Leading Aircraft Manufacturer Opens Factory in Georgia

Elbit Systems, an Israel-based international defense electronics company, is set to open a factory in Tbilisi, Georgia.

Renowned companies, such as aircraft manufacturers Bombardier, Boeing and Airbus – the world’s most profitable companies in the aerospace industry – will be among its customers.

An estimated $85 million is to be invested by the Israeli company in partnership with the Georgian State Investment Fund. The factory will produce civilian aircraft components.

Elbit Systems manufactures military and civilian aviation, aerospace and maritime transport systems, management, control, communication, computer and intelligence systems, as well as electro-optical and other tools.

Elbit Systems has different kinds of production in several countries, including the United States, France, Italy, Macedonia, Romania, Great Britain and Brazil. Company shares are traded on the Tel Aviv and NASDAQ stock exchanges. In 2014, the turnover of the company was around USD 3 billion.

According to Nino Cholokashvili, Georgia’s head of the project, lower salaries, location and a favourable tax environment were key in the decision to start production in Georgia.

“In recent years, competition has been increasing in the market for the production of aircraft components. In response, the majority of large manufacturers are seeking alternative countries to move production and reduce costs,” Cholokashvili said. “In order to produce composite materials, for which at least 40-50% of production cost goes to labor, it is especially important to have a country where labor costs are considerably lower.”

Elbit Cyclone, a subsidiary company of Elbit Systems, produces composite materials, in the city of Haifa, Israel. But they needed to create a reserve capacity. The company chose Georgia from a number of alternatives.

The average Israeli salary is $2,500, which is about 10 times larger than the Georgian. By locating the factory in Georgia, Elbit hopes to significantly reduce costs.

In order to get onto the international market, Georgian production has to first receive ISO and NADCAF certification. Then the quality of the products have to be confirmed by the companies which are choosing to purchase the composite aircraft components.

Construction of the factory is planned for completion in 2017. Production should begin in 2018.

Approximately 300 Georgians will be employed. However, currently there are no specialists in Georgia.

According to the investment agreement, Elbit representatives will train specialists in Georgian universities, after which they will be employed. The universities where the training will take place have not yet been selected.

“The fact that this company is coming back to Georgia means a lot to me personally and to my government,” said the Prime Minister of Georgia, Irakli Garibashvili. “I know it was not fair that the company encountered problems for which the Saakashvili government had to pay compensation. Your return means that the trust that existed before has been restored,” the PM added, speaking at the meeting with the President of Elbit Systems – Cyclone, Bezhalel Machlis.

Bezhalel Machlis stated that in addition to the factory building, other projects in Georgia are also under consideration.

“This investment is very important for Georgia because aircraft manufacturing is stable. The number of civilian airplanes is expected to double in the next 20 years. This gives us confidence that our products will be sold and create additional income for the country,” said Nino Cholokashvili. “We don’t want to wait for two years until the factory construction is over. We are planning to sign preliminary agreements to sell our products as soon as the factory opens.”

Georgia believes the project will attract other corporations as well. Georgia is 15th among 189 countries in the business ratings (World Bank: Doing Business), 1st place among the Eastern European and the Central Asian countries, and 9th among the Western European countries. According to a Forbes study, Georgia takes 4th place in low taxes after Qatar, the United Arab Emirates and Hong Kong.

Ana Akhalaia

15 October 2015 21:57
Bruno Söhnle