Local Economic Development Plan 2020-2021

Zugdidi Municipality

December 2019

1. Executive Summary The present Local Economic Development Plan (LED) has been prepared within the framework of Initiative “Mayors for Economic Growth” (M4EG). In the process of elaboration of the plan, a working group was set up with the involvement of local authorities, business sector, non-governmental organizations Due to its favorable geographical location, which implies the presence of the coast, the prospect of the construction of deep-sea port, in the vicinity of Zemo- region, provides the opportunity to establish itself as a transit-logistics center of regional importance and a so-called "hobby" for managing mountain and seaside resorts. . The purpose of the present plan is to define tasks that will support the long term improvement of the municipality and plan particular actions with simultaneous analysis of the current situation. The document reflects the economic analysis of the situation in the municipality, as well as challenges, strengths and weaknesses, opportunities and threats, vision and goals of the municipality development. To achieve economic growth, it is important to overcome weaknesses such as: insufficient investment volume and lack of effective mechanisms for attracting them, limited access to finance, underdeveloped labor training systems, lack of qualified staff, insufficient awareness of tourism potential and promotion. This is due to the low awareness of the population about advanced technologies, weak advertising support and marketing of the products produced in the municipality. The vision of is to become one of the fastest growing municipalities in the region with its stable economy, strong transport sector, dynamically developing tourism and agriculture, processing and small business sectors, an attractive investment climate and infrastructure, which is important increase ad revenue, as a precursor to a significant improvement in living standards and the long-term well-being. The aim of the municipality is to improve the investment environment, increase tourist attractiveness and support the development of small and medium businesses. To achieve these goals, the local economic plan includes measures such as: developing investment packages, improving tourism infrastructure, enhancing entrepreneurial knowledge, helping to find financial resources, organizing exhibitions and festivals to promote local production and awareness. Zugdidi Municipality is ready to finance major part of the activities envisaged by the plan from its own local budget. As for SME development, donor recruitment is planned.

2. Table of Contents Preface by the Mayor 1. Executive Summary 2. Table of Contents 3. List of Tables and Figures and Abbreviations 4. Introduction to Plan 5. Process of Local Economic Development Plan Development 6. Local Economic Analysis 6.1. Analysis of Local Economic Structure 6.2. Local Cooperation and Networking 6.3. Business-friendly, Transparent and Corruption-free Administration 6.4. Access to Finance 6.5. Land and Infrastructure 6.6. Regulatory and Institutional Framework 6.7. Skills and Human Capital, Inclusivity 6.8. External Positioning and Marketing 7. Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis 8. Vision and Objectives 9. Action Plan 2020-2021 10. Financing Scheme 11. Monitoring Indicators and Mechanisms

Annexes Annex A. Process of Local Economic Development Plan Development Annex B. Mayor’s Order on creation of working group on Local Economic Development; Annex C. LEDP Protocols and registration sheets of meeting and working group meetings with private sector in the process of development; Annex D. Members of Local Partnership; Annex E. Statistical information about Zugdidi Municipality

3. List of Tables & Abbreviations List of Tables Table 1. SWOT Analysis Table 2. Action Plan Table 3. Financing Scheme Table 4. Monitoring indicators and mechanisms

Abbreviations M4EG - Mayors for Economic Growth LED - Local Economic Development IDFI - Institute for Development of Freedom of Information CTC - Counseling and Training Center MSDC - Management Systems Development Center ADB - Asian Development Bank SWOT - Strengths, Weaknesses, Opportunities, Threats DMO - Destination Management Organization 4. Introduction to the plan In May 2018 Zugdidi City Hall joined the EU initiative “Mayors for Economic Growth” under the signature of the Mayor . Zugdidi municipality is located in the central part of western Georgia (area - 682.1 sq. Km). Zugdidi borders with the center of the region (Samegrelo Zemo Svaneti). It is cultivated on the plain, on the bank of the Chkhoushia River, 110 m above sea level. The administrative center of the municipality is Zugdidi, which is located 339 kilometers (5 hours) away from capital of Georgia. The nearest airport ( International Airport) is 90 km away and 70 km from port. The construction of Anaklia Deep Sea Port has already begun on the territory of Zugdidi Municipality and Zugdidi will become a port municipality in the nearest future. As of January 1, 2019 the number of population is 101.8 thousand, and according to the 2002 census it was 150.2 thousand. The population has declined by 48.4 thousand, or 32.2%, over the last 17 years. If we compare the population decrease throughout the country (population in 2002 decreased from 3991.3 thousand as of January 1, 2019 to 3723.5 thousand, ie 6.7%), the population decrease is particularly high. According to the 2014 census, 42 998 (40.8%) live in the administrative center of the municipality, and 62 511 in rural areas (59.2%). Population distribution by sex is as follows: 50 306 (47, 7%) - male, 55 203 (52.3%) - female. The median age for the municipality is 40 years, 38.4 for men and 43.1 for women. The share of the working population is 67%. In recent years the migration tendency has been growing. It especially concerns young, qualified and capable of work people, who move to work to urban settlements of Georgia and more developed countries due to good employment opportunities. The EU initiative "Mayors for Economic Growth" is a real opportunity to achieve sustainable local economic development of the municipality. The present economic development plan was developed for the purpose the initiative “Mayors for Economic Growth”, which was created based on a close dialogue with private and public sector focused on the development . During the development of the plan, the Partnership members were actively involved, their recommendations and opinions were reflected in the final document. The Local Economic Development Plan has been prepared as part of the EU's "Mayors for Economic Growth" initiative and cannot be considered as a substitute for other similar plans. The plan was developed in cooperation with the private sector and civil society, according to the standards of the initiative “Mayors for economic growth", in line with the methodology submitted by the Secretariat of the initiative. The purpose of the municipality is to ensure the involvement of all stakeholders, both at the planning and implementation stages. This plan is in line with national and regional strategies - Georgian Agriculture Development Strategy 2015-2020, Georgian Tourism Strategy 2025, Samegrelo-Zemo Svaneti Region Development Strategy 2014-2021 and will facilitate their implementation. Major part of the activities will be funded from Zugdidi Municipal budget and will be reflected in the local budget in the form of programs and the rest will seek external resources.

