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BUSINESS & ECONOMICS

ILLICIT TRADERS WORK THE GEORGIA-TURKEY SHUTTLE

Daan van der Schriek 8/06/03

Illegitimate trade comprises up to four-fifths of Georgia’s economy, with many vendors and goods crossing Georgia’s border with Turkey. While smuggling continues, Georgia and Turkey remain far from agreement on tariff and trade policies that would promote open interstate commerce.

Nikolay Hadjiyski, the head of the Tbilisi office of the European Bank for Reconstruction and Development (EBRD), said official estimates indicate that the shadow economy comprises between 45-50 percent of Georgia’s GDP. "But I’d say that it’s certainly more than 50 percent," he added. According to Hadjiyski, people smuggle without fear of punishment or temptation of better opportunities from the legitimate economy. For many, he says, the state apparatus has lost much of its importance.

Context suggests that legitimate trade could thrive across the Georgia-Turkey border. After 12 years of small-scale trade between Turkey and the former Soviet republics, shuttle traders can conduct business in Russian or Georgian in many eastern Turkish marketplaces. The Avrasya bazaar, a seaside market near the Turkish Black Sea port of Trabzon, is locally known as the Russian bazaar. After serving in the early years of independence as a nexus for cheap goods from all over the former Soviet Union, the market still houses mainly Russian and Georgian traders, along with Turkish citizens plying their own wares. Russian-speaking vendors from former Soviet republics, known locally as "Russians," have set up shop in other eastern Turkish towns, including Hopa, Artvin and Ardahan.

The first of these traders arrived in 1990, during the last full year of Mikhail Gorbachev’s tenure as Soviet leader. Travelers arrived via an underdeveloped and potholed road from Batumi, Georgia to Hopa, Turkey. These days, some traders express amazement at how easily they can cross into Turkey, a feat that was next to impossible to accomplish before 1990. "We just pay ten dollars and get into Turkey," said Gia, one of the Georgian traders who asked to use only one name for attribution. "Who could have imagined that during the Soviet Union?"

Taxable trade between the two countries shows relatively meager results. Georgia’s Department of Statistics announced July 26 that Georgia traded less with its neighbor than with the United Kingdom. The report attributed 12.5 percent of Georgia’s foreign trade to Turkey, compared with 13.5 percent to the United Kingdom and 17 percent to Russia.

Turkey says it is trying to develop rail, high-speed communications, and other infrastructural links with Georgia worth roughly $200 million. The Itar-Tass news agency reported recently, however, that Turkey is waiting for Georgia to finance construction of its segment of a train line from Tbilisi to Kars.

So far, the most notable improvements are seen in highway construction. The road from Hopa to Batumi has already been broadened, and engineers are widening the road onwards from Hopa to Trabzon to twice its current size. The border post at Sarpi, meanwhile, is fully computer-equipped. "Every year things get better and better here," said one Georgian customs official proudly.

Investment by Turkish citizens in Georgia also seems unlikely to crowd out illicit trade. Turkey’s Foreign Affairs Ministry acknowledges on its web site that "the most important legal instrument which could further encourage Turkish investments in Georgia" � an accord on protecting investments from double taxation � has not yet been negotiated. Meanwhile, Tevfik Yaprak, the World Bank’s country manager in Georgia, indicated that the country’s "hostile environment and weak government" provided entrepreneurs few incentives to play by the established rules.

Editor�s Note: Daan van der Schriek is a freelance journalist based in Baku.

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