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Investment Opportunities
in Pharmaceuticals Sector of Georgia
Georgian National Investment Agency
(GNIA)
2016
Area: 69,700 sq km
Population: 3.7 mln
Life expectancy: 75 years
Official language: Georgian
Literacy: 100%
Capital: Tbilisi
Currency (code): Lari (GEL)
GEORGIA - COUNTRY OVERVIEW
GDP 2015 (E): USD 14 billions
GDP real growth rate 2015 (E): 2.8%
GDP CAGR 2010-2015 (GEL) (E): 5.6%
GDP per capita 2015 : US$ 3743
Inflation rate 2015 : 4%
Total Public Debt to Nominal GDP (%) 2014 :
35.5%
2
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**
**** *
**
3GEORGIA OFFERS INVESTORS:
A politically stable investment destination
Efficient, pro-business and corruption-free government
Enlargement of market size by Free Trade Agreements
Competitive cost of labor and energy
Entry gate in the region
Solid sovereign balance sheet
Stable banking sector
16th most secured country in the world
BB- Stable
BB- Stable
Ba3 Positive
*
*
*
*
*
*
*
*(Global Competitiveness Index -2015/2016)
4ECONOMIC STRUCTURE AND TRENDS
GDP: Strong rebound after a relatively small contraction in 2009
Source: Geostat, MOF
Growing GDP per capita (USD)
Source: Geostat, MOF
11881484
1764
2315
2921
24552623
32313523 3600 3676 3743
0
500
1000
1500
2000
2500
3000
3500
4000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Diversified nominal GDP structure in 2015
Source: Geostat, MOF
Favorable public debt situation
Source: Geostat, MOF
Agriculture, forestry and
fishing9.2%
Industry16.5%
Construction8.0%
Trade; Repair of goods16.6%Hotels and
restaurants2.5%
Transport and Communication
10.7%
Real estate, renting and
business activities
6.6%
Public administration9.3%
Education4.9%
Health and social work
6.0%
Other sectors10.0%
40.0%32.2%
25.5%31.2%
41.0% 42.4%36.5% 34.9% 34.7% 35.5%
26.8%21.1%
16.8%23.5%
31.7% 33.6%28.8% 27.6% 27.2% 26.8%
0%
20%
40%
60%
80%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Total Public Debt to Nominal GDP (%) External Public Debt to Nominal GDP (%)
5.8%
9.6% 9.4%
12.6%
2.4%
-3.7%
6.2%
7.2%6.4%
3.4%4.6%
2.8%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Real GDP growth, y-o-y (%)
5
Free Trade Agreements with
~ 900 million market
and access without Customs Duty
GEORGIA
LIBERAL TRADE REGIMES
* Very simple and service oriented customs policy and administration – customs clearance in 15 minutes
* ~80% of goods free from import tariffs
* No quantitative restrictions
PREFERENTIAL TRADE REGIMES:
* FTA with Turkey and CIS countries (Russia,
Ukraine, Kazakhstan etc.)
* DCFTA (Deep and Comprehensive Free
Trade Agreement) with EU was singed on
June 27, 2014
* GSP agreement with USA, Norway,
Switzerland, Canada, Japan
* Member of WTO
6TAXATION - SIMPLE, LOW, EFFICIENT AND FAIR
* No payroll tax or social security tax
* No capital gains tax
* No wealth tax and inheritance tax
* Personal income tax for interest, dividend, royalty – 5%
* Foreign-source income of individuals fully exempted
* Accelerated depreciation on capital assets
* Loss carry forward for corporate profit tax purposes (10 years)
* No restrictions on currency convertibility or repatriation of capital & profit
* Double taxation avoidance treaties with 52 countries
Number of Taxes 6
Corporate Profit Tax 15%
Personal Income Tax 20%
VAT 18%
Customs/Import Tax 0%, 5% or 12%
Excise Tax Depends on goods
Property Tax Up to 1%
* Import and consumption are increasing early -
Compound Annual Growth Rate of pharmaceutical
imports to Georgia during 2010-2014 was 13%
* Expected growth in Georgia due to currently low per
capital pharmaceutical expenditures along with rising
incomes and strong projected GDP growth
* Emerging markets widely considered to be focal point
for growth in the global pharmaceutical market over the
coming decade, and Georgia and the surrounding region
have significant room for growth
ADVANTAGES OF INVESTING IN PHARMACEUTICALS SECTOR OF GEORGIA 7
Growing Market
Low Costs
Existing Production Base and Experience
* Competitive labor costs
* Low utility costs
* Georgia already produces different types of
pharmaceuticals and exports some of them in regional
countries
* Compound Annual Growth Rate of pharmaceutical
exports from Georgia during 2010-2014 was 30%
* There are 8 large and 13 medium size producers
* Georgia has skilled & qualified labor in the
pharmaceutical industry
Government Support
* Free Industrial Zones, where businesses are exempt
from all taxes except Personal Income Tax (20%),
* Government incentives for new production companies
SECTOR OVERVIEW 8
Key Players
* 96 large wholesalers and retailers
* Largest pharmacy chains: Aversi, PSP
* Other Key Pharmacy chains: GPC, ABC Pharmacia (Pharmadepot brand) Sakhalko Aptiaki,
Narinjispheri Pharm, Neopharm+, Hekate
* Key Distributors: PSP, Aversi, Globalpharm, GPC, ABC Pharmacia, Impexpharm, GEA, Tonusi
Types of Manufacturing
* Level of manufacturing: Mostly secondary manufacturing and packaging. Primary manufacturing
in herbal/natural medicines and bacteriophage production
* Forms: Broad range (tablets, sprays, syrups, powders, injections, extracts, capsules, gels, balms,
eye drops, granules)
* Ailments Treated: Broad range (gastrointestinal, cardiovascular, pain, ear/nose/throat,
respiratory, etc.)
