The President of Georgia Saakashvili has started his political strategy on a double track of consolidation. On the one hand, this consolidation takes the form of an attempt at political stabilization, above all following the conflict with Russia over territorial issues, on the other, as an improvement in economic fundamentals in collaboration with international financial institutions.
The classic recipes, agreed with Imf and Wb, foresee "modernisations" and privatizations of important sectors of the economy, such as the transport sector, in which investments to upgrade infrastructure and privatize the railway network. In addition to this, the Government's effort is centered on a diversification of economic sectors aiming at the development of the tourism and services sector to make the country less dependent on the three key sectors to which it is linked: mining, energy and agriculture. The business climate has improved following reforms aimed at promoting private activity in the economy through a substantial reduction in bureaucracy for opening new businesses and for customs procedures.
However, critical issues still remain, given above all by infrastructural deficiencies and the small size of the country, furthermore to this it is necessary to add the critical issues related to the volatility of the exchange rate and fluctuations in the price of oil. To date, Italy is among the top 10 exporters to Georgia for a value of 136 million euros, up 20% on the previous year. These volumes are driven by mechanical engineering (one third of total exports), refined energy products and metallurgy.
Evaluating the relatively low-skilled workforce and the difficult operating context, the Georgian opportunity for now can be seen more in relation to commercial rather than productive internationalization; however, if the process of stabilization and consolidation, accompanied by an efficiency improvement of the infrastructural endowment, obtains good results, a gradual introduction of production by Italian entrepreneurs could be possible.
Italy, on the other hand, is the 19th market for Georgian exports consisting mainly of mining, energy and agricultural products for a value of 80 million euro.
Sace provides a limit of 30 million euros, providing unconditional insurance against private and banking risk, while with conditions for sovereign risk.
This analysis is based on the study "Exploring new markets" of the Sace study center available at the following address.
