Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698055270054.pdf (Georgia)
01 Georgian Economic Outlook November, 2015 Country Overview Resilient Economy Proved by Sovereign Credit Ratings Area Population Life expectancy Official language Literacy Currency GDP: 2014* 69 700 sq km 3,7 mln 72.9 years Georgian 100% Lari (GEL) US$ 16.5 billion GDP - real growth rate 2014 4.6% GDP - Per Capita 2014 US$ 4,426.3* Inflation rate 2014 (average annual; e-o-p) 3.1%; 2.0% Public External debt to GDP 2014 26.8% * Source: GeoStat & MoESD calculation (according to Census, 1st January 2015 ) BB- Stable BB- Stable Ba3 Positive MoESD Georgia in International Ratings Doing Business, 2016 Index of Economic Freedom, 2015 Heritage 1 2 3 Singapure New Zealand Denmark Estonia Lithuania Latvia Georgia Armenia Russia Turkey Azerbaijan Ukraine Georgia /2006 16 20 22 24 35 Up from #112 in 2005 51 55 63 83 112    “Globally, Georgia improved the most in the areas measured by Doing Business over the past 12 years” “Georgia made improvements in all 10 areas included in the aggregate distance to frontier score, through 39 regulatory reforms” “Georgia stands out in Europe and Central Asia for having made big strides toward better and more efficient business regulation” Source: WB Significantly improved position in Property Rights Hong Kong 1 Singapure 2 New Zealand 3 Estonia 8 Lithuania 15 Georgia 22 Latvia 37 Armenia 52 Turkey 70 Azerbaijan 85 Moldova 111 Russia 143 Belarus 153 Ukraine 162 76.8 74.7 73.0 69.7 67.1 89.6 89.4 82.1 free (100-80) mostly free (79.9-70) moderately free (69.9-60) mostly unfree (59.9-50)
 repressed (49.9-0) Up from #99 in 2005 63.2 61.0 57.5 52.1 49.8 46.9 World Economic Freedom, 2015 Fraser 12 19 22 Up from #62 in 2003 35 1 2 3 Hong Kong Singapore New Zealand Georgia Lithuania Estonia Latvia Latvia Turkey Russia Moldova Azerbaijan Ukraine 71 82 99 103 118 128 MoESD Corruption Free Government & Good Governance Global Corruption Barometer 2013 Free Industrial Zones World Governance Indicators 2014 “Produce in Georgia” 1% 3% 4% 5% 6% 7% 7% 8% Denmark Norway Georgia UK Estonia Romania USA Bulgaria Czech Rep Armenia Latvia Turkey Greece Lithuania Serbia Kazakhstan Ukraine % admitting having paid a bribe 15% 18% 19% 21% 22% 26% 26% 32% 37% 70% of surveyed thinks that corruption has been decreased Source: Transparency International Singapore Estonia USA Czech Rep. Georgia Hungary Italy Romania Bulgaria Turkey Albania Armenia Serbia Moldova Bosnia & Herz.
Kazakhstan Azerbaijan Russia Ukraine 100.0 93.3 88.5 81.3 79.3 up 5.6p y/y 74.5 72.6 71.6 71.2 66.3 60.6 60.1 56.3 53.8 49.5 44.7 43.8 36.5 28.8 Ahead of 10 EU member countries Source: WB Georgia improved ranking in all 2014 WGI  Voice & accountability - up 1.2p y/y to 55.7  Political stability - up 3.7p y/y to 35.9  Government effectiveness - up 2.2p y/y to 71.6  Regulatory quality - up 5.6p y/y to 79.3  Rule of law - up 10.8p y/y to 64.4  Control of corruption - up 9.5p y/y to 75.5 MoESD Simple, Low, Efficient and Fair Tax System 03 Tax Misery & Reform Index 2009, Forbes - 4th Least Tax Burden Country in the World Number of Taxes VAT Personal Income Tax Property Tax Import Corporate Profit Tax Excise 6 Flat decreased form 21 18% 20% Up to 1% 0%, 5%, 12% 15% Varies Double Taxation Avoidance Treaties with 49 countries Dividend and Interest Tax 5% No Social insurance Tax • Payroll Tax • • Capital gains Tax • Wealth Tax • 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 47 countries MoESD Growing & Diversified Economy Nominal GDP and Real Growth Growing GDP Per Capita 20 15 10 5 0 n o i l l i b $ S U 12.6% 9.4% 10.2 7.8 12.8 2.6% 15.8 16.1 16.5 6.4% 4.6% 14.4 7.2% 3.3% 10.8 11.6 6.2% -3.7% 2006 2007 2008 2009 Nominal GDP 2010 2011 2012 2013 2014* GDP real growth $ S U 5000
