Georgia’s Possible Positioning in a New Global Production & Trade System, Part 2
Op-Ed
Our country naturally enjoys numerous advantages when it comes to positioning itself in our newly rearranging world. Besides the technical aspects of doing business, it is essential to name a number of geopolitical, geographic and institutional factors. Geopolitically speaking, a prominent factor is Georgia’s foreign policy and its growing integration into European and Euro-Atlantic structures—an integration which, in addition to its economic significance, contributes to the stability and security of our state. Georgia has come a long and difficult way along this path, a clear result of which is the country’s firm contribution to the stability and security of the Black Sea region for the North Atlantic Alliance. Georgia’s waves of political, economic and social reforms, although they have obviously not yet realized their full potential, make our country stand out quite favorably against the background of our immediate and regional neighbors. In this respect, many of our competitors still need to embark upon this path if they are to become part of global economic value chains.
And yet, at the same time, what I have just said does not mean that, in order to position ourselves successfully, we must always act unilaterally; this would be both unrealistic and not serious. Considering Georgia’s small scale in terms of consumers and resources, as well as the possibility of establishing a “Mini China” regional hub, it is vital to coordinate our efforts with other countries that are politically and economically comparable to us and whose understanding of the overall picture is similar. It would be ideal to draw up a set of trans-regional rules with regionally important economic actors or to harmonize national legislations in order to present a united economic front against competitor hubs (in Asia or Latin America, for example). We needn’t look too far for additional comparisons: even such projects as Baku-Tbilisi-Ceyhan and Baku-Tbilisi-Erzurum are clear proof of the potential benefits of coordination and understanding between different countries. It should be specifically mentioned here that, when discussing the universal rules of trade and the wide area of their usage, Georgia figures rather naturally under the roof of world trade. We are practically the only country in the region to have free trade agreements with China, Hong Kong, the European Union, the European Free Trade Association (EFTA), Turkey and the CIS countries, and we may expect to sign more such preferential trade agreements in the nearest future.
Also, regarding Asian hubs, a further advantage that Georgia derives from her immediate and regional geographical position is a proximity to the American and European “end users” of the production and recycling centers of this new architecture of global supply. Along with other factors, this geographic advantage further increases demand for the development of infrastructure, including ports—infrastructure which, alongside the growing human and productive potential of the Black Sea region, will also increase the significance of Georgia’s role. Obviously, the format of this article makes it difficult to cover every aspect of this question, but I will pick out one or two of them. When discussing the possibility of establishing a regional “Mini-China”, one of the obstacles we face is our relative lack of a sufficiently numerous and qualified workforce; this must be compensated for if we aim to attract even a dozen medium-sized enterprises to Georgia. In this regard, I believe that one (admittedly arguable) possibility would be to modify Georgia’s immigration legislation in such a way as to enable us to employ additional workers under specific fixed-term conditions. Other countries successfully do precisely that, and I think that this option deserves at least proper consideration and discussion.
I mentioned the possibility of welcoming a fixed-term workforce, and I would like to underline the fact that the local workforce’s lack of necessary qualifications and skills could and must be rapidly solved in a different manner. It is vitally necessary that the government set up targeted programs to train and prepare the local workforce, for without this it would be difficult to ensure Georgia’s competitiveness with other “Mini-Chinese” hubs. The question of precisely what kinds of businesses or companies need to be attracted in order to ensure Georgia’s economic development must also be considered. Given the rearrangements caused by the recent “perfect economic storm”, however, we will not have the luxury of being able to calmly make our choice, and in this regard attracting any “prey” would be a lucky catch. Proper planning will also be tactically vital if Georgia’s strategic development is to be systemic and not follow a zig-zag path. We therefore need to draw up a list of “essential” business activities that could be easily integrated with our current national structure and could also further the country’s strategic development. And speaking of tactics, one method would be to issue a so-called “investment passport” to every “essential” business activity or company. Such a “passport” or bespoken equivalent would set out rules for the relationship between the government and essential businesses, key investors or companies wishing to establish themselves in Georgia, including potential tax exemptions and legal guarantees, etc. Individually documenting and itemizing every single meaningful investment or business would also communicate a useful political message abroad and increase Georgia’s attractiveness to investment.
I also wish to remind readers that Georgian legislation already provides for an instrument similar to the above-mentioned approach: these are the commercial-legislative platforms known as “special economic zones”. Refining and improving the concept of these special economic zones might indeed serve as more flexible alternative to improve Georgia’s suitability to the modern demands of global supply chains, but this discussion would of course be beyond the scope of this article.
In a word, current realities essentially open up new perspectives for us. Making good use of these will require proper planning and consequent execution. Along with all the thoughts I have shared through this peice of article, I believe Georgia would benefit greatly if the government would soon define a series of guidelines for such a plan. Most importantly, these guidelines should incorporate all the messages for the business sector concerning specific results and processes in a clear, business-like language. These guidelines should also make clear Georgia’s ambition to join various global or regional initiatives, and should set out potential fiscal measures and suggestions for supporting the “onshorization” of foreign businesses in Georgia. Also, foreign official and media communications should be activated, including consultations with business actors of interest to us. Our current times will only reward the intelligent and the daring.
By Victor Kipiani, Geocase Chair
Hualing FIZ. Image source: bm.ge
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