Georgia - A Regional Hub and Asia’s Gateway to Europe?
06 November, 2014
Georgia - A Regional Hub and Asia’s Gateway to Europe?
Georgia, which connects Asia and Europe by the shortest geographic route, is also expected to ease the access of Asian investments to the European market. The liberal trade regime with the EU as well as the clement business climate gives this chance to the small Caucasian country that plans to become a regional hub in transport, logistic, energy and production sectors.

A two-day international investment forum was held on October 29-30th in Tbilisi to exhibit Georgia’s potential for attracting investments
from China, Asia, and Central Asia in particular. The Asian Development Bank (ADB) and the Ministry of Economy and Sustainable Development of Georgia organized the event that brought together up to 300 high-ranking governmental and business representatives from Asian countries and beyond.
It is hardly a secret that to protect its market from flooding with Chinese exports, the EU puts rigid restrictions on China. On the other hand, after the global financial crisis, China and India were among the fast growing economies in the world that could afford new investments. Thus, the entire world has been turning its head toward the East, especially to China to get a slice of its huge investment pie. On the other hand, Chinese and Indian markets, each with population over a billion lures in Western businesses. At the first sight, Georgia with its relatively small, underdeveloped economy and population (of just slightly more than four million) looks pitiful in this international race for Asian markets and investments.
However, as the forum highlighted, Georgia’s favorable geographical location between Asia and Europe, low taxes, its liberal trade regimes with its neighboring countries, its easy-doing business climate, plus the recently signed free trade agreement with the EU puts Georgia in a very good position to attract Asian – and especially Chinese – investments.
“Geographically, Georgia is in a very strategic position to be a regional hub between Asia and the EU – the gateway to Europe. Geographically, this country is in very good position to facilitate trade. This is a very important advantage that Georgia has,” Wencai Zhang, Vice President of the ADB said in an interview to Georgian Journal. “The second advantage is its open economy. Georgia has a very small but very open economy toward the outside world. You just signed an Association Agreement with the EU, restarted trade with Russia and you have tried to get free trade with Central Asia. If there is also free trade with China, I think all these free trade and free investment policies in place will put the country in a very good position.”
John Defterios, CNN’s Emerging Markets Editor and Anchor of Global Exchange, believes that Georgia has all the building blocks at hand. The crucial aspect now is whether Georgia can be the springboard for Asian investments into the very large European market. According to him, Georgia, with its taxes much lower than most European countries have right now and with its free export opportunity to the EU, may attract plenty of investors.
Levan Surguladze, Head of Caucasus Financial Service (an investment fund), believes Georgia really does have big potential as a regional hub especially from the logistic and transport perspective. Production development also seems attractive.
“Georgia offers the most liberal customs regime in the Caucasian region. It allows traders to store their goods and cargos at Georgian customs warehouses and sell the product without customs clearance in the neighboring countries. It spares traders extra costs. So investors from both Asia and Europe may be interested in developing logistic and warehouse infrastructure here and shipping cargo in all directions. As for production, I see more potential for European rather than Chinese investors to come here for production. The point is that production costs in China have increased lately. The workforce got expensive and the production profit margin is not as large as before. Transportation costs are also high. Therefore European producers who used to produce in China may now come to Georgia. The Georgian labor force is not as cheap as in China but production costs are much lower here than in Europe. Besides, Georgia is closer to Europe and offers many privileges for start-up businesses. New businesses enjoy tax exemptions. Also, free industrial zones implemented in Georgia offer low-cost production opportunities. European entrepreneurs may produce products here and take them to Europe as Georgian exports that now have free access to the EU,” Surguladze said.
However he emphasizes the increased competition on railway routes. The recently created Eurasian Union, which unites Russia, Belarus, Kazakhstan, and Armenia as a unified custom space creates huge competition for Georgia. This huge space offers unified customs and tariffs for the transportation corridor on the Asia-Europe route that looks attractive from a logistics point of view. It challenges the South Caucasian corridor that includes Georgia and Azerbaijan with different customs tariffs on the Caspian – Black Sea route. Tariffs on the South Caucasian railway must be liberalized if it wants to beat the competition, Surguladze believes.

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