 4500 4000 3500 3000 2500 2000 1500 1000 500 0 4,426 ,3523 3,600 3,231 2,921 2,455 2,623 2,315 1,764 2006 2007 2008 2009 2010 2011 2012 2013 2014* Average real GDP growth (2003-2014) Diversified Economy GDP 2014* 7% 6% 5% 4% 3% 2% 1% 0% 3.3% 3.6% 4.0% 4.1% 4.1% 2.5% 2.6% 1.3% 6.3% 4.8% 7% 6% 5% 4% 3% 2% 1% 0% y r a g n u H e n i a r k U c i l b u p e R h c e z C Source: IMF, GeoStat Top performer in the region other,
a i g r o e G Top performer in the region other, 22.9% Trade, 17.5% Healthcare, 6.0% Construction, 7.1% Industry, 16.9% Transport & Communication, 10.4% Agriculture, 9.3% Public Administration, 9.9% Source: GeoStat MoESD Foreign Direct Investment In 2014, FDI to Georgia amounted to 1,758.4 mln USD which is not only 86,7% increase compared to 2013, but also the highest yearly indicator over the last 6 years.
FDI Share in GDP – up from 6.1% to 10.6% in 2014 2500 2000 1500 1000 7.0 n o i l l i m $ S U 19.8 15.3 12.2 7.0 7.7 6.1 5.8 5.8 10.6 FDI inflows 25 20 15 10 5 0 % Georgia  has Bilateral Investment Treaties (BIT’s) with the 29 countries • (negotiations launched with 2 countries)  is member of ICSID Convention (since 1992) Largest Investor Countries 2014* Netherlands Azerbaijan China USA Luxemburg United Kingdom Russian Federation 21% 19% 12% 10% 6% 6% 5% 500 0 450 1,190 2,015 1,564 658 814 1,117 912 942 1,758 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* FDI share in GDP (%) FDI Breakdown by Sectors 2014 Transport and Communication 2% 11% 6% 7% 8% 11% 12% Construction 25% Manufactuing Energy sector Real estate 18% Financial sector Mining Hotels and restaurants Other sectors Source: GeoStat MoESD EU Duty Free access to 500 mln market Since September 2014 CIS US, Canada, Japan, Norway, Switzerland Turkey Most Favored Nation (MFN) since 2000 Liberal Trade Regimes 56 FTA with EFTA – ongoing negotiations Duty Free access to additional 14 mln market FTA with China– negotiations will start in nearest future Access to additional 1.5 bln market Access to ~ 900 Million market without duty DCFTA FTA GSP  Simple, transparent & business oriented customs FTA procedures  Efficient tax administration  No quantitative restrictions and tariff barriers  Average Customs Clearance ~ 15 minutes  0% of customs duties over 80% of imports  0% customs duty on export  0% of VAT on export  Maximum customs duty on imports –
 5-12% MoESD Well Developed Infrastructure 16 Sea Ports Poti Sea Port Port has 15 berths • • Total Capacity - 10 million tones annually • Capacity of the container terminal - 500 000 TEU cont.
annually • Owned/Operated by APM Terminals Existing Road & Railway Rail • • 2 344 km (100% electrified) 7,400 rolling stock, 144 locos Port has 11 berths Batumi Sea Port • • Total Capacity 17 million tones annually • Capacity of the container terminal -100 000 TEU annually • Operated by JSC KazTransOil Kulevi Sea Port • • Annual capacity 5 mln tones annually • Owned/operated by SOCAR (Azerbaijan ) Port has 2 berths Road 1,500 km international road 20,000 km internal and local roads • • • East-west highway project International Airports Tbilisi International Airport • • 1.5 mln.
passengers (Capacity - ~ 3 mln.)

