Up your stakes in Uruguay (no, that’s not a typo)

Sunset over Montevideo

by Oliver Dowson, CEO of International Corporate Creations Ltd

The first thought of companies looking for business opportunities in South America is unlikely to be Uruguay – yet for many, that could be the ideal location to set up.
The country is best known for agriculture, especially beef farming – in fact, cattle outnumber humans by nearly 4 to 1 (12 million cattle, just 3.5 million people) and over 80% of the land mass is dedicated to meat production. So very few businesses are likely to consider it as an export market.

So, to attract international investment, the country has re-invented itself as a hub for business across the whole of South and Latin America. Taking advantage of its central location and time zone, Uruguay has set up Free Trade Zones which provide advantageous facilities for distribution, manufacturing and services to be delivered to all those huge markets around it – Brazil, Argentina, Chile, Colombia and others.

Visiting, as I did recently, one cannot help but be impressed. Although there are of course still enclaves of “real South America” in Montevideo, generally the city is uber-modern and buzzes with life. It has benefited enormously from years of political stability, and great strides have been taken to rid business of bureaucracy. As a result, it’s now the easiest country in South America to set up in and do business from. The fact that basing in a Free Trade Zone means zero taxes just feels like icing on the cake.

Although I admit to loving all South America, I have always avoiding favouring any one country. However, I do feel very positive about Uruguay. I’ve always found it very difficult to convince the businesses I talk to in Europe and North America of the potential of South America – but perhaps this is the place that can “tick all the boxes” and convince doubters of the value.
With my own experience of running service sector businesses in the region, one thing that particularly impressed me was the language capabilities. Obviously Spanish is the national language, but being bordered by its much bigger neighbour Brazil, many people also speak Portuguese. English is taught in schools from an early age, resulting in wide fluency. When I set up businesses myself in the past, I went to Brazil, as it was impossible to find enough staff in Colombia, Argentina or Chile who could speak Portuguese – and so I’ve now been kicking myself for never thinking of checking out Uruguay.

I visited three excellent examples of FTZ-based businesses, each demonstrating a different aspect of the value of choosing to base in Uruguay.

The first manufactures generic drugs for export throughout Latin America. The Science Park FTZ offered them literally a greenfield site to build a state-of-the-art facility, staffed by highly qualified local personnel but also exploiting robotics wherever feasible. The tax-free status was clearly a key factor, but the major points were the ease of export to all regional countries (and taking advantage of Uruguay being a member of the Mercosur tariff-free group of countries) and minimal bureaucracy.

The second was a vast distribution centre, importing a wide variety of products in bulk, and repacking them to meet specific retail orders to deliver to duty-free shops in airports throughout the continent. The value of being in one of the only free trade zones in South America, with a major port and airport within a short distance, no import or export duties and minimal paperwork, really came home here.

But it was the third example that registered with me as the best opportunity of all for the companies that I regularly talk to in the services sector. The company I visited is a sort of Latin version of Amazon. It has based its entire customer service operation in Montevideo and is now expanding its management team – it’s grown in just a few years from a dozen people to several hundred. Apart from the tax-free status of the FTZ, the real business benefits are the central location, multi-lingual staff and convenient time zone – which works not just for Latin America, but for the USA and Canada as well, of course. This is a model that can be replicated on quite a small scale, and SMEs looking to expand services across the Americas – and those that may have thought this to be an “impossible continent” – should definitely consider basing their operations in Uruguay.

It’s also a very civilised place to live, so, whilst you probably don’t need expats to run your business, any that you bring over should be very happy. Montevideo is a modern city, bordered by what seems to be unending beaches. And if it’s too quiet for you, Buenos Aires (Argentina) is just an hour by hydrofoil over the River Plate.
There’s a lot of support and advice available from the investment authority, Uruguay XXI, and specific to the services sector, Uruguay Smart Services – and, of course, my own business, International Corporate Creations, is always ready to advise and provide practical assistance for international expansion to any country in the world.

