Issue 1, 2016. February-march



December 18 was a big day for Georgia: the European Union reaffirmed its commitment to Georgia and Ukraine by granting their citizens rights to obtain visas for short-term business, tourist or family trips. Bloomberg's Helena Bedwell speaks with producers, economists and government officials about what Brussels' visa-free regime could mean for the Georgian economy.

Helena Bedwell

Georgia lacks common borders with the EU. But the new visa-free regime Brussels has granted the country, together with the 2014 free trade agreement, could help Georgia build new bridges and bolster increasing trade relations.

Breaking away from the Russian Market

For Russian market has traditionally been the main focus for Georgian producers.

Trade between the two countries dwindled following Moscow's 2006 trade embargo, although the Russian market has slowly opened up to Georgian producers since 2012.

The breakthrough in trade relations with Russiah as been a welcoming bolster for Georgian trade. But it has come with fears that the Georgian economy could once again grow dependent on Moscow.

Pundits hope, however, that the new benefits from EU's visa-free regime and the Deep and Comprehensive Free Trade Agreement (DCFTA) will help Georgia build stronger trade relations outside of Russia and the former Soviet Union.

Roman Gotsiridze, an expert and former central banker of Georgia, believes the wider EU market will give Georgia more opportunities to grow and start mass production.The most important benefits of all, he noted, could be the visa-free regime's power to end the illegal immigration of Georgians abroad and kick-start affordable tourism.

International Marketing for Georgia's Famous Cuisine

In the first six months of the Georgia-EU trade agreement, Georgian exports of fruit juices to the EU more than tripled, according to a DCFTA fact sheet.

Under the free trade agreement, Georgia has started exporting some products to the EU that it did not export to it before, such as acyclic alcohols and synthetic filament yarns.

Georgia's Ministry of Agriculture, which has a significant role as a connecting bridge to the EU market, was asked whether any fluctuations have been detected in trade numbers.

"The EU market is not a virtual reality for us anymore; as much as 35% of total trade is with the EU market right now, an increase as compared to previous years," Levin Davitashvili, the Deputy Minister of Agriculture, said in an interview in Tbilisi in December. "Hazelnuts, spirits, wine, and mineral waters reign in trade at this moment."

The authorities also predict a bright future for other products, aside from the traditional frontrunners. These include juices, berries, kiwis, and newly grown exotic fruits, for which Georgia has perfect soil sand climate. Challenges, such as packaging, quality control, and rules to satisfy the EU market are being worked on intensively along with the local farmers, Davitashvili added.

Davitashvili sees more room for growth of markets for Georgian organic products, like supplying kiwis to Germany, and blueberries grown all-naturally, while he is less optimistic that he will see Georgia supplying such markets right away. "We don't have any other barriers, but not having a critical mass of agricultural production right now, everything is sold very fast."

There are already success stories, like the company SOPROSS AG, which has been based in France for two years and imports premium-class Georgian products to France and Monaco. Created by the Sopromadze family, it offers the French market of 80 million sauces, juices and other 25 other types of products that have already established a reputation in France.

Khatuna Sopromadze, a co-founder of the company, tells me that at first it was very difficult to establish local contacts and build consumer trust. She added that Georgian producers were equally hard to deal with. In the end, however, success came: today legendary places like the Café de Paris Monaco, Hotel de Paris Monaco, Salle Empire, Monaco Hotel Hermitage and its Salle Belle Epoque, Fairmont Monte Carlo, and Monte-Carlo Bay Hotel & Resort offers Georgian products.

"We began by introducing Georgia and its culture to our potential customers so they could see just how much love and warmth is put toward making these products,"she said. "We have managed to make them love Georgian products; we are very proud that we achieved something like this."

Georgian tea is also being exported to the EU market.

"Any market, including the Russian market, is great for traders and businesspeople and is interesting and profitable," noted Mikheil Chkuaseli, the CEO of Geoplan, is largest producer of Georgian tea.

"But I believe that sales should be diversified and never be dependent on one particular market, Risks are high with Russia, including political risks. Also, if we totally concentrate on Russia, we won't have enough for other markets."

Reassuring International Investors

The Director of Georgia's National Investment Agency, Giorgi Pertaia, said EU visa liberalization will also pave the way for more foreign investors in Georgia.

He noted that it will help foreign businesses perceive Georgia as a stable, successful, Western-oriented country. In an interview right before the EU visa liberalization announcement was made, Pertaia noted that Brussels' decision to grant Georgia a visa-free regime would reassure the country's partners that Georgia is a reliable partner.

Vato Lejava, the Chancellor of the Free University of Tbilisi, agreed, noting that by reducing travel restrictions for Georgians, Brussels has made it easier for entrepreneurs to make contacts and build business relations in the EU market.

"You have heard stories when foreigners come to Georgia, decided to stay here and begin businesses, whatever that is, making wine, planting fruits or vegetables or just launching a guesthouse." Lejava said in an interview in Tbilisi. "The same logic can apply to visa liberalization. People will have great opportunities to socialize with each other and make business decisions. Georgia is part of the...Western world."