Turkish-Georgian Economic Relationship as an Example of Good Will and Successful Cooperation

Sarpi, Georgian-Turkish border || Creative Commons

Turkish Republic was one of the first nations to recognize Georgia’s independence after the collapse of Soviet Union already on December 16, 1991; diplomatic relationship had been established on May 21, 1992.

Georgia announced its independence from the Soviet Union in April of 1991 despite several economic challenges it could predict after. Soviet Georgia was not the richest but not the poorest in the Union; what could be easily discovered was the flourishing underground economy totally based on bribery (of Moscow officials) and so called Tsekhs, – illegal entities operating almost in every factory.

Soviet economy was  a centrally planned command system where everything had to be decided in Moscow – prices, volume of production, quality, design etc. The communist party leadership and the Central planning authorities were also deciding about where to sell and supply produced goods. Thus, industrial entities were tied to each-other by commands regardless of their interests.

Georgian industrial factories (around 900) had almost no access to foreign markets but even if they had these were of the soviet satellites of Eastern Europe; this type of relationship was also impossible without Moscow’s full control. Therefore, soviet Georgian economy was not based on economic interest but political one – a colony to serve the empire. This was a closed economic space behind the Iron Curtain.

Because of non-existence of relationship and competition from global markets quality of Georgian goods and services, as well as, labor force and management – had stagnated. At the beginning of independence Georgian economy suffered one the worst decline in the human history by around 78 percent (the World Bank information). Almost all the factories and the agrarian sector failed to continue selling their goods to old adapted buyers of former Soviet Union or find new partners. The first reason was the wrong quality of the produced goods, but the second – no knowledge and experience of dealing with global markets, no partners, no established ways and no means. Simultaneously, Russian Federation organized an energy blockade of Georgia which lasted around a decade.

All the mentioned and some other problems quickly destroyed Georgia’s economy, unemployment rose to 90 percent and only in 1995 it was possible start a new economy based on the market competition -Georgia needed to find its niche in the global market and establish new economic ties with the world.

The very first country which supported Georgia’s efforts to establish a new state and economy (or re-establish the old ones) was its direct neighbor Turkey. As it was mentioned, Turkish leaders showed openness to develop economic and political ties with Georgia; together with Georgian side they have made several steps for this. So-called zero problem relationship promoted by 76 different agreements between the sides made it possible formation of a voluntary, effective deep and friendly cooperation. In this article I am going to illustrate some of achievements of this cooperation and the basis they were made on.

The first Turkish-Georgian trade agreement was made in 2000 although the trade between the two nations was substantial already in 1990s – in 1995 Turkey became a major trade partner of Georgia with around 20 percent of total Georgian foreign trade. In the 1990s its share of Georgia’s foreign turnover averaged 15 percent and remained at that level during the following decades; from USD$129 millions total trade in 1995 between the two nations reached almost USD2 billion in 2014, or increased 15 times. Free Trade Agreement between two nations in 2007 made the economic relationship even closer and effective.

Total trade of goods and services during the observed two decades amounted around USD13.6 billion or a little less than a year GDP of current Georgia.

1The major export goods to Turkey were: electricity, metals, fertilizers, clothing, fishery and cars; while the major imported goods from Turkey were: metals, pharmaceutical goods, furniture, paper, cables, etc, (2014, Ministry of Economic Development of Georgia).

Very important was also Turkish role in the Foreign Direct Investments made in Georgia. The table below (Embassy of Turkish Republic information) shows this in details since 2008:

3The total amount invested during the period of 2001-2014 was around USD931 m. Together with remittances sent by Georgian citizens to their relatives the total Turkish participation in Georgian economy during the entire period after the Georgia’s independence easily exceed 1.2 Billion USD; total volume of remittances according to the National Bank of Georgia Statistics has been around USD355 m during the period between 2000 and 2014. Very impressive is also the number of Turkish or Turkish-Georgian joint companies operating in Georgia that has been steadily growing and exceeded 3,200 (Geostat information).

Turkey and Georgia cooperated in many other directions, such as education, tourism and health care. The total number of visitors of Georgia from Turkey during the period of 2005-2014 was 7 million (the chart on the right). This was a result of very intensive and effective decision making and cooperation between the two nations ended with a bilateral Agreement, letting citizens of each side visit the other with an ID card (after November 2011). Very efficient is also the system of border crossing between the countries, where the office works with a principle of one window; this dramatically decreased the number of procedures and the time needed for a traveler and goods to pass the border in Sarpi.

2The friendly nations also worked together in multilateral projects. Azerbaijan, Turkey and Georgia (together with Western Governments and Oil Companies) have been cooperating in energy and transportation infrastructural projects. Baku-Tbilisi-Ceyhan Oil and South Caucasus (Shah Deniz) Natural Gas pipelines that were constructed and have been operating since 2006, have changed the entire geo-political and economic climate in the region, becoming a serious global partner. Since its launch in 2006 BTC (1,760 km) already pumped around 298 m tons of Oil from the Caspian Sea towards the Mediterranean port of Ceyhan (BP website information). Shah Deniz pipeline (692 km) has a capacity to pump 8.8 Billion sq m of natural gas and became very important means for the energy security of the region and beyond. The Turkish investments in the energy infrastructure of Georgia during the period of 2009-2014 amounted USD46 m (Geostat)

2003 Agreement between the same three nations also promises to finalize the Railway between Baku and Kars (Turkey) via Tbilisi in 2015, the capacity of which can reach 1 million passengers and 17 million tons per year, and has to advance the cooperation, development and peace in the region.

This story of bilateral cooperation between Turkey and Georgia gives an interesting example of how good will and understanding each others needs, despite several historic and political differences in past, can create a high level of cooperation from which both sides can benefit politically and economically. The other nations in the Southern Caucasus region and beyond can learn a good lesson from this story. More openness and transparency in relations can bring more success, create new initiatives and move the cooperation and development ahead in diverse sectors of economy in addition to energy supply, climate of tolerance and peace.

The article was originally published at Global&Liberal magazine of the Friedrich Naumann Foundation for Freedom: https://www.freiheit.org/content/global-liberal-freihandel-verbindet

Gia Jandieri