Economic Prosperity Initiative (Epi) Value Chain Assessment Report

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Economic Prosperity Initiative (Epi) Value Chain Assessment Report ECONOMIC PROSPERITY INITIATIVE (EPI) VALUE CHAIN ASSESSMENT REPORT Friday, April 1, 2011 This publication was produced for review by the United States Agency for International Development. It was prepared by Deloitte Consulting LLP. VALUE CHAIN ASSESSMENT REPORT USAID ECONOMIC PROSPERITY INITIATIVE (EPI) CONTRACT NUMBER: AID-114-C-10-00004 DELOITTE CONSULTING LLP USAID/CAUCASUS FRIDAY, APRIL 1, 2011 DISCLAIMER: The author‘s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government. DATA Author Organization Martin Webber J.E. Austin Associates, Inc. David Feige J.E. Austin Associates, Inc. Carlton Jones J.E. Austin Associates, Inc. Alan Saffery EPI Dennis Zeedyk EPI Lakshmi Lyer CNFA Numerous authors of individual value chain assessments contributed to the report. Their details follow in this table. Value Chain Author(s) Organization Agricultural Value Chains Blueberries and Davit Grigolia EPI Hazelnuts Fresh Fruit and Mamuka EPI Processed Fruit Gachechiladze Juices Fresh Avtandil EPI Vegetables, Korakhashvili Processed Vegetables, and Root Crops Wine Gia Bibileishvili EPI ECONOMIC PROSPERITY INITIATIVE (EPI) i Non-Agricultural Value Chains Apparel Zviad Kvlividze EPI Carlton Jones J.E. Austin Associates, Inc. Basalt Fiber Temur EPI Products Bolotashvili Carlton Jones J.E. Austin Associates, Inc. Perlite, Wood, Temur EPI and Clay Bolotashvili Products Paper/paperboard Dr. Ken Marsh J.E. Austin /corrugated and Associates, Inc. Plastic crates/beverage EPI bottles David Charkviani Adventure Ursula Jessee J.E. Austin Tourism and Associates, Inc. Wine Tourism EPI Irakli Toloraia MICE Tourism Sergo EPI Baramidze Deloitte Transport and Kent Ford Consulting LLP Logistics Yvan M. Caceres John H. Arnold EPI ICT David Bolkvadze ECONOMIC PROSPERITY INITIATIVE (EPI) ii ABSTRACT Georgia benefits from strategic location, beautiful physical features and historical treasures, and talented, energetic people. In recent years, a democratically elected, forward-looking government has created an empowering, laissez-faire business environment, complementing these natural endowments with an atmosphere in which business can flourish. Recognizing that this combination of assets and opportunity is rare in the world, the U.S. Government wishes to strengthen, deepen, and institutionalize these developments to ensure continued peace, stability, and democratic political and economic growth. The Economic Prosperity Initiative (EPI) project has conducted 18 assessments for value chains in agriculture and non-agriculture sectors in Georgia. In addition, two deep sector assessments are underway, for ICT and Transport & Logistics. Through these assessments, the EPI team has identified 17 priority value chains as target partners for project implementation. EPI‘s work with the ICT and Transport & Logistics sectors, which are elements of many value chains, will contribute to the competitiveness of the entire economy. ECONOMIC PROSPERITY INITIATIVE (EPI) iii CONTENTS ABSTRACT EXECUTIVE SUMMARY METHODOLOGY AND SELECTION CRITERIA AGRICULTURAL VALUE CHAIN ASSESSMENTS ANNEX 1: BLUEBERRY VALUE CHAIN ASSESSMENT ANNEX 2: HAZELNUTS VALUE CHAIN ASSESSMENT ANNEX 3: FRESH FRUIT VALUE CHAIN ASSESSMENT ANNEX 4: FRUIT JUICE VALUE CHAIN ASSESSMENT ANNEX 5: FRESH VEGETABLE VALUE CHAIN ASSESSMENT ANNEX 6: PROCESSED VEGETABLES VALUE CHAIN ASSESSMENT ANNEX 7: ROOT VEGETABLES VALUE CHAIN ASSESSMENT ANNEX 8: WINE VALUE CHAIN ASSESSMENT NON-AGRICULTURAL VALUE CHAIN ASSESSMENTS ANNEX 9: APPAREL VALUE CHAIN ASSESSMENT ANNEX 10: BASALT VALUE CHAIN ASSESSMENT ANNEX 11: CLAY PRODUCTS VALUE CHAIN ASSESSMENT ANNEX 12: PERLITE VALUE CHAIN ASSESSMENT ANNEX 13: WOOD PRODUCTS VALUE CHAIN ASSESSMENT ANNEX 14: PAPER/PAPERBOARD/ CORRUGATED PACKAGING VALUE CHAIN ASSESSMENT ANNEX 15: PLASTIC CRATES/BEVERAGE BOTTLES VALUE CHAIN ASSESSMENT ANNEX 16: ADVENTURE TOURISM VALUE CHAIN ASSESSMENT ANNEX 17: MICE TOURISM VALUE CHAIN ASSESSMENT ANNEX 18: WINE TOURISM VALUE CHAIN ASSESSMENT ANNEX 19: ICT SECTOR ASSESSMENT ANNEX 20: TRANSPORT AND LOGISTICS SECTOR ANALYSIS ECONOMIC PROSPERITY INITIATIVE (EPI) iv EXECUTIVE SUMMARY USAID designed and procured the Economic Prosperity Initiative (EPI) – a four-year USD 40.4 million program – to build upon Georgia‘s substantial progress in creating a business environment that provides opportunity for competitive investment and economic growth. EPI‘s broad goal is as follows: “EPI will improve enterprise, industry, and country-level competitiveness by identifying and targeting key external and internal factors to enhance the growth rates and productivity of enterprises in the economy, thereby enhancing the economic well-being