In the Regions of Georgia

ANALYSIS OF COMPETITIVE SECTORS IN THE REGIONS OF GEORGIA

Irina Kvakhadze Nana Tsertsvadze

Tbilisi 2020 The project „GEclose2EU" is implemented by the "Economic Policy Research Center" (EPRC) in cooperation with Enterprise Georgia Agency.

“This publication has been produced with the support of Sweden. Its contents are the sole responsibility of the Economic Policy Research Center (EPRC) and can in no way be taken to reflect the views of the Swedish government”. © Economic Policy Research Center

ISBN 978-9941-8-2612-2

2 CONTENTS

Aim of the study...... 7 Methodology of the study...... 7

GURIA...... 11 General description of the region...... 12 Location...... 12 Administrative arrangement of Guria...... 12 Natural environment...... 12 Resorts...... 12 Natural resources...... 13 Macro indicators of the region...... 14 Demography...... 14 Social and economic conditions of the population...... 16 Labor market – education and skills...... 19 Business activity in Guria...... 20 Priority sectors...... 22 Administrative and support service activities...... 23 Share...... 23 Manufacturing...... 23 Professional, scientific and technical activities...... 24 Construction...... 24 Arts, entertainment and recreation...... 24

IMERETI...... 28 General description...... 29 Location...... 29 Administrative arrangement...... 29 Natural environment...... 29 Macro indicators of the region...... 30 Demography...... 30 Social and economic conditions of population...... 32 Labor market...... 35 Business activity...... 36 Priority sectors...... 38

SHIDA KARTLI...... 41 General description of the region...... 42 Location...... 42 Administrative arrangement...... 42 Macro indicators of the region...... 43 Demography...... 43 Distribution of population by urban and rural settlements...... 44

3 Distribution of population by sex and age...... 44 Social and economic conditions of the population...... 45 Conclusion on the social and economic conditions of the population...... 47 Labor market and skills...... 47 Priority sectors...... 51

SAMTSKHE-JAVAKHETI...... 54 General description of the region...... 55 Location...... 55 Administrative arrangement...... 55 Natural environment...... 55 Natural resources...... 57 Macro indicators of the region...... 57 Priority sectors...... 64

ADJARA...... 67 General description of the region...... 68 Location...... 68 Administrative arrangement...... 68 Natural environment...... 69 Tourism and resorts...... 69 Natural resources...... 70 Macro indicators of the region...... 71 Demography...... 71 Labor market – education and skills...... 75 Priority sectors...... 80

MTSKHETA-MTIANETI...... 85 General description of the region...... 86 Location...... 86 Administrative arrangement...... 86 Natural environment...... 86 Tourism and resorts...... 87 Natural resources...... 87 Macro indicators of the region...... 88 Demography...... 88 Priority sectors...... 94

RACHA-LECHKHUMI & KVEMO SVANETI...... 96 General description of the region...... 97 Location...... 97 Administrative arrangement...... 97 Natural environment...... 98

4 Tourism and resorts...... 98 Natural resources...... 98 Micro indicators of the region...... 99 Demography...... 99 Priority sectors...... 105

KVEMO KARTLI...... 107 General description of the region...... 108 Location...... 108 Administrative arrangement...... 108 Natural environment...... 109 Tourism and resorts...... 109 Natural resources...... 109 Macro indicators of the region...... 110 Demography...... 110 Priority sectors...... 117

SAMEGRELO-ZEMO SVANETI...... 119 General description of the region...... 120 Location...... 120 Administrative arrangement...... 120 Natural environment...... 121 Tourism and resorts...... 121 Natural resources...... 121 Macro indicators of the region...... 122 Demography...... 122 Priority sectors...... 129 Administrative and support service activities...... 129 Other service activities...... 129 Transportation and storage...... 130 Real estate activities...... 130 Agriculture, forestry and fishing...... 130 Manufacturing...... 130

KAKHETI...... 131 General description of the region...... 132 Location...... 132 Administrative arrangement...... 132 Natural environment...... 132 Tourism and resorts...... 133 Natural resources...... 133 Macro indicators of the region...... 134 Demography...... 134 Priority sectors...... 140

5 SUMMARY...... 144 Priority sectors in nine regions of Georgia...... 144 Rationale of the study...... 145 Recommendations for microgrants program...... 146 The European approach to the development of small and medium business...... 146 Financial support to SME in the EU...... 147

ANNEXES...... 148 Annex 1. Priority sectors, Guria...... 149 Annex 2. Priority sectors, Imereti...... 150 Annex 3. Priority sectors, Shida Kartli...... 151 Annex 4. Conducted interviews, Guria, Imereti, Shida Kartli...... 152 Annex 5. Priority sectors, Samtskhe-Javakheti...... 153 Annex 6. Conducted interviews, Samtskhe-Javakheti...... 154 Annex 7. Priority sectors and subsectors in Adjara (excluding Batumi)...... 155 Annex 8. Priority sectors and their subsectors in Batumi...... 156 Annex 9. Interviews conducted in Adjara...... 157 Annex 10. List of priority sectors, Mtskheta-Mtianeti...... 158 Annex 11. Interviews conducted, Mtskheta-Mtianeti...... 159 Annex 12. List of priority sectors, Racha-lechkhumi and Kvemo Svaneti...... 159 Annex 13. Interviews conducted in Racha-Lechkhumi and Kvemo Svaneti...... 160 Annex 14. Priority sectors, Kvemo Kartli...... 160 Annex 15. Interviews conducted, Kvemo Kartli...... 161 Annex 16. Priority sectors, Samegrelo-Zemo Svaneti...... 162 Annex 17. List of interviews conducted in Samegrelo-Zemo Svaneti...... 163 Annex 18. Priority sectors, Kakheti...... 164 Annex 19. Interviews conducted in Kakheti...... 165 Annex 20. Literature...... 165

6 AIM OF THE STUDY

The aim of the study is to identify priority sectors in the regions of Georgia for the Micro and Small Business Support component of the Enterprise Georgia Agency.

METHODOLOGY OF THE STUDY

This study was conducted by applying qualitative and quantitative components of research.

The first stage: multidimensional analysis The study in each region was conducted in three stages. The first stage involved the analysis of all regions from several perspectives. The main objective at this stage was to identify strengths and weaknesses of a region by each of the below listed components and then to analyze the impact of identified strengths or weaknesses on the entrepreneurial and economic activity of a region. Components of multidimensional analysis: – Location – Demography – Economic and social conditions – Resources – Labor market – Development policy – Infrastructure

The second stage: assessment of sectors by special model The second stage involved the analysis of business activity. The objective at this stage was to identify those sectors that have been showing the best development by various indicators. According to the classification of the National Statistics Office of Georgia (Geostat), which is based on international standards, the economic activity consists of the following sectors: A. Agriculture, forestry and fishing B. Mining and quarrying C. Manufacturing D. Electricity, gas, steam and air conditioning supply E. Water supply; Sewerage, Waste Management and Remediation Activities F. Construction G. Wholesale and retail trade; repair of motor vehicles and motorcycles H. Transportation and storage I. Accommodation and food service activities J. Information and communication K. Financial and insurance activities L. Real estate activities M. Professional, scientific and technical activities

7 N. Administrative and support service activities O. Public administration and defense; compulsory social security P. Education Q. Human health and social work activities R. Arts, entertainment and recreation S. Other service activities T. Activities of households as employers; undifferentiated goods and services producing activities of household for own use U. Activities of extraterritorial organizations and bodies The above classification was applied in analyzing the sectors at the second stage of the study. Moreover, a special model was developed to assess each sector by various criteria at this stage. The criteria were set in line with the priorities of Micro and Small Business Support Component of Enterprise Georgia. The sectors were assessed by the following criteria:  Employment  Added value  Turnover  Intermediate consumption  Investments  Number of companies in a sector  Average monthly salary In order to assess the sectors in the light of their current as well as potential development, two aspects were defined as quantitative indicators of criteria: the share - to asses a sector’s current level, and the growth - to assess a sector’s development potential. Since the criteria selected for the model had only one aspect (due to incomplete data or non-measurement), the above listed seven criteria were grouped into two classes. The first class included those criteria that were assessed by two aspects whereas the second class included those criteria that had one aspect. Class I criteria:  Employment;  Added value;  Turnover;  Intermediate consumption. Class II criteria:  Investments;  Number of companies in a sector;  Average monthly salary. The criteria were assigned weights, taking into the account the priorities of Micro and Small Business Support Component of Enterprise Georgia. The weights were first assigned to the classes of criteria, then to the criteria and finally to the aspects of the criteria. As a result, the weights were distributed as follows:

8 Table 1. Sector assessment model, weights assigned

Weight of Weight of Weight of Final Criteria Aspect class criteria aspect weight

Growth* 0.3 0.072 0.40 Employment Share** 0.7 0.168 Growth 0.3 0.054 0.30 Added value Share 0.7 0.126 0.6 Growth 0.3 0.036 0.20 Turnover

Class I criteria Share 0.7 0.084

Intermediate Growth 0.3 0.018 0.10 consumption Share 0.7 0.042

0.50 Investments Share*** N/A 0.2

Concentration 0.4 0.33 of companies Share N/A 0.13 in a sector Class II criteria Average 0.17 monthly Growth N/A 0.067 salary

* Share – the share of sector in the total indicator in 2017 ** Growth – an average growth of the sector over three years, 2015-2017 *** Share of investments – the share of the sum of investments in the sector in 2015-2017 in the average total investment in the same period (in Guria)

Sectors were analyzed according to criteria by using the data prepared by the Geostat. The assessment of the sectors in accordance with the above-mentioned model was followed, at the same stage of the study, by a thorough study of the sectors identified as leading (5) through the model. The main reference point in performing this task was the indicator showing the share of companies in a sector’s subsector in the total number of companies operating in the relevant sector; thus, the subsectors were identified by this indicator. There were two main reasons behind choosing the quantity of companies for further analysis: 1) the regional statistics is quite scarce when it comes to details and the number of companies is that rare data which may be seen in various dimensions, including even in a narrower dimension of a sector, subsector and activity; 2) the number of companies in a sector indicates a level of demand for products or services offered by the sector to the market and also, a possibility for a cluster to develop around the sector. The key limitation of the study is that the analysis rests on the data for the years 2015-2017 because the 2018 regional statistics has not yet been processed and the Geostat will publish it in October 2019 when. This limitation is somewhat counterbalanced by a new avaialble data on the distribution of companies by regions as of 1 February 2019. Yet another limitation of the study is that there is no data recorded on the activities and size of a number of companies.

The third stage: holistic analysis The third stage of the study was conducted to neutralize the abovementioned limitations and to holistically identify priority sectors. The third stage of the study involved a revision of the sectors identified by the assessment model, conduct of so-called realities test on them, analysis of sectors by the results obtained on the first stage of the study and information obtained from additional sources, and based only on this analysis, the identification of priority sectors.

9 Study tools: As noted at the beginning of this subchapter, qualitative and quantitative tools were applied at various stages of the study. Qualitative tools:  Desk research to analyze regions from various dimensions: development strategies of the regions, documents and reports on the economic development of the country, related literature and data were examined;  Semi-structured interviews to identify opportunities and challenges in the regions: interviews were conducted with representatives of Enterprise Georgia, governors of regions (with the deputy governor in Imereti), private companies and organizations supporting business. Quantitative tools:  Gathering of the Geostat data;  Development of the model;  Processing of the data in the model.

10 GURIA

11 GURIA

GENERAL DESCRIPTION OF THE REGION

Location The Guria region is in the south-west of Georgia, situated mainly on the Kolkheti Valley. Guria borders with the Black Sea to the west, Adjara-Guria mountain range, the Choloki river and the Autonomous Republic of Adjara to the south, Imereti to the east, and Samegrelo to the north. The territory of the region comprises 2,033 km² that is 2.9% of the country’s territory.1.

Administrative arrangement of Guria Guria consists of three self-governing entities: Lanchkhuti, Ozurgeti and Chokhatauri. The executive government on the regional level is the state representative-governor who is based in the city of Ozurgeti. Guria counts two cities (Lanchkhuti, Ozurgeti), five towns and 189 villages.

Natural environment By natural conditions Guria is divided into the lowland and the highland. Climate in Guria’s lowland is humid subtropical with moderately hot summers and moderately cool winters. The climate of highland is distinguished for clean air. The mountain climate and its healing properties results from the mixture of sea and mountain air. Summer in the highland is moderately warm while winter is moderately cold.2

Resorts

The Guria region is rich in resorts – both at the seaside and in the mountains: Bakhmaro is in the Chokhatauri municipality, situated at 2050 meters above the sea level, along the Adjara-Guria mountain range. It is 52 km away from the center of Chokhatauri. The territory of Bakhamro represents a sort of structural basin surrounded by centuries-old evergreen spruce-fir forests, after which the alpine zone starts. Lenchi hill ridge (2505 meters) towers Backmaro from the east, which is dubbed as the “sunrise” mountain by tourists who often enjoy this scene. The Sakasria mountain range rises on the south-west side of Bakhmaro, with a small Bakhmaro peak also called the “sunset” mountain (2250 meters). Especially impressive is the scene, which can be viewed from here weather permitting, is called the “drowning of the sun” into the Black Sea. To the west, the resort is open, allowing sea breezes to reach. This results in the best sea and mountain mixed climate. The cover of snow in winter cover is very high (4-5

1 Source: www.guria.gov.ge 2 http://guria.gov.ge/geo/static/161

12 meters) and stays for up to six months which represents a very favorable factor for the development of ski resort. The climate of Bakhmaro is an effective healing means for various diseases. It is worth noting that Bakhmaro hosts tourists during winter too. Every year, on the day of Feast of Transfiguration a traditional horse racing is held in Bakhmaro.3 Gomismta is a resort with mineral waters, forest, healing climate and other natural resources that may be used for healing, prophylactics and rehabilitation purposes. Nabeghlavi is a balneological resort, situated at 400 meters above the sea level, along the bank of clean Gubazeuli river. It is famous for its unique climate and favorable conditions for balneotherapy as well as a precious mineral water Nabeghlavi. Ureki is situated in the south-west part of the Kolkehti Valley. The climate of the resort is humid subtropical. Winter is very mild (5.8° above zero in January). The sea, sun, fine “velvetish” sand that has magnetic properties make Ureki a perfect holidaymaking and healing resort. Natural properties of Ureki may be used for healing cardiovascular diseases, peripheral organs and musculoskeletal system both in children and youngsters. Shekvetili is situated along the seaside, at the estuary of Natanebi river, at 2 meters above the sea level. It is 21 km away from Ozurgeti and 3 km away from Kvemo Natanebi (the nearest railway station). Shekvetili is home to Black Sea Arena, the largest concert hall in Georgia which was inaugurated on 31 July 2016 and can seat up to 10 000 people. It is also home to a Marriot hotel, Paragraph Shekvetili“4. Grigoleti is in the Lanchkhuti municipality, 25 km away from the center of Lanchkhuti and 12 km away from Poti. The landscape is flat with a broad strip of sandy beach running along the sea. The sand contains large quantities of magnetic iron particles. The climate is coastal, subtropical. The climate of the resort is favorable for the treatment of nervous system and chronic lung diseases.5

Natural resources

Water resources and energy generation potential. The region is rich in water resources – rivers, lakes, natural and artificial water reservoirs, ground freshwater, mineral water and thermal water resources. Guria counts 25 medium and small mountain rivers with the total length of 598 km and the total size of basins over 100 km2. There are three lakes in the region (the total area - 3.5 km2) and three water reservoirs (the total area - 4.4 km2). According to the 2011water intake data, 96% of water resources (ground and surface water) of the region is used for generating hydro power, 2% is used for drinking purposes while the rest for industrial, irrigation and recreational purposes. Guria borders with the Black Sea which is of transborder importance. Mineral springs originating in Guria are Nabeghlavi (reserves - 101,9 m3 a day) and Guliani (reserves not estimated). The production of Nabeghlavi is well developed and it is one of key export commodities of the region. The use of the region’s mineral spring resources for recreational and resort purposes is limited due to absence of relevant infrastructure. Energy potential of thermal springs is not used either. The potential of the Black Sea coastal zone in the region, famous for its unique balneological properties (Ureki-Shekvetili- Natanebi magnetic sand beaches), is also underused mainly due to absence of water supply, sewerage systems and relevant treating facilities. Potential of water resources is not used effectively in hydro power industry. The geographic location and climate of the region provides a possibility for constructing small cascade hydropower plants (HPP) with the overall capacity of 80-100 MW; this would not only meet the region’s demand for electricity, but would also allow to sell electricity and thus, have an additional source of income. There are two HPPs operating in Guria: Bzuzha HPP (on the Bzuzha river) and Achi HPP (on the Achi river) with the total capacity of 12.8 MW. Both HPPs are integrated into a common energy system of Georgia. A new HPP cascade, Bakhvi Hydro Power, which consists of six units and has the total capacity of 60 MW, has been constructed since 2007. Alternative energy resources are available in the region. Direction, speed and continuation of winds that are common in the Lanchkhuti municipality provide an opportunity to use dominating wind resources for energy purposes. A wind turbine may operate, on average, 127 days a year. Solar energy may be used for hot water supply in small hotels, public and residential buildings. There is a possibility to use the energy potential of biogas, biomass (hazelnut shells and sawmilling waste) and thermal water resources.

3 http://guria.gov.ge/geo/static/242 4 https://ka.wikipedia.org/wiki/%E1%83%A8%E1%83%94%E1%83%99%E1%83%95%E1%83%94%E1%83%97%E1%83%98%E1%83%9A %E1%83%98 5 http://guria.gov.ge/geo/static/257

13 Region is also rich in forest resources,which allow a diverse utilization of forests. Woodland covers 48% of the territory of Guria. The total woodland area comprises 86,4 hectares of which 81,2 ha is covered with forests. Among main tree species of the forest, the dominant is beech from hardwood deciduous species. Hornbeam, acacia and chestnut trees cover a substantial area. From coniferous species, the dominant trees include spruce, fir and pine. From softwood deciduous species, alder and cottonwood cover the largest area. Underwood and shrubs are mainly represented by cherry laurel, common rhododendron and honeysuckle azalea. There are bamboo trees in the region too. The use of forest and forest resources potential is of great importance for the development of the region. There are various mineral resources in the region. As of now, there are 74 licenses issued for the extraction of mineral resources. Bentonite clay deposits are found in the Ozurgeti municipality, with the reserves estimated at more than 10 million tons. Clay is extracted and processed in very small amounts today. Processing of clay and replacing exported products with it may substantially increase budget revenues and provide local population with jobs. Peat fields in the territory of Kolkheti Park cover 300 ha. They are used to produce organic fertilizers that are ecologically clean and suitable for any type of soil (extraction of peat on the territory of the park is banned under the international agreement). Apatite in Georgia is found only in the Ozurgeti municipality (the village of Vakisjvari), where rocks contain 7%-10% of apatite. There is also red iron ore in the territory of the same village. Pockets of copper ore are also discovered here, as well as small amounts of lead, silver and zinc. Kaolin deposit is found in the village of Makvaneti where the thickness of kaolin layer is from 0,4 to 11 meters. Syenite deposits are found in the villages of Shemokmedi and Gomi (syenite is an igneous rock resembling granite and is one of best construction materials). Ochre deposit is found in Nagomari village, which has the thickness of 1,5 – 2 meters and the amount of trivalent iron oxide of 22.33% (ochre is used for producing mineral colors). Tufa and granite decorative materials can be found in the Chokhatauri municipality, with the reserves of each estimated at 400,000 m3. Limestone is found in Lanchkhuti municipality. Limestone is marly, of white or grey color. The raw material meets the requirements for the production of construction hydraulic lime. There are also several deposits of clay for bricks in the Lanchkhuti municipality, with the clay of brown, bluish grey and greyish blue color. A deposit of rocks containing phillipsite is in the same municipality. Sand and gravel fields are in the Ozurgeti as well as Lanchkhuti municipalities. The reserves are approved as raw materials for concrete and mortar, which meet standard requirements. Raw oil field is also found in the Lanchkhuti municipality. Mineral resources are not estimated and therefore, their potential impact on local economy is unknown.

MACRO INDICATORS OF THE REGION

Demography

Number and density of population According to the Geostat data, the population of Guria, as of 1 January 2008, comprised 110,500, that is 3% of the Georgia’s total population. Guria is the third smallest region of the country by population.

Figure 1. Population by regions (%)

Imere� 13,59 Kvemo Kartli 11,59 Adjara AR 9,4 Samegrelo-Zemo Svane� 8,6 Kakhe� 8,44 Shida Kartli 6,95 Samtskhe-Javakhe� 4,18 Guria 2,96 Mtskheta-M�ane� 2,52 Racha-Lechkhumi and Kvemo Svane� 0,81

0 2 4 6 8 10 12 14 Source: Geostat

14 The most populated municipality in Guria is Ozrugeti with 55% of the region’s population (61,305 people). This is followed by the Lanchkhuti municipality (27.87%, 30,804 people), and the Chokhatauri municipality with 16% of the region’s population (18,415 people). According to 1 January 2018 data, the density of population in Guria stands at 54.4 per square kilometer.

Figure 2. Population density (men/km2)

Adjara AR 119,4 Imere� 79 Shida Kartli 75,6 Kvemo Kartli 67,2 Guria 54,4 Samegrelo-Zemo Svane� 43 Kakhe� 27,7 Samtskhe-Javakhe� 24,3 Mtskheta-M�ane� 16,7 Racha-Lechkhum-Kvemo Svane� 6,6

0 20 40 60 80 100 120 Source: Geostat

It is worth to note that the population density in Tbilisi is 2,297 people. As the figure shows, all regions lag well behind Tbilisi by this indicator. The density of population in Tbilisi is 42 times higher than in Guria, 29 times higher than in Imereti and 30 times higher than in Shida Kartli. Such a big difference compared to Tbilisi shows a low urbanization rate of other regions. High population density has its advantages – on a territory with more people, infrastructure and transportation system develop more intensively, economic activity is higher as business operation costs are often lower. As we see, the population density in almost all regions under scrutiny, including Guria, is low.

Urban and rural population The Ozurgeti municipality has three towns and 24 villages. The Lanchkhuti municipality has 15 administrative units and 54 villages. The Chokhatauri municipality has one town and 23 villages. Urban population of the region comprises 26.4% whereas rural population totals 73.6%. The rural population of Georgia is 42.6%.6 This exceeds a corresponding average indicator in Europe where, as of 2015, only 28% lived in villages.7 The level of urbanization in Georgia is low by this indicator too. The situation is worse in Guria where the share of rural population stands at 73%.

Distribution of population by sex and age Guria’s population consists of 48.22% men and 51.78% women. The distribution of urban and rural population by sex is similar: urban population of Guria consists of 46.65% men and 53.35% women while rural population consists of 48.84 men and 51.16% women. The age distribution of the population is the following: the 0-14 age group comprises 16% of the population, that of 14-64 stands at 65%, and over 65 comprises 19%. The distribution of population by age and sex is provided in the figure below, which shows that men prevail among young (0-14 age group) and working age (15-54 age group) population while women prevail among the population aged over 65. This trend is common both in urban and rural settlements. Per 100 working age population (aged 15-64) in Georgia there are 22 persons aged 65 and over. In Guria, this ratio is 28 elderly per 100 working age people. In Europe, the old-age dependency ratio was 28.8% in 2017. In Georgia, an average dependency indicator is lower than in Europe. In Guria, however, this coefficient is similar to that of Europe.

15 Figure 3. Distribution of Guria’s population by age and sex

68 62 70

40 22 30 17 15 15 20

0 0-14 14-64 65+ Men Women

Source: Geostat

In demographic terms, the situation in Guria is one of gravest. The region accounts for only 3% of the country’s population. Furthermore, this is one of most sparsely populated regions. This state of affairs creates barriers to the development of region since sparsely populated areas, as a rule, are not treated as a priority in terms infrastructure development – transportation, utilities services, roads, etc.; this factor may impede the development of business because costs of business operation increase due to absence of necessary infrastructure or less concentrated settlement of population. The high share of rural population – 73% is also indicative of low urbanization of the region. Furthermore, as compared to an average indicator of Georgia, the old-age dependency ratio is high in Guria, comprising 28 elderly per 100 working-age population (aged 15-64). This state of affairs is yet another challenge in terms of economic development.

Social and economic conditions of the population To assess social and economic conditions of the population, the study analyzed various data, including: economic activity of the population, average income of households, revenue structure of households. Each set of the data is reviewed below: As of 2017 data of the Geostat, Guria shows the highest employment rate in Georgia.

Figure 4. Employment in Guria, 2017

Tbilisi 42,1 Shida Kartli 56,5 Imere� ** 57,7 Adjara AR 62 Kvemo Kartli 62,2 Samegrelo-Zemo Svane� 63,2 Mtskheta-M�ane� 64,4 Samtskhe-Javakhe� 70 Kakhe� 71,4 Guria 75,5

0 10 20 30 40 50 60 70 80 Source: Geostat

16 The employment structure shows that 73.6% of employment accounts for self-employment.

Figure 5. Share of self-employed population in the total employed population, Guria, 2017 (%)

Guria 74 Kakhe� 72 Samtskhe-Javakhe� 70 Samegrelo-Zemo Svane� 65 Shida Kartli 61 Mtskheta-M�ane� 59 Kvemo Kartli 58 Imere� ** 57 Adjara AR 52 Georgia 52 Tbilisi 16

0 10 20 30 40 50 60 70 80

Source: Geostat

As seen from the figure, Guria shows the highest self-employment in Georgia. The figure below shows that the share of hired employment is the lowest in Guria.

Figure 6. Share of hired employees, Guria, 2017 (%)

Tbilisi 84 Georgia 48 Adjara AR 48 Imere� ** 43 Kvemo Kartli 42 Mtskheta-M�ane� 41 Shida Kartli 39 Samegrelo-Zemo Svane� 35 Samtskhe-Javakhe� 30 Kakhe� 28 Guria 26

0 10 20 30 40 50 60 70 80 90

Source: Geostat

It is interesting to see how the high employment rate and the employment structure affect the income of population. According to 2018 data of the Geostat, per capita income in Guria is one of the lowest in Georgia by aggregated data. As the figure below shows, per capita income comprises GEL 243 in Guria, Samtskhe-Javakheti and Mtskheta-Mtianeti. The only region that lags behind these three regions by this indicator is Kvemo Kartli.

17 Figure 7. Income per capita, 2018

Tbilisi 341 Kakhe� 287 Georgia 285 Imere�, Racha-Lechkhum-Kvemo Svane� 269 Adjara 267 Shida Kartli 267 Samegrelo-Zemo Svane� 256 Guria, Mtskheta-M�ane� & Samtskhe-Javakhe� 243 Kvemo Kartli 231

0 40 80 120 160 200 240 280 320 360 Source: Geostat

As the employment structure shows, the employment in Guria is high on the account of self-employment. In order to assess the effectiveness of self-employed work we should see what is the share of self-employment in total revenues. The figure below shows that the largest share of per capita income in Guria accounts for hired employment.

Figure 8. Sources of cash and non-cash income, Guria, 2017

Remi�ances from abroad Property (lease, interest on deposit) 4 1 Self-employment 6

Money received as gi� Hired employment 7 36

Proceeds from agricultural products 10

Non-cash income 13

Pensions, scholarships, assistance 23

Source: Geostat

Apart from per capita income, the revenue structure also indicates the grave economic situation in Guria. The largest source of income, after the hired employment, is pensions, scholarships and assistance. The same holds true for the number of families registered for allowances. The share of families registered for allowances in total households is the second highest in Guria after Racha-Lechkhumi.

18 Figure 9. Share of families receiving allowances in the total households by regions

Shida Kartli 12 Kvemo Kartli 6 Samtskhe-Javakhe� 8 Samegrelo-Zemo Svane� 11 Mtskheta-mTiane� 12 Imere� 11 Kakhe� 11 Racha-Lechkhum-Kvemo Svane� 30 Guria 14 Adjara AR 8 Tbilisi 5 Georgia 9

0 4 8 12 16 20 24 28 32 Source: Geostat, healthcare and social security 2017; Geostat – general population census, 2014.

As seen from the figure above, almost half of the households (45.7%) is registered for allowance. The social and economic situation of population in Guria is grave. Despite a high employment indicator, the data shows a remarkably low per capita income in Guria as compared to other regions. A high self-employment rate cannot ensure the wellbeing of the population. Dependence on pensions, social allowances and other types of subsidies is high in Guria – yet another indication of gravity of socioeconomic situation. Clearly, a low purchasing power of population has an adverse effect on opportunities of business development; at the same time, this state of affairs speaks about an urgent need for enhancing the economic activity in the region of Guria.

Labor market – education and skills There are 101 secondary schools and one vocational college in Guria. There is no higher educational institution in the region. According to Geostat data, in 2018-2019 academic year there were 141 pupils per school whereas this ratio stood at 252 countrywide. By this indicator, Guria is ahead of only Racha-Lech- khumi and Mtskheta-Mtianeti. According to the Geostat, there are four state vocational education institutions and no such private institution in Guria/Racha-Lechkhumi, Kvemo Svaneti and Mtskheta-Mtianeti in total. A corresponding separate indicator for Guria is not publicly available. According to the list of vocational education institutions, published on the webpage of the Ministry of Ed- ucation, there is only one state college in Guria. The college “Horizonti” is in Ozurgeti. The college trains students in the following vocations: cook, sewing specialist, forester, plant protection technician, tractor driver, guide, auto mechanic, electrician, computer networks and systems technician, bookkeeper, stylist (women and men hairdressing), hotel administrator, restaurant administrator, sewing machine technician, sewing machine operator, quality manager of sewn goods, welder, bricklayer. The municipalities of Guria are in a short distance from Kobuleti, Poti, Ureki and Samtredia (40-45 minutes’ drive). The region’s population may acquire various vocations in these cities. We studied what vocational education institutions are available in Kobuleti, Poti, Ureki and Samtredia. According to the information of the Ministry of Education, there are only two vocational colleges in these cities: New Wave (in Kobuleti) and a public college Pazisi (in Poti). The college New Wave runs the following dual programs: culinary art, fruit growing (stone fruits/pome fruits/nuts), welding, conduct of construction, floor and tile works, painting works, assemblage of plaster-cardboard constructions, water supply systems, hotel service. The interview with a representative of vocational education institution Pazisi revealed that college graduates work as self-employed and hired employees. In terms of self-employment, the demand is high for the vocations of stylist and bookkeeper, while in terms of hired employment, popular vocations include IT specialist, cashier, sewing specialist. In a written interview, the state representative in Guria, Mr. Zurab Nasaria said: “One of the challenges is the migration of rural population which results in the workforce outflowing, villages deserted and development halted. Yet another serious challenge is the vocational education because when it comes to

19 investments, an investor first of all inquires about the availability of local professional workforce. For this very reason, it is planned, with the support from the state, to enhance the vocational education institution operating in Ozurgeti and to open a vocational institution on its basis in Chokhatauri, which will be tailored to the regional specifics and needs (agriculture, tourism, manufacturing).” According to the most recent Geostat data (2017), as many as 9,774 persons graduated from vocational colleges in Georgia in 2017. Only 5.28% of them accounted for the Guria, Racha-Lechkhumi-Kvemo Svaneti and Mtskheta-Mtianeti regions. This indicator is one of the lowest among Georgia’s regions and share of each of these three regions further decreases as this 5.28% is the total data for these regions. This indicates that vocational education in Guria (and two other regions) is not a popular opportunity for acquiring new skills. No study has been conducted so far that would evaluate skills of working age population of Georgia by regions. According to the World Economic Forum’s Global Competitiveness Report 2018,8 major challenges in Georgia in terms of skills are the quality of vocational education, skills of graduates of vocational education institutions, digital skills of population and qualified workforce. By these criteria Georgia is, respectively, the 131st, 123rd, 101st and 111th among 140 countries. The only study which provides scarce information as to what skills are in shortage in Guria is a labor market study conducted by the Ministry of Health Care and Social Affairs in 2015. According to this study, Guria experiences a severe shortage of welders and agricultural specialists. Computer and in general, digital skills are decisive in the modern world. As noted above, there is no study (except for Global Competitiveness Report of the World Economic Forum) that would assess such skills of working age population in Georgia and especially, in its regions. The Geostat data by regions is also scarce to give an idea of digital skills or opportunities to develop them in the regions. Main regional data is the share of households with the access to the Internet. In 2018, this indicator for four regions – Kvemo Kartli, Guria, Samtskhe-Javakheti and Mtskheta-Mtianeti, stood at 57.5%. Difficulties characteristic of Guria’s labor market are similar to those of Georgia’s labor market, in general: lack of opportunities to acquire knowledge, lack of qualified workforce, absence of digital skills. The demographic situation in Guria further aggravates the labor market. As the regional development strategy of Guria says: “a large segment of university graduates does not return to Guria.” In parallel to devising a sectoral development policy, it is necessary to create an opportunity, for example, centers of vocational education, for acquiring knowledge and skills necessary for these sectors.

Business activity in Guria According to Geostat data, as of 1 February 2019, Guria counts 4,531 enterprises (save state-owned, legal persons in public law and non-commercial enterprises). As many as 94.68% of them are small-sized enterprises. The figure below shows the distribution of enterprises by their size.

Figure 10. Enterprises by size Large Unspeciﬁed Medium 0,04 4,92 0,36

Small 94,68 Source: Geostat

8 Global Competitiveness Report 2018, World Economic Forum.

20 By their legal form, the majority of enterprises, 76%, is an “individual entrepreneur” which is not surprising as the size of more than 90% of enterprises is small in Guria. By a new Geostat classification, a business is small if its annual turnover is up to GEL 12 million and the number of employees up to 50. Business activity in Guria is mainly driven by small and medium businesses. The most recent business data of Geostat is provided in the table below.

Table 2. Business data, 2017, Guria

Guria, businessindicators

Intermediate Avg. monthly Turnover Added value Investments Employment consumption salary Large 6.59% 9.74% 9.6% 2.17% 10% 837.6 Medium 32.35% 0.438964242 46.97% 84.78% 22.80% 998.3 Small 61.05% 0.464241677 43.39% 13.04% 67.20% 358.1 Source: Geostat, regional data

The table clearly shows that the small-sized business accounts for the largest share of turnover and employment. In terms of added value and intermediate consumption, small and medium businesses are equally active and these two segments account for 90% of the sum of these indicators. Medium-sized business is in the lead by investments. Such dynamic seems logical as Guria has only two large- and 16 medium-sized companies. As regards average monthly salary, it is the highest in medium-sized enterprises and the lowest in small-sized companies. This indicates about a grave economic situation in Guria as small companies account for the largest share (67%) of employment where average monthly salary is well below – three and two times lower than average monthly salaries in medium and large companies. By sectors, the distribution of companies in Guria is as follows:

Table 3. Distribution of companies by sectors

Share of Sector companies Wholesale and retail trade; repair of motor vehicles and motorcycles 51.85% Transportation and storage 12.58% Manufacturing 9.68% Accommodation and food service activities 5.22% Construction 5.19% Other service activities 2.63% Real estate activities 2.50% Professional, scientific and technical activities 2.43% Agriculture, forestry and fishing 1.73% Human health and social work activities 1.36% Mining and quarrying 1.10% Administrative and support service activities 0.90% Financial and insurance activities 0.83% Information and communication 0.73% Education 0.53% Arts, entertainment and recreation 0.50% Water supply; Sewerage, Waste Management and Remediation Activities 0.13% Public administration and defense; compulsory social security 0.07% Activities of extraterritorial organizations and bodies 0.03%

Source: Geostat

21 The table shows that more than half of companies operating in Guria are engaged in the trade sector, followed far behind by “Transportation and storage,” “Manufacturing,” and “Accommodation and food service activities.” The majority of small-sized companies in Guria operate in the following sectors: trade, transport and storage, manufacturing. The majority of medium-sized companies operate in manufacturing, trade, construction. One of the two large companies is in bread baking business while another is in infrastructure construction business.