PRODUCTION OF PHARMACEUTICALS9
5157
6164
78
0
10
20
30
40
50
60
70
80
90
2010 2011 2012 2013 2014
USD
Mill
ion
Production of pharmaceuticals, 2010-2014
2425
2625
32
0
5
10
15
20
25
30
35
2010 2011 2012 2013 2014U
SD M
illio
n
Value add of pharmaceuticals, 2010-2014
* In 2014 Production of pharmaceuticals was USD 78 Million
* CAGR of production is 11% for 2010-2014 years
* Production of pharmaceuticals is represented by 8 large and 13 medium size producers
* Large companies account for 92% of production
* Value add of pharmaceuticals production reached USD 32 million in 2014 and increased by CAGR 8% during 2010-2014 years
* Domestic consumption of pharmaceuticals was approximately USD 338 million in 2014 from which only 23% was covered by
domestic production
TRADE OF PHARMACEUTICALS10
221 228
265
318
365
0
50
100
150
200
250
300
350
400
2010 2011 2012 2013 2014
USD
Mill
ion
Import of pharmaceuticals, 2010-2014
3744
5559
105
0
20
40
60
80
100
120
2010 2011 2012 2013 2014
USD
Mill
ion
Export of pharmaceuticals, 2010-2014
* In 2014 Import of pharmaceuticals increased by 15% and reached USD 365 Million. CAGR of import accounted for 13% during
2010-2014 years
* Top 5 countries by pharmaceuticals import are Turkey, Germany, Hungary, France and Switzerland
* Export of pharmaceuticals reached USD 105 Million in 2014 and CAGR accounted for 30% during 2010-2014 years
* Main markets for Georgian export are Uzbekistan, Azerbaijan and Armenia. During 2010-2014 years CAGR of these three
countries’ import amounted 15%
11LABOR AND EDUCATION
Higher Education System of Georgia* Unemployment rate is 12.4 %. 50% of unemployed population are aged
between 20-34
* The average monthly salary in pharmaceuticals manufacturing is 547 USD (2014)
including white and blue-collar workers
* Study in the pharmaceutical field becoming more and more popular and several
public and private universities offering degree programs in pharmacy. Tbilisi
State Medical University (TSMU) is considered to have one of the strongest
program in this field
* Georgia Has historically had strong scientific research institutes which still
operate today. Those operating with in the pharmaceutical field are: I.
Kutatelaze Institute of Pharmaco-Chemistry , George Eliava Institute of
Microbiology (including focus on phages), National Center for Disease Control
and Public Health (NCDC)
12UTILITY COSTS
CategoryGEL kwh including
VAT (18%)USD kwh including
VAT (18%)
Tbilisi:
220/380 volt (average) 0.198 0.087
6–10 kv 0.153 0.067
35 – 110 kv 0.140 0.062
Kakheti region
220/380 volt (average) 0.175 0.077
6–10 kv 0.165 0.073
35 – 110 kv 0.130 0.057
Other parts of Georgia:
220/380 volt (average) 0.199 0.088
6–10 kv 0.142 0.063
35 – 110 kv 0.136 0.060
Upper marginal rates of power
CategoryGEL/m3
including VATUSD/m3
including VAT
Tbilisi: 4.400 1.938
Drinkable water 3.555 1.566
Sewerage system water 0.845 0.372
Other parts of Georgia (there are few exemptions):
4.307 1.897
Drinkable water 3.375 1.487
Sewerage system water 0.932 0.411
Maximum rates of water
Electricity:
* Government of Georgia has determined maximum rates of electricity in
Georgian Lari (GEL). The rates are different according to regions of Georgia and
voltages
* Factories consuming more than 1 million kwh per year (1 kwh per year from
2017) can be registered as direct consumers. They can purchase electricity
directly from energy producers and negotiate on any price
* Connection fee is abolished, if the company needs 35-110 kv voltage level
Gas:
* Gas rates (for industrial use) are deregulated by Government, which means
private company can choose the supplier of gas (currently there are 37 gas
supplier companies) and negotiate tariffs with them. Approximate average gas
costs are 0.37 – 0.42 USD/m3 (including VAT).
