LOCAL ECONOMIC DEVELOPMENT PLAN FOR TBILISI ... - LED

TABLE OF CONTENTS
Local Economy Assessment and SWOT Analysis ..........................................................................................6
Introduction .............................................................................................................................................................6
Tbilisi basic info......................................................................................................................................................8
1. Demography ................................................................................................................................................. 11
1.1. Tbilisi community.................................................................................................................................... 11
1.1.1. Age and gender structure............................................................................................................... 11
1.1.2. Education structure of Tbilisi population........................................................................................ 13
1.1.3. Geographical structure of population............................................................................................. 14
1.1.4. Changes in the Tbilisi population.................................................................................................. 16
1.2. Workforce................................................................................................................................................ 19
1.2.1. Workforce and economically active people................................................................................... 19
1.2.2. Unemployment................................................................................................................................ 20
1.2.3. Workforce........................................................................................................................................ 21
1.3. Wages..................................................................................................................................................... 22
1.3.1. Average monthly salaries by sectors............................................................................................ 22
1.3.2. Earnings by gender ........................................................................................................................ 23
1.4. Quality of life ........................................................................................................................................... 24
1.5. Informal economy................................................................................................................................... 26
1.6. Education................................................................................................................................................ 28
1.6.1. Numbers and types of schools ...................................................................................................... 28
1.6.2. Teachers ......................................................................................................................................... 29
1.6.3. Further and higher education......................................................................................................... 29
1.6.4. Occupational shortages and oversupply....................................................................................... 31
2. Economic base and current economic performance. .......................................................................... 35
2.1. Number and size of firms by sector;...................................................................................................... 35
2.2. Numbers of full-time equivalent employees;......................................................................................... 36
2.3. Investment .............................................................................................................................................. 38
2.4. Start-ups.................................................................................................................................................. 39
2.5. Export and trade statistics;..................................................................................................................... 40

2.5.1. Direction of trade............................................................................................................................. 41
2.5.2. Trade Turnover ............................................................................................................................... 41
2.6. Airport, rail cargo, passenger statistics.................................................................................................. 42
3. Geographical map of the broader region................................................................................................ 45
3.1. Georgian’s and Tbilisi neighbors ........................................................................................................... 45
3.1.1. Russia.............................................................................................................................................. 46
3.1.2. Kazakhstan ..................................................................................................................................... 47
3.1.3. Ukraine ............................................................................................................................................ 48
3.1.4. Georgia............................................................................................................................................ 49
3.1.5. Armenia........................................................................................................................................... 50
3.1.6. Azerbaijan ....................................................................................................................................... 51
3.1.7. Kyrgystan ........................................................................................................................................ 52
3.1.8. Uzbekistan ...................................................................................................................................... 53
3.1.9. Tajikistan ......................................................................................................................................... 54
3.1.10.Turkmenistan .................................................................................................................................. 55
3.2. Economic factors in selected economies in Tbilisi’s region ................................................................. 56
3.3. Benchmarking of Tbilisi’s economy....................................................................................................... 59
4. Assessment of the business environment............................................................................................ 69
4.1. Business environment............................................................................................................................ 69
5. Assessment of current strengths, weaknesses, opportunities and threats in the local economy:71
5.1. Identification of key problems facing City of Tbilisi economy..............................................................74
6. Appendices................................................................................................................................................... 75

CHARTS
TABLES

CHARTS
TABLES

Report
This report includes the evaluation of Tbilisi local economy and the SWOT analysis and
thus illustrates the first stage of writing the Local Economic Development Plan for the City
of Tbilisi.
Statistical data quoted in the report have been collected by the SRGG consultants
assisted by the Economic Policy Department staff of Tbilisi City Hall. The assessment of
data and evaluation of economic competitiveness was done by the team of SRGG
consultants working with representatives of Tbilisi City Hall and other Georgian cities and
regions: Rustavi, Kutaisi, Batumi, Kvemo Khartli, Mtsheta-Mtianeti.
As the project continues this information will enable us to identify key barriers standing in
the way of local development and help us suggest necessary solutions.
Present condition of the economy determines the perspectives of local development.
Widely used „passive marketing” (i.e. expecting initiatives from outside) by no means
guarantees that regional resources are utilized for the benefit of local community. It is
obvious that good will, or even an initiative demonstrated by local organizations, is not
enough to ensure local development. What is more, if local authorities do not use their
potential, positive solutions are even less likely to happen. Thorough knowledge about the
condition of local economy, which can be obtained through analyzing each of its
segments, must become a vital element of the local development policy.
The report consists of six parts, the reference list and annexes.
The first part describes the demographic situation in relation to the age and professional
structure of employed and unemployed people. The data concerning education is also
discussed in the chapter. The second part presents municipal economic resources and
their current output. In the third part the economic structure of Tbilisi is compared with the
situation in the region. In the next fourth chapter local business environment is analyzed
with the reference to capital accessibility, business procedures, taxes. The final part
includes the analysis of strong and weak points as well as the opportunities and threats
that Tbilisi economy has to face.

In the Soviet era Tbilisi and Georgia were a part of centrally planned socialist economy.
Transportation system, cooperation networks, trade links were mainly developed within
internal Soviet market. And the country’s contacts with the rest of the world, including
transportation infrastructure, were led through the Soviet Union. Political reasons and
missing appropriate infrastructure not only stopped Georgia from the relations with
partners from outside the USSR but, due to the supremacy of central institutions, also
hindered bilateral contacts between the republics.
As a result of the political changes in the region transportation channels across Northern
Caucasus and Russia are closed.
Presently Georgia and Tbilisi are re-establishing their traditional central role on the route
from Asia to Europe. Not only does it require reconstructing economic and cultural links
but it is also vitally important to invest in transportation sector. Investments in the sea
harbours of Baku and Poti, the airport in Tbilisi and Baku, pipelines from Azerbaijan via
Tbilisi to Turkey, new road and railway connections from Tbilisi to Turkey and Baku will
integrate Georgia and Tbilisi into transit services and help rebuild natural cooperation
bonds.

