Georgia is consistently performing very well in the World Bank’s “Doing Business” (DB) ranking 24th country globally in 2016: DB ranking is made up of several different indicators Georgia only ranked 62nd for getting electricity (GE) GE indicator is a proxy for electricity supply quality to the business What is the exact problem and how can a real improvement of the business environment in this area be effected? Aim is not to improve ranking alone, but to use the DB methodology to identify room for real improvement.
Although the mining sector of Georgia only accounts for a small share of GDP, around one quarter of Georgia’s total exports are related to mining activities. Increased use of Georgia’s natural resources thus has the potential to benefit the economic development of the country as well as to contribute to public finances. How can regulation be improved to strengthen the economic gains and public revenues from the mining sector? The current regulation creates unnecessary obstacles to investment in mining. These deter investors from increasing activities in Georgia, leading to less economic growth of Georgia in mining and related industries as well as smaller public revenues from a sector that generally is highly interesting from a perspective of creating tax and other public income.
Aiming to contextualize the challenges and opportunities faced by Georgian trout farmers, the ISET Policy Institute, in cooperation with CARE international and the Georgian Farmers Association (GFA) organized a trout sector stakeholders’ forum in Kutaisi on December 4th, 2015. The forum focused on the industry’s dynamics regarding input suppliers, farmers, cooperatives, market intermediaries, consumers, and exporters with the overall goals of improving productivity in the sector, connecting farmers with new business opportunities (by product and market diversification), exploring export markets, and developing and managing the Georgian trout sector. Attending the forum were representatives of international and domestic agricultural organizations, the ministry of Agriculture’s regional information and consulting centers, local government officials, and several stakeholders from the private sector.
The main objective of this project was to analyse the predicted potential for Georgia to specialize in the production of various agricultural goods. APRC assisted the German Economic Team within this project with regards to: searching, collecting and summarizing data, reviewing existing literature to study the potential of agricultural goods which have a relative comparative advantage compare to other. The empirical paper by GET Georgia predicted the potential for Georgia to develop its specialization in 14 agricultural goods. Our analysis showed relative comparative advantage of several goods and we grouped them into following three categories: Fruit and Vegetable; Tobacco, Dairy Product, Fish and Sea Food. There are large investment needs, but also many potential benefits from higher value-added, processed products.
ISET-PI analyzed the potential for Georgia to specialize in the production of several types of engineering goods: Insulated wire and cable; Pleasure and sport vessels; Cargo containers; Derricks, cranes, and straddle carriers. The analysis of the current situation in Georgia and on the world market revealed very limited current production in the engineering sector and showed that technology generally is not up-to-date. Past infrastructure in the engineering industry in Georgia has either been abandoned or is largely technologically outdated, which has caused a need for the sector to essential start from scratch. In the team’s comparative analysis of Georgia versus other Eastern European and Asian countries, we have identified three key competitive factors: An analysis of Human Capital showed competitive wages, but limited qualifications of the workforce. Consequently Georgia is initially most suitable for production techniques that call for low-skilled industrial labor. Additionally, Georgia has excellent business environment with relatively sound levels of political stability with low administrative tax burdens. Finally, the outlook for transportation and supply-chain logistics is heavily dependent on the type of good in question, although the newly constructed East-West highway is mitigating many problems in this regard.
Oil prices have endured a large and persistent decrease due to increased worldwide production and the weakness of global demand. Prices are soon expected to stabilize around USD 60/barrel. ISET-PI and GET have focused on the improved terms of trade that Georgia could potentially see due to its high share of energy imports compared to its GDP indicators. This dynamic could cause an indirect albeit upward change in demand for Georgian goods. World market price changes fully transmit to Georgian oil price and because of this, the research team expects and immediate effect on the Georgian economy as worldwide prices for energy fall. Using USD/GEL exchange rate as of February 2015, the team modeled the effect of a 41% decrease in world oil prices and calculated the macro-level effects of saving GEL 503 m in 2015. The forecasted result is a 2.3% increase in disposable income in the Georgian GDP.