Tbilisi Free Zone

 Information about Tbilisi Free Zone (TFZ)

How does the TFZ assist international investors?

There are many free zones around the world, with a history spanning several decades, and geographically, they are present on nearly every continent. These thousands of free zones differ in profile and operating models. The main so-called “umbrella” model is the free economic zone, which, by its very name, encompasses all types of narrow or broad profiles and activities, providing a platform for a specific economic activity where certain fiscal or other benefits exist. Governments create various types of specialized zones based on their strategic interests, such as free trade or industrial zones, as well as special zones.

In Georgia, the history of such zones dates back to 2007 with the establishment of free industrial zones (FIZs). Between 2008 and 2016, four FIZs were established in Georgia: first in Poti and Kutaisi, followed by the Hualing Free Industrial Zone in Kutaisi and the Tbilisi Free Industrial Zone.

Like all such new formations that require a proper regulatory platform, both in terms of tax and operational simplicity, as well as infrastructure development and raising awareness, Georgia’s Free Industrial Zones  faced significant challenges in terms of development dynamics during the initial years. The difficulties were compounded by an unstable regional political and economic situation and low investor interest in the region. However, since the post-COVID period, several FIZs in Georgia have begun to establish a strong presence on the regional map.

As of today, the situation is as follows: around 400-500 companies are registered and operating in Free Industrial Zones, with the majority being in the trade sector. This group of companies is mainly focused on regional import-export, covering the countries of the South Caucasus and Central Asia. A growing segment is small and medium-sized manufacturing industries, covering a relatively wide area. Among the entities engaged in such activities in Free Industrial Zones, we find not only companies from the mentioned regions but also European and Turkish companies.

As for the sectors, Georgian FIZs feature light industries, including construction materials, agricultural products, pharmaceuticals, perfumes, textiles and clothing, electronics, as well as small-scale wood processing, furniture production, non-ferrous metallurgy, new technologies, and others.

Despite having a unified legislative framework, Free Industrial Zones in Georgia differ in terms of size and profile. The Tbilisi FIZ, located in the capital, functions primarily as a trade-logistics hub with a well-developed warehousing infrastructure and smaller-scale manufacturing industries. The Poti FIZ, due to its proximity to the port and large area, is focused more on large-scale manufacturing projects. In Kutaisi, the FIZs, based on the old industrial infrastructure, feature a few medium-sized projects.

The list of advantages brought by Free Industrial Zones is substantial, especially for a developing economy like Georgia, which also serves as a strategically important logistics hub. One of the primary benefits is employment. Free Industrial Zones in Georgia cover about 400 hectares (with the Poti FIZ alone occupying 300 hectares), but despite this relatively small area, several thousand jobs have already been created through the activities of the FIZ administrations. The creation of these jobs is not just about employment but also contributes to the growth of skills and intellectual capacity within the workforce.

The inflow of foreign capital is another noteworthy effect. Due to limited access to financing from local financial institutions, FIZ companies and infrastructure mainly develop through foreign direct investments, amounting to tens of millions of dollars entering the country’s economy. For banks, this means hundreds of new clients, more turnover, and consequently, more profit.

Amid Russia’s aggression in Ukraine, Georgia’s growing role as a key player in the “middle corridor” is further elevating the function of Free Industrial Zones. Projects attracted to Free Industrial Zones are primarily export-oriented, boosting the operations of Georgian logistics and transport companies, as well as port and railway freight turnover. It is important to note the significance of growing export figures, both in terms of volume and fiscal contribution, which is crucial for addressing the country’s trade deficit.

Based on the above, it can be summarized that further strengthening of existing Free Industrial Zones will bring only positive effects to the country, both in terms of increasing material wealth and overall economic development. Therefore, it is essential to continue close cooperation between the government and the managing companies of Free Industrial Zones, in terms of optimizing legislation, ensuring infrastructure and various services, and joint promotion efforts.