Tbilisi in region
The capital of Georgia, Tbilisi, is located at one of the routes of historical silk-road and
holds the best trade-transit center position due to its strategic location at the cross-roads
of Russia, North Caucasus, Turkey and Trans-Caucasus, Armenia and Azerbaijan. The
city is located in the South-East part of Georgia on both banks of river Mtkvari, in Tbilisi
gorge. Due to its geographical position and natural climatic conditions, Tbilisi is one of the
best located cities not only in Georgia but in the whole
Caucasus region.
Tbilisi represents important industrial, social and cultural center of East Europe and
Caucasus region and, at the dawn of the millennium, is becoming one of the most
important transportation links for global energy carriers, information flows and trade
projects.
The construction of the Kars (Turkey)-Tbilisi-Baku (Azerbaijan) 826-kilometer railway will
probably be the most significant project in the entire Caucasus and could bring
tremendous economic dividends to the region and international economy. The railway line
has huge potential to deepen the integration of Turkey, Georgia and Azerbaijan, which, in
turn, will link them more closely with Europe and Asia.
.

Tbilisi metro area.
Tbilisi metropolitan area is spreading along the river Mtkvari, so-called “Tbilisi trench”, and
is located at the spot where several historical and ethnographic regions meet. Tbilisi
metro’s role in the entire system of Georgian settlement is mainly based on its location on
the cross-point of the basic country settlement axis, as well as the regional and
transnational one.
Metro territory consists of four municipal territories (Mtskheta, Tbilisi, Rustavi, Gardabani)
and the sub–regional divisions (rayons).
Mtskheta (the World Heritage Site) has overtaken the functions of historical-cultural and
tourist-recreation center in the process of metro forming in the area of Mtskheta-Tbilisi-
Rustavi-Gardabani. It is more reasonable that Mtskheta directly boarders Tbilisi and is
eccentrically allocated in regard of the region.
According to this concept,
Mtskheta regional recreation part
(e.g. Tskhvsarichamia, Zedazeni,
Tsitsamuri,
Armazi,
Shiomghvime) remains within the
Mtskheta municipality and is
accordingly considered in the
Tbilisi metro entire city planning
space.
Rustavi basically has industrial
functions.
Gardabani is known for its fuelenergy
profile enterprises and
storing functions.
The potential to play administrational, business, financial, scientific, educational and
cultural relation functions typical of a powerful regional center is the main city forming
factor in Tbilisi.

City of Tbilisi.
By January 1, 2006, population of Tbilisi amounted to 1093 thousand, 15.2% of Tbilisi
population is ethnically non-Georgians. The major non-Georgian ethnic groups are
Armenians, Russians, Azeri and Sestinas.
Tbilisi represents multi-functional administrational, industrial and cultural-educational
center of Georgia. The city is situated along 33 kilometers of the river Mtkvari and its total
area is 372 square kilometers. River Mtkvari divides the city into two . The left bank side
of the city exceeds the right side districts in both territory and population.
Since 2001, after the unification of the districts, Tbilisi consists of the following ones:
Gldani-Nadzaladevi (87.9 square km), Didube-Chugureti (18 square km), Vake-Saburtalo
(84 square km), Mtatsminda-Krtsanisi (40.4 square km), Isani-Samgori (123.9 square km)
and Tskneti village (17.8 square km). Almost 30 percent of population of the Capital City
lives in Gldani-Nadzaladevi district, while the highest level of population density is shown
in Didube-Chugureti district where, according to the 2005 census, there are 7 855 people
per square km. On average, population density in Tbilisi is 2 937 people per square km.
The lowest density is in Isani-Samgori district with 2 323 people per square km. The
smallest part of Tbilisi population lives in Mtatsminda-Krtsanisi district with 93 922 people.
Population density in Gldani-Nadzaladevi district is 3 677, in Vake-Saburtalo district –
2930, in Mtatsminda-Krtsanisi district – 2 324 people per square km.
At the beginning of 2007 Tbilisi significantly expanded its territory incorporating suburban
areas. As a result, more housing and commercial land appeared on the market, which is
of key importance for the growth of Tbilisi metropolitan area.

The analysis of trends in the city economy will start with the analysis of population
migration and education background of the residents.
This indicator measures changes in demographic and sex structure in the capital of
Georgia starting from the 19th century until now It helps to understand the demographic
profile of the city and the ability of city institutions, local authorities and socio – economic
partners to respond to changes in demography. The diversity is measured by both gender
and geographical location.
Year Total population men women men in % women in %
1897 159.5 95.2 64.3 59.7 40.3
1926 294 147.3 146.7 50.1 49.9
1939 519 251.0 268.0 48.4 51.6
1959 702 311.0 391.0 44.3 55.7
1970 889 404.0 485.0 45.4 54.6
1979 1066 486.0 580.0 45.6 54.4
1989 1246.9 573.3 673.6 46.0 54.0
1996 1359.7 624.1 735.6 45.8 54.2
2001 1089.7 492.5 597.2 45.1 54.9
2002 1081.7 488.9 592.8 45.2 54.8
2003 1083.5 489.7 593.8 45.1 54.9
2004 1086.4 491.1 595.3 45.2 54.8
2005 1092.6 493.9 598.7 45.2 54.8
Development of Georgia, City
of Tbilisi.
The population of Tbilisi has increased from 159.5 thousand in 1897 to 1,092,600 in 2005.
The distribution of the population by sex has changed extremely during the past century
from the male domination at the end of 19th century and the beginning of the 20th until
reaching stable higher female participation in the total number of city’s residents between
1970 - 2005.
Since 2002 (when the population reached its minimum as a result of continuous decline
process that had begun in the early 1990s) the number of Tbilisi residents has been rising
at a regular rate.