One of the Free Trade Zones in Montevideo
Montevideo Port
On the top of the Uruguay World Trade Centre Montevideo

Turbulent times require an international solution

Global Access of Service and Technology Solutions System
Nationalism is resurgent. Brexit continues to be the known unknown, but is looming. The pound has fallen and shows no sign of recovering much. Inflation has started to rise. So have business insolvencies. We’re heading into the unknown of Brexit. We’re in the throes of an election that is at best diversionary.
All the indicators are scary, but despite them, much of British Business is doing what it does best. Keeping calm and carrying on. Waiting for “clarity” before taking any new action or making any investments or changes. Which is, of course, courting disaster.
As you’d expect me to say, the current uncertainties make internationalisation a top priority for businesses, especially those in the services sector. However, I’m coming from a different angle here.
The Brexit priority seems to be cutting immigration. Potential European immigrants, however, aren’t waiting for a change of policy – they’re already going somewhere else – and many who are already in the UK are looking for opportunities to leave. This is a problem for almost all businesses, even those that don’t currently employ any (and it’s not just the health service that’s dependent on foreign labour).
Fewer immigrants means it will be more difficult to hire. Some politicians seem to think that there is a vast pool of domestic labour that is being neglected by employers who would rather hire foreigners. Any business person could tell them that there is no prejudice against nationals in any company here – the vast majority of that pool of unemployed Britons either can’t work, won’t work or are unemployable. To solve the problem, we welcome and hire young, talented and hard working people from Europe and the wider world.
Following basic economic rules, a reduction in the supply of such people will increase the cost of all labour, as employers are forced to offer higher salaries to attract the staff they need from a scarcer offering. Deliberate cuts to profitability are limited, so, coupled with the higher prices now seeping through from exchange rate changes in 2016, we are bound to see an accelerating inflationary spiral.
One solution is to hire abroad, in countries where the skills you need are more plentiful and costs are lower. I’m not advising outsourcing – that takes away your control and generally increases costs – but setting up a subsidiary operation.
Entrepreneurs in the services sectors tend to shy away from this idea, or limit their interest to offshoring back office jobs. But why? The businesses that they serve, especially the younger and more dynamic ones, don’t expect local friendly face-to-face chats with their solicitor or accountant. In the modern world, everyone’s used to online access and video conference calls, and is happy if it means the service costs less or has other advantages such as 24/7 service.
Moving a lot of the work offshore to your very own subsidiary, retaining the core skills and entrepreneurship here, can ensure sustainability for the business and increase profitability.
Making new sales to an international market from that base can also guard against currency fluctuations. Companies already exporting services can, by moving the centre of delivery away from their home country, avoid any new trade barriers and guard against negative and nationalistic sentiments that may arise in their existing markets (think “America First”). Similar benefits can be had by manufacturers moving final assembly abroad.
Done the right way, creating a new overseas subsidiary can be quick and cheap to set up. In most cases, it could be trading within 6 months and be self-financing in the first year. Come on, small UK businesses, what are you waiting for?

