Caspian Energy (CE): Your Excellency, on June 27 Georgia signed the Association Agreement with the EU. Which economic benefits did Georgia get after rapprochement with the EU? Which sectors of the Georgian economy are most attractive for European investors?
Irakli Garibashvili, Prime Minister of Georgia: We see association with the EU, including the Deep and Comprehensive Free Trade Area, as a step to ensure the irreversibility of Georgia’s political and economic integration in the EU. It brings the EU-Georgia relations to a qualitatively new level of cooperation in all directions that should contribute to the transformation of the country into a genuine European State.
As a catalyst to political, economic and social reforms, AA, including DCFTA, will contribute to economic growth, integration in world markets and global supply chains, as well as to economic and political modernization.
Through DC FTA, Georgia will get better access to the EU’s Internal Market, the largest and stable market in the world of 500 million. The agreement will also ensure lowering of costs of trade with the EU for Georgian companies, broadening the range of Georgian products accepted in the EU market, lowering the costs of products for consumers and increasing the quality of products available, attracting European direct investors who will find familiar rules and procedures in place.
We already have large European companies in our financial, construction, transport and logistics, retail and agricultural sectors, but we see growing interest from European companies in other areas as well. We expect that new opportunities will be grasped by green field investments in export oriented manufacturing sectors interested in gaining access to the European market.
CE: Do you support a multi-faceted development of the export policy of Georgia? Which other markets, besides the European one, are most attractive for Georgia?
Irakli Garibashvili: The diversification of export products as well as export markets is a top priority of our trade policy. First, we want to diversify our export framework by creating favorable conditions for export oriented manufacturing in Georgia. In terms of business environment, Georgia is a leader in the region. With a view to providing additional benefits for the companies interested in launching manufacturing businesses, we are running the state program “Produce in Georgia” which is accessible equally for local and foreign investors and envisages preferential terms in privatization of state owned lands or relevant property, enhanced access to financial resources and technical assistance through government agencies.
In addition, through specialized state agencies, we are working on promotion of Georgian products in international markets, supporting Georgian exporters in gaining a foothold at important fairs and exhibitions and in finding partners abroad.
Neighboring and regional markets remain key markets for Georgia, though we are devoting our resources to ensure our presence in Asian and North American markets. Currently, Georgia enjoys free trade with the markets of more than 800 million consumers, but we are continuing our active works on enhancing trade regimes with other partners as well.
CE: Georgia and Azerbaijan have been energy partners for many years. How will the bilateral relations of the two countries develop? Do you see Georgia as the largest Black Sea energy hub on production and transit of LNG or other energy carriers?
Irakli Garibashvili: The strategic energy partnership between Georgia and Azerbaijan started years ago. The successful implementation of large-scale oil and gas transportation projects has served as the sound basis for the expansion of energy partnership between the two countries and the development of the South Gas Corridor, a very important alternative energy supply corridor for EU. Moreover, the Azerbaijani state company SOCAR is an important investor in the country. It owns and operates a number of assets such as gas stations, gas distribution networks, a port, etc. Georgia, as a reliable transit country, and Azerbaijan, as a major supplier of oil and gas from the Caspian Region, will definitely explore further opportunities to boost their relations in the energy sector and enhance transport and regional cooperation.
In our opinion, it is important to promote LNG trade on the Black Sea. Initiated together with Azerbaijan, Romania and Hungary, the AGRI project (Azerbaijan-Georgia-Romania Interconnector) implies the establishment of a liquefaction plant on the Black Sea shore and LNG transportation to Romania.
Another interesting project is the development of Euro-Asia oil transportation corridor, implying the transportation of oil from the Caspian Region through Georgia and Ukraine to Poland. Georgia offers the shortest route to the EU market for Caspian resources, and this gives us confidence that more projects of regional and international importance will be implemented with the participation of our country.
CE: How would you assess the tourism and investment potential of Georgia?
Irakli Garibashvili: Further development of tourism is of strategic importance for Georgia; this sector is one of the key contributors to the country’s economy, making up about 6-7 percent of Georgia’s GDP every year. In 2013, the number of international arrivals to Georgia grew by 22 percent and exceeded 5 million. Thus, the mid-term demand for accommodations has already surpassed the current supply, and we expect that with investments from major hotel chains and the private sector the supply will increase further to keep pace.