Table 4. Share of companies in sectors, by size

Guria Description S M L Total Agriculture, forestry and fishing 1.68% 6.25% 0.0% 1.7% Mining and Quarrying 1.04% 6.25% 0.0% 1.1% Manufacturing 9.51% 25.00% 50.0% 9.6% Electricity, gas, steam and air conditioning supply 0.00% 0.00% 0.0% 0.0% Water supply; Sewerage, Waste Management and Remediation 0.13% 0.00% 0.0% 0.1% Activities Construction 5.11% 12.50% 50.0% 5.2% Wholesale and retail trade; repair of motor vehicles and 52.17% 18.75% 0.0% 52.0% motorcycles Transportation and storage 12.64% 6.25% 0.0% 12.6% Accommodation and food service activities 5.28% 0.00% 0.0% 5.2% Information and communication 0.74% 0.00% 0.0% 0.7% Financial and insurance activities 0.84% 0.00% 0.0% 0.8% Real estate activities 2.45% 6.25% 0.0% 2.5% Professional, scientific and technical activities 2.45% 0.00% 0.0% 2.4% Administrative and support service activities 0.91% 0.00% 0.0% 0.9% Public administration and defense; compulsory social security 0.07% 0.00% 0.0% 0.1% Education 0.54% 0.00% 0.0% 0.5% Human health and social work activities 1.31% 6.25% 0.0% 1.3% Arts, entertainment and recreation 0.44% 12.50% 0.0% 0.5% Other service activities 2.66% 0.00% 0.0% 2.6% Activities of households as employers; undifferentiated goods 0.00% 0.00% 0.0% 0.0% and services producing activities of household for own use Activities of extraterritorial organizations and bodies 0.03% 0.00% 0.0% 0.0%

In Guria, 53 business entities were awarded grants under the Enterprise Georgia’s micro grants program. Almost half of them, 44.83%, accounts for non-agricultural services and production.

PRIORITY SECTORS

By means of sector assessment model, which is described in detail in the study methodology, the sectors were awarded the following scores:

Table 5. Sectors by awarded scores

Sector Evaluation Administrative and support service activities 0.52572737 Manufacturing 0.247091024 Professional, scientific and technical activities 0.246652269

22 Wholesale and retail trade; repair of motor vehicles and motorcycles 0.246447904 Construction 0.222917647 Arts, entertainment and recreation 0.189124431 Accommodation and food service activities 0.157176436 Transportation and storage 0.156136785 Information and communication 0.141006529 Agriculture, forestry and fishing 0.106467378 Human health and social work activities 0.06816285 Mining and quarrying 0.049852881

According to the table, the sectors distinguished in Guria by current as well as potential development are: 1. Administrative and support service activities 2. Manufacturing 3. Professional, scientific and technical activities 4. Wholesale and retail trade; repair of motor vehicles and motorcycles 5. Construction 6. Arts, entertainment and recreation To assess the potential of sectors and subsectors, a more detailed study of the structure of sectors was conducted. For the detailed analysis, the number of companies per sector was used. The result of the analysis is provided below:

Administrative and support service activities

Table 6. Subsectors of the administrative and support service activities Subsector Share Rental and leasing activities 44% Services to buildings and landscape activities 15% Tourism services 11%

Manufacturing

Table 7. Subsectors of manufacturing Subsector Share Manufacture of food products 40% Manufacture of rubber and plastic products 14% Manufacture of non-metallic mineral products 12% Manufacture of fabricated metal products, except machinery and equipment 7% Manufacture of furniture 9%

Manufacturing is the largest sector and therefore, the data on subsectors needs to be looked at too. In food products manufacturing, the majority of companies operate in the following three spheres: – Manufacture of bakery and pastry goods – Processing and preserving of fruits and vegetables – Processing of tea In the manufacture of rubber and plastic products the largest part accounts for the manufacture of builders' ware of plastic. Companies operating in this subsector mainly manufacture plastic doors and windows. In the manufacture of non-metallic mineral products, the leading activity is the manufacture of concrete products. Furniture manufacturing companies manufacture industrial and household furniture as well as mattresses. As regards the manufacture of fabricated metal products, this is dominated by the manufacture of metal doors and windows.

23 Professional, scientific and technical activities

Table 7. Subsectors of professional, scientific and technical activities

Subsector Share Architectural and engineering activities; technical testing and analysis 61% Legal and accounting activities 16%

Construction

Table 9. Subsectors of construction

Subsector Share Construction of buildings 68% Civil engineering 15% Specialized construction activities 17%

Civil engineering involves the construction of roads and motorways and other infrastructure, while specialized construction activities include roofing, finishing, painting and other similar activities.

Arts, entertainment and recreation

This sector is developed in Guria mainly owing to the Black Sea Arena, a miniature park and an amusement park Tsitsinatela.

Table 10. Subsectors of arts, entertainment and recreation

Subsector Share Creative, arts and entertainment activities 26% Sports activities and amusement and recreation activities 26%

Since Guria is especially rich in sea and mountain resorts, the Shekvetili and Bakhmaro resorts have been actively utilized since 2018. Furthermore, based on interviews on the topic of regional development of Guria with the state representative in Guria as well as representatives of companies operating in Guria, we deemed it suitable to add hotels and café-restaurants sector to the top five sectors identified by the model. In the end, the list of sectors, subsectors and subsector activities identified in Guria looks as follows:

Table 11. Prospective sectors, subsectors and activities

Sector Subsector Subsector activities Rental and leasing of trucks Rental and leasing of other personal and Rental and leasing household goods activities Renting and leasing of agricultural machinery and equipment Administrative and support Combined facilities support activities Services to buildings and service activities General cleaning of buildings landscape activities Landscape service activities Travel agency, tour operator and other Travel agency activities reservation service and related activities

24 Processing and preserving of fruit and Manufacture of food vegetables products Manufacture of bakery and pastry goods Manufacture of other food products Manufacture of rubber Manufacture of builders' ware of plastic and plastic products Manufacture of glass and glass products Manufacture of other Manufacturing Manufacture of articles of concrete, cement non-metallic mineral and plaster products Cutting, shaping and finishing of stone Manufacture of metal structures Manufacture of fabricated metal products, except Forging, pressing, stamping and roll-forming of machinery and equipment metal; powder metallurgy Manufacture of other fabricated metal products Legal activities Legal and accounting activities Accounting, bookkeeping and auditing activities; tax consultancy Professional, scientific and technical activities Architectural and Architectural and engineering activities and engineering activities; related technical consultancy technical testing and Technical testing and analysis analysis Construction of residential and non-residential Construction of buildings buildings Construction of roads and railways Civil engineering Construction of engineering projects Construction Other specialized construction activities Electrical, plumbing and other construction Specialized construction installation activities activities Demolition and site preparation Building completion and finishing Creative, arts and

entertainment activities Arts, entertainment and recreation Sports activities and amusement and recreation activities Accommodation Accommodation and food Restaurants and mobile service activities food service activities

The above listed sectors may be grouped into three clusters:  Construction cluster which will include: the construction sector itself; rental and leasing activities; manufacture of rubber and plastic products; manufacture of other non-metallic mineral products; manufacture of fabricated metal products, except machinery and equipment; architectural and engineering activities; technical testing and analysis;  Food manufacturing cluster which will include: processing and preserving of fruit and vegetable; manufacture of bakery and pastry goods; manufacture of other food products; accommodation;  Tourism cluster which will include: manufacture of food products; entertainment and recreation; accommodation and food service activities. In the sectors listed in Table 8, opportunities for micro and small entrepreneurs are seen in following areas:  Diversification of products

25  Diversification of services  Cross-sectoral development  Vertical development Several examples are provided below: Manufacture of bakery and pastry goods – Packaging – Product diversification – Service diversification – Delivery service – Culinary tourism – Basic marketing services (packaging, labelling design, etc.) – Processing of dairy products (for confectionery raw material) – Manufacture of confectionery semi-finished goods – Manufacture of confectionery fillings (of nut, chocolate, fruit) Processing of fruit and vegetable This sector mainly includes hazelnut processing operators. Therefore, the opportunities are seen in the following areas: – Manufacture of hazelnut, confectionery and food products – Hazelnut collection and export – Processing of hazelnut shells into fuel products (special briquettes) – Packaging – Marketing Processing of tea – Diversification of production – Manufacture of tea enriching flowers and aromas – Specialized points of sale of tea – Clay tea ware – Recreational-tourist service (e.g. museum) – Supply of tea – cafes, restaurants – Marketing – Packaging Tourism cluster – Tour agencies – Tour and tourism inventory (skis, bicycles, skateboards, tents, etc.) – Souvenirs – Transportation (rental, service) – Guesthouses – Cafes, bars, restaurants, snooker and similar entertainment places – Culinary and other experience tourism – Manufacture of hotel and café inventories (soaps, linen, dishware, etc.) – Rental of conference equipment and services – Maintenance: gardening, cleaning, groups of technical service

26 – Music inventory and service – Video-photo service and rental Manufacture of rubber and plastic products – Diversification of production by manufacturing doors and windows – Production of insolated glass – Aluminum windows – Balusters – Jalousies – Manufacture of shade tents – Design C2. Non-metallic mineral products – Manufacture of glass souvenirs – Manufacture of glass jewelry – Coloring and decorating of glass – Outdoor concrete furniture – Concrete finishing materials – Concrete interior ornamental articles – Concrete infrastructural structures – wells, drainage pipes, well tiles, concrete parapets – Marketing – Design C3. Manufacture of furniture – Planning – Furniture fittings – Manufacture of curtains – Manufacture of bed linen – Manufacture of interior ornamental articles – Manufacture of pillows and blankets

27 IMERETI IMERETI

GENERAL DESCRIPTION

Location Imereti is border by the Likhi Range from the east, the Tskhenistskali river from the west, the Caucasus mountains from the north and Persati, or Meskheti mountains to the south. The name “Imereti” stems from the geographic location of the region, meaning the area on the other side of Likhi Range.

Administrative arrangement

Administrative-territorial units of the Imereti region defined by the legislation of Georgia are: Municipal City of Kutaisi, Chiatura Municipality, Tkibuli Municipality, Tskaltubo Municipality, Baghdati Municipality, Vani Municipality, Zestafoni Municipality, Terjola Municipality, Samtredia Municipality, Sachkhere Municipality, Kharagauli Municipality, Khoni Municipality. The territory of the region totals 6552 km². Population comprises 700 000 persons; the population density is 108 persons per square kilometer. The administrative center of the region is the city of Kutaisi. There are 542 settlements in the region, including 11 cities: Kutaisi, Vani, Tkibuli, Tskaltubo, Chiatura, Baghdati, Zestaponi, Terjola, Samtredia, Sachkhere, Khoni; three towns: Shorapani, Kulashi, Kharagauli; and 554 villages. Administrative units of the region are: city hall – 1 (Kutai- si); municipal administration – 11, town council – 2, village council – 161.

Natural environment Imereti is divided into two parts: Upper imereti and Lower Imereti. The region is rich in flora and fauna. Forests stretch over mountainous landscape over 250 000 ha of land. The maximum height is 2850 meters from the sea level. Imereti is mainly located in a humid subtropical climate zone. Impact of the sea is weak- ened in lower or middle mountain districts, though the climate is still humid. Winter is cold and summer is relatively dry and hot. Average temperature in January is 2-5°C above zero whereas the maximum summer temperature is 38-40°C. Precipitation comprises 100-200 mm. Annual rainy days reach 150. Main water arteries are the Rioni and Kvirila rivers.

Mineral resources The Imereti region is distinguished for a variety of mineral resources available in the territory of Georgia. More than 100 deposits of mineral resources are registered in Imereti, with more than half of them being the export commodity. The main mineral resource is manganese in Chiatura with total reserves of various ore types estimated at 215 million tons. Unexplored manganese reserves are through to be in Kvirila and Zesta-

29 poni districts, in the territories of Chkhara-Ajameti, Kutaisi and Terjola. Other significant mineral resources of the region are coal, barite, liatonite, construction materials and clay in Tkibuli and Gelati. Surroundings of Kutaisi is rich in bentonite clays (gumbrine), marble, Eklari limestone, Kursebi teschenite, Bazaleti deposits. There is a variety of soil in the region. Main types of soil are: alluvial, subtropical arid yellow soil, red soil, humus-carbonate and grey soils.

Recreational resources Imereti occupies a leading place in the recreational system for its unique natural and hydromineral resources, mineral springs. From among healing springs, distinguished ones are: Tskaltubo, Sairme (Baghdati municipality), Nunisi (Kharagauli municipality), Sulori (Vani municipality), also various mineral springs in Sachkhere. There is a vast reserve of thermal springs. Mountains and forests occupy 250 000 ha of land. Resorts and recreational zones of the region make Imereti an interesting tourist destination. The landscape of the region, healing mineral springs of balneological resorts attract holidaymakers. At present there are 53 resorts and holidaymaking bases in Imereti, including such well-known ones as Tskaltubo, Sairme, Nunisi, Simoneti, Sulori, Satsire, Chiatura’s Khreiti, Samtredia, Zvare, Amaghleba. Especially outstanding is the Sataplia Nature Reserve in the territory of Tskaltubo (345 ha), with its karst cave and fossilized dinosaur footprints. Imereti counts more than 900 historical monuments and above 350 natural monuments. Major tourism resources of Imereti are protected territories, national parks, resorts and holidaymaking zones.

MACRO INDICATORS OF THE REGION

Demography Number and density of population According to 1 January 2018 data of the Geostat, the population of Imereti makes up 507,038 people, that is 13.59% of Georgia’s total population. By this indicator, Imereti is the leader in Georgia.

Figure 1. Population by regions

0 2 4 6 8 10 12 14 Source: Geostat

Kutaisi has the highest number of registered residents - 141,000 people, that is 27.81% of the region’s population and 3.8% of the country’s population. Kutaisi’s population exceeds the number of population of the entire Guria region. Imereti’s second largest settlement by population is Zestaponi municipality with 56,500 people that is 11.14% of Imereti population and 1.5% of Georgia’s population. This is followed by Tskaltubo municipality with 51,400 people that is 10.14% of Imereti’s population and 1.4% of Georgia’s population;

30 Samtredia municipality with 45,900 residents, i.e. 9.05% of the region’s population; Chiatura municipality with the population at 39,100, i.e. 7.75% of Imereti population. The sixth by population is Sachkhere municipality with 36,300 people living there, followed by Terjola (33,300 people), Vani (22,800), Khoni (22,200), Baghdati (19,800) and Tkibuli (19,300) municipalities. The smallest number of people live in Kharagauli municipality – 19,100 which is 3.77% of the region’s population and 0.5% of the country’s population.

Table 1. Population in municipalities of Imereti region, 2018

Municipality Population Share of Georgia Share of region Imereti 507 000 13.60% 100.00% City of Kutaisi 141 000 3.80% 27.81% Baghdati municipality 19 800 0.50% 3.91% Vani municipality 22 800 0.60% 4.50% Zestaponi municipality 56 500 1.50% 11.14% Terjola municipality 33 300 0.90% 6.57% Samtredia municipality 45 900 1.20% 9.05% Sachkhere municipality 36 300 1% 7.16% Tkibuli municipality 19 300 0.50% 3.81% Tskaltubo municipality 51 400 1.40% 10.14% Chiatura municipality 39 300 1.10% 7.75% Kharagauli municipality 19 100 0.50% 3.77% Khoni municipality 22 200 0.60% 4.38% Source: Geostat

The density of population per square kilometer comprises 79 in Imereti, which makes it Georgia’s second most densely populated region after Adjara.

Figure 2. Density of population

Adjara AR 119,4 Imere� 79 Shida Kartli 75,6 Kvemo Kartli 67,2 Guria 54,4 Samegrelo-Zemo Svane� 43 Kakhe� 27,7 Samtskhe-Javakhe� 24,3 Mtskheta-M�ane� 16,7 Racha-Lechkhum-Kvemo Svane� 6,6

0 20 40 60 80 100 120 Source: National Statistics Office of Georgia

Distribution of population by urban and rural settlements As noted above, the Imereti region counts 11 cities, three towns and 554 villages. As of 1 January 2018, the rural population of the region comprised 51% whereas the urban population stood at 49%. This indicator of urbanization is a little lower than the average urbanization in Georgia where the share of rural population totals 42.6%.

31 Distribution of population by sex and age The population of Imereti consists of 48% men and 52% women. The distribution of urban population by sex little differs from the average regional indicator, with the share of men standing at 47% and of women at 53%. In rural population of the region, shares of men and women are equal. The share of under-14 population in the region comprises 17%; that of 15-65 age group is 65% while the share of people aged over 65 is 18%.

Figure 3. Distribution of population by sex and age in Imereti region, 2018

67 63 70

40 21 30 19 16 14 20

0 014 1464 65+ Men Women

Source: Geostat

According to Figure 3, in Imereti, men prevail among the population aged under 65 whereas women prevail among the population aged over 65. The age dependency ratio in Imereti is 27 elderly per 100 working-age persons, which is very close to the average indicator of Europe (28%). Imereti is the most populated region (after Tbilisi) with the share of its population comprising 13.6% of Georgia’s population. By population density, it is the second after Adjara, with the indicator of 79 persons per square kilometer. By the level of urbanization, the rural and urban population is more equally distributed as compared to other regions, standing at 49% and 51%, respectively. All these indicators are good basic data to assume that the demographic situation in Imereti region is favorable for the economic development.

Social and economic conditions of population

To better assess opportunities of economic development and more correctly identify sectors with high potential, it is necessary to study social and economic conditions of the population and evaluate their purchasing power and various economic indicators of households.

Economic activity of population By employment, the indicator of Imereti region is close to Georgia’s average indicator (56.65%) and comprises 57.7% (share of employed people among the population above 15 years of age). However, 57.28% of those employed are self-employed people.

32 Figure 4. Share of self-employed population in the total employed population, 2017

Guria 74 Kakhe� 72 Samtskhe-Javakhe� 70 Samegrelo-Zemo Svane� 65 Shida Kartli 61 Mtskheta-M�ane� 59 Kvemo Kartli 58 Imere� ** 57 Adjara AR 52 Georgia 52 Tbilisi 16

0 10 20 30 40 50 60 70 80

Source: Geostat

By the number of hired employees, the Imereti region shows a somewhat average indicator.

Figure 5. Share of hired employees, 2017

Tbilisi 84 Georgia 48 Adjara AR 48 Imere� ** 43 Kvemo Kartli 42 Mtskheta-M�ane� 41 Shida Kartli 39 Samegrelo-Zemo Svane� 35 Samtskhe-Javakhe� 30 Kakhe� 28 Guria 26

0 10 20 30 40 50 60 70 80 90

Source: Geostat

Per capita income in Imereti totals GEL 269, which is lower than the average indicator of Georgia (GEL 285), but higher than corresponding indicators of Guria, Samtskhe-Javakheti and Mtskheta-Mtianeti, Kvemo Kartli and Shida Kartli.

33 Figure 6. Income per capita, 2018

0 40 80 120 160 200 240 280 320 360 Source: Geostat

Distribution of income by sources of revenues are as follows: hired employment accounts for the highest share in income, comprising 86.8% of total revenues (see Figure 7); pensions, scholarships and assistance account for 21%; money received as gift and non-cash revenues stand at 13% each; self-employment comprises 8%.

Figure 7. Distribution of average monthly income of population in Imereti, 2017

Remi�ances from abroad 7 Self-employment 8 Hired employment 35

Money received as gi� 10

Proceeds from agricultural products 6

Non-cash income 12

Pensions, scholarships, assistance 22 Source: Geostat

The fact that pensions, scholarships and assistance account for 21% of average monthly income, the second source of revenue by size, gives an idea about the economic situation in the region. At the same time, the share of families registered for allowances in Imereti is more than 30% in total households.

34 Figure 8. Share of families receiving allowance in total households by regions

Shida Kartli 12 Kvemo Kartli 6 Samtskhe-Javakhe� 8 Samegrelo-Zemo Svane� 11 Mtskheta-mTiane� 12 Imere� 11 Kakhe� 11 Racha-Lechkhum-Kvemo Svane� 30 Guria 14 Adjara AR 8 Tbilisi 5 Georgia 9

0 4 8 12 16 20 24 28 32 Source: Geostat

Some economic indicators of Imereti are better than in other regions and in certain cases, even close to Georgia’s average indicators. This makes it clear that the social and economic situation in the region creates a possibility of having a relatively high purchasing power and consequently, provides prospects for the development of small and micro business.

Labor market Vocational education According to 2017-2018 data, two private and two public higher educational institutions operate in the Imereti region. The largest of them, the Akaki Tsereteli State University, runs nine faculties, those of humanitarian sciences, pedagogical, exact and natural sciences, business, law and social sciences, medi- cine, technical engineering, technological engineering, agrarian and marine transportation. The university provides bachelor’s, master’s and doctoral studies as well as vocational training. The Imereti region counts nine private and five public vocational education institutions. In 2017, the total of 400 women and 1,011 men were enrolled in them. The number of teachers comprised 546, including 337 women and 209 men. Vocations taught at the colleges are quite diverse and multiple. In particular, the vocational education institution at the Akaki Tsereteli State University train in the following vocations: kindergarten caregiver-pedagogue, librarian, specialist of footwear and leather accessories, specialist of decorative-applied cloths, furniture constructing specialist, customs administrator, advertising agent, systems administrator. A Kutaisi-based public college, Elite, offers numerous courses including authorized diploma programs: bookkeeper, restaurant manager, hotel manager, event organizer, information technologist, correspondent, practicing nurse, pharmacy assistant, nursing assistant, dental technician, masseur, office manager, caregiver-pedagogue, bank cashier operator. However, the most demanded vocations among the listed ones are the practicing nurse and hotel administrator as prospects of employment with these professions in clinics and hotels is high. A segment of college graduates falls under the self-employed category and they start up their own business. Such a profession is dental technician. According to the experience of the public college Iberia, the most demanded vocations are cooking, pastry cooking, restaurant administration, welding and carpentry. There are also vocational colleges with relatively narrow profiles in Kutaisi. For example, a public college, Sio, specializes in medical vocations and offers training in the following professions: practicing nurse, masseur, nursing assistant. The number of operating public and private general educational institutions comprised 396 at the beginning of 2018-2019 academic year, with the total of 76,603 pupils enrolled in them. Public preschool educational institutions were 291 at the beginning of 2018-2019 academic year and the enrollment stood at 22,763 children.

35 Business activity As of 1 February 2019, there were 23,705 enterprises registered in the Imereti region, of which 95.11% (22,547 companies) is small-sized enterprise, 0.47% (111 companies) is medium-sized and 0.06% (14 companies) is large enterprise. The size of 4.36% of enterprises (1,033 companies) is not specified.

Figure 9. Distribution of enterprises by size, Imereti, 2019 Large Unspeciﬁed 0,06 4,36 Medium 0,47

Small 95,11 Source: Geostat

By legal forms, the companies are distributed as follows: 72.93% of total enterprises is individual entrepreneur, 26.16% is a limited liability company, while 0.9% is all the rest legal forms of ownership.

Figure 10. Distribution of enterprises by legal forms, Imereti, 2019

Coopera�ve General partnership 0,13 0,19 Limited partnership JSC 0,01 0,28 Branch of foreign Asso�a�on company 0,27 0,03 LLC ` 26,16

Ind. enterpreneur 72,93 Source: Geostat

It is important to study the distribution of companies by sectors in order to accurately assess prospects of each sector.

36 As of 1 January 2019, the highest concentration of companies - 49%, is seen in the sector of wholesale and retail trade. The majority of these companies - 99.7%, is small-sized. The second sector by the concentration of companies - 11%, is manufacturing with the majority of companies - 98.6%, being small-sized. The third concentrated sector in the Imereti region is the transportation and storage with 9% share of companies; 99.9% of them is a small-size company.

Figure 11. Distribution of enterprises by sectors, Imereti, 2019

Other 9,1 Human health and social work ac�vi�es 1,84 Professional, scien�ﬁc and technical ac�vi�es 2,51 Other service ac�vi�es 3,54 Educa�on 0,96 Construc�on 4,08

Real estate ac�vi�es Wholesale and retail trade, repair of motor 4,13 vehicles and motorcycles 49 Accommoda�on and food service ac�vi�es 4,62

Transporta�on and storage 8,96

Manufacturing 11,26

Source: Geostat

Apart from the distribution of enterprises by sectors, an interesting aspect is the distribution of enterprises among sectors by enterprise sizes.

Table 2. Distribution of companies among sectors by size

Imereti, share Description S M L Total Agriculture, forestry and fishing 1% 1% 0% 0.82% Mining and quarrying 1% 2% 7% 1.04% Manufacturing 11% 20% 21% 11.40% Electricity, gas, steam and air conditioning supply 0% 2% 0% 0.06% Water supply; Sewerage, Waste Management and Remediation Activities 0% 2% 0% 0.06% Construction 4% 14% 7% 4.06% Wholesale and retail trade; repair of motor vehicles and motorcycles 52% 19% 0% 51.38% Transportation and storage 9% 2% 0% 8.88% Accommodation and food service activities 5% 2% 0% 4.71% Information and communication 1% 2% 0% 0.77% Financial and insurance activities 2% 2% 7% 1.51% Real estate activities 5% 4% 0% 4.59% Professional, scientific and technical activities 2% 2% 0% 2.49% Administrative and support service activities 1% 2% 0% 1.39% Public administration and defense; compulsory social security 0% 0% 0% 0.08% Education 1% 5% 0% 0.98% Human health and social work activities 2% 19% 57% 1.83% Arts, entertainment and recreation 0% 1% 0% 0.45%

37 Other service activities 4% 1% 0% 3.51% Activities of households as employers; undifferentiated goods and 0% 0% 0% 0.03% services producing activities of household for own use Activities of extraterritorial organizations and bodies 0% 0% 0% 0.00%

The table above shows that the largest number of small-size companies, 52%, is engaged in trade, which is followed by manufacturing and transportation and storage. The majority of medium-sized companies is engaged in manufacturing, followed by health care and trade in equal numbers, and construction. More than half of large companies is concentrated in the trade sector, followed by manufacturing, and transportation and storage. As regards the grants of Enterprise Georgia, grants were awarded to 141 business entities in Imereti. As many as 125 of them planned to create nonagricultural products and services.

Priority sectors A general indicator of business activity is not sufficient to identify prospective sectors. Towards this end, an analysis was conducted by applying a special model. Through this model, the sectors were awarded the following scores:

Table 3. Sectors by scores

Description Total Manufacturing 0.289 Wholesale and retail trade; repair of motor vehicles and motorcycles 0.213 Arts, entertainment and recreation 0.190 Water supply; Sewerage, Waste Management and Remediation Activities 0.135 Other service activities 0.133 Transportation and storage 0.121 Construction 0.109 Accommodation and food service activities 0.103 Professional, scientific and technical activities 0.094 Real estate activities 0.088 Human health and social work activities 0.083 Mining and quarrying 0.082 Education 0.068 Information and communication 0.059 Agriculture, forestry and fishing 0.058 Administrative and support service activities 0.058 Electricity, gas, steam and air conditioning supply 0.020

As the table shows, the sectors that have highest level and rate of development are: Manufacturing; Whole- sale and retail trade; repair of motor vehicles and motorcycles; Arts, entertainment and recreation; Water supply; Sewerage, Waste Management and Remediation Activities; Other service activities; Transportation and storage. Much like in the case of Guria, we removed wholesale and retail trade from the obtained list. After analyzing each of the sectors it became apparent that the companies concentrated in the sector “Water supply; Sewerage, Waste Management and Remediation Activities” are mainly limited liability companies subordinated to the municipality and they are not developed following free market principles. Therefore, this sector was also removed from the list of prospective sectors. The final list of top sectors, taking into consideration the resources, infrastructure and location of Kutaisi, looks as follows: Manufactur- ing; Arts, entertainment and recreation; Other service activities; Transportation and storage; Construction.

38 We studied each sector by the concentration of companies to identify subsectors with the highest level of activity and consequently, bigger business opportunities. The table below shows all those sectors, subsectors and subsector activities that comply with the results of analyses at stages 1 and 2.

Table 4. Prospective sectors

Sector Subsector Activity Processing and preserving of meat and production of meat products Manufacture of food Processing and preserving of fruit and vegetables products Manufacture of grain mill products, starches and starch products Manufacture of bakery and pastry goods Manufacture of furniture Manufacture of refractory products Manufacturing Manufacture of other Manufacture of other porcelain and ceramic products non-metallic mineral Manufacture of articles of concrete, cement and products plaster Cutting, shaping and finishing of stone Manufacture of rubber and Manufacture of rubber products plastic products Manufacture of plastic products Manufacture of fabricated Manufacture of metal structures metal products, except Forging, pressing, stamping and roll-forming of metal; machinery and equipment powder metallurgy Creative, arts and

entertainment activities Arts, entertainment Sports activities and and recreation Sports activities amusement and recreation activities Amusement and recreation activities Other service Other personal service Hairdressing and other beauty treatment activities activities Physical well-being activities Land transport and Urban and suburban passenger land transport Transportation and transport via pipelines Freight transport by road storage Warehousing and support

Construction Other civil engineering projects Demolition and site preparation Electrical, plumbing and other construction installation Specialized construction activities activities Building completion and finishing Renting of construction machinery and equipment with operator

39 The sectors identified in Imereti were grouped into three main clusters:  Construction cluster which includes the following three sectors and subsectors: Manufacture of furniture; Manufacture of other non-metallic mineral products; Manufacture of rubber and plastic products; Manufacture of fabricated metal products; Construction; Freight transport by road;  Tourism cluster which includes manufacture of food products; arts, entertainment and recreation; urban and suburban passenger land transport. The sectors that are identified as priority but are not grouped into any of the above clusters are: personal service activities; transportation and storage. Furthermore, given that three out of 22 medium-sized and one out of three large-sized manufacturing companies in the Imereti region are engaged in textile manufacturing, we deemed it suitable to add the manufacture of wearing apparel to the priority subsectors. Small enterprises in this sector have an opportunity to participate in the value chain. Opportunities for entrepreneurs in the proposed sectors, subsectors and activities are in following areas:  Diversification of products  Diversification of services  Cross-sectoral development  Vertical development Several examples of such diversification are: Manufacture of rubber and plastic products – Manufacture of plastic furniture – Manufacture of plastic toys – Manufacture of plastic household articles – Recycling of plastic Personal service activities – Cosmetic parlors – Spa and recreation – Solarium – Fitness center – Craftsman (similar to the Mister-Master model) – Cleaning Transportation and storage – Storage – Shipment – Distribution – Shuttles – Tourism rental

40 SHIDA KARTLI

41 SHIDA KARTLI

GENERAL DESCRIPTION OF THE REGION

Location

Geographically, the Shida Kartli region is in central part of Eastern Georgia and covers 5,279 square kilometers.

Administrative arrangement

Region consists of four municipalities: Gori, Kaspi, Kareli and Khashuri municipalities. The regional center of Shida Kartli is Gori which is 90 km away from Tbilisi.

Table 1. Geographic, administrative and demographic indicators of Shida Kartli region

Population as of Shida Kartli, City, Administrative unit 1 January 2018 Area, km2 Main data town (village) (Geostat) Region, total 259 251 5 729* 4+2 Gori municipality 123 233 2 327 1 33 (?) Kareli municipality 41 145 687.9 1+1 18 (82) Kaspi municipality 42 753 803.2 1 ? (71) Khashuri municipality 52 120 585.2 1+1 11(84)

Source: Geostat, shidakartli.gov.ge

Gori municipality: The Gori municipality is in the central part of Eastern Georgia. It borders with administrative region of Os- setia to the north, Kaspi municipality to the east, Borjomi and Tsalka municipalities to the south and Kareli municipality to the west.

Kaspi municipality: The Kaspi municipality is situated in Shida Kartli, the eastern part of Georgia, on both sides of the Mtkvari river, at 560 meters above the sea level and includes Lekhura, Tedzami, Kavturi and partially, Ksani valleys.

Kareli municipality: The Kareli municipality is situated in the central part of Georgia, on the Shida Kartli lowland. The municipality borders with Gori municipality to the east, Khashuri municipality to the west, Znauri municipality to the north and Borjomi municipality to the south.

42 Khashuri municipality: The Khashuri municipality is at 690 meters from the sea level. It occupies 582,5 km2, which comprises 0.84% of the total land of Georgia. It borders with Kareli municipality to the east and the north, Sachkhere municipality to the north, Borjomi municipality to the south and west, Kharagauli municipality to the west. The climate in the municipality is humid subtropical. Winter is mild and summer is warm. The Khashuri municipality has a favorable strategic location as it is situated on the crossroads of Eastern, Western and Southern Georgia.

MACRO INDICATORS OF THE REGION

Demography Number and density of population As of 1 January 2018, the population of the region totals 259,251 people, that is 6.95% of total Georgian population.

Figure 1. Population by regions

0 2 4 6 8 10 12 14 Source: Geostat

Figure 2. Density of population

Adjara AR 119,4 Imere� 79 Shida Kartli 75,6 Kvemo Kartli 67,2 Guria 54,4 Samegrelo-Zemo Svane� 43 Kakhe� 27,7 Samtskhe-Javakhe� 24,3 Mtskheta-M�ane� 16,7 Racha-Lechkhum-Kvemo Svane� 6,6

0 20 40 60 80 100 120 Source: National Statistics Office of Georgia

43 The largest municipality in Shida Kartli by population is Gori with 123,233 people living there, as of 1 Jan- uary 2018. It is followed by Khashuri municipality with the population at 52,120 and Kaspi municipality with 42,753 people. The least populated municipality is Khashuri with 41,145 people. The density of population in Shida Kartli is 75,6 people per square kilometer, on the average.

Distribution of population by urban and rural settlements

Some 40% (105,211 people) of the region’s population lives in urban settlements while 60% (158,171) in rural settlements. The Gori municipality has one city – Gori which is the regional and municipal center, and 33 administrative units, both urban and rural settlements. The Kaspi municipality has 17 administrative units consisting of one city (Kaspi), 71 villages and 60 remains of settlements. The Kareli municipality has one city (Kareli) and 18 administrative units consisting of one town (Agara) and 82 villages. The Khashuri municipality has one city (Khashuri), one town (Surami) and 11 rural administrative units consisting of 84 villages.