Expanding to Dubai – the Hong Kong of Arabia

Dubai is to Arabia what Hong Kong is to China – a super-modern, accessible, Western-friendly tax-free economic and tourist hub that bridges the divide to countries all over the region that appear more challenging to business. So it’s hardly surprising that so many companies are interested in setting up there, or in one of the other Emirates.
While Dubai’s economy originally relied on oil, gold and jewellery, there has been huge diversification, much of it driven by foreign direct investment. So, although it imports over $200bn of goods annually, around half of that value is re-exported. The burgeoning services and tourism sectors account for an even greater proportion of the economy.
Setting up a branch or subsidiary is not without hurdles, of course. The first decision, which puts off many, is whether to set up in a Free Trade Zone (FTZ) or on the “mainland”. The original concept of FTZs is to encourage inward foreign investment, typically by offering reduced or zero taxes and government-sponsored facilities. In the case of Dubai, FTZs are promoted on the basis that they allow 100% foreign ownership, whereas “mainland” companies need a minimum of 51% UAE ownership.
Although there are all sorts of restrictions on what business can be carried out, and where and to whom one can sell, B2B businesses shouldn’t be fazed – they just need to pick the right FTZ. B2C businesses that want to sell to consumers in the UAE, however, will need to be on the “mainland”, and will need a local partner. That’s often not as difficult to find as one might expect, and, with the right advice, there are ways of avoiding having to cede much control or a massive share of the profits.
For those going the FTZ route, the next step is picking the right one to set up in. That sounds easier than it is. There are 39 FTZs in Dubai alone, and more domiciled in other Emirates (e.g. Sharjah and Ras Al Khamah) that permit companies to trade in (and sometimes even work from) Dubai. The FTZs vary in terms of the types of company activity permitted or encouraged, facilities, costs and (to a limited extent) bureaucracy.
All FTZs have physical boundaries, but most are simply clusters of office towers and warehouses that one can drive through without being conscious of having crossed any boundary. One of the larger and typical ones is the Dubai Multi Commodities Centre (DMCC), which covers around 200 hectares to the West of Dubai. There are around 12,000 companies set up here, increasing by 150-200 per month.
The location of the FTZ only becomes a concern where the business needs physical premises. Perhaps the majority of the businesses starting up in Dubai are small, with just one or two staff who will work from home, so they can avail of flexible arrangements available from some of the FTZs.
Objective and independent advice on choosing the right FTZ is essential – and yet, perhaps surprisingly, it is not always sought or taken. There are many local agencies offering setup services (and in some cases the FTZ Authority itself might provide those services), but almost all “prefer” one or two FTZs they will steer clients towards and offer headline-grabbing low fees.
Beware, though, of the hidden costs. Simply obtaining, notarising and legalising the necessary paperwork can cost more than the setup services themselves. Different FTZs have very different licence fees and unexplainable differences in bureaucracy – set up times can vary from 4 to 26 weeks. And that’s under pressure – local agents need a lot of chasing, which can be very costly with your time.
Businesses need bankers, accountants and lawyers, and setup agents again steer clients towards their favourites. It’s clear that commission payments are an important consideration. Over the years I’ve made a point of personally visiting every business that our clients will have to rely on, to ensure that they are solid, reliable and meet Best Practice in business probity. That’s a good idea everywhere, but definitely essential in Dubai, where (regrettably) I’ve met quite a few charlatans.
So take good advice, and don’t be put off by apparent barriers. Dubai is a great location for business expansion. It’s easy to work, it’s perfectly situated for trading all over the Middle East, almost everyone speaks English, and it’s got great weather, beaches and things to do, so almost everyone will be happy to visit regularly.

Don’t freeze! Expand!

Watch For Wildlife. Large SUV in Front of a Deer in Deep Forest at Night. Road Danger at Night. Deer Crossing. Wildlife Photo Collection.
Deer in the headlights!

Business hates uncertainty. We’ve been seeing real and scary indications all year through that global trade from the UK has been getting paralysed, and now it seems likely that the USA could be slowing down as well. All of this is driven by uncertainty over the future – in the case of the UK, caused by Brexit, in the USA by the election of Trump.

The brave words of UK politicians do not seem to be feeding into business activity. A survey by a manufacturers’ organisation, EEF, shows most businesses freezing or reducing investment, saying future uncertainty is the reason. A report by the Institute of Chartered Accountants points to an expected slowdown in domestic sales, so even if exports increase because of a weaker pound, the overall business outlook is fragile at best. The rising costs of imports are making employers cautious about spending more on new hires and increasing salaries, and most expect that salaries will rise slower than prices, which would mean living standards drop in 2017. Yet another report from Hitachi Capital says that 42% of large and medium-sized UK firms cancelled or put off investing following the Brexit vote

It’s not unusual, of course, to read about British businesses being reluctant to invest in plant, machinery and training – that’s been a recurrent theme for many years. Sadly, however, we’re now seeing businesses not investing in international expansion (or any expansion). Last month I attended  the Global Expansion Summit in London – one of the best-organised events of its type in years – but only a tiny minority of the audience represented businesses ripe for such expansion; the bulk were service organisations looking for business.  Anecdotal evidence points to low audiences in other events targeted at established businesses.

