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9 Sectors with Investment Potential under DCFTA

Deep and Comprehensive Free Space Agreement (DCFTA) provides good opportunity for not only Georgian  entrepreneurs for penetrating new markets, but they are interesting for foreign investors too.

Developing communication channels acquires special importance to introduce Georgia’s investments and new exports market opportunities to global investors. In this respect, communications strategy is an important document, because strengthening correct communication channels enables to raise the interest of foreign investors.

As part of DCFTA outer communication strategy PricewaterhouseCoopers Georgia  (PwC) conducted a research and outlined 9 sectors that have potential as part of DCFTA agreement. The project was implemented with the financial support of Great Britain Good Management Fund. The project consultants determined the following sectors after agreement with Ministry of Economy and Sustainable Development of Georgia.

  1. Berry cultures: strawberry, raspber
  2. Honey;
  3. Household chemicals;
  4. Processed fruits and vegetables;
  5. Wine;
  6. Construction Materials;
  7. Electricity cables;
  8. Jackets, coats;
  9. Silk, Silk thread and fabr

PwC consultant Nino Eliashvili pointed out that, initially, meetings were held with various offices and business associations as part of the project.  All named sectors were analyzed thanks to these meetings. Initially, 32 sectors were named and they were discussed using the example of 20 countries. Finally, 9 sectors were left and no comprehensive research was conducted on these 9 sectors. According to the project executors, finally, 3 products will be selected and the so-called Follow up will be carried out on these chosen products and deep analysis will be prepared on each of these products that will be decided by consent of Ministry of Economy.

Final report on determined 9 sectors has been transmitted to Ministry of Economy and Sustainable Development, however, Ministry of Economy does not unveil this document. Mariam Gabunia, head of foreign trade policy department of the Ministry, noted that the document will not be publicized until completion of detailed research of the sectors, while research of specific sectors will start after attracting additional funds. Currently, administrative procedures are being agreed.

“After completion of final research and issuance of specific recommendations, we will take them into account in our activity and plan future activities”, Mariam Gabunia said.

Consultant Eka Gadzadze explained research methodology in details, as well as factors that were taken into account for selecting these 9 sectors ultimately. Initially, interviews were conducted with representatives of all state and nongovernmental sectors, including Food Safety National Agency, Ministry of Economy and Sustainable Development, Invest in Georgia, Partnership Fund, Co-investment Fund and so on, about 15 institutions.

Moreover, sectors were analyzed using examples of various countries. In this direction EU nonmember countries were selected to outline which countries could be involved in making investments in Georgia and exports opportunities for EU’;

There is analysis of international markets due to the named sectors.

  1. Berry cultures: strawberry, raspberry;

Global market of berry cultures is growing and demand for this product, as one of the useful products, grows year to year. Over the past 10 years, demand for berry in Europe doubled and consumers spent 1.3 billion EUR on this product;

Top five countries producing raspberry are as follows: Russia, Poland, USA, Serbia, Ukraine. As to strawberry production countries, according to the 2013  indicators, they are: China, USA, Mexico, Turkey, Spain. Germans and Polish citizens are leaders in berry consumption. This product is popular in Scandinavian countries too.

  1. Honey

Honey is one of the products of animal origin that was admitted to EU market. Now we should maximally use this opportunity. EU ranks first in terms of honey consumption. Because of increased consumption and reduction of internal production, EU cannot satisfy domestic demand and consumers have to buy about 40% form other countries.

Honey production countries are as follows: China, Turkey, USA, Iran and Russia.

This sector may be attractive for investors, because Georgian honey, especially Alpine zone honey, is of higher value on EU market as compared to Chinese honey, while production costs are low in our country. Antibiotics existing in honey structure and other supplements represent a problem, as they exceed the norm in most cases. In case we ensure production of high-quality and  ecologically clean honey, we can easily establish our honey in the segment of top-level honey.

  1. Household Chemicals

According to Transparency Market Research, the global market of household chemicals totaled  US$27,468.6 million in 2015. According to their prognosis, the market will rise to  US$27,468.6 million by 2024. Global market of household products comprises the following groups: air cleaning aerosols, dish washing products, cleaning and laundry powders, furniture and floor cleaners, toilet cleaning products.

Germany, France and Canada are leaders in terms of use of household products. At the same time, Germany and the USA are main manufactures of the mentioned products.

