Georgia’s wine industry is heavily dependent on export to CIS countries, especially Russia. Two main short-run risks associated with the Russian market presently affect Georgian wine exports: The possibility that Russia might cancel its free trade agreement with Georgia, and the economic slowdown in Russia which could lead to reduced demand for Georgian wine. These short run risks are substantial, albeit manageable as they will reduce Georgian wine exports in total by only USD 28.5 m or 17%. In the long run, the Russian wine market is likely to stagnate or even decline as the Russian population shrinks and ages. Therefore, steps should be taken to reduce the dependence on this market and diversify exports. We recommend several measures to expand exports to non-CIS markets:
For resilient economic development in Georgia, the country should encourage exports of higher-value added goods. In this report, ISET-PI and GET have found that Georgia might be able to develop a comparative advantage when it comes to exporting higher-value energy-intensive products. According to projections of its electricity network operator, Georgia will develop excess capacities of low-cost electricity in the next decade. The policy challenge is twofold. Attracting investments requires high prices and a stable regulatory environment. Both conditions can be achieved by increasing market integration with Turkey. Conversely, integration leads to high electricity prices in Georgia, making the country less attractive to electricity intensive industries.
The Policy Brief predicted potential for Georgia to specialise in the international provision of business services (PP/01/2015). Potential was predicted in the service trade category of “other business services”, encompassing mainly: – Operational leasing services: International leasing of equipment – Legal and accounting services, Management consulting and public relations – Advertising, market research – R&D, architectural and technical services We proceed in two stages:
ISET-PI and GET have predicted the potential for Georgia to specialize in the international provision of business services. This potential can be primarily applies to the following practices: Operational leasing services, Legal and accounting services, Management consulting and public relations, advertising, market research, R&D, architectural and technical services. The analysis of the current situation in Georgia and on the world market revealed the presence of limited genuine export and showed that present business services exports are largely the byproduct of other economic activities. As for the competitive potential of Georgia for producing these goods, the team has identified three key competitive factors: The analysis of Human Capital showed Georgia has highly competitive wages in service sector jobs, but with the need for additional training. Additionally, Georgia has been characterized as having an excellent business environment with a low tax burden, efficient bureaucracy, and low levels of corruption. Finally, Georgia has a strong infrastructure for business communication services.
On July 1, 2015, the Stakeholders’ Forum on the Tea Sector took place in Kutaisi. This was a first event in a series of dialogues about agriculture and rural development in Georgia organized by the ISET Policy Institute in partnership with CARE International in the Caucasus, the Regional Development Association, and the Georgian Farmers Association. The main goal of the forum was to clearly visualize the challenges and opportunities faced by the various sector actors involved, including input suppliers, farmers, cooperatives, processors, market intermediaries, consumers, and exporters with the overall goals of improving productivity in the sector, connecting farmers with new business opportunities, exploring new export markets, and developing and managing Georgian tea brands.
ISET-PI and GET have predicted the potential for Georgia to specialize in the production of energy-intensive goods such as: Aluminum (unwrought, bars and rods, foil), Zinc (Unwrought) and Fertilizer mixtures. Primarily, the analysis of Georgia’s current situation showed that there is no significant production in energy-intensive goods, except nitrogenous fertilizers. Georgia has no proven reserves of bauxite and zinc ore. However, the country does has access to large export market in Europe, CIS and Asia. For the analysis of Georgia’s competitive potential, the team concentrated on three main factors: An analysis of Electricity prices that showed very competitive conditions and the potential for a cost-effective energy supply. Additionally, research regarding the domestic availability of natural resources showed a minimal utilization level of Georgia’s hydro-power potential – around 18% of potential output. Finally, with regard to transport prices for imports and exports: Port infrastructure is insufficient and the status of Georgia’s ongoing deep-sea port project is not yet fully ascertainable.