Georgia craves to become a regional hub
09 December, 2010
Georgia craves to become a regional hub

Georgia is believed to become transportation hub between Europe and Asia if due infrastructure leading to Central Asia is developed properly and reasonable price-making policy is shaped out.
To make Georgia a regional hub, Georgian government made customs clearance procedures more liberal starting last November.  Namely the 20-day timetable fixed for zero customs clearance of motor cars is extended to 45 days. According to Nika Gilauri, Prime Minister of Georgia, the extension of customs procedure-timeline must facilitate to increase re-export

turnover and revenue incomes.
Based on official statistics of the Revenue Service [of the Ministry of Finances (MOF)] car re-export figure increased by approximately 50% in October of 2010 by year-over-year comparison.  Moreover, the car-re-export figure of January-December totals 19 605 that translates into 6634 of growth at the moment as the total re-export of motor-cars accounted for 12 971 in 2009.
The bigger part of re-exported motor cars is forwarded to Kazakhstan, Azerbaijan and Armenia. Economic analysts believe Georgia can become a key on-land transit hub for all Central Asian countries including Turkmenistan, Kazakhtan, and specifically the landlocked Uzbekistan, Tajikistan, Kirgizstan, and Afghanistan. The US already uses this route to forward food products for its army to Afghanistan. 
After his visit to China and India [by end-October] Gilauri accentuated that Georgia can become a regional center not only from motor-car re-export point of view but for other industries as well. And making customs procedures simpler is supposed to promote the country as a regional hub to this end.
Levan Surguladze, Head of Caucasus Financial Service, an investment fund, thinks the car re-export growing tendency bespeaks of Georgian transit potential in the region and advises government to focus on activation of its transit function as much as possible as the transit infrastructure development boosts development of affiliated sectors and job creation.
“Kazakhstan apparently discusses Georgia as a regional hub, the biggest share of car-re-export comes with Kazakhstan recently, and car re-export tops the list of re-exported goods thanks to Kazakhstan.  Kazakh-bound cars were transported from Finnish port to Russia and then they had to cross the entire Russian territory to get Kazakhstan. While the route from Poti Port [Georgian Black Sea outlet] to Baku Port at Caspian Sea and a ferry connecting Baku to Actau port of Kazakhstan is the shortest route,” Surguladze explained to Georgian Journal.
At the moment the route lacks duly developed railway infrastructure from Actau to Astana and other Central Asian cities but the fact that car-re-export increased via Georgia to Kazakhstan means that this route is competitive and will be an established key route to other central Asian countries including Uzbekistan and Turkmenistan [that are pretty lucrative markets] if the railway and road infrastructure is developed. Sanctions imposed on Iran restrict potential of Iran transit route to central Asia and cuts much ice with Georgian alternative route to this end.
According to Surguladze, development of transit route can boost related sectors: to develop repair and service sectors for example.
“As far as great amount of cars were exported via Finnish port of Kotka to Russia, there was a car-repair plant established in Kotka, where cars were repaired and assembled and forwarded to Russia. The similar practice can be duplicated in Georgia, and if car-re-export increases significantly we can develop car repair and assembling infrastructure, as well as other car-related services that can give extra incomes and boost local economy,” Surguladze elaborated.
Levan Kalandadze, Director Executive of Association of Georgian Small and Medium Sized Enterprises, agrees that Georgian transit route has a serious potential to be a regional hub as it naturally is the shortest route between Europe and Asia, but fears that existing political risks [frozen territorial conflicts and political tension with Russia] and unreasonable price-making policy undermine this perspective. Kalandadze assures that Georgian railway [been an important part of Georgian transit route] fixes higher transit tariffs than its competitor Russian railway and cargos are diverted to Russian direction.
“The single thing Georgian government can do to increase its competitive power as a transit country is to make the price-making policy very reasonable and lower than in neighboring countries, only low prices and liberal transit rules can offset the political risks actually,” Kalandadze said. “Otherwise Europe/Asia can find other alternative transit routes.”
Representatives of forwarding business that prefer to remain incognito agree with him.
Georgian Railway authority disagrees assuring that it fixes quite reasonable tariffs, moreover liberal customs procedures, low corruption and short distance between two points [Europe and Asia] makes Georgia more competitive than the  highly corrupted Russia with less liberal customs rules and much longer distance.


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