5. Process of Local Economic Development Plan Development In order to develop the Local Economic Development Plan (LED) of the Municipality of Zugdidi, a working group was set up to work on the development of the document, whose task was to gather and analyze information. The composition of working group was as follows: one representative from the private sector, one from the civil sector and three from the local government. (Giorgi Shengelia-Zugdidi Municipality Mayor; Irakli Pipia - Local Economic Development Officer, Marika Khasia - Head of Investment Projects and Donor Relations, Founder of Gia Shelia-LLC "Novation 2009" (Business Sector), Merab Danelia - "Regional Development" Association (RDA) (Non-Sector) Working Group). A Local Economic Development Partnership also has been established in order to be actively involved local stakeholders in the development of the plan. The partnership is comprised of three representatives from the private and non-governmental sectors and one from the education sector, three of whom are women and four men. Key decisions were made by a majority of votes ,most of which decided upon by way of consensus. The average intensity of meetings was one meeting per month. During the development of the plan, meetings were held with representatives of the banking and tourism sectors, farmers and NGOs. Attendees were asked to fill out questionnaires in accordance with the methodology provided by the M4EG Secretariat and email them. Send by mail to LED officer. A meeting was held with City Hall officials to coordinate the process of developing the LED plan.

6. Local Economic Analysis 6.1. Analysis of local Economic Structure: The local economy of Zugdidi municipality is mainly represented by agriculture, processing industry, construction, tourism, services and trade. The most promising and developing directions are agricultural, tourism and processing industries. According to the data of the National Statistics Office of Georgia, by the beginning of 2018 the number of economic entities with active status in Zugdidi municipality is 2270. Compared to 2014, the number of registered enterprises has increased. The business support state programs have contributed to the growth of enterprises. Large enterprises are mainly in agriculture (2) and processing industry (6). There is a tendency for companies to grow at the expense of SMEs. Industry-based industries are mainly represented by the nut processing industries (90), the building materials and timber processing industries (91), the food industry (51), and the furniture manufacturing (9). The agro-climatic conditions of Zugdidi Municipality are conducive to the creation of multifaceted and highly profitable agricultural production, especially for the development of fields such as nut breeding and production, tea production, corn production, subtropical crops production (Citrus, bay leaf, feijoa and more.), kiwi, cranberries, fruit trees, One-year production of cereals and vegetables. The total volume of agricultural land is 35556 ha. Among them: arable land - 7262 hectares, perennials - 24010 hectares, mowing and pastures - 4284 hectares. As of 2017, 961 tons of tangerines, 243 tons of oranges and 412 tons of lemons were exported to the municipality of Zugdidi; 16842 tons of nuts; 933 tons of bay leaf; 956 tons of kiwi; 16062 tons of corn; 574 tons of Feihoa; 1065 tons of grapes; 152 tons of persimmon. The main agricultural export products are nuts, citrus fruits, kiwi and cranberries. During the last 15 years the area of hazelnuts has increased in particular, as export demand has been increasing every year. In recent years, a new berry culture - blueberries that has not been known so far in our country - has gained popularity. Blue cranberries are one of the first places to be compared to other agricultural crops. Average yield 8-10t / ha. In well- maintained plantations, yields reach 12-15 tones. Blueberry plantations have been planted on approximately 50 ha with the support of the Implement Future program. The agricultural sector is represented by 28 enterprises, 14 agricultural cooperatives and 1953 private farmers. The population of the municipality is 46601 cattle, 10171 pigs, 1528 sheep and goats, 291148 winged birds. Beekeeping is one of the main areas of agriculture in the municipality. It is represented by 4 agricultural cooperatives and 250 farmers. They own about 5,000 bees and produce 80 tons of honey. The rapid growth in the agricultural sector is hampered by the lack of access to agricultural services and technology, a shortage of highly qualified specialists in the field. In recent years, the spread of new diseases and pests (Asian parasites) has become an important factor that has significantly reduced the amount of agricultural produce, especially nut crops. One of the impediments to the development of the agricultural sector is the small size of land available for use by farmers, most of them cultivating less than 1 ha. According to the 2014 Agricultural Census, 83.1% of the land is owned by 1 hectare, 15.9% by 1 to 5 hectares, and only 1% by more than 5 hectares. The problem is compounded by the fact that on average, 1 hectare of farmland is represented by 2-3 plots. Therefore, the development of profitable and economically robust agriculture is impossible without land consolidation. Zugdidi municipality has a high potential for development of tourism as an important economic sector. This is due to a combination of a number of factors in the municipality, including: ancient cultures of and Svaneti, unique cultural and historical sites and museums, caves and caves, battlefields and picnics, wetlands of Kolkheti and its rare highlands, extremely high Black Sea area and developing skulls ortuli zones. All of this creates special conditions for almost all types of tourism (motor, horse riding, hiking, eco-tourism, hunting tourism, amateur fishing, bird watching, agro tourism, research tourism, pilgrim tourism, extreme tourism and others). Dadiani Palace Complex is a historical-architectural museum of Zugdidi, where the robe of the Most Holy Mother of God is kept. The Zugdidi Historical Museum has many shrines besides the Virgin robe. Along with other notable historical exhibits, the museum houses Napoleon Bonaparte's mask and personal belongings. The landmark of the city is the 18th-century Dadiani Botanical Garden, which is being rehabilitated by the Municipal Development Fund of Georgia, with an investment value of GEL 12 million. In the city, in recent years, about 5,000 visitors from different parts of Georgia have been welcomed to celebrate the Virgin robe. Zugdidi Municipality has the potential (climatic conditions, geographical location) to become a major destination for tourists, to play the role of a tourist hub, both during the mountain holiday season and at sea, and generally combine the sea and the mountain with interesting tourist routes. Medical tourism has great potential in Tsaishi Balneological Resort, whose condition is deplorable and needs major capital investment to restore it. The flow of tourists in the municipality is increasing, hence the tourism business sector improves the quality of service every year and increases the service area. A sharp increase in the flow of tourists during the summer season has also been facilitated by recent music festivals in the Black Sea. There are 15 hotels and 80 family-run hotels in the municipality. There are 40 cafes and restaurants. 1345 enterprises are focused on trade and population services. The municipality has a referral hospital with 570 staff and 180 beds, as well as infectious and tuberculosis hospitals, 14 first aid centers, 40 rural outpatient clinics, one dental clinic and 30 dental offices. Waste collection and management is performed by a municipal non-profit legal entity. Transport services are provided by 136 micro enterprises. There are 10 medium, 38 small and 10 micro-enterprises in the field of construction. According to the annual turnover in the business sector, production volume is increasing. For example, in 2016 the business sector turnover amounted to GEL 656.4 million, which is GEL 122.7 million higher than in 2014 (an increase of approximately 23%). Production in 2016 amounted to GEL 471 million, up 22.5% compared to 2014. The business sector employed 8275 people in 2014, up from 8587 in 2015. Based of the above stated, the trend of steady growth in production is maintained in the municipality. 