It is no secret that for Armenia, which faces blockade, commercial  ties with Georgia are significant. How is the present potential employed and what development prospects are observed in the economic relations of these two countries?

Banks.am talked to Advisor to the Rector of Tbilisi State University, Georgian economist Irakli Murtskhvaladze.
 
-To a certain extent, the turnover between Armenia and Georgia, particularly the volumes of export from Armenia to Georgia have increased in 2013. How would you explain it?
 
-While considering Armenian-Georgian relations, we must note that in the past Georgia used to export to Armenia more, and import from Armenia to Georgia was very limited (around 0.9 % of total import to Georgia).

But in 2013 imports from Armenia to Georgia grew. Now they make up 2.5 % of total Georgian import. It’s a significant increase. It is explained by the fact that Armenian companies are exporting to Georgia some consumer goods already known in Georgia over the past years, that’s why the Georgian market welcomes them. For example, Armenian coffee, which was not well known perhaps 5 years ago, is quite famous today. There are several importers of Armenian coffee; distribution networks also operate.

Let’s also note that Georgia is the major trade route Armenia uses to import all the necessary goods. Some of them are direct Georgian imports, like Georgian beer, lemonades, and citrus fruits. But some of them are indirect imports to Armenia, like cars that Georgians buy in Germany and then sell them to Armenians. It’s not exactly our production, but it still counts as import from Georgia to Armenia.

-However, Georgia’s top three trade partners are Turkey, Azerbaijan and Russia. Will Turkey’s and Azerbaijan’s factor have any impact on the future development of Armenian-Georgian economic relations?

-I doubt it will have any negative impact on Georgian-Armenian relations because major trade relations between Georgia and Azerbaijan are established in the sphere of energy resources, especially oil. On the other hand, we have reopened economic relations with Russia, which is declared as Armenia’s strategic ally. We have reopened markets for Georgian import to Russia for our beverages, mineral water and some agricultural products. I would like to point out that our trade relations with Russia do not have any negative impact on Georgian-Turkish or Georgian-Armenian trade relations.

-Much is spoken in Armenia about the Armenian capital outflow to Georgia. What could you say about it?

- There are some specific reasons for capital flow from Armenia to Georgia. First of all, it is based on the good knowledge of Armenian investors of Georgian market. Many of them were grown up in Georgia, and they know what the demands of the Georgian market are, how they can exploit it and generate profit; also, they have friends who they can trust and do business with.

-Georgia is not among the top five investors in Armenia. What is the reason for the lack of Georgian investors’ interest in the Armenian market?

- It’s not true that we are not interested in the Armenian market. We are interested, but unlike Armenian businessmen, we don’t have the advantage that you have in investing in Georgia. There is large Armenian population living in Georgia today. Armenia is more a mono ethnic state, and there are only 90 families of Georgians living in Armenia. So we don’t have too many people in Armenia with the practice and knowledge of Armenian business in details. Maybe, we are not in the top 5, but still, Georgia makes some investments in Armenia. We also have to consider that just like Armenia, Georgia is also a small nation and we can’t be competitive in foreign direct investments in Armenia at the same scale with the USA or Russia.  

-Three years ago, Georgia made an attractive offer to Armenian investors. Georgia was offering to build hotels in Black Sea coastal areas by releasing them from taxes for 15 years. What progress was recorded?

- Exact information can be obtained from the Ministry of Sustainable Development and Economy of Georgia. Owners of hotels with at least 50 rooms in the regions of Kobuleti and Anaklia, who have made investments amounting to over USD 1mln, are released from property and income taxes for 15 years.   

-In 2013, Georgia was the third by the number of tourists to Georgia, which is apparently owing to the sea factor. Do you think the Georgian tourism industry offer sufficient conditions in terms of service?

- Over the recent years, this sector has been improved. Tourism is one of the major directions in the economical development of Georgia. We offer big incentives for investors. The state also invests in infrastructure projects. We are trying to attract not only new tourists but also those who have already visited our country. The second direction we are currently improving is mountain tourism, Gudauri, Bakuriani, etc. Another attempt we are making is to offer cuisine tourism – the relevant presentation of the national foods and beverages.
 
-The IT sector is a priority in the Armenian economy. Is Georgia interested in the employment of Armenia’s IT potential?

- I think Armenia should take measures in advertising its IT potential in Georgia because it’s how the business works. We are not going to come to Armenia and ask if you have some good ideas or not. Don’t you want to be the ones telling us that? It’s a good opportunity for Armenian specialists to advertise their business not only to Georgian companies, but also to foreign companies currently operating in Tbilisi. So if they do it themselves, they will have targets not only the Georgian market but also the international one.

-Recently, Armenian and Georgia Presidents stated that Armenia’s Customs Union membership will not have any impact on Armenian-Georgian relations. Do you find it realistic?

- It is very difficult to predict what will happen in the future but every nation is free to do what they think is the best for them. The Armenian government made a decision to join the Customs Union, and the Georgian government is advocating for European and Euro Atlantic integration. Right now we are preparing to sign the Association Agreement with the EU. It also includes DCFTA, which will facilitate Georgia-EU trade relations.

But on the other hand, we don’t turn a blind eye on the Russian market, and we will trade with them too. I think these agreements open a new window of opportunities for us rather than create obstacles.

-It’s irrefutable that former Georgian President Mikhail Saakashvili facilitated the business conditions during his presidency. In this regard, what policy does the current Georgian President pursue?

- In terms of doing business, my personal opinion is that it’s even better now because what was done well by Saakashvili is more improved today. We have positive changes too. Some of the major issues the international society was concerned about in the past were the property rights in Georgia. We have significant progress in this sector too, and now it is very safe to do business in Georgia. Nobody will interfere with your business. The only thing you will have to do properly is to pay taxes in time.

Irakli Murtskhvaladze was interviewed by Narine Daneghyan