On April 11, 2008, the government of Georgia signed an agreement with Ras Al Khaimah Investment Authority (RAKIA) regarding the development of a free industrial zone adjacent to Georgia’s biggest Black Sea port, Poti. The agreement was signed by Ekaterine Sharashide, the former minister of economic development for Georgia, on behalf of the government of Georgia, and by Dr Khater Massaad, on behalf of RAKIA and the government of Ras Al Khaimah in the United Arab Emirates.

RAKIA itself is an expert in setting up and running free zones. It has already launched and managed three successful free zones in the Middle East, and is in the process of finalising two in Africa (Sudan and Tanzania) and one in Asia (India).

Hassle-free business

The basic concept of a free zone is to free an entrepreneur of all restrictions to enable them to build world-class, cost-competitive, long-term, self-sustaining business enterprises that can serve customers all over the world and generate direct and indirect economic development for the area in which the free zone is located. By locating within a free zone, a company will benefit from freedom from taxes and duties, fewer import and export restrictions, and local and municipal laws will not necessarily apply to companies operating within the zone. Entrepreneurs operating within a free zone can focus fully on their business without diverting their attention on tax or regulatory matters. This therefore enables entrepreneurs to build their businesses in the shortest possible time and with minimum possible resources.

The local economy benefits in the form of job creation; higher outputs with regards to logistics, transportation and port developments; revenue from taxes accrued from sales in the local country from the free zone-based companies; the teaching of specific skills to local workers; and an indirect increase in business for airlines and hotels and the tourism, retail and entertainment sectors in general. Free zones also lead to developments in ancillary units and services outside the main business area, creating a win-win situation for all stakeholders.

Strategic Intent

As an investor-friendly company, taking into consideration the needs of EU manufacturers, RAKIA decided to set-up an ultra-modern free industrial zone with state-of-the-art facilities right on the gateway of the East and West – at Poti in Georgia. Georgia as a country and Poti as a destination are strategically located at the centre of the historical silk route connecting the East and the West. The silk route has been a key business corridor for centuries, linking traders from China, India and south-east Asia with their European counterparts.

RAKIA Georgia Free Industrial Zone LLC commenced operation on June 9, 2008. This modern free industrial zone, with world-class infrastructure and facilities, will be the first of its kind not only in Georgia but also within the whole eastern European region. Its strategic location beside the Poti Sea Port gives investors tremendous market reach, besides the cost and logistical advantages. Poti Sea Port is one of the largest on the Black Sea, and has served the trade and commerce industry for more than 150 years.

As the free zone is situated next to the Poti Sea Port, it offers investors the advantage of very low import and export costs, as local logistical and transportation demands are minimal (also, no taxes are applicable in the free zone for the import and export of raw materials). The free zone is well connected to Georgia’s railway system and road network, which offer easy access to the rapidly growing economies of Turkey, Azerbaijan, Kazakhstan and Russia. Poti’s proximity to the Black Sea coast also provides access to the key markets of Asia and the EU. Europe-based manufacturers will note that Poti offers similar cost advantages to many locations in China, India and Africa. Similarly, companies from Asia, Africa and the Middle East wishing to expand into Europe can build a low-cost base in the proposed free zone in close proximity to key European markets, which they would otherwise find prohibitively expensive to set up shop in.

Other areas in which Poti excels are:

• Infrastructure (Poti’s railways, port, telecommunications facilities and roads are all of an excellent standard);
• Low-cost skilled labour;
• A pro-business, proactive government;
• A high quality of living at a low cost;
• A low crime rate;
• Pleasant sub-tropical weather;
• Beautiful mountain resorts and beaches;
• Many places of historical importance; and
• Excellent educational and medical facilities.

These factors combine to make Poti FIZ one of the most attractive free zones within eastern Europe and the Commonwealth of Independent States.

RAKIA’s vision

RAKIA Georgia FIZ LLC’s vision is to make Poti Free Industrial Zone a global hub of manufacturing and services, and to create an investment destination of choice for investors. The company hopes to create wealth and employment and to facilitate sustainability and profitability for every investor. RAKIA Georgia FIZ LLC will symbolise excellence and offer the highest standards in customer service.

Our mission is to offer complete ‘end-to-end’ solutions to the needs of every investor and ensure complete customer satisfaction. We will ensure minimum transaction and conversion costs and enable businesses to launch in the fastest time possible. This will make investment in Poti free zone a simple, quick and a pleasant experience and will ultimately achieve the goal of improving the quality of life in the Poti region in particular, and in Georgia in general.

The Poti FIZ project is spread over 300 hectares of land and will involve investment to the tune of $400m, including investments in the Poti Sea Port. Services provided in the free zone include:

• primary and secondary roads giving complete access to all industrial plots within the project area;
• street lighting;
• water supply;
• fire-fighting operations;
• a sewerage network;
• a storm-water drainage system;
• an electric supply and telecommunication system; and
• an irrigation network for green zone areas.

The design criteria for each segment of development of infrastructure will meet international specifications to ensure that the free zone’s facilities are comparable to the best in the world.

A project presentation ceremony was held on March 13, 2009, and was attended by the president of Georgia, Mikheil Saakashvili, along with other senior officials of the Georgian government, and the CEO of RAKIA, Dr Khater Massaad. The first investors were officially awarded with a Poti FIZ licence by President Saakashvili. RAKIA Georgia FIZ LLC has already received investments from and issued licences to companies in Azerbaijan, Armenia, Turkey, the United Arab Emirates, Ukraine and Iran, as well as businesses from Georgia.

Poti Free Industrial Zone is expecting to attract investors from a variety of industries. These include:

• small and medium-sized enterprises;
• high-tech industries;
• bio-tech companies;
• companies from the building materials and engineering industries; and
• enterprises from the fast-moving consumer goods and durables industries.

RAKIA Georgia FIZ LLC is also expecting companies from the media, IT and business processing outsources sectors to be represented at the free Zone at some point in the future. Steel manufacturers, attracted by Poti FIZ’s low energy costs, have also expressed an interest in the free zone.

At present successful companies such as Aray Tomorrow (LG Products, Georgia), Zamil Steel (Saudi Arabia), Azersun Holding (Azerbaijan), Multi Group (Armenia), JBF (India), Pran Foods (Bangladesh), Ghani Glass (Pakistan), Tegetta Motors (Georgia), Mercury Holding (Iran) and Vestel (Turkey) have confirmed their interest and intentions to come to Poti FIZ.

RAKIA Georgia FIZ LLC also plans to set up an offshore financial centre in the second phase of the free zone development, which will offer all financial services to the investors from all over the world.

Poti FIZ will be officially inaugurated in May 2010 after completion of the first phase of the construction of infrastructure.