1876 1897 1922 1926 1959 1979 1989 2002
Population total in
thousands 104.0 159.6 233.9 294.0 694.7 1056.1 1246.9 1081.7
Georgians 22.2 42.2 80.9 112.2 336.3 656.4 824.4 910.7
Armenians 37.6 47.1 85.3 100.1 149.2 152.9 150.1 82.6
Russians 30.0 44.8 38.6 45.9 125.7 129.1 124.9 32.6
Ossetians 0.9 1.4 2.8 15.6 27.9 33.2 10.3
Ukrainians 2.7 10.9 12.6 16.1 3.3
Jews 1.3 2.9 8.8 8.9 17.3 14.8 13.5 1.6
Azerbaijanis 3.3 5.8 9.6 12.9 18.0 10.9
Kurds 2.5 12.9 23.4 30.3 2.1
Greeks 0,4 1,2 1,3 1,4 7,1 16,2 21,7 3.8
Other ethnic groups 11,6 17,8 14,3 14,1 10,1 9,7 14,7 23.8
The population of Tbilisi is multinational. Two major ethnic groups are the Georgians and
the Armenians. The most significant decrease within the group of Russians was observed
after 1989, which was caused by political transformation taking place in the country.
Avarage age in 2002
Total Men Women
M. Tibilisi 35.8 33.6 37.6
Gldani - Nadzaladevi 34.9 33.1 36.4
Vake - Saburtalo 37.3 35 39.2
Isani - Samgori 34.4 32.5 36.1
Didube - Chugureti 37.4 34.7 39.6
Mtatsminda - Krtsanisi 36.4 33.8 38.6
The residents average age is calculated between 32.5 (men in Isani – Samgori) and 39.6
(women in Didube-Chugureti). Distribution by sex shows that women are older than men
by a couple of years. Geographically, the district Didube – Chugureti is populated by the
oldest residents, both female and male.

In %
Level of education 1970 1979
Higher 17.8 19.3
Higher, incomplete 4.5 3.9
Secondary, specialization 7.2 7.9
Secondary, general 28.7 27.4
Secondary, incomplete 14.4 11.4
Primary 17.5 1.2
Not specified 9.9 28.9
Total 100.0 100.0
Education level 2002 ( in thousands) 2002 ( %)
General primary education 18.6 2.1
General elementary education 66.2 7.6
Complete general secondary
education 220.5 25.4
Vocational education 21.4 2.5
Secondary tertiary education 127.6 14.7
Incomplete higher education 44.7 5.2
Higher 368.9 42.5
In the educational structure of Tbilisi population a significant trend can be observed of
people constantly improving their education level. In particular, the number of people with
secondary and university education has increased. The process started in the early
1970s and has resulted in a high share of residents with this level of education in a group
of 14-44-year-olds (i.e. in the productive age), which is shown in the table below.
Education level
Age structure
2002 ( in thousands)
15-44 6.7
45-59/64 2.4
Primary 60+/65+ 9.5
15-44 69.1
45-59/64 35.9
Professional secondary 60+/65+ 22.7
15-44 128.6
45-59/64 49.6
General secondary 60+/65+ 42.3
15-44 202.1
45-59/64 107.8
University 60+/65+ 59.1

The demographic changes observed during the last several years have to be seen as
related to the whole metropolitan area, as Tbilisi area population is in fact a source of
workforce for its economy. The data shows the number of residents, population density
division in pre-productive, productive and post productive groups in a) narrow metropolis
area such as: rayon Mccheta, Tbilisi, City of Rustavi and rayon Gardabani and b) broader
metropolis area including areas of Daba Kojori and Daba Didi Lilo.
Population Area ( km2) Population density
Tbilisi 1 081 679 244,4 4425,8
Rejon Mccheta 64 829 805,0 90,1
City of Rustavi 116 384 60,6 1920,5
Rejon Gardabani 114 348 1304,1 87,7
Metropolitan Area
Preproductive Productive age Postproductive
Population
(year 2002)
age
age
Rejon Gardabani 114 348 27 832 73 473 13 043
City of Gardabani 11858 2 872 7 829 1 157
Rejon Mccheta 64 829 13 834 41 627 9 365
City of Mccheta 7718 1 583 5 043 1 092
City of Rustavi 116 384 26 470 78 664 11 241
The measure of population diversity by rayons and cities in metropolitan area is vital to
understand the economic well-being in the areas as compared to the whole metropolis.
The most populated rayon Gardabani and the city of Rustavi have also the highest
number of residents in productive age (almost 73 thousands and almost 79 thousands,
respectively). Rayon Mccheta is on the third position with the number of 41 627 residents
in productive age.
1996 2001 2002 2003 2004 2005
Tbilisi - total 1359.7 1089.7 1081.7 1083.5 1086.4 1092.6
of which:
Gldani-Nadzaladevi 398 322.8 320.4 320.9 321.6 323.3
Didube-Chugureti 196.9 140.6 139.5 139.5 139.7 141.4
Vake-Saburtalo 299.2 245.5 243.8 244.0 244.6 246.1
Mtatsminda-Krtsanisi 113.4 94.0 93.3 93.9 93.9 93.9
Isani-Samgori 352.2 286.8 284.7 285.2 286.6 287.9

The total number of Tbilisi population has decreased by almost 300 000 inhabitants
between 1996 – 2005, reaching finally the figure of 1 092 600. The same decreasing
trend can be observe in all districts.
The highest number of residents lives in Gldani – Nadzaladevi. In all districts the total
number of residents has increased by small percentage during the last 5 years, except
Mtatsminda – Krtsanisi, where the number of residents has stayed on the same level for 4
years.
District
Total in
2002
Productive
age
%
Preproductive
age
%
Post
productve
age
Gldani -
Nadzaladevi 320,361 217,980 68.0 65,337 20.4 37,035 11.6
%
Vake - Saburtalo
243,838 162,327 66.1 44,709 18.3 36,802 15.1
Isani - Samgori
284,691 196,570 69.1 57,237 20.1 30,851 10.8
Didube -
Chugureti 139,447 91,739 65.8 25,794 18.5 21,909 15.7
Mtatsminda -
Krtsanisi 93,342 63,137 67.6 17,462 18.7 12,743 13.7
Tibilisi 1,081,679 731,753 67.6 210,539 19.5 139,340 12.9
The detailed information about the population structure within the districts shows the age
diversity of the capital city.
Differences are not big but it is worth noticing that the productive age group amounts to
69 % of Isani Samgori community. Post productive groups exceed 15% of the population
of Vake-Saburtalo and Diube-Chugureti.

