Aid for Trade Needs Assessment – Georgia

United Nations Development Programme

Main findings

Impact of economic reforms on human development

• Ambitious institutional and business reforms started in 2004 simplified business regulations boosting the countries competitiveness and facilitating foreign trade

• Economic reforms reduced bureaucratic obstacles, hence making it possible for businesses to expand their operations, create new jobs and increase employment and output

• Business reforms were accompanied by significant capital inflows and GDP growth, conditioning resilience after the Russia-Georgian conflict in 2008 and maintaining continued growth during the global financial crisis

• Growth in Georgia has mainly been macroeconomic, and was associated with an excess absorption and credit expansion, and foreign investment mainly in non-tradable sectors

• Economic growth was not related to innovations and investment in high-technology industries, to increase employment and equity in income distribution

• Trade liberalization efforts stimulated exports, but in fact, exporters haven’t been able to make use of the international trade preferences

Main obstacles to trade• Business climate reforms were implemented – but SMEs

and sensitive sectors have only marginally been effected by this

• Forced diversification in the Georgian economy have highlighted a lack of expert knowledge, infrastructure and logistics

• The agriculture sector represents the biggest employer but lacks commercialization, productivity, export capacities, compliancy with international standards and has weak market channels

• The wine sector – one of the main exporting sector – witnessed the loss of access to traditional markets. In addition, there remain issues with compliancy to consumers preferences and standards on alternative markets, branding and marketing

Main recommendations

• Business reforms need to be adequately transformed facilitating growth which positively affects human development

• In order to ensure maximum HD impact, strategies need to target labor intensive sectors, increase labor efficiency and investments for the development of the labor force

• In connection to the Government’s programme of TBT (Technical Barriers for Trade) and Georgia EU FTA negotiations it is necessary to improve trade service institutions both on a legislative and practical level

• Further support to SMEs and entrepreneurship in key sectors should be considered by policy makers

• Enhancement of trade competitiveness should be promoted through:o enhancing institutional mechanisms by the

government,o partnership relationships and joined efforts of private

companies

• To ensure long term economic development, and stable growth rates, the social impact of growth must be improved alongside the elimination of barriers for producers that want to produce for export

• Improve trade promotion services:o Improved access to market informationo Improved access to finance (credits), trade guarantee

schemes, harvest collateral schemeso Development of certification infrastructure (SPS

standards) in line with international standardso Improvement of transportation and logistics

• Maximization and integration of the agriculture sector within the international trade system through:

o Access to trade promotion serviceso Application of advanced technology and inputso Enhancing S & PS standards in agricultureo Identify new trade channels and niches for Georgian

goodso Increase resources for agricultural and agro- food

researcho Develop agricultural and extension services

vocational education in agriculture and processing/manufacturing

o Introducing a special support programmes in:o mechanization, use of fertilizers and irrigation,

agriculture management practices, organization, providing quality and safety controls to enhance efficiency and improve trade capacity in the agricultural sector

• Identification of priority sectors that will present the basis for industrial development with a special focus on new technologies and knowledge

• Promote Georgian wine export - establishing and promoting “Brand Georgian Wine” at global markets