Thursday, September 13, 2012

Georgian export stumbles over Tbilisi’s uncertain political will

by Nino Patsuria

12.09.2012. Georgian export stumbles over the equivocal political will of Georgian administration. On the one hand, official Tbilisi lingers to get back to traditional Russian market because distrusts it since the embargo of  2006. Neither does it hurry toward its declared priority of the EU market that offers to unfold its free market prospects to Georgia if the liberally inclined Tbilisi changes its mind and undertakes the European way of stronger market regulations focused on safer and high quality product.

After a year since Russia’s entry into the World Trade Organization (WTO), Russia seems ready to get more docile and reopen its market to Georgian products, mainly wine, mineral water and agriculture products that Genadi Onishchenko, Russian top sanitary, hurled away in 2006 for alleged quality reasons. Now Onishchenko touts Georgian products back. As he said to Interfax on September 6, 2012, many Georgian companies have already submitted paper-work at RosPotrebNadzor, Sanitary Service of Russian Federation, for further approval so as to start exporting Georgian product to Russian market.

These papers include a year-long applications of IDS Borjomi Georgia, producing mineral water Borjomi, and Sarajishvili brandy company, both reputable companies holding international quality certificates and exporting to post- Soviet, as well as, European countries.

Onishchenko assures the fault falls with Georgian government who apparently is not interested in the solution of  this problem. “As I said a year ago, in order to allow the entry into the Russian market either Borjomi, that also had problems, or Georgian wines, at least Sarajishvili brandy, we just need to inspect the territories of the said enterprises. They have already submitted the papers,” Onishchenko was reported by Rusisan media past week.  “But Georgian government apparently is not interested in it.”

Guja Bubuteishvili, Director General of Srajishvili company, does not trust Onishchenko who is well aware of Sarajishvili brandy’s quality. “I will believe the Russian market is open when not Onishchenko but Russian government will say this. This is a quibbling of words. Onishchenko has visited my plant for numerous times and has been praising my enterprise in about 170 articles in Russian media, but our negotiations with Russian side has shown no progress,” Bubuteishvili said in the interview to Georgian Journal.

Georgian Ministry of Agriculture in response to Onishchenko’s accusations released an official statement on September 6, 2012 and stressed that Georgian state welcomes any foreign certifying/testing organ to visit Georgia on purpose to grant Georgian companies the export permission ultimately, and the state never interferes in the relationship between foreign certification organs and local business.

Demur Giorkhelidze, an economic expert with the oppositionist Georgian Dream political coalition, does not trust the governmental message for the reality confirms different scenario. “The reality is that business depends on government in Georgia and it does not dare to undertake a move toward Russian market that is traditional and spares business of millions of investments to be spent on advertisement that are necessary at other markets including the EU,” He said to Georgian Journal.  “The year of 2013 is supposed to be very hard and Russian market is very important to us, it falls in the interest of Georgia not Russia to reappear at Russian market.”

Giorkhelidze believes Georgian administration has no political will to get back to Russian market that may facilitate the business to get wealthier, stronger, more independent and thus get out of governmental control. Therefore, the authorities latently press on Georgian business to forget Russian market and the business appeases as it fears to be shut down.

Badri Ramishvili, a marketing expert, thinks it is the political will of the Kremlin to keep Georgia off  the Russian market. Ramishvili believes that Georgia should be focused on the EU market that offers free trade rather than bargain with Russia that promises no trade preferences.

That’s nonsense that Georgian administration lost Russian market in 2006. It was Russian policy to divert Georgia from its political course through sundry economic tools.  Russian ideologist Dugin openly says that Russia has tried different remedies including gas cut-offs and trade embargo to make Georgia change its political course but to no avail,” Ramishvili said. He believes Russian embargo did a good job to Georgia in fact as it impelled the business to take care of quality and seek other markets that is much more important rather than to bargain with Russia on some preferences that will have political price, the price that is not worth of commercial benefits Georgia may enjoy as an aftermath.

Since Russia joined the WTO that prohibits any kind of trade embargo between its member-states, Georgia, also a WTO member-state, already may have trade with Russia and has nothing to bargain about except the trade preferences that will include political price by all means,” Ramishvili said. He believes Russian market is not worth of paying political price. “We had Russian market before 2006 and so what, were we thriving? No,” he said and advised to focus on the free trade with the EU that may really boost Georgian economy.

The tariff-free trade prospects with the EU with about 500 million of population and ten-fold bigger capacity than Russian market is much more enticing perspective to think of. Thanks to the Black Sea logistics to European countries, which is cheaper rather than transportation to remote Russian regions 2-3 thousand kilometers away of Georgia and fixing high customs tariffs on top of it.

Moreover, the quality problem that hampers Georgian export to the EU at the moment will hurdle it in Russia in future as well. “Competition in Russia will be getting stronger with the time as the WTO standards will be gaining strength. More and more western reputable companies will enter there and Georgia will face stronger competition in Russia as in Europe. So what is better, to focus on the tariff-free trade with the EU or Russia that fixes customs tariffs?” Ramishvili asks.

What puzzles Ramishvili is that official Tbilisi lingers to enjoy the EU free trade offer due to its liberal inclinations. Actually, when talks on free trade with the EU started in 2008, the EU forecast was to enforce the promised trade regime starting 2011-2012. Now the prospect is delayed by three years. The reason is that Tbilisi is reluctant to implement the EU requirements on market regulation as obligatory preconditions for starting the free trade.

“As soon as the EU free market becomes attainable, I expect investments influx in Georgia and export curve going high,” Ramishvili said. As of now the lack of markets suffocates Georgian export leaving it pending for better time and sensible political will.


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