Analyzing the first indicator measuring the comparative population changes by districts it
is important to take into account the measures not only from the last few years, but take a
longer perspective in order to observe the ongoing demographic processes. The other
indicator presents the past tendencies by age and gender in the years 1922 – 1922.
2000
Tbilisi residents population (1897 - 2005)
1980
YEARS
1960
1940
1920
1900
159500
294000
519000
702000
889000
1246900 1089700 1083500 1092600
1066000 1359700 1081700 1086400
Population
Districts
Census 1989 Census 2002 Changes in population
Census Census Change % Change
M. Tibilisi 1,263,489 1,084,087 -179,402 -14.2
Gldani –
Nadzaladevi 386,501 320,956 -65,545 -17.0
Vake – Saburtalo 244,202 244,525 323 0.1
Isani – Samgori 331,268 2,840,022 -47,246 -14.3
Didube – Chugureti 194,740 140,011 -54,729 -28.1
Mtatsminda –
Krtsanisi 106,778 94,573 -12,205 -11.4

Age structure of Tbilisi population 1922-2002
2002
1989
Preproductive
Productive
Postproductive
1979
1970
YEARS
1959
1939
1930
1926
1922
0 10 20 30 40 50 60 70
% of Population
Population by age structure and gender in years 1922 – 2002
In % Age groups Men Women
%
Pre
product
ive
Product
ive
Post
product
ive
%
Pre
prod
Product
ive
Post
prod
Pre
prod
Product
ive
Post
prod
1922 28.3 65.1 6.5 29.7 64.7 5.6 27.1 65.7 7.2
1926 27.2 66.7 6.1 27.5 67.5 5.0 26.9 65.8 7.3
1930 26.8 66.7 6.5 - - - - - -
1939 27.1 67.3 5.6 27.8 66.6 5.6 25.8 66.8 7.4
1959 22.9 67.1 10.0 26.3 65.0 8.7 20.3 68.7 11.0
1970 24.2 63.6 12.2 26.9 65.4 7.7 22.0 64.1 13.9
1979 22.8 64.9 12.3 25.2 65.2 9.6 20.7 64.1 14.6
1989 24.6 59.3 16.1 27.2 62.4 10.4 22.4 56.7 20.9
2002 19.5 67.6 12.9 22.0 70.6 7.4 17.3 65.2 17.5
From the total number of Tbilisi residents of 1 263 489 in 1989 the population decreased
by about 14 % until 2002. For the last 4 years the index of general population growth has
been only 0,2%, in 2002 this index was absolutely negative (-0,7%).

The number of women increased slightly from 1989 to 2002, while in the same period the
number of men decreased nearly by 200 thousand. Such tendency is conditioned by the
wave of emmigration at the beginning of the 1990s largely depriving the community of
able-bodied males. This misbalance in sex, in a short- and long-term perspective, may
deeply affect the social-economic development of the society.
Among all the districts the most significant population decrease by about 27% was
observed in Didube - Chugureti district in 1989 – 2002.
Generally, the demographic changes in Tbilisi result in gradual ageing of the whole
population, which in turn causes systematic fall in the number of people in productive
age. At the same time, we can notice a negative balance of migration, which also
indicates unfavorable economic conditions in the city. Unfortunately, current data on
migration is not available.
In persons
1889 1979 1989 1995 2002
Population 1,066 1,246,936 1,378,9 1,081.7
Natural increase 7,815 8,331 7,815 2,426 2,056
Birth 18,185 19,802 13,565 12,007
Deaths 10,370 11,987 11,139 9,951
Marriages 10,975 10,404 5,393 4,192
Divorces 3,173 2,912 1,504 1,001
Natural increase per 1000
inhabitants 7.7 6.3 5.6 1.9
Natural increase
In persons 2000 2001 2002 2003
Tbilisi 1701 2688 2056 2438
Gldani-nazaladevi 386 541 92 5
Didube-chugureti 204 186 -152 661
Vake-saburtalo -182 75 -136 -71
Mtacmindakrcanisi
927 1467 1618 1391
Isani-samgori 366 419 634 452
This indicator measures the balance between births and deaths in Tbilisi from the end of
XIX century until 2002.
Birth rate, death rate, and natural population growth rate have been decreasing since
1889, which does not contribute to population growth of Tbilisi. The number of marriages
and divorces, as measured in 1979 – 2002, has also been decreasing constantly.
The comparison of births index and deaths index by districts measured between 2000 –
2003 shows the highest number of births in Isani – Samgori district.

