Summary 

In this article we examined several aspects of structural transformation in Georgian economy. The main accent was made on the evaluation of the entrepreneurship policy and its results within the association agreement. Since its independence, Georgia faces structural transformation and fundamental challenges. The first one focuses on moving resources into modern industries, while the second one on developing broad capabilities.

The experience of some countries shows that structural transformation can fuel rapid growth on its own, but if it is not backed up by fundamentals, growth peters out and remains episodic. On the other hand, the accumulation of fundamentals, which requires costly, time-consuming, and complementary investments across the entire economy, only produces steady but slow growth if it is not backed up by structural change. The bottom line is that, ultimately, sustained growth and convergence require both processes. Until 2012, The Implemented reforms and economic policy mostly served improvement of institutional environment and sectoral reallocation, technology updating, labor productivity growth, improvement of small and medium sized enterprises has not been consid­ering. Thus, Georgia seems to have reaped the growth benefits of rapid fundamental change, even though its human capital development indicators are comparatively poor and have not improved as much. In other words, Georgia has significant improvements in governance, and yet its compara­tively poor record with structural change has kept with lower growth. This paper shows that Georgia’s performance was linked to its government’s liberalization policies and other efforts to remove obstacles facing private business. These reforms contributed directly to productivity growth within sectors, but also enabled reallocation of factors of production across sectors. As a result, GDP per capita doubled in real terms in 2003-2012, but poverty did not fall. Large productivity gaps still exist both among and within sectors.

Big pools of labor in agriculture that over time move primarily into services, rather than manu­facturing. In the late 2017, Georgia had 40 percent of its workforce in agriculture, producing about 9% country’s GDP. This discrepancy between agriculture’s claim on the economy’s resources and its contribution to output reflected the large differential in labor productivity across activities. The typical worker in manufacturing produced two times more output than the typical worker in agriculture.

In 2016 Georgian government introduces program 2016-2020 ,,Freedom Rapid Devel­opment Prosperity”. One of goal of this program were the supporting small and medium busi­nesses, promoting entrepreneurship and start-ups, developing agriculture, and furthering the country’s integration into the world economic system. In addition to global activities focused on a fundamental transformation of Georgian economy, the Government of Georgia is implement­ing policy directed at the transformation and development of specific sectors driving economic growth. These sectors are: Energy, Agriculture, Transport, Tourism.

In terms of enterprise policy, the important document is the associate agreement signed between Georgia and EU. One of the parts of this agreement is the introduction of deep and comprehen­sive free trade area. This regime increases market access between the EU and Georgia based on having better-matched regulations.

According to the associate agreement, one of the important requirements is to implement small and medium sized entrepreneurship policy considering of the principals of European small busi­ness act. Within DCFTA, according to the action plan of 2014-2017, The following area was defined as priority: introduction of the strategy of small and medium sized entrepreneurship for 2016-2020, which will be the main strategy document for supporting and formulation of small and medium sized entrepreneurship policy implemented by state agencies: Enterprise Georgia, Innovation and technological agency. The purpose is to assist SME in “upgrading. The program focuses on developing entrepreneurship, increasing the competitiveness of the private sector, enhancing the country’s export potential. This policy covers a large number of initiatives, in­cluding from programs of technical assistance, provision of guarantees to get access to banking resources, to programs supporting firms’ equity and incentives to upgrade equipment. The up­grading program aimed at increasing the technological, marketing and organizational capacities of firms increasingly facing EU competition. There were also measures to facilitate integration into global markets, such as streamlined technical controls, improved customs procedures, and increased access to information on standards and technical regulations to raise transparency and meet EU trade obligations.