Table 2. Distribution of population between urban and rural settlements

Shida Kartli region Rural Urban Population 102 879 156 372

Source: Geostat

Distribution of population by sex and age

The general population census, conducted by Geostat in 2014, puts the total population of the region at 263,382 including 48.22% (128,282) men and 51.78% (135,100) women. As regards their distribution by urban and rural settlements, the urban population consists of 46.65% men and 53.35% women while rural population consists of 48.84% men and 51.16% women. The age distribution of population looks as follows: under-14 population comprises 16% of total population of Shida Kartli, 15-64 age group totals 67% and those aged more than 65 stand at 15%. The share of men is higher in under-14 and 15-64 age groups while the share of women is higher in over 65 age group.

Figure 3. Distribution of Shida Kartli population by age and sex

68 65 70

40 20 30 17 18 12 20

0 014 1464 65+ Men Women

Source: Geostat

44 In Shida Kartli there are 22 persons aged 65 and above per 100 working-age population (15-64 age group). This data is analogous to the country’s indicator and is below the European indicator where the age dependence ratio is 28 elderly per 100 working-age population. Shida Kartli is a quite densely populated region with 75,6 people per square kilometer, lagging behind only Adjara and Imereti regions. Age dependence ratio in terms of retirement-age population is 22% which equals the average indicator of Georgia. The rural population is more numerous than urban population. Furthermore, the share of men among the population aged under 64 is a little higher than that of women. These data show that the number and distribution of working-age population by sex and age as well as rural/urban settlements is rather normal in the region.

Social and economic conditions of the population Employment According to the results of the survey conducted by the National Statistics Office of Georgia in 2017, the rate of employment among Shida Kartli’s population aged above 15 (216,300 people) was 12.9%. The share of employees in the total economically active population was 56.5%.

Table 4. Distribution of population by economic activity Distribution of population aged 15 and over by economic activity in Shida Kartli, 2017 (thousand people) Total 15+ population 216.3 Total economically active population (workforce) 140.3 Employee 122.2 Hired employee 47.1 Self-employed 75 Unspecified 0.1 Unemployed 18.1 Population outside the workforce 76 Unemployment rate (%) 12.9 Activity rate (%) 64.9 Employment rate (%) 56.5 Source: Geostat

Out of working-age population of the region (aged 15 and over), 34.67% is employed and 61.37% is self-employed.

Figure 4. Share of self-employed population in the total employed population, Shida Kartli, 2017

Guria 74 Kakhe� 72 Samtskhe-Javakhe� 70 Samegrelo-Zemo Svane� 65 Shida Kartli 61 Mtskheta-M�ane� 59 Kvemo Kartli 58 Imere� ** 57 Adjara AR 52 Georgia 52 Tbilisi 16

0 10 20 30 40 50 60 70 80 Source: Geostat

45 The share of hired employees is 38.54% of total employed population of Shida Kartli.

Figure 5. Share of hired employees in Shida Kartli, 2017

Tbilisi 84 Georgia 48 Adjara AR 48 Imere� ** 43 Kvemo Kartli 42 Mtskheta-M�ane� 41 Shida Kartli 39 Samegrelo-Zemo Svane� 35 Samtskhe-Javakhe� 30 Kakhe� 28 Guria 26

0 10 20 30 40 50 60 70 80 90 Source: Geostat

Income per capita in Shida Kartli is GEL267, on average.

Figure 6. Per capita income in Shida Kartli, 2018

0 40 80 120 160 200 240 280 320 360 Source: Geostat

The bulk of Shida Kartli population’s income comes from hired employment which comprises 35%. The second substantial source of income is pensions, scholarships and assistance - 20%. The third source is non-cash revenues at 13%.

46 Figure 7. Distribution of cash and non-cash revenues in Shida Kartli, 2017

Remi�ances from abroad Property (lease, interest on deposit) 2 1

Self-employment 13

Money received as gi� Hired employment 7 38

Proceeds from agricultural products 9

Non-cash income 12

Pensions, scholarships, assistance 18

The number of families receiving allowance is 12,684 which comprises 9.9% of total number of families receiving allowances in Georgia.

Figure 8. Share of families receiving allowances in total households by regions

Shida Kartli 12 Kvemo Kartli 6 Samtskhe-Javakhe� 8 Samegrelo-Zemo Svane� 11 Mtskheta-mTiane� 12 Imere� 11 Kakhe� 11 Racha-Lechkhum-Kvemo Svane� 30 Guria 14 Adjara AR 8 Tbilisi 5 Georgia 9

0 4 8 12 16 20 24 28 32 Source: Geostat

Conclusion on the social and economic conditions of the population

The social and economic conditions of the population in Shida Kartli somewhat follows a general trend in the country by all above discussed indicators. The dependence is high on pensions, scholarships and assistance and non-cash income.

Labor market and skills

Education According to 2017/2018 data, two public and one private higher educational institutions operate in the Shi- da Kartli region.

47 According to 2017 data, four private and four public vocational education institutions operate in Shida Kar- tli, employing 89 women and 32 men. Among the total number of students enrolled in that year 293 were women and 271 were men, whereas among graduates 206 were women and 146 were men.

Table 5. Vocational education institutions Vocational education institutions in Shida Kartli, 2017 Man Woman Teacher 32 89 Student 271 293 Graduate 146 206 Source: Geostat

Vocational education institutions in the region train students in various vocations, but the most demanded ones are welder, electrician, sewing specialist, plumber-sanitation systems technician, vegetable garden grower (this latter is a new vocation, since agriculture is developed in Shida Kartli, new agriculture standards have been adopted that generated the demand for vegetable garden grower). The demand is also high for vocations of seamstress, masseur, office manager. In the college with medical profile the demand is high on nursing assistant, practicing nurse and pharmacy assistant training programs. According to the data at the beginning of 2018/2019 academic year, there were 171 public and private general educational institutions in the region with the total of 37,799 schoolchildren enrolled at them. The total of 124 preschool educational institutions enroll 10,620 children.

Business activity in Shida Kartli According to Geostat data of 2017, the turnover of the business sector in Shida Kartli comprised GEL 1 376.9 million which amounts to 1.9% of the total business turnover of the country. The output of the business sector made up GEL 826,3 million, according to the same data. As of 1 January 2019, there were the total of 31,846 business entities registered in the Shida Kartli region, which comprises 4.38% of the country’s total number. However, only 8,737 entities are active. Of the enterprises registered in Shida Kartli, 94.7% is small business, 0.38% is medium and only 0.05% is large business.

Figure 8. Distribution of enterprises registered in Shida Kartli by size Large 0,05 Unspeciﬁed Medium 4,87 0,38

Small 94,7 Source: Geostat

48 The number of employees in the business sector made up 18 575 people. According to the 2017 data of Geostat, an average monthly salary of business sector employees was GEL 564.4 which is the second to last indicator among the regions, ahead of only the lowest-income region of Racha-Lechkhumi and Kvemo Svaneti, and lower than the average monthly salary of the country by 45%.

Table 6. Labor remuneration

Average labor remuneration of employees by regions (in business sector), 2017, GEL (source: Geostat) Georgia 1,019.70 Tbilisi 1,167.60 Mtskheta-Mtianeti 950 Adjara AR 848.5 Kvemo Kartli 817.3 Samegrelo-Zemo Svaneti 758.2 Imereti 698 Samtskhe-Javakheti 664.7 Guria 596.1 Kakheti 593.9 Shida Kartli 564.4 Racha-Lechkhumi and Kvemo Svaneti 509.6

According to the Geostat data, in 2017, the Kvemo Kartli region saw the total of GEL 145,7 million investments in fixed assets. Of these investments GEL 113,7 million was invested in large enterprises, GEL 23,9 million in medium-sized companies and GEL 8 million in small-sized enterprises (see Figure 9). It is worth to note that GEL 33,7 million was invested by local private (legal and natural person) investor while GEL 111,9 million was invested by foreign (legal and natural person) investor.

Figure 9. Investment in fixed assets, by size of enterprise, Shida Kartli, 2017 Small 5,5

Medium 16,4

Large 78,1

By types of economic activity, the leader by turnover in Shida Kartli is wholesale and retail trade; repair of motor vehicles and motorcycles, showing turnover of GEL 607.6 million; the second largest is manufacturing with GEL 472,2 million turnover while the third is construction with GEL 105,6 million turnover (by 2017 data of Geostat). The leading sector by employment is wholesale and retail trade; repair of motor vehicles and motorcycles with 5704 average annual employees in 2017, followed by manufacturing with 4323 em-

49 ployees and construction with 2168 employees (see Table 7). According to the same table, remuneration is the highest in “Arts, entertainment and recreation” sector where employees receive GEL 1639 per month on average; this is followed by the sector of mining and quarrying with a monthly average salary of GEL 1320,5 and the construction sector with a monthly annual salary of GEL 788,2.

Table 7. Sectors by turnover, employment and labor remuneration

Turnover, Average monthly Shida Kartli, 2017 Employees, unit GEL mln. remuneration Total 1376.9 18575 564.4 Agriculture, forestry and fishing 33.0 942 310.5 Mining and quarrying 14.5 271 1320.5 Manufacturing 472.2 4323 653.6 Electricity, gas, steam and air conditioning supply - - - Water supply; Sewerage, Waste Management 1.4 149 429.9 and Remediation Activities Construction 105.6 2168 788.2 Wholesale and retail trade; repair of motor 607.6 5704 370.6 vehicles and motorcycles Transportation and storage 18.6 567 749.6 Accommodation and food service activities 10.4 578 178.0 Information and communication 44.6 267 555.1 Real estate activities 9.9 356 339.5 Professional, scientific and technical activities 7.5 308 674.7 Administrative and support service activities 10.1 186 532.6 Education 2.7 427 289.3 Human health and social work activities 26.4 1950 620.8 Arts, entertainment and recreation 10.8 177 1639.0 Other service activities 1.5 200 100.5

It should be noted here that in 2017, the largest investment in the amount of GEL 115,5 million was made in manufacturing (see Figure 10), followed by information and communication at GEL 20 million and construction at GEL 3,6 million. An interesting aspect is the distribution of companies among sectors by their size.

Table 8. Distribution of companies among sectors, by size

Shida Kartli, share Description S M L Tot Agriculture, forestry and fishing 2% 3% 0% 2% Mining and quarrying 1% 0% 0% 1% Manufacturing 10% 28% 0% 10% Electricity, gas, steam and air conditioning supply 0% 0% 0% 0% Water supply; Sewerage, Waste Management and Remediation Activities 0% 3% 0% 0% Construction 3% 0% 50% 3% Wholesale and retail trade; repair of motor vehicles and motorcycles 60% 34% 25% 60% Transportation and storage 7% 6% 0% 7% Accommodation and food service activities 3% 0% 0% 3% Information and communication 1% 3% 0% 1% Financial and insurance activities 1% 0% 0% 1% Real estate activities 3% 0% 0% 3% Professional, scientific and technical activities 2% 0% 0% 2% Administrative and support service activities 1% 0% 0% 1%

50 Public administration and defense; compulsory social security 0% 0% 0% 0% Education 1% 3% 0% 1% Human health and social work activities 2% 16% 25% 2% Arts, entertainment and recreation 0% 3% 0% 0% Other service activities 4% 0% 0% 4% Activities of households as employers; undifferentiated goods and services 0% 0% 0% 0% producing activities of household for own use Activities of extraterritorial organizations and bodies 0% 0% 0% 0%

The table shows that the majority of small-sized companies operate in the trade sector, followed by the manufacturing. These two sectors account for 70% of the companies. The majority of medium-sized companies are engaged in trade, manufacturing and human health. Most of large companies, 70%, operate in trade and manufacturing while 7% in transportation and storage.

Priority sectors Much like in cases of Guria and Imereti, the second stage of study was dedicated to identifying priority sectors by applying the assessment model. The table below shows the sectors and their assessments:

Table 9. Assessment of sectors by means of the model

Sector Score Manufacturing 0.28 Arts, entertainment and recreation 0.28 Wholesale and retail trade; repair of motor vehicles and motorcycles 0.25 Information and communication 0.21 Professional, scientific and technical activities 0.19 Administrative and support service activities 0.15 Other service activities 0.14 Transportation and storage 0.10 Construction 0.10 Human health and social work activities 0.08 Agriculture, forestry and fishing 0.08 Real estate activities 0.06 Accommodation and food service activities 0.06 Mining and quarrying 0.05 Education 0.00

Considering the aims of the Enterprise Georgia, the trade was excluded from the sectors. Furthermore, we thoroughly analyzed the companies operating in the “Arts, entertainment and recreation” and “Information and communication” sectors and subsectors. Since these companies depend on one-time procurements and real activity of companies in these sectors is not evidenced, these sectors were also excluded. After processing the initial list in such a way five leading sectors were identified: Manufacturing; Profession- al, scientific and technical activities; Administrative and support service activities; Other service activities; Transportation and storage. Each of these sectors need to be thoroughly analyzed in order to find out opportunities for better development.

51 Table 10. Priority sectors, subsectors and activities

Sector Subsector Activity Processing and preserving of meat and production of meat products Processing and preserving of fruit and Manufacture of food products vegetables Manufacture of grain mill products, starches and starch products Manufacture of bakery and pastry goods Manufacture of wood and of Sawmilling and planing of wood products of wood and cork, Manufacturing except furniture; manufacture Manufacture of products of wood, cork, straw of articles of straw and plaiting and plaiting materials materials Manufacture of rubber and Manufacture of builders' ware of plastic plastic products Manufacture of cement Manufacture of other Manufacture of concrete products for non-metallic mineral products construction purposes Cutting, shaping and finishing of stone Manufacture of furniture Architectural and engineering Architectural and engineering activities and activities; technical testing and related technical consultancy analysis Professional, Legal and accounting activities scientific and Advertising and market technical activities Advertising agencies research Other professional, scientific Photographic activities and technical activities Renting and leasing of cars and light motor Rental and leasing activities vehicles Rental and leasing of trucks Administrative and Travel agency, tour operator support service and other reservation service Tour operator activities activities and related activities Services to buildings and Cleaning activities landscape activities Other service Personal service activities Hairdressing and other beauty treatment activities Land transport and transport Urban and suburban passenger land transport Transportation and via pipelines Freight transport by road storage Warehousing and support Warehousing and storage activities for transportation

One cluster was identified in the Shida Kartli region – manufacture of wood which include wood processing, manufacture of furniture. Also, it is possible to diversify professional activities – architecture - into interior design, modelling services. In the sectors, subsectors and activities listed in the table above, there are business opportunities in the following strategies:  Diversification of products  Diversification of services  Cross-sectoral development  Vertical development Several examples are provided below:

52 Processing of meat: – Manufacture of dried meat – Specialized store of meat products – Manufacture of semi-finished meat products Professional activities: – Interior design – Printing, design of advertising material – Video service

53 SAMTSKHE-JAVAKHETI SAMTSKHE-JAVAKHETI

GENERAL DESCRIPTION OF THE REGION

Location The Samtskhe-Javakheti region is in the south-east of Georgia. The region includes three historical districts: Samtskhe, Javakheti and Tori. The region borders with Adjara, Guria, Imereti, Shida Kartli, Kvemo Kartli, Armenia and Turkey and occupies 6412 square kilometers.1 The Samtskhe-Javakheti region has a geopolitical location as it borders with Turkey and Armenia that creates favorable opportunities for the development of trade, economic and cultural relations with the neighboring countries. Furthermore, the region is crossed by Bako-Tbilisi-Ceyhan oil pipeline and Marab- da-Akhalkalaki-Kars railway.2

Administrative arrangement There are six municipalities in the region: Akhaltsikhe, Adigeni, Aspindza, Borjomi, Ninotsminda and Akha- lkalaki. Akhaltsikhe is the regional center and home to the administration of state representative-governor. The region counts 353 settlements, including five cities: Akhalkalaki, Akhaltsikhe, Borjomi, Vale, Ninots- minda; seven towns: Bakuriani, Bakurianis Andeziti, Tsagveri, Akhaldaba, Adigeni, Abastumani, Aspindza; and 259 villages.”3

Natural environment There are two landscape-climatic zones in the Samtskhe-Javakheti region: Samtskhe with a moderately dry subtropical mountainous climate characterized by less snowy winter and long warm summer; and Javakheti with a moderately dry climate characterized by cold winter and long cool summer. Precipitation is unequally distributed in the region both in terms of time and space. Bulk of precipitation occurs in solid form, creating snow layers of varying height and duration. Javakheti Plateau is rich in lakes. There are approximately 80 large and small lakes. The surface area of only eight lakes exceeds 40 square kilometers; the largest lake is Paravani.4

1 www.geostat.ge 2 Development Strategy of Samtskhe-Javakheti Region 2014-2021. 3 Development Strategy of Samtskhe-Javakheti Region 2014-2021. 4 http://samtskhe-javakheti.gov.ge/main.php?act=static&lang=geo&pid=1

55 Tourism and resorts The Samtskhe-Javakheti region stands out among the regions of Georgia from the perspective of tourism. It is distinguished for its historical and cultural monuments as well as resorts and recreational zones. A substantial increase in hotels and other accommodation facilities has been observed in recent times in the region. The number of visitors has been growing too. Visitors to the region mainly arrive from Armenia, Rus- sia, Germany, Israel and the USA. The region now mainly experiences development of cultural, recreational and adventure tourism. Samtskhe-Javakheti is famous for its historical and cultural monuments including such notable sites as Vardzia monastery complex, Tmogvi, Khertvisi, Rabati fortresses, Zarzma and Sapari monasteries as well as several popular resorts, the Borjomi-Kharagauli National Park and the Javakheti Protected Areas. How- ever, for tourism to develop further, it is required to build high standard hotels and additionally, smaller hotels. It is also necessary to offer modern tourist service packages to customers, improve the level of service, open high-quality catering facilities, use a tourism potential of lakes in the region, fully utilize eco-tourism capacity - the Borjomi-Kharagauli National Park and the Javakheti Protected Areas, develop a new tourist guide and raise awareness of local population about advantages of the development of tourism.5 Resorts Town of Abastumani is one of the most famous balneological resorts in the country, with a concentration of sanatoriums and other medical institutions. For its unique climatic conditions, it is recognized as a place favorable for treating lung diseases. Substantial reserves of thermal springs (41-48 C) available there have been used in balneological therapy since the 1870s. One of distinguished features of the town is the bath which is fit out on a high-quality level in balneological-technical terms. The town is situated on both banks of the river while the majority of sanatoriums are located on a terraced slope of woodland (“Otskhe,” “Araz- indo,” “Aghobili”). A unique scientific-research institution, the first alpine astrophysical observatory founded in 1932 is located on the Mount Qanobeli (at 1650 meters above the sea level); it is a separate settlement which includes hotels too. The city of Borjomi is the resort itself and includes the main resort and recreational districts of Likani, Plato and Papa. The Borjomi-Likani complex, which is 150 km away from Tbilisi, is located in the Borjomi Gorge, one of the most beautiful places in Georgia, situated at 807 meters above the sea level. The main wealth of the resort is the healing mineral water Borjomi used for treating gastrointestinal diseases, liver disorders, biliary tract disorders, kidney diseases, metabolism, nervous system and cardiovascular disorders. Borjomi is an important tourist destination both for its nature and historical sights. The Borjomi Local History Museum houses many interesting archeological and cultural artefacts. A chain of resorts – Daba, Tsagveri, Tsemi, Tba, Likani, Patara Tsemi, Bakuari, is situated to the south-east of Borjomi. Tsagveri is 14 km away from Borjomi. It has been famous as a balneological resort since the 19th century. It occupies a central place in the Borjomi-Bakuriani resort zone and is surrounded by mountains covered with coniferous forests. Situated at 1700 meter above the sea level, Bakuriani is a famous mountain resort of Georgia and a center of international importance. It is 29 km from Borjomi, situated in a broad cave surrounded by mountain slopes covered with forests. The climate and landscape of Bakuriani is ideal for the development of winter sports. Winter is largely sunny and not windy. First skiers appeared there as early as in 1908, while the first ski base was established in 1932. Bakuriani of modern days, which transforms into a “sport city” in winter, is interesting for visitors not only for ski trails, cable lines, sports and healing establishments, hotel service, efficiency of recreational and heliotherapy, but also for diverse possibilities of active tourism.6

5 Development Strategy of Samtskhe-Javakheti Region 2014-2021. 6 http://samtskhe-javakheti.gov.ge/main.php?lang=geo&act=pages&pid=64

56 Natural resources Climate in Samtskhe-Javakheti shows a considerable potential of renewable energy resources. In particular, the indicator of solar radiation is quite high, allowing to exploit solar energy based on relevant technical and economic estimations. Furthermore, the direction, speed and duration of winds in the region offer an opportunity to use wind for generating energy throughout a year. The region is rich in mineral resources. Main resources mined in Samtskhe-Javakheti include peat, basalt, diatomite, perlite, clay, sand and gravel, volcanic slag, brown coal, gold and andesite. The Samstkhe-Javakheti region is rich in water resources – rivers and lakes too. Compared to other regions of Georgia, it has limited thermal water resources. Water resources available in the region are used for drinking (8%), hydro energy (80%), industrial purposes, irrigation and fisheries. Samstkhe-Javakheti is the region rich in forests. Almost all forests of the region perform special functions of climate regulation, soil protection, and water regulation.7

MACRO INDICATORS OF THE REGION

Demography The number and density of population According to the Geostat data of 1 January 2019, the population of Samtskhe-Javakheti stood at 154 139 people, which comprises 4.18% of Georgia’s total population.

Figure 1. Population by regions

0 2 4 6 8 10 12 14

Source: National Statistics Office of Georgia

The largest share of regional population, 27%, that is 42 258 people, lives in Akhalkalaki municipality. Akha- ltsikhe municipality lags a little behind Akhalkalaki by the number of residents - 39 395 people, that is 26% of regional population. The third municipality by the number of residents is Borjomi - 25 136 people, i.e. 16%. These are followed by Ninotsminda municipality – 13%, or 20 554 residents; Adigeni municipality - 16 249 residents, i.e. 11%; and Aspindza municipality with 10 547 residents that comprise 7% of the region’s total population.

7 Development Strategy of Samtskhe-Javakheti Region 2014-2021.

57 Table 1. Population in municipalities of Samtskhe-Javakheti region

Number Share in region’s Share in Georgia’s Region, self-governing unit (thousand) population population Georgia 3,723.5 Samtskhe-Javakheti 154.1 4.1% Adigeni municipality 16.2 10.5% 0.4% Aspindza municipality 10.5 6.8% 0.3% Akhalkalaki municipality 42.3 27.4% 1.1% Akhaltsikhe municipality 39.4 25.6% 1.1% Borjomi municipality 25.1 16.3% 0.7% Ninotsminda municipality 20.6 13.3% 0.6% Source: National Statistics Office of Georgia, 1 January 2019

Density of population per square kilometer comprises 24 in the Samtskhe-Javakheti region.

Figure 2. Population density

Adjara AR 119,4 Imere� 79 Shida Kartli 75,6 Kvemo Kartli 67,2 Guria 54,4 Samegrelo-Zemo Svane� 43 Kakhe� 27,7 Samtskhe-Javakhe� 24,3 Mtskheta-M�ane� 16,7 Racha-Lechkhum-Kvemo Svane� 6,6

0 20 40 60 80 100 120 Source: National Statistics Office of Georgia

Distribution of population by urban and rural settlements As of 1 January 2019, some 35% of Samtskhe-Javakheti population lived in urban settlements, according to Geostat data. Thus, the urban residents make up 54 354 people. Rural residents comprise 65%, or 99 785 people in the region. The urbanization indicator of Samtskhe-Javakheti is lower than the average indicator of Georgia - the rural population of Georgia comprises 43.6%.

Social and economic situation of the population The share of the population aged 15 and over is 68% in Samtskhe-Javakheti. Among employed population 31% is hired employee whereas 69% is self-employed. The share of self-employed in the employed population of Samtskhe-Javakheti is one of the highest in Georgia.

58 Figure 3. Share of self-employed population in the total employed population, 2018

Guria 74 Kakhe� 72 Samtskhe-Javakhe� 70 Samegrelo-Zemo Svane� 65 Shida Kartli 61 Mtskheta-M�ane� 59 Kvemo Kartli 58 Imere� ** 57 Adjara AR 52 Georgia 52 Tbilisi 16

0 10 20 30 40 50 60 70 80

Source: Geostat

The share of hired employment is among the lowest – 31%, being ahead of only Kakheti and Guria.

Figure 4. Share of hired employees in Samtskhe-Javakheti, 2018

Tbilisi 84 Georgia 48 Adjara AR 48 Imere� ** 43 Kvemo Kartli 42 Mtskheta-M�ane� 41 Shida Kartli 39 Samegrelo-Zemo Svane� 35 Samtskhe-Javakhe� 30 Kakhe� 28 Guria 26

0 10 20 30 40 50 60 70 80 90

Source: Geostat

By per capita income, Samtskhe-Javakheti is the second to the last alongside Guria and Mtskheta-Mtianeti regions, with this indicator comprising GEL 242.8 (by 2018 data).

59 Figure 5. Income per capita, 2018

0 40 80 120 160 200 240 280 320 360 Source: Geostat

In Samtskhe-Javakheti, cash revenues account for 89% of all revenues of the population. The structure of cash revenues is the following: revenues from hired employment comprise 40%; pensions, scholarships and assistance is the second largest contributor to cash revenues, comprising 25%; proceeds from agricultural products stand at 13%; self-employment income at 8%, money received as gift at 7% , remittances at 6% and revenues from property (lease, interest on deposits) at a mere 1%. Non-cash revenues of the regional population comprise 11% of total revenues.

Figure 6. Distribution of average monthly cash revenues of population in Samtskhe-Javakheti, 2018 Property (lease, interest on deposit) 1 Remi�ances from abroad 6 Self-employment 8

Money received as gi� 7 Hired employment 40

Proceeds from agricultural products 13

Pensions, scholarships, assistance 25 Source: Geostat

The second largest share in the revenue structure of the population accounts for pensions, scholarships and assistance, standing at 25%, which indicates about a grave economic situation in the region. The share of families receiving allowance does not exceed 30%, one of the lowest indicators in Georgia.

60 Figure 7. Share of families receiving allowances in total households by regions

Shida Kartli 12 Kvemo Kartli 6 Samtskhe-Javakhe� 8 Samegrelo-Zemo Svane� 11 Mtskheta-mTiane� 12 Imere� 11 Kakhe� 11 Racha-Lechkhum-Kvemo Svane� 30 Guria 14 Adjara AR 8 Tbilisi 5 Georgia 9

0 4 8 12 16 20 24 28 32

Source: Geostat, healthcare and social security 2017; Geostat – general population census, 2014

Labor market – education and skills According to the data of 2018-2019 academic year, there are one state and one private higher educational institutions in the Samtskhe-Javakheti region. The State University of Samtskhe-Javakheti runs four faculties: those of education, humanitarian and social sciences; business administration; law; and engineering, agrarian and natural sciences.8 According to the 2018 data, there are five vocational education institutions in the region, with the total enrollment of 364 students and the number of teachers comprising 159.9 Those willing to study at vocational education institutions of Samtskhe-Javakheti are offered a broad choice of vocations. For example, the vocational education level of the State University of Samtskhe-Javakheti has the following educational programs: nursing assistant, masseur, artistic apparel construction specialist, agricultural business administrator, computer design and drafting (AutoCad) operator, Internet technologist (web specialist), bookkeeper, pharmacy assistant, specialist of decorative stone and other materials cutting, plants specialist, web interface designer, practicing nurse, masseur-rehabilitator, kindergarten caregiver-pedagogue, zootechnician, criminalist (photo dactyloscopy), bookkeeper.10 The public college Opizari also offers a rather wide range of study programs: agrarian machinery and equipment mechanic, veterinary service specialist, plant (healing, aromatic) production specialist, bookkeeper, Internet technologist (web specialist), carpenter, tiling artisan, wood processing specialist, welder, food products production specialist, vehicle plumber, restaurant business administrator, second-level cook, third-level cook, confectioner, sewing goods specialists, fishing, forestry, welding, artistic wood cutting, floor and tiling works, veterinary, animal production (animal husbandry) – dual, bee farming – dual, production of meat and meat products – dual, motorway construction, web technologies.11 As of 2018-2019 academic year, 206 general educational schools operated in the Samtskhe-Javakheti region with the total of 24 532 pupils enrolled in them.12 Business activity According to the Geostat data of 1 February 2019, the Samtskhe-Javakheti region counts 5 175 business entities. As many as 93.4% of them (4 832 enterprises) is small-sized business, 0.5% (28 enterprises) is medium-sized and only 0.1% is large enterprise (three companies). The size of 6% of the companies (312 companies) is unspecified.

8 http://www.sjuni.edu.ge/ge/ 9 Source: Ministry of Education, Science, Culture and Sport of Georgia. 10 http://www.sjuni.edu.ge/ge/ 11 http://www.sjuni.edu.ge/ge/ 12 Source: Ministry of Education, Science, Culture and Sport of Georgia.

61 Figure 8. Distribution of business entities by size in Samtskhe-Javakheti Large Unspeciﬁed 0,1 6,0 Medium 0,5

Small 93,4 Source: Geostat

By legal form, companies operating in Samtskhe-Javakheti are distributed as follows: the majority of the companies, 88.3% (4 570 companies) is individual entrepreneur, 10.7% (552 companies) is a limited liability company, 0.6% (30 companies) is partnership, 0.4% (19 companies) is a cooperative, 0.1% (three companies) is a joint stock company, and 0.02% (one company) is a branch of foreign enterprise.

Figure 9. Distribution of companies operating in Samtskhe-Javakheti by legal forms, 2019 Asso�a�on Coopera�ve JSC Branch of 0,6 0,28 0,1 foreign company LLC 0,02 10,7

Individual enterpreneur 88,3 Source: Geostat

By spheres of activity, the companies in Samtskhe-Javakheti are distributed as follows: more than half of business entities, 52.4%, is concentrated in the retail and wholesale trade; 11% operates in manufacturing, 8.25% in accommodation and food service activities which is the result of tourism development and popu- larity of resorts in the region; 5.35% is in construction sector, 4.48% in transportation and storage, 2.92% in other services, 2.33% in real estate activities, 2.27% in professional, scientific and technical activities, 2.02% in human health and social work activities, 8.96% is engaged in all the remaining activities.

62 Figure 10. Distribution of business entities operating in Samtskhe-Javakheti by activities, 2019

Other 8,96 Professional, scien�ﬁc and technical ac�vi�es 2,04 Other service ac�vi�es 2,27 Educa�on 2,33 Construc�on 2,92

Real estate ac�vi�es 4,48

Accommoda�on and food service ac�vi�es Wholesale and retail trade, repair of motor 5,35 vehicles and motorcycles 52,4

Transporta�on and storage 8,25

Manufacturing 11,00

Source: Geostat

The concentration of companies in sectors differs by size of companies. Large companies (three in total) are represented in two sectors – the manufacturing (two companies) and the construction (one company). The majority of middle-sized companies - 25%, operates in the construction sector, while 14.29% of the companies operates in manufacturing. In regard to small-sized companies, the sectors of concentration differ and look as follows: more than half of the companies, 52.81%, is in wholesale and retail trade, 10.93% is in manufacturing while 8.29% is in accommodation and food service activities.

Table 2. Distribution of companies by activities and size

Companies by size Spheres of activities S M L Total Agriculture, forestry and fishing 1.92% 0.00% 0.0% 1.9% Mining and Quarrying 0.75% 0.00% 0.0% 0.7% Manufacturing 10.93% 14.29% 66.7% 11.0% Electricity, gas, steam and air conditioning supply 0.16% 3.57% 0.0% 0.2% Water supply; Sewerage, Waste Management and 0.13% 7.14% 0.0% 0.2% Remediation Activities Construction 5.15% 25.00% 33.3% 5.4% Wholesale and retail trade; repair of motor vehicles and 52.81% 10.71% 0.0% 52.4% motorcycles Transportation and storage 4.46% 7.14% 0.0% 4.5% Accommodation and food service activities 8.29% 3.57% 0.0% 8.2% Information and communication 1.35% 0.00% 0.0% 1.3% Financial and insurance activities 0.50% 0.00% 0.0% 0.5% Real estate activities 2.36% 0.00% 0.0% 2.3% Professional, scientific and technical activities 2.29% 0.00% 0.0% 2.3% Administrative and support service activities 1.92% 3.57% 0.0% 1.9% Public administration and defense; compulsory social 0.16% 0.00% 0.0% 0.2% security Education 0.75% 17.86% 0.0% 0.9% Human health and social work activities 1.98% 7.14% 0.0% 2.0% Arts, entertainment and recreation 1.13% 0.00% 0.0% 1.1% Other service activities 2.95% 0.00% 0.0% 2.9%

63 Activities of households as employers; undifferentiated goods and services producing activities of household 0.00% 0.00% 0.0% 0.0% for own use Activities of extraterritorial organizations and bodies 0.00% 0.00% 0.0% 0.0%

PRIORITY SECTORS

As noted in the study methodology, a special model is applied to assess the sectors. According to this model, the sectors in Samtskhe-Javakheti got the following scores:

Table 3. Results of the assessment model – Samtskhe-Javakheti

N Sector Samtskhe-Javakheti 1 Agriculture, forestry and fishing 0.153572852 2 Mining and Quarrying 0.063758601 3 Manufacturing 0.244795257 4 Electricity, gas, steam and air conditioning supply 0.114598516 5 Water supply; Sewerage, Waste Management and Remediation Activities 0.819465385 6 Construction 0.124907973 7 Wholesale and retail trade; repair of motor vehicles and motorcycles 0.23604806 8 Transportation and storage 0.126497698 9 Accommodation and food service activities 0.191397846 10 Information and communication 0.177292369 11 Real estate activities 0.276669057 12 Professional, scientific and technical activities 0.176778858 13 Administrative and support service activities 0.070529513 14 Education 0.082080564 15 Human health and social work activities 0.06459971 16 Arts, entertainment and recreation 0.25059632 17 Other service activities ------

According to the assessment model, the distribution of sectors in Samtskhe-Javakheti by level of their development is the following:

Table 4. Results of the assessment model, scores by descending order

N Sector Samtskhe-Javakheti 1 Water supply; Sewerage, Waste Management and Remediation Activities 0.819465385 2 Real estate activities 0.276669057 3 Arts, entertainment and recreation 0.25059632 4 Manufacturing 0.244795257 5 Wholesale and retail trade; repair of motor vehicles and motorcycles 0.23604806 6 Accommodation and food service activities 0.191397846 7 Information and communication 0.177292369 8 Professional, scientific and technical activities 0.176778858 9 Agriculture, forestry and fishing 0.153572852 10 Transportation and storage 0.126497698 11 Construction 0.124907973 12 Electricity, gas, steam and air conditioning supply 0.114598516 13 Education 0.082080564

64 14 Administrative and support service activities 0.070529513 15 Human health and social work activities 0.06459971 16 Mining and quarrying 0.063758601

The “wholesale and retail trade” was removed from the list based on the interviews conducted with the Enterprise Georgia Agency – upon the agreement with the agency, the objective of the study was to identify priority sectors with the exception of the trade and the primary agricultural production. “Water supply; Sewerage, Waste Management and Remediation Activities” was also removed because key actors in this sector are public limited liability companies. “Arts, entertainment and recreation” was excluded from priority sectors too as the companies operating in this sector are mainly sports clubs and providers of gambling games. As a result of qualitative analysis of the operating companies the following five sectors were identified as priority sectors in the Samtskhe-Javakheti region: 1. Manufacturing 2. Accommodation and food service activities 3. Professional, scientific and technical activities 4. Agriculture, forestry and fishing 5. Transportation and storage These sectors consist of subsectors which need to be analyzed in order to identify which subsectors show higher dynamics. The structure of sectors was further scrutinized to assess the potential of subsectors. A factor used in this detailed analysis was the number of companies in a sector. The results of the analysis are provided in Table 5.

