In October 2023, Tbilisi hosted an event dedicated to the Republic of Kazakhstan. The event was also attended by the Minister of Economy and Sustainable Development, Levan Davitashvili. FactCheck took interest in the dynamic of economic relations between Georgia and Kazakhstan. In the first nine months of 2023, the trade turnover with Kazakhstan increased by 197%. There is also growth, albeit at a slower pace, in terms of investment and tourism.
Georgia and Kazakhstan established diplomatic relations in 1992. Information about economic relations has been available since 1995.
Georgia has a free trade agreement with Kazakhstan, as well as with other CIS member states, and the majority of products are exempt from tariffs on both sides during import. Nevertheless, exports to Kazakhstan have increased only in the last two years whilst imports from Kazakhstan remain at a minimum level.
Kazakhstan's share in Georgia's exports fluctuated on average within the 2% margin of total exports until 2023 (1.1% in 1995-2003, 2.5% in 2003-2012 and 2012-2022). The only exception was 2011 when exports to Kazakhstan increased three times to USD 156 million due to the re-export of cars which accounted for 7.2% of the total export at that time. In 2012, exports to Kazakhstan again dropped to USD 62 million.
Georgia’s exports to Kazakhstan increased almost 2.5 times, from USD 96 million to USD 238 million in 2022 as well. This time, together with cars, the export of tobacco products and mineral waters also increased. In the first nine months of this year, exports to Kazakhstan reached USD 504 million which is more than the total figure of 2019-2022. Cars account for 80% of export which is essentially re-export, not net export.
In 2021, Georgia sold a total of 2,280 cars to Kazakhstan, in 2022 – 7,352 and this figure increased to 26,580 in the first nine months of 2023 which is 11.7 times more as compared to 2021.Together with the number of cars, the average export value of one car increased by 52% as compared to 2021 and by 10% (USD 15,600) as compared to 2022.
Graph 1: Export to Kazakhstan
Source: National Statistics Office of Georgia
For over 15 years, the export of cars has occupied an important niche in the overall structure of exports and has often been in a leading position, although it has never held a 34% share before. In January-September 2023, Georgia exported products valued at a total of USD 4.6 billion. Of that amount, cars accounted for USD 1.6 billion. In addition to Kazakhstan, exports also increased to Kyrgyzstan, Armenia and Azerbaijan. Until August; that is, until the next package of sanctions came into effect, car exports destined to the Russian market were also growing.
There is no such growth dynamic when it comes to imports. In 1995-2022, the share of Kazakhstan in imports was on average 0.7%, it peaked at 1.8% in 2010 and decreased to 0.2% in January to September 2023. Overall, the trade turnover with Kazakhstan increased by 197% to USD 525 million in the first nine months of 2023 as compared to the same period of the previous year at the expense of the increase in the re-export of cars.
Kazakhstan's share in foreign direct investment has almost never been high. Prior to 2005, there are only zeros on paper. In 2005-2022, the share of Kazakh investments fluctuated within 1% on average and investment outflows were sometimes recorded. The only exception is 2006 when its share of FDI exceeded 13%. That one-time jump-like growth in 2006 was due to the purchase of Tbilgaz (Kaztransgaz-Tbilisi since 2006 and Tbilisi Energy since 2019) by a Kazakh company. A total of USD 300 million was invested from Kazakhstan in 2005-2022, including USD 161 million in 2006.
Graph 2: Investments from Kazakhstan
Source: National Statistics Office of Georgia
In the first two quarters of 2023, investments from Kazakhstan increased from USD 14 million to USD 26 million as compared to the same period of the previous year and its share accounted for 2.4% of total investments which, although higher than its own average, is still miniscule.
The share of the Kazakh Halyk Bank operating in Georgia in both loan and deposit portfolios is less than 2%. Silknet is the second largest telecommunication company (operating in the market of mobile operators, fixed telephones, cable TV and broadband Internet) in Georgia and is owned by the Kazakhs. The Silk Road Group also owns Radisson hotels in Tbilisi and Tsinandali.
As for other economic parameters, Kazakhstan is in 6th place with a 2.7% share in terms of its 130,000 visitors to Georgia in the first three quarters of 2023. In the same period of 2019, it was in 8th place with 75,000 visitors.
In addition, Kazakhstan is also ranked 6th in terms of remittances with a 6.1% share in the third quarter.
Of the major parameters of economic relations, Kazakhstan is among the top-ten in every area, although it is only export where Kazakhstan is among Georgia’s top-five partners. Foreign trade has increased significantly mostly at the expense of car re-export both in terms of absolute numbers and as a share of Georgia’s total trade. There is noticeable growth in other areas, particularly in 2022-2023, albeit at a slower pace. Overall, Kazakhstan is ranked first in terms of economic relations from among Georgia’s non-neighbour CIS member states as of 2023.