6.2. Local Cooperation and Networking: The cooperation network between business companies is more or less established. Zugdidi Regional Chamber of Commerce and Industry, which represents the business community in the region, operates in the municipality. It brings together about 130 registered companies and firms. The chamber protects the interests of its members in Georgia and abroad, promotes national products, assists regional businessmen in creating their own products and exploiting new markets, as well as attracting investment in the region. It assist small and medium-sized entrepreneurs and also, the establishment of sectoral clusters, associations. There is a Nut Producers Association in the region, which brings together around 8200 members nationwide. Joined by farmers, they use a group-based approach that allows them to share their practical experiences and find ways to solve different problems together. Each group has a leading farmer and is additionally served by a qualified agronomist who makes monthly recommendations to farmers and observes changes in their nut gardens. Members of the association also enjoy benefits from a variety of services, including: soil examination, nut-handling techniques, crop drying, and more. At the same time, agro credits are available to purchase fertilizers and pesticides and other services. The Georgian Hazelnut Producers Association has set up a hazelnut drying and storage center in Zugdidi Municipality, which provides 1,000 tons of hazelnut drying and 500 tons of storage per season. There are 17 processing and exporting companies working in the hazelnut sector from the Association of Georgian Hazelnut Exporters and Exporters, Zugdidi Municipality. The nut sector is one of the important and promising parts of the municipality's agriculture and the Georgian economy in general. It is this factor that has led to the merger of processing and exporting companies with the aim of popularizing the hazelnut sector and enhancing its competitiveness both locally and internationally. The Association assists its members in resolving tax and legal and financial issues. The Association is actively working to improve the quality of nuts, sales and financial skills of member companies. Organizes trainings on various topics. It also collaborates with state, donor and financial institutions. There are about 30 beekeepers from the municipality in the Western Georgia Beekeepers' Alliance. Beekeepers mainly work with old methods, and the field demands the transition to new rails. That is why the aforementioned union was created to bring new innovations and new technologies to each farmer. Zugdidi Municipality has an Association of Kiwi Producers with about 30 farmers. The association serves to share experiences among farmers, improve the quality of production and bring kiwi to Europe. In recent years, through the legislative amendments ,state initiative and the efforts of international organizations, the development of agricultural cooperatives is actively promoted and similar cooperation is encouraged. State programs and international organizations facilitate agricultural cooperatives not only in financial reinforcement, but also in farther training through training and teaching. At present, there are 21 agricultural cooperatives operating in the municipality. As for the cooperation between private sector and the municipality administration, individual meetings with business organizations and financial institutions are held periodically to discuss the need for improved municipal services, possible financial resources, and improved municipal image, both in good housing and in the workplace. Cooperation with the public sector is perceived more as a political step. 6.3. Business-Friendly, Transparent and Corruption-Free Administration: Increasing the transparency and accountability of local government activities is a key priority of Zugdidi municipality. The activities in City Hall are conducted on the “one window” principle, documents submitted by mail or manually are registered in the electronic system of records management of the City Hall. The time for document turnover has been reduced. The City Hall has its web page and information service subordinated to it, which mainly publish activities conducted with the involvement of local authorities. The Economic Service of City Hall communicates with business sector in case of application, issues information and provides consultations to business representatives. The municipality administration tries to promote business sector through various activities. In 2018, with the support of Zugdidi City Hall, Honey Festival was held. Entrepreneurs across the municipality exhibited their products. The open air market also featured honey vodka and drinks made from local fruit. Handmade items and accessories were on display. The purpose of the event was to promote SMEs, popularize honey production as a sectoral direction. A total of 51 entrepreneurs from the villages of the municipality participated in the honey festival. The two-day international event "Ajika Festival" was also supported by the City Hall. The festival featured the best Ajika and other Georgian products. Zugdidi Announced as “Mother of Ajjik spot ". Municipality also organized the New Year holidays during the Christmas market was held. Despite the municipality's efforts to disseminate information about government-sponsored projects and donor programs, entrepreneurs still lack sufficient information about available financial resources as well as business organizations that can assist them. Donor programs or donor organizations business support programs. The Chamber of Commerce assists new companies in developing a business plan, and industry associations work to promote local products and find additional markets. The right to use the municipal property or privatize it is assigned through electronic auctions, the data on property to be transferred with privatization and use right is published on the official website. Anyone can participate in the electronic auction. The sessions of the municipality are open for citizens and they can submit remarks and initiatives. According to the findings of the Institute for Development of Freedom of Information (IDFI), Zugdidi Municipality was named among the most open and accountable public institutions. According to the survey, Zugdidi Municipality is the only municipality in the country whose executive and representative bodies have 100% access to public information. They meet the highest standards in the 2018 Access to Public Information report. On July 2, 2019, representatives of the Institute for Development of Freedom of Information (IDFI), the Center for Counseling and Training (CTC), and the Center for Management Systems Development (MSDC) presented the results of the 2019 assessment of municipalities prepared by the Local Government Index. Zugdidi ranks fourth among the municipalities with a high level of transparency in accountability. 6.4. Access to Finance: The financial sector in municipality is quite developed, it is represented by almost all branches operating in the country, as well as several microfinance organizations operating in the municipality. Information about the financial resources available for business development is more or less available. Banks and microfinance organizations within the municipality issue loans to business companies and agro- enterprises for both working capital and fixed assets. Both secured and unsecured loans are available. On a relatively large amount of loans, business companies face difficulties in securing loans. At the same time, large loans are discussed at headquarters. Businesses bear the heavy burden of high interest rates. It is difficult to finance startups, in which case banks require at least 3-6 months of turnover. In addition to the banking sector, there are other alternative means of accessing finance, including state programs to support the development of agriculture and entrepreneurship, such as "preferential agro credit", "produce in Georgia", USAID's project Growth in Georgia and more. In 2017, Zugdidi Municipality and USAID Zrda Activity in Georgia signed a Memorandum of Understanding. Under the Memorandum, Zrda and the municipality will work together to design and constract appropriate infrastructure projects, that support economic/market development and/or protects vulnerable communities from natural disasters. Zrda will work closely with municipal authorities, rural people, and macro, micro and medium-sized entrepreneurs involved in economic development planning. This ensures that the community's priorities in the municipal budget are met during its development so that the funds needed for infrastructure improvement are available. The project is working on infrastructure development plans in the target communities to identify priority projects and provide targeted assistance to the municipality in developing elaborate project proposals and project design in line with USAID and Georgian Government standards. This assistance can be considered as a municipality contribution to attract funding from central government or other sources, such as international donor organizations, to build or rehabilitate existing priority infrastructure. At this stage, the project has been developed and delivered to Zugdidi Municipality with the project documentation of the Chkhoria administrative unit for drinking water supply, funded by the Regional Fund and the first phase of rehabilitation is completed, the second phase is planned for 2020. The Partnership Fund Program, a joint project of Startup Georgia and the US Agency for International Development (USAID), will create new enterprises in the villages adjacent to the border line. The project, "New Enterprises in Disturbed Villages", enables start-up entrepreneurs to launch innovative innovation-driven businesses in the villages adjacent to the border dividing line, which will encourage investment, employment of the local population and revenue generation. USAID Zrda will provide funding from the Partnership Fund. The beneficiary will be required to have a minimum cash contribution of only 10%, the remaining 90% will be financed by Startup Georgia's long-term preferential loan, while USAID Zrda will double the total amount of the beneficiary. In 2018, the Partnership Fund built an Innovation Center 600 meters from Bridge in Rukhi Administrative Unit. The center provides systematic training in programming, design, entrepreneurship and various business areas. There is also a techno park in the municipality. 