Table 5. Priority sectors and their subsectors

Sector Subsector Subsector activities Manufacture of bakery and pastry goods Manufacture of dairy products Manufacture of food products Processing and preserving of meat and production of meat products Manufacture of wood and of Sawmilling and planing of wood products of wood and cork, except furniture; manufacture Manufacture of products of wood, cork, straw of articles of straw and plaiting and plaiting materials Manufacturing materials Manufacture of rubber and Manufacture of builders' ware of plastic plastic products Manufacture of refractory products Manufacture of other Manufacture of articles of concrete, cement and non-metallic mineral products plaster Cutting, shaping and finishing of stone Manufacture of furniture Accommodation services Accommodation and Food and beverages service food service activities activities Legal and accounting activities Legal activities Architectural and engineering Professional, Architectural and engineering activities and activities; technical testing and scientific and related technical consultancy analysis technical activities Advertising and market Advertising research

65 Growing of non-perennial crops Crop and animal production, Animal production hunting and related service Agriculture, forestry activities Support activities to agriculture and post-harvest and fishing crop activities Forestry and logging Logging Fishing and aquaculture Freshwater aquaculture Transportation and Land transport and transport Passenger land transport (except rail) storage via pipelines Freight transport by road

The listed sectors may be combined in three clusters:  Food manufacturing cluster which will include: manufacture of bakery and pastry goods; manufacture of dairy products; other food products; processing and preserving of meat and production of meat products; accommodation services; food and beverage service activities; transportation and storage; agriculture, forestry and fishing;  Tourism cluster which will include: food manufacturing; accommodation and food service activities; transportation and storage; agriculture, forestry and fishing;  Wood manufacturing which will include: manufacture of products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials; logging; manufacture of furniture. The interview conducted with the deputy governor of Samtskhe-Javakheti revealed that tourism and food manufacturing clusters do have real potential in Samtskhe-Javakheti: “the most developed sectors in Samtskhe-Javakheti are tourism and agriculture, specifically animal production: milk processing and production of meat. A significant progress is observed in the area of animal production which is very much supported by milk processing enterprises and cooperatives are set up, bringing together local residents who are guaranteed that milk delivered by them will be purchased. Akhalkalaki, Ninotsminda and Akhaltsikhe are potato growing municipalities; Aspindza has seen of late the recovery of old and forgotten Meskhetian vine species and terraced vineyard growing, which will spur the development of local wine-making.” For micro and small entrepreneurs, the opportunities in the sectors listed in Table 4 are seen in the following areas:  Diversification of products  Diversification of services  Cross-sectoral development  Vertical development

Noteworthy information obtained through interviews The interviews conducted with entrepreneurs in Samtskhe-Javakheti revealed the following areas investing in which, in entrepreneurs’ view, will bring good results: – Manufacture of cream and butter – Manufacture of wood souvenirs for tourists – Wood extraction – Import of material for enterprises manufacturing plastic – Equipment for processing and cutting wood and other construction materials (laminate) – Working spaces for providers of professional services – Poultry feeds – Egg packaging material

66 ADJARA

67 ADJARA

GENERAL DESCRIPTION OF THE REGION

Location The Autonomous Republic of Adjara is in the south-west of Georgia. The south-west of the region runs along the state border between Georgia and Turkey; to the north, the region borders with the Guria region while to the east it borders with the Samtskhe-Javakheti region. The west border of the Adjara region runs along the Black Sea coastline. The territory of Adjara totals 2 900 square kilometers. Adjara is easily accessible by railway, highways, marine and air routes. The rehabilitation of the highway connecting Adjara with Samtskhe-Javakheti significantly increases the access of Adjara to the southern Georgia and therefrom, to Armenian and Iranian markets. The seaside location enables Adjara to reach markets by land as well as air and marine routes. Adjara, specifically the seaport of Batumi is part of TRACECA corridor connecting Europe with Asia via the Caucasus.1 Batumi. The city of Batumi is the administrative center of the Autonomous Republic of Adjara (Adjara AR). This crescent-shaped city is situated at the Black Sea coast, on the Kakhaberi lowland, at 2-3 meters above the sea level. The city stretches over seven kilometers from the north-east to the south-west. Most part of Batumi borders with the bay to the south and is built on the northern section of the Kakhaberi lowland, and to the north-east, borders with the Bartsakhani and Korolistskali rivers. The territory of Batumi totals 6494,31 hectares.2

Administrative arrangement Adjara was proclaimed as the autonomous republic in 1921 and since then has maintained this status. The capital of the autonomous republic is Batumi. Adjara AR is administered by the chairman of the government. The government bodies are: The Ministry of Education, Culture and Sport; the Ministry of Finance and Economy; the Ministry of Agriculture; the Ministry of Health and Social Affairs. Territorial entities of Adjara are: Batumi, Kobuleti municipality, Khelvachauri municipality, Khulo municipality, Shuakhevi municipality, Keda municipality. There are five municipalities, two cities, five towns and 322 villages inAdjara AR.

1 Source: Strategic Development Plan of Adjara Autonomous Republic, 2016-2021. 2 https://batumi.ge/ge/?page=show&sec=1

68 Natural environment Natural environment of Adjara is diverse, varying according to its geography. The climate is subtropical in coastline Adjara, with mild winter and hot summer. Mountainous districts, however, are less humid and characterized by heavy snowfall sometimes reaching several meters. The nature of Batumi is influenced by humid coastal subtropical climate. Winter in Batumi is mildand snowless while summer is warm. Average annual temperature is 15°C and downpours are frequent. It rarely snows and melts quickly. Average annual water temperature at the shore is 17°C. Sea breezes in the coastal line are strong, alleviating the heat. There is a natural lake in Batumi, now comprising part of the 6 May Park in Batumi. Various subtropical plants grow in Batumi and its vicinities. There are many man-made parks, tea and citrus plantations. Indigenous Colchis trees and shrubs are preserved on hills.3

Tourism and resorts Adjara is an outstanding region in terms of tourism. A dominant type is the seasonal tourism at the Black Sea coast. “Adjara is home to the picturesque beaches of Batumi, Kvariati, Sarpi, Gonio, Tsikhisdziri, Mtsvane Kontskhi (the Green Cape) and Kobuleti. During the summertime, the beaches are often crowded with tourists enjoying their holidays.”4 Mountain resorts of Adjara: Nigazeuli is in 78 km from Batumi at 800 meters above the sea level. It is home to Nigazeuli fortress and wall of XVIII century, a mosque and museum. There is a 20-meter high Nigazeuli Waterfall too. Gobroneti is situated at 700 meters above the sea level and is 56 km away from Batumi. There is Adjarian Wine House; historic monument Tamar’s Bridge and Makhuntseti Waterfall in the Makhuntseti community; Tsivasula Fortress, ground bridge and Shervashidzes' Wine Cellar in the Pirveli Maisi community; Museum of History and Zvare St. George Church in the town of Keda. Beshumi is in 123 km from Batumi, at 1850-1900 meters above the sea level. Beshumi is surrounded by sub-alpine coniferous forests and is distinguished for its clear and fresh air. The climate of the resort is favorable for people suffering from chronic respiratory diseases and bronchial asthma. The resort is open from mid-June till early September. A traditional public festival Shuamtoba is held in mid-August, with horse-racing being one of various events of the festival. Chakvistavi is built on the banks of Chakvistavi River. It is fully surrounded by Mtirala National Park which is the most humid spot in Eastern Europe. The village of Chakvi has the Honey House. Petra Fortress is in 25 km from Chakvistavi. Goderdzi is a new ski resort which is situated in 109 km away from Batumi, at 2000–2366 meters above the sea level. The total length of ski trails makes up eight kilometers and they are equipped with gondola and bubble type cable ways. Accommodation facilities in the resort include cottages and guest houses. Gomarduli resort is also a ski resort in 65 km away from Batumi, at 1120 meters above the sea level. The total length of ski trails is 300 meters and they are equipped with a 250-meter-long cableway. Accommoda- tion facilities are represented by cottages and guesthouses. Mountain resorts of Adjara also include: Merisi, Pirveli Maisi, and Machakhela Gorge. Seaside resorts of Adjara include: Sarpi, Tsikhisdziri, Mtsvane Kontskhi, Chakvi, Kvariati, Kobuleti. Sarpi is 18 km away from Batumi, at the Georgia-Turkey border checkpoint. Sarpi is distinguished for mixed mountain and sea air and a cozy atmosphere. Sea water is especially transparent along the coastline. The average water temperature is +25°C. Hotels and guesthouses are located very close to the beach. Tsikhisdziri is situated to the north of Batumi, 17 km away from it, at 60-90 meters above the sea level. The climate of Tsikhisdziri is the mix of sea and mountain air. Summer is cooler and winter warmer than in Batumi or Makhinjauri. The city of Petra, built by Byzantine Emperor Justinian in VI century, is situated here. Mtsvane Kontskhi (Green Cape) is in 9 km from Batumi, situated at 70-91 meters above the sea level. The Batumi Botanical Garden, one of the richest in Europe, is built on the hills of Mtsvane Kontskhi and visited

3 http://old.gobatumi.com/ge/feelit/climate-weather 4 http://www.gobatumi.com/ka/about-adjara

69 by thousands of holidaymakers and visitors annually. Kvariati is in 15 km from Batumi, at the Georgia-Turkey border. Kvariati is distinguished for mixed mountain and sea air and a cozy atmosphere. Sea water is especially transparent along the coastline. The average water temperature is +25°C. Hotels and guesthouses are located close to the beach. Gonio Fortress, a unique fortification dating back to the 1st century is located near Kvariati. Kobuleti is in 25 km away from Batumi. It is one of major resorts of Adjara, distinguished for its historic sites, mild subtropical climate, ionized sea air, coniferous trees, burning sun, warm sea water, and unique sandy beach slanting towards the sea. Beaches are well equipped; cafes and bars are arranged in the coastal line and there are various water amusement facilities. The seaside park has many sports grounds, summer cafes and bars, bungalows and restaurants. Mild, humid, subtropical climate is recommended both for holidaymaking and healing. The city of Batumi is one of most distinguished tourist destinations. With its old and new architecture, the oldest seaport, the Botanical Garden and seaside boulevard, European-style squares and streets, globally popular hotel brands and distinguished cafes, Batumi is the perfect manifestation of modern Georgia. Batu- mi is one of cultural centers of the country, playing host to numerous international festivals and events with famous musicians and other artists participating in them.5 On 8 June 2019, Batumi won the so-called tourism Oscar, the World Travel Award 2019.

Natural resources Soil. Typical red soils dominate the seaside sections of Adjara. They are most favorable for growing subtropical cultures (tea, citrus, tung trees, laurel, etc.). Alluvial soils dominate the Kakhaberi and Kobuleti low- lands; peat boggy soils and silty boggy soils are in lower territories, especially in Ispani marshes (Kobuleti). Water. Adjara is especially rich in hydro resources, with its rivers that hold substantial hydro energy reserves. Almost all rivers flow into the Black Sea. Only the Kvabliani river belongs to the Caspian Sea basin, via the Mtkvari river. The river Chorokhi creates a large network of rivers. There is the total of 16 rivers flowing in the territory of Adjara with the total length reaching 402.6 km. There are few small lakes in Adjara. The region is also rich in ground and mineral water reserves. Forest. Forests occupy 65% of the total Adjara territory. There are subalpine as well as mixed Colchic deciduous forests mainly represented by oak, beech, chestnut, fir, spruce, pine woods. The total forest area comprises 191 603,7 hectares, including state reserves – 13 693 ha, national parks – 15 807,1 ha, green zone forests – 6 668,1 ha, forests of drinking water catchment zone – 1 990,9 ha, protective forest sections adjacent to settlements – 12 421,9 ha, subalpine forests – 7 084,1 ha, forest strips protecting banks of water bodies – 5 869,0 ha, soil protecting and water regulating forests – 128 069,6 ha. The indicator of forest in Adjara AR is notably higher than the corresponding indicators of the entire Georgia (39.1%), Turkey (11%) and the entire world (27%). By vertical stratification, the first layer of forest is humid subtropical (up to 350 meters from the sea level); the second layer is mixed, deciduous Colchic forests (from 350 to 900 meters above the sea level). The third layer is beech forests (from 900 to 1500 meters above the sea level), the fourth layer is fir and spruce trees (from 1500 to 1800 meters above the sea level), the fifth layer is subalpine forests (from 1800 to 2300 meters from the sea level). The largest share of woodlands is at 1000-2000 meters above the sea level and comprises 61%.6 Mineral resources. Adjara is one of the richest regions in Georgia by mineral resources. There are known reserves and occurrences of non-ferrous and noble metals, chemical raw materials, construction materials, gemstones. The region is rich in mineral and drinking water reserves. Metal reserves are represented by copper-polymetallic deposits and several ore mineral occurrences of Merisi group. The total resources of known industrial reserves are: gold – 44,5 tons, copper – 176,1 thousand tons, lead – 17,8 thousand tons and zinc – 15,5 thousand tons. From among construction materials, the finishing stone reserves are: 1) Dacite of Danisparauli (1124,0 thousand m3), 2) Gabbro diorite of Khalastavi (550,0 thousand m3), 3) Dacite of Sanalia (700,0 thousand m3), 4) Siento-diorites of Namonastrevi (600,0 thousand m3); from inert materials: 1) inert materials (11 000,0 thousand m3), 2) diorite of Khekru (1339,0 thousand m3), 3) andesite of Kinkishi (8765,0 thousand m3), 4) andesite of Dologni (1330,0 thousand m3); from brick and ceramic clays: 1) of Brili (1002,0 thousand m3),

5 http://www.gobatumi.com/ka/content/31 6 http://adjara.gov.ge/branches/description.aspx?pid=203&gid=1&ppid=190#.XQSXkYgzbIU

70 2) of Ochkhamuri (4000,0 thousand m3), 3) of Tsetskhlauri (1718,0 thousand m3), 4) of Jikhanjuri (448,0 thousand m3), 5) Chorokhi sand and gravel (943,0 thousand m3). Adjara is rich in substantial occurrences of color and jewelry gemstones. Occurrences of jasper, opal, chal- cedony, petrified wood stone and viscous basalt were discovered in Arsiani Range. Their resources have been estimated: agate – 212,0 tons, opalized wood – 1500,0 tons, viscous basalt – 2330,0 tons. Adjara is rich in hydromineral resources. Mineral water springs are found both in coastal and mountainous regions. Springs mainly contain hydrocarbon-sulphate, natrium-magnesium. There are also springs containing hydrocarbon-chloride iron-aluminum, natrium-calcium and sulphate- hydrocarbon calcium-natrium.7

MACRO INDICATORS OF THE REGION

Demography Number and density of population According to Geostat data of 1 January 2019, the population of Adjara AR comprises 349 028 people, that is 9.4% of the total population of Georgia. Batumi is the second largest town in Georgia after Tbilisi. The population of Batumi stands at 166 044 which is 4.5% of Georgia’s population and 47.6% of Adjara’s population.

Figure 1. Population by regions

0 2 4 6 8 10 12 14 Source: National Statistics Office of Georgia

As noted above, the largest segment of Adjara’s population – 47.6% lives in Batumi, reaching 166 044 people. The second by population is the Kobuleti municipality – 72 806 people, that is 20.9% of Adjara’s population. The third is Khelvachauri municipality with 52 365 residents and 15% share of Adjara’s population. This is followed by Khulo municipality with 25 902 people, i.e. 7.4%; Keda municipality with 16 809 residents, i.e. 4.8% of the region’s population; and Shuakhevi municipality with the number of residents at 14 102 and the share at 4.3%.

71 Table 2. Population in Adjara AR Number of Share in Georgia’s Share in region’s Region, self-government unit residents population population Georgia 3,723.5 Adjara AR 349.0 9.4% City of Batumi 166.0 4.5% 47.6% Keda municipality 16.8 0.5% 4.8% Kobuleti municipality 72.8 2.0% 20.9% Shuakhevi municipality 15.1 0.4% 4.3% Khelvachauri municipality 52.4 1.4% 15.0% Khulo municipality 25.9 0.7% 7.4% Source: National Statistics Office of Georgia

Adjara is the most densely populated region in Georgia, with the density of population comprising 120.4 per square kilometer.

Figure 2. Population density, 2019

Adjara AR 119,4 Imere� 79 Shida Kartli 75,6 Kvemo Kartli 67,2 Guria 54,4 Samegrelo-Zemo Svane� 43 Kakhe� 27,7 Samtskhe-Javakhe� 24,3 Mtskheta-M�ane� 16,7 Racha-Lechkhum-Kvemo Svane� 6,6

0 20 40 60 80 100 120

Source: National Statistics Office of Georgia

Distribution of population by urban and rural settlements Adjara is also distinguished by its high urbanization level, mainly conditioned by the city of Batumi. Accord- ing to Geostat data of 1 January 2019, some 57% of Adjara’s population lives in urban settlements. This makes up 197 667 people including 155 044 residents of Batumi which comprises 84% of Adjara’s urban population. Region’s rural population totals 43%, that is 151 361 people.

Social and economic situation of population The share of population aged 15 and over among the employed people is 62%. The share of hired employment among employment is 49%. According to 2018 data, the official unemployment rate in Adjara stood at 9.1%.8 The share of self-employed people in the total employed population in Adjara is the second lowest, after Tbilisi.

8 Geostat data.

72 Figure 3. Share of self-employed population in the total employed population, 2018

Guria 74 Kakhe� 72 Samtskhe-Javakhe� 70 Samegrelo-Zemo Svane� 65 Shida Kartli 61 Mtskheta-M�ane� 59 Kvemo Kartli 58 Imere� ** 57 Adjara AR 52 Georgia 52 Tbilisi 16

0 10 20 30 40 50 60 70 80

Source: Geostat

The share of hired employment is, accordingly, the second highest, after Tbilisi.

Figure 4. Share of hired employees in the total employed population, 2017

Tbilisi 84 Georgia 48 Adjara AR 48 Imere� ** 43 Kvemo Kartli 42 Mtskheta-M�ane� 41 Shida Kartli 39 Samegrelo-Zemo Svane� 35 Samtskhe-Javakhe� 30 Kakhe� 28 Guria 26

0 10 20 30 40 50 60 70 80 90 Source: Geostat

According to the 2018 data of Geostat, an average monthly income per capita in Adjara totals GEL 267.4 of which GEL 249.8 accounts for cash revenues and GEL 17.6 for non-cash revenues. By income, Adjara’s indicator is a little lower that the average indicator of Georgia.

73 Figure 5. Income per capita, 2018

0 40 80 120 160 200 240 280 320 360 Source: Geostat

As much as 93% of population’s income in Adjara comprise of cash revenues. The structure of cash revenues is as follows: the income from hired employment comprises 50%. The second largest source of cash revenues is self-employment with its share at 17%. The third source of cash revenues is pensions, scholarships and assistance, comprising 16%. The share of money received as gift is 8%, that of remittances is 4% and of proceeds from the sale of agricultural produce is 3%. Cash revenues from property (lease, interest on deposits) make up the smallest share – 2%. Non-cash revenues of Adjara’s population comprise 7% of all revenues.

Figure 6. Distribution of average monthly cash revenues of the population in Adjara, 2018

Property (lease, interest on deposit) Remi�ances from abroad 2 4

Self-employment 17

Hired employment Money received as gi� 50 8

Proceeds from agricultural products 3

Pensions, scholarships, assistance 16

Source: Geostat

The share of families receiving allowance is 35% in Adjara AR, which is higher than the average indicator of Georgia.

74 Figure 7. Share of families receiving allowances in total households by regions

Shida Kartli 12 Kvemo Kartli 6 Samtskhe-Javakhe� 8 Samegrelo-Zemo Svane� 11 Mtskheta-mTiane� 12 Imere� 11 Kakhe� 11 Racha-Lechkhum-Kvemo Svane� 30 Guria 14 Adjara AR 8 Tbilisi 5 Georgia 9

0 4 8 12 16 20 24 28 32

Source: Geostat, healthcare and social security 2017; Geostat – general population census, 2014

LABOR MARKET – EDUCATION AND SKILLS

According to the Geostat data of 2018-2019 academic year, there are three public and five private higher educational institutions in Adjara. The Shota Rustaveli Batumi State University has seven faculties: those of economy and business, exact sciences and education, law and social sciences, natural sciences and health care, technological, tourism, and humanitarian sciences. The university provides all levels of education, including vocational education.9 The Batumi State Maritime Academy has two faculties: the faculty of maritime engineering and the faculty of business and management. The departments of the maritime engineering faculty are: Navigation Depart- ment, Marine Engineering Department, Electrical Engineering Department, Basic Engineering Department, Exact and Natural Sciences Department, Foreign Languages Department. The departments of Business and Management Faculty are: Logistics Department, Port Management Department, Humanitarian and Social Sciences Department.10 According to the 2018 data, there are 14 vocational education institutions in the region with the total number of students at 2 652 and teachers at 686.11 Four faculties of the Shota Rustaveli Batumi State University offer the following vocational education programs: kindergarten caregiver-pedagogue (level V), web interface developer (level III), web interface designer (level III) and web programmer (level V) are provided by the faculty of exact sciences and education; librarian (level IV) is provided by the faculty of law and social sciences; practicing nurse (level V), pharmacy assistant (level IV) are provided by the faculty of natural sciences and health care; architect-technician (level IV, modular program), apiarist (level III) are provided by the faculty of technologies.12 A vocation training center operates at the Batumi Maritime Academy and provides the following vocational education programs: Deck Rating, Computer Engineering Graphics Operator, Engine Room Rating, Crane Operation (level III), Crane Operation (level IV), Fishing Vessel Navigation (level V), Port Logistics Manage- ment (level V), Freight Logistics Operation (level IV) Welding (level III), Welding (level IV).13 As of 2018-2019 academic year, there are 255 general educational schools operating in Adjara AR, which has the total of 57 826 pupils.14

9 https://www.bsu.edu.ge/ 10 http://www.bsma.edu.ge/ 11 Source: Ministry of Education, Science, Culture and Sport of Georgia. 12 https://www.bsu.edu.ge/ 13 http://www.bsma.edu.ge/ 14 Source: Ministry of Education, Science, Culture and Sport of Georgia.

75 Business activity Given that Batumi is the second largest city in Georgia and the data on Batumi significantly differs from the data of the rest of Adjara, the data on Batumi and the rest of Adjara is provided separately for better accuracy considertions. According to Geostat data of 1 February, there are 6 816 entrepreneurial entities in Adjara. As many as 95.2% of them (6 491 enterprises) is small, 0.4% (27 enterprises) is medium and 0.1% (five companies) is large. The size of 4.3% of the companies (293 companies) is unspecified.

Figure 8. Distribution of business entities in Adjara by size Large Unspeciﬁed Medium 0,1 4,3 0,4

Small 95,2 Source: Geostat

The data on Batumi is different: out of total 10 942 companies operating in Batumi, 93.8% (10 263 companies) is small, 1.4% (148 companies) is medium and 0.3% (32 companies) is large; the size of 4.6% of enterprises (499 companies) is not specified.

Figure 9. Distribution of business entities in Batumi by size Large Unspeciﬁed Medium 0,3 4,5 1,4

Small 93,8 Source: Geostat

By legal forms, the companies operating in Adjara are distributed as follows: the largest share of companies – 80.93% (5 516 companies) is individual entrepreneur, 18.35% (1 251 companies) is limited liability

76 company, 0.41% (28 companies) is associations, 0.16% (11 companies) is limited partnership and 0.04% (three companies) is joint stock company.

Figure 10. Distribution of business entities operating in Adjara by legal forms, 2019

Coopera�ve JSC General 0,1 0,05 partnership Asso�a�on 0,16 0,41 LLC 18,35

Individual enterpreneur 80,93 Source: Geostat

In Batumi, legal forms of enterprises are the following: the largest share of companies is individual entrepreneur, comprising 76.37% (8256 companies); 23.12% (2530 companies) is limited liability company, 0.27% (29 companies) is associations, 0.16% (17 companies) is joint stock company, 0.07% (eight companies) is limited partnership, and 0.092% (two companies) is cooperative.

Figure 11. Distribution of business entities operating in Batumi by legal forms, 2019

Coopera�ve Asso�a�on 0,02 JSC 0,27 0,16 General partnership LLC 0,06 23,12

Ind. enterpreneur 76,37

Source: Geostat

The distribution of enterprises by sectors in Adjara is the following: 51% of the enterprises, that is 2 451 companies, is engaged in the trade sector; the second largest sector by concentration of companies is the transportation and storage with 566 companies engaged in it, i.e. 12% of total companies; the third sector is manufacturing with its share of 9% that totals 421 companies. These are followed by the construction sector with 332 companies, i.e. 7% of the enterprises; other service activities which counts 107 companies, that is 2%; professional, scientific and technical activities with 84 companies, i.e. 2%; administrative and support service activities with 77 companies, or 2%; real estate activities and financial and insurance activities with 1% each and the number of companies at 76 and 72, respectively. The number of companies engaged in all other activities is 224 in total, which comprises 5% of all enterprises in Adjara.

77 Figure 12. Distribution of business entities by sectors in Adjara, 2019 Real estate ac�vi�es Financial and insurance ac�vi�es 1 1 Other Administra�ve and support service ac�vi�es 5 2 Professional, scien�ﬁc and technical ac�vi�es 2

Other service ac�vi�es 2 Construc�on 7

Accommoda�on service actvi�es 8 Trade 51

Manufacturing 9

Transporta�on and storage 12 Source: Geostat

The distribution of enterprises by sectors in Batumi is the following: the highest number of companies – 3 813, is engaged in the trade sector, comprising 45% of all companies operating in Batumi; the second largest sector by concentration of companies is construction with 741 companies engaged in it, i.e. 9% of total companies; the third sector is accommodation services activities with its share of 9% that totals 739 companies. These are followed by the transportation and storage sector with 646 companies, i.e. 8% of the enterprises; manufacturing with 646 companies, that is 8%; professional, scientific and technical activities with 337 companies, i.e. 4%; real estate activities and other service activities with 3% each and 265 and 297 companies, respectively; administrative and support service activities and financial and insurance activities with 2% each and the number of companies at 220 and 172, respectively. The number of companies engaged in all other activities is 568 in total, which comprises 7% of all enterprises in Batumi.

Figure 13. Distribution of business entities by sectors in Batumi, 2019 Financial and insurance ac�vi�es Other 2 7 Real estate ac�vi�es 2 Administra�ve and support service ac�vi�es 3 Professional, scien�ﬁc and technical ac�vi�es 3 Other service ac�vi�es 4 Trade 45 Construc�on 8

Accommoda�on service actvi�es 8

Manufacturing 9

Transporta�on and storage 9 Source: Geostat

The concentration of companies in sectors differs by size of companies in Adjara. Large companies (5 in total) operate in three sectors: manufacturing (2 companies), education (2 companies) and accommodation service activities (1 company):

78 Table 3. Distribution of companies among sectors by size in Adjara

Companies by size Sectors S M L Total Agriculture, forestry and fishing 0.96% 0.00% 0.0% 1.0% Mining and quarrying 0.54% 0.00% 0.0% 0.5% Manufacturing 8.68% 10.71% 40.0% 8.7% Electricity, gas, steam and air conditioning supply 0.06% 3.57% 0.0% 0.1% Water supply; Sewerage, Waste Management and 0.08% 3.57% 0.0% 0.1% Remediation Activities Construction 6.89% 7.14% 0.0% 6.9% Wholesale and retail trade; repair of motor vehicles and 51.01% 25.00% 0.0% 50.8% motorcycles Transportation and storage 11.81% 0.00% 0.0% 11.7% Accommodation and food service activities 8.60% 3.57% 20.0% 8.6% Information and communication 0.29% 0.00% 0.0% 0.3% Financial and insurance activities 1.50% 0.00% 0.0% 1.5% Real estate activities 1.57% 3.57% 0.0% 1.6% Professional, scientific and technical activities 1.75% 0.00% 0.0% 1.7% Administrative and support service activities 1.59% 3.57% 0.0% 1.6% Public administration and defense; compulsory social security 0.17% 0.00% 0.0% 0.2% Education 0.54% 14.29% 40.0% 0.7% Human health and social work activities 0.98% 10.71% 0.0% 1.0% Arts, entertainment and recreation 0.69% 14.29% 0.0% 0.8% Other service activities 2.23% 0.00% 0.0% 2.2% Activities of households as employers; undifferentiated goods 0.02% 0.00% 0.0% 0.0% and services producing activities of household for own use Activities of extraterritorial organizations and bodies 0.02% 0.00% 0.0% 0.0%

The number of large companies operating in Batumi is 32 in total and they operate in nine sectors. The highest number of large companies is concentrated in the construction sector (9 companies) and the arts, entertainment and recreation sector (5 companies):

Table 4. Distribution of companies among sectors by size in Batumi

Companies by size, Batumi Sectors S M L Total Agriculture, forestry and fishing 0.51% 0.68% 0.0% 0.5% Mining and quarrying 0.41% 0.68% 0.0% 0.4% Manufacturing 7.60% 8.84% 9.4% 7.6% Electricity, gas, steam and air conditioning supply 0.05% 0.00% 0.0% 0.0% Water supply; Sewerage, Waste Management and 0.05% 0.68% 6.3% 0.1% Remediation Activities Construction 8.49% 19.73% 28.1% 8.8% Wholesale and retail trade; repair of motor vehicles and 45.67% 17.69% 9.4% 45.0% motorcycles Transportation and storage 7.91% 7.48% 9.4% 7.9% Accommodation and food service activities 8.67% 11.56% 3.1% 8.7% Information and communication 0.66% 0.68% 3.1% 0.7% Financial and insurance activities 2.05% 1.36% 0.0% 2.0% Real estate activities 3.15% 2.72% 0.0% 3.1% Professional, scientific and technical activities 4.04% 1.36% 0.0% 4.0% Administrative and support service activities 2.61% 2.72% 0.0% 2.6%

79 Public administration and defense; compulsory social security 0.14% 0.00% 0.0% 0.1% Education 1.44% 8.84% 6.3% 1.6% Human health and social work activities 1.81% 8.16% 9.4% 1.9% Arts, entertainment and recreation 1.13% 6.80% 15.6% 1.3% Other service activities 3.58% 0.00% 0.0% 3.5% Activities of households as employers; undifferentiated goods 0.01% 0.00% 0.0% 0.0% and services producing activities of household for own use Activities of extraterritorial organizations and bodies 0.01% 0.00% 0.0% 0.0%

PRIORITY SECTORS

As noted in the study methodology, a special model was applied to assess sectors. With this model we assessed Adjara (excluding Batumi) and Batumi. The assessment of Adjara by the model is provided below:

Table 5. Assessment of Adjara by means of the model

N Sector Adjara A Agriculture, forestry and fishing 0.070983207 B Mining and quarrying 0.056154484 C Manufacturing 0.097616403 F Construction 0.14508641 G Wholesale and retail trade; repair of motor vehicles and motorcycles 0.221760648 H Transportation and storage 0.116395659 I Accommodation and food service activities 0.162165458 J Information and communication 0.049531924 L Real estate activities 0.066318557 M Professional, scientific and technical activities 0.059614012 N Administrative and support service activities 0.028174612 P Education 0.022750337 Q Human health and social work activities 0.059099081 R Arts, entertainment and recreation 0.1500104 S Other service activities 0.18096715

In Adjara, the sectors are sorted by scores in descending order:

Table 5. Sectors by scores in descending order, Adjara

N Sector Adjara G Wholesale and retail trade; repair of motor vehicles and motorcycles 0.221760648 S Other service activities 0.18096715 I Accommodation and food service activities 0.162165458 R Arts, entertainment and recreation 0.1500104 F Construction 0.14508641 H Transportation and storage 0.116395659 C Manufacturing 0.097616403 A Agriculture, forestry and fishing 0.070983207 L Real estate activities 0.066318557 M Professional, scientific and technical activities 0.059614012 Q Human health and social work activities 0.059099081 B Mining and quarrying 0.056154484

80 J Information and communication 0.049531924 N Administrative and support service activities 0.028174612 P Education 0.022750337

As seen from the above table, leading sectors in Adjara (excluding Batumi), according to the assessment, are: wholesale and retail trade; other service activities; accommodation and food service activities; arts, entertainment and recreation; construction/transportation and storage; manufacturing. We removed the “wholesale and retail trade” from the list based on the interviews conducted with the En- terprise Georgia Agency – upon the agreement with the agency, the objective of the study was to identify priority sectors excluding the trade and the primary agricultural production. As regards “arts, entertainment and recreation”, it mainly includes providers of gambling games, museums, sport clubs, amusement park operators. This sector is viewed as tourism supporting sector, requires substantial investments and does not fall within the boundaries of micro grants financing of Enterprise Georgia. We studied the structure of the following leading sectors by the concentration of companies therein. The sectors are: 1. Other service activities; accommodation and food service activities 2. Accommodation and food service activities 3. Construction 4. Transportation and storage 5. Manufacturing 6. Agriculture, forestry and fishing The list contains six sectors instead of five. We deemed it correct to add the sixth sector – agriculture, forestry and fishing, to the list because “other service activities” is a quite poor sector from the perspective of diversity and mainly consists of hair salons. These sectors consist of subsectors which need to be analyzed in order to identify the subsectors with higher dynamics. The structure of sectors was further scrutinized to assess the potential of subsectors. The number of companies in a sector was used in the detailed analysis. The result of the analysis is provided in Table 6.

Table 6. Priority sectors and their subsectors in Adjara

81 Processing and preserving of meat and production of meat products Manufacture of food products Manufacture of dairy products Manufacture of grain mill products, starches and starch products Manufacture of rubber and Manufacture of builders' ware of plastic plastic products Cutting, shaping and finishing of stone Manufacturing Manufacture of other Manufacture of articles of concrete, cement and non-metallic mineral products plaster Manufacture of glass and glass products Manufacture of wood and of Sawmilling and planing of wood products of wood and cork, except furniture; manufacture Manufacture of products of wood, cork, straw of articles of straw and plaiting and plaiting materials materials Manufacture of furniture Animal production Crop and animal production, Support activities to agriculture and hunting and related service post-harvest crop activities activities Growing of non-perennial crops Agriculture, forestry Growing of perennial crops and fishing Logging Forestry and logging Support services to forestry Aquaculture Fishing and aquaculture Fishing

The above listed sectors may be grouped into three clusters: Tourist cluster which will include accommodation and food service activities, transportation, manufacture of food products, fishing and aquaculture, entertainment and recreation. Food manufacturing cluster which will include processing of tea, processing of meat, manufacture of dairy products, manufacture of bakery goods, also, restaurants and hotels. Construction cluster which will include construction, wood manufacturing, wood processing, manufacture of furniture, manufacture of resin and plastic, manufacture of non-metal mineral products. Table 7 provides the results of assessing Batumi by the model.

