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Trade partners of Georgia

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The number of trade partners of Georgia has increased during the past decade which mostly was the result of signing an Association Agreement between the EU and Georgia on 27 June 2014. This agreement has entered into force since 1 July 2016 and today the EU is the main trade partner of Georgia.

The agreement introduced a preferential trade regime (Deep and Comprehensive Free Trade Area), which based on having better-matched regulations, increases market access between the EU and Georgia. It’s also noteworthy that Georgia has been a member of the World Trade Organization since 2000.

According to World’s Top Exports, Georgia shipped US$2.3 billion worth of products around the globe in 2017. The exact list showcasing 15 of Georgia’s top trading partner countries that imported the most Georgian shipments by dollar value during 2017 looks like this:

  • Russia: US$368.1 million (15.9% of total Georgian exports)
  • Turkey: $202.5 million (8.7%)
  • China: $191.6 million (8.3%)
  • Bulgaria: $173.2 million (7.5%)
  • Armenia: $153.5 million (6.6%)
  • Azerbaijan: $124.3 million (5.4%)
  • United States: $119.6 million (5.2%)
  • Ukraine: $90.8 million (3.9%)
  • Romania: $88.8 million (3.8%)
  • Italy: $65.7 million (2.8%)
  • Switzerland: $60.1 million (2.6%)
  • Spain: $58.9 million (2.5%)
  • Uzbekistan: $58.7 million (2.5%)
  • Iran: $58.2 million (2.5%)
  • Belarus: $47.4 million (2%)

Around 29% of Georgia’s trade takes place with the EU. As for EU export to Georgia, after the information given by European Commission, it is amounted to €1.96 billion in 2016. The key export products are mineral products, machinery and appliances, chemical products and transport equipment.

Georgia’s main imports are oil, motor cars, pharmaceutical products, wheat and meslin, sugar and electrical equipment. The list of main import partners includes – Russia, Turkey, Ukraine, Azerbaijan, Germany, USA and so.

On January 1, 2008, Georgia signed Free Trade Agreement with China too and became the first country from Caucasus region to have such a deal with it. According to this agreement – honey, wine, tea, mineral water, vegetables and other agricultural products will be exported to China with zero tariffs and without any more custom fees or transition period.

But this is not a first time when two countries forged strong ties. Following the information given by Georgian National Wine Agency, our wine was the most wanted export product lately and around 7,585,407 bottles of Georgian wine were exported to China last year. In general, exactly this country takes third place as the largest importer of Georgian wine.

The DCFTA and Free Trade Agreement with China allows Georgian trade-related laws to generally match internationally legal frameworks. Georgia’s adoption of leading trade countries’ approaches to policy-making will improve governance, strengthen the rule of law and offer more economic opportunities by expanding our marker. That will also attract foreign investments to Georgia.

 

Author: Tamar Devdariani © BUSINESS GEORGIA

Georgian Agriculture

Changing Agri-Business of Georgia

by business climateBusiness EnvironmentBusiness in TerritoriesBusiness MarketForeigners in BusinessInternational EnvironmentLatest PostsNewsTrade Opportunities

Agricultural traditions are the main part of Georgian cultural heritage and mentality, as long as favorable climate with fertile soil make it one of the most productive economic sectors for the country and support production of a variety of high-value agricultural products including wine, nuts, citrus fruits, peaches, apricots, etc.

After signing a Deep and Comprehensive Free Trade Area (DCFTA) with the European Union in 2014, Georgia can produce agricultural products meeting the required safety and security standards and that makes it even more favorable for new investors of European markets, as longs as they can benefit from rising consumption on the local market, which is complemented by the Duty-free access to 900 million foreign markets under this agreement.

Georgia has emphasis on labor-intensive crops such as tea and grapes. In 2017, after the three-year study conducted by experts from seven countries, Georgia officially acknowledged as the cradle of wine and was invited to be a host of solo exhibition illustrating its oldest traditional viticulture and wine-making in Bordeaux, Paris.

Nowadays, wine export growth gives positive prospects to the sector, for instance after the data published in National Wine Agency of Georgia in January-February (2018) 10,8 mil. bottles of wine have been exported to 38 countries worldwide, that is 23% higher than the similar data of the last year.