6.5. Land and Infrastructure: In recent years, simultaneously to the tendencies of development of business, the demand for buildings, land and infrastructure increases. The Economic Service of the City Hall identifies plots of land at the territory of the municipality, registers unregistered plots of land in the ownership of the municipality, conducts inventory- taking of buildings in its ownership. In most cases, the transfer procedure is delayed. The municipality is not able to privatize these properties and engage them in economic activities, which is one of the impediments to the development of the municipality's economy. The demand is mainly for small companies with adequate and isolated workplaces. Office spaces are mostly in private buildings, but prices are high and very often small companies do not have the money to rent them. Most of the municipal and state-owned buildings on the territory of administrative units are depreciated, most have no strategic location, making it difficult to privatize or transfer them. An important part of Zugdidi's land resource is the so-called former industrial zones (Brownfields), formerly known as Zones. Zugdidi Branch of the Tea and Subtropical Crops Research Institute and Formerly, Communal Park Area. The area of potentially useable land is 150 hectares across the city, of which 110 hectares. Of State, 12 acres. Of the municipality, and 28 ha. It is privately owned. This creates a favorable environment for the future development of the city. There seems to be enough land in the city. The main stumbling block is that only a small portion of this land is owned by the municipality, as a result of which investors are forced to contact the Ministry of Economy. This leads to a decrease in the role of the municipality in investor relations. Infrastructure needed for the city to function properly, such as the supply of natural gas and electricity. Zugdidi territory is completely covered. Currently a new water supply and sewage system and wastewater treatment plant are under construction. The works will be completed in 2020. The project is financed by the Asian Development Bank (ADB) and its cost exceeds 220 million GEL. Upon completion of the project, the city will have a continuous water supply and sewage system. The municipality has a Techno Park and Innovation Center. 6.6. Regulatory and Institutional Framework: According to the legislation in force in the country, the competences of the municipality for defining the legislative and institutional framework in support of economic development and improvement of business environment are limited and it is the competence of the central government. Zugdidi Municipality is an independent self-governing unit. Self-competence includes determining the property tax rate. It is up to the Zugdidi municipality to set local rates and set their rates. Currently, there are 4 local fees in Zugdidi Municipality, which are administered in accordance with the decisions of the Municipal Council. These fees are: 1. Construction permit (other than construction of radiation or nuclear facilities of particular importance); 2. Cleaning the populated area; 3. Gambling business; 4. Issuance of a special (zonal) agreement. The biggest problem remains getting a construction permit. Getting permission is a time- consuming procedure. There is no coordination between agencies in this area and various agencies request the same information. Each individual approval requires time and the applications for construction permission are not reviewed simultaneously by all responsible agencies, and the next agency has to wait for the results of the previous agency. Within the framework of EU-funded Twinning Project (TWINNIG) “Improving Infrastructure Quality through Better Planning Systems”, with the assistance of Polish experts, Prepare a plan for regulating the development of certain areas (approximately 97 hectares) in the south-eastern part of Zugdidi. This will allow Zugdidi Municipality to institute refinement and implement uniform practices in terms of permit planning procedures and general policies regarding the preparation of a pilot plan for knowledge and development under the project. 6.7. Skills and Human Capital, Inclusiveness: Development of workforce is a relatively new concept for the municipality. Although the municipality has higher education institutions and several vocational colleges, the educational system does not address the real needs of the business sector. In the conditions of tourism in the municipality, there is a huge demand for service personnel and their further training. Waiters, guides, administrators and other staff has increased. There is a lack of qualified staff in the IT sector, agriculture and veterinary. The local labor market has low remuneration (the average monthly wage in 2016 was GEL 428.8) and the skilled and skilled labor from the municipality flows into the country's capital and abroad. As of 2017, the unemployment rate in the region was 8.6%. Mostly, people who have been unemployed for at least two years are motivated to get a new qualification and become very passive in their search for new jobs. There is no employment agency in the municipality, job seekers themselves, through direct communication with private businesses and job seekers from the internet. There is no coordination between the municipality, the business sector, educational and training institutions. Some business companies provide training only to their needs, but this is not organized and it is not agreed with other companies working in the same sector. Anaklia Special Economic Zone will start operating alongside the port and plan to launch port freight services and other logistics activities for the first time. Anaklia City plans to develop a special economic zone in phases. The first phase covers the next 9 years, where 100 hectares of land will be used and 2700 people will be employed. 6.8. External Positioning and Marketing: The main goal of Zugdidi Municipality is to become an attractive city not only for local population, but for visitors and investors as well. Traditional hospitality, historical-cultural sites, distinctive nature and geographical location serve as a strong side of Zugdidi, for international, as well as local positioning. Compared to other municipalities in the region, the municipality of Zugdidi is considered to be an attractive place to live, work, tour and invest. It should also be noted that the investment potential of Zugdidi Municipality is not properly represented to potential investors, as the Municipality's investment catalogs are not developed. Destination Management Organization (DMO) was established in Samegrelo-Zemo Svaneti. With the founding of the DMO, USAID - Zrda and the Georgian National Tourism Administration jointly identify challenges for tourism development in the region and identify priorities to promote and better promote the region. Samegrelo-Zemo Svaneti is one of the best tourist regions of Georgia, combining historical-cultural heritage with the unique beauty of nature and the advantages of adventure tourism. The DMO will conduct an analysis of all existing tourist attractions in the region, identify and implement new approaches that will contribute to the region's economic growth and employment. A new modern style hotel was opened in 2018, with the support of State program ”Enterprise Georgia”. In 2019 another high class hotel opened with the support of the same program. During the last five years, the municipal administration has invested heavily in improving the infrastructure of the municipality. Hiking trails, drainage canals were arranged, tens of kilometers of roads were rehabilitated, Zugdidi Central Boulevard renovated, Dadiani Palace rehabilitated, and a full rehabilitation of the Botanical Garden completed this year. The program of municipal cultural events has become more diverse, which has led to a gradual increase in the flow of tourists. The Tourism Department actively works to promote the municipality as a tourist destination and participates in various tourism related events. In connection with the holiday, an English-Georgian booklet (tourist-pilgrim guide) has been published, various guides have been installed in several places in the city. Sec. Light Boxes, which contains information on tourist routes, has been filmed in Zugdidi. Another guidebook is planned for Zugdidi this year. The municipality periodically participates in various exhibitions and forums where it promotes the municipality. In 2014 Anaklia hosted an international business forum, which allowed potential investors to meet with representatives of the existing business sector and discuss the business environment and benefits of doing business in Zugdidi Municipality. The fact that Georgia's first deep water port will be the port of Anaklia makes Zugdidi municipality a particularly attractive city. Anaklia is located on a major section of the Old Trade Road and is a key transit point for the New Silk Road between China and Europe. Port location, technical and infrastructural capabilities will be the main reasons for cargo transportation. However, ongoing infrastructure projects in support of the One Belt One Road initiative in the region are another important indicator of boosting trade between Europe and China in the future. The vision of Anaklia Development Consortium is to create a world class port complex and establish Anaklia as a focal point of trade to and from Central Asia on the New Silk Road Trade route between China and Europe. The New Special Economic Zone will complement the ports activity and transform Anaklia project into a new city - scale economic driver for Georgia, a regional business and trade hub on the crossroads of Europe and Asia. Anaklia city will envisaged as a frontier business destination for International companies, to capitalize on its strategic location and the unique incentives it will offer as a result of its special Economic Zone status.