I see this “wait and see” attitude as a terrible mistake.  I’m not into nostalgia, but I think my own experience is relevant here.

Back in 2006-07, when no-one saw the 2008 crash coming, I worked on setting up subsidiary businesses in Australia, Japan and Brazil. All of them were initially very small, and intended just as customer support centres to solve time zone issues and provide a foothold for potential future expansion. The total setup costs were small, and operationally they were cost-neutral as we saved on labour in the UK and USA.

It turned out to be remarkably fortuitous. When, a couple of years later, business dried up in the UK and the USA, we switched sales effort to Australia and Japan, where economies were expanding. We moved backroom operations to Brazil, where costs were a quarter of those in the UK. Result? Global turnover and profits both increased by 50%.  We now had a small multinational valued at more than double the original UK-only business.

I’m not saying that there’ll be another crash – but I do advise all business owners to plan international expansion now. Not only is there no need to wait to see what happens – it would be foolish to do so.

There are great opportunities for so many businesses – and exporting is only one of them. Manufacturers setting up assembly operations in other countries can benefit from free trade agreements already negotiated to sell to a wider region. Most medium and larger companies can benefit from setting up service centres, not only from much lower costs but also a greater availability of the skilled labour that seems likely to become much scarcer here. Those lower costs and high skills can enable some companies to perform R&D that they simply couldn’t otherwise afford.

Whatever the reason, companies benefit from cushioning against risks of recession and exchange rate volatility – and, most importantly of all, massively increase their valuation for that inevitable eventual IPO or trade sale. The answer to all this uncertainty isn’t to wait and see – it’s to expand overseas right now.

by Oliver Dowson, CEO, International Corporate Creations Ltd.

What’s the first step to start your business?

Well the very first step is to have a great business idea!

Then you have all the bureaucratic and legal steps such as choosing the right business structure, the business name, logos, accountants, office and facilities, marketing strategy, etc. But how do you turn the idea into a profitable business? Here are some thoughts.

1 – Start by analysing your own problems

The easiest and most direct way of achieving that a-ha! moment is to come up with a product or service that you want to use yourself. Think about something that you need and cannot find the solution anywhere else. What is your need? And how do you fulfil it? The advantage of creating something for yourself is that you might find out there is a huge market for it as other people are looking for the same solution. You’re passionate about what you do because you’re solving your own difficulties and it works as a simple way of testing the quality of the idea!

2 – Execute your idea

How many times have you heard people saying – I’ve got this idea – but never tried it – they could have been millionaires by now – who knows? More important than having the idea is executing it. You have a problem, find of a solution, test it and see how much it is worth. It might not be successful the first time around, but do it!

3 – Make the time

“I don’t have the time” – make no excuses. Manage your time efficiently, define the priorities for that day and replace those 2 hours on the sofa in front of a TV to work on your project. As soon as you start, you’ll be sure whether this is something serious enough for a business or just something you could do as a hobby. If, after a while, you see it doesn’t work you haven’t lost anything at all – just a few hours of your life.

4 – Define your limitations

If your product is not for everyone that’s ok, as long as it works for some. Your “customer” (even if this is a friend whom your showing your business idea to) may feel insulted because you do not want to add another service or feature to your product/service – and that is ok if you truly believe in your project. Your limitations are set by answering the question: “Why you are doing this?”