As you may know, Georgia is an open market economy aiming at becoming a regional hub for trade and production. The current reforms undertaken by the Government of Georgia aim to encourage competition in the domestic market and increase the competitiveness of our private sector.
It is significant that in 2014 Georgia demonstrated over 6 percent GDP growth, which itself tells much about the effectiveness of our reform agenda. Looking at the export figures, you will see considerable growth in comparison with the previous year. I believe our economic potential will become even more evident since, a few months ago Georgia, took a historic step forward and signed the Association Agreement with the European Union, including the Deep and Comprehensive Free Trade Area (DCFTA).
By advancing our external trade, we gained free access to the EU market that means free movement of goods and services, which in turn adds value to Georgia’s strategic location. Signing DCFTA made investors once again take a closer look at Georgia and start considering using this country as a manufacturing and logistics hub. All these achievements and constant interest from investors are impressive given the current situation in our region.
Moody’s rating agency has updated Georgia’s rating from stable to positive, which once again indicates the level of comfort for investors who consider Georgia as a stable country and a reliable business destination. As for our financial institutions, let me refer to the current success of our second largest bank that successfully launched Initial Public Offering on London stock exchange in June 2014, despite the situation in the region.
CE: What would you say about the plans in terms of development of cooperation with Kazakhstan?
Irakli Garibashvili: Kazakhstan is a dynamically developing country and an important partner of Georgia in the Central Asian region. For decades, friendly relations have been established between our countries.
Kazakhstan is an important trading partner of Georgia with whom we enjoy free trade regime. It is a destination for such Georgian goods as wines and spirits, mineral waters, nuts, and others. We have investments from Kazakhstan in banking, transport, tourism and other services. Kazakhstan, as a member of the Customs Union, and Georgia, as a country engaged in the free trade area with the EU, have additional opportunities to offer our entrepreneurs and promote their cooperation.
In the framework of EU TRACECA Programme, Georgia has actively supported the “Silk Wind” project initiated by Kazakhstan. The main goal of this project is to increase transit traffic on the railway lines and sea routes from China to Europe, and also optimize and further develop international transport corridors. As part of the project, an Intergovernmental Agreement has been drafted between the Governments of Azerbaijan, Georgia, Kazakhstan and Turkey. We hope to sign the document in the near future.
CE: Is Georgia interested in the market of Turkmenistan?
Irakli Garibashvili: Trade between Georgia and Turkmenistan has been growing steadily in the past years, yet the figures of bilateral economic cooperation have yet to be satisfactory, as they do not correlate with the potential both countries have.
We see prospects for deepening our economic ties in such areas as trade and transit of energy goods, supply of agricultural products and cooperation in the light manufacturing sector. Another priority is to cooperate with Turkmenistan in the field of transit. The successful operations of TRACECA transport corridor is key for both countries. We are looking forward to improving connections between Caspian and Black Seas.
Among other spheres of cooperation, Kazakhstan and Turkmenistan are important tourism markets for Georgia. We have had considerable increase in arrivals from Kazakhstan, and we are doubling our efforts to further raise awareness about Georgia’s tourism potential in these countries.
CE: What are the prospects of implementation of the Europe-Caucasus-Asia transport corridor by means of the Baku-Tbilisi-Kars railroad?
Irakli Garibashvili: The Government of Georgia strongly supports the implementation of regional infrastructure projects. The construction of the Baku-Tbilisi-Kars regional railway will encourage regional cooperation in the field of transport and trade between the Central Asia, Black Sea Region and Europe, and will attract new cargo flows. Its overall capacity will peak at 15 million tons of cargo per year. Initially, the capacity will be 5 million tons of consignments and one million passengers. As of today, 60 percent of construction works are finilized. Construction shall be completed in 2015.
CE: Is it possible to reanimate the White Stream Trans-Black Sea gas pipeline in the present context?
Irakli Garibashvili: As you know, the White Stream Trans-Black Sea gas pipeline project was initiated to transport natural gas from the Caspian Region to Romania and Ukraine. This project was included on the list of Projects of Common Interest from EU. The Georgian Government expressed its political support for this project as well. The recent events in Ukraine, as well as complexity of the project itself, and limited resources in the Caspian Region without additional gas resources from Turkmenistan require greater efforts to increase the competitiveness of this project and other alternative gas transportation projects on the Black Sea.
Thank you for the interview
