New transit routes are reshaping Georgia

Things are rolling forward! On its  official website , the Roads Department of Georgia provides regular – sometimes daily – updates on the progress of major construction projects that crisscross the country.

They all belong to several gigantic projects aimed at transforming Central Asia and the South Caucasus into an attractive transport route between the East and the West. Indeed, in the 21st century, not only have trade flows between Asia and Europe increased greatly, but geopolitical interests have also undergone a major shift.

Finally, the EU took another step when it unveiled its “EU–Asia Connectivity Strategy”, providing the basis for the Global Gateway Initiative it launched in 2021 – a  geopolitical connectivity programme  underpinned by Western values in response to China’s BRI.

Since Putin began waging war on Ukraine, Georgia’s position as a “bridge builder” and “gateway to East and West” has acquired much more significance: There is now a lot of demand for alternative transit routes that bypass Russia and the “Northern Corridor”, especially by land.

Last year,  Germany Trade & Invest , Germany’s foreign trade agency, and various  online outlets  reported that transport volumes through the middle corridor rose more than sixfold between 2021 and 2022. The estimates were based on figures from the TITR. Notably, the calculations do not include truck transport, which still accounts for the majority of goods transported overland.

While freight capacities via Central Asia and the South Caucasus are reaching their limits – not only because of infrastructure bottlenecks – the countries involved are investing billions and working round the clock to eliminate obstacles.

Indeed,  according to OECD analysis , Georgia alone is investing around USD 6.6 billion in ongoing and planned transport route expansion projects. And based on data from Georgia’s Ministry of Finance, international investment loans for road projects totalling USD 3.5 billion have been secured since 2000; as of June 2023, USD 2.3 billion of this remains as external public debt. Notably, road infrastructure projects constitute 27% of Georgia’s overall external public debt. These loans are primarily from European and Asian development banks in which Switzerland also partly has a stake.

The initial results are clearly visible in Georgia: completed, ongoing, or planned road projects (2018–2024) measuring over 700 kilometres in total crisscross the country’s challenging topography from north to south and west to east.

Besides putting Georgia on the geopolitical map of partner countries in Asia and Europe, the government of Georgia hopes that its mega infrastructure projects (MIPs) will bring one thing in particular: economic growth. And not only by means of transport business. Rather, the MIPs are also intended to boost exports, tourism, and the settlement of new centres of production.

Georgian companies are also getting in on the action, according to government figures – particularly when the projects are fully funded by the government of Georgia. By contrast, when a project involves Georgian participation in international financing, the money usually finds its way back to foreign companies, especially Chinese firms (exact data with mouseover over the graphic).

Thus, while China is implementing the lion’s share of road construction in Georgia, EU companies (as of April 2023) are only entrusted with one project. This Chinese dominance has ruffled feathers in the EU.

In its November 2022 “ Report on the implementation of the EU Association Agreement with Georgia ”, the EU parliament highlights “negative security implications of Chinese investments in strategic infrastructure”. Yet, in the same breath, it calls on the EU Commission and Georgia to “consider increasing the number of Trans-European Transport Network projects in Georgia.”

The latter is illustrated by the expansion of the highway from  Tbilisi to Lagodekhi via Bakurtsikhe , also referred to as the Kakheti highway. The route leads to the border with Azerbaijan and connects the capital of Georgia with Baku, the main transfer port on the western shore of the Caspian Sea (see yellow section below).

On the Georgian side, the planned highway section could impact existing micro-businesses and street vendors, cutting them off or shrinking their customer base as the new highway diverts commuter traffic to other areas.

The World Bank, which is supporting the expansion, claims it will  finance a marketplace along the highway  that will ensure jobs for women especially. 

The question remains: How do those affected see it?

Limited engagement of local populations and community representatives is one thing. The other is that “we noticed that those responsible for the road project were not working closely with the municipal governments”, says Salukvadze.

Against this background, observes the researcher, it is hardly surprising that the relevant municipal authorities were not informed of specific construction plans. “If at all, local authorities were only involved when it was necessary to arrange a public meeting or to mediate problems between residents and construction companies.”

In the study area, this approach almost resulted in several farmers being cut off from their fields by the new highway. When villagers noticed this just before the start of construction, they organized a  rally , which led to negotiations about the plans.

In point of fact, Georgia’s legislation provides for the participation of local communities. And, indeed, public meetings are held and logged. But that does not eliminate the mistrust of local residents. “They are not aware, or not fully aware, of what they can ask of local authorities in terms of having a say in MIPs. People do not know the relevant processes or their rights,” note Gugushvili and Salukvadze in their findings.

For such cases, there is indeed a grievance process –  Grievance Redress Mechanism  – in place for MIPs. However, the study revealed that municipal representatives were not adequately informed about its existence and significance.

Worse than this, “They do not expect to prevail against the ‘giant’. They have doubts about whether raising their voices and expressing criticism is even desired or whether it will achieve anything in the end.”