Table 7. Assessment of Batumi by model

N Sector Batumi A Agriculture, forestry and fishing 0.070389165 B Mining and quarrying 0.05598721 C Manufacturing 0.096156573 F Construction 0.147583037 G Wholesale and retail trade; repair of motor vehicles and motorcycles 0.2140822 H Transportation and storage 0.111290409 I Accommodation and food service activities 0.162316875 J Information and communication 0.05004289 L Real estate activities 0.068392492 M Professional, scientific and technical activities 0.062601046 N Administrative and support service activities 0.029512023 P Education 0.023976772 Q Human health and social work activities 0.060316346

82 R Arts, entertainment and recreation 0.150704812 S Other service activities 0.182688354

The assessment of Batumi by scores in descending order is the following:

Table 8. Assessment of sectors in Batumi by scores in descending order

N Sector Batumi G Wholesale and retail trade; repair of motor vehicles and motorcycles 0.2140822 S Other service activities 0.182688354 I Accommodation and food service activities 0.162316875 R Arts, entertainment and recreation 0.150704812 F Construction 0.147583037 H Transportation and storage 0.111290409 C Manufacturing 0.096156573 A Agriculture, forestry and fishing 0.070389165 L Real estate activities 0.068392492 M Professional, scientific and technical activities 0.062601046 Q Human health and social work activities 0.060316346 B Mining and quarrying 0.05598721 J Information and communication 0.05004289 N Administrative and support service activities 0.029512023 P Education 0.023976772

As we see, the results of assessment model for Batumi and Adjara are similar. A reason of this could be the reality that the economy of Adjara is largely tied to Batumi and repeats its trend. We additionally studied the structure of sectors in Batumi to see whether it differs from the structure of sectors in Adjara. The study revealed that indeed, the structures of Adjara (excluding Batumi) and Batumi differ by the concentration of companies in sectors. The analysis of the structure of sectors in Batumi revealed the following priority sectors and subsectors:

Table 9. Priority sectors and their subsectors in Batumi

83 Land transport and transport via Freight transport by road pipelines Removal services Transportation and Support activities for transportation storage Warehousing and support activities for transportation Service activities incidental to land transportation Processing and preserving of meat and production of meat products Manufacture of food products Manufacture of bakery and pastry goods Processing of coffee Manufacture of furniture Manufacture of rubber and Manufacture of builders' ware of plastic plastic products Manufacturing Manufacture of articles of concrete, cement and Manufacture of other plaster non-metallic mineral products Cutting, shaping and finishing of stone Manufacture of fabricated Manufacture of structural metal products metal products, except machinery and equipment Treatment and coating of metals; machining Manufacture of wearing apparel Arts, entertainment Sports activities and amusement Other amusement and recreation activities and recreation and recreation activities (except entertainment centers)

Sectors and subsectors in Batumi may be grouped into two clusters – those of tourism and construction clusters. However, their composition differs from corresponding clusters of Adjara. Tourism cluster: accommodation and food service activities; art, entertainment and recreation. Construction cluster: construction (all the three subsectors), transportation and storage, manufacture of furniture, manufacture of articles of resin and plastic, manufacture of non-metal mineral products, manufacture of metal products.

Noteworthy information obtained from interviews Provided below are several ideas suggested during interviews conducted with entrepreneurs in Batumi and rest of Adjara, about the areas where, in respondents’ view, investing will prove successful. Adjara: – Distribution of food products to resorts, both with and without refrigerator – Printing house which performs printing on rolls, for packaging materials and also plastic packages, which is, unfortunately, absent in Adjara region – Machinery for processing glass – Machinery for processing wood (for example, for processing angles) – A possibility to purchase oil for machinery and other parts – today, they have to purchase it in Turkey. Batumi: – Much like the supply of supermarkets, to develop a network supply service so that a company sup- plies chemical means, bed linen, hygienic means, etc. altogether, instead of us having to find such companies individually – the hotel owner – To have an enterprise manufacturing concrete pipes and wells. These products are not manufactured in Georgia and we have to import them from Turkey, which is far more expensive – Packaging material for a product (coffee), which is brought from Tbilisi – Vacuum packaging, also brought from Tbilisi – Machinery for casting artificial stones.

84 MTSKHETA-MTIANETI

85 MTSKHETA-MTIANETI

GENERAL DESCRIPTION OF THE REGION

Location The Mtskheta-Mtianeti region is in the east of Georgia. The territory of the region totals 5 606 square kilometers which is around 10% of Georgia, according to the 2014 data. To the north Mtskheta-Mtianeti borders with the republics of the Russian Federation: North Ossetia, In- gushetia and Chechnia; to the east it borders with the Kakheti region, to the south with the Kvemo Kartli region and to the west with the Shida Kartli region. In historical and geographic terms, the region includes the following provinces: Khevi, Ertso-Tianeti, Pshavi, Khevsureti, Mtiuleti, Gudamakari, and partially, Ksni- skhevi.1

Administrative arrangement The Mtskheta-Mtianeti region has two cities (Mtskheta and Dusheti), five towns (Zhinvali, Pasanauri, Tiane- ti, Sioni, Stepantsminda) and 480 villages. Municipalities of Mtskheta-Mtianeti region are: 1. Dusheti 2. Tianeti 3. Mtskheta 4. Kazbegi The administrative center of the region is a self-governing city of Mtskheta.

Natural environment The natural environment of Mtskheta-Mtianeti is influenced by snowy mountains of the Greater Caucasus Mountain Range with peaks at 3500 meters and 5000 meters from the sea level, passes, gorgeous lakes and alpine fields. There is the Jvari Pass, one of the passes on the Caucasus Mountain Range, along the Military Road in the Mtskheta-Mtianeti region. Region is rich in hydro resources; the following rivers create a hydrographic network: Mtkvari, Aragvi, Ksani, Tergi and their tributaries. Natural lakes and water reservoirs worth noting are: Bazaleti Lake, Lisi Lake, Jvari Lake, Zhinvali water reservoir, Abudelauri lakes.

1 Source: webpage of the administration of state representative in the Dusheti, Tianeti, Mtskheta and Kazbegi municipalities.

86 86 The region is also rich in forests which are dominated by the following tree species: beech, oak, hornbeam, elm and others.2

Tourism and resorts Mountainous territories and foothills of Mtskheta-Mtianeti represent a rather interesting and promising area for the development of tourism and resorts. In general, the importance of mountainous regions, in terms of tourism and resorts, is further enhanced by healthy climate and many mineral and healing springs in this region, with a purposeful and complex use of which it is possible to restore old and establish new climatic balneological centers of various profiles. Mtskheta-Mtianeti has a huge potential for the development of the tourism sector. All the four municipalities and the city of Mtskheta are distinguished for their historic past, monuments, customs and traditions. Mtskheta is a UNESCO World Heritage Site and of special importance. The mountainous part of the region attracts tourists and has a vast potential for the development of various types of tourism: cultural, religious, archeological, adventure, eco, agricultural, ski, extreme and other types of tourism. Especially interesting in terms of fast development of tourism are Mtskheta and Kazbegi municipality. The interest to these two tourist destinations has always been high. Infrastructural development taking place in the region has contributed to the increase in local and foreign tourists. Furthermore, local population has shown an increasing interest towards the development of guesthouses and other tourism service establishments.3

Natural resources Annual discharge of rivers in the eastern Caucasus region is 4 063 cubic meters. Potential capacity of rivers is 1 million kilowatts, which comprises 6.4% of potential capacity of Georgia’s rivers. The Aragvi river is distinguished for its hydro energy reserves, with a hydro energy potential of 0.5 million kilowatts and the river Tergi (within the borders of Georgia) with a potential capacity of 0.23 million kilowatts. A number of springs are not fully studied and registered.

The region is rich in various mineral resources: copper – – the deposit is located in the Kazbegi region, in 10 km from the village of Gveleti and is known as Devdoraki Copper Deposit. The reserve is large though not fully explored; polymetal ores – small outcrops of lead and zinc are available in the gorge of the river Asa, though the concentration of ore is low; a small amount of stibium is found in Kazbegi (Surma); andesite – Arsha, Sakutseto and other deposits with the total reserves of 3 637 thousand cubic meters are present in the gorges of the river Tergi and its left tributaries; quartzite – deposits of industrial importance are found near the town of Stepantsminda; slates – multiple deposits are observed along the Military Road and Aragvi gorge of Pshav-Khevsureti; rock crystal – small deposits are near the town of Stephantsminda, though possibilities and scale of use are yet to be explored; diabase – substantial reserves are found in the Juta and Roshka areas (estimated reserve of 10 million m3), with big prospects of industrial use; the Aragvi river system contributes to the development of inert materials. sand-gravel is intensively extracted in Dusheti and Mtskheta municipalities. Water resources of the region play an important role in its social and economic development. They are represented by lakes, water reservoirs, rivers, glaciers and ground waters. Zhinvali, Sioni, Narekvavi, Za- hesi water reservoirs, created for irrigation, and drinking water supply, play an important role in the region. Ground waters are also very important for water resources of the region. They are renewable annually and distinguished for cleanness and sustainable water debit. These waters may fully meet demand for drinking and industrial water and provide excess resource. Mineral waters are discovered in all four municipalities (about 115 springs) with diverse chemical composition. Geographic location of most of them allows for building resorts on their basis as well as sanatoria, holidaymaking establishments and water (both potable and mineral) bottling enterprises. Rivers crossing the region (Mtkvari, Aragvi, Iori, Tergi) represent substantial hydro energy resources. Zahesi HPP is built on the Mtkvari river, Zhinvali HPP and Aragvi HPP are built on the Aragvi river, Sioni HPP is built on the Iori

2 http://www.mtskheta-mtianeti.gov.ge/ 3 http://www.mtskheta-mtianeti.gov.ge/page/full/18/%E1%83%94%E1%83%99%E1%83%9D%E1%83%9C%E1%83%9D%E1%83%9B%E1%8 3%98%E1%83%99%E1%83%90

87 river. One HPP was built in the Kazbegi municipality (on the river Tergi) and there is a plan to build several small HPPs too. Main rivers also create substantial resources of inert materials. At present, quarries operate on Aragvi, Ksani and Iori.4

MACRO INDICATORS OF THE REGION

Demography Population and density The Mtskheta-Mtianeti region is one of the less populated area in Georgia. According to Geostat data of 1 January 2019, the population of the region comprises 2.52% of total Georgian population, which is 93 636 people.

Figure 1. Population by regions

0 2 4 6 8 10 12 14 Source: National Statistics Office of Georgia

More than half of Mtsheta-Mtianeti population lives in Mtskheta municipality. They make up 53 592 people, which is 57.2% of the regional population. The second largest municipality by population is Dusheti with 27.9% of the region’s population, which amounts to 26 151 people. This is followed by Tianeti municipality with 10.8%, i.e. 10 087 residents. The smallest municipality by population is Kazbegi which counts 3 806 residents, that is 4.1% of total population of the region.

Table 2. Population in the municipalities of Mtskheta-Mtianeti region

Quantity Share in Georgia’s Share in region’s Municipalities (thousand) population population Mtskheta-Mtianeti 93.6 2.5% Dusheti municipality 26.2 0.7% 27.9% Tianeti municipality 10.1 0.3% 10.8% Mtskheta municipality 53.6 1.4% 57.2% Kazbegi municipality 3.8 0.1% 4.1%

Source: National Statistics Office of Georgia The density of population in Mtskheta-Mtianeti is 16.7 per square kilometers, one of the lowest in Georgia.

88 Figure 2. Population density

Adjara AR 119,4 Imere� 79 Shida Kartli 75,6 Kvemo Kartli 67,2 Guria 54,4 Samegrelo-Zemo Svane� 43 Kakhe� 27,7 Samtskhe-Javakhe� 24,3 Mtskheta-M�ane� 16,7 Racha-Lechkhum-Kvemo Svane� 6,6

0 20 40 60 80 100 120

Source: National Statistics Office of Georgia

Distribution of population by urban and rural settlements Mtskheta-Mtianeti region has two cities, five towns and 480 villages. According to Geostat data of 1 January 2019, 24% of Mtskheta-Mtianeti population lives in urban settlement, which makes up 22 077 people. The share of rural settlements is quite high – 76%, that is 71 559 people. On average, 43% of Georgia’s population lives in rural areas. The indicator of Mtskheta-Mtianeti significantly exceeds this average indicator, pointing to a quite low urbanization level.

Social and economic conditions of population The share of employed people aged 15 and over is 64% in the region. The share of self-employed among the employed people is 56% in Mtskheta-Mtianeti region.

Figure 3. Share of self-employed population in total employed population, 2017

Guria 74 Kakhe� 72 Samtskhe-Javakhe� 70 Samegrelo-Zemo Svane� 65 Shida Kartli 61 Mtskheta-M�ane� 59 Kvemo Kartli 58 Imere� ** 57 Adjara AR 52 Georgia 52 Tbilisi 16

0 10 20 30 40 50 60 70 80 Source: Geostat

The share of hired employees among the employed people in the region is 44%.

89 Figure 4. Share of hired employees, 2017

Tbilisi 84 Georgia 48 Adjara AR 48 Imere� ** 43 Kvemo Kartli 42 Mtskheta-M�ane� 41 Shida Kartli 39 Samegrelo-Zemo Svane� 35 Samtskhe-Javakhe� 30 Kakhe� 28 Guria 26

0 10 20 30 40 50 60 70 80 90 Source: Geostat

As regards income per capita, this indicator is not recorded separately for Mtskheta-Mtianeti region, but only in conjunction with Guria and Samtskhe-Javakheti regions. According to this indicator, these three regions show the lowest income per capita – GEL 242.8 which is well below the corresponding average indicator of Georgia (GEL 285).

Figure 5. Income per capita, 2018

0 40 80 120 160 200 240 280 320 360 Source: Geostat

In the revenues of Mtskheta-Mtianeti region 89% accounts for cash revenues and remittances, while 11% accounts for non-cash revenues. Among cash revenues, the largest share, 40%, is income from hired employment, 25% is pensions, scholarships and assistance, 13% is proceeds from sale of agricultural produce, 8% is from self-employment, 7% is cash given as a gift, 6% is remittances from abroad and only 1% is income from property (lease and interest on deposits).

90 Figure 6. Distribution of average monthly income of population in Mtskheta-Mtianeti, 2018 Property (lease, interest on deposit) Remi�ances from abroad 1 6

Self-employment 8

Money received as gi� 7 Hired employment 40

Proceeds from agricultural products 13

Pensions, scholarships, assistance 25 Source: Geostat

It is worth noting that the second largest component in the income of the regional population is pensions, scholarships and assistance. Besides, the share of families among the households, who are registered for allowance amounts to 40% in Mtskheat-Mtianeti, which speaks about the social conditions in the region.

Figure 7. Share of families receiving allowance in total households by regions

Shida Kartli 12 Kvemo Kartli 6 Samtskhe-Javakhe� 8 Samegrelo-Zemo Svane� 11 Mtskheta-mTiane� 12 Imere� 11 Kakhe� 11 Racha-Lechkhum-Kvemo Svane� 30 Guria 14 Adjara AR 8 Tbilisi 5 Georgia 9

0 4 8 12 16 20 24 28 32 Source: Geostat, healthcare and social security 2017; Geostat – general population census, 2014

Labor market – education and skills According to the data of 2018-2019 academic year, there is only one private higher educational institution in Mtskheta-Mtianeti region. As for vocational education institutions, separate data on the region is not available while according to the combined data of Guria, Racha-Lechkhumi and Kvemo Svaneti and Mtskheta-Mtianeti regions, there were the total of four such institutions in 2018. One of such vocational education institutions is the Ilia Tsinamdzgvrishvili Public College which is located in the village of Tsinamdzgvriantkari. This institution offers the following programs: bee farming; fruit growing (stone fruits/pome fruits/nuts); forestry; electrician; tourist guide for cultural heritage of Georgia; tractor driver; hairdresser; sewing goods specialist; vine-growing and wine-making. Since 2016, Adventure Tourism School has operated in Gudauri, implementing two programs: Hiking guide (level III) and mountain guide (level IV).

91 At the beginning of 2018-2019 academic year, there were 88 general educational schools in Mtskhe- ta-Mtianeti, which had 11 899 pupils enrolled in total.

Business activity According to 1 January 2019 data, there are the total of 3 075 enterprises in Mtskheta-Mtianeti region. Seven of these enterprises are large-sized companies (0.23%), 27 are medium-sized (0.88%) while 2 878 small-sized (93.59%). Size of 5.3% (163 companies) is not specified.

Figure 8. Distribution of business entities operating in Mtskheta-Mtianeti by size

Large Unspeciﬁed Medium 0,23 5,3 0,88

Small 93,59

Source: Geostat

By legal forms, the companies operating in Mtskheta-Mtianeti are distributed as follows: 80.29% (2 469 companies) is individual entrepreneur, 18.44% (567 companies) is limited liability partnership, 0.94% (29 companies) is association, 0.2% (six companies) is joint stock company and 0.13% (four companies) is cooperative.

Figure 9. Distribution of business entities operating in Mtskheta-Mtianeti by legal form, 2019 Asso�a�on 1 LLC 19

Individual enterpreneur 80 Source: Geostat

By sectors, the distribution of companies in Mtskheta-Mtianeti is as follows: the highest share of companies, 45.6%, is concentrated in the wholesale and retail trade sector. The second most concentrated sector is

92 transportation and storage sector – 13.5%. The third is manufacturing with 9.2% share, followed by accommodation service sector with 9.1%. The fifth concentrated sector is construction – 5.8%, followed by administrative services with 2.5% share and agriculture, forestry and fishing with 2.2% share.

Figure 10. Distribution of business entities operating in Mtskheta-Mtianeti by sectors, 2019 Real estate ac�vi�es Other 2 8 Agriculture, forestry and ﬁshing 2 Administra�ve and support service ac�vi�es 2 Professional, scien�ﬁc and technical ac�vi�es 3

Construc�on 6 Wholesale and retail trade 46

Accommoda�on service actvi�es 9

Manufacturing 9

Transporta�on and storage 13 Source: Geostat

As regards the distribution of companies among sectors by size, it looks as follows: 71% of large companies is concentrated in manufacturing, 14.3% in wholesale and retail trade and another 14.3% in education. Among medium-sized companies, 22.22% is engaged in construction sector, 18.52% in wholesale and retail trade and 14.81% in manufacturing. Small-sized companies are mainly concentrated in three sectors: 46.08% in wholesale and retail trade, 13.76% in transportation and storage and 9.09% in accommodation and food service activities. More details on the distribution of companies among sectors by their sizes is provided in the table below:

Mtskheta-Mtianeti Sector S M L Total Agriculture, forestry and fishing 2.26% 0.00% 0.0% 2.2% Mining and quarrying 1.35% 0.00% 0.0% 1.3% Manufacturing 8.90% 14.81% 71.4% 9.2% Electricity, gas, steam and air conditioning supply 0.05% 0.00% 0.0% 0.0% Water supply; Sewerage, Waste Management and Reme- 0.19% 0.00% 0.0% 0.2% diation Activities Construction 5.58% 22.22% 0.0% 5.8% Wholesale and retail trade; repair of motor vehicles and 46.08% 18.52% 14.3% 45.6% motorcycles Transportation and storage 13.76% 0.00% 0.0% 13.5% Accommodation and food service activities 9.09% 11.11% 0.0% 9.1% Information and communication 0.43% 0.00% 0.0% 0.4% Financial and insurance activities 0.48% 0.00% 0.0% 0.5% Real estate activities 1.88% 0.00% 0.0% 1.8% Professional, scientific and technical activities 2.65% 3.70% 0.0% 2.7% Administrative and support service activities 2.41% 7.41% 0.0% 2.5% Public administration and defense; compulsory social 0.14% 3.70% 0.0% 0.2% security Education 0.67% 7.41% 14.3% 0.8% Human health and social work activities 1.68% 7.41% 0.0% 1.8%

93 Arts, entertainment and recreation 0.67% 0.00% 0.0% 0.7% Other service activities 1.73% 3.70% 0.0% 1.8%

PRIORITY SECTORS

As noted in the study methodology, a special model was applied to assess the sectors. According to this model, the sectors in Mtskheta-Mtianeti got the following scores:

Table 3. Results of assessment model, in descending order

N Sector Mtskheta-Mtianeti 1 Arts, entertainment and recreation 0.3455266 2 Real estate activities 0.33954771 3 Information and communication 0.210023749 4 Wholesale and retail trade; repair of motor vehicles and motorcycles 0.128757144 5 Human health and social work activities 0.12089549 6 Transportation and storage 0.104565723 7 Administrative and support service activities 0.103801499 8 Professional, scientific and technical activities 0.096837452 9 Accommodation and food service activities 0.094927392 10 Manufacturing 0.080749857 11 Agriculture, forestry and fishing 0.073818494 12 Construction 0.051779076 B Mining and quarrying 0.002751543

By current level and potential of development, the model identified the following sectors in Mtskheta-Mtiane- ti: 1. Real estate service activities 2. Human health 3. Transportation and storage 4. Administrative and support service activities 5. Accommodation and food service activities 6. Manufacturing These sectors contain subsectors which need to be analyzed in order to identify those subsectors that show a higher degree of dynamic. To assess the potential of subsectors, we studied the structure of subsectors. For the detailed analysis, we used the number of companies in a sector. The results of the analysis are provided in Table 4.

Table 4. Priority sectors and their subsectors

Sector Subsector Subsector activity Buying and selling of own real

Real estate estate activities Renting and operating of own or

leased real estate Human health and Medical and dental practice activities Human health activities social work activities Hospital activities

94 Land transport and transport Urban and suburban passenger land transport Transportation and via pipelines Freight transport by road storage Warehousing and support Support activities for transportation activities for transportation Renting and leasing of motor

vehicles Administrative and Renting and leasing of construc- support service tion and civil engineering ma- activities chinery and equipment Travel agency and tour operator activities Accommodation Accommodation and food service Food and beverage service activities activities Processing and preserving of meat and production of meat products Processing and preserving of fruit and vegetables Manufacture of food products Manufacture of dairy products Manufacture of bakery and pastry goods Manufacturing Manufacture of other food products (prepared meals, sugar, ets.) Manufacture of furniture Manufacture of beverages Manufacture of other Manufacture of articles of concrete, cement and non-metallic mineral products plaster

Several sectors in Mtskheta-Mtianeti may be viewed as a tourist cluster. They are: – Manufacture of food products – Real estate service activities – Accommodation – Travel agency and tour operator activities

Noteworthy information obtained through interviews Within the framework of the study interviews were conducted with 19 entrepreneurs from various (priority) sectors. In response to the question as to which sector shows the highest degree of development in the region, the majority of respondents named tourism and trade. Furthermore, according to the entrepreneurs, the development of ophthalmologist clinics and in general, medical clinics, also, trade in meat is observed in the region. Some entrepreneurs believe that the region has a refrigerating and warehousing potential. One businessman, the representative of Mountain Friks, said that they need packaged dry food for expedi- tions: “we import food products we need from the Netherlands and we would like to have it available here; in general, such type of food is in shortage in Georgia while the one that is available here is of low quality.” A representative of the dairy products and cheese processing enterprise wished “there was a local milk enterprise where milk can be transformed into powder; but as I know, this is very difficult to do and is a distant prospect; therefore we purchase milk powder from America or Turkey and sometimes, it turns out that it is not of high quality and we have to seek a new one over again.” An Intrako Georgia representative (animal feed manufacturing company) said that “very little quantities of fertilizers and pesticides are manufactured locally and we have to buy imported ones which are rather expensive; it would be, of course, better if they were manufactured in Georgia and we wish it were so… We would also like to have an agro-consulting center in our region, which would provide farmers with advice, correct information about diseases of farm cattle, would correctly diagnose diseases and consequently, administer correct treatment. This is something we, at present, very much lack in the region.”

95 RACHA-LECHKHUMI & KVEMO SVANETI

96 RACHA-LECHKHUMI & KVEMO SVANETI

GENERAL DESCRIPTION OF THE REGION

Location The Racha-Lechkhumi and Kvemo Svaneti region is located in western Georgia and consists of the following historic geographic provinces: Racha, Lechkhumi and Svaneti (partially). The territory of the region, as of 1 March 2014, comprises 4 600 square kilometers, which is 6.6% of the country’s entire territory. The Racha-Lechkhumi and Kvemo Svaneti region borders with Russia to the north (South Ossetia, Kab- ardino-Balkaria) and the Mestia municipality in Georgia; with the Samegrelo region to the west; the Imereti municipalities to the south as well as the Java municipality of Samachablo (the so-called South Ossetia). The region is located at the altitude ranging between 400 meters and 5 000 meters above the sea level. The region is mainly populated by ethnic Georgians with their total number reaching 49 000 people.1

Administrative arrangement The Racha-Lechkhumi and Kvemo Svaneti region includes the following administrative-territorial units determined under the law:

1. Ambrolauri municipality 2. Tsageri municipality 3. Lentekhi municipality 4. Oni municipality 5. City of Ambrolauri

There is the total of four municipalities, three cities, two towns and 279 villages in the Racha-Lechkhumi and Kvemo Svaneti region.2 The executive government of the region is a state representative – governor whose administrative office is in the city of Ambrolauri. Ambrolauri is 280 km away from Tbilisi.3

1 Source: http://rls.gov.ge/open_a.php?id=1 2 Source: Geostat. 3 Source: The development strategy of Racha-Lechkhumi and Kvemo Svaneti region for 2014-2021.

97 Natural environment The Racha-Lechkhumi and Kvemo Svaneti region is rich in diverse flora and fauna. The natural diversity includes the highlands, glaciers and ranges of the Caucasus, rivers and waterfalls, numerous forests and animals and birds therein, natural caverns and caves, passes, alpine meadows, roads and footpaths, Shaori and Lajanu water reservoirs, Svan towers and other sites. Mineral waters and resorts of the region are well known – Shovi, Utsera, Lashichala, Kveshake, Muashi, Sortuani, Bugeuli, Khidikari, with more than 25 namesake healing mineral and sulphur springs. The resort places such as Khidikari, Tsesigora, Uravi, Bati, Skhepuri, Kvedis Tba and others are especially outstanding for their landscape.4 The region is situated on the southern hill of the Central Caucasus Range and belongs to a mountainous zone. The region is at the latitude ranging between 400 meters and 4 000 meters above the sea level, within the humid sea climate zone. The lower highlands are characterized by moderately cold winter and relatively hot summer while the climate in upper highlands zone is snowy.

Tourism and resorts There are unique conditions in the Racha-Lechkhumi and Kvemo Svaneti region for the development of various types of tourism (vehicle, horseback, hiking, hunting, eco, etc.), with its natural and geographic conditions, attractive nature, climate, fresh mountain air, rich coniferous and deciduous forests, abundance of cultural monuments, mineral waters and other natural resources. The region’s resorts are Shovi, Utsera, Kveshake, Sortuani, Khidikari, Bugeuli, Lashichala, Dzuguri, Akhalchala, Zeskho, Muashi where up to 100 healing mineral and Sulphur springs are found. The development of tourism in the region is impeded by poor infrastructure and lack of investments. At present, the infrastructure of the majority of resorts is com- pletely dilapidated and requires total rehabilitation. Among the resorts of the region especially worth noting are Shovi and Utsera for their climate and mineral springs with healing qualities. Shovi may be transformed into a ski resort enabling the resort to provide round-the-year service to holidaymakers and contribute to the social and economic development of the region. Conditions for the development of ski resort are also very favorable in the village of Skmeri. Shaori and Lajani water reservoirs are the places that attract tourists. Shaori water reservoir is one of most gorgeous places in Ambrolauri municipality, which is surrounded by unique species of forests and cultural and historic monuments. Shaori has a potential for the development of tourism for all seasons (including ski tourism). At present the region has several comfortable hotels (in Ambrolauri, Oni, Lentekhi and Shovi). The region lacks catering facilities. A tourism information center was opened in the city of Ambrolauri in 2012, with the main objective to attract relevant investments and develop routes of various types of tourism.5

Natural resources Water resources and hydro energy potential. The Racha-Lechkhumi and Kvemo Svaneti region is rich in water resources. As much as 99% of water resources is used in hydro energy. The main water arteries are: the Rioni river with its tributaries in Ambrolauri and Oni municipalities; the rivers Tskhenistskali, Kheledura and Laskadura in Lentekhi municipality, and the Tskhenistskali and Rioni rivers in Tsageri municipality. There are two reservoirs in the region. Total water volume of Shaori reservoir is 90 million cubic meters while its utilization volume is 87 million cubic meters. The Shaori Reservoir is designed to regulate the seasonal flows for the hydro power plant. Total water volume of Lajanuri reservoir is 20 million cubic meters while the utilization volume is 17 million cubic meters. The water reservoir is of weekly regulator type and provides water for Lajanuri HPP. The region is rich in natural springs and places for resorts. The potential of mineral springs is not properly utilized and they are not offered to regional or international markets. A daily debit of 28 types of mineral water in the resort Utsera comprises 800 tons. They are rich in calcium and iron, contain boron and iodine. Sixteen types of mineral waters are found in Shovi, with the daily debit of 150 tons. They are of the first chemical composition type, containing calcium, natrium, iron, magnesium, chloride and other minerals.

4 http://rls.gov.ge/open_a.php?id=7 5 Source: The development strategy of Racha-Lechkhumi and Kvemo Svaneti region for 2014-2021.

98 Mineral water in Tsageri municipality is well known, especially healing balneological waters of Lashichala resort and mineral healing spring of Dzuguri, which is good for people suffering from diabetes. Also noteworthy are healing mineral waters of Alpani, Akhalchala, Agvi-Tsageri, Ladzgveri and Usakhelo, which are used for treating arthrological, gastroenterological, gynecological, neurological diseases. Due to absence of relevant infrastructure, the mineral water resources are utilized only to the minimum extent. With its rich water resources, the region is of strategic importance for hydro energy industry of Georgia. The major energy facilities in the region are two HPPs: Ritseula HPP with the capacity of 6,1 MW in Ambrolauri and Lajanuri HPP with the capacity of 112,5 MW in Tsageri. These two HPPs ensure power supply of the region. There is a possibility to build small HPPs at various locations (on the rivers of Kheledura, Cheshura, Jejora, Jonoula). Theoretical technical hydro potential of the rivers of the Rioni river basin is 428.8 MW of installed capacity and 2390 million kWh of generated electricity. In using hydro resources, it is very important to take into account geodynamic potential of the region and risk of high danger. Wind power potential is insignificant. The region has a good potential in terms of the use of solar energy with 4,2-4,5 kWh of daily indicator (the largest indicator in the Caucasus is seen on the hill of south Cauca- sus Range). At present, there are only separate cases of the use of solar energy (in the city of Oni). Bearing in mind the development of animal husbandry in the region, there is a big potential of developing a biogas sector in the region. Forest resources. The Racha-Lechkhumi and Kvemo Svaneti region is rich in forests. The woodlands comprise around 61% of the region’s total territory (292,9 thousand ha with the total timber reserves of 6-,6 million cubic meters). There are virgin forests, which are maintained in their original form and biodiversity. There are also many decades’ old artificially planted coniferous (mainly cedar) woods. Forests stretching across the region are distinguished for their special functional purpose. In addition to industrial potential of these forests, they have soil protective, water regulatory, climate regulatory functions. Especially worth noting is the woodland of the resort zone. Forests allow to fully meet the demand of population for fuelwood as well as timber. From main tree species comprising the forest, the dominating one, from among hardwood deciduous species, is beech (spread over 134 724 had with the timber reserves of 24 665 thousand m3). Oak woods occupy a substantial territory (26 075 ha, 3 205 m3). From coniferous species, the prevailing trees are spruce (29 314 ha, 11 281 thousand m3), fir (9 002 ha, 2 720 thousand m3), and pine (5 900 ha, 398 thousand m3). From softwood deciduous species, dominant species are birch (13 139 ha) and alder (5 244 ha) with the total timber reserve of 612 thousand cubic meters. Mineral ores. Ferrous metal and non-metal fossil are extracted in the region. There is sand-gravel in all four municipalities with the total reserves of 780 000 m3. There is also limestone (130 000 m3), coal (300 000 m3), plaster (900 m3), diabase (20 000 m3), barite (reserve not estimated), magnum (10101 tons), and gold (reserve not estimated). Due to lack of investments, large amount of mineral resources is not mined. Effective management and use of mineral resources and its resource potential in the regions requires that reserves of existing resources are recorded anew, systematized approximate market values determined. The existing information is based on studies that were conducted many years ago and hence, their reliability is somewhat questionable.6

MICRO INDICATORS OF THE REGION

Demography Number and density of population The Racha-Lechkhumi and Zemo Svaneti region is one of the least populated areas. According to Geostat data of 1 January 2019, there are 29 701 people living in the region, which is 0.8% of the population of Georgia. The largest segment of population of the region lives in Ambrolauri municipality. Their number makes up 10 643 and comprises 35.8% of the regional population. The second by the population is Tsageri municipality – with 30.7% share and 9 105 residents. It is followed by Oni municipality with 19.5% and 5 778 people; and Lentekhi municipality with 14.1% and 4 175 people.

6 Source: The development strategy of Racha-Lechkhumi and Kvemo Svaneti region for 2014-2021.

99 Figure 1. Population by regions, 2019

0 2 4 6 8 10 12 14 Source: National Statistics Office of Georgia

Table 1. Population in the municipalities of Racha-Lechkhumi and Kvemo Svaneti region

Quantity Share in Georgia’s Share in region’s Municipality (thousand) population population Racha-Lechkhumi and Kvemo Svaneti 29.7 0.8% Ambrolauri municipality 10.6 0.3% 35.8% Lentekhi municipality 4.2 0.1% 14.1% Oni municipality 5.8 0.2% 19.5% Tsageri municipality 9.1 0.2% 30.7%

Source: National Statistics Office of Georgia, 1 January 2019

The density of population in the Racha-Lechkhumi and Kvemo Svaneti region is the lowest in Georgia – 6.6 per square kilometer.

Figure 2. Population density ` Adjara AR 119,4 Imere� 79 Shida Kartli 75,6 Kvemo Kartli 67,2 Guria 54,4 Samegrelo-Zemo Svane� 43 Kakhe� 27,7 Samtskhe-Javakhe� 24,3 Mtskheta-M�ane� 16,7 Racha-Lechkhum-Kvemo Svane� 6,6

0 20 40 60 80 100 120 Source: National Statistics Office of Georgia

100 Distribution of population by urban and rural settlements The Racha-Lechkhumi and Kvemo Svaneti region has three cities, two towns and 279 villages. According to Geostat data of 1 January 2019 data, only 23% of the region’s population lives in urban settlements, which makes up 6 825 people. Rural population comprises 77%, that is 22 876 people. On average, 43.6% of population lives in rural settlement in Georgia. The urbanization indicator of Racha-Lechkhumi and Kve- mo Svaneti region is the lowest in Georgia.