The indicator measures the number of employed people in Tbilisi, a breakdown by age
groups and gender. This measure will provide more detailed information for better
understanding the employment and unemployment profile in the capital city, that
highlights availability of human resources and shows if there is a balance of age groups
and gender. The employment rates make the relationship between demographic trends
and the labor market more comprehensive.
Economically active (*Labour force)
In thds of people Total Women
2000 422.2 194.4
2001 434.5 205.4
2002 448.5 209.1
2003 429.0 204.5
2004 426.9 206.0
2005 429.8 203.9
20-
24
25-
29
30-
34
35-
39
40-
44
45-
49
50-
54
55-
59
60-
64 65+ Total
In thds

Unemployment changes can be analyzed in the period of five years. The number of
unemployed people has increased in all age groups.
In thds
people

This indicator measures the total number of employed citizens in Tbilisi in the last four
years. It breaks down data by type of activity in order to describe the active labor market.
This data present key employment sectors in the past and show where the new jobs
emerged during four years as well as those sectors which are in urgent need of
improvement.
2000 2002 2003 2004 2005
Agriculture hunting & forestry 0.7 3.0 2.6 6.8 3.1
Mining 1.4 0.5 0.1 0.6 0.5
Manufacturing 24.9 28.4 29.8 33.9 39.0
Electricity, gas & water supply 7.6 7.9 5.9 7.6 7.9
Construction 10.4 12.8 17.0 15.4 11.6
Wholesale & retail trade, repair of motor
vehicles & personal & household goods 44.5 78.2 73.3 71.1 64.4
Hotels and restaurants 5.8 5.7 6.4 7.7 6.6
Transport, storage & communication 19.5 24.6 25.8 21.2 21.9
Financial intermediation 0.2 3.4 4.1 5.2 6.1
Real estate renting & business activities 11.2 10.7 19.9 16.7 15.2
Public administration & defense, social
security 43.2 37.9 32.5 29.1
Education, healthcare & social work 37.3 64.3 63.7 67.6 69.1
Other community, social and personal
services activities 6.7 31.3 23.3 19.9 19.7
Household economy with hired employment 5.1 5.3 6.5 8.4
Exterritorial organizations & bodies 0.3 1.9 2.9 2.5
Non identified
Total 170.2 319.5 317.0 315.6 305.1
The total number of employed decreased from 319.5 thousand to 305.1 thousand in four
years. Most of them fill in education, health and social jobs in 2005.
The highest increase in employment can be observed in manufacturing and trade,
although in 2005 the number of workers in this segment fell, which was the effect of
technological and organisational changes. Also, more workers were employed in
segments dealing with services such as education, health & social work as well as social
and personal services.
It is worth pointing out that organizational changes in public administration and
technological innovations in commercial sectors will result in further redundancies in the
following years.

This indicator measures the average gross monthly earnings in GEL in 2005, break down
by gender and major industry type. Tracking wage levels changes within the capital city
industries can indicate their competitiveness.
The second indicator measures the earnings of females in comparison with males during
the last year.
2005
In GEL/month total Women Men
By business type 302.9 217.6 348.8
Agriculture, hunting and forestry 169.7 167.0 170.3
Industry - total 326.9 244.6 363.5
Mining industry and quarry 432.5 405.1 437.5
Processing industry 253.9 180.3 292.6
Power, natural gas and water supply 527.5 525.6 528.1
Construction 339.0 271.7 343.7
Wholesale and retail sale, repair of vehicles, motorcycles,
household commodities and items of personal use
222.1 186.4 247.8
Hotels and restaurants 143.6 115.4 181.6
Transport, warehouses and communications 267.9 238.7 277.4
Financial intermediation 1146.8 1131.3 1164.1
Property transactions, leasing and commercial activities 228.9 161.2 278.7
Public administration and defense, mandatory social
insurance
433.1 378.9 448.1
Education 168.8 151.0 199.2
Healthcare and social service 136.6 119.8 193.8
Other communal, social and personal services 165.5 148.9 184.6
In 2005 the highest monthly average wage of 1146,8 GEL was earned in the financial
intermediation sector, while the lowest one was paid in healthcare and social service -
136,6 GEL. Female average monthly salaries are always lower then male salaries in all
sectors
In GEL/ month 2000 2001 2002 2003 2004
Entrepreneurial sphere – total 89.7 128.6 132.4 154.8 184.9
of which:
Industry 128.9 160.5 155.3 206.5 229.5
Construction 169.2 175.6 198.8 232.3 304.8
Wholesale and retail trade; repair of motor vehicles,
motorcycles and personal and household goods
36.4 79.5 73.9 72.6 107.9
Hotels and restaurants 78.9 150.5 190.7 242.6 233.3
Transport, storage and communications 180.1 188.4 194.8 221.9 279.0
Real estate, renting and business activities 106.2 123.6 127.0 156.0 184.7
Education 61.8 88.0 85.5 113.2 112.2

The monthly average wage during the last five years has increased in all branches.
Industries offering the highest salaries include mainly: financial intermediation, power,
natural gas and water supply, public administration and defense, mandatory social
insurance and constructions.
2000 2001 2002 2003 2004 2005
Average monthly salary in (GEL) 80 129 154.8 174.4 218.7 302.9
by gender:
Men 192.0 200.3 251.6 348.8
Women 106.0 133.4 166.7 212.6
The average monthly salary of women improved during the 4 years. The average monthly
salaries was almost doubled, but the gender pay gap still exists. In traditional economy
sectors the gap was about 20%, while in the service sector the disproportion was not so
big.

The basic measure of the quality of life is the cost of living in the city and the information
how many individuals and families can cover these costs. In recent years living cost have
increased by about one third.
(GEL/month) a soul two
souls
three
souls
four
souls
five
souls
six and more
souls
2000 104.9 167.8 188.8 209.7 235.9 327.2
2001 104.6 167.4 188.4 209.3 235.5 326.5
2002 113.4 181.4 204.1 226.7 255.1 353.7
2003 118.5 189.6 213.3 237.0 266.6 369.6
2004 124.4 199.0 223.8 248.7 279.8 388.0
2005 137.6 219.8 247.2 274.7 309 428.5
The Government of Georgia established the amounts of social assistance for the families
below the poverty margin which depend on the number of members of registered socially
vulnerable families at the moment of allocation of the welfare benefit.
The amounts are as follows: for single-member families – 38 GEL; for two-member
families – 55 GEL; for three-member families – 70 GEL; for four-member families – 85
GEL; for five-member families – 100 GEL; for six-member families – 115 GEL; for sevenmember
families – 125 GEL. For the families with eight and more members 10 GEL
assistance is added for the eighth and each additional member.
As the above mentioned data indicates, on 30 May 2006 in Tbilisi there were 95 749
people living in 33 349 families who considered themselves being in extreme poverty
according to their socio-economic status and who expressed the wish to receive social
assistance. Both by number of families and number of population, the majority of the
registered families live in Gldani-Nadzaladevi (32.0%) and Isani-Samgori districts
(23.0%), while the minority of registered families inhabit Vake-Saburtalo district (12.4%).
The statistics indicate that the living conditions of the registered population are extremely
hard. Considering the cash-based add-ins of all types, 37.2% of total financial income of
registered population are old age pensions, 27.1% - salaries and 20.1% - income from
individual business activity.

