Turkey Georgia’s number one foreign trade partner, as in turnover also in conditions


Metamorphosis of vectors of foreign economic relation in Georgia began in 1992, when realization of this relationship became free.

The right of participation in foreign economic relation was regulated by the state with separate certificate, with the help of similar named Ministry. On the legislative level liberalization of economy became very easy, but from the above mentioned period till 2008 Georgia couldn’t change the geography of export and import. Russia was an invariable partner till now and in 2007, in spite of Russia’s embargo, this country was on the second place in the foreign economic turnover. Just after the war, according to the results of 9 months of 2008, Russia moved to the 5th place. (See table #1)
Here a great place was occupied by the energy carriers. Today it is changed by Azerbaijan. Turkey has already been number 2nd partner in the foreign economic relation, but most important is that, in 2007, when Russia declared embargo on many products, Georgia seriously began thinking about changing the geography of export. But received privileges for the membership of World Trade Organization (WTO) and awarding GSP or regime of GSP to Georgia from the West side did not act greatly on production of our exporting products and exporting index. The growth of exporting production was our permanent heel of Achilles.
According to the data of 9 months of 2008, among the participants in the foreign economic relations of Georgia, Turkey won the first place and 15,9% of foreign trade turnover comes to it (source www.nbg.gov.ge, because the website of Statistics Department is inaccessible). It is very important, that in realized 3 billion importing index – 695 million, and on the 1,2 billion export – 243 million – comes to the same country – to Turkey. So every fourth exported goods comes to Turkey. So the regime which will be established by Turkey on the exported production from Georgia is very important. It is worth mentioning, that average custom duty is 70% in Turkey, besides their subsidize increases advantages to agricultural production.
But because of territorial nearness and in comparison with Europe more or less liberality of non-tariff barrier, the market of 80 million inhabitant of Turkey is very important for Georgia’s business. The agreement about trading on preferential regime with Turkey was signed on December19, 2006 in Ankara. However, in this privileged list the place was not isolated for many important exporting goods of Georgia, among them for agricultural goods. But from the side of Georgia, transition to liberal trading policy (or refusal of custom policy at all) conferred a great advantage to Turkey’s exporting business and accordingly they also strengthened expansion of Georgian business. That’s why the agreement of free trade was created with new size and was signed on November 21, 2007.
This agreement contained also agricultural productions. Among them there was wine. Turkey procrastinated the ratification of this agreement nearly for a year and only from November it was possible to enter into force, which will increase the level of pre-agreement export by 70%. The reason of this fact is that produced production in Georgia will become more competitive in Turkey. The side of Turkey knows this fact very well, that was the reason of procrastination of agreement’s ratification. It should be said, that industrial sector in Turkey is developing quite rapidly, but there are three big problems:
1. Country is still agrarian till today and a big part of employed population work in agriculture. There are quite unprofitable and extensive agricultural enterprises on the Anatolian Plateau, around Ankara or The Vani Lake. But from the side of employment this has a great importance and that’s why agriculture of Turkey is much more subsidized than agriculture of Europe’s other countries.
2. Problem of attracting investments has been created since 2006. But today boom has been stopped. From the side of attracting investments there is a quite difficult situation.
3. Turkey is the candidate of membership of EU and before entering, it is trying to help its own agriculture at most. That’s why it does not let nearly any one enter its market. It has made an exception only for Georgia.
Turkey is increasing production of wine in a quite fast rate, because it wants to satisfy great demand of tourists on these goods by its own producing. It’s true that it has a segment of cheap wine yet, but it does not want Georgian wine, which is very popular among tourists, enter its market in a large quantity.
In spite of everything, after the war in August Turkey is clearly trying to play a great role in Caucasus and have a good relationship with Azerbaijan, naturally with Georgia and even with Armenia, leading constant consultations with it. According to Turkey’s analysts, Turkey is ready to reconcile even with Armenia if it fulfills two conditions: the first, it will not demand recognition of genocide and corresponding compensations and the second, it will not have a territorial claim. It is difficult to say if Armenia agrees, but one thing is obvious, Armenians are taking part in the dialogue and are in a neighboring mood too. This fact is very important, because production of exporting business on the Georgian territory, which’s goal will be exporting to Turkey, will develop in a fast speed.
Naturally, every control and restriction – technological, second-technologies, quality and standards – remains in force and from this side there is not more danger than it was before. This part is regulated by the 16th article of the agreement. The fact, that Turkish goods, especially building materials and food are not very qualitative, is not a secret. But everything depends on customers and their taste. Customers should not be lacked from liberty and market should be free and competitive.
The fact is one, setting in motion the agreement of free trade with Turkey – our number one foreign trade partner, will be a new stimulus for development of investment and exporting production in Georgia. It is out of doubt, the business of Georgia has received advantages with this agreement.
If Ukrainian, Kazakh, German or Chinese businessman wants to export his goods in preferential conditions to the Turkey’s market, for this they will get a serious bridge-head with investment in Georgia.