Social and economic conditions of population Geostat database provides employment indicators of Racha-Lechkhumi and Kvemo Svaneti region in conjunction with the indicators of Imereti region. According to this combined indicator, the share of employees among people aged 15 and over is 60%. The share of self-employed in the employed population of these regions is 56%.

Figure 3. Share of self-employed population among employed population by Georgia’s regions, 2018 Guria 74 Kakhe� 72 Samtskhe-Javakhe� 70 Samegrelo-Zemo Svane� 65 Shida Kartli 61 Mtskheta-M�ane� 59 Kvemo Kartli 58 Imere� ** 57 Adjara AR 52 Georgia 52 Tbilisi 16

0 10 20 30 40 50 60 70 80

Source: Geostat

The share of hired employees among the employees of the region is 44%.

Figure 4. Share of hired employees among employees by Georgia’s regions, 2017

Tbilisi 84 Georgia 48 Adjara AR 48 Imere� ** 43 Kvemo Kartli 42 Mtskheta-M�ane� 41 Shida Kartli 39 Samegrelo-Zemo Svane� 35 Samtskhe-Javakhe� 30 Kakhe� 28 Guria 26

0 10 20 30 40 50 60 70 80 90 Source: Geostat

101 Indicator of average income per capita is not available separately for the Racha-Lechkhumi and Kvemo Svaneti region but only in conjunction with the Imereti region. According to this indicator, an average monthly income per capita comprises GEL 269.5 (data of the 2018 year) for these regions. This indicator is a little lower than the average indicator of Georgia (GEL 285).

Figure 5. Income per capita, 2018

0 40 80 120 160 200 240 280 320 360 Source: Geostat

The revenue structure is the following: cash revenues and remittances make up 88% of income of Ra- cha-Lechkhmi and Kvemo Svaneti population while non-cash revenues comprise 12%. In cash revenues, the highest share – 41% accounts for revenues from hired employment, 25% for pensions, scholarships and assistance, 11% for money received as gift, 9% for self-employment revenues, 8% for remittances from abroad, 7% for proceeds from sale of agricultural produce and a mere 0.3 for revenues from property (lease, interest on deposits).

Figure 6. Distribution of average monthly income of population in Imereti and Racha-Lechkhumi and Kvemo Svaneti regions, 2018 Property (lease, interest on deposit) 0,3 Remi�ances from abroad 8

Self-employment 8,7

Hired employment Money received as gi� 41 10

Proceeds from agricultural products 7

Pensions, scholarships, assistance 25 Source: Geostat

It is important to note that the second largest component of income of the population is pensions, scholarships and assistance. Moreover, the share of households that receive allowances in Racha-Lechkhmi and Kvemo Svaneti exceeds 70%, the highest indicator in Georgia, which speaks about a difficult social situation in the region.

102 Figure 7. Share of families receiving allowance in total households by regions

Shida Kartli 12 Kvemo Kartli 6 Samtskhe-Javakhe� 8 Samegrelo-Zemo Svane� 11 Mtskheta-mTiane� 12 Imere� 11 Kakhe� 11 Racha-Lechkhum-Kvemo Svane� 30 Guria 14 Adjara AR 8 Tbilisi 5 Georgia 9

0 4 8 12 16 20 24 28 32 Source: Geostat, healthcare and social security 2017; Geostat – general population census, 2014

Labor market – education and skills According to data of 2017-2018 academic year, only one private higher educational institution operates in Racha-Lechkhmi and Kvemo Svaneti. A separate data on vocational education institutions in the region is not registered. Such data is available only for Guria, Racha-Lechkhmi and Kvemo Svaneti and Mtskheta-Mtianeti regions together and it stands at four. The vocational college Erkvani operating in Ambrolauri offers the following programs: enamel specialist; jeweler; wine maker; tractor driver; bookkeeper-technician, bee farmer.7 At the beginning of the 2018-2019 academic year, the Racha-Lechkhmi and Kvemo Svaneti region had 68 general educational schools enrolling the total of 2 954 pupils.

Business activity The Racha-Lechkhmi and Kvemo Svaneti region counts the total of 1 208 enterprises, as of 1 February 2019. Eleven enterprises are medium-sized (1%), 1 140 are small-sized (94%), while the size of 57 companies (5%) is unspecified. There is no large-size company among the enterprises operating in the region.

Figure 8. Distribution of companies in Racha-Lechkhmi and Kvemo Svaneti by size Unspeciﬁed Medium 5 1

Small 94 Source: Geostat

103 By legal forms, the companies operating in the region are distributed as follows: 87.2% of companies (1 053 companies) is individual entrepreneur; 12% (145 companies) is a limited liability company, 0.7% (eight companies) is association and 0.2% (two companies) is cooperative.

Figure 9. Distribution of business entities operating in the Racha-Lechkhiumi and Kvemo Svaneti region by legal forms, 2019 Asso�a�on Coopera�ve 0,6 0,2 LLC 12

Individual enterpreneur 87,2 Source: Geostat

By economic activities, the companies in the Racha-Lechkhiumi and Kvemo Svaneti region operate in the following sectors: the highest number of companies is engaged in retail and wholesale trade – 45.8%. The second concentrated sector is construction – 12.9%. The third is manufacturing – 11.8%; the fourth is accommodation with 6% of the companies. It is followed by agriculture, forestry and fishing with 5.1% of the companies; arts, entertainment and recreation with 4.5% of the companies; human health and social work with 1.7% of the companies. The total of 8.1% of the companies operate in other sectors.

Figure 10. Distribution of business entities operating in the Racha-Lechkhiumi and Kvemo Svaneti region by sectors, 2019 Human health and social service ac�vi�es Other 2 8

Other service ac�vi�es 2 Arts, entertainment and recrea�on 2 Agriculture, forestry and ﬁshing 5

Wholesale and retail trade 46 Construc�on 13

Accommoda�on service ac�vi�es 6

Manufacturing 12 Transporta�on and storage 4 Source: Geostat

As regards the distribution of companies among sectors by the size, it looks as follows: 22.22% of medium-sized companies is engaged in construction, also another 22.22% is in manufacturing. Small-sized companies are concentrated in three sectors: 46% of companies operate in retail and wholesale trade, 13% is in construction and 12% is in manufacturing.

104 Details on the distribution of companies among sectors by size is provided in the table below:

Rache-Lechkhumi and Sector Kvemo Svaneti S M Total Agriculture, forestry and fishing 5% 11% 5% Mining and quarrying 1% 0% 1% Manufacturing 12% 22% 12% Water supply; Sewerage, Waste Management and Remediation Activities 0% 11% 0% Construction 13% 22% 13% Wholesale and retail trade; repair of motor vehicles and motorcycles 46% 0% 46% Transportation and storage 5% 0% 4% Accommodation 6% 0% 6% Real estate activities 2% 0% 2% Professional, scientific and technical activities 1% 0% 1% Administrative and support service activities 2% 0% 2% Public administration and defense; compulsory social security 0% 11% 0% Education 1% 11% 1% Human health and social work activities 2% 0% 2% Arts, entertainment and recreation 2% 11% 2% Other service activities 2% 0% 2%

PRIORITY SECTORS

The sector assessment model showed the fact that Racha-Lechkhumi and Kvemo Svaneti is one of poorest regions with low level of business activity; the majority of sectors did not show any data on employment and other indicators used by us, or these indicators were zero. Therefore, instead of selecting top sectors, we selected all those sectors which showed any kind of business by our criteria. These sectors are:

Sector Score Transportation and storage 0.31206618 Accommodation and food service activities 0.266667886 Wholesale and retail trade; repair of motor vehicles and motorcycles 0.176859917 Manufacturing 0.106181671 Construction 0.068387219 Agriculture, forestry and fishing 0.033173636 Mining and quarrying 0.020334237

For the further analysis and gaining deeper insight into sectors we investigated which subsectors are relatively developed within the sectors (using the indicator of concentration of business entities).

The analysis of subsectors provided the following result: Transportation and storage The majority of companies operating in this sector is concentrated in “urban and suburban passenger land transport,” and a small number in “freight transport by road. This sector requires transformation both in this

105 and all other regions, because it falls short of tourism development standards. A development potential is seen in this very sector – with the tourism increasing, providers of passenger transportation may offer modernized shuttle and organized passenger transportation service to both international and local tourists. Accommodation and food service activities This sector in Racha-Lechkhumi and Kvemo Svaneti consists of hotels and catering facilities. Considering the growth in tourist flows, this sector is obviously a priority for the region. Manufacturing The biggest subsector of manufacturing, by the concentration of companies, is the manufacture of food products. Food manufacturing activity is very low while its structure poor in the region; 80% of the companies is engaged in manufacture of bakery and pastry goods, 10 % in meat processing. These are the activities that comprise manufacturing. The second by the concentration of companies is the following subsector of manufacturing: “manufacture of products of wood and cork, except furniture; manufacture of products of straw and plaiting materials.” The main activity of companies in this subsector is sawmilling and planing of wood. The third by the number of companies in manufacturing is the manufacture of beverages (owing to Ra- cha), with the largest share accounting for wine making. It should be noted that although wine making is developed in Racha, the manufacture of other grape products is not developed, such as manufacture of grapeseed oil or various cosmetic means. Moreover, the region manufactures builders' ware of plastic as well as concrete – something that is characteristic for all studied regions. Construction Construction in the region mainly consists of construction of residential and non-residential buildings and construction of roads and motorways. Agriculture, forestry and fishing Interestingly, there are few companies registered as wine makers and animal producers in the region (16 in total). This may be explained by the fact that these activities are mainly carried out by households who are not registered as business entities. This also indicates that their activity is not systematic and large enough to develop into a regular business. Noteworthy information obtained through interviews: The majority of respondents in the region said that tourism is the only sector that has been notably developing. Respondents also emphasized the qualification of personnel: “it would be very beneficial to establish vocational education institutions. We would like to have more qualified workforce,” (Geoflower LLC, Ambrolauri municipality). It is very difficult to hire local staff and we often have to bring them from various regions; we would like to be soon able to locally find qualified personnel” (individual entrepreneur Mariam Sultanishvili, hotel business, Oni municipality). The state representative – governor also emphasized the importance of tourism. Infrastructure and private projects that are underway in the region will contribute to the development of tourism in the region: “Very important road-infrastructure projects are being implemented, which will improve traffic in the region and play a very important role in the development of tourism. In 2020, two large projects will be completed; moreover, local roads are built to Khvamli Mount, Mravaldzali, village Ghebi and other villages. Once these roads are completed, an estimated 80% of tourists visiting Svaneti will continue their travel to Racha too or vice versa, will travel from Racha to Svaneti by these roads. When talking about sectors with large potential, tourism is this type of sector for sure.”

106 KVEMO KARTLI

107 KVEMO KARTLI

GENERAL DESCRIPTION OF THE REGION

Location The Kvemo Kartli region is in the south-east of Georgia. The region borders with Samtskhe-Javakheti region to the west, Tbilisi, Shida Kartli and Mtskheta-Mtianeti regions to the north, Kakheti region to the east, Republic of Azerbaijan to the south-east and Republic of Armenia to the south. The territory of Kvemo Kartli comprises 6.5 thousand square kilometers which is 9.3% of the country’s territory. The mountainous settlements include 19 villages of Dmanisi municipality (above 1500 meters), 46 villages of Tsalka municipality (above 1500 meters) and 35 villages of Tetritskaro municipality (above 1300 meters). Ethnic Georgians comprise 44.7% of the region’s population, ethnic Azerbaijanis are 45.1%, ethnic Arme- nians are 6.4%, and Abkhaz, Ossetians, Russians, Greeks, Ukrainians and Kurds make up 3.8%.1 The administrative center of the region is the city of Rustavi which directly borders with the capital of the country, Tbilisi. Proximity of Kvemo Kartli to Tbilisi, Tbilisi airport, Azerbaijan and Armenia, as well as its location on the crossroads of transportation corridors and a high urbanization level, create favorable conditions for the development of the region.2

Administrative arrangement The region counts seven cities, six towns and 334 villages. There are seven self-government units in Kve- mo Kartli:

1. Self-government city of Rustavi 2. Bolnisi municipality 3. Gardabani municipality 4. Dmanisi municipality 5. Tetritskaro municipality 6. Marneuli municipality 7. Tsalka municipality.

1 http://kvemokartli.gov.ge/region 2 Development Strategy of Kvemo Kartli Region 2014-2021.

108 The state executive government on the regional level is a state representative who is headquartered in the city of Rustavi3.

Natural environment The Kvemo Kartli region is straddles moderate and subtropical zones. Due to landscape peculiarity, the region’s climate is dry. Part of the Kvemo Kartli’s lowland belongs to a rather moderate continental climate type. Climate in the mid zone of the region is relatively cool and humid. Subnivean climate dominate a higher zone.4

Tourism and resorts Natural and geographic conditions of Kvemo Kartli as well as nature sites, cultural and historic monuments provide an opportunity for tourism to develop. Potential tourism types are: horseback, hunting, eco, educational, family, ethnographic, agricultural, healing and rehabilitation and other types of tourisms. There are settlements in Kvemo Kartli that date back to the first millennium before Christ. Prehistoric settlements and human remains found in Dmanisi are recognized as major archeological discoveries. Experts concluded that hominids lived in Dmanisi 1.8 million years ago. Consequently, Dmanisi may be regarded as an earliest settlement in Europe and Asia. Overall, Kvemo Kartli counts more than 650 historic sites of which 300 are included in various tourist routes. Kvemo Kartli contains a resort, Manglisi, and several recreational zones where sanatoria and holiday establishments may host up to 10 000 people every year. Resort zones are in Dmanisi, Bolnisi, Tetritskaro, Gardabani and Tsalka municipalities. However, tourist facilities fall short of modern standards and consequently, the region faces a challenge of improving tourism infrastructure. Hotels are less developed in Kvemo Kartli. There are five hotels in the city of Rustavi. Guesthouses have not yet been developed properly. Tsalka and Dmanisi have guesthouses but in small numbers. The key problem for the sector remains a low labor remuneration of personnel and an extremely low level of investments in fixed assets and hence, low quality of services.5

Natural resources The Kvemo Kartli region is rich in water resources - rivers, lakes, ground fresh waters. Resources of mineral (healing acid and sulphur mineral springs are found only in Bolnisi and Dmanisi municipalities) and thermal waters are in smaller quantities as compared to other regions. The region is crossed with the Mtkvari river of cross-border importance and its tributaries. The total of 31 medium and large rivers flow in the Kartli Region. The total length of these rivers is approximately 900 km. There are 15 lakes in the region (with the total surface area of 18 km2), mainly used for recreational, irrigation and fishing purposes. Six reservoirs existing in the region (with the total volume of water comprising 30 400 million m3) are used for drinking water supply (Khrami for the city of Rustavi), energy generation (Tsalka) and irrigation. The energy sector is represented with three thermal power plants located in the city of Gardabani. Over the past decade, imbalance between the rate of power generation and the demand for power has been gradually increasing, negatively affecting the social and economic development of the region. Therefore, a special importance is assigned to the development of small size hydropower plants and use of renewable energy resources which the Kvemo Kartli region has in sufficient amounts. Kvemo Kartli has a big potential of energy generation by using such renewable resources as hydro, wind and solar energy. Kvemo Kartli is distinguished for its diversity in terms of use of solar energy. Almost half of the region belongs to a zone with optimal conditions for the use of various solar equipment (flat-plate collectors, powerful solar furnaces, solar power towers, generators) available in warm periods of a year (May-October). This zone includes the city of Rustavi, Marneuli, Gardabani and Bolnisi municipalities. The territory is characterized by wide, woodless, sloped gorges with open horizon and hence, high daily, monthly, seasonal and yearly values of direct and total radiation.

3 http://kvemokartli.gov.ge/region 4 Development Strategy of Kvemo Kartli Region 2014-2021 5 Development Strategy of Kvemo Kartli Region 2014-2021.

109 In terms of wind power, a promising territory of Kvemo Kartli is believed to be the Mtskheta-Mtianeti section of the Mtkvari valley. Among nine territories suitable for wind stations in Georgia, the city of Rustavi is assessed as a prospective wind station with the installed capacity of 60 MW and 130 kWh of generated power annually, which will meet the demand for power of about 14 000 families. The interest towards the use of wind power in this section is also heightened by the problem of irrigation of Samgori valley. Forests in Kvemo Kartli cover 21.7% of the territory, the lowest indicator among the regions of Georgia. The woodlands comprise 143,2 thousand ha of which 134.6 ha is covered with woods. From artificially planted coniferous forests the dominant species in the region is pine (5335 ha, timber reserves – 193,3 thousand cubic meters), while from deciduous species - beech (25332 ha, 5143,3 thousand cubic meters). Oak covers quite a substantial area (21564 ha, 2105 thousand cubic meters) as well as hornbeam and oriental hornbeam, while from softwood deciduous – Canadian cottonwood (260 ha, 27,4 thousand cubic meters). There are also almond, small size apricot and pear trees while shrubs and underwood are mainly represented by paliurus. Algeti valley is distinguished for its biodiversity, where the Algeti National Park has been established. Hunt- ing farm operates over 22 thousand ha of land in the region. Kvemo Kartli is rich in mineral resources. The region produces ferrous and nonferrous metals, ferro alloys and industrial mineral. There are also more than 200 deposits of ferrous, nonferrous and precious metals, chemical and ceramic raw materials, hydro minerals and fuel resources the majority of which is untapped. Copper, barite and a number of associated minerals are mined in polymetal field of copper and barite of Madneuli complex. Madneuli deposit is situated in 80 km from Tbilisi. The ore is extracted from open pit by applying dig and blast method. Extracted ore is distinguished for a high concentration. Production capacity is estimated at 12 thousand tons of concentrate handled a year. Gold reserves in Madneuli make up 49 thousand ounces while those of silver - 94 thousand ounces. Building and finishing stones available in the region are of strategic importance. The region also has high quality minerals – basalt and tufa. The demand on these minerals is high both on domestic and foreign markets. Furthermore, there are deposits of copper, barite, wolfram, nickel, iron, zinc, sulphate, manganese, marble, gypsum, white stone. There are also raw materials for construction ceramics (kaolin deposits of darbazi and Pitareti), glass containers (metasomatites of Adulariani) and china (quartzite of Bektakari). Volcanic deposits of Dmanisi and Tsalka contain light stone materials, riprap and rubble. There are also lithographic stone deposits (Algeti, Gomareti, Akhkalapa). The Algeti deposit is the largest in the Caucasus. Deposits of clay-gypsum are regarded as an important type of ore in the region. A strategic resource for the region is also construction and finishing stones available on the territory of the region, reserves of which are quite substantial. It includes such rare species of the resource as tufa in Bol- nisi and marble-like limestone in Sadakhlo. Fee imposed on licensing mining activity is one of important sources of revenues to relevant municipal budgets. The database on mineral resources of Kvemo Kartli, potential of its resources and estimated market values rely on studies and works conducted many years ago, which questions the reliability of this database.6

MACRO INDICATORS OF THE REGION

Demography Number and density of population By the number of population, the Kvemo Kartli region is the second largest in Georgia. According to Geostat data of 1 January 2019, it comprises 11.6% of total Georgian population, which amounts to 433 162 people.

6 Development Strategy of Kvemo Kartli Region 2014-2021.

110 Figure 1. Population by regions, 2019

0 2 4 6 8 10 12 14 Source: National Statistics Office of Georgia

The highest number of people of Kvemo Kartli lives in the city of Rustavi. According to Geostat, as of 1 January 2019, the population of Rustavi stood at 29.6% of the region’s population, that is 128 299 people. Among municipalities, Marneuli has the highest number of residents – 106 778, that is 24.7%, followed by Gardabani with 80 788 residents, i.e. 18.7%; Bolnisi with 55 444 and 12.8%, respectively; Tetritskaro - 22 057 people and 5.1%; Dmanisi – 20 381 residents, that is 4.7%; and Tsalka with 19 415 residents, which comprises 4.5% of the total population of the region.

Table 2. Population in the municipalities of the Kvemo Kartli region

Share in Quantity Share in Georgia’s Municipality the region’s (thousand) population population Kvemo Kartli 433.2 11.6%

City of Rustavi 128.3 3.4% 29.6%

Bolnisi municipality 55.4 1.5% 12.8%

Gardabani municipality 80.8 2.2% 18.7%

Dmanisi municipality 20.4 0.5% 4.7%

Tetritskaro municipality 22.1 0.6% 5.1%

Marneuli municipality 106.8 2.9% 24.7%

Tsalka municipality 19.4 0.5% 4.5%

Source: National Statistics Office of Georgia, 1 January 2019

The density of population per square kilometer is 67.2 in the Kvemo Kartli region.

111 Figure 2. Population density

Adjara AR 119,4 Imere� 79 Shida Kartli 75,6 Kvemo Kartli 67,2 Guria 54,4 Samegrelo-Zemo Svane� 43 Kakhe� 27,7 Samtskhe-Javakhe� 24,3 Mtskheta-M�ane� 16,7 Racha-Lechkhum-Kvemo Svane� 6,6

0 20 40 60 80 100 120 Source: National Statistics Office of Georgia

Distribution of population by urban and rural settlements The Kvemo Kartli region has seven cities, six towns and 334 villages. According to Geostat data of 1 Jan- uary 2019, 44% of population lives in the cities of the region and they make up 188 439 residents. The remaining 56% lives in rural areas, i.e. 244 723 people.

Social and economic conditions of population According to Geostat, the share of employed people in the population aged 15 and above comprises 59%. The share of self-employed among the employed people is 59% as well.

Figure 2. Share of self-employed population in total employed population in Georgia by regions, 2018

Guria 74 Kakhe� 72 Samtskhe-Javakhe� 70 Samegrelo-Zemo Svane� 65 Shida Kartli 61 Mtskheta-M�ane� 59 Kvemo Kartli 58 Imere� ** 57 Adjara AR 52 Georgia 52 Tbilisi 16

0 10 20 30 40 50 60 70 80

Source: Geostat

The share of hired employees in the region is 41% of the employees.

112 Figure 4. Share of hired employees among employees by Georgia’s regions, 2018

Tbilisi 84 Georgia 48 Adjara AR 48 Imere� ** 43 Kvemo Kartli 42 Mtskheta-M�ane� 41 Shida Kartli 39 Samegrelo-Zemo Svane� 35 Samtskhe-Javakhe� 30 Kakhe� 28 Guria 26

0 10 20 30 40 50 60 70 80 90

Source: Geostat

An average monthly income per capita stands at GEL 231.3 in the Kvemo Kartli region (2018 data). This indicator is well below the average indicator for Georgia (GEL 272.7).

Figure 5. Income per capita, 2018

0 40 80 120 160 200 240 280 320 360

Source: Geostat

According to Geostat data, 91.5% of income of the regional population accounts for cash revenues and remittances whereas 8.5% for non-cash income. Among cash revenues, the biggest source is income from hired employment, standing at 46.4%; pensions, scholarships and assistance comprise 17.4%; self-employment provides 13% of income; 8 money given as gift is 8%; remittances from abroad make up 7.7%; proceeds from the sale of agricultural produce stand at 7.4%; revenues from property (lease, interest on deposits) comprise a mere 0.1% of the income.

113 Figure 6. Distribution of average monthly income of population in Kvemo Kartli, 2018 Property (lease, interest on deposit) Remi�ances from abroad 0,1 7,7

Self-employment 13

Hired employment Money received as gi� 46,4 8

Proceeds from agricultural products 7,4

Pensions, scholarships, assistance 17,4 Source: Geostat

Much like in other regions, the second largest component of income in Kvemo Kartli is pensions, scholarships and assistance. However, the share of families receiving allowance does not exceed 25% of the total households.

Figure 7. Share of families receiving allowances in total households by regions

Shida Kartli 12 Kvemo Kartli 6 Samtskhe-Javakhe� 8 Samegrelo-Zemo Svane� 11 Mtskheta-mTiane� 12 Imere� 11 Kakhe� 11 Racha-Lechkhum-Kvemo Svane� 30 Guria 14 Adjara AR 8 Tbilisi 5 Georgia 9

0 4 8 12 16 20 24 28 32 Source: Geostat, healthcare and social security 2017; Geostat – general population census, 2014

Labor market – education and skills As of 2018/2019 academic year, there was no higher educational institution registered in the Kvemo Kartli region. As of 2018, there were five vocational education institutions in the region. The vocational education institution, Modusi, operating in Rustavi offers a rather broad range of programs: plumber-sanitation systems technician, IT specialist, lab assistant of chemical analysis of substances and materials, office manager (secretary-referent), masseur, dyer, vehicle mechanic, mechanic of electrical ignition and supply equipment, mechanic of diagnosing and repairing electronic and digital equipment, assembler of plaster and cardboard constructions, bookkeeper-technician, electricity technician.7 Another college, Arsi, also based in Rustavi, runs the following programs: practicing nurse, pharmacy as-

114 sistant, bank cashier-operator, insurance agent, nurse assistant.8 Two colleges operate in Marneuli: the Marneuli college and the Marneuli branch of the public college Elite. The Marneuli college runs the following programs: nurse assistant, pharmacy assistant, practicing nurse, financial services, office work, caregiver.9 As regards the Marneuli branch of the public college Elite, the range of programs is broad: bookkeeping, restaurant administrator, hotel manager, event organizer, IT specialist, correspondent, practicing nurse, pharmacy assistant, nurse assistant, dental technician, masseur, office manager, caregiver-pedagogue.10 As of 2018/2019 academic year, there were the total of 267 general educational school with the total of 69 606 pupils enrolled.11

Business activity According to Geostat data of 1 February 2019, the Kvemo Kartli region counts the total of 13 161 enterprises of which 23 are large (0.2%), 84 are medium-sized (0.6%), 12342 are small-sized (93.8%) whereas the size of 712 (5.4%) is unspecified.

Figure 8. Distribution of business entities by size in Kvemo Kartli Large Unspeciﬁed Medium 0,6 5,4 0,2

Small 93,8 Source: Geostat

By legal forms, the companies in the region represent: individual entrepreneur – 86.2% of companies (11 346 enterprises); limited liability company – 13.3% (1753 companies); joint stock company – 0.2% (22 companies); association, cooperative and limited partnership – 0.1% each, i.e. 17, 14 and nine companies, respectively. By sectors, the companies in Kvemo Kartli are distributed as follows: the highest number of companies, much like in other regions, is concentrated in retail and wholesale trade and they comprise more than half of the companies – 58%. The second highest concentration of companies is seen in manufacturing – 9%; the third sector is transportation and storage with 8% of the companies, followed by accommodation and construction represented with 4% each, real estate activities and other service activities with 3% each, and professional, scientific and technical activities, human health and social work activities, and administrative and support service activities with 3% each.

8 http://www.collegearsi.ge/sag_programebi.html 9 www.mcm.edu.ge 10 http://www.cceliti.ge/main/modules/4/16 11 Geostat.

115 Figure 9. Distribution of business entities in the Kvemo Kartli region by legal forms, 2019 Coopera�ve JSC 0,1 0,2 General Asso�a�on partnership 0,2 0,1 LLC 13,2

Individual enterpreneur 86,2 Source: Geostat

Figure 10. Distribution of business entities operating in Kvemo Kartli by sectors, 2019 Other Human health and social service ac�vi�es 6 2 Proﬀessional, scien�ﬁc and technical ac�vi�es 2 Other service ac�vi�es 3 Construc�on 4

Real estate ac�vi�es 4

Accommoda�on and food service ac�vi�es 4

Transporta�on and storage Wholesale and retail trade 8 58

Manufacturing 9 Source: Geostat

By their size, the companies are distributed among sectors in the following way: among large companies 17% is engaged in construction and also 17% in retail and wholesale trade, 13% operates in education, 9% in human health and social work activities. Among medium-sized companies 23% is engaged in manufacturing, 19% in retail and wholesale trade, 13% in construction. As regards small-sized companies, they are concentrated in three sectors: retail and wholesale trade – 58%; manufacturing – 9%; and transportation and storage in 8%. Detailed distribution of companies among sectors by size is provided in the table below:

Table 3. Distribution of enterprises by size and sectors

Kvemo Kartli Sector S M L Total Wholesale and retail trade 58% 19% 17% 58% Manufacturing 9% 23% 17% 9% Transportation and storage 8% 5% 4% 8%

116 Accommodation 4% 0% 0% 4% Construction 4% 13% 0% 4% Real estate activities 3% 2% 0% 3% Other service activities 3% 1% 0% 3% Professional, scientific and technical activities 2% 0% 0% 2% Human health and social work activities 2% 10% 9% 2% Administrative and support service activities 2% 2% 4% 2% Other sectors Agriculture, forestry and fishing 1% 5% 4% 1% Education 1% 4% 13% 1% Information and communication 1% 1% 0% 1% Financial and insurance activities 1% 0% 0% 1% Mining and quarrying 1% 0% 9% 1% Arts, entertainment and recreation 1% 6% 9% 1%

PRIORITY SECTORS

The assessment model, based on criteria therein, awarded the following scores to the sectors in Kvemo Kartli:

Table 4. Assessment of sectors, Kvemo Kartli

Sector Kvemo Kartli Wholesale and retail trade; repair of motor vehicles and motorcycles 0.188574168 Manufacturing 0.138415465 Transportation and storage 0.133261853 Professional, scientific and technical activities 0.112417343 Mining and quarrying 0.111296081 Electricity, gas, steam and air conditioning supply 0.104931996 Agriculture, forestry and fishing 0.086334631 Other service activities 0.05966263 Accommodation and food service activities 0.056768744 Human health and social work activities 0.055147548 Information and communication 0.039057682 Construction 0.036121286 Education 0.031317943 Water supply; Sewerage, Waste Management and Remediation Activities 0.030218843 Administrative and support service activities 0.030116328 Arts, entertainment and recreation 0.027668746 Real estate activities 0.022726855

As the table shows, the leading sectors in Kvemo Kartli are: 1. Wholesale and retail trade; repair of motor vehicles and motorcycles 2. Manufacturing 3. Transportation and storage 4. Professional, scientific and technical activities 5. Mining and quarrying Each this sector contains subsectors and to form a better idea about activities eligible for grants we needed to see the level of business activity in subsectors. To this end, the concentration of companies has been

117 analyzed in subsectors of each sector. Given the purpose of the research project, trade sector was excluded from this analysis. Moreover, the mining and quarrying and the electricity, gas, steam and air conditioning supply were excluded from priority sectors, because several companies are no longer operating in this sector, changing the concentrations of companies in the sectors. Furthermore, tourism is a priority sector for Georgia. Considering these factors, the list of priority sectors is as follows: 1. Manufacturing 2. Transportation and storage 3. Professional, scientific and technical activities 4. Agriculture, forestry and fishing 5. Accommodation and food service activities Analysis of subsectors of each priority sector is provided below.

Manufacturing In manufacturing, a leading subsector, much like in other regions, is food manufacturing. In food manufacturing, the largest concentration of companies is seen in the following activities: manufacture of bakery and pastry goods, processing of milk and cheese making, processing of meat. A substantial share of companies is engaged in the manufacture of builders' ware of plastic; cutting, shaping and finishing of stone; manufacture of lime, plaster and concrete; manufacture of cement. Some 8% of companies is engaged in manufacture of furniture.

Transportation and storage In this sector, 93% of companies is engaged in passenger transportation, and urban and suburban passenger land transport, while 7% in warehousing and support activities for transportation.

Professional, scientific and technical activities The majority of companies, 41%, in this sector performs architectural and engineering activities, 30% is engaged in legal and bookkeeping activities, followed by advertising, photographic, and translation and interpretation activities.

Agriculture, forestry and fishing In this sector, 93% of companies is engaged in crop and animal production, hunting and related service activities, more specifically in growing of non-perennial crops (38%), animal production (33%), mixed farming and support activities for animal production.

Accommodation and food service activities In this sector, 89% of companies accounts for restaurants and food supply activities while 11% for hotels.

118 SAMEGRELO- -ZEMO SVANETI

119 SAMEGRELO- -ZEMO SVANETI

GENERAL DESCRIPTION OF THE REGION

Location The Samegrelo-Zemo Svaneti region is located in western Georgia, mainly on Kolkheti Valley. The region borders with the Black Sea to the west, the Autonomous Republic of Abkhazia to the north-west, the Rus- sian Federation to the north, the Imereti and the Racha-Lechkhumi and Kvemo Svaneti regions to the east, and the Guria region to the south. The total territory of Samegrelo-Zemo Svaneti comprises 7,5 thousand square kilometers, that is 10.8% of the country’s territory.1

Administrative arrangement The region includes 498 settlements, including eight cities, two towns and 487 villages. Mountainous settlements of the region (above 1000 meters) include 136 villages of the Mestia municipality and one village of the Martvili municipality. There are nine administrative units in the Samegrelo-Zemo Svaneti region: 1. City of Poti 2. Abasha municipality 3. Zugdidi municipality 4. Martvili municipality 5. Mestia municipality 6. Senaki municipality 7. Chkhorotsku municipality 8. Tsalenjikha municipality 9. Khobi municipality. The executive government on the regional level is the state representative - governor whose administration is located in the city of Zugdidi. Zugdidi is 325 km away from Tbilisi.2

1 Source: http://szs.gov.ge/geo/static/144 2 Source: http://szs.gov.ge/geo/static/144

120 120 Natural environment Climate is subtropical in the main part of the region and subalpine and alpine in its northern section. The region contains the Kolkheti Valley which is characterized by excessively humid subtropical climate and is strongly influenced by the Black Sea. A moderate climate, natural beauty and protected fauna of the region provide an opportunity for the development of winter and summer tourism.3

Tourism and resorts Samegrelo-Zemo Svaneti has a high potential for the development tourism as an important economic sector owing to the combination of factors such as ancient culture of Kolkheti and Svaneti, unique cultural-historical monuments, museums, caves and caverns, rafting and picnic places, the wetland Kolkheti with its rare nature, geographic peculiarity - landscape mosaics and biological diversity, Zemo Svaneti glaciers, Black Sea water area and developing resort zones. All these create favorable conditions for the development of various types of tourism (motor, horse riding, hiking, ecotourism, nautical, river, hunting, amateur, fishing, birdwatching, agricultural, educational, religious, extreme tourism, etc.) A unique site in terms of tourism is the Kolkheti National Park located in the western part of Samegrelo with its land area comprising 28 571 ha and sea water area 1 574 ha. In 1996, the Kolkheti National Park was granted the status of Ramsar Site of International Importance under the Ramsar Convention. A visitors’ center of the Kolkheti National Park and other infrastructure were designed in such a way as to ensure that materials and technologies used in the construction do not harm the environment and visitors of the park. The park also has good prospects for the development of ecotourism. During mass bird migration, visitors have an opportunity to watch numerous rare birds from birdwatching towers erected in the territory of the national park while staying either at the visitors’ center built in the park or the hotels in Poti, Grigoleti and Anaklia. Hiking trails are developed along coastal dunes and Imnati peat bogs. The best means of sightseeing wetlands is motor boats and boats. A visit to the National Park is made even more exciting by archeological and cultural sites adjacent to the park, such as: the ancient capital of Lazica, Archaeopolis (with inscriptions and frescos dating back to II-IX centuries before Christ), Martvili Monastery complex, Khobi monastery, Tsaishi church, Khobi monastery of nuns and Kortskheli monastery. Enguri water reservoir and middle and upper sections of the river, as well as Martvili caves and Tobavarchkhili lakes provide a favorable ground for the introduction and development of ecotourism subtypes such as hunting, fishing, horse riding and active tourism. The Enguri river also provides excellent conditions for the development of sailing and rafting. Zemo Svaneti is famous for its natural beauty and an extraordinary landscape which, with the infrastructure having developed in the past few years, attract increasingly more tourists and holidaymakers. The region includes seaside and ski resorts. The Hatsvali and Tetnuldi mountain ski resorts were already built. There are seaside resorts - Anaklia and Ganmukhuri. A new boulevard and supporting infrastructure are being built in Poti, along the Maltakva coastal zone.4

Natural resources The Samegrelo-Zemo Svaneti region is rich in mineral resources. The region counts 2 441 large and small rivers. The longest rivers are Khobistskali (150 km), Tekhuri (101 km), Abashistskali (66 km) while transit rivers are Enguri, Rioni and Tskhenistskali with their lengths on the territory of Samegrelo comprising 94 km, 88 km, and 44 km, respectively. Among water bodies, Paliastomi Lake and Jvari water reservoir are distinguished for their agricultural and environmental importance. The volume of ground waters makes up 25% of region’s total water resources. Because of steeply sloped landscape of mountainous zone and excess precipitations, the rivers of Samegrelo represent a rich source of electricity. The total capacity of hydropower resources of these rivers makes up 3.3 million kWh which comprises 13% of total theoretical hydropower resources of Georgia. Arable lands account for 39.2% of total land area, shrubs for 3.5%, marshes for 2.0%; water, channels and roads occupy 7.3% of land while buildings - 2.1%; unused land comprises 8.3%. Kolkhety Valley is dominated by peat and swamped forests. The region is rich in mineral resources of economic and social importance.