5 -Mission possible

Plan your business in a way that you only commit to what you can do, working within your limitations. This doesn’t mean you’re just being safe, you’re being honest about it. You can promise you’ll provide your product/service to the best of your abilities but don’t fall into the trap of promising the best service they’ll ever get. Set the expectations into a realistic level.

6 –What do you REALLY need

If all the bureaucracy seems a lot to take in and is already scaring you, take a second thought: do you need all of that in the first stage? Maybe you can start in a shared space instead of a river view office with ridiculous service charges? Can you reply to your own emails and handle and all the workload for the first 3 months? Can you start straight away instead of in 6-months’ time? At a later stage, you might need a more complex plan but outline what is imperative to have.

 The best time to plant a tree was 20 years ago. The second best time is now.” – Chinese proverb

 

by Joana Miranda, Manager Admin at ICC – International Corporate Creations

INTERnational Expansion by ICC

icc-expansion-intelligence

Working with ICC,  we’ll take you and your team through a logical 5 step process designed to help that you maximise the value of your business in every possible way, while minimising your risk and ensuring control of investment.

ICC’ll find the best way for your company to:

  • Grow sales
  • Reduce costs
  • Increase your business valuation

We’ve successfully conceived, built and managed international operations for ourselves and our clients in many countries. We know how to do that at the lowest cost and at the same time extract the highest value.

Contact us to learn more!

 

© ICC – International Corporate Creations Ltd

5 key reasons why International Expansion drives up M&A interest and valuations

International expansion should be a no-brainer for SMEs that have achieved critical mass in their home market.   But although I’ve never seen it cited as a reason, perhaps it should be a key consideration for those anticipating eventual exit routes via M&A.

Stating the obvious, increased sales has immediate impact on revenues and profits.   Every country tries to encourage its businesses to export more, but most rely on finding agents and distributors to sell their products and services.  Companies that set up their own international subsidiaries deliver far better results.

But there’s a lot more to international expansion than just increasing sales.   For example, it offers insurance against localised recessions and currency volatility.   As a rule, countries that are resilient when others are suffering recession not only maintain their local markets, but their currency increases in value.   US and UK companies that had operations in Australia benefited massively during the 2008-2010 recession – purchasing power was maintained, and the Australian dollar rose dramatically.   As a result, sales volume increases of 10% translated to revenue increases (when expressed in USD or GBP) of over 50%.  Many companies that had expanded internationally survived when they might otherwise have sunk, and some even grew their global revenues and profits.

Even companies that have nothing to export, but a reasonably sized headcount, can expand abroad.  Setting up Shared Service Centres in lower cost economies – typically to process accounts or manage HR or IT – reduces business costs and increases profitability.  Many companies think they are too small, or have unfounded fears of complications, and may dabble in the water by going to Outsourcing.  However, if it’s big enough to outsource, it’s probably big enough to set up one’s own subsidiary to do the job – and doing that will not only give the company proper control, but typically be 30-40% cheaper.

Future expansion of those SSCs to add in more highly skilled R&D operations can then take advantage of skilled labour that can be difficult to recruit and retain in developed countries.  Such staff often prove far more enthusiastic for the company than domestic recruits, and deliver much higher productivity.

But perhaps the biggest reason of all for international expansion is that turning a domestic business into a multi-national, however small, massively increases the valuation of the company for M&A purposes.  EBITDA, the common basis of most valuations, will be higher anyway, as a result of the increased sales and reduced costs that derive from the international operations.  The fact that a business is international as opposed to being in a single country demonstrates the vision and capabilities of the owners.   Further, it also opens up interest from new potential purchasers who may be attracted by exploiting the company as a fast track route to expansion to new markets that they do not already have covered – pushing up multiples of EBITDA.

So why are there so many companies that remain obstinately insular?   Some think the costs will be too high, some doubt they have resources to cope, some still are even scared by different languages and cultures.  All of those beliefs are wrong.  Businesses should grasp the nettle – expansion can be easy.

