Economic Policy to Promote Industrial Development in Georgia
Authors: Erkomaishvili Gulnazi 
Published: February 2023

In connection with the transition to a market economy, the industrial industry inherited from the Soviet economy was almost completely dismantled. In 1990-1994, compared to the Soviet era, the production of industrial products decreased fivefold and the number of jobs fourfold (National Statistical Service of Georgia, 1995). Industrial products became uncompetitive in both domestic and foreign markets. The production of machines, devices, tools, electric machines, vehicles, products of light and partly food industry was stopped. Accordingly, the level of industrial production fell, the specific share of industry in the total domestic product decreased, and industrial ties were dissolved. All this led to the deindustrialization of the country. In 1999, the Ministry of Industry of Georgia developed: the Industrial Concept of Georgia and “Strategic Programs for the Development of Industrial Enterprises of Georgia in 2000-2005” in order to solve the extremely important tasks facing the industry of Georgia in the period of transition to a market economy and for their further development. However, they did not have a major impact on the revitalization of the industrial sector. In the years 2003-2012, the share of industry in the total domestic product decreased. By 2020, sales of industrial products and production increased significantly, but the pandemic had a serious impact on both indicators. In 2022, compared to 2020, sales decreased by 2.6 times and output by 2.9 times. The number of employees has increased slightly in recent years; there were no major changes during the pandemic. Wages increased 1.9x in 2022 compared to 2014, with a slight increase in the post-pandemic era. The largest sub-sector of the industry is manufacturing, the share of which has increased compared to previous years (2018 - 18.4%, 2019 - 18.4%, 2020 - 20%). The share of the mining industry has also increased slightly (2018 - 1.2%, 2019 - 1.4%, 2020 - 1.9%). This is followed by the supply of electricity, gas, steam and air conditioning, the share of which is characterized by a downward trend (2018 - 2.3%, 2019 - 2.1%, 2020 - 2.1%). The water supply is also characterized by a decreasing trend; Sewage, waste management and decontamination works (2018 - 0.7%, 2019 - 0.7%, 2020 - 0.6%) (Georgian National Statistics Service, 2021). The economic policy of the state plays an essential role in the development of industry. Institutes have been established in Georgia since 2012, the aim of which was, among other things, to promote the development of various branches of industry. To date, the Government of Georgia has implemented a number of programs in this direction. Specifically, Produce in Georgia, Partnership Fund, Industrial Development Group, Innovation and Technology Development Agency of Georgia, Startup Georgia. After the implementation of programs to support the industrial sector, there are some positive results both in terms of employment and business development. At the current stage of industrial development, the country should choose a model aimed at technological development and maximum growth of export potential. An industrial policy should be developed in the country, which will allow us to apply innovative approaches in the priority branches of industry. It is necessary to use such instruments of industrial policy as: innovations and technologies, education and skills, orientation to foreign trade, development of a mechanism to support priority industries, competitiveness and protection of competition. Based on the identified challenges in the area of ​​industry, recommendations for the implementation of an active industrial policy in short and long term periods were developed. Namely: the government's priority orientation of industrial development; paying special attention to the processing industry sectors that Georgia has the potential to produce; supporting the development of scientific fields; Determination of certain benefits for those investors who invest money in industrial production; State partnership with the private sector, manifested in the fight against bureaucracy, corruption and crime, creating favorable business conditions for entrepreneurs; Coordination between education - science - production should be implemented in the country. Much attention should be paid to basic scientific research, which does not require purely commercial returns in the short term, science should become a real productive force; Particular importance should be attached to the formation of such an entrepreneurial ecosystem that will contribute to the expansion of export-oriented production; Overcoming entry barriers in export markets. Keywords: Industry, sectoral structure of industry, export-import of industrial products, institutions implementing industrial policy. JEL Codes: L16, L52, L53, O25