor

• • Basic CAD/CAM services Basic CAD/CAM services (e.g., reformatti ng)(e.g., reformatti ng)

• • Finance & accounti ngFinance & accounti ng• • Employee services & payrollEmployee services & payroll• • Selected verti cal processes in Selected verti cal processes in

banking, fi nancial services and banking, fi nancial services and insurance (e.g. CRM, mortgage, insurance (e.g. CRM, mortgage, investment) and logisti cs investment) and logisti cs managementmanagement

• • Deep talent poolDeep talent pool• • Engaged workforceEngaged workforce• • Building career modelsBuilding career models

• • Advanced CAD/CAM Advanced CAD/CAM programmingprogramming

• • IT infrastructure servicesIT infrastructure services

• • Business analyti csBusiness analyti cs• • Mathemati cal modelingMathemati cal modeling• • Business researchBusiness research• • Market researchMarket research• • Data management servicesData management services

EU/global center for core EU/global center for core competenciescompetencies

INVESTAIN GEORGIA

GEORGIAN NATIONALGEORGIAN NATIONALINVESTMENT AGENCYINVESTMENT AGENCY

www.investingeorgia.orgwww.investingeorgia.org

E-mail: enquiry@investi ngeorgia.orgPortf olio Manager: Mamuka Chikhladze

E-mail: mchikhladze@investi ngeorgia.org

regional service hub

Documents

leading service subsector

service activitieshealth

theleading service

trade services

total fdi inows

total investment

value of gdp

sum of service exports