7. Strengths, Weaknesses, Opportunities, Threats (SWOT) Analysis The main challenges that have been identified for the economic development of Zugdidi Municipality are; small volume investments and lack of their effective mechanisms for attracting, limited access to financial resources, less developed human resource training system, lack of promotion and awareness of tourism potential, limited access to counselling services; lack of new technologies; law level of production capacity development. In response to existing challenges, the maximum use of strengths and opportunities should focus on supporting investment attraction, increasing tourism attractiveness and supporting SMEs. Strengths Weaknesses 1.Convenient geopolitical location (Black Sea coast, 1.Absence of long-term strategic plan of economic port, associated strategic transport arteries and development of the municipality transit function) 2.Low income of the population and local budget, low 2. Energy Capacities: Renewable Energy Sources; level of local private savings and investment; Biomass, sun, geothermal waters 3.Low interest in and access to modern energy 3. Recreational potential of water resources, large efficient technologies resources of thermal and fresh water 4. Unsatisfactory level of industry development 4. Relatively high rate of economic diversification 5. Insufficient FDI and lack of effective mechanisms 5. Extensive experience in manufacturing, industry, to facilitate their attraction processing, food production, SMEs; 6.Expensive banking products and limited access to 6. The existence of secondary and higher education alternative capital; centers, educational-scientific traditions 7.Weak support for export-oriented sectors and local 7. Cheap labor and relatively skilled labor; businesses; Weak advertising support and marketing 8. High potential for tourism development, more or of the products less regulated infrastructure, hotels, restaurants 8. Outflow of qualified personnel; 9. Nearest resorts in Anaklia and Ganmukhuri and 9. Poor access to information regarding financing renovated opportunities; 10. Attractive agro-climatic conditions and strong 10. Poor management of local land and municipal competitive potential of the local horticulture ; property 11.Strong progress in developing local tourism infrastructure

