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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 nontradable 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 • There is the need to restructure the agricultural sector in order to increase export capacities and improve its competitiveness • Lack of human resource competencies and adequate scientific knowledge • Improving educational capacities (including for existing specialists) • Supporting scientific and research activities • Establishing market information and intelligence systems • Raising Georgian brands awareness 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 information o Improved access to finance (credits), trade guarantee schemes, harvest collateral schemes o Development of certification infrastructure (SPS standards) in line with international standards o Improvement of transportation and logistics • Maximization and integration of the agriculture sector within the international trade system through: o o o o o o Access to trade promotion services Application of advanced technology and inputs Enhancing S & PS standards in agriculture Identify new trade channels and niches for Georgian goods Increase resources for agricultural and agro- food research 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