There is fierce competition connected to the tea in Georgia, because  strong local manufacturers are not allowing the international players to take over tea entirely but as Euromonitor International reveals, consumers of tea in Georgia stay quite conservative and most brands produce only black or green tea.

According to the Strategy for Agricultural Development in Georgia for 2015-2020, it is estimated that 25% of Georgia’s total land area is classified as permanent pastureland and about 70-80% of pasturing is self-regulated among local and nomadic pasture users, which gives good grounds for stockbreeding, but without having strong supporting policies small farmers which make 95% of all farmers, typically cultivating around one hectare of land with low output aren’t able to compete with imported products, which except dairy food and beverages mostly relies on meat products, as well as grains and egg. Generally, Georgia imports 80% of its packaged food products which has a significant negative impact on its trade balance.

The Georgian government identifies agriculture as a priority for development and has also set up the Agriculture Investment Fund to support the sector by providing credits for farmers. The projects of building new agricultural products processing plants can get grant from the government with a total value of up to 250 000 USD. In addition to this, investor can symbolically buy state owned immovable non-agricultural property only for 1 GEL.

Government of Georgia intends to create a favorable business environment because full use of Georgian agriculture potential is vitally important for country’s economy, for this purpose, in 2015, Parliament passed a bill allowing foreigners to own the land but with certain limitations as long as foreigners now may own agricultural land if they inherit it, co-own the land through marriage to a Georgian citizen or by being a member of a Georgian citizen household or hold a residence permit.

Georgia has 22 micro-climates varying from cool and dry to warm and humid. These diversified micro-climates allow for a longer than normal harvesting season and a range of growing conditions. Soils are of volcanic origin in the river valleys, which tend to be quite fertile and reasonably easy to cultivate.

Country has easy and cheap access to water as well and the prices of other utilities such as energy and gas is low too, but on the other hand, according to the 2017 budget, by GEL 83,000,210 reduced agricultural financing resulted in decreased funding for financing programs like the agricultural development program, food safety, epizootic goodwill and plant protection, viticulture, implementation of scientific research activities and so on.

During the last years, as a result of good international cooperation, the positive tendencies are being observed in regard to expanding the export market, increase of production and attracting the investment in the agricultural sector. But local production is still under strong necessity of boosting as long as even though having rich resources, trade balance between import and export is still unenviable in Georgia.

Author: Tamar Devdariani © BUSINESS GEORGIA

Photo: Tamuna Ubiria © BUSINESS GEORGIA

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GEORGIA, PART OF LAPIS LAZULI CORRIDOR CONNECTING EUROPE & ASIA

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On November 15, after three years of technical talks, during the 7th Regional Economic Cooperation Conference on Afghanistan (RECCA-VII) in Ashgabat, Turkmenistan was signed the agreement, making Georgia part of Lapis Lazuli Corridor.

Georgian Vice Prime Minister and Foreign Minister Mikheil Janelidze signed a document which will enable Georgia to be part of a one more transport corridor between Europe and Asia.

The Lapis-Lazuli Transit, Trade & Transport Route (also known as the “Lapis Lazuli Corridor”) aims to enhance regional economic cooperation and connectivity between the countries of Afghanistan, Turkmenistan, Azerbaijan, Georgia and Turkey.

The corridor begins from Aqina in northern Faryab province and Torghundi in western Herat (both in Afghanistan), and continues to the port (on the Caspian Sea) of Turkmenbashi in Afghanistan; after passing the Caspian Sea, the route continues on to Baku, capital of Azerbaijan, and then connects onward to Tblisi, capital of Georgia, as well as the Georgian ports of Poti and Batumi; in the end, the corridor will connect to the cities of Kars and Istanbul (Turkey) at the entrance of Europe.

The name “Lapis Lazuli” is derived from the historic route that Afghanistan’s lapis lazuli and other semiprecious stones were exported along, over 2,000 years ago, to the Caucasus, Russia, the Balkans, Europe, and North Africa.

Current projects will improve infrastructure and procedures across the five countries and they are estimated to exceed $2 billion, according to RECCA VII.

