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Whether Georgian Products Overcome Azerbaijani Restrictions

Government of Azerbaijan has taken decision on increasing customs duties and restricting imports. The new decision will come into force soon and will be valid for two years. Government of Georgia assures that the decision will not affect Georgian products and exporters.

Azerbaijani officials have confirmed that changes will not concern Georgia, Deputy Economy Minister Genadi Arveladze said.

“We have concluded a bilateral and multilateral free trade agreement with Azerbaijan and this agreement is free of growth in similar imports tariffs. Consequently, this decision will not affect Georgian products. We have consulted the issue with Azerbaijani colleagues and they have confirmed this circumstance”, Arveladze said.

According to Azerbaijani media agencies, customs duties on imports of several products will increase for a period of two years, including on meat products, poultry meat, egg, fruit, vegetables, nuts, juices, strong and soft drinks, including mineral waters, building materials – concrete, cement, ceramics and brick.

According to the new law, one kilogram of chicken meat will be taxed by 1 USD, 1000 chicken eggs will be taxed by 100 USD, 1 kg of cucumber will be taxed by 0.20 USD, 1 kg of filbert – by 0.40 USD, 1 kg of apple – by 0.30 USD, one liter of mineral waters – by 0.70 USD.

Government of Georgia seems calm, but Georgian businessmen with entrepreneurial ties in Azerbaijan provide different assessments. A part of Georgian exporters forecasts contraction in revenues because of the mentioned decision, while another part  assures that restrictions will only slightly aggravate the tax burden.

Tskali Margebeli company (Nabeghlavi)

If these restrictions do not concern Georgian products, this will be wonderful. Otherwise, increased imports taxes will boost smuggling and distributor companies will try to deliver products to Azerbaijan bypassing customs procedures.

The ratio of Azerbaijan in the company’s exports is unimportant, but the decision will affect the company revenues anyway. In this case, our company may increase  exports to other neighboring countries, Svimonishvili noted.

 “We will maintain exports in Azerbaijan, but the volumes will decline. It is important how Azerbaijani distributors will cope with the situation and what tariffs they will set. In general, imported water is expensive in Azerbaijan and higher prices may slow down the demand. We will maintain the existing tariffs, but the product price will rise in value in Azerbaijan. We have communicated with our Azerbaijani partners, but they remain in waiting regime”, Svimonishvili noted.

Poultry Development Association of Georgia

Despite statements by government of Georgia, the mentioned decision will negatively affect Georgian companies, Zurab Uchumbegashvili, head of Poultry Development Association of Georgia and Kumisi company, noted.

Georgia exports only breed chicks (broiler chicken) and incubation eggs to Azerbaijan, but the Azerbaijani market is closed for poultry meat and eggs. The decision of government of Azerbaijan will make negative impact on Georgian companies, Uchumbegashvili said.

«Contrary to Georgian practice, government of Azerbaijan develops the domestic market and the country does not import either meat or chicken. Azerbaijan cares for domestic production and has increased taxes and this is a reasonable decision and all normal countries practice similar approaches», Uchumbegashvili said.

In whole, the ratio of Azerbaijan in exports of companies is 7-8% and even this figure is very considerable for Georgian companies, he said.

“It is impossible to count customs tax in any other category, unlike VAT. These are lost expenditures. Therefore, tariffs will become uncompetitive”, Uchumbegashvili noted.

Senaki Cement Factory (under construction)

Azerbaijan is expected to increase imports tariffs on building materials, including on concrete, cement, brick, ceramics and asbestos. It is not desirable for our country, when Azerbaijan grows imports tax, Mindia Guberidze, director of Senaki cement plant, noted.

Following the free market principles, tax rate should be zeroed or minimized. Taxes should not become precondition for admitting or blocking products to the market. Only quality, prices, supply conditions and other indicators should be decisive in imports issues, Guberidze said.

As to cement production in Georgia and its impact on the company, the company had no plans for cement exports to Azerbaijan. Even if the company exports cement to Azerbaijan, no significant impacts are expected, he said. The new cement factory will make focus on Georgian market and Black Sea region countries, Guberidze added.

“Negotiations with Azerbaijan were conducted on the level of memorandum. We have not launched production yet. It should be also noted that annual output of Azerbaijan is 11 million tons of cement, while annual consumption is only 7 million tons. Therefore, Azerbaijan does not have much demand for imported cement”, Guberidze noted.

Berika winemaking company

Azerbaijani restrictions will less affect Georgian winemaking companies, because Georgian wines are exported to this country in minimal volumes, LLC Berika director Lasha Revazishvili said.

 However, it will be wonderful if everything proceeds due to the government’s promises. Otherwise, Georgian exports will considerably decline to Azerbaijan, he noted.