After simplification of Georgia-China trade-economic relations, Chinese products inflow into the Georgian market may extremely increase and Georgia’s negative trade balance may deepen further. Section of economists show skepticism with regards to the agreement, about the Government.
Government of Georgia calls the agreement being a historical document. Section of economists expects Chinese products to oversaturate the Georgian market.
Free trade agreement with China is definitely an mimportant document that opens worth it to read opportunities for attracting investments, Prime Minister Giorgi Kvirikashvili told Government meeting.
Georgia is taking back its historical geostrategic functions, Georgian Pm added.
“We have signed free trade agreements with the neighboring countries, along with with EU. This factor makes Georgia an incredibly interesting country for investments. We think that free trade agreement? with China is of crucial importance for attracting new investments and developing exports-oriented production. It becomes an important new door who has opened for Georgia for developing export potential and exports-oriented production. Georgia is taking back its historical geostrategic function stage by stage. Our country needs to be open for similar economic cooperation and we all believe this can be significant breakthrough”, Giorgi Kvirikashvili noted.
The agreement document was created for several years and I thank everybody, having taken part in developing this document, Kvirikashvili said.
Historical Agreement and Figures
According to Geostat, national statistics service of Georgia, in 2016 Georgia-China external trade marked 717.090 million USD, including exports comprised 169.586 million USD, while imports constituted 547.503 million USD. Negative trade balance marked 377.916 million USD, and that is 52.7% of bilateral trade turnover.
In the primary quarter of 2017, Georgia exported 49.384 million USD products to China and imported 126.512 million USD products from China. Negative trade balance marked 43.8%.
These indicators show that Georgia-China export-import correlation is not really very favorable. After full enactment of the new stage of trade-economic relations with China, it’s not necessarily ruled out exports-imports mismatch increase further. Economists don’t eliminate similar scenario.
Professor Rati Abuladze, doctor of economics, explains that signature of Georgia-China free trade agreement is a positive help Georgia’s economic diplomacy. It should be noted that China was the 1st country that recognized independence of Georgia and developed dynamic relations with this country. Today China is Georgia’s major trade partner. This agreement is really a strategic step that stresses enhancement of political contacts between countries, dynamic continuing development of economic relations, Abuladze described.
The expected economic dividends with this agreement are the following:
- Mutual economic dependence of China and Georgia, growth of economic relations and cooperation;
- Shaping favorable environment for doing work (fast-growing exports market with 1.388 billion residents, growing solvency, favorable competitive environment, Recognize how opportunities);
- Coincidence of Georgian business potential with Chinese market demand structure, growth of activities of companies and advancement of external trade;
- Existence of favorable trade and economic infrastructure for sales of Georgian products (in China), which will grow exports of merchandise. Below the agreement, 94% of Georgian products are going to be exempted from customs tax;
- Growth in foreign investments and implementing new investment projects (In 2016 Chinese FDI inflow marked 27.4 million USD);
Abuladze explains that Georgia should shape economic and trade relations, however, achievements of monetary diplomacy really should be driven by the agreement problems should be to:
- create preferential conditions for Georgian business. This agreement would be to decide how competitive environment shall be ensured for Georgian business, which resources will move under simplified regime and which production will grow.
- Ensure a growth in Georgian product exports scales, when compared with Chinese products imports, under “Mutual beneficial principle”.
- reflect individuals market benefits in economic indicators. Its worth noting that in 2016 exports marked 169.6 million GEL and imports totaled 547.5 million USD;
- Turnover of merchandise, capital or workforce between China and Georgia should ensure “competitive advantage conditions” for Georgian environment;
- ensure preferential condition for Georgia resources, particularly when implementing budget-financed projects (in Georgia and China).
According to Abuladze,? this particular factors need economic and political analysis of Georgia’s economic diplomacy:
- Effect of China’s trade-economic activation on Georgia’s economic policy;
- How china shall be perceived in Georgia’s development perspectives, as China represents “Factory of your World”.
- How China’s major and competitive companies (including China-based foreign companies) will affect domestic players in Georgia. What’s going become the effect of globalization of your mentioned companies. Research works demonstrate that Chinese companies strive for becoming global companies;
- What may be the “place” of China, as a leading actor, in terms of geopolitics, besides economic aspects.
“Free trade agreements always make positive impact on enhancement of trade relations between countries when it comes to external economic integration, enhancement of cooperation in a number of fields, intense movement of capital or workforce. Because of this, most of these factors guarantees Georgia’s economic stability and steadiness”, Rati Abuladze said.
Economic expert Akaki Chargeishvili states that enactment in the mentioned agreement is often a positive event. Rapidly agreement was signed a few days ago, Georgian products had penetrated Chinese market a long time before, mainly alcohol based drinks, including wine. Both private and state sectors have serious expectations, Chargeishvili said.
This is serious advancement for economic growth of our country and also the private sector should make a maximum using of this chance, Chargeishvili noted.
?We have now huge potential in agriculture sector, because today the planet suffers from food shortage. Therefore, Georgia is a real chance?, Chargeishvili said.
Government of Georgia should shape an institution of trade-economic representatives at the very least in Chinese provinces that may operate as representations of your Georgian state and will support private sector. Georgian embassies will be unable to valuably perform all these goals, he stated.
Economic expert Gia Khukhashvili says that the disposable trade agreement with China creates certain strategic opportunities for Georgia, according to Georgia’s geopolitical function.
“As to specific economic effect, certain risks may arise. Similar agreements will almost allways be bilateral. As soon as the contractual parties have different economic development levels, the less-developed party may bear losses. In such cases, i will be more vulnerable. This signifies our economy will? become more saturated by Chinese products and we’ll n’t have any instrument to balance this. We really do not have a lot of exports potental in comparison with China and as a consequence, increase of Chinese products is inevitable.
Moreover, this agreement may bring heavier outcomes. Our economy has shaped today. Real sector of economy needs development to help make the country attractive for investors. As a consequence, we have to place competitive products. After we set such preferential regime to Chinese products, the land will lose the interest of investors, each and every investor will fail as a result of competition with Chinese products. That is a main risk and this also agreement may lower Georgia’s investment attractiveness and we’ll never build the true sector of economy”, Khukhashvili said.
If we configured these factors in best way from strategic perspective, we could raise interest of Chinese investors? for making investments in Georgia’s real economy sector to help make our country an exports instrument for Eastern European market and also for Russian market, Khukhashvili said.
“But this agreement confers trade privileges to China. Therefore, China? do not possess much interest to create investments in Georgia’s real sector. Many The european countries have refused to sign similar agreements with China as a result of simple reason