According to the declared data, total income of the last one month of the registered
socially vulnerable population amounted to 3,082,604 GEL that is 32.1 GEL per person
for the registered category of population, and this indicator represents only 32.5% of
minimum living costs according to the Department of Statistics as of January 1, 2006
(19.6% under old indicators).
(mln. lari)
2000 2001 2002 2003 2004
Total income 176,3 214,3 244,7 261,7 291,2
Cash income and transfers – total 161,0 198,2 230,5 252,3 277,6
Contractual employment 91,3 109,6 126,4 127,2 142,3
Self-employment 36,0 38,5 46,9 43,4 51,6
Sales of agricultural products 0,5 0,2 0,3 0,6 1,9
Income from asset holdings (lease of property
and interest income)
3,3 4,5 2,5 4,1 5,6
Pension, stipends, family allowances, benefits 12,4 15,9 16,8 13,4 17,7
Remittances from abroad 3,3 11,9 14,2 29,0 21,8
Remittances from relatives 14,3 17,6 23,4 34,8 36,7
In-kind income
15,3 16,1 14,2 9,4 13,5
Other cash total 34,4 21,4 68,3 48,2 50,9
Sale of assets 10,9 9,2 25,9 7,6 21,3
Debt or use of savings 23,5 12,1 42,4 40,7 29,6
Cash – total 195,3 219,6 298,8 300,6 328,5
Cash and non-cash means – total 210,7 235,7 313,0 310,0 342,1
(mln. lari) 2000 2001 2002 2003 2004
Total consumption expenditure 322.1 344.1 380.1 349.6 385.3
Total cash expenditure on consumption 306.8 328.0 365.9 340.2 371.7
Food item, alcohol, tobacco 158.7 170.7 180.8 172.3 189.2
Clothing and footwear 15.1 16.7 16.6 16.0 18.3
Household items 41.0 38.1 10.3 10.6 13.2
Health care 14.9 18.1 25.7 21.1 20.3
Fuel and electricity 19.0 24.3 32.5 30.4 32.4
Transportation 28.1 27.5 50.2 38.5 39.7
Education and recreation 13.7 15.3 28.7 11.8 13.1
Other cash expenditure on consumption 16.3 17.2 21.1 39.5 45.6
Consumption in kind 15.3 16.1 14.2 9.4 13.5
Other expenditure – total 29.2 26.0 64.1 41.0 45.5
Agriculture 0.2 0.1 0.3 0.4 0.4
Social transfers 1.5 2.4 5.9 7.1 8.6
Savings or loans 27.5 23.4 22.5 20.2 21.4
Investment 0.0 0.0 35.4 13.3 15.0
Total cash expenditure 336.0 353.9 430.0 381.1 417.2
Total expenditure 351.3 370.0 444.2 390.5 430.8

There have been two different periods of domestic economy in the last years. In the
nineties and at the beginning of current decade undeclared activity was often the only
chance for a family to survive.
Information on non-observed economy in those years is presented on the basis of
surveys conducted by the State Department for Statistics of Georgia National Accounts
and the Macroeconomic Analysis Division.
In the Georgian economy, especially in the entrepreneurial sector, the share of the nonobserved
economy is quite high – one third in the total output and more than 55 percent
in the entrepreneurial sector, according to estimates for 2000-2001.
The share of the non-observed economy in the entrepreneurial sector varies a little
across the years but remains very high:
Total output of
the economy
Total output of
the
entrepreneurial
sector
1996 1997 1998 1999 2000 2001
Non-observed
26.9 27.4 28.3 29.2 33.2 33.7
According to regular statistical
surveys 73.1 72.6 71.7 70.8 66.8 66.3
Total
100 100 100 100 100 100
Non-observed
56.8 54.7 54.3 54.2 56.1 57.8
According to regular statistical
surveys 43.2 45.3 45.7 45.8 43.9 42.2
Total
100 100 100 100 100 100
The analysis of the non-observed economy shows that among non-statistical reasons of
its existence the low level of accounting in small enterprises and the informal sector are
the most important. In the informal sector it is often quite impossible to separate
entrepreneurial income and expenses from other income and consumption expenditures
of a household. For small enterprises this is combined with income understating that
takes place for tax avoiding purposes, or just in case, to keep off possible complications
when declaring income.
In the informal sector a part of the production is often aimed for non-market selfconsumption.
Therefore, to determine the real production extent in this sphere is one of
the most difficult problems of measuring the non-observed economy.
Due to large share of the informal sector in the national economy, this problem is
especially important in Georgia. According to the estimates, in 2001 the share of the
informal economy in the total output was as large as 35% and 57,8 for the entrepreneurial
sector.