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Baku-Tbilisi-Kars railway line is opening up reconnecting Asia to Europe

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On October 30, 2017, the ceremony on departure of the Baku-Tbilisi-Kars (BTK) railway line’s first train from New Baku International Sea Port will be attended by Georgian Prime Minister Giorgi Kvirikashvili, Azerbaijani President Ilham Aliyev, Turkish President Recep Tayyip Erdogan, President of Kazakhstan Nursultan Nazarbayev and Uzbekistan Prime Minister Abdullah Arypov.

The project of a railroad between Azerbaijan and Turkey through Georgia was first discussed in July 1993 and a multi-lateral accord to build the link was signed by the three countries in January 2005. In February 2007 in Tbilisi, Azerbaijan, Georgia and Turkey signed a trilateral agreement to launch the construction of the railroad the same year.

On November 21, 2007, the presidents of Georgia – Mikheil Saakashvili, the president of Azerbaijan – Ilham Aliyev, and Turkey – Abdullah Gül inaugurated the construction of the railroad at a groundbreaking ceremony at the Marabda junction south of Tbilisi, and the first rails in Turkey began to be laid in July 2008 from Kars.

For the construction of the railroad on Georgian territory, Azerbaijan provided a US$775 million loan to Georgia, signed between a Georgian state-owned company Marabda-Karsi Railroad LLC and Azerbaijan.

In total 105 kilometers of new line has been built between Kars and Akhalkalaki, with 76 kilometers within Turkey and 29 kilometers in Georgia. The existing railway line from Akhalkalaki to Marabda and on to Tbilisi and Baku has been modernized.

Its total length is 826 kilometers and it will be able to transport 1 million passengers and 6.5 million tons of freight at the first stage. According to estimates, the railway line will be capable of carrying 17 million tons of cargo and about three million passengers by 2030.

Transportation between China and Europe will take about 15 days with the completion of the Middle Corridor. The BTK railway project will be one of the main connectors in terms of transportation projects which also include the EU-led Transport Europe-Caucasus-Asia Corridor (TRACECA) and the One Belt One Road Middle Corridor.

Implementation of an international railway project in the scope of the “Iron Silk Road” through the Baku-Tbilisi-Kars railway line and the construction of a railway line tunnel in Bosporus, along with connecting Trans-Europe and Trans-Asia railway networks and carrying freight and passengers directly through Azerbaijan, Georgia and Turkey territories from Europe to Asia, will boost the transit potential of the countries and accelerate the processes of integration in Europe, developing the cooperation within the framework of European Neighborhood policy.

The Georgian Railway company believes that increasing trade between Turkey and Central Asia provides it with a significant opportunity to capture trade flows, particularly raw materials imported into Turkey from Central Asia and finished goods exported by Turkey. With respect to Turkey-Russian trade, company believes there is an opportunity to capture more volumes, particularly of dry cargo, that are now shipped via Iran or the Russia-Black Sea route.

The project, which will bring vitality to the region both in terms of employment and trade, is the third largest project realized by all three countries after the Baku-Tbilisi-Ceyhan and Baku-Tbilisi-Erzurum projects in the energy sector.

Photo by JSC Georgian Railway

Perspectives of Economic Relationships Between Georgia and China

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Perspectives of Economic Relationships Between Georgia and China

On June 9, Georgia celebrates 25th anniversary of diplomatic relations with China.  BUSINESS GEORGIA offers an exclusive interview with Mr. Ji Yanchi, Ambassador of the People’s Republic of China to Georgia.

“Free Trade Agreement” with China –  What is the significance of this agreement and what positive changes may it bring for both China and Georgia?

In September 2015, then prime minister Garibashvili took part in the World Economic Forum in Dalian, and held a fruitful meeting with Chinese Premier Li Keqiang, they agreed to launch the negotiations on free trade agreement. In December 2015, the negotiations began. In February 2016 the first official delegation from China arrived. The FTA negotiations lasted for 7 months and ended in October through the utmost efforts of both parties. In October 2016, Chinese Minister of Commerce, Gao Hucheng  visited Georgia, during which he met with prime minister Kvirikashvili and made a joint statement on finalizing the FTA. At present the most important thing is to ratify this agreement as early as possible. We hope these legal procedures can be completed by the end of the year thereby make the FTA come into force officially. The FTA will deepen the economic and commercial cooperation and will bring our bilateral relations closer. Through this agreement Georgia will be able to export its products to China – a market of 1.4 billion customers. It is estimated that exports from Georgia to China will increase by 33.6 % while exports from China to Georgia by 6.7 %. It is also noteworthy that there are some special articles in the contract, which were not included in similar treaties before.  For example, there is an annex about trade and transportation service. It is somewhat customized to Georgia’s aspiration to be a corridor connecting Europe and Asia.

