EPI Annual Report: Year 2

Economic Prosperity Initiative (EPI) project has reached its mid-point. The due diligence activities of conducting over eighty assessments at the project start, followed by targeted action plans, have paid off. EPI was able to identify opportunities for catalytic policy reforms and activities in key leverage points within its value chains and sectors where EPI’s assistance was applied during Year 2 of the project. As a result, several EPI supported policy reforms have been implemented in a broad consultative process, such as financial leasing, risk-based audit, customs warehousing, tax simplification, and e-Governance initiatives, which are already creating a positive impact for the Georgian economy. Similarly, sectors that barely existed when EPI commenced its activities, with very limited knowledge of their potential, such as corrugated paper packaging, heated greenhouse industry, Meetings, Incentives, Congresses, and Exhibitions (MICE) tourism and crop insurance, are truly starting to take off. EPI connected Georgian businesses to the market and helped them adopt the right technology, standards or practices; after which, these businesses saw the potential and made their own investments to seize on these opportunities.

EPI’s targeted approach supported by rigorous impact analysis of all our activities, including policy reforms, enabled the project to made significant progress towards meeting or even exceeding its life of project targets already at this half-way point. EPI was able to achieve this by building partnerships, promoting public private dialogue and facilitating fact-based policy making, as well as by building the capacity of local businesses and employees to adopt international best practices and standards. EPI’s efforts secured USD 109 million in foreign investment and commitments, with an additional pipeline of investment opportunities of USD 559 million. EPI also facilitated USD 155 million in exports, mostly through its efforts in the wine and MICE tourism, hazelnut and apparel sectors, already exceeding its life of project export target of USD 150 million.

The financial leasing reform that EPI implemented through a consultative process with private and public sector stakeholders, the promotion of investments in the heated greenhouse industry, and the launch of a crop insurance industry, resulted overall in a domestic finance increase of USD 125 million since project start. EPI also achieved consistent increases in productivity (40% average productivity increases for all of its value chains), employment (7,050 new jobs) and revenues (annual revenue increase of 27% or USD 11.8 million for agricultural sector, and 61% increase or USD 47 million for manufacturing and services sectors) for all of its value chains.

EPI also ensured that the project activities impact a broad population of farmers and businesses, while building local capacity of Georgian service providers. EPI policy reforms and value chain activities reached 5,666 farmers and 212 agribusinesses, and 588 businesses in the manufacturing and services sectors. EPI also engaged 92 agricultural service providers (in turn reaching another 32,600 farmers and 6,208 agribusinesses), and 42 business service providers (reaching another 877 businesses).

At the same time, EPI created a solid foundation from where additional targeted assistance by EPI can build from during Year 3 of the project. EPI’s world-class apparel industry vocational program will be a key factor for attracting new foreign investment and positioning Georgian apparel factories to expand their exports and create much needed jobs. Further investments in workforce to increase customer service skills and wine knowledge have created ripple effects in the tourism sector to offer higher quality services to incoming floods of tourists. Other trainings, such as large-scale agricultural producer programs created double-digit productivity increases for the agricultural value chains that were previously dismissed as non-commercial sectors as they are dominated by smallholder subsistence farmers. EPI is now working with these farmers to create sustainable commercial linkages between lead farmer groups and higher value markets to generate revenue increases for large communities in Western Georgia.

EPI’s targeted investment promotion function has heightened the Georgian government’s interest to adopt best practices in investment promotion and thereby create sustainability. Not only that, it has also built up a pipeline of actual and committed investments and new investment leads that will bring the needed know-how, market linkages and finance to Georgian productive industries, creating new jobs and opportunities for Georgians, especially in the rural areas.

EPI was able to achieve such results through its “open-source” approach to development. EPI continues to look for opportunities to partner with others who have similar objectives as EPI. Whether it is transitioning its resources to US Treasury team at the Revenue Service, providing training to beneficiaries of USAID New Economic Opportunities (NEO) and USAID Azerbaijan Competitiveness and Trade (ACT) projects or partnering with GIZ to improve the quality of infrastructure, EPI’s top consideration is how to multiply the project impact and effectively use available resources in the country. The focus of EPI activities is first and foremost commercial – the feasibility studies and business plans fully justify any investment that EPI makes in terms of its resources or consulting services. Only when viable, and often tested through small-scale pilots, EPI proceeds with activities, aligning other stakeholders’ objectives and securing and leveraging additional funds and resources to achieve common goals.

In the hazelnut sector, EPI helped USAID establish its first Global Development Alliance (GDA) for the USAID Georgia Mission, leveraging around USD 1.5 million of private funds from Ferrero International to improve the competitiveness of the hazelnut industry. EPI also identified an opportunity to facilitate trade and truly position Georgia closer to its aspiration of becoming a regional trade and cargo hub. Specifically, EPI garnered the support and resources of global shipping lines and port operators, Georgian railways, freight forwarders and Customs to jointly implement a port community system similar to those of the most developed ports, such as Rotterdam and Singapore, to achieve further trade efficiencies for the sector. The new GDA is expected to follow in Year 3.

EPI’s focus remains the same: living up to its principle of “Georgians for Georgia”, building local capacity and ensuring sustainability of all the activities. Starting with trainings and leadership development of its own staff with all the components now fully transitioned to leading Georgian experts, EPI has created a lasting impact for talent development long after EPI ends. EPI’s highly coveted internship program is creating buzz among students as it ensures high job placement rates after only a brief yet challenging internship program with EPI. Over 134 business development service providers, financial advisors, and agricultural service providers are all enhancing their capabilities, with EPI assistance, to provide high value services to its clients. EPI’s focus on women entrepreneurs and fully embedded women-focused community outreach specialists in EPI’s agricultural sector are creating new opportunities and development impact for women that were often excluded from participating in business or other leadership roles.

By now, EPI has fully established itself as the connector, bringing diverse audiences to the table to engage in informed debates and promote participatory and transparent policy-making. While not always easy to quantify its immediate impact, such an eco-system of trust and multi-stakeholder engagement will enable Georgia in the long run to achieve the ultimate goal of EPI – increase competitiveness and bring prosperity for Georgians.

Further Reading