2023 April-May Analysis

Georgia, UAE set to strengthen economic ties

A new visa-free travel regime announced in 2022 now allows citizens of Georgia and the United Arab Emirates to travel freely between the two countries for up to 90 days at a time. But a new holiday destination isn’t the only thing Georgia stands to gain from its growing ties with the Gulf state. A free trade agreement between the two countries, finalized in March, is set to offer Georgia increased foreign investment opportunities and access to a new market of nearly 10 million consumers.

Free trade negotiations

Georgia and the United Arab Emirates are set to enter a “new era” of economic relations after the conclusion of its third and final round of trade negotiations held in Tbilisi from March 15 -17. In a joint statement signed by Georgian Minister of Economy Levan Davitashvili and Emirati Minister of State for Foreign Trade Thani bin Ahmed Al Zeyoudi on March 17, the two sides announced that negotiations had successfully been concluded, with the free trade deal slated to be officially signed later in the year.

The move to increase trade relations, which was first announced by then Georgian Economy Minister Natia Turnava at Dubai Expo 2020 in the fall of 2021, marks a further step towards solidifying Georgia’s competitiveness as a regional trade hub at a time when Russia’s invasion of Ukraine in 2022 has left northern land-based trade routes connecting Europe and Asia effectively nonviable for many transporters.

And for the UAE, these free trade negotiations represent part of their newly unveiled foreign trade agenda, which seeks to diversify away from oil and gas and double the size of the country’s economy to $820 billion by 2030. It follows recent trade agreements signed by the country with India, Israel, and Indonesia and the announcement of free trade talks with the Eurasian Economic Union (Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia) and Ukraine in December 2022.

Georgia’s trade history with the UAE

Georgian Deputy Minister of Economy Genadi Arveladze opened the final round of talks on March 15, noting that a free trade agreement would open the UAE market and its 10 million consumers with “high purchasing power” to Georgian exporting companies in a move that Minister of Economy Davitashvili added would be “mutually beneficial” for both countries. But what has the two countries’ trade history looked like previously?

In 2022, bilateral non-oil trade between the two countries reached $468 million, a 110% increase compared to the same period in 2021. This comes on the back of a 52% increase in non-oil trade the year before, with the trade delegation of the UAE to Georgia estimating that trade between the two countries now accounts for 63% of Georgia’s total trade with the Arab world.

And while up 51% YoY in 2022, Georgia’s exports to the Gulf state seem to still be recovering from a post-Covid slump, amounting to only 41% of their 2019 figures. This is likely due to pandemic’s border closures and supply chain disruptions, which had a devastating impact on Georgia’s auto re-export business in 2020 and hit its largest export to the UAE: cars.

Prior to the pandemic, however, Georgian exports to the UAE had been on a steady incline, with auto re-exports consistently holding the top spot. In 2019, for instance, car re-exports made up 60% of the country’s $75.3 million value of exports to the UAE as Georgia’s geographic location, low import tax rates, and relatively low cost of automobile services enabled it to become something of a used car market hub. And with the effects of the pandemic subsiding [Georgia’s auto re-export market hit a record $904 million in value in 2022] and the signing of the free trade deal, auto exports to the UAE seem poised to resume their growth trajectory.

Other major exports to the UAE in recent years included gold and semiconductors, though gold exports have continued to decline in both value and share of total exports. In 2016, for instance, gold made up 21% of total export value to the UAE. In 2019, it was 16% of exports, and by 2020, it had dropped to just 6%.

Georgian imports of goods from the UAE have fluctuated over the last ten years, largely bouncing between a value of $150 million and $200 million in annual value. Topping the list since 2014 has been the import of mobile phones, which equaled $155 million in value alone in 2022. Other major imports in 2022 included tobacco products ($20 million) and computers ($12 million).

Investment prospects

In addition to official trade delegation meetings in early March, the UAE-Georgia Business Forum was held in tandem in Tbilisi to jump start new cooperation and the “deepening of economic ties” between the two countries. From the UAE delegation, representatives of the Ministry of Economy, the UAE International Investors Council, the Sharjah Chamber of Commerce and Industry, and leading business representatives joined the more than 250 attendees, which also included leading Georgian business representatives of sectors like agriculture and hospitality, food product distributors, transport and logistics, real estate, and information technologies.

Among the topics of discussion was the prospect of increased foreign direct investment in the country as a trade delegation representative from the UAE noted that “mutual direct investment exceeded $1 billion by the end of 2021, with UAE investments into Georgia currently representing 5% of all FDI into the country – the sixth largest source of foreign direct investment.”

With key areas of potential cooperation like agriculture, tourism, transport, and energy emphasized, the event comes a little over a year after the announcement of plans to develop a new solar power plant in Akhali Samgori by UAE state-owned renewable energy firm Masdar. The company, which has renewable development projects in over 40 countries, has called the $87 million investment and creation of a 100 MW photovoltaic farm the first step toward “further renewable energy opportunities with the Government of Georgia that will leverage our experience to support the nation’s economic development.”