Water:
* Maximum rates of drinkable water and water for sewerage system are also
determined by GovernmentExchange rate in 2015: 1 USD = 2.2702 GEL
13INVESTMENT OPPORTUNITIES IN PHARMACEUTICAL SECTOR
Pharmaceutical Manufacturing Hub for regional distribution
R&D and Clinical Testing
* For local market and export
* Opportunities to invest in existing companies or in new
factories/greenfield projects
* Contract Manufacturing Organizations (CMOs)
* Opportunity to establish regional logistical hub for
distribution and benefit from growing retail markets in
neighboring and other CIS countries
* Increasing number of clinical trials registered in Georgia, due to low costs and prevalence of volunteers. Few global contract
research organizations (CROs) have representation in Georgia for clinical trials
* US$ 200 million national laboratory (Central Public Health Reference Laboratory established in 2011 ) with biosafety level 2 and 3
laboratories and vivarium, ready to cooperate with governments and private sector
14INVESTMENT OPPORTUNITIES IN PHARMACEUTICALS NICHE SUB-SECTORS
Bacteriophages
* Since the 1930s, Georgia has been a pioneer and leader in R&D and production of bacteriophages
* Used for treating various bacterial infections
* With rise of drug resistant strains of bacteria, potential role of phages is garnering new attention in the
West
* Well established exports within the CIS region, and room for new markets with further R&D and
marketing
Natural/Herbal Medicines
* 40 varieties of unique medicinal and herbal plants in the Caucasus mountains
* Underutilized pristine/organic agricultural land available for cultivation
* Already a number of producers of natural based and herbal based medicines, including
unique/innovative branded products
* Growing sales within the CIS
* Potential to break into the EU market with investment into EU-demanded standards, licensing, and
marketing
15INCENTIVES AND ACCESS TO FINANCE
PARTNERSHIP FUND
– 100% state owned fund
– Operating fields: Energy; Hospitality & Real Estate, Manufacturing, Agribusiness
– Finances up to 49% of equity in new investment projects
GEORGIAN CO-INVESTMENT FUND
– USD 6 billion private equity fund
– Investment sectors: Energy & Infrastructure, Hospitality & Real Estate, Manufacturing, Agriculture, Logistics
– Minimum Project Size: USD 5 M
– GCF equity stake in projects: 25%-75%
PRODUCE IN GEORGIA
Mission: supporting of manufacture and agriculture industries
Government offers:
– Subsidies for loan interest payment
– Free lands/buildings for factory construction
FREE INDUSTRIAL ZONES
Four Free Industrial Zones (FIZs) operate in Poti (sea port), Kutaisi(second largest city) and Tbilisi (capital city)
If a company produces goods for export in FIZ, it is exemptedfrom all taxes except Personal Income Tax (20%), which is paidfrom employees’ salaries
Successful Cooperation with International Financial Institutions
STATE AGENCY
* Promoting Georgia internationally
* Supporting foreign investments and investors
before, during & after investment process
“One-stop-shop” for investors
Moderator between Investors, Government and Local
Companies
GEORGIAN NATIONAL INVESTMENT AGENCY16
01.
0 2.
0 3.
Government
Local
Companies
Mission - Attracting Greenfield and M&A Investments
Investors
GNIA
17WHAT YOU CAN GET FROM GNIA
COMMUNICATION - Access to Government at all levels/Local partners
INFORMATION - General data, statistics, sector researchesi
ORGANIZATION - Organization of site visits & Accompanying investors
AFTTERCARE - Legal advising & Supporting services
THANK YOU !
Giorgi Pertaia, Director GEORGIAN NATIONAL INVESTMENT AGENCY
www.investingeorgia.org
7 Bambis Rigi, Business Center Mantashevi, II floor 0105, Tbilisi, Georgia
Tel: (+995 32) 2 473 696
E-mail: [email protected]