of workers in the economy.” EPI contract sections ―Component 2 – Improve the Competitiveness of Targeted Agriculture Sectors‖ and ―Component 3 – Improve the Competitiveness of Targeted Non-Agriculture Sectors‖ require the evaluation of agriculture and non-agriculture sectors, and specify that that value chains must be selected from the priority sectors. Soon after EPI was mobilized, teams of value chain analysts began the process of prioritizing economic sectors based on their competitiveness potential and their ability to meet EPI productivity, employment, investment, access to finance, and exports targets. The Sector Assessment Report identified 10 priority sectors, and within these sectors, 23 priority value chains for further assessment. This Value Chain Assessment Report presents the results of EPI‘s further investigations into 18 value chains and 2 sectors and identifies the value chains with which EPI recommends engagement to support Georgia‘s competitiveness growth. The Report is the EPI deliverable for ―Work Plan Level 22120 Priority Agricultural Value Chain Selection‖, ―Agricultural Sector Selection Report #1‖, ―Work Plan Level 32120 Non-Agricultural Value Chain Selection‖, and ―Non-Agricultural Value Chain Selection Report #1‖. EPI carried out the Value Chain Assessment activities during January-February 2011. Many of the priority value chains identified during the Sector Assessment phase were ultimately selected for recommendation. The Value Chain Assessments enabled EPI to validate several value chains that should be recommended for EPI‘s implementation partnerships, most of which were the same as those identified through initial strategic hypotheses. The Value Chain Assessment process met two important objectives: Enabled EPI to identify value chains for initial implementation partnerships Enabled EPI to develop strong dialogue and linkages with key value chain actors, allowing the program to identify with whom it should engage to develop the value chains‘ action plans. As a result of the assessments, EPI is already working with many of the actors who will be key to the action plan development process. Additional benefits of the Value Chain Assessment process: Through investigations and discussions with value chain actors, several ideas for quick win activities were identified, some of which are already underway. An understanding of the potential competitiveness strategies and entry points for each value chain was developed. ECONOMIC PROSPERITY INITIATIVE (EPI) v Several short-term Georgian and international subject experts were mobilized during the Assessment. Their participation has in effect ―jump-started‖ the strategizing (and supporting analytics) process, enabling EPI to progress beyond value chain selection. Information and data for the value chain assessments was obtained from: Available reports Print and online data sources Government statistical sources Meetings with value chain actors (more than 275 meetings) Expertise of Georgian and international experts Numerous field visits in Georgia The assessment of each value chain is presented in the annexes formatted in such a way so as to allow users to extract any particular value chain of interest. Each value chain is assessed in terms of its (1) competitiveness potential; (2) impact on the economy and beneficiaries; (3) quality of leadership (within the value chain); and (4) synergies with other value chains, cross-cutting themes, and other aspects of importance to EPI‘s objectives. EPI proposes to immediately move forward to work with the following value chains & sectors: Non-Agricultural Value Chains/Sectors Agricultural Value Chains Apparel Blueberries Construction Materials: Hazelnuts Basalt Fiber products Fruit: Perlite products Wood products Fresh fruit Fruit juice Packaging Vegetables: Paper/paperboard/corrugated Plastic crates/beverage bottles Fresh vegetables Processed vegetables Tourism: Root vegetables Adventure Wine MICE1 Wine Transport and Logistics Sector Details to be determined ICT Sector 1 Meetings, Incentives, Conferences, Exhibitions ECONOMIC PROSPERITY INITIATIVE (EPI) vi Details to be determined The selected value chains include many synergies. For example: Construction firms will be major actors in the growth of the construction materials value chains and many will be involved in initiatives for each of the three selected construction materials value chains. Some initiatives will be undertaken collaboratively.2 The packaging value chains are important for growth of the agricultural value chains, among others. Elements of all three tourism value chains are intertwined; initiatives in one will support the growth of the others. The wine and wine tourism value chains are inextricably linked. The fresh fruits and processed
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