Opportunities Threats 1. Construction and development of Anaklia Port 2. The Municipality of Zugdidi, as a "Signatory of the 1. Unstable political situation in the region and 3. Covenant of Mayors", has the opportunity to attract country funding from various donor organizations and funds 2.Conflicting location to implement sustainable energy development and 3. New pests and diseases spread in agriculture investment attraction projects in the city; 4. Development of transit logistics centers of regional importance, management of mountain and sea connecting tourist flows and fulfillment of the “hub” function; 5. Finding new markets for agricultural products (mainly nuts, kiwi, cranberries); 6. Enhancing skills and capacities of local private sector and SMEs especially in tourism sector

8. Vision and Objectives Vision Zugdidi will be one of the fastest growing municipalities in the region with its sustainable economy. Dynamically developing tourism and agriculture, processing and small business areas, will significantly increase the incomes, as a precondition for improving living standards for long-term residents welfare. Key Objectives: Promotion of local investment opportunities, (1); Increasing tourist attractiveness (2) and Capacity building of skills and knowledge of Local SMEs (3). 9. Action Plan The action plan is developed with the involvement of partners and all stakeholders, which will be implemented with their support and participation. The plan mainly focuses on promoting tourism, agro-sector, small and medium-sized businesses. Zugdidi City Hall and its corresponding structural units are responsible for the implementation of the actions specified in the Action Plan. Private and civil sector representatives will play an important role in the implementation of the plan. Together with the municipality, the financial support for the implementation of the plan will be provided by central budget, private companies and donor organizations.