Why Georgia became one of the priority country for China?

Georgia is an important country along the “Silk Road Economic Belt” for the fact that it is a transit corridor connecting Europe and Asia as well as a transit country in trade. This is why we added annex about trade service into the FTA. Georgia has the potential to use all the resources to the full and China is ready to help at any time.

How China and Georgia cooperate in the financial sphere, is it intended to open new commercial banks in Georgia?

The Free Trade Agreement promotes cooperation between the two countries in the sphere of finance, Nowadays Chinese company “Hualing Group” has bought Basisbank, which operates successfully. It is also known that a Chinese company signed cooperation memorandums with Georgia on establishing the Georgian Development Bank and Georgian construction fund. I believe this will be a great stimulus for the development of Georgia’s economy, for investment growth and for projects implementation. The Chinese government supports Chinese companies to invest in Georgia.

Is it planned to establish partnership in energy sector?

In fact, the energy cooperation between our countries has a long history. Back in 2000, a Chinese energy company built a hydropower plant in the Pankisi Gorge, which is the first foreign invested power plant after the independence of Georgia. This plant contributed a lot to the economic development of the region, and it still operates well. Currently Chinese companies actively participate in Georgian energy sector. Our cooperation in the sphere of energy is constantly growing, Chinese companies have a desire to make more investments, especially in the construction of hydro power plants, since China is leading in this area, with the most medium and small size hydro plants in the world. China also has the largest electrical grid in the world. In this regard, our cooperation can bring great benefits to Georgia.

Which other spheres and fields will be attractive to Chinese investors in Georgia?

It is interesting to promote the trade-related service sector. Recently many Chinese companies are interested in the Georgian market. We see increasing number of representatives coming to study the market. Besides wine, mineral water and mines, agriculture and energy sector are of great potential. Particularly, cooperation in renewable energy vehicle sector. Another important field is tourism, as you know, Georgia has rich resources in this regard. After signing the FTA, Ministry of Commerce of China issued a permit to open China-Georgia bilateral tourism companies in Beijing , Shanghai and Tianjin. In my opinion, the society is stable in Georgia, and the investment and tax policies are really favourable. If the central and local government of Georgia could implement these policies into practice, it is promising that more Chinese investments and tourists will be attracted to Georgia.

Is there any plan for high level visit from China to Georgie in the nearest future?

Organizing exchange visits is absolutely important, but it needs preliminary preparation in advance. High level visits are more meaningful only when you have big cooperation projects in hands. Currently the Chinese government is implementing greenhouse project, which completely works on solar energy, we want to make it an exemplary project and we hope similar greenhouse farming could be implemented in Georgia in the near future. This will bring great benefits to the country, helping change it from  fruit and vegetable importer to exporter. In Western Georgia, Chinese companies are working hard for the revival of Georgian tea-growing industry. The first batch of tea was harvested this year. If the tea industry in Georgia could regain its past glory, tea will become a main agriculture exporting product of Georgia. The potential in the tea industry is huge. I think if the aforementioned projects could be successfully implemented, this will become a good example of the “Silk road Economic Belt” and will contribute not only to deepen agriculture cooperation but also to develop relations in the field of culture. As you may know, Mr. Liu Junzhou – a Chinese tea expert brought tea seedlings to Georgia in the late nineteenth century, thus, tea has a historical and cultural significance to our countries. Mr. Liu is the envoy of China-Georgia friendship. Hopefully, with the support of tea farming, we can write a new chapter for our historical and cultural connections.

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South Korean steel company is interested to invest $500m in Georgia

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South Korea’s largest multinational steel-making company POSCO is showing an interest in investing hundreds of millions of dollars in Georgia.

Company representatives visited Tbilisi to meet local leaders and share their interest in investing $500 million in building an ultra-modern metallurgical plant in Georgia. During the meeting the two parties introduced the investment project and revealed their future plans regarding Georgia.

