Bargain one trouble for another
On 1st November of 2008, agreement between Georgia and Turkey about Free Trading became operative. According to the agreement, parties repealed customs duties on the imported products. Nevertheless, customs duties still remain on some of the agricultural products and quotas are being established for the part of the commodities. For instance, Georgian businessmen are not allowed to export Georgian wine in a desired quantities, as according to this agreement only 250 thousand bottles can be exported a year. Ad notam, in 2007, the worth of exported wine in Russia amounted $75 million that is more than 20 million bottles. Only this number proves that unfortunately Turkey cannot replace Russia yet. Views are split in two concerning this point in the agreement – the supporters of the agreement claim that it creates new opportunities for Georgian entrepreneurs in trading with Turkey. However, part of the experts has negative and skeptic attitude toward the agreement. They reckon that the current trading conditions between Georgia and Turkey resemble a playing in one gate.
Against the background of complicated political and almost stopped economical relations with Russia, Turkey has already become Georgia’s number one trade partner before entering into the mentioned agreement. Another eloquent testimony to this is Georgian Statistics Department data according to which trade turnover with Turkey in 2008 amounted $%1202.8 million that is higher than the previous year’s rate by 33.7 percent. The rate of trade turnover with this country has increased by 1.9 percent – from 14% to 15.9%. The worth of export to Turkey amounts $262.9 million. The rate has increased by $91.1 million in comparison with the previous year rate. Export has increased in such commodity groups as: ferroalloy, ferrous metal scrap-iron and, nitrogen manure. Growth is observed in import from Turkey also, especially in cement, oil and medicine commodity products. Average annual growth of trade between Georgia and Turkey is 46%, while annual growth of Georgia’s export to Turkey is 29%. Is this advantageous for us? Are these numbers proving useful for the development of Georgian economy? If we analyze export’s structure, we will see that Georgia mainly is exporting scrap-iron, raw materials and timber, while Turkey is importing endless stream of low quality building materials, food-staff, and textile. The data are not desirable for us. Maybe our government has planned Turkish-Georgian business forum to change this situation. The business forum has been held on 24-25 February in Tbilisi and Batumi. The forum was attended by Georgian businessmen, Minister of Economic Development of Georgia – Lasha Jvania, Prime Minister Nika Gilauri, and Minister of Energy Aleko Khetaguri on Georgian side, while Turkish side represented State Minister Kurshad Tuzmen, Turkish parliamentarians and businessmen. As regards the format of the forum – small part was devoted to the presentations made by the government, while whole day was dedicated to establishing relationship between Georgian and Turkish businessmen. As the Minister of Economic Development of Georgia declared this suggests new investments in Georgia and free environment for business that enables Turkish businessmen to start business in Georgia timely. Consequently this creates additional income, working places and entrepreneurs for the country.
However, these are only unrealized desires. As the numbers show the different situation and Turkey number one trading partnership for Georgia is only fiction. There are no pile of investments that major economical partner should carry out in Georgia, if not taking into consideration millions spent on construction and repairing of Tbilisi international airport?! Considering all the above mentioned it is not surprising that for the participating Turkish and Georgian companies this forum was bearing just reconnaissance character that hasn’t been followed by actually signed contracts and started business relations in Georgia. We convinced in this while speaking with the representatives of various companies.
“ElitElectronics always actively participates in such kind of forums and we think that exchanging with novelties and cooperation is very important for both parties. We cooperate with the investors from various countries and have active relations with Turkey either. We came here for the similar reason; we want to get acquainted with the novelties and possible partners. However, some specific project isn’t being discussed at this stage” – declared Ekaterine Tavtavadze, construction project development manager of “ElitElectronics”.
Nesil Melek, marketing manager of Turkish company “SANKO” (www.sankomakina.com.tr), distributor of construction equipment: “Despite current global crisis, we wish to broaden our business, find new partners and deepen existing relations. These are the aims of our visit to Georgia. The time shows how the events will develop. We already have few partners in Georgia, for instance “GTG Group”, besides we have individual partners too. We import construction technique from various countries. There is a demand on this product in Georgia also. Therefore, we wish to establish our business in Georgia on a wide scale”.
Foodstuff producing Turkish company SUNAR GRUP’s (www.sunarmisir.com) general director Ibrahim Etem Kan: We decided to participate in this forum because Georgia and Turkey has established good political and economical relations that is especially important when investing in this country. We have no representative office in Georgia, but we cooperate with one company in Batumi. In the future we plan to broaden our business in Tbilisi also”.
It seems that Turkish businessmen only think about future plans and possible investments, but there are not seen any actual projects.
In the statements of two governments officials everybody emphasized importance of Turkish-Georgian relationship. Minister Laja Jvania declared that this day is of great importance for the future of both Georgia and Turkey. “It won’t be an exaggeration if I say that today in Tbilisi has been held a remarkable event that is another stimulus for the development of Georgian Turkish political, economical and trading relations… Against the background of world crisis, that has its negative effect on our region also; Turkish businessmen are majorly interested in business development, investments and future relations in Georgia. Turkey has big experience in running small and average businesses that is especially interesting for Georgia. There are many other aspects interesting for these two countries also. Specifically, construction of hydroelectric power plants and electricity transmission lines, which encourages export, agriculture and transportation fields. In transportation field, cooperation of the three countries – Georgia, Azerbaijan, and Turkey – is of great importance not only for our small region, but for whole Eurasia also, from China to Europe. This is prospective future way for our big continent and I am sure it will be accomplished” – declared Minister of Economic Development Lasha Jvania.
As we already mentioned forum was attended by Prime Minister Nika Gilauri also: “Turkey recently has become main trading partner for Georgia. The major part of Georgia’s export goes on Turkey and largest import comes from there. Besides, Turkey is a big source of investments in various fields, such as energy, tourism business etc. As you may know, construction of several hydroelectric plants is being planned. Consequently, this conference is especially important in order to maintain business relations in the future”.
Turkish state minister Kurshad Tuzmen declared: “We are two transitive countries that pass world trade and economy on own territories. We implemented many considerable projects together and there are many future projects to be accomplished. Our aim is to increase trade turnover by $1.5 billion. In a year this number increases up to $3 billion, while in four years the amount will be up to $5 billion. It is important to establish joint customs station in Sarphi and act as a one window principle. We will draw important trading map in the world trading. Accomplishing this project means that cargos from Asia go to Europe through Georgia and Turkey. Georgian and Turkish economies supplement each other”.
The facts show the different. How one explains the abovementioned statement of Turkish state minister, while Turkey refused to accomplish Nabucco project that is of special strategic importance for Georgia (See “Sakartvelos Ekonomika No 1, 2009, “Europe’s bitter harvest, Nabucco – myth of reality”), and when Nabucco is considered as fundament for energy security for Georgia, Turkey and whole regions also.
During the meeting some main directions have been outlined that are especially important in Turkish-Georgian relations. Besides this, accomplishment of specific project has been planned. This project covers customs station modernization plan and increasing its passing ability. Georgia and Turkey will implement joint project on creation of Sarphi customs station infrastructure. The parties agreed to sign mutual understanding memorandum. Sarphi customs station meets new western standards that encourage operative exchange of information. Bureaucratic apparatus will be eradicated. It will work with one window principle. This enables to fasten service by 60-70 percent and increase cargo turnover and passengers’ flow 2.5 times.
Such international practice exists between Turkey and Syria, Switzerland and France. At the instance of Georgian party, Turkish party decided to allow passenger thoroughfare from 1st March until construction of Sarphi customs station infrastructure won’t be finished. Energy sector is becoming one of the most important fields in Turkish-Georgian relations. During the meeting, it was emphasized that hydro energy sector is one of the prospective field in Georgia, for attracting investments. Georgia doesn’t posses gas and oil, but is has many hydro resources, only 12-189% of which is used at this stage. The construction of 500 kilowatt high voltage transmission line between Georgia and Turkey is becoming realizable. All the necessary documents have been already signed. (However, nowadays this is one of the delayed and controversial themes in Georgia). However, as it become known during teh forum the financing of the project is already ensured by international organizations. The financing will be part of the $4.5 billion package that donors assigned to Georgia on Brussels conference. At the end of the year, this essential and strategic project construction must be started. Georgian party will get financing from EBRD, KFW and EIB, while Turkey has its own sources of financing. This transmission line enables to export additional 1000 megawatt electricity to Turkey.
Once more I repeat that this is just drop in the bucket for Turkey. The question remains open – how far Turkey is real partner for Georgia and how it can support Georgian economy development? Maybe the scales of the forum and eloquent statements of Georgian officials is only drunkenness with Turkish relations and nothing more? What changes by replacing Russia with Turkey? Nothing – as neither our ex trading partner and nor the current one indulges us with investments. The fundament of country’s economical development is investments.