1996 1997 1998 1999 2000 2001
Share of the non-observed output in the total output of the
section, percent
Industry 46 43 40 39 41 41
Agriculture, forestry, fishing 9 9 9 9 11 9
Construction 18 35 33 33 45 52
Transport 38 35 36 37 36 37
Communications 23 23 19 24 21 25
Trade 66 60 57 56 56 57
Hotels and Restaurants 62 61 60 64 69 75
Other 24 27 31 33 41 38
Total economy 26.9 27.4 28.3 29.2 33.2 33.7
Industries where the largest share of non-observed output to hotels and restaurants,
construction, trade and industry was assessed during the survey.
As in many post–communist economies, non recorded operations and the informal
economy still remain among the major impediments to the economy. However,
successful anti-corruption policies, together with increased institutional efficiency, have
resulted in a clear tendency towards the legalization of the informal economy.
In % 2000 2001 2002 2003
Non recorded 32.6 32.9 33.6 31.6
Although the most recent data was not available it should be pointed out that the tax
collection has dramatically improved.
Government reforms after “Rose Revolution” changed the situation by the introduction of
new simplified business and tax regulations. As a result many existing non-observed
companies registered their activities and started to pay taxes.

The demographic changes are primarily reflected in the Tbilisi educational system. It is
important that there are enough schools and high standard school facilities. When private
schools and institutions appear as competition for public schools, also the quality of
education, curricula and certification processes have to be monitored.
The indicator measures the number and types of schools by ownership, educational
network and number of students in 1990/1991 – 2004/2005 school years to display the
different educational opportunities and options.
students Number of institutions Number of students, thsd.
)
Pre-school
institutions
Public general
education
schools
Non-public
general
education
schools
Public
professional
secondary
schools
Private
professional
secondary
schools
Public higher
educational
institutions
Private higher
educational
institutions
1990/
1991
2000/
2001
2001/
2002
2002/
2003
2003/
2004
2004/
2005
1990/
1991
2000/
2001
2001/
2002
2002/
2003
2003/
2004
281 184 187 186 188 48,3 23.4 24.6 23.8 24.0
2004/
2005
211 208 209 209 209 211 185,5 159.4 159.2 157.2 153.9 148.7
55 61 66 74 85 6.5 7.1 8.6 9.0 12.9
26 23 23 23 23 23 19,9 11.3 10.2 8.7 8.1 8.5
17 15 17 18 21 1.5 1.0 1.5 1.3 2.1
15 15 15 15 14 58.2 64.9 68.4 70.6 78.3
87 90 90 87 104 20.4 17.2 18.1 16.8 21.3
Tbilisi has several types of schools to choose from. In due course the number of public
educational institutions in school years between 1990/1991 and 2004/2005 is stable and
the number of non–public and private schools and institutions measured since 2000/2001
has increased.
The following trends can be observed regarding the number of pupils and students in
Tbilisi. As a result of demographic changes the registered number of pupils in pre–school,
public general education, public professional secondary schools and institutions has fallen
down in comparison with 1990/1991, but in public higher educational institutions and in
non–public or private schools the number of students has been constantly increasing
since 2000/2001.

The detailed information was recorded for the public general education schools in the
capital city, where the same number of 211 schools has existed since 1990/1991 school
year. Although the day school number has increased during last 15 years (while evening
schools decreased), at the same time the number of students in day schools has
decreased by 40 000.
Public general education
schools
Private general education
schools
2000 2001 2002 2003 2004
11,412 11,00 11,999 12,167 11,923
1,800 2,153 2,27 2,700 2,072
The public general educational schools and private general educational schools will
reduce the number of employed teachers when the number of pupils continues to
decrease.
2000 2001 2002 2003 2004 2005
Total Women Total Women Total Women Total Women Total Women Total Women
Total
number of
students 82.1 41.0 86.4 43.1 87.4 43.9 99.6 49.6 86.8 45.2
In public
universities 58.2 27.4 64.9 30.6 68.4 33.0 70.6 34.7 78.3 37.4 66.9 33.6
In private
universities
17.6 - 17.3 10.5 18.1 10.1 16.8 9.1 21.3 12.2 19.9 11.6
Graduated - - 12.7 6.8 14.7 8.1 13.8 7.2 15.0 8.0 15.9 8.6
In public
universities 9.3 5.1 9.4 4.7 11.3 6.0 10.7 5.3 11.4 5.9 11.9 6.4
In private
universities - - 3.3 2.1 3.4 2.1 3.1 11.8 3.7 2.1 4.0 2.2

In thds of students Public universities Private universities
2000/2001 2001/2002 2005/2006 2005/2006
Total 58.2 64.9 66.9 19.9
Industry and
construction 18.8 25.0 22.8 0.3
Agriculture 3.5 3.4 2.9 1.5
Economics 2.3 2.5 3.2 1.5
Health care 4.3 4.4 4.1 1.1
Physical culture
and sports 1.9 2.2 2.9 2.6
Education 24.3 24.1 26.0 10.6
Art. and culture 2.8 2.9 4.3 0.8
Others 0.3 0.3 0.6 0.5
Each year more and more university students are recruited in Tbilisi. The trend can be
observed both at state and private higher education organisations, which results from the
fact that schools are competing for students.
The most popular faculties are engineering, industry and construction and pedagogical
studies.

2006 Tbilisi
Saburtalo-
Vake
Isani-
Samgori
Didube-
Chuhureti
Gldani -
Nadzaladevi
Mtacminda-
Krcanisi
Registered vacant workplaces - 175
Workers 98 80 18
Specialists 28 25 3
Technical staff 49 39 10
Registered vacant workplaces by economic activity
Agricultural
industry,hunting,forestry
Fish industry
Heavy and mining industry
Manufacturing industry 3 3
Electricity,natural gas and
water economy 2 2
Constructions 75 57 18
Wholesale and retail trade,
consumer, motor-car and
motorcycle services 7 7
Hotels and restaurants 12 12
Transportation
management, warehouses
and communication
Financial activity 2 2
Real estate finance,and
commercial activity 19 10 9
Executive personnel, selfdefense
and mandatory
insurance
Education 9 9
Public health and social
services 40 36 4
Other social and personal
services 6 6
Housing and communal
services
Registered job seekers - 8763
Workers 2480 675 867 228 710 2766
Specialists 4782 1991 926 1010 855 1035
Technical staff 1501 602 268 311 320 424
Primary education 2
General education 20 7 7 7 5 90
Full secondary education 2514 654 863 863 725 2690
Primary training education 14 10 1 7
Secondary training
education 1630 616 425 425 343 478
High/ university education 4584 1965 766 766 747 950