 

Article originally published in ACQ Magazine by Oliver Dowson, CEO at ICC – International Corporate Creations https://issuu.com/smartwave/docs/gamechangers_five_sixteen/44

 

New countries lead the way in Asia

There are a lot of countries in Asia – but most businesses tend to think only of a few when considering international expansion or investment.   Interest in China has faded as more realise how difficult it is to deal with, and outsourcing to India is drying up as wage inflation eliminates its competitiveness.   The tiger economies of Japan, Singapore, Taiwan and Hong Kong continue unabated.  However, those looking for new opportunities, whether it’s a matter of tapping export markets or seeking better value and quality manufacturing or outsourcing, should look elsewhere. 

The biggest “rising star” country in the last few years has been Malaysia.  The reduction in red tape has been notable, and strong action has been taken against corruption.  The government is pushing Kuala Lumpur as a regional and international financial centre (particularly for Islamic finance).  However, it’s a great country for trade from many other perspectives – good value, good infrastructure and communications, growing market and a well-educated workforce.   Like most of the countries I’m including here, it’s in the ASEAN Free Trade Area, so establishment in any one of them can open up significantly wider markets.

Philippines fell out of consideration in the 90’s for various reasons, but foreign business interest has been increasing in the last few years.  It is arguably the best country in the region for Shared Service Centres and Outsourcing, and has been taking business away from India, with its flexible workforce and excellent English language skills.  Other types of business face difficulties that can’t be overcome – it may be one country, but made up of over 7,000 islands, and plagued by typhoons on an annual basis, so economic activity is centred in just two or three locations. 

Recently, the most heavily promoted country for trade has been Indonesia.  There are many government incentives and the statistics are all encouraging, but many shy away because of security concerns. 

Vietnam’s economy continues to expand rapidly, and it’s a country worth considering as a more manageable alternative to China – although there’s still plenty of red tape.  For a number of years the pace of inward investment exceeded the availability of skilled personnel, but that issue is quickly being overcome.   Trade treaties with China and Japan, as well as other ASEAN countries, make Vietnam an attractive base.

Slightly more intrepid businesses that want to stay ahead of the curve should now be looking to neighbouring countries which are now opening up.   In my opinion, Cambodia will rival Vietnam and Malaysia within another five years, and although smaller, Laos won’t be far behind. 

The country that over the last few years has emerged from nowhere – in business terms – is Myanmar (Burma).  There have been rapid changes since 2010, five years before the new democratic government led by Aung San Suu Kyi came to power – and there were a lot of regional business leaders already negotiating deals there when I first visited in 2013.  It is a big country, most of the labour force work in agriculture, the infrastructure is terrible and the education level is poor, but the opportunities feel terrific. 

Other major countries in Asia have been declining as attractive business destinations.   Thailand has labour availability issues as well as a system that discourages foreign business ownership.  South Korea is a vibrant economy boasting some of the world’s leading brands, but is difficult for foreigners to penetrate, with almost all economic activity in the hands of a small number of powerful “chaebol”, and the country feels to be in gentle decline.   Sri Lanka and Bangladesh continue as important textile manufacturing centres, but rarely figure in any other international business considerations. 

Asia as a whole remains as attractive and important as ever – but it’s the emerging countries that are the most exciting.

 

