Georgia - Foreign Trade

Foreign trade

In the Soviet period, Georgian trade with the world outside the Soviet Union was severely restricted by Moscow's foreign economic policy. Almost all of Georgian foreign economic activity was conducted by fourteen central enterprises, most of which operated under the direct management of Moscow. Bulgaria, Czechoslovakia, Germany, Japan, and Poland were among the most important of Georgia's trading partners. Gamsakhurdia, suspicious of businessmen who sought to export Georgian goods, banned all export activity. The Shevardnadze government, however, created conditions for significant improvement of international investment and trade. In May 1992, licensing requirements for import or export activities were dropped except for the import of goods in the military and medical categories. This change represented a significant expansion of the rights of enterprises to engage in foreign economic activity. Export of twelve commodities, mostly foodstuffs, was still prohibited at the end of 1992. Fees and other restrictions on the registration of joint ventures were removed, and the state tax on all imports was canceled. Import duties ranged from 5 to 55 percent, and export duties from 5 to 90 percent, with an exemption for former Soviet republics; the VAT on exports dropped to 14 percent in late 1992. The National Bank of Georgia imposed a tax of 12 percent of exporters' hardcurrency earnings. In early 1993, new trade policies had not led to major increases in foreign trade and investment. Continued political instability, ethnic warfare, and extremely poor transportation and telecommunications facilities continued to discourage foreign investors in 1993.

In the second half of 1993, continued military upheaval did not entirely deter progress in foreign investment. The Renault automobile company of France, the German Tee Kanes tea company, and British and Dutch liquor companies signed contracts in August, and officials of Mitsubishi and an American shipbuilder visited Georgia to assess investment conditions.

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