"Enterprise Georgia" is working with donor organizations to create 4 new clusters
It is known that the process of creating business clusters in Georgia was initiated by the European Union and GIZ (German Society for International Cooperation). The main partner of the project from the government is the agency "Enterprise Georgia". the agency acts as a mediator between representatives of the private sector, donor organizations and other agencies. The Agency also participates in inter-discussions about the development of clustering policy in Georgia.
“In the planning process there was a need for an independent party, which would be an additional mechanism for cooperation between industry representatives and the implementation of specific initiatives. Clusters have an important role in developing various initiatives and mechanisms with the Agency (Including in terms of cooperation with donor organizations and getting funds)”- says “Enterprise Georgia”.
According to the agency, they were actively involved in each stage of cluster formation, informing the private sector about the benefits of joining the cluster, participating in workshops and trainings. They have spread the information about the importance and benefits of the cluster.
Two new grant programs have been launched to support tourism industry last year. People employed in the tourism sector and hotel owners get benefits from those programs. Within the framework of this grant program, "Enterprise Georgia" has added a clustering mechanism. For example, if the entrepreneur wants to build a family hotel in Shatili and has a person living nearby who has to do horse or motorbike rental service, and the third neighbor wants to build a restaurant or museum, this union or so called cluster will be awarded extra points. The agency explains that the purpose of this mechanism is to encourage partnerships and facilitate the establishment of tourist centers.
According to the agency, negotiations are currently underway with organizations that are actively working to create clusters in Georgia. The United Nations Industrial Development Organization (UNIDO) is currently working on evaluation of existing potential in the country. Based on the identified priorities, additional diagnostic studies will be planned to determine the feasibility of establishing 4 sector clusters.
According to “Enterprise Georgia” GIZ is working to establish clusters in the construction and textile industries. UNDP (UN Development Programme) works on packaging cluster, FAO (Food and Agriculture Organization) – on nursery (seed/seedlings) cluster, and ADA (Austrian Development Agency) - on sustainable mountain tourism and organic agriculture.
"Enterprise Georgia" explains how sectors are being selected for clusters and what procedures are involved in the process of its formation: “first, a potential sector is identified based on in-depth research. Individual meetings are held with the private sector to find out their readiness. At the same time, their awareness about the importance of the cluster is measured.
It should be noted that in the first stage (before creation) companies have a rather skeptical attitude towards clusters because the idea of the cluster is perceived as sharing internal information with a competitor. Changing a given stereotypical attitude and clearly demonstrating the effectiveness of working together is one of the key steps in this process.
Once the priority sectors have been identified, it is important to raise the awareness of company representatives about the importance of clusters, to show them what benefits such an organization can bring. Additionally, the government needs to define a unified structure that will integrate support mechanisms, incentive activities or other specific, targeted frameworks that will facilitate the development of the private sector through clusters. – says “Enterprise Georgia”
It is interesting what the government is doing to promote the clusters. What benefits do the state-owned enterprises in the cluster enjoy from the state program, do they have any advantage in terms of receiving funding compared to other private businesses? We asked those question to “Enterprise Georgia”. It turns out that cluster members do not have any privileges in terms of access to finance. For them, "they can only use the co-financing mechanism while participating in exhibitions." However, the agency says that clustering and joining forces will enable enterprises to increase their chances of obtaining funds with preferential terms.
“Establishing clusters and their proper management help increase productivity, implement innovations, access resources, and increase competitiveness. Consequently, the existence of such a type of unity plays an important role in the development of the economy.
For small and medium-sized businesses, the cluster is an additional opportunity to have constant access to up-to-date information about their sector and possibility to use relevant infrastructure. In collaboration with other representatives of the sector, a particular entrepreneur can acquire new competencies, encourage competition, as well as to have access to qualified staff. Under conditions of limited resources, the unity of companies means finding additional funds in terms of access to machinery, raw materials or business services. Operating independently impedes access to specific channels. Those opportunities create a beneficial environment for the cluster.
At the same time, considering the challenges related to access to finance, the cluster is exactly the tool that unites small and medium entrepreneurs and gives them the opportunity to develop together, purchase machines and ensure timely and efficient delivery of joint orders” - says "Enterprise Georgia".
Author: Nona Kvlividze
The article is prepared with the financial support of the Ministry of Foreign Affairs of Lithuania and "Development Cooperation and Democracy Promotion Programme."
