EIGER conference at TSU 25 November 2016 Tbilisi, Georgia Regional disparities in urbanization and socioeconomic development in Georgia Dr. Joseph Salukvadze (Tbilisi State University) EIGER conference at TSU 25 November 2016 Tbilisi, Georgia

Main sources

Georgia’s settlement system: General characteristics

Stagnant demography: Population change by cities and municipalities (2002-2014)

Low urbanization level - 57% in 2014

Below average economic performance for existing urbanization level Urbanization and GDP per capita, 2014 (source WB 2015)

Regional differences: GVA structure, GVA per capita and urbanization rate (Source: Geostat 2013)

Competitiveness of Georgia’s economic clusters, 2010 Source: Miller (2012)

The Most Problematic Factors for Doing Business in Georgia (2014) Source: World Economic Forum, Global Competitiveness Report 2014-15

Major overall problems of underdeveloped urban system Weak economic basis for urban development: Complicated access to well-located and serviced land for productive clusters Mismatch of labour in terms of skills Unavailability of sufficient capital at right price Poor access to input and output markets Inadequate basic services and municipal infrastructure Problems in setting-up of enabling regulatory environment with low costs of regulatory compliance Poor governance in terms of financial and human resources capacities.

Necessity of differentiated policies: Three types of cities Arranged by size, status and economic potential: “Big 4” growth centers – Tbilisi, Kutaisi, Batumi, Rustavi Regional centers with more localized economic gravitational pull; Secondary urban economies with market access and opportunities to tap into growth potential of the Big 4. Each type requires different policy approaches that leverage the ways in which they contribute to productivity and economic growth.

Cities and towns by size and type

Example 1: Tbilisi – the main national ‘growth pole’ Tbilisi’s economy has been growing steadily in last years. However the growth model driven largely by local consumption, tourism and real estate, i.e. non-tradable sectors, may not sustainable. To sustain its growth and lead Georgia’s transition towards a more productive innovative economy Tbilisi needs to focus on using its endowments to build a more diversified and innovative economy. To support further growth Tbilisi needs to reconsider its growth strategy and strategically prioritize interventions that will support development of tradable sectors: business and finance services, support for SMEs, and support for innovative sectors that have potential to grow in the long run such as pharmaceuticals and ICT. It should educate and retain qualified labor-force, as well as attract talents from outside, in order to successfully compete with regional competitors. Implementation of a good governance pattern would be crucial.

Tbilisi GDP Per Capita and GDP growth versus its Comparators Source: Oxford Economics

Example 2: Collaboration with rural areas Regional centers and many secondary cities located in agriculture-intensive regions should be considered as centers of agro-processing and agro-logistics, facilitating urban approach to regional growth. Agriculture has a potential to serve as inputs and provide linkages to other sectors where urban areas can play a significant role. Agro-processing facilities and investment are well-suited to urban areas, particularly those that assist in increasing the productivity of the agricultural sector. There is ample opportunity to create dynamism in the agriculture sector by connecting it to other sectors. Cluster analysis clearly show the proximate relationship between agriculture, agro-processing, and tourism.

The focus of the EU support for regional policy in Georgia Strategic and master planning Capacity building of city administrations Assisting universities for developing of relevant curricula, training courses, etc. Helping in elaboration of a topic of agglomeration/ metropolitan region

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