Export promotion and dynamics in the neighboring countries

Nino Arveladze

Export potential’s dynamics and its complete utilization is the problem of all transitional economies, be it a country of the CIS or Eastern Europe.

The cornerstone of the economic reforms in these countries is creation of the system of export production promotion and full-fledged integration into the world market. Particularly noteworthy are the countries that are rich in energy resources, such as Russia, Azerbaijan, Kazakhstan. However, in spite of the low level of their economies’ openness, export production growth in these countries is impressive even without taking into account energy resources.
Here Georgia has a serious growth rate. According to this rate, it holds the third – the fourth place by the data of 2005, but as to the real GDP and its size – our country holds the fourth place from the end.
The subject of foreign debts is also important. Here, as far as the GDP is concerned, the situation has improved as well, but, according to absolute indicators, we are among the outsiders.
AGeneral macroeconomic indicators are also important. Here the situation is difficult as well, (cxrili zogadi makroekonomikuri) and, according to the negative balance of the foreign trade turnover, in comparison with all the neighboring countries and the CIS countries, except for Kyrgyzstan and Tajikistan, we hold the last place.
Until we start speaking about individual countries, it is important to analyze the general impedimental factors, during which we shall make use of the quarterly review bulletin of the international organizations and nongovernmental organization GEPLAC (Georgian European Policy and Legal Advice Centre).
We present you the dynamics of effect of some impedimental factors:

Generalizing these factors we come to the conclusion that, unlike our neighbors, in our country
1. Bank resources are less available for export production and there is no system of Eximbanks in the banking sector, while it occupies an important place in the US, Turkey and in the system of other leading economies. Banks do not purposefully work on export projects.
2. The frequency of the tax administration’s check-ups is very high, which, undoubtedly, brings down the productivity of export production. The imperfect procedure of dispute consideration and the judicial system is a barrier for the development of business. The situation is complicated by the lack of the arbitration system.
3. The issue of infrastructure and energy, along with the low level of transport development in our country in comparison with our neighbors, becomes one of the impedimental factors for the development of export production. Transportation of a 20 ft container from Hong-Kong to Poti costs 1000 USD, and from Poti to Tbilisi – the same amount. There is a similar situation in export as well, the imperfect system of transport insurance contributes to this.
4. Business’s ignorance of the preferences existing on the western market.
5. Lack of export promotion as such.

What is going on in individual countries?

Armenia
According to the data of Armenia’s National Statistics Committee, in 2005 the country’s foreign trade made 2.718 billion USD, of which 950 million USD falls on export, and 1.768 million USD – on import. The negative trade balance made up 817 million USD, which does not include 777.3 million USD worth of humanitarian aid.

The share of trade with the CIS countries makes up 690.3 million USD, i.e. 25.4%. Last year the trade with these countries increased by 35%. The negative trade balance with the CIS countries makes up 40.5%. Armenia’s largest trade partner is Russia, the turnover with this country is equal to 353 million USD, then comes Ukraine – with the turnover of 137.7 million USD.
The trade with the EU reached 34.8%, it has increased by 58% and made up 9462 million USD. The country’s largest trade partner in Europe is Germany, the share of which is 10%, then comes Belgium – 9.9%. The Statistics Committee says that precious and semi-precious stones trade increased by 12.4% and made up 336.4 million USD, though their import increased by 19.2% and reached the level of 347.6 million USD.

Azerbaijan
According to the data of the Statistics Department of the Republic of Azerbaijan, in June-July 2005 the country’s export of oil products made up 1329.526 thousand tons, which is 83.926 thousand tons more in comparison with the corresponding period of 2004. The main export partners of Azerbaijan are Italy, France and Russia, and the main import partners – Russia, UK and Turkey.
In 2006 Azerbaijan’s oil export made up about 211.000 barrels a day, but it is expected that it will be doubled in 2006 and reach the level of 478.000 barrels a day.

Ukraine
Among the European countries, Ukraine is the country having the most dynamic economy. Its economy made a considerable progress after it had managed to find the export market in the recent years. In 2002 Ukraine’s export increased by 1-.4% and made up 21.9 billion USD, import increased by 5.7% and reached the level of 17.9 billion USD, the trade balance was 4 billion USD. In 2003 the export of goods and services increased by 24.1%, and import – by 4.1%. On 2003-2005 the export of produced goods and construction materials became one of the main locomotives of economic growth. In 2004 the country’s export increased by 43.3% and reached the level of 26.5 billion USD, import increased by 28% and made up 23.3 billion USD.
The country’s main foreign trade partners are Russia, Germany, Turkey, US, Italy, Poland, China and Hungary. Ukraine has trade relations with almost 200 countries of the world. In 2005 decrease in export and increase in import was observed, the result of which was the trade deficit in the amount of 748.1 million USD. One of the reasons of the negative balance was incorrect appraisal of the national currency in relation to USD. Ukraine’s economy has the western orientation. In 2004, in comparison with 1996, the volume of export to Europe increased by 2.5 times, import – by 2 times, the volume of export to Asia increased by 3 times, and import – by 3.8 times. The Russian Federation remains the largest trade partner of Ukraine, the volume of export makes up 20%, and that of import – 40%.

Latvia
In 2000-2002 Latvia’s export was annually increasing by 11-12%, and in 2003 the export of wood, metal and machine-building’s sector made up 23% of the total export.

Lithuania
Lithuania is a member of the EU, in 2003 its economy underwent a crisis, in 2004 Lithuania’s export made up 8.88 billion USD. Its main export partners are Switzerland, Germany, Russia, France, US, UK, Estonia and Denmark.

Estonia
Estonia is a member of the World Trade Organization and a new member of the EU. Its economy is notable for its liberalism. Estonia’s foreign trade regime is one of the unique ones in Europe. The country’s main trade partners are Finland, Sweden and Germany. 33% of falls on machinery and technical equipment, wood and paper – 15%, textile – 14%, food products – 8%, furniture – 7%.

Moldova
Moldova is known as one of the poorest countries in the world, and it has a lot of difficulties in its economy like other former soviet countries. The growth of the country’s export considerably falls behind its import. The country has been a member of the WTO since 2001, it profits by the EU’s GSP system, as a result of which in 2000-2002 the country’s export increased from 77 million euro to 110 million euro. GSP preferences are especially important for export of Moldovan clothes and footwear. In 2001-2005 a lot of legislative changes were implemented in the country, which was done for the development of business, tax system and agroindustrial sector, and all this happened from the viewpoint of export’s increasing. In 2005 Moldovan export made up 1.04 billion USD, import – 2.23 billion USD. The country’s main export partners are Russia – 35.8%, Italy – 13.9%, Romania – 10%, Germany – 7.3%, Ukraine – 6.6%, Belorus – 6%, US – 4.6%.

Bulgaria
The main purpose of Bulgaria’s economic policy is to become a member of the EU by 2007. Over the past years the trade with the EU countries considerably increased. In 2003 export to the EU countries rose by 3.1%. The export commodities are: textile, clothes, iron, metal, agricultural products and meat.