Molly Corso in Tbilisi -
Georgia's anaemic export sector has received a boost from an unlikely source: used cars. The re-export of second-hand cars has buoyed Georgian exports to nearly pre-crisis heights, although experts warn the effect is likely to be short lived.
The new appetite for used cars comes in the wake of the Customs Union between Russia-Belarus-Kazakhstan, which places new restrictions on the import of cars to the member states. The overall union was introduced last year, but a discount for used cars imported from non-member states ended on July 1. So in the months leading up to that discount ending, Kazakh sellers raced to ports around the world like those in Georgia to stock up on used cars before the price of importing cars into Kazakhstan increased as much as by 10 times, depending on the engine size.
The race for vehicles has been a bonanza for Georgia, and auto dealers who import cars from the US, Europe and Japan. In Rustavi, a small industrial town roughly 30 kilometers from Tbilisi, cars reign supreme. A former hub of steel production for the Soviet Union, Rustavi has been reborn as the epicentre of Georgian car trading. On a series of lots, in a scene reminiscent of stadium parking before a big match, SUVs from California compete for attention with similar models from Japan and Europe. During a visit on a Saturday in May, shoppers braved rain and high winds to haggle for deals.
For Giga Topuridze, business is booming. A dealer of American and European used cars, Topuridze said business has been "moving" after months of stop and go selling following the 2008 war with Russia and then the global economic crisis. "Business is going. It would be wrong to say I am not satisfied. It is improving now, after the war it was horrible," he says. "The best is these past two months. It has never been this good."
This demand pushed cars past scrap metal and ferro alloys to drive Georgia's exports to a new, post-war high in May. Data show that car exports brought in $197m over the first five months of the year; total exports for the period were $85m - a 41% increase over the same period last year.
At the opening of a new used car lot in Rustavi, Georgia on June 2, Prime Minister Nika Gilauri said the phenomenon was proof that his government's reforms work. He noted that while several years ago over half of all Georgian exports were scrap metal, today the country exports more cars and chemicals than scrap. "We are neither automobile manufacturers nor vehicle assembly is being carried out here, but in spite of this a lot of companies, traders, many people import their cars to Georgia and sell cars from Georgia," Gilauri said. "We have simplified the procedures, we have simplified the procedure of import and export, registration, purchase... As a result, we are number one in the region in this line. You can come to Georgia and in an hour buy a car, register it, take credit, fuel up, choose a number and go away."
In 2011, the World Bank named Georgia as the top reformer over the past five years. The government has focused on streamlining customs, in particular, to bolster Georgia's image as the centre of the new Silk Road, linking the Black Sea to the Caspian Sea and beyond.
But reforms might not be enough to keep car export levels high, now that the Customs Union is in force. Trade figures for July have not been published yet, but dealers caution that business has relied too heavily on Kazakh clients and this business will tail off now.
The dealers at Mycar.ge, however, are more circumspect. "Before, the Kazakhs were not here, but the business was surviving. It was okay," Vesik Katamadze, Mycar.ge's director, said.
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