Georgia’s low-tech sectors are ripe for investment in innovation
One overwhelming theme spreads across the whole EBRD region: the need for innovation. Crucial for the future economic well-being of each and every country, innovation is also a lucrative opportunity for investors.
In many countries challenging business environments are a deterrent to innovation – in fact innovative companies are particularly sensitive to obstacles to doing business. Georgia, the top-rated transition country in the World Bank’s 2015 Doing Business ranking, stands out in this respect.
Georgia also has an underserved domestic market and large EU and CIS markets at its doorstep. And it is the country’s low-tech sectors, such as primary agriculture and food processing, and not only hi-tech sectors, that offer the most fertile ground for investment in innovation.
Low productivity is a curse of many industries in Georgia, as it is indeed in the wider EBRD region. The latest EBRD/World Bank’s Business Environment and Enterprise Performance Survey (BEEPS) shows that companies in Georgia are much less productive than those in innovation leaders, such as Israel.
While productivity in Georgia is fairly similar to that in the CIS, where the majority of Georgian exports go, the BEEPS shows that in terms of innovation (introducing new products, processes and technologies); Georgian companies actually lag even behind most CIS countries.
This is an opportunity not just for domestic but also for foreign strategic and financial investors. Even a relatively small-scale innovation introducing well-established technologies into a sector can boost productivity.
Agriculture is a good example. There is room for improving farm management and processes, for example the use of fertilisers, use of more advanced farming techniques, and investing in better hardware. There is also the possibility to adopt more modern technologies, typically associated with social networks. Georgian farms could benefit, for example, from sensor-based solutions for herd management or for agricultural irrigation systems.
The EBRD for its part has supported the sector with a successful Georgian Agriculture Financing Facility. It helps local banks offer local currency financing to farmers, provides first loss risk cover and has introduced other innovative approaches such as cooperative finance schemes.
Georgian agriculture has a way to go before its cows go digital. But massive improvements of productivity, such as those achieved by companies described in this series, demonstrate how innovative investors are
Agris Preimanis is EBRD Lead Economist for Georgia and Central Asia