According to Cleaning and Laundry Products research published by National Investment Agency in 2015, global sales of clothes washing products  made up 55.053 million USD in 2013, while sales of dish washing products marked 12.840 million USD,  aerosol sales totaled 7.327 million USD. Europe ranks first with 34% on global household chemicals market.

  1. Processed Fruits and Vegetables

Europe plays leading role on global market of processed fruits and vegetables. Germany, France and United Kingdom, Belgium and Netherlands are biggest importers of processed fruits and vegetables, quickly-growing markets are located in central and Eastern European countries. Imports of processed fruits and vegetable from developing countries made up about 25% in 2014, while in the same year total consumption slightly declined, because consumption of fresh fruit and vegetable increased over the past period.

  1. Wine

In winemaking countries, the so-called old world countries are leaders and they are traditional winemaking countries such as: France, Italy, Spain, USA and Argentina.

Major wine consumption countries are as follows: the USA, France, Italy, Germany, China, Great Britain, Argentina, Spain, Russia and Australia.

In 2015 wine consumption rose by only 0.9 million hectoliters. Over the past 10 years the world consumption records almost the same volume, however, wine consumption has changed due to countries. If previously the major wine consumption was recorded in traditional winemaking countries, now new winemaking countries appear, where wine consumption is growing at high paces over the past year. These countries are the USA and China.

Diverse natural conditions of Georgia create ideal environment for rich harvest and production of high-quality wines. 525 domestic and foreign grape varieties grow in Georgia and domestic wines are famous for unique and rich aroma. This is proved by awards obtained at international festivals. In 2014 wine exports constituted 22% of agriculture products exports. In 104 total value of exported wines made up 183 million USD.

  1. Construction Materials

According to one of the research works  (Global construction 2025), total output of construction materials will rise by more than 70% and reach 15 trillion USD as of 2025. Three countries occupy 60% of the market: China, India and the USA. However, under the report, 5% contraction is expected on western European markets by 2025. In 2010 China surpassed the USA and created a major market of construction materials. It is expected that by 2025 China’s ratio on global market will rise to 26% from 18%.

The so-called Green Construction represents one of the quickly growing sectors on the market of construction materials. Various governments make focus on this segment when planning construction projects.

  1. Electricity Cables

According to BCC Research, global market of cables and wires will rise to 297.4 billion USD by 2019. This market is divided in two parts: electricity cables and cables, which are used in telecommunication industry. A major part of total market is recorded for electricity cables and according to the same research, this segment will rise to 219.7 billion USD by 2019.

Averaged annual growth pace will be 7.5%. Electricity cables constitute 73% of total market that is preconditioned mainly by global economy growth, growing demand for electricity and increased consumption in developing markets.

According to CBI research, in 2015-2020 the importance of Asian countries (excluding China) and other developing countries will surpass such countries as Japan and European countries in terms of production, because European production is moving to comparatively low-cost regions, over the past years (2009-2014), exports considerably increased from such countries as Costa-Rica and Tunis. Because of lower expenditures, the US manufacturers removed production to Costa-Rica, while European manufacturers translocated production to Tunis.

  1. Jackets, Coats

According to indicators of Textile Plant, a project of Georgian Industrial Development Group (GIDG), the world clothes market volume constitutes 1.100 billion USD with trading value of 700 billion USD and makes up 1.8% of the global GDP. Clothes consumer market of EU countries marked 350 billion USD and it is considered the biggest market today, while China is considered the major exporter with 288 billion USD exports. Leading countries are as follows: EU, USA and Japan, which make focus on highest profitability stages of chain of textile and clothes price, such as design, marketing and distribution, while production activities are mainly concentrated on China and other developing countries such as Bangladesh, Vietnam, Pakistan, Indonesia and Turkey.

  1. Silk: Silk Thread and Fabric

Silk House business model prepared by Georgian Industrial Development Group overviews Silk global market. According to the research, silk market is huge on global level and it continues growing. Several giant countries are outlined in terms of production of  silk cocoon and silk thread. These countries occupy 80% on global market, while the remaining part is shared by smaller countries. On International silk market, main trading product is silk cocoon, silk thread and  silk cocoon wastes. China is the world’s major silk manufacturer and important trading chain with huge volume of exports and imports.

As to tendency on international silk market, the global demand for silk products is growing, along with growth in prices and output.

It should be also noted that in all countries of the world volume of exported silk cocoon and thread declines and this points to growing domestic demand in manufacturing countries.

Keti Melkadze eugeorgia.info