POSCO is a multinational steel-making company headquartered in Pohang, South Korea. It had an output of 39.1 million tons of crude steel in 2011, making it the world’s fourth-largest steelmaker by this measure. In 2010, it was the world’s largest steel manufacturing company by market value.

EU-Brexit-referedum

Brexit Uncertainty – What Happens Next?!

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3 weeks of chaos around Brexit – exchange markets are trying to figure out the results of the historical UK EU referendum. Sales of British national currency reached its record-breaking level. Risks that London is loosing its position as the global finance center are getting high. While National Bank of Britain is planning to spend 250 billion pound sterling for keeping stability, Brussels host European central banks to discuss solutions.

On the current “hot” topic immigration, the negotiations with the UK might be a welcome occasion for many European governments. While the EU, in our view, will never agree to change the principle of free labour movement in the EU, stricter rules for immigration from non-EU countries and stricter rules for access to social benefits for EU-citizens could pave the road for a compromise.

What are global effects of Brexit and what can be risks for Georgia – read the hottest topic in Business Georgia July – August Issue.

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Eurozone beats growth expectations

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The eurozone’s reputation as the laggard of the global economy appeared to be overly pessimistic, after revised figures showed annual GDP growth in the currency bloc edged higher to 1.7%.

Eurostat, the official data agency for the European Union, showed that GDP growth in the first quarter was 0.6%, after being trimmed to 0.5% in an earlier estimate, pushing the annual growth rate up from the previous estimate of 1.6%.

Eurostat pointed out that an increase in investment was among the biggest factors in the boost to GDP across the eurozone along with a rise in exports of 0.4%, though the eurozone’s healthy trade balance was slightly eroded by a rise in imports of 0.7%.

Among the largest economies in the EU, France grew at 0.6%, Germany 0.7% and Spain 0.8%. Italy could only manage a 0.3% growth rate while Greece contracted by 0.5%, Poland slipped by 0.1% and Hungary suffered a 0.8% drop in national income.

European Bank Supports with 50 Million USD to Enterprise Development in Georgia

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Within the frame of the EU financial and technical assistance, the European Bank for Reconstruction and Development (EBRD) will allocate 50 million USD to support enterprise development in Georgia. The EBRD and the Bank of Georgia signed the relevant Agreement on 27 May, at the Ministry of Economy and Sustainable Development of Georgia. The Bank of Georgia Deputy Director General, Levan Kulijanashvili and Bruno Balvanera, the EBRD Director for Caucasus, Moldova and Belarus signed the Agreement.
The Agreement was signed within the European Commission DCFTA supporting program (DCFTA Facility), which aims to strengthen support for small and medium businesses in Georgia, Ukraine and Moldova in terms of adaptation with the DCFTA-requirements. European Union and the European Bank for Reconstruction and Development signed an agreement on allocating the 380 million euros by the EBRD to the local partner banks of the three states that will further issue loans for local businesses.
The EU, on its turn, will provide additional 19 million Euros for technical assistance, investment promotion and risk sharing.

The EU and the EBRD joint decision will allow the local SMEs to meet the EU standards and fully enjoy the opportunities that the DCFTA offers to business.
Source: Ministry of Economy and Sustainable Development of Georgia

Georgia-Slovakia Business Forum

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H.E.Giorgi Kvirikashvili, Prime Minister of Georgia and H.E. Andrej Kiska, President of Slovakia opened the Georgia-Slovakia Business Forum, which was attended by H.E. Nodar Khaduri, Minister of Finance of Georgia.

discussed issues of Forum were cooperation between the two countries in areas such as energy, information technology, transport, logistics, infrastructure and trade.

” A very important event took place today. The business forum is a good format for Slovak investors to use the opportunities that Georgia has including  the relations with the EU – I mean, Comprehensive Free Trade Area agreement. The meeting is important for the businessmen to learn more about investment opportunities in Slovakia and the Slovak partners proposals. There are great prospects for cooperation between our countries, in different sectors. “- said Khaduri.

The event was organized by the National Investment Agency, the Slovak Investment and Trade Development Agency, the Association of Employers. The partner of the Chamber of Commerce.

Source: Ministry of Finance of Georgia