2005 Tbilisi
Saburtalo-
Vake
Isani-
Samgori
Didube-
Chuhureti
Gldani -
Nadzaladevi
Mtacminda-
Krcanisi
Registered vacant workplaces - 391
Workers 179 38 27 77 30 22
Specialists 43 14 25 2
Technical staff 169 59 27 45 11
Registered vacant workplaces by economic activity
Agricultural
industry,hunting,forestry
Fish industry
Heavy and mining
industry
Manufacturing industry 19 9 3 7
Electricity,natural gas
and water economy
Constructions 6 2 4
Wholesale and retail
trade,consumer,
motorcar and
motorcycle services 79 21 2 44 9 3
Hotels and restaurants 11 1 7 3
Transportation
management,
warehouses and
communication 33 3 11 19
Financial activity
Real estate finance, and
commercial activity 40 1 2 37
Executive personnel,
self-defense and
mandatory insurance 13 4 9 9
Education 1 1
Public health and social
services 10 1 9
Other social and
personal services 173 85 25 36 4 27
Housing and communal
services 6 21 2 6 9 3
Exterritorial
organisations
Registered job seekers - 11953
Workers 4986 658 791 194 577 2766
Specialists 5150 1760 752 879 724 1035
Technical staff 1817 600 268 266 259 424
Primary education 2 2
General education 106 7 3 1 5 90
Full secondary
education 4929 622 791 229 597 2690
Primary training
education 21 10 4 7
Secondary training edu 1948 588 372 228 282 478
High/ university
education 4898 1776 645 867 660 950

2004 Tbilisi
Saburtalo-
Vake
Isani-
Samgori
Didube-
Chuhureti
Gldani -
Nadzaladevi
Mtacmind
a-Krcanisi
Registered vacant workplaces - 405
Workers 182 70 32 25 55
Specialists 121 6 32 83
Technical staff 102 10 67 2 23
Registered vacant workplaces by economic activity
Agricultural
industry,hunting,forestry
Fish industry
Heavy and mining
industry
Manufacturing industry
Electricity, natural gas
and water economy
Constructions
Wholesale and retail
trade, consumer, motorcar
and motorcycle
services 103 79 21 3
Hotels and restaurants 10 6 4
Transportation
management,
warehouses and
communication
Financial activity 20 20
Real estate finance, and
commercial activity
Executive personnel,
self-defense and
mandatory insurance 1 1
Education 1 1
Public health and social
services 32 1 31
Other social and
personal services 238 32 66 85 55
Housing and communal
services
Exterritorial
organisations
Registered job seekers - 21841
Workers 7782 695 1765 106 2706 2510
Specialists 9237 3170 1211 1092 2050 1714
Technical staff 4822 534 1148 432 2186 522
Primary education 9 7 2
General education 107 4 7 96
Full secondary
education 8010 671 1799 346 2815 2379
Primary training
education 114 10 76 19 2 7
Secondary training
education 4909 829 888 383 2028 781
High/ university
education 8538 2878 1354 798 2049 1459

More careful observation of the trends on the local labor market is also carried out in the
districts of Tbilisi. Its results show that every year there are less registered vacancies and,
at the same time, there are fewer job seekers. It results from the fact that people find jobs
outside the labor market institutions operating in Tbilisi. The districts where workers are
most looked for are Saburtalo-Vake oraz Didube-Chuhureti, while the district where the
number of job seekers is the highest (several times more than in other parts of the city) is
Isani-Samgori. It is worth mentioning that it is the district with the largest share of people
in productive age.
Key conclusions for the demography part:
1. Positive demographic trends – since the middle of 1990s the number of residents
has been systematically growing and over 65% of each district’s population are
people in productive age.
2. The metropolitan area of the City of Tbilisi (cities of Gardabani, Mccheta, Rustavi
and rayons of Gardabani and Mccheta) is surrounded by towns with high potential
of population in productive age. The educational structure of Tbilisi is dominated by
people in their productive age educated on the secondary and higher level.
3. The ethnic structure of the city is getting less diversified with the growing share of
people of Georgian origin.
4. The number of the employed decreases while there are more and more
unemployed people.
5. The level of women’s salaries is lower than the salary level in individual sectors. A
significant rise in pay has been observed in few sectors (constructions, hotels
restaurants, trade).
6. The share of non-registered („grey zone”) businesses in the city’s economy
exceeds 33%.
7. The number of schools falls, which is the effect of the decreasing number of
children in primary schools. It signals the change in current demographic trends in
the city and the decrease in local population in the future.
8. There are too many teachers employed in the system of education.
9. The number of state and private university students is growing, especially at the
faculties teaching engineering and construction, which partly results from the
recent growth of manufacturing and construction industries in Tbilisi.
10. Official statistics concerning staff turnover show that there are more people
seeking jobs than the labor market can provide. The sectors where demand is the
highest include commerce and constructions.
11. Number of the unemployed officially registered in job centers is much lower than
the total actual number of the unemployed, which mainly was as a result of
insufficient interest of the unemployed citizens in receiving official unemployed
status. It also shows that job centers do not play an important role on the labour
market and do not offer desired services to the workforce and entrepreneurs. In
the future they should take much more initiative in serving individuals that are
looking for job or new qualifications as well as entrepreneurs looking for qualified
workers. It is important to remember that job centers are key players in the
development of workforce programs.

1997 2000 2001 2002 2003 2004
Entities – total 8411 30701 35327 41316 47632 56571
of which:
Agriculture, hunting and forestry 202 216 219 229 239
Fishing 9 9 11 11 12
Mining and quarrying 66 72 73 75 80
Manufacturