Davos 2016: Georgia reveals its role in the modern Silk Road

Georgia’s Prime Minister Giorgi Kvirikashvili has discussed Georgia’s role in the modern Silk Road while participating in a panel discussion "Eurasia and the Modern Silk Road” at the World Economic Forum 2016 in Davos, Switzerland today.

Kvirkashvili also shared his thoughts on the economic potential of the region to the international audience.

Together with the session’s international speakers Kvirikashvili discussed the topic ‘What are the prospects for regional development in Eurasia’.

The Silk Road initiative, reconstruction of the Silk Road Economic Belt, or as it is called the One Belt One Road Initiative, brings new momentum for developing economic ties on the Eurasian continent.

Europe needs dynamism from China and from Asian countries and vice-versa Asian countries need new technologies and know-how from Europe. So this is a network of different routes developing connectivity between Europe and Asia,” said Kvirikashvili.

The Georgian PM introduced the audience to Georgia’s integral role in the revitalised Silk Road project and the action already taken by Georgia within the project.

I can tell you that we have recently undertaken important changes to modernise our infrastructure, to modernise the railway [and] we are completing highway construction. We are working very closely with our neighbours in order to develop the policy approach in managing the Southern Caucasus corridor together with Kazakhstan and Central Asian countries,” Kvirikashvili said.

The 19 kilometre section of the Ruisi-Agara Highway opened on December 16, 2015 in east Georgia. Photo by press office of Georgia's Ministry of Infrastructure and Regional Development. 

Silk Road route – a partnership or competition?

Georgia’s Prime Minister said the Silk Road was becoming very competitive but it was a "friendly competition” only.

Recently we had a direct train passing from China through Kazakhstan, Azerbaijan and Georgia towards Europe. The direct train from China to Tbilisi took seven days which means that in about ten to 11 days it can travel from China to Europe,” he said.

This road is becoming a very competitive one but this is friendly competition and it increases the economic dynamism on the whole Eurasian continent. It brings peace and understanding between different countries. This is more of a partnership than competition,” Kvirikashvili stressed.

What effort has Georgia taken within the Silk Road project?

Kvirikashvili named several infrastructural projects and activities that Georgia planned to implement to develop the Silk Road route.

The Georgian leader said his country had an ambitious plan to build a new deep sea port in Anaklia on Georgia’s Black Sea coast, "which will be started in the nearest future”.

Anaklia Black Sea Port has attracted the interest of one of the largest Chinese state companies, Power China. Photo by press office of Georgia's Ministry of Economy.

Additionally Kvirikashvili said the Georgian Government would further liberalise the tax system.

We are one of the best in ease of doing business in the world. We have one of the lowest taxes in the world and we are going to abolish tax profit this year.

Plus we have Free Trade Agreements with European Union countries and recently we launched free trade negotiations with China. We have relatively low labour costs and energy cost, so we are becoming one of the most open economies in the region,” Kvirikashvili said.

Do other panelists share the optimism of Georgia’s PM?

All three other speakers of the session shared the optimistic views of Kvirikashvili regarding the opportunities presented by the Silk Road route.

Chairman of the Board of Directors of Eurasian Resources Group Sàrl Alexander Machkevitch said it was very difficult to create the shortest and most effective way from China to Europe however reestablishing the Silk Road was the most effective way to do so.

For thousands of years people were coming to the Silk Road route in search of this effective way. We see great opportunities [in this project],” he said.

This is the most effective way to deliver any product from South-East to Europe. In Kazakhstan much has already been done to implement these ideas. I am very optimistic about this project but the Prime Minister of Georgia would agree with me that all the project participant countries need more coordination, more joint implementation of strategy. Because the counties follow their own interests and the Silk Road is possible only through full coordination of all countries involved,” Machkevitch said.

Meanwhile chairman of Dubai World Sultan Ahmed bin Sulayem said he was also "very optimistic” about the Silk Road project.

The Silk Road reduces the time for containers to reach Europe. Today by sea it takes 42 days and by train it takes 12 days. [The Silk Road] also reduces travel costs,” he said.

Today in the shipping industry it is a very difficult situation [and] there is an over capacity. A container from China to Europe used to be between $15,000 to $18,000 USD. Today it is $3,000 to $4,000 US dollars. Obviously they are losing a lot. Now when we are talking about the cost for the train it is about $4,500 dollars to $5,000 USD. So I am very optimistic about this project,” Sulayem said.

What are the challenges the region faces?

President and chairman of VTB Bank Management Board Andrey Kostin said the main challenge for the region was to change the structure of the regional economy. He believed it would be better if post-Soviet countries created a real integrated economy which would benefit all participants.

On the other hand Russia welcomes the Chinese initiative, the belt initiative. There are some obstacles as very different countries are involved in this cooperation [but] we definitely see China as the dominant force of this cooperation.

China is growing into a leading economic nation despite all the problems and the nation which wants to be leader in the Asian part. Russia is eager to join this initiative,” said Kostin.

While speaking at the panel discussion the VTB Bank official mentioned Georgia and said VTB Bank was working successfully in the country.

I am proud that in spite of all the political difficulties my bank has been working in Georgia all through this time quite successfully. We really want to have a very good relationship with Georgia. We think it is an important partner, traditional, historical partner and friend for Russia,” Kostin said.

Meanwhile Georgia’s Prime Minister said a current challenge facing Georgia was the falling price of oil.

For us the challenge is the falling oil price because for a country like Georgia, which is less industrialised and which is more focused on trade and commodities, a fall in the price of oil means a fall in the investment appetite in the oil countries that provide the most important FDIs for Georgia.

That is why we are suffering along with the oil countries. This means that we need to do more extraordinary things inside Georgia like further cutting budget costs, giving more oxygen to the private sector. I think this is the biggest challenge,” Kvirikashvili said.

In general the Georgian official agreed with Machkevitch, chairman of the Board of Directors of Eurasian Resources Group, that the cooperation level among the Silk Road participant countries was a challenge.

Unless we have excellent coordination and cooperation, the Silk Road cannot be as effective as it should be,” Kvirikashvili stated.