3 Source: http://szs.gov.ge/geo/static/144 4 Source: http://szs.gov.ge/geo/static/135

121 Thermal springs are in Tsalenjikha, Chkhorotsku, Zugdidi, Khobi, Martvili and Senaki municipalities. There are four main peat deposits in the region: those of Anaklia in Zugdidi municipality, Churia and Nabadi in Khobi municipality, Otsantsale in Martvilli municipality. Moreover, there are small occurrences of peat, those of Chataukala in Zugdidi region, Chkhopi and Etseri in Martvili municipality, Tsakipuli in Tsalenjikha municipality. Total reserves make up 48 million tons. The economic potential of this sector reaches USD 333.2 million in total. The region has ferrous metals too with estimated reserves of gold at 103.7 tons, lead at 300 thousand tons, zinc at 370 thousand tons, copper at 376 thousand tons, cobalt at 6 tons, silver at 8.4 tons. The total economic potential of this sector is USD 2985.86 million. Finishing stones - magmatic rock deposits are mined in Martvili, Mestia and Chkhorotsku municipalities, with the economic potential of reserves estimated at USD 317 million. Finishing stones - marble deposits are in Mestia municipality with the economic potential of reserves at USD 441 million. Finishing stones - limestone deposits are in the Mestia, Martvili and Tsalenjikha municipalities with the economic potential of reserves at USD 75 million. Raw materials of stone for sawing and gravel – limestone deposits are in Martvili, Senaki Chkhorotsku and Tsalenjikha municipalities. The economic potential of their reserves is estimated at USD 248 million. Construction sand and gravel deposits are in Senaki, Abasha, Chkhorotsku and Tsalenikhi municipalities. The economic potential of the reserves comprises USD 952 million. The limestone deposits are in Mestia, Senaki, Zugdidi and Tsalenjikha municipalities. The economic potential of reserves is estimated at USD 79 million. Clay brick fields are in Tsalenjikha, Chkhorotsku, Zugdidi, Senaki, Martvili, Khobi and Abasha municipalities. The economic potential of reserves is estimated at USD 249.8 million. Plaster and anhydrite deposits are in Tsalenjikha municipality with the reserves estimated at 12584 thousand tons and economic potential of the reserves at USD 219 million. Barite deposits are in Mestia, Tsalenjikha, Martvili and Zugdidi municipalities. The reserves are not estimated. Apart from the above listed, the region has reserves of ground potable water, healing springs and healing minerals and stones. The region’s economic potential of balance reserves comprises USD 3439.4 million; of estimated resources makes up USD 2996.9 million. The total economic potential of the region stands at USD 6436.3 million.5

MACRO INDICATORS OF THE REGION

Demography Population and density The population of Samegrelo-Zemo Svaneti region comprises 8.6% of Georgia’s population, which is 316 195 people, according to Geostat data of 1 January 2019.

Figure 1. Population by regions, 2019

0 2 4 6 8 10 12 14 Source: National Statistics Office of Georgia The largest number of population of the Samegrelo-Zemo Svaneti region lives in Zugdidi municipality. They

122 comprise 101 815 people, i.e. 32% of the regional population. The second largest city by population is Poti with 41 624 residents, that is 13% of regional population. This is followed by Senaki municipality with 36 040 people and 11% share; Martvili municipality with 32 184 residents that is 10%; Khobi municipality with 28 733 residents, i.e. 9%; Tsalenjikha municipality with 24 269 people, i.e. 8%; Chkhorotsku municipality with 21 710 people and 7% share; Abasha municipality with 20 341 residents and 6% share; and Mestia municipality with the smallest number of population – at 9 479, i.e. 3% of the region’s total population.

Table 1. Population in the municipalities of Samegrelo-Zemo Svaneti region

Quantity Share of Georgia’s Share of region’s Municipality (thousand) population population Samegrelo-Zemo Svaneti 316.2 City of Poti 41.6 1.1% 13.2% Abasha municipality 20.3 0.5% 6.4% Zugdidi municipality 101.8 2.7% 32.2% Martvili municipality 32.2 0.9% 10.2% Mestia municipality 9.5 0.3% 3.0% Senaki municipality 36.0 1.0% 11.4% Chkhorotsku municipality 21.7 0.6% 6.9% Tsalenjikha municipality 24.3 0.7% 7.7% Khobi municipality 28.7 0.8% 9.1% Source: National Statistics Office of Georgia, 1 January 2019

The density of population per square kilometer is 43 in the Samegrelo-Zemo Svaneti region.

Figure 2. Population density

Adjara AR 119,4 Imere� 79 Shida Kartli 75,6 Kvemo Kartli 67,2 Guria 54,4 Samegrelo-Zemo Svane� 43 Kakhe� 27,7 Samtskhe-Javakhe� 24,3 Mtskheta-M�ane� 16,7 Racha-Lechkhum-Kvemo Svane� 6,6

0 20 40 60 80 100 120 Source: National Statistics Office of Georgia

Distribution of population by urban and rural settlements The Samegrelo-Zemo Svaneti region has eight cities, two towns and 487 villages. According to Geostat data of 1 January 2019, 40% of regional population lives in urban areas and comprises 125 003 people. The remaining 60% lives in rural areas and their number makes up 191 192 people.

Social and economic conditions of the population According to Geostat, the share of employed people in the population aged 15 and above comprises 58% in the Samegrelo-Zemo Svaneti region. Among the employed people of the region, 65% is self-employed.

123 Figure 3. Share of self-employed population in the employed population by Georgia’s regions, 2018

Guria 74 Kakhe� 72 Samtskhe-Javakhe� 70 Samegrelo-Zemo Svane� 65 Shida Kartli 61 Mtskheta-M�ane� 59 Kvemo Kartli 58 Imere� ** 57 Adjara AR 52 Georgia 52 Tbilisi 16

0 10 20 30 40 50 60 70 80 Source: Geostat

The share of hired employees among the employees in the region comprises 35%.

Figure 4. Share of hired employees among employees by Georgia’s regions, 2017

Tbilisi 84 Georgia 48 Adjara AR 48 Imere� ** 43 Kvemo Kartli 42 Mtskheta-M�ane� 41 Shida Kartli 39 Samegrelo-Zemo Svane� 35 Samtskhe-Javakhe� 30 Kakhe� 28 Guria 26

0 10 20 30 40 50 60 70 80 90

Source: Geostat

An average monthly income per capita stands at GEL 256.4 in the Samegrelo-Zemo Svaneti region (2018 data). This indicator is well below the average indicator for Georgia (GEL 285).

124 Figure 5. Income per capita, 2018

0 40 80 120 160 200 240 280 320 360 Source: Geostat

In the revenues of population of Samegrelo-Zemo Svaneti region, cash revenues and remittances account for 87% while non-cash revenues for 13%. From cash revenues, the highest share, 42%, is the income from hired employment; pensions, scholarships and assistance account for 25.6%; self-employment accounts for 9.3%; cash received as gift comprises 9.1%; proceeds from the sale of agricultural produce make up 8.9%; remittances from abroad comprise 4.8%; and revenues from property (lease, interest on deposits) account for 1%.

Figure 6. Distribution of average monthly income of population in the Samegrelo-Zemo Svaneti region, 2018

Remi�ances from abroad Property (lease, interest on deposit) 4 1

Self-employment 8

Money received as gi� 8 Hired employment 36

Proceeds from agricultural products 8

Non-cash income 13

Pensions, scholarships, assistance 22 Source: Geostat

Much like in other regions of Georgia, the second largest component of income in Samegrelo-Zemo Svaneti is pensions, scholarships and assistance. The share of families registered for allowance comprises 35% of households in the Samegrelo-Zemo Svaneti region.

125 Figure 7. Share of families receiving allowance in households by regions

Shida Kartli 12 Kvemo Kartli 6 Samtskhe-Javakhe� 8 Samegrelo-Zemo Svane� 11 Mtskheta-mTiane� 12 Imere� 11 Kakhe� 11 Racha-Lechkhum-Kvemo Svane� 30 Guria 14 Adjara AR 8 Tbilisi 5 Georgia 9

0 4 8 12 16 20 24 28 32 Source: Geostat, healthcare and social security 2017; Geostat – general population census, 2014

Labor market – education and skills According to data of the 2017-2018 academic year, there are one private and one state higher educational institutions operating in the Samegrelo-Zemo Svaneti region. The Shota Meskhia State Teaching University of Zugdidi offers the following educational programs: Bachelor’s Degree programs: Business Administration; Primary Education; English Philology; History; Pub- lic Administration; Pharmacy; Georgian Language Training Program; Georgian Philology; Law; Teacher Training Program.6 Master’s Degree programs: Small Business Management; History of Georgian Literature; History of Geor- gia. According to 2018 data, there are eight vocational education institutions operating in the region. The Shota Meskhia State Teaching University of Zugdidi also implements the following vocational education programs: bank operator, bookkeeper, criminalist, IT specialist, office manager, computer networks and systems technician, dental technician, dancer, cook, electrician, carpenter, welder, plant grower, vegetable garden grower, veterinary service specialist, farmer, animal breeder. A vocational college “Tetnuldi” operates in Mestia and offers the following programs: restaurant administrator, cook, specialists of applied decorative textile, carpenter, guide, welder, bookkeeper-technician, accommodation specialist, electrician, IT support.7 The public college Pazisi, operating in Poti, trains students in the following vocations: bookkeeping, cashier (at bank, etc.), office manager (secretary-referent), hotel administrator, customs representative, electrician, engine mechanic, restaurant administrator, welder, low voltage electrician, sewing specialist, IT support, electrician, fishing, accounting. As of 2018-2019 academic year, there were 263 general educational schools in Samegrelo-Zemo Svaneti, with the total of 43 684 pupils enrolled.

Business activity According to Geostat data of 1 February 2019, there are 12 764 enterprises in Samegrelo-Zemo Svaneti. Eight of these enterprises (0.1%) are large, 79 (0.6%) are medium-sized and 12 089 (94.7%) small-sized enterprises while the size of 588 companies (4.6%) is not specified.

126 Figure 8. Distribution of business entities operating in the Samegrelo-Zemo Svaneti region by size Large Unspeciﬁed Medium 0,1 4,6 0,6

Small 94,7 Source: Geostat

By the legal form, the distribution of the enterprises is the following: 88.2% (11 253 companies) is an individual entrepreneur; 0.3% (34 companies) is cooperative; 0.2% is association, joint stock company and limited partnership each, comprising, respectively, 26, 25 and 20 companies.

Figure 9. Distribution of business entities operating in Samegrelo-Zemo Svaneti by legal form, 2019

Coopera�ve JSC 0,3 0,2 General Asso�a�on partnership 0,2 0,1 LLC 11

Individual enterpreneur 88,2

Source: Geostat

By sectors, the companies in the Samegrelo-Zemo Svaneti region are distributed as follows: the highest number of companies, much like in other regions, is concentrated in retail and wholesale trade and they comprise more than half of the companies – 51.6%. The second highest concentration of companies is seen in transportation and storage – 13.6%; the third sector by concentration is manufacturing with 9.1% share, followed by construction with 4.4% share; accommodation with 3.9% share; real estate activities at 3.3%; other service activities at 2.7%; human health and social work at 2%; and professional, scientific and technical activities at 1.9%. The remaining 7.4% of the companies is engaged in all other sectors.

127 Figure 10. Distribution of business entities operating in the Samegrelo-Zemo Svaneti region by sectors, 2019 Other 7 Proﬀessional, scien�ﬁc and technical ac�vi�es 2 Human health and social service ac�vi�es 2 Other service ac�vi�es 3 Construc�on 4

Real estate ac�vi�es 3 Accommoda�on and food service ac�vi�es 4 Wholesale and retail trade 52

Transporta�on and storage 14

Manufacturing 9 Source: Geostat

The distribution of companies among sectors by the size looks as follows: 38% of large companies is concentrated in transportation and storage, while 25% in manufacturing and education each. The largest number of medium-sized companies is in transportation and storage, comprising 27% of the category. Some 19% of medium-sized companies is engaged in manufacturing and 14% in human health and social work activities. As regards small-sized companies, they are mostly concentrated in three sectors: 52% is engaged in retail and wholesale trade, 13% in transportation and storage and 9% in manufacturing. Details on the distribution of companies among sectors by size is provided in the table below:

Samegrelo-Zemo Svaneti Sector S M L Total Wholesale and retail trade 52% 5% 13% 52% Transportation and storage 13% 27% 38% 14% Manufacturing 9% 19% 25% 9% Construction 4% 8% 0% 4% Accommodation 4% 0% 0% 4% Real estate activities 3% 0% 0% 3% Other service activities 3% 0% 0% 3% Human health and social work activities 2% 14% 0% 2% Professional, scientific and technical activities 2% 0% 0% 2% Financial and insurance activities 2% 0% 0% 2% Agriculture, forestry and fishing 1% 4% 0% 2% Administrative and support service activities 1% 6% 0% 1% Education 1% 5% 25% 1% Mining and quarrying 1% 0% 0% 1% Information and communication 1% 0% 0% 1% Arts, entertainment and recreation 0% 6% 0% 0% Water supply; Sewerage, Waste Management and Remediation 0% 3% 0% 0% Activities Public administration and defense; compulsory social security 0% 1% 0% 0%

128 PRIORITY SECTORS

The assessment model identified the following sectors in Samegrelo-Zemo Svaneti:

Samegrelo- Sector Zemo Svaneti Administrative and support service activities 0.378449153 Other service activities 0.264854007 Electricity, gas, steam and air conditioning supply 0.237123623 Transportation and storage 0.191740804 Wholesale and retail trade; repair of motor vehicles and motorcycles 0.151452522 Real estate activities 0.118657838 Arts, entertainment and recreation 0.104475608 Agriculture, forestry and fishing 0.085486582 Manufacturing 0.082442506 Accommodation and food service activities 0.074427353 Professional, scientific and technical activities 0.06260523 Information and communication 0.055787567 Mining and quarrying 0.047045883 Construction 0.044518838 Education 0.023534569 Human health and social work activities -0.003580116

To identify priority sectors, a thorough analysis of sectors and companies within them was carried out. The sector “Electricity, gas, steam and air conditioning supply” was excluded from priority sectors for a number of reasons: it transpired that the operation of three companies in this sector was suspended. Furthermore, this sector depends on the implementation of gasification of population by the state and only few companies operate there. The sector “Arts, entertainment and recreation” was also removed from the list as this sector mainly consists of sports clubs and gambling games providers. Also, bearing in mind the scope of the study, the sector of trade was removed from the list. With these corrections, the list of priority sectors in Samegrelo-Zemo Svaneti looks as follows: 1. Administrative and support service activities 2. Other service activities 3. Transportation and storage 4. Real estate activities 5. Agriculture, forestry and fishing To identify priority subsectors within these sectors, the concentration of companies in subsectors was eval- uated. The results of this analysis are provided below:

Administrative and support service activities

The majority of companies in this sector are engaged in rental and leasing activities, more specifically, in renting and leasing of cars and light motor vehicles, and renting and leasing of construction and civil engineering machinery and equipment. This is followed by “Services to buildings and landscape activities” where the companies basically offer “general cleaning of buildings.” Some 15% of the companies represents travel agencies.

Other service activities The majority of the companies in this sector, 77%, is hairdressing and beauty parlors; 18% is engaged in the repair of computers, watches, clocks and jewelry as well as personal goods.

129 Transportation and storage The majority of the companies in this sector, 74%, is engaged in land transportation, more specifically in urban and suburban passenger land transport, and freight transport by road. As regards storage, it accounts for 26% of the companies and the majority of companies in this subsector is engaged in other support activities for transportation.

Real estate activities The majority of companies in this sector is mainly engaged in renting and operating of own or leased real estate.

Agriculture, forestry and fishing In this sector, 60% of companies is concentrated in “Crop and animal production, hunting and related service activities.” The structure of this subsector looks as follows: 35% of companies is engaged in growing of fruit, berries and citrus; 23% is engaged in support activities to agriculture, 17% in raising of animals and 12% in growing of non-perennial crops. Since tourism is a sector of strategic importance for Georgia, the sector “Accommodation and food service activities” was also included in the list of priority sectors. Although manufacturing did not make it into the list of priority sectors, it is still important to analyze it in order to see where added value may be created.

Manufacturing Like in other regions, the majority of companies in this sector is concentrated in food manufacturing. The majority of companies in food manufacturing (39%) is engaged in the processing and preserving of fruit and vegetables. This is a rather interesting data and differs from all those regions where the majority of companies in food manufacturing is engaged in the manufacture of bakery and pastry goods. The share of companies manufacturing bakery and pastry goods in Samegrelo-Zemo Svaneti stands at 34%. 9% of companies manufactures flour while 10% manufactures seasonings. Ten percent of companies in manufacturing sector manufacture rubber and plastic products, 9% manufactures non-metallic products while 8% furniture. As regards interesting information obtained through interviews conducted with entrepreneurs, excperts from the interviews are provided below and they suggest several interesting ideas: “By the way, I have not though of building a business, but I would like to see a more smoothly running service centers, higher quality spare parts and at affordable prices, and also lower prices on fuel,” individual entrepreneur Irakli Dolbaia; passenger transportation. “I would like to see locally produced fish feed. Since this is not available, we have to import it from the Netherlands. However, fish powder manufactured here is exported to Turkey, then the Netherlands buys it and then we have to buy it from, so to say, the third hand at tenfold price,” cooperative Jogho, agriculture. “It would be good to have special fish feed produced locally,” Poreji 1 LLC, freshwater aquaculture. “We import bottles and containers from abroad; it would be good to have them available locally,” Mada LLC, processing of fruit and vegetables. “There are companies that help us with tractors to cultivate the land, but every time I needed it, I was unable to get this service as they were either broken or had other problems; it would be good if anyone takes care of that problem. The situation is very bad in terms of tractor service. This sphere needs to be put to rights,” Kolkhuri Company LLC, support activities to agriculture.

130 KAKHETI

131 KAKHETI

GENERAL DESCRIPTION OF THE REGION

Location Kakheti is an easternmost region of Georgia. It borders with the Russian Federation to the north, the Republic of Azerbaijan to the east and south. The territory of Kakheti comprises 11,310 thousand square kilometers, which is 17.5% of Georgia’s territory and the largest among the regions of Georgia. The location of Kakheti, namely, its proximity to Tbilisi and the common border with the Republic of Azerbaijan, define the role of transport artery of this region and create a favorable ground for economic cooperation between the two countries.1

Administrative arrangement The region has nine cities (Akhmeta, Gurjaani, Dedoplistskaro, Telavi, Lagodekhi, Sagarejo, Signagi, Kva- reli, Tsnori) and 276 villages. The administrative center is Telavi. There are eight administrative units in Kakheti. The Kakheti region includes the following municipalities: 1. Akhmeta 2. Gurjaani 3. Dedoplistskaro 4. Telavi 5. Lagodekhi 6. Sagarejo 7. Signagi 8. KvarelI

Natural environment The climate of Kakheti is transitional between humid subtropical and continental climates. The region is influenced by dry Middle Asian, Caspian Sea air masses as well as humid Black Sea air masses. An average temperature in winter is 0°C while in summer it reaches +23-30°C. The Kakheti region is separated from the Russian Federation by a high Caucasus range. A much lower range of Gombori runs from west to east in the middle of the region. Alazani Valley is situated between the

1 Source: Development Strategy of Kakheti region 2014-2021.

132 ranges, which is crossed by one of the region’s two main rivers, Alazani. The second main river, Iori, flows on the southern side of the Gombori Range, which also runs from west to east, forming the Iori Valley. The two ranges, two rivers and two valleys determine peculiarities and potential of agriculture of the Kakheti region and distinguishe Kakheti from other regions of Georgia. Around 11%-12% of Georgia’s woodlands is in Kakheti. Thirty percent of Kakheti’s territory is covered with forests and by this indicator, the region is the third in Georgia. As much as 98% of forests of the region belongs to mountainous category and is of immense ecological and economic importance. Some 85% of forests is deciduous dominated by beech, oak and hornbeam. The upper section of Alazani Valley also contains maple, poplar, alder, chestnut and yew. The forests, in general, grow at 500-2000 meters above the sea level, with the alpine zone starting from that point. Kakheti is an agricultural region with the main activity being viticulture. There are about 80 species of vine in Kakheti. There are some oil reserves in Sagarejo and Dedoplistskaro municipalities.2

Tourism and resorts Kakheti is rich in historic and cultural monuments and heritage, unique culinary and wine artefacts, making the region a tourism attraction which is further facilitated by the proximity to Tbilisi and favorable location for transportation. More than 30 hotels operate in the region, including famous hotel brands. The accommodation price in the region ranges between GEL 10-15 and GEL 350.3 The Kakheti region is also home to many protected territories and nature reserves. Namely, the Akhmeta municipality is home to Batsara-Babaneuri Nature Reserve and Ilto Managed Reserve. Akhmeta municipality also contains Tusheti State Nature Reserve which is part of Tusheti Protected Area and is especially rich in historic and cultural sites.4,5 One should also mention the Lagodekhi Protected Areas. Kakheti is also rich in museums of historic or other importance. There are house museums of Nato Vachnadze, Ioseb Noneshvili and other public figures.6 The entire Kakheti region and the Mta-Tusheti district falling within it are distinguished for culinary diversity and uniqueness: various grape species and accordingly, wines; khinkali (meat dumpling); dambalkhacho (cheese) which is on the UNESCO intangible cultural heritage list. Khinkali, Kakhuri shoti (bread), guda (goat) cheese and other unique gastronomic products make the Kakheti regions especially attractive from the perspective of culinary tourism. In recent times, the Kakheti region has seen a rapid development of tourist locations, local wine cellars, hotels and vineyards/chateaus. From among resorts especially worth noting is Akhtala with its dry climate, warmth and lack of humidity. The healing mud available in the resort is called Akhtala.7 Ujarma is yet another noteworthy resort, which is in Sagarejo municipality and represents a balneological resort. Christian and historic monuments add special tourism value to the Kakheti region. The region is home to famous monuments such as Davit Gareji Monastic Complex, Alaverdi Monastery, Ikalto Academy, Shuamta Monastery, Bodbe Monastery and other monuments of cultural heritage.

Natural resources Along with freshwater resources, forests are main natural resources of the Kakheti region, providing the local population with firewood, construction materials, non-wood forest products as well as large and small game. There are also the following natural resources available in Kakheti: various types of limestone (cement, lime, gravel, sand), brick clay, porphyrite breccia, roofing schist, marble, sandstone, marbled limestone.8

2 http://kakheti.gov.ge/geo/static/87/regions/ 3 http://gov.ge/files/275_38368_341843_136617.09.13%E2%80%931.pdf 4 http://apa.gov.ge/ge/protected-areas/cattestone/tushetis-daculi-teritoriebis-administracia/tushetis-daculi-teritoriebis-damatebiti-girsshesan- ishnaobani 5 http://akhmeta.gov.ge/ge/nakrzalebi-da-daculi-teritoriebi?person=1 6 http://www.gurjaani.ge/tourism/ 7 http://www.gurjaani.ge/tourism/ 8 http://akhmeta.gov.ge/ge/bunebrivi-resursebi

133 MACRO INDICATORS OF THE REGION

Demography Population and density According to Geostat data of 1 January 2018, the population of Kakheti comprises 8.44% of Georgia’s population, which amounts to 314 681 people.

Figure 1. Population by regions

0 2 4 6 8 10 12 14

Source: Geostat

Eighteen percent of the region’s population lives in Telavi municipality, making up 56 700 residents. The second largest municipality by population is Gurjaani with 53,100 people that is 17% of the region’s population while the third largest by population is Sagarejo municipality – 52 300 and 17%, respectively. Lagodekhi municipality counts 41 400 residents, i.e. 13%. Akhmeta and Kvareli municipalities each count 10% of the region’s population, which amounts to 30 000 people in each municipality. The population of Signagi municipality comprises 9% of the regional population, which is 29 700 people; the smallest by the population is Dedoplistskaro municipality – 21 100 residents, that is 7% of the regional population.

Table 2. Population in municipalities of the Kakheti region

Quantity Share in Georgia’s Share in region’s Municipality (thousand) population population Kakheti 314.7 8.4% Akhmeta municipality 30.2 0.8% 10% Gurjaani municipality 53.1 1.4% 17% Dedoplistskaro municipality 21.1 0.6% 7% Telavi municipality 56.7 1.5% 18% Lagodekhi municipality 41.4 1.1% 13% Sagarejo municipality 52.3 1.4% 17% Signagi municipality 29.7 0.8% 9% Kvareli municipality 30.3 0.8% 10% Source: National Statistics Office of Georgia, 1 January 2018

The density of population in the Kakheti region is 27.7 per square kilometer.

134 Figure 2. Population density

Adjara AR 119,4 Imere� 79 Shida Kartli 75,6 Kvemo Kartli 67,2 Guria 54,4 Samegrelo-Zemo Svane� 43 Kakhe� 27,7 Samtskhe-Javakhe� 24,3 Mtskheta-M�ane� 16,7 Racha-Lechkhum-Kvemo Svane� 6,6

0 20 40 60 80 100 120 Source: National Statistics Office of Georgia

Distribution of population by urban and rural settlements There are nine cities and 276 villages in the Kakheti region. According to Geostat data of 1 January 2019, 23% of the region’s population lives in urban settlements, which amounts to 71 000 people. Rural residents comprise 241 500 people. An average indicator of rural population in Georgia is 43.6% while the share of rural residents in the Kakheti region well exceeds the average country indicator and reaches 77%.

Social and economic conditions of the population The share of employed population in Kakheti significantly exceeds Georgia’s average indicator (56.65%) and comprises 71.38% (share of employed people aged 15 and over). However, 51.47% of employees is self-employed people.

Figure 3. Share of self-employed population in the total employed population, 2018

Guria 74 Kakhe� 72 Samtskhe-Javakhe� 70 Samegrelo-Zemo Svane� 65 Shida Kartli 61 Mtskheta-M�ane� 59 Kvemo Kartli 58 Imere� ** 57 Adjara AR 52 Georgia 52 Tbilisi 16

0 10 20 30 40 50 60 70 80 Source: Geostat

As regards the share of hired employees among the employed people, it is quite low in the Kakheti region and comprises 27.84% of employed population.

135 Figure 4. Share of hired employees, 2017

Tbilisi 84 Georgia 48 Adjara AR 48 Imere� ** 43 Kvemo Kartli 42 Mtskheta-M�ane� 41 Shida Kartli 39 Samegrelo-Zemo Svane� 35 Samtskhe-Javakhe� 30 Kakhe� 28 Guria 26

0 10 20 30 40 50 60 70 80 90

Source: Geostat

By per capita income, the Kakheti region is GEL 287, which is a little bit higher that the average indicator of Georgia (GEL 285).

Figure 5. Income per capita, 2018

0 40 80 120 160 200 240 280 320 360

Source: Geostat

Cash revenues account for 87% of all revenues of Kakheti’s population, of which 35% is revenue from hired employment; 27% is from pensions, scholarships and assistance; 18% is proceeds from sale of agricultural products; 10% is self-employment revenues; 7% is money received as gift, 2% is remittances from abroad and 1% is income from property (lease, interest on deposits).

136 Figure 6. Distribution of average monthly cash revenues of population in Kakheti, 2017 Remi�ances from abroad Property (lease, interest on deposit) 2 1

Self-employment 10

Money received as gi� 7 Hired employment 35

Proceeds from agricultural products 18

Pensions, scholarships, assistance 27 Source: Geostat

The second largest source of income of the population is pensions, scholarships and assistance with 23% share, which indicates about a grave economic situation in the region. At the same time, the share of families registered for allowances in the Kakheti region reaches 40% of all households.

Figure 7. Share of families receiving allowance in total households by regions

Shida Kartli 12 Kvemo Kartli 6 Samtskhe-Javakhe� 8 Samegrelo-Zemo Svane� 11 Mtskheta-mTiane� 12 Imere� 11 Kakhe� 11 Racha-Lechkhum-Kvemo Svane� 30 Guria 14 Adjara AR 8 Tbilisi 5 Georgia 9

0 4 8 12 16 20 24 28 32

Source: Geostat, healthcare and social security 2017; Geostat – general population census, 2014

Labor market – education and skills According to the data of 2017-2018 academic year, there were one state and two private higher educational institutions. The Iakob Gogebashvili Telavi State University provides studies on all three educational levels through five faculties: faculty of humanities, faculty of agricultural science, faculty of educational sciences, faculty of exact and natural sciences, faculty of social sciences, business and law. The university also provides vocational education in the following vocations: preschool caregiver-pedagogue, specialist of applied decorative textiles, and felt master.9 According to the data of the same period, three private and three public vocational education institutions

137 operate in the Kakheti region, enrolling the total of 1121 students, including 449 women and 672 men. The number of teachers in these vocational institutions comprises 224 of which 161 are women and 63 are men. The vocational education institutions mainly offer programs related to wine making and agriculture. For example, the college Aisi in Kachreti offers training in the following vocations: viniculture, fruit growing, fishing, animal husbandry, forestry, bee farming, IT, electrical works, tiling works, stone works, assemblage of plaster-cardboard constructions, tour operator, guide of cultural heritage, practicing nurse, pharmacy assistant, hairdresser, felt master, etc. The list of studies offered by the college Prestige in Telavi is also quite diverse: veterinary service specialist (small animals, agricultural animals and birds, exotic animals, birds and fishes, etc.); wine maker; cook (second level), cook (third level), computer networks and systems technician, IT specialist, office manager (secretary-referent), bookkeeper, electrician, tiling master, plumber-sanitation systems technician, carpenter, felt master, hairdresser (women and man), hotel administrator, guide, milk processing. The college Farmers’ School in Sagarejo is entirely specialized in agricultural activities. As of 2018-2019 academic year, there were 193 general educational schools in Kakheti with the total of 42 707 pupils enrolled in them.

Business activity According to Geostat data of 1 February 2019, as many as 10 755 business entities operate in the Kakheti region, of which 94.2% (10135 companies) is small-sized, 0.5% (56 companies) is medium-sized and only 0.1% (eight companies) is large enterprise. The size of 5.2% of the business entities (556 companies) is not specified.

Figure 8. Distribution of business entities operating in Kakheti by size Large Unspeciﬁed 0,1 Medium 5,2 0,5

Small 94,2 Source: Geostat

By a legal form, companies operating in Kakheti are distributed as follows: the majority of companies, 86.4% (9290 companies) is individual entrepreneur; 12.6% (1360 companies) is a limited liability company; 0.4% (385 companies) is association; 0.2% (25 companies) is a cooperative; also 0.22% (22 companies) is a limited partnership; 0.1% (16 companies) is a joint stock company and 0.04% (four companies) is a branch of foreign company.

138 Figure 9. Distribution of business entities operating in the Kakheti region by legal form, 2019 Coopera�ve JSC General partnership 0,2 0,1 0,2 Branch of Asso�a�on foreign 0,4 company 0,1 LLC 12,6

Individual enterpreneur 86,4 Source: Geostat

The distribution of companies among sectors in Kakheti differs from other regions. In contrast to other regions, companies operating in Kakheti, considering the specifics of the region, are largely concentrated in viniculture. In particular, the break-down of business by sectors is the following: the highest share of companies, 60.7%, is engaged in retail and wholesale trade. The second sector by the concentration of companies is manufacturing, with 11.4% of the companies operating there and grape processing being a leading activity. The third sector is accommodation and food service activities with the share of companies at 3.8%, as well as transportation and storage also at 3.8%; these are follower by construction – 3.5%; agriculture, forestry and fishing – 2.9%; other service activities, real estate activities at 2.3% each; professional, scientific and technical activities – 1.9%. Companies in all other sectors comprise 7.3% in total.

Figure 10. Distribution of business entities operating in the Kakheti region by sectors, 2019 Proffessional, scien�fic and technical ac�vi�es Other 1,9 7,3 Real estate ac�vi�es 2,3 Other service ac�vi�es 2,4 Agriculture, forestry and fishing ac�vi�es 2,9 Construc�on 3,5

Accommoda�on and food service ac�vi�es 3,8

Transporta�on and storage 3,8

Wholesale and retail trade 60,7 Manufacturing 11,4

Source: Geostat

As regards the distribution of companies among sectors by their size, it looks as follows: 50% of large companies is concentrated in manufacturing, 37.5% in education and 12.5% in electricity, gas, steam and air conditioning supply. The majority of medium-sized companies, 26.79%, is also concentrated in manufacturing; 16.07% in construction and 10.71% in arts, entertainment and recreation. Small-sized companies are concentrated mainly in three sectors: wholesale and retail trade – 61.17%; manufacturing – 11.28%; transportation and storage, and accommodation and food service activities – 3.81 each.