Thematic Block The main goals Action / project Duration (start / Partners Estimated Final results Monitoring ideas end) involved costs indicators External Positioning 1. Attracting 1.1. Creation of 2/2020 – 11/2021 Ministry of 30 000 GEL There is a prerequisite Increased and Marketing investment municipal tangible Economy and 9 375 euro for raising the interest investment asset database Sustainable of potential investors; interest; Development Effective administration Number of of municipal property privatized management and municipal privatization process properties 1.2. Develop 2/2020 – 11/2021 12 000 GEL Created 3 investment Number of investment 3 750 euro offers investment offers proposals and offer them to potential investors 1.3. Advertise the 2/2020 – 11/2021 Ministry of 20 000 GEL The awareness of the Information municipality as a Economy and 6 250 euros investment website created; good place to start Sustainable opportunities of the Number of a business and Development municipality has brochures invest increased prepared; The number of videos made Land and 2. Increasing 2.1. Rehabilitation 2/2020 – 11/2021 Ministry of 1 000 000 The number of visitors Number of Visitors infrastructure tourist of the access road Regional GEL to the historical-cultural attractiveness to Chakvinji Development and 312 500 euro monument and their Fortress Infrastructure of security has increased External Positioning Georgia and Marketing 2.2. Arrangement 2/2020 – 11/2021 National Agency 250 000 GEL The attractiveness of Number of Visitors of ethnographic for Cultural 78 125 euro the historical-cultural space in Rukhi Heritage monument has Prison Preservation; increased and the number of visitors has increased 2.3. Organize 2/2020- Zugdidi 40 000 GEL There are 2 culinary Number of annual culinary 11/2021 Local 12 500 Euro festivals; Increased festivals held; festival to promote entrepreneurs; awareness of the Number of festival local produce and DMO municipality, attendees introduce locals to popularization of local tourists natural products Access to finance 3. SME 3.1. Raising SMEs' 2/2020-11/2021 International 20 000 GEL Access to information The number of Development knowledge of organizations 6 250 Euro on fundraising has entrepreneurs Skills and Human finance increased informed about Capital this 3.2. Organizing 3/2020-11/2021 Local 40 000 GEL There is a festival of Number of festivals and entrepreneurs; 12 500 Euro honey, wine, cheese, festivals and exhibitions to ajika, handmade items; exhibitions held; promote local Promotion of locally Number of entrepreneurs produced products participating entrepreneurs and visitors 3.3. Increase 2/2020-12/2021 Local NGOs; 30 000 GEL Entrepreneurial skills of Number of knowledge of Local vocational 9375 Euro the subjects participants in the SMEs, startups schools and participating in the trainings through targeted training centers; trainings are enhanced trainings International donor organizations; 3.4. Improving 2/2020-12/2021 Ministry of 30 000 GEL About 30 farmers are Number of farmers farmers' skills and Agriculture; 9375 Euro trained; The level of participating in abilities by training Local NGOs; qualification of farmers retraining them Local vocational has increased schools and training centers; International donor organizations; 10. Financing Scheme

