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Trade and Investmeent Between Georgia and Azerbaijan

This research was conducted as part of Private Sector Development in the South Caucasus Program, conducted by GIZ which is, in turn, part of its wider Caucasus Initiative. The principle objective of the study is to inform decision makers about the various barriers to trade and investment between Georgia and Azerbaijan so as to help them reduce these barriers.

There is no doubt that trade and investment between Georgia and Azerbaijan are crucial to both countries. For Georgia the import, export and investment figures speak for themselves. Azerbaijan is currently Georgia’s largest single export market and accounts for 8% of its Foreign Direct Investment. Georgia is crucial to Azerbaijan as a trade transit country most obviously for oil, but also for goods originating from Turkey and the West. As a result, even if trade and investment between the two countries does not increase significantly, the connection between the two will remain vital.

As a result, increasing the effectiveness of the trade regulation regime across Georgia and Azerbaijan as well as increasing efficiency on the Georgia/Azerbaijan border-crossing would certainly be in both countries’ interest. For Georgia it would provide an increased opportunity for exports into a country that has a massive demand for agricultural products that Georgia could help to provide. For Azerbaijan it would lower the cost of imports not just from Georgia, but also from other countries that transit their goods through Georgia. For both countries improved movement of goods could also stimulate economic activity on the border. Also, given that the Russian market is closed to Georgia but open to Azerbaijan, a more open border could generate a secondary business in food processing of Georgian agricultural products for the Russian market. This would benefit both countries.

To try and identify how to achieve some of these goals, the research involved an overview of existing analysis of the two economies, analysis of macroeconomic statistics, particularly as they relate to trade and investment, semi-structured interviews with experts and business people and three surveys, one with companies that import or export goods, one with business people who run transportation companies and one with truck drivers at the border. The research was designed and managed by GeoWel Research and conducted by GeoWel Research in Georgia and the Caucasus Resource Research Center in Azerbaijan.

The results of the research are organized thematically into five categories.

1. General business environment
2. Existing patterns of trade and investment
3. Legal and procedural environment for trade
4. Transport and Logistics
5. Practical assessment of ease of trade between Georgia and Azerbaijan

In the document, these themes are the principle organizing structure with each country discussed beneath them. In this summary, the division is first made by country.

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