PMC Research Presents Findings on Georgia’s Potential within Belt & Road Initiative
On January 25, PMC Research hosted a public discussion and a presentation introducing the findings of the research on ‘Georgia as a Transit Hub and its Increasing Potential in the Implementation of the Belt and Road Initiative.’
The study findings presented by PMC Research researchers Mariam Zabakhidze and Rezo Beradze, focused on highlighting Georgia’s role and potential in the framework of the Belt and Road Initiative (BRI), and gave recommendations regarding the possible future steps to be undertaken for the country to be better integrated in the abovementioned BRI. It is widely regarded as an important opportunity allowing the country to become a transit hub and benefit from the increased trade possibilities between China and Europe.
The study claims there is a “clear interconnection between the BRI and Georgia’s economic development strategy in terms of infrastructure development and trade facilitation,” and advises “Georgia to leverage the advantages of its trade agreements (DCFTA with the EU; FTA with China) and favorable business environment to become an important transit hub in the South Caucasus region and beyond.”
The study also notes that, notwithstanding the clear political will from the Georgian government to become a part of BRI, the country has yet to undertake a number of steps “to utilize its strategic location, facilitate investment and become more than a transit country.” It says the Georgian government “needs to be proactive and develop a strategy at the regional and national level,” and goes on to present several recommendations in this regard, which center on establishing working groups involving public and private sector stakeholders to discuss setting a common vision on increasing TRACECA corridor competitiveness, work on simplifying border –crossing procedures through the TRACECA corridor; developing a national strategy document with a “clear message underpinning Georgia’s stance on becoming a transit hub to the stakeholders of BRI,” and establishing a BRI harmonization unit, ensuring effective usage of Georgia’s potential and opportunities beyond being a transit hub.
The study suggests the China-Central Asia-West Asia corridor could encompass TRACECA, offering various opportunities for Georgia.
The study points out that despite Georgia’s growing involvement in BRI, and the increased interest of China in the South Caucasus region, there are a number of barriers for both countries, from the lack of modernized and developed hard infrastructure to challenges related to the lack of soft infrastructure tools. On the positive side, the authors of the study highlight that Georgia can use its advantages, notably its business-friendly environment, liberal trade policy and low rates of corruption, “to attract more foreign investment and to create more added value within the country”.
Noting China and Georgia’s FTA agreement signed in 2017, the Anaklia Deep Sea Port construction, the Baku-Tbilisi-Kars Railway project and the expansion of the country’s East-West highway as some of the milestones of Georgia’s growing engagement in BRI, alongside the Tbilisi Belt and Road Forum held in 2017, during which numerous memorandums of understandings were signed with China, the report goes on to analyze China-Europe economic cooperation trends. The research authors suggest that, “while assessing the potential of Georgia to derive economic gains from being a transit hub, the current situation regarding trade corridors should be investigated.”
“Georgia can offer a platform to China through which it can more efficiently trade with Europe. However, for this platform to become competitive, and a number of some complex and interrelated issues need to be addressed. Georgia’s success in this regard will largely depend on the success of coordinated hard and soft infrastructure development and the taking full advantage of the Baku-Tbilisi-Kars railway link to Turkey and Anaklia Deep Sea Port. In this vein, convergence between the BRI and Georgia’s economic development trajectory is linked to infrastructure development. At the same time, Georgia can utilize the advantages of its trade agreements and business environment to become an important transit hub in the South Caucasus region and beyond,” the study emphasizes, noting that one of the major challenges for the country might be the significant decrease of transit in Georgia.
“Although it is too early to evaluate the impact of BRI-related infrastructure development on Georgia’s potential transformation into a transit hub, current evidence suggests the existence of clear opportunities for Georgia to modernize its infrastructure. To ensure that the full potential of this new connectivity is achieved, old infrastructure needs to be modernized. In addition, soft infrastructure tools need to be put in place.”
In terms of recommendations and conclusions, the study suggests that “Georgia needs to be proactive and should determine how to derive maximum benefits from the BRI for its economic development. To do so, a coherent, coordinated and complementary strategy based on national development goals, reflecting the comparative advantages of different development partners, needs to be put into place,” alongside a recommendation for the Georgian government to develop a strategy on both a regional and national level.
Another recommendation underlines the need to create simplified border-crossing procedures, while creating a soft infrastructure tool regionally and introducing a unified tracking and tracing system.
The study also recommends the “strengthening of currently limited regional cooperation and identification of complementarities of each country through the TRACECA corridor.”
The authors of the study say that, on a regional level, Georgia needs to focus on the “competitiveness of the corridor that passes through it. The strengths and weaknesses of each corridor need to be examined very carefully and future actions should be based on the advantages of TRACECA compared to its rivals. Thus, Georgia needs to establish working groups involving key public and private stakeholders within the country and in the region to discuss and establish a common vision.”
Recommendations on the national level, according to the study, include working on a national transportation strategy document and creating a BRI harmonization unit, under the Ministry of Economy and Sustainable Development of Georgia, that will study the advantages of the country as well as find areas for improvement.
“Georgia could be an attractive partner for BRI countries as it is the only country in the region to have signed a DCFTA with the EU and an FTA with China,” the study notes.
“From Georgia’s perspective, the most significant expectation relates to the improvement of its hard infrastructure connectivity. This corresponds with some of the infrastructure projects forming part of Georgia’s national development strategy, such as building a new deep-water sea port on the Black Sea, improving Georgia’s railways, and expanding road transport in Georgia, thus creating an opportunity for “‘win-win’ cooperation,” the paper concludes.
The study was conducted by PMC Research, as part of the project ‘Public Policy Discourse and Dialogue Platform,’ with the support of Policy and Management Consulting Group (PMCG).
Nino Gugunishvili