Exclusive Interview
The more trading partners that a country has in the global economy, then the better it is for its development. Georgia, a developing country, must not only look for new partners but also strengthen the ties with states that are already in partnership. The United Kingdom has always been, and will continue to be, an important market and strategic partner for Georgia. The UK is currently the largest investor in Georgia’s economy. The UK-Georgia Trade Hub has made it easier to trade between the two nations. In an interview with GEORGIA NOW, Bachi Gabunia – the Founder and Director of UGTH – discusses why the two countries are great partners, how now is a good time to export, what type of production to export, Georgia’s position as a gateway to East, and much more.
Gabunia tells Gabunia: “Historically, it was always in the interest of Georgians that they enter the British market.” The exchange rate of the British Pound, which is currently 4,16 GEL to 1 GEL at the time of writing, was always higher and more stable. However, historically, it was associated with many issues, including the costs of transport, customs clearance and warehousing.
“At one time, the process of entering the British Market required the involvement of several profit making ‘negotiator companies’. About 4-5 of these companies were needed for one business. Exporting small quantities of production was also difficult: companies had send a container full. Another problem would be with storage and distribution. Only the bravest of the brave would take the risk.
Bachi Gabunia is a Georgian-based businessman who lives in London. He came up with the idea of creating the UK-Georgia trade hub to simplify the trade between the two nations. Designed to unite small and medium-sized businesses interested in entering the British market, simplify logistical-administrative services for them, helping them overcome difficulties, and cutting the costs of warehousing goods, the trade hub actually consists of two hubs: one in Tbilisi and one in London. The hub will allow British and Georgian entrepreneurs to store their export-oriented production. The common warehouse and the fact that production will be grouped together for transportation minimizes costs. This means a small-business owner can start shipping via UGTH as little as a pallet of product.
“It wouldn’t have been realistic for us to be able to implement this, or at least implement it so quickly, if we hadn’t received help from certain organisations,” Gabunia notes.
“The Georgian British Chamber of Commerce under the leadership of Mako Aashidze is a very sophisticated tool for any business that wants to open a door. It would have taken me many months or even years to get this project off the ground without their help.
“This engagement was very professionally done, and I received the information and assistance that my business needed. It is important to note that Sophio Katsarava was the Georgian Ambassador in the United Kingdom who I contacted via the Chamber. She showed great support for the project. The British Council also expressed interest in the project,” Gabunia said.
The Founder Director continues by stating:
“First, this project focuses on several factors which are vital today. First, it is important to note that about 70% of goods sold in the UK are imported. These goods are traditionally imported from other European countries as well as further abroad. The UK wants to establish a relationship with everyone independent of the European Union. However, after Britain’s decision, it was unable to reach an agreement with Europe on a trade deal. The UK and Europe have yet to agree on what form European cargo will take in the British state and what codes and tariffs it will pass through.
“This will cause hundreds to stop at the border and they may not have the ability to cross for a long time.” Britain has begun to sign agreements with other countries, including second-tier European nations. The agreement with Georgia was signed in October 2019 and the most recent one with Ukraine. The Ukrainian agreement is only the first step, as both the Ukrainian government and the British parliament must ratify it. This may take time as it is linked to certain procedures. Georgia has already gone through all of this and can now export without any delays to the UK.
“Another factor is that, due to the coronavirus epidemic, e-commerce was highly developed. This has made it possible for almost 80 percent of people to order products online. This makes it easier to sell Georgian products. Georgian products are placed on popular online sites, and can be distributed through them.
“Georgian entrepreneurs can sell their products from Tbilisi via online sales, while in London we strive to deliver goods within two hours after purchase. The hub will organize everything. The hub doesn’t interfere with the production price. We don’t ask for a percentage of their profit. We are just a service to help them export the goods and delivery them to the client,” Gabunia explains.
As mentioned above, entrepreneurs can ship as little as one pallet of their production to the UK, thanks to the Hub’s packaging-when-transferring service. The UK-Georgia Trade Hub founder director says that timing is another reason to export now.
“We are trying to start shipping in November to get pre-New Year’s and Christmas sales. As you know, this period is when the maximum amount of money is spent and Georgian products could be included in this process.
“Since September, when the project was announced, the interest has been quite high. We’re already in negotiations with 7-8 Georgian firms.”
The interest of the Georgians in the British market is evident. Why should the British market be of interest to the Georgian side?
The British Ministry of Foreign Trade contacted us to ask about the products it could export to Georgia to determine which ones are more marketable. The Georgian market, of course is specific, but we explained to the British side that the Georgian markets is not just Georgian, it is the Caucasus Market, because once production enters Georgia it can enter Azerbaijan and Armenia, Turkey and even Russia.
It is now common knowledge that many British goods are packaged or manufactured in European countries along the Second Belt. Georgia is also considered as a supplier of British products. Georgia will replace other countries like Bulgaria and Latvia in the British market under this agreement.
What kind of products could Georgia export to Britain?
We have adapted the model that is used in other countries. Tracks are created based on countries such as Latvia, which has a chain of shops and its own warehouses. The list of goods includes well-known Georgian goods produced in Germany, Ukraine, and other countries.
Due to the new regulations and Brexit-related problems mentioned above, Georgia will have the ability to replace original Georgian goods produced elsewhere, in these networks, with real Georgian goods. These networks are already in place and offer a wide range of products, from wine to water.
Georgian designers are generating a lot of interest. Georgia has several medium-sized shoe and clothing companies that want to sell their products in the British market. The prices of these products are lower than those of the British, so they are likely to be popular in the UK. The quality and taste are however very sophisticated.
Who will benefit most from a partnership with Trade Hub?
This project will be a great help to mid-sized businesses who have products that can be exported outside Georgia but have not been financially strong enough. The state may provide grants to these companies at a later date to help them make their first export. Barambo chocolate is popular, for example, as it is of European quality. Georgian products include juices, spices and handmade jewelry.
What are you currently working on?
We have a contract in place with an organization that will promote sales or distribute products to the UK. We are also preparing a list of possible products that could enter the Georgian Market from the UK. In time, we will begin negotiating with Georgian distributors for possible sales. Once this is done, the business will decide on the price.
Britain has obligations under existing agreements with other countries. A trade agreement with the United States for example prevents Britain from trading directly with certain countries like Iran. However, products imported to Georgia can be freely traded on that market. Georgia is a gateway to the Caucasus, and other countries.
On Thursday, October 22nd, the UK-Georgian Trade Hub presented the project to the Georgian Innovation and Technology Agency (GITA) in Tbilisi. As more small, mid-sized and large businesses learn about the hub and its benefits, more products will be exported and imported.
By Nini Dakhundaridze
Read More @ georgiatoday.ge