ObjectivesFund scope
Over the last 15 years, Georgia’s economic competitiveness has changed dramatically with the reduction of corruption. The facilitation of business development, opening a business and paying taxes is now simpler, cheaper and quicker, as is accessing local and international markets. Georgia has made alignment with the European Union an important part of its public policy reform, which has brought a strong West-facing agenda to all parts of its market reforms.
In spite of efforts, however, the economic and social development of Georgia is hampered by low performance in innovation and business sophistication. The business start-up rate is a mere 8.6% and business-to-business cooperation is poor, resulting in a lack of cluster development. ‘Clusters’ are made up of businesses within a particular value-chain or geography and often coordinate their activities to share risks, improve technology, and reduce costs. This has caused a decreased provision of inputs and skills, downstream service development, product certification and quality control, export facilitation, transportation and logistics and international branding and marketing, all of which is problematic given Georgia’s ambition to expand its exports to the European Union and its highly sophisticated markets that require complex, consistent and high-quality products.
The Innovative Action for Private Sector Competitiveness programme enhances entrepreneurship and business sophistication by strengthening the capacities of the government and local entities to develop and operate clusters. Stakeholders provide private sector support and entrepreneurship development on the packaging and seedling sectors, which offer the greatest opportunity for growth, cluster development, and have the potential for broader economic and social impact.
Theory of Change
The Joint Programme addresses the low levels of entrepreneurship, business skills, local production, poor diversification, and limited trade opportunities in the Georgian economy by:
- Strengthening the capacities of policy-makers and other stakeholders to identify and develop clusters.
- Piloting clusters in packing and seeds/seedlings sectors to enhance their value chains.
- Providing strategic investments to companies/projects which are developing the clusters.
- Engaging the Georgian diaspora in mainstreaming SME Development support.
Funded initiatives use cluster development to help enhance inter-firm cooperation to overcome coordination externalities, improve technologies, and new market penetration. Moreover, in providing strategic investments to companies, the Joint Programme is helping them to overcome cluster bottlenecks in technology upgrade and innovation, and increase design input, certification, environmental standard uptake, and foreign market understanding and access