139 Kakheti Sector S M L Total Agriculture, forestry and fishing 2.89% 5.36% 0.0% 2.9% Mining and quarrying 0.43% 3.57% 0.0% 0.5% Manufacturing 11.28% 26.79% 50.0% 11.4% Electricity, gas, steam and air conditioning supply 0.01% 0.00% 12.5% 0.0% Water supply; Sewerage, Waste Management and 0.17% 5.36% 0.0% 0.2% Remediation Activities Construction 3.42% 16.07% 0.0% 3.5% Wholesale and retail trade; repair of motor vehicles and 61.17% 8.93% 0.0% 60.7% motorcycles Transportation and storage 3.81% 0.00% 0.0% 3.8% Accommodation and food service activities 3.81% 3.57% 0.0% 3.8% Information and communication 0.69% 0.00% 0.0% 0.7% Financial and insurance activities 0.76% 0.00% 0.0% 0.8% Real estate activities 2.28% 1.79% 0.0% 2.3% Professional, scientific and technical activities 1.90% 0.00% 0.0% 1.9% Administrative and support service activities 1.58% 0.00% 0.0% 1.6% Public administration and defense; compulsory social security 0.10% 1.79% 0.0% 0.1% Education 1.01% 1.79% 37.5% 1.1% Human health and social work activities 1.73% 8.93% 0.0% 1.8% Arts, entertainment and recreation 0.55% 10.71% 0.0% 0.6% Other service activities 2.41% 5.36% 0.0% 2.4% Activities of households as employers; undifferentiated goods 0.00% 0.00% 0.0% 0.0% and services producing activities of household for own use Activities of extraterritorial organizations and bodies 0.00% 0.00% 0.0% 0.0%

PRIORITY SECTORS

As mentioned in the study methodology, a special model was applied to assess sectors. By this model, the sectors in Kakheti were assessed as follows:

N Sector Kakheti 1 Water supply; Sewerage, Waste Management and Remediation Activities ------2 Wholesale and retail trade; repair of motor vehicles and motorcycles 0.252068787 3 Manufacturing 0.237973971 4 Professional, scientific and technical activities 0.216096126 5 Education 0.201848794 6 Transportation and storage 0.191899209 7 Arts, entertainment and recreation 0.16301886 8 Accommodation and food service activities 0.148869515 9 Information and communication 0.131807696 10 Real estate activities 0.1255033 11 Construction 0.107689214 12 Agriculture, forestry and fishing 0.093022834 13 Other service activities 0.079560128 14 Mining and quarrying 0.069402172 15 Human health and social work activities 0.067667089 16 Administrative and support service activities 0.018084199 17 Electricity, gas, steam and air conditioning supply 0.003691123

140 By existing level and potential of development, the assessment model identified the following sectors: 1. Wholesale and retail trade; repair of motor vehicles and motorcycles 2. Manufacturing 3. Professional, scientific and technical activities 4. Education 5. Transportation and storage 6. Arts, entertainment and recreation 7. Accommodation and food service activities The sector of wholesale and retail trade was excluded from the list based on interview with the Enterprise Georgia Agency: upon the agreement with the agency, the objective of the study was to identify sectors except trade and primary agricultural production. As a result of detailed analysis, the arts, entertainment and recreation sector was included in the tourist cluster. The structure of sectors was studied thoroughly to assess the potential of sectors and their subsectors. For the detailed analysis, the number of companies in a sector was used. The result of the analysis is provided in table 4. Since manufacturing is the largest sector, it needs to be studied at the level of subsectors. Major subsectors of the manufacturing are listed in the Table 3 below:

Table 3. Subsectors of the manufacturing sector

Subsector 1 Manufacture of food products 32% 2 Manufacture of beverages 22% 3 Manufacture of rubber and plastic 12% 4 Manufacture of non-metal mineral products 8% 5 Manufacture of furniture 6%

It was important for the study to identify the concentration of companies in activities of each subsector. In manufacture of food products, companies are mainly concentrated in the following activities:

– Manufacture of bakery and pastry goods – Manufacture of dairy products – Processing and preserving of meat and production of meat products – Manufacture of grain mill products, starches and starch products – Processing and preserving of fruit and vegetables

In the manufacture of beverages there are two major activities: manufacture of wine and manufacture of beer. Leading activity in the manufacture of rubber and plastic, much like in other regions, is the manufacture of builders' ware of plastic. As regards the manufacture of non-metal mineral products, the leading activities here are the manufacture of concrete, cement and plaster, and cutting, shaping and finishing of stone. Detailed information on promising sectors is provided in Table 4 below.

141 Table 4. Promising sectors, subsectors and activities

Sector Subsector Activities Manufacture of bakery and pastry goods Manufacture of dairy products Processing and preserving of meat and production Manufacture of food products of meat products Manufacture of grain mill products, starches and starch products Processing and preserving of fruit and vegetables Manufacture of wine Manufacturing Manufacture of beer Manufacture of beverages Manufacture of other non-distilled fermented beverages Manufacture of rubber and Manufacture of builders' ware of plastic plastic products Manufacture of builders' ware of plastic Manufacture of other Cutting, shaping and finishing of stone non-metallic mineral products Manufacture of cement, limestone and plaster Manufacture of furniture Architectural and engineering Architectural activities activities; technical testing Engineering activities and related technical and analysis consultancy Accounting, bookkeeping and auditing activities; Professional, Legal and accounting tax consultancy scientific and activities Other legal activities technical activities Advertising and market Advertising agencies research Other professional, scientific Photographic activities and technical activities Translation and interpretation activities Educational centers, training

centers Driving school activities Education Cultural education General primary and

secondary education Vocational education Land transport and transport Urban and suburban passenger land transport via pipelines Freight transport by road Transportation and Service activities incidental to land transportation storage Warehousing and support Support activities for transportation activities for transportation Warehousing and storage Hotels and similar accommodation with restaurants Accommodation Accommodation Hotels and similar accommodation without and food service restaurants activities Food and beverage service Restaurants and mobile food service activities activities Other food service activities

The listed sectors may be grouped into three clusters:  Cluster of food service activities which will include: Manufacture of bakery and pastry goods; Manu- facture of dairy products; Processing and preserving of meat and production of meat products; Man- ufacture of grain mill products, starches and starch products; Processing and preserving of fruit and vegetables; Accommodation; Food and beverage service activities; transportation and warehousing.

142  Cluster of vocational education: Manufacture of food products; Manufacture of wine; Education; Ac- commodation.  Tourism cluster which will include: Manufacture of food products; Arts, entertainment and recreation; Accommodation and food service activities. Opportunities for micro and small enterprises in those sectors that are listed in Table 4 are in the following areas:  Diversification of products  Diversification of services  Cross-sectoral development  Vertical development

Noteworthy information obtained from interviews The interviews with the Kakheti government provided the following information about the development of sectors and major trends: “Agriculture and primarily, viniculture represent the priority sector among economically profitable sectors for the region. New vineyards have been built and developed intensively, quality of wine have been improving and export potential enhancing, many new small and medium winemakers have been emerging, the sector has been becoming self-sustainable and has not required subsidies from the state for several years now. It becomes increasingly profitable. “The second agricultural activity, also interesting and promising, is growing of nuts – almonds, pistachios that have been intensively planted and are the cultures that give high yield. Moreover, these trees are planted on such soil that is useless for vineyard and accordingly, unused. “Yet another interesting trend is growing and processing olive. Olive tree orchards are being built intensively. “Fruit and vegetable growing is a traditional agricultural activity. Local farmers grow and sell seasonal fruits (watermelon, peach, melon, etc.) “Animal husbandry and specifically, raising of sheep is one of export products. At this stage there is no local wool processing, but wool is exported to factories in Ukraine and Italy.” Interviews with representatives of the private sector revealed the following business opportunities in Ka- kheti: – Manufacture of grape concentrate – Raising of meat animals – Local manufacture of material needed for plastic builders’ wear – Supply and installation, repair of machinery for crashing gravel – Bottle corks, local sorting – Manufacture of linen for hotels and restaurants.

143 SUMMARY

This chapter sums up the study conducted to identify priority sectors in nine regions and overviews the European experience of small and medium enterprises.

PRIORITY SECTORS IN NINE REGIONS OF GEORGIA

The study conducted in nine regions of Georgia, the methodology of which is provided in Annex 1, revealed the sectors that are leaders by various indicators. Table 1 provides a summary of the study results:

Table 1. Priority sectors identified in nine regions of Georgia

Guria Adjara Imereti Kakheti Svaneti Shida Kartli Kvemo Kartli Samegrelo-Zemo Mtskheta-Mtianeti Racha-Lechkhumi and Kvemo Svaneti Samtskhe-Javakheti Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas, steam and air

conditioning supply Water supply; Sewerage, Waste

Management and Remediation Activities Construction Wholesale and retail trade; repair of

motor vehicles and motorcycles Transportation and storage Accommodation and food service

activities Information and communication Real estate activities

144 Professional, scientific and technical

activities Administrative and support service

activities Education Human health and social work activities Arts, entertainment and recreation Other service activities

Often, similar sectors are developed in regions. However, differences are observed on the level of subsectors; for example, while one region specializes in fruit processing, another is engaged in dairy production. Interestingly, manufacture of plastic is developed in every region mainly the manufacture of doors and windows. This trend suggests a possibility of amalgamation. The sector “Accommodation and food service activities” was put on the list of priority sectors in the Shida Kartli and the Samegrelo-Zemo Svaneti regions because, despite weak indicators (relative to those of other sectors), tourism is a strategic sector for the country and each region. The sectors that did not make it into priority sectors of any region are: 1. Mining and quarrying 2. Electricity, gas, steam and air conditioning supply 3. Water supply; Sewerage, Waste Management and Remediation Activities 4. Information and communication Support to the development of these sectors, with the exception of information and communication, exceeds the scope of microgrants program. However, the microgrants program may be conducive to the development of the sectors in the regions such as technologies and computer sciences. If the microgrants program identifies this sector as a priority, it will be advisable to first evaluate a convergence with the programs of Georgia's Innovation and Technology Agency and whether it will be effective to use resources of two agencies for the achievement of a similar goal.

RATIONALE OF THE STUDY

The study identified those sectors that represent important sectors by employment, turnover, intermediate consumption, added value, investments, average salary and the concentration of companies in a sector. The study reflects the status quo of the sectors as well as their growth by the abovementioned indicators. Clearly, the study cannot reflect those sectors and subsectors that do not exist in regions at all. However, if favorable conditions are created, they may emerge, develop and perform an important role in the growth of economy, employment and welfare. The existing ecosystem is the basis of diversification of the sectoral structure of economy – the emergence and development of new sectors. Essential structural changes in the sectors of economy mainly occur as a result of investments, state economic policy (industrial policy) or educational reforms. Structural problems existing in regions do not create a fertile ground for starting up innovative business. Regions still face infrastructural problems such as water, electricity, natural gas supply, roads, communi- cations. Furthermore, qualified workforce is in shortage in the majority of regions; there are no vocational education institutions and the market is not supplied with innovative knowledge that may encourage the emergence of a new sector. Besides, the global experience shows that small and medium business, especially in countries like Georgia, find it very difficult to contribute to the country’s economy in terms of innovations, technological progress and novelty. Bearing in mind the above described systemic problems, this objective is even more difficult to fulfill for small and medium entrepreneurs in the regions of Georgia. Without a clear-cut industrial policy, it is impossible to identify and prioritize such sectors that do not exist in regions in any form today. However, Georgia lacks such policy and vision. In the absence of such policy, the identification of sectors for microfinancing aims, which are not developed in the regions at all, would be sporadic and out of context and probably, doomed to failure: the development of a new sector requires a relevant ecosystem and availability of components necessary for the development of a sector. It is for this very reason that we deemed it suitable to identify within this study only those sectors that are already developed to some extent and are developing in the regions.

145 RECOMMENDATIONS FOR MICROGRANTS PROGRAM

For the microgrants program to encourage diversification of small and medium business and innovations in the regions, we recommend that when considering applications in the sectors identified by the study, preference is given to those applicants who intend to do the following in a priority sector:  Diversification of products  Diversification of services  Cross-sectoral development  Vertical development This will decrease risk factor of the sector, on the one hand, and on the other hand, allow to encourage innovations in the sector.

THE EUROPEAN APPROACH TO THE DEVELOPMENT OF SMALL AND MEDIUM BUSINESS

The European Union pays a heightened attention to the development of small and medium entrepreneurship. Main objectives in this area are: – Creating favorable environment for business – Promoting entrepreneurship – Facilitating access to new markets and internationalization – Facilitating access to financing – Supporting SME in the areas of competition and innovations – Supporting SME in networking and providing them with critical information – Supporting growth of start-ups and companies Funding for SME is available under various programs and initiatives. Small Business Act (SBA) and Entre- preneurship 2020 Action Plan are designed to assist SME development. The EU support SME development through several strategies: – Creation of favorable environment for business – Promotion of entrepreneurship – New market access and vision of internationalization – Facilitation of access to financing – SME support in the areas of competition and innovations – Creation of SME support networks and provision of critical information – Support of growth of start-ups and companies The EU pursues a multi-sectional, integrated approach to SME development, though its policy does not consider differences between SMEs of new and old members. Majority of SME in the EU countries is a micro enterprise. They take up business in order to survive. Such business, as a rule, is unable to make a substantial contribution to innovative development of economy. The SME structure in Georgia is similar to this trend and consequently, it is unrealistic to expect any extraordinary innovations from it. Around ¾ of European SMEs is concentrated in five leading sectors. These sectors are: Wholesale and retail trade; Manufacturing; Construction; Service: and Accommodation and food service activities. By added value, employment and the number of enterprises, the most important sector for medium-sized enterprises is manufacturing while trade is for small and micro enterprises. The majority of SME, especially micro enterprises, serve the local markets. Only a small number of them operate on the international market or offer innovations. The tendency that a size of company largely de- termines its capacity to enter the international market is seen not only in Europe but also across the world.

146 It is noteworthy that innovative and technological capacities of SMEs differ in old and new EU member states. SMEs of old EU member states are more prepared to use financial and technical support of the EU. This difference stems from systemic shortcomings in new EU member states, such as shortage of skills and technologies.

FINANCIAL SUPPORT TO SME IN THE EU

The EU provides financial assistance to SMEs via local financial institutions. Forms of financing vary – loan, guarantee, capital financing, grant. In the majority of cases, decision on the amount, term, interest rate and other conditions of financing is taken by local financial institutions – venture funds, business angels, social investors. Funding programs are mainly implemented by the European Investment Bank (EIB) and the European Investment Fund (EIF). There is basically no sectoral restriction on SME financing. However, main criteria include green energy, innovation, technological novelty, sustainable economic development – these criteria are in line with the EU strategic development, UN sustainable development goals.

147 ANNEXES ANNEX 1. PRIORITY SECTORS, GURIA

Sector Subsector Subsector activities Rental and leasing of trucks Rental and leasing of other personal and Rental and leasing activities household goods Renting and leasing of agricultural machinery Administrative and and equipment support service Combined facilities support activities Services to buildings and activities General cleaning of buildings landscape activities Landscape service activities Travel agency, tour operator and other reservation service and Travel agency activities related activities Processing and preserving of fruit and vegetables Manufacture of food products Manufacture of bakery and pastry goods Manufacture of other food products Manufacture of rubber and Manufacture of builders' ware of plastic plastic products Manufacture of glass and glass products Manufacturing Manufacture of other Manufacture of articles of concrete, cement and non-metallic mineral products plaster Cutting, shaping and finishing of stone Manufacture of metal structures Manufacture of fabricated Forging, pressing, stamping and roll-forming of metal products, except metal; powder metallurgy machinery and equipment Manufacture of other fabricated metal products Legal activities Legal and accounting activities Professional, Accounting, bookkeeping and auditing scientific and activities; tax consultancy technical activities Architectural and engineering Architectural and engineering activities and activities; technical testing and related technical consultancy analysis Technical testing and analysis Construction of residential and non-residential Construction of buildings buildings Construction of roads and railways Civil engineering Construction of engineering projects Construction Other specialized construction activities Electrical, plumbing and other construction Specialized construction installation activities activities Demolition and site preparation Building completion and finishing Creative, arts and entertainment

Arts, entertainment activities and recreation Sports activities and amusement

and recreation activities Accommodation Accommodation and food service Restaurants and mobile food

activities service activities

149 ANNEX 2. PRIORITY SECTORS, IMERETI

Arts, entertainment activities and recreation Sports activities and amusement Sports activities and recreation activities Amusement and recreation activities Other service Hairdressing and other beauty treatment Other personal service activities activities Physical well-being activities Land transport and transport via Urban and suburban passenger land transport Transportation and pipelines Freight transport by road storage Warehousing and support

activities for transportation Development of construction projects Construction of buildings Construction of residential and non-residential buildings Construction of roads and railways Civil engineering Construction of engineering projects Other civil engineering projects Construction Demolition and site preparation Electrical, plumbing and other construction Specialized construction installation activities activities Building completion and finishing Renting of construction machinery and equipment with operator

150 ANNEX 3. PRIORITY SECTORS, SHIDA KARTLI

Sector Subsector Subsector activities Processing and preserving of meat and production of meat products Processing and preserving of fruit and Manufacture of food products vegetables Manufacture of grain mill products, starches and starch products Manufacture of bakery and pastry goods Manufacture of wood and of Sawmilling and planing of wood products of wood and cork, Manufacturing except furniture; manufacture Manufacture of products of wood, cork, straw of articles of straw and plaiting and plaiting materials materials Manufacture of rubber and Manufacture of builders' ware of plastic plastic products Manufacture of cement Manufacture of other Manufacture of concrete products for non-metallic mineral products construction purposes Cutting, shaping and finishing of stone Manufacture of furniture Architectural and engineering Architectural and engineering activities and activities; technical testing and related technical consultancy Professional, analysis scientific and Legal and accounting activities technical activities Advertising and market research Advertising agencies Other professional, scientific and Photographic activities technical activities Renting and leasing of cars and light motor Rental and leasing activities vehicles Rental and leasing of trucks Administrative and support service Travel agency, tour operator and activities other reservation service and Tour operator activities related activities Services to buildings and Cleaning activities landscape activities Other service Personal service activities Hairdressing and other beauty treatment activities Land transport and transport via Urban and suburban passenger land transport Transportation and pipelines Freight transport by road storage Warehousing and support Warehousing and storage activities for transportation

151 ANNEX 4. CONDUCTED INTERVIEWS, GURIA, IMERETI, SHIDA KARTLI

Private sector 1. JSC sewing company Imeri – Imereti 2. JSC microfinance organization Krystal – Imereti 3. LLC Gazservisi – Imereti 4. LLC Unix Development Aghmashenebeli – Imereti 5. LLC Danama – Imereti 6. LLC Resort Sairme – Imereti 7. LLC Tskaltubo Plaza – Imereti 8. LLC Imereti, LLC Ani – Imereti 9. Service – 7 – Guria 10. LLC Gzamsheni – 18 – Guria 11. LLC Moderni 2009 – Guria 12. LLC Pirveli Savachro Sakhli – Guria 13. LLC Gormedi – Shida Kartli 14. LLC Ibolia - Shida Kartli 15. LLC GSK Kula - Shida Kartli 16. JSC Iavnana - Shida Kartli 17. JSC Gomi Spiritus and Vodka company – Shida Kartli

Public Sector 1. State Representative in Guria Zurab Nasaria 2. Deputy State Representative in Imereti ioseb Khakhalishvili 3. State Representative in Shida Kartli Giorgi Khojevanishvili 4. Mayor of Khashuri municipality Giorgi Guraspashvili

Vocational education institutions 1. Public college Elite, Kutaisi 2. Pazisi, Poti 3. Kutaisi public college Iberia 4. Gori public college Gantiadi

Business supporting organizations • GIZ • Chokhatauri strategic development union "Ialoni" • "Enterprise Georgia"

152 ANNEX 5. PRIORITY SECTORS, SAMTSKHE-JAVAKHETI

Accommodation Accommodation services and food service activities Food and beverages service

activities Legal and accounting activities Legal activities Professional, Architectural and engineering Architectural and engineering activities and scientific and activities; technical testing and related technical consultancy technical activities analysis Advertising and market research Advertising Growing of non-perennial crops Crop and animal production, Animal production hunting and related service Agriculture, forestry activities Support activities to agriculture and and fishing post-harvest crop activities Forestry and logging Logging Fishing and aquaculture Freshwater aquaculture Transportation and Land transport and transport via Passenger land transport (except rail) storage pipelines Freight transport by road

153 ANNEX 6. CONDUCTED INTERVIEWS, SAMTSKHE-JAVAKHETI

1. LLC Kristali+ 2. Cooperative Triala 3. Individual entrepreneur Tamaz Ghorjomelidze 4. Micro entrepreneur Malkhaz Tomashvili 5. LLC Dachi 2017 6. LLC Georgian Block 7. Individual entrepreneur Ioseb Khelisupali 8. Individual entrepreneur davit Balakhadze 9. LLC En Kvadrati 10. LLC Populari 2 11. Individual entrepreneur Khatuna Gabrieliani (restaurant Edemi) 12. Individual entrepreneur Merab Gogoladze 13. LLC Mamuli 14. LLC Gona 2018 15. LLC Meskheti Poultry 16. Milk enterprise Tsipora 17. LLC MTP 18. Individual entrepreneur Shaori 19. Individual entrepreneur Akaki Muradashvili 20. First Deputy Governor of Samtskhe-Javakheti Shalva Berdzenishvili

154 ANNEX 7. PRIORITY SECTORS AND SUBSECTORS IN ADJARA (EXCLUDING BATUMI)

Sector Subsector Subsector activities Other service Other personal service activities Hairdressing and other beauty treatment activities Accommodation Accommodation service activities Hotels and similar accommodation and food service Food and beverage service Restaurants and mobile food service activities activities activities Event catering and other food service activities Construction of residential and non-residential Construction of buildings buildings Civil engineering Construction of roads and motorways Construction Electrical, plumbing and other construction Specialized construction installation activities activities Renting of construction machinery and equipment with operator Land transport and transport via Freight transport by road and removal services Transportation and pipelines Urban and suburban passenger land transport storage Urban and suburban passenger Service activities incidental to land land transport transportation Manufacture of bakery and pastry goods Processing of tea and coffee Processing and preserving of meat and Manufacture of food products production of meat products Manufacture of dairy products Manufacture of grain mill products, starches and starch products Manufacture of rubber and Manufacture of builders' ware of plastic plastic products Manufacturing Cutting, shaping and finishing of stone Manufacture of other Manufacture of articles of concrete, cement and non-metallic mineral products plaster Manufacture of glass and glass products Manufacture of wood and of Sawmilling and planing of wood products of wood and cork, except furniture; manufacture Manufacture of products of wood, cork, straw of articles of straw and plaiting and plaiting materials materials Manufacture of furniture Animal production Crop and animal production, Support activities to agriculture and hunting and related service post-harvest crop activities activities Growing of non-perennial crops Agriculture, forestry Growing of perennial crops and fishing Logging Forestry and logging Support services to forestry Aquaculture Fishing and aquaculture Fishing

155 ANNEX 8. PRIORITY SECTORS AND THEIR SUBSECTORS IN BATUMI

Sector Subsector Subsector activities Repair of computers and communication Repair of computers and equipment personal and household goods Other service Repair of personal and household goods activities Physical well-being activities Other personal service activities Hairdressing and other beauty treatment Accommodation service activities Accommodation Restaurants and mobile food service activities and food service Food and beverage service Event catering and other food service activities activities activities Beverage service activities Construction of residential and non-residential Construction of buildings buildings Construction of roads and motorways Civil engineering Construction of utility projects Construction Electrical, plumbing and other construction installation activities Specialized construction Other construction installation activities Renting of construction machinery and equipment with operator Land transport and transport via Freight transport by road pipelines Removal services Transportation and Support activities for transportation storage Warehousing and support activities for transportation Service activities incidental to land transportation Processing and preserving of meat and production of meat products Manufacture of food products Manufacture of bakery and pastry goods Processing of coffee Manufacture of furniture Manufacture of rubber and Manufacture of builders' ware of plastic plastic products Manufacturing Manufacture of articles of concrete, cement and Manufacture of other plaster non-metallic mineral products Cutting, shaping and finishing of stone Manufacture of fabricated Manufacture of structural metal products metal products, except machinery and equipment Treatment and coating of metals; machining Manufacture of wearing apparel Arts, entertainment Sports activities and amusement Other amusement and recreation activities and recreation and recreation activities (except entertainment centers)

156 ANNEX 9. INTERVIEWS CONDUCTED IN ADJARA

Adjara Batumi 1. Individual entrepreneur Marine Mgeladze 1. LLC Lazeri 2. Association M Group 2. LLC Shvarckopf 3. LLC Almadaroi 3. LLC JT Georgia 4. Individual entrepreneur Davit Gogiashvili 4. LLC Paetoni restornebi 5. Individual entrepreneur Jemal Khinikidze 5. LLC Universal Group 6. LLC Niu Power 6. LLC Euro-Palace-Gonio 7. Director Manana Lemsadze 7. LLC Gza 8. LLC Tanamedrove Stili 8. LLC Mshvildosani 2010 9. LLC Tita 9. LLC gorg Tranziti 10. LLC Barumi Karebi 10. LLC Misa Trans 11. Individual entrepreneur Mindia bolkvadze 11. LLC Kartuli salokomotivo kompania 12. Individual entrepreneur Tamila Antidze 12. LLC Beka-Trans 13. Individual entrepreneur Pati Kvirikadze 13. LLC Marleni 14. Individual entrepreneur Shorena Gegidze 14. Individual entrepreneur Koba Kobaladze 15. Individual entrepreneur Ekaterine Nakashidze 15. LLC AMB+ 16. LLC GS Developmenti 16. LLC LLC T.G. KOMPANY 17. LLC Vektori 2015 17. LLC Sameba 18. LLC Zoma 18. LLC Lider Betoni 19. LLC Tamta 2011 19. LLC STAR GALAXY 20. Individual entrepreneur Jambul Dumbadze 20. LLC Atsaura 21. Individual entrepreneur Temur Mikeladze 22. Individual entrepreneur Zviad Mikeladze

157 ANNEX 10. LIST OF PRIORITY SECTORS, MTSKHETA-MTIANETI

Sector Subsector Subsector activity Buying and selling of own real

Real estate estate activities Renting and operating of own or

leased real estate Human health and Medical and dental practice activities Human health activities social work activities Hospital activities Land transport and transport via Urban and suburban passenger land transport Transportation and pipelines Freight transport by road storage Warehousing and support Support activities for transportation activities for transportation Renting and leasing of motor vehicles Administrative and Renting and leasing of construction and civil support service activities engineering machinery and equipment Travel agency and tour operator

activities Accommodation Accommodation and food service Food and beverage service

activities activities Processing and preserving of meat and production of meat products Processing and preserving of fruit and vegetables Manufacture of food products Manufacture of dairy products Manufacture of bakery and pastry goods Manufacturing Manufacture of other food products (prepared meals, sugar, etc.) Manufacture of furniture Manufacture of beverages Manufacture of other Manufacture of articles of concrete, cement and non-metallic mineral products plaster

158 ANNEX 11. INTERVIEWS CONDUCTED, MTSKHETA-MTIANETI

1. Deputy State Representative in Mtkheta-Mtianeti region Matsatso (Manana) Narimanidze 2. Individual entrepreneur Kakhi Khelashvili 3. LLC Mukhrani 4 Policlinic 4. LLC Dental help 5. Individual entrepreneur Tariel Maisuradze 6. LLC Translogistic 7. LLc Armazi 8. LLC Mountain Prix 9. LLc Teknika 10. LLC Gudaura 11. LLC Khevi 12. Individual entrepreneur Nineli Gelashvili 13. LLc Tsikhisdziri 2014 14. LLC Mtskheta food Company 15. LLC Agroconsortium Tserovani 16. Individual entrepreneur Maia Dzamashvili 17. LLC Intrako Georgia 18. LLC Industri Company 19. Individual entrepreneur Aleksi Ganjashvili 20. Individual entrepreneur Nodar Tsiklauri

ANNEX 12. LIST OF PRIORITY SECTORS, RACHA-LECHKHUMI AND KVEMO SVANETI

Sector

1. Transportation and storage 2. Accommodation and food service activities 3. Wholesale and retail trade; repair of motor vehicles and motorcycles 4. Manufacturing 5. Construction 6. Agriculture, forestry and fishing

7. Mining and quarrying

159 ANNEX 13. INTERVIEWS CONDUCTED IN RACHA-LECHKHUMI AND KVEMO SVANETI

1. State Representative in Racha-Lechkhumi and Kvemo Svaneti Archil Japaridze 2. LLC Dauta 3. Oni municipality landscaping service 4. Dani 2010 5. Individual entrepreneur Meliton Liparteliani 6. Individual entrepreneur Avtandil Popkhadze 7. Individual entrepreneur Giorgi Murusidze 8. Individual entrepreneur gia Kanteladze 9. Individual entrepreneur Diomide Dvali 10. Khvamli XXI 11. Individual entrepreneur Levan Benidze 12. LLC Jeen Georgia 13. LLC Motekristo3 14. Individual entrepreneur Mariam sultanishvili 15. Individual entrepreneur Teimuraz Gudumidze

ANNEX 14. PRIORITY SECTORS, KVEMO KARTLI

Manufacturing  Food manufacturing: manufacture of bakery and pastry goods, processing of milk and cheese making, processing of meat  Manufacture of builders' ware of plastic  Cutting, shaping and finishing of stone  Manufacture of lime, plaster  Manufacture of concrete  Manufacture of cement  Manufacture of furniture

Transportation and storage  Passenger transportation  Urban and suburban passenger land transport  Warehousing and support activities for transportation

Professional, scientific and technical activities  Architectural and engineering activities  Legal and bookkeeping activities  Advertising activities

160  Photographic activities  Translation and interpretation activities

Agriculture, forestry and fishing  Growing of non-perennial crops  Animal production  Mixed farming  Support activities for animal production

Accommodation and food service activities  Restaurants and food supply  Accommodation

ANNEX 15. INTERVIEWS CONDUCTED, KVEMO KARTLI

1. State Representative in Kvemo Kartli Shota Rekhviashvili 2. Individual entrepreneur Jemal Jokhadze 3. Individual entrepreneur Zurab Merabishvili 4. LLC Ojakhuri 5. LLC Progresi 6. LLC Temuri 7. LLC Zhirapi 8. Individual entrepreneur Teimuraz Japaridze 9. Individual entrepreneur Levan Moseshvili 10. LLC Kharagauli 11. Graali 2008 12. LLC Konstruktori 13. Individual entrepreneur Ioseb Gabidzashvili 14. Individual entrepreneur Tarile Olkishvili 15. Individual entrepreneur Levan Bareladze 16. LLC Daviti 17. LLC Mebagheoba 2015 18. Individual entrepreneur Pavle Beruashvili 19. LLC Vake 20. LLC Nike 21. LLC Business Center Hotel Rustavi 22. LLC Edo

161 ANNEX 16. PRIORITY SECTORS, SAMEGRELO-ZEMO SVANETI

Administrative and support service activities  Renting and leasing of cars and light motor vehicles  Renting and leasing of construction and civil engineering machinery and equipment.  Services to buildings and landscape activities  Travel agencies

Other service activities  Hairdressing and beauty parlors  Repair of computers, watches, clocks and jewelry as well as personal goods

Transportation and storage  Urban and suburban passenger land transport  Freight transport by road  Other support activities incidental to transportation

Real estate activities  Renting and operating of own or leased real estate

Agriculture, forestry and fishing  Crop and animal production, hunting and related service activities: o Growing of fruit, berries and citrus o Support activities to agriculture o Raising of animals o Growing non-perennial crops

Accommodation and food service activities  Hotels  Restaurants, bars, cafes  Catering

Manufacturing  Manufacture of food products o Processing and preserving of fruit and vegetables o Manufacture of bakery and pastry goods o Manufactures of seasonings  Manufacture of articles of rubber and plastic  Manufacture non-metallic mineral products  Manufacture of furniture

162 ANNEX 17. LIST OF INTERVIEWS CONDUCTED IN SAMEGRELO- ZEMO SVANETI

1. LLC Gasko+ 2. Individual entrepreneur Irakli Dolbaia 3. Individual entrepreneur Roland Gvalia 4. LLC universal Service Company 5. Cooperative Jogho 6. Individual entrepreneur Zameri Gergedia 7. Cooperative RK Nektari 2016 8. LLC Kolkhuri Company 9. LLC New Parket 10. LLC Anchous 2011 11. LLC Poreji 1 12. LLC Mada 2014 13. Individual entrepreneur Nona KAdjarava 14. Individual entrepreneur Sergo Beraia 15. LLC Jvari 91 16. Individual entrepreneur Gigo Shanava 17. Individual entrepreneur Zviad Tsulaia

163 ANNEX 18. PRIORITY SECTORS, KAKHETI

Sector Subsector Subsector activity Manufacture of bakery and pastry goods Manufacture of dairy products Processing and preserving of meat and Manufacture of food products production of meat products Manufacture of grain mill products, starches and starch products Processing and preserving of fruit and vegetables Manufacture of wine Manufacturing Manufacture of beer Manufacture of beverages Manufacture of other non-distilled fermented beverages Manufacture of rubber and Manufacture of builders' ware of plastic plastic products Manufacture of builders' ware of plastic Manufacture of other Cutting, shaping and finishing of stone non-metallic mineral products Manufacture of cement, limestone and plaster Manufacture of furniture Architectural and engineering Architectural activities activities; technical testing and Engineering activities and related technical analysis consultancy Professional, Accounting, bookkeeping and auditing scientific and Legal and accounting activities activities; tax consultancy technical activities Other legal activities Advertising and market research Advertising agencies Other professional, scientific and Photographic activities technical activities Translation and interpretation activities Educational centers, training

centers Driving school activities Education Cultural education General primary and secondary

education Vocational education Land transport and transport via Urban and suburban passenger land transport pipelines Freight transport by road Transportation and Service activities incidental to land storage Warehousing and support transportation activities for transportation Support activities for transportation Warehousing and storage Hotels and similar accommodation with restaurants Accommodation Accommodation Hotels and similar accommodation without and food service restaurants activities Food and beverage service Restaurants and mobile food service activities activities Other food service activities

164 ANNEX 19. INTERVIEWS CONDUCTED IN KAKHETI

1. State Represenattive in Kakheti region Irakli Kadagishvili 2. LLC Sachino 3. LLC Shiraki 4. LLC Ostati 5. LLC Sapari 2013 6. Individual entrepreneur Aleksi Bardanashvili 7. LLC Geodi 8. LLC Sesili 9. LLC Mate+ 10. LLC Saba 2005

ANNEX 20. LITERATURE

 Condemned to be left behind? Can Central and Eastern Europe emerge from its low-wage model? (Brussels, 2017 © Publisher: ETUI aisbl, Brussels, financially supported by the EU)  The EU industrial policy and SME development in Central and Eastern Europe (Zhelyu Vladi- mirov).  Financing programs for SMEs, https://ec.europa.eu/i  The small business act for Europe  The Entrepreneurship 2020 Action Plan  Stronger Economy, EU4Business, Annual Report 2018  Regional development strategies of 10 regions discussed in the study  Socio-economic development strategy – Georgia 2020  Small and Medium-Sized Enterprises in European Regions and Cities, ESPON, 2017  Analysis report on SME success factors and best practices, Access 4 SMEs, 2017

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ISBN 978-9941-8-2612-2

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