by Oliver Dowson, CEO at ICC – International Corporate Creations

8 Do’s and Don’ts for businesspeople facing Brexit

  1. DON’T go to any seminars, conferences or events dedicated to talking about Brexit. You have better things to do with your time. I can paraphrase them all for you in one sentence – “We have no idea what is going to happen, but when we do we will have an opinion”.
  1. DON’T think that because some economic indicators are improving, Brexit has passed, the experts were wrong, we’re all still alive and it’s no big deal. It’s all still to happen…. and it could take a long long time.
  1. DO panic – or at least make plans. Business people are supposed to be permanently optimistic, but this time take a break to be a pessimist. Think what the worst scenario could be for your business, and then plan accordingly. The government won’t tell us what their plans are until it’s too late for you to take effective action.
  1. DON’T lose sleep though. At least, not over Brexit. It won’t turn out as bad as you’ve been imagining it while you made those plans.
  1. DO change any branch offices that you may have in other EU countries to subsidiaries instead. It’ll take a little time to organise and it’s better to do it now in case any new rules come in.
  1. DO discuss contingency plans for any EU staff you have in the UK and UK staff you have in the EU, before they make their own. Most politicians say that nothing will change for employees already in place, but this is a time when it’s wise not to assume anything. Your staff are your most critical asset, and they’ll be worried about this, even if they’re not saying anything to you.
  1. DON’T stop planning your international business expansion. Whatever happens, your business will make more money in the short term and be worth more in the long term if you expand your operations internationally. In the worst case scenario, you’ll have another established business base in a less volatile location. It’s short-sighted to hold back on investment – and in any case, setting up overseas doesn’t have to cost a lot.
  1. DO please ask me and my team for advice on points 4 and 5 (and possibly 2 as well!).

 

by Oliver Dowson, CEO at ICC – International Corporate Creations

Georgia on my mind

International business expansion can bring even more successful and rapid results where there are unique opportunities.   So I’m always on the lookout for them, especially in countries that aren’t top of most people’s lists.  Last week I visited Georgia, and discovered an incredibly exciting pace of growth in a beautiful and welcoming country that exceeded all my expectations.  As soon as you step off the plane you start to see the potential.

It’s a small country with a population of just 3.5 million, and from 1921 to 1989 was part of the USSR.  Now it has reverted to proud independence, and is capitalising on its geographic position at the “crossroads of Europe”, a logical transport link between Asia and Europe.   As a result, most Foreign Direct Investment has been in infrastructure – new rail lines and motorways, and a deep water port in Anaklia on the Black Sea coast.   Now the country is starting to focus on other opportunities, and I see excellent potential for mid-range businesses – but it will be necessary to grasp them quickly.

At present, getting there can be a challenge – there are relatively few direct flights from Western Europe to the capital, Tbilisi (and none from the UK), and almost all of those arrive and depart at an unconscionable hour of the early morning.   That’s set to change over the next year, with budget airlines now negotiating access to other airports that are convenient both for the capital and the coast.  Once landed, immigration is a breeze, and it’s just the first warm welcome one receives.

In recent years Georgia has modernised rapidly, with glitzy new buildings and malls, but all the history has been retained.   The old town of Tbilisi is charming, and the remote cave monasteries fascinating – and between the two is some of the most beautiful countryside in the world.  The coastal resorts are similarly stunning.  Costs are low, the people are welcoming, summers are hot and sunny, the food is delicious – and it’s the country where wine was invented.  The potential for developing tourism, therefore, is huge, and arguably the top motive for FDI.

The country is also justifiably proud of being rated the 3rd safest in the world, and ranks highly for ease of doing business, economic freedom, lack of corruption and economic stability.   Taxation, an important consideration for most businesses, is simple and low – it claims to be the 9th lowest tax burden country in the world – and new policies from 2017 will make the system more attractive still.

I met with the Ministry of Economy, and learnt that their other priorities are energy, transport and manufacturing.  Even without the attractive government incentives, the free trade agreements with the EU, EFTA, CIS, GSP and Turkey, availability of a young educated workforce with low labour costs (average US$ 355/month) and inflation at a low 4.2% make a compelling case for considering manufacturing.

One thing there is no shortage of is water, and only 20% of the potential for hydro-electric generation has been exploited.  The value here is not just domestic, but in exports to Turkey and Russia, neighbouring countries with power deficits.

I was quickly convinced that almost every type of business should think seriously about expanding to Georgia – the time is right.

 

by Oliver Dowson, CEO at ICC – International Corporate Creations