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Georgia on European Way: Creation of Effective Model for DCFTA and SME Strategy Implementation
Project Findings & Recommendations for Further Action
The Deep and Comprehensive Free Trade Area (DCFTA) Agreement, which is a part of the Association Agreement (AA) between the EU and Georgia, is active since September 1, 2014 and has the potential to be significantly beneficial for the Georgian economy. Compared to other EU-provided platforms for closer cooperation — such as the visa-free regime — DCFTA has the capacity to deliver significant changes over a period of several years. The size of a business determines how quickly it can benefit from the trade agreement. Small and medium enterprises (SMEs), one of the target groups of the project “Georgia on European Way: Creation of Effective Model for DCFTA and SME Strategy Implementation,” account for more than ninety percent of Georgian businesses but produce less than one fifth of the total turnover and are weak exporters. For them to benefit from the DCFTA, their products must first meet EU quality standards and safety regulations. After that, they must find the best route to the EU single market.
During the project, local SMEs voiced a variety of concerns and challenges related to taking advantage of the DCFTA. However, they were also interested in the potential to use the benefits offered by the trade agreement and wanted to improve the quality of their products, as well as their logistic capacities. They expressed interest in selling outside their region of production, for example, in Tbilisi, where prices are higher, and to start exporting. The majority of the SMEs involved in the project considered the EU single market as a long-term perspective, not as something that could be achieved in the short-term.
Moreover, participants who were not involved in business did not understand the DCFTA’s effect on their lives until it was explained that the DCFTA does not solely focus on exporting goods to the EU. Overall, It impacts the safety of locally produced products overall, including what is being sold at the local market. The implementation of the DCFTA includes the adoption of the EU technical standards, for example, phytosanitary and hygienic standards. That will increase the safety of food products, which will have a direct and positive effect to consumers’ health.
The project also found that the local governments in Georgian regions and municipalities need more information and a deeper understanding of the DCFTA and how they can support local businesses. While the original intention was that civil society organizations (CSOs) in Georgian regions would help bridge the gap in awareness about the DCFTA and the SME strategy implementation, they also required more information and stronger capacities.
This study is the final product of the project “Georgia on European Way: Creation of Effective Model for DCFTA and SME Strategy Implementation.” It provides a brief overview of the executed activities, but mainly focuses on measuring the effect the project had on increasing the capacities of Georgian CSOs to contribute to DCFTA/SME strategy implementation. It also compares Georgian SMEs’ preparedness to export to the EU at the beginning of the project (April 2017) to their level at the end of the project (July 2019).
Finally, it offers the main conclusion reached by the project implementers. This and similar projects have enabled Georgian CSOs to develop the capacity to work on DCFTA related issues. The project also contributed to informing Georgian SMEs about procedures and existing support mechanisms in order to start exporting to the EU. However, more work is needed and it should be done in cooperation with civil society, businesses and local and central governments. It is the hope of the project implementers that the project’s findings and recommendations will be useful for future work in this area.
This publication is the integral part of the project “Georgia on the European Way: Creation of Effective Model for DCFTA and SME Strategy Implementation” (henceforth – project) implemented from April 2017 – July 2019. The project aimed to address the lack of awareness about opportunities provided by the Deep and Comprehensive Free Trade Area (DCFTA) Agreement between Georgia and the EU. It sought to increase the role of Georgian civil society organizations in a nation-wide DCFTA communication campaign and their capacities to assist local small and medium enterprises (SMEs) prepare to access the EU single market.
The project has been implemented by an international consortium of non-governmental organizations and think tanks under the leadership of the Eastern Europe Studies Center (EESC, Lithuania) together with the Association of Business Consulting Organizations (ABCO Georgia), the Georgian Institute of Politics (GIP, Georgia), GLOBSEC Policy Institute (GPI, Slovakia), Young Scientists Union “Intellect” (Georgia), ATINATI (Georgia) and Association Caucasus Genetics (Georgia).
This study has been produced with the assistance of the European Union. Its contents are the sole responsibility of project implementers and do not necessarily reflect the views of the European Union.