Serving 32 destinations Batumi International Airport • • 210,000 passengers (Capacity – 600 thsd.)

Serving 11 destinations Kutaisi International Airport • • 218,000 passengers (Capacity – 600 thsd.)

Serving 9 destinations Supsa Terminal Capacity: 5 mln tones annually Operated by BP Poti Sea Port • Poti Port has a potential to increase its cargo- handling capacity up to 25 million tons of cargo per annum.
Planned Rail • Baku-Tbilisi-Kars new railroad line Modernization • Tbilisi Railway Bypass Anaklia Deep Sea Port • Capable of accommodating Panamax size cargo vessels • High capacity – up to 100 mln.
tons turnover annually Road • East-west highway • Rehabilitation of existing infrastructure Tbilisi International Airport • • 2nd runaway to be constructed International Cargo terminal Kutaisi International Airport • Runaway extension • Cargo Terminal MoESD Energy Sustainability & Potential Diversified energy supply sources Net electricity exporter since 2008  One of the top countries in the world by the water resources per capita International Investors  Second in the Europe by the water reserves amount  300 rivers out of total 26,000 for electricity generation  Currently, only 20% of hydro potential is utilized  Hydro Potential for development - 40 TWh  Well developed electricity transmission infrastructure  Increasing demand on electricity in neighboring countries Installed Capacity – 2,790 MW Already Licensed 3,528 MW 10 years perspective – 6,318 MW Up to USD 700 mln FDI per year Up to USD 7 bln FDI in 10 years MoESD Tourism Growing Growing International Arrivals - 95 % increase in number of tourists since 2011 4,39 mln 5,37 mln 2,82 mln 5,50 mln 2011 2012 2013 2014 2,000 1,500 1,000 500 - International Tourism Receipts mln.USD 1,720 1,787 1,411 955 241 313 384 447 476 659 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 The New York Times ranked Georgia 6-th among 52 best countries for the tourism destination  12 000 historical and cultural monuments  2400 spring of mineral waters  103 resorts and 182 resort areas;  84 protected areas  UNESCO heritage cites  Youth Olympics in 2015  Tbilisi
 Silk Road Forum in 2015  UEFA Super Cup in 2015 MoESD Tourism Prospects 60 “SUN-BEACH” RESORTS Expansion of summer “sun and beach” franchise focusing on high-end segment New master resort development All inclusive summer resorts Batumi, Anaklia, Kobuleti, Other Black Sea locations WINTER SKI RESORTS FOUR SEASON RESORTS Master development of winter resorts with unique profile equivalent to the Alps Government is fully committed to provision of basic infrastructure Main Locations: Mestia, Gudauri, Bakuriani, Goderdzi Majestic landscapes allowing for a wide range of summer tourism activities such as trekking, horse riding, bird watching and river racing Mestia, Gudauri, Bakuriani, Goderdzi, Kazbegi and other locations MEDICAL & SPA RESORTS Development of Spa Resorts Include hotels, Different types of Clinics, fitness, Outdoor activities Tskaltubo, Akhtala, Borjomi, Abastumani, Other locations GAMING INDUSTRY Development of the Gaming Industry to Serve regional markets.
Gambling Industry is prohibited in neighboring countries.

Around 70% of international visitors are nationals of gambling prohibited countries.
Include hotels, casino entertainment, family Services and shopping MoESD Georgia – Resilient Economy Influence of global & domestic factors on regional currencies Georgia used compared to peers less reserves to support GEL Weakening against US$ 25.1% 25.3% 25.6% 26.5% 13.4% 13.7% 38.9% 41.2% 34.8% 29.4% 50% 40% 30% 20% 10% 0 Source: Bloomberg Note: US$ per unit of national currency; 9 Nov 2014 - 9 Nov 2015 Reserve loss, % 60% 50% 40% 30% 20% 10% 0 Source: IMF a v o d o M l a i n e m A r n a j i a b r e z A Georgia: Strong GDP growth forecast by IMF 2016F 2017F 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% a i g r o e G .
p e R z y g r y K n a t s h k a z a K a i v t a L .

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p e R h c e z C a i r a g l u B a i s s u R s u r a l e B Source: IMF, WEO October 2015 MoESD Georgia – Government Vision & Reforms GoG’s Guiding Principles Support to development of free private sector driving economic growth trough  Transparent, efficient & optimal government  Free market economy, based on fair competition, absolute respect for property rights and independent judiciary system  Optimal model of smart regulations Some of the Important Reforms & Projects DCFTA Reforms For effective realization of DCFTA reforms are ongoing and GoG is committed to follow DCFTA Reform Agenda Digital Forecasting Transition from analogue to digital broadcasting in very short time.
Licensing requirement for broadcasters was abolished Internetization Internetization of rural regions of Georgia is ongoing Cadastre • Inventorizaion process of state owned property • Land registration throughout Georgia For full inclusion of still inactive property in economic activities MoESD Large Scale Investment Projects Anaklia Deep Sea Port Shortest Root from China to Georgia  Strategic location  Capacity of accommodating Panamax type cargo vessels  All round year transportation  High capacity – up to 100 mln.
tons turnover annually  Up to USD 1 bln for first phase (out of 9) in Georgia Expansion of the South Caucasus Pipeline through Azerbaijan and Georgia  Additional USD 2 bln FDI in Georgia  16 billion cubic meters of new natural gas to Europe and Turkey.
Construction of civil airplanes composite parts’ manufacturing plant  Additional USD 85 mln FDI in Georgia  Supply of Boeing, Airbus, Bombardier and others Construction HPP Nenskra  Investors: K-Water, EBRD, ADB  Additional USD 1 bln investment in Georgia  Additional 280 MW installed capacity MoESD Thank you for your attention Ministry of Economy and Sustainable Development of Georgia