Actions Estimated Source of funding Funding Notes costs Local Top level business Donors Others deficit budget budgets (please specify) 1.1. Creation of municipal tangible asset database 30 000 Gel 30 000 Gel 9 375 Euro 9 375 Euro 1.2. Develop investment proposals and offer them to 12 000 Gel 12 000 Gel potential investors 3 750 Euro 3 750 Euro 1.3. Advertise the municipality as a good place to 20 000 Gel 20 000 Gel start a business and invest 6 250 Euro 6 250 Euro 2.1. Rehabilitation of the access road to Chakvinji 1 000 000 Gel 50 000 Gel 950 000 Gel Castle (Jikha) 312 500 Euro 15 625 Euro 296 875 Euro 2.2. Arrangement of ethnographic space in the Rukhi 250 000 Gel 250 000 Gel Castle area 78 125 Euro 78 125 Euro 2.3 Organize an annual culinary festival to promote 40 000 Gel 20 000 Gel 20 000 Gel local produce and introduce locals and tourists 12 500 Euro 6 250 Euro 6 250 Euro 3.1. Raising SMEs' knowledge of finance 20 000 Gel 10 000 Gel 10 000 Gel 6 250 Euro 3 125 Euro 3 125 Euro 3.2. Organizing festivals and exhibitions to promote 40 000 Gel 40 000 Gel local entrepreneurs 12 500 Euro 12 500 Euro 3.3. Increase knowledge of SMEs, startups through 30 000 Gel 10 000 Gel 20 000 Gel targeted trainings 9 375 Euro 3 125 Euro 6 250 Euro 3.4. Improving farmers' skills and abilities by training 30 000 Gel 10 000 Gel 20 000 Gel them 9 375 Euro 3 125 Euro 6 250 Euro Total 1 472 000 Gel 452 000 Gel 950 000 Gel 20 000 Gel 50 000 Gel 460 000 Euro 141 250 Euro 296 875 Euro 6 250 Euro 15 625 Euro 11. Monitoring Indicators and Mechanisms

The implementation of the Local Economic Development Action Plan of the Zugdidi Municipality will be monitored by the Partnership Monitoring Committee of 5 members, 2 of whom will be from the civil sector, 2 from the private sector and 1 from the local government. Gender balance will be maintained when staffing the monitoring team. The Committee will monitor it quarterly and report to the Secretariat for Economic Growth every six months.

Action Duration (start Expected Results Month 1-6 Expected Results Months Expected Results Months Expected Results Months / end) 7-12 13-18 19-24 1.1. Creation of municipal 2/2020- A tender has been Estimated and entered A tender has been The creation of tangible asset database 11/2021 announced for the in the database 50% of announced for the the municipal preparation of measurement municipal tangible preparation of tangible asset drawings for real and assets measurement drawings for database is movable property and their real and movable property completed audit evaluation and their audit evaluation 1.2. Develop investment 2/2020- A working group has been 1 investment proposal 2 investment proposals A potential investor has proposals and offer them to 11/2021 set up to work on has been developed; A have been developed been retrieved and an potential investors investment proposals potential investor has offer has been made been retrieved and an offer has been made 1.3. Advertise the municipality as 2/2020- Information leaflets and Tender has been Website is running; The information on the a good place to start a business 11/2021 video clips are selected, as announced for the Image videos and website has been and invest well as the technical creation of the website, information leaflets have updated requirements for creating a preparation of video been prepared website clips and information booklets 2.1. Rehabilitation of the access 2/2020- Pre-project research has Project cost The project The work is done road to Chakvinji Fortress 11/2021 been carried out; The estimates are implementation money is project proposal is prepared allocated from the state endorsed by the City budget; The tender for Council and is outlined in the procurement of the Regional Development construction works has Strategy Action Plan; been announced and the Tender on design is contract has been announced concluded with the winning company 2.2. Arrangement of 2/2020- A detailed concept of the The project has been Ethnographic space and The ethnographic area ethnographic space in the Gray 11/2021 project to be implemented prepared, the budget relevant infrastructure are of the tourist attraction Castle area is developed provides for the project arranged of Rukhi Castle is implementation accessible to visitors 2.3. Organize an annual culinary 2/2020- Entrepreneurs wishing to The festival is held Entrepreneurs wishing to The festival is held festival to promote local produce 11/2021 participate in the culinary participate in the culinary and local produce and introduce festival have been festival have been it to tourists. identified; The festival identified; The festival location and themes are location and themes are selected selected 3.1. Raising SMEs' knowledge of 2/2020- The training program Trainings are conducted The training program Trainings are conducted finance 11/2021 is compiled, the is compiled, the training participants training participants are selected, the are selected, the partners are partners are retrieved retrieved 3.2. Organizing festivals and 3/2020- Entrepreneurs There are 2 exhibitions- Entrepreneurs There are 2 exhibitions to promote local 11/2021 interested in sale interested in exhibitions-sale entrepreneurs participating in participating in the exhibition, the exhibition, sales, location sales, location and themes are and themes are selected selected 3.3. Increase knowledge of 2/2020- The training program is Trainings are The training program is Trainings are SMEs, startups through targeted 12/2021 compiled, the training conducted compiled, the training conducted trainings participants are selected, participants are selected, the partners are retrieved the partners are retrieved 3.4. Improving farmers' skills 2/2020- The training program is Trainings are The training program is Trainings are and abilities by training them 12/2021 compiled, the training conducted compiled, the training conducted participants are selected, participants are selected, the partners are retrieved the partners are retrieved % Of total budget spent 100% 10% 20% 30% 40% (benchmark)