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Georgia seeks access to huge markets

21 May 2014 [09:00] - TODAY.AZ
By AzerNews

The Georgian government is adopting new measures to make healthier the business environment inside the country.

Georgian Finance Minister Nodar Khaduri made the remark in a short interview with AzerNews at the sidelines of EBRDAM 2014 in Warsaw.

Khaduri said it is difficult to go to the details of the measures to boost the Georgian economy but as a sample he referred to the government plans to simplify tax procedure and stimulate competition. He also called for easy access to export markets.

Khaduri said one of the most important projects is to expand access to new markets.

"We will sign an Association Agreement to have access to huge European markets in near future. At the same time, we have adopted new reforms in this regard. Another initiative is to protect interests of the business sector including property rights," he said.

Georgia will sign the EU Association Agreement on June 27. The agreement is expected to further boost exports.

The minister further said it is not the only particular initiative to boost the economy adding there are a set of multiple initiatives that the government of Georgia is taking, including reforms of judiciary.

Georgia achieved robust economic growth between 2003-2012, averaging 6.1 percent annually following some structural reforms that stimulated capital inflows and investments. The reforms helped improve the business environment, strengthened public finances, upgraded infrastructure facilities and liberalized trade. The growth was also supported by increased foreign direct investments (FDI) and driven by capital accumulation, sound use of excess capacity rather than net job creation and with productivity gains concentrated mainly in the non-tradables sectors. GDP per capita increased from $920 in 2003 to $3,500 in 2012 (in current prices).

The Doing Business 2013 shows Georgia strengthened its secured transactions system through an amendment to the civil code to cover more products, proceeds and replacement of collateral. Also, Georgia reduced the time needed to export and import by creating customs clearance zones. The country made enforcing contracts easier by simplifying and speeding up the proceedings of commercial disputes. Georgia expedited the process of resolving issues by establishing or tightening time limits for all procedures, including auctions.

According to the EBRD report on recovery in eastern Europe and the Caucasus affected by Russia-Ukraine crisis, in Georgia, growth slowed down to 3.2 per cent in 2013 after a rapid growth period of 2010 to 2012. October's presidential elections have lowered political tensions and paved the way for improved consumer and business confidence.

However, the Russia-Ukraine crisis will impede the growth through lower regional export demand, more cautious investors, and possibly less favourable tourism revenues. The EBRD growth outlook for Georgia is thus moderately reduced to 4.0 per cent in 2014 and 2015, provided that the Russia-Ukraine crisis does not significantly deepen.

Regarding the Georgian Development Fund, the minister said the government is working on the initiative. "This will facilitate the attraction of cheap money to the country, issuing loans through commercial banks and providing guarantees, etc," he said.

The government submitted a draft law "On Georgia's Development Bank" to the parliament on April 25. The Development Bank - an idea initiated by former Prime Minister, billionaire and founder of the "Citizen'" NGO Bidzina Ivanishvili - is to be established through the reorganization of the country's Partnership Fund, according to the draft law.

Speaking about the initiative to establish touristic route between Georgia, Azerbaijan and Turkey, he said the work is underway on this initiative between these three countries.

"Also this is not the only trilateral initiative, there are a lot of initiatives that will be benefiting from the increasing cultural diversity," he noted.

Azerbaijan, Georgian important partners

Speaking about the Georgia-Azerbaijan trade ties, Khaduri said the trade with Azerbaijan is very important for Georgia because Azerbaijan is one of Georgia's main trade partners both in terms of export and import.

"Joining emerging markets is in our interest and especially our neighboring countries and in Central Asia," he said.

In reply to a question on the recent recovery of Georgian exports to Russia and the slowdown in its export to Azerbaijan, Khaduri said Georgia will retain its shares on Azerbaijani market.

"Azerbaijan will not lose its interest for Georgia. By no means. We have never viewed Russian market as an alternative to any other markets especially Azerbaijani market," Khaduri said.

GruzStat reports that the trade turnover between Georgia and Azerbaijan stood at $319.75 million as of the first quarter of 2014. Thus, Azerbaijan remains the second largest foreign trade partner of Georgia.

The volume of foreign trade operations between the two countries has increased by 7.7 percent in a year. By comparison, the trade turnover between Azerbaijan and Georgia was slightly more than $296.9 million in the first quarter of 2013.

Turkey is the largest trade partner of Georgia (the trade turnover between the two countries is $368.4 million), while Russia ranks third in this list ($190.3 million).

Asked about the possibility of drawing loans from Azerbaijan for implementing new projects in Georgia, Khaduri said Georgia has a very close relationship with Azerbaijan.

"We have a lot of Azerbaijani investors in Georgia. They have good relationships with Georgia and Georgian partners and together they realize big projects. But we have never viewed Azerbaijan as the creditor, we have always viewed this country as the friendly nation," he said.

Earlier Georgian Deputy Prime Minister Kakha Kaladze noted that Georgia expects more investments from Azerbaijan and Turkey as joint regional projects.

Azerbaijan was among the top five countries in terms of direct foreign investment in Georgia in 2012. The volume of Azerbaijan's direct investments in the neighboring South Caucasus republic amounted to $59 million in 2012, or 7 percent of the total direct investment in the country.

Total FDI in Georgia amounted to $911.6 million in 2012, involving 72 countries.

In just five years -- from 2008 through 2012 -- the amount of Azerbaijan's direct investments in Georgia amounted to $308.7 million. The largest volume of investments was reported in 2011, when the figure was $138 million. The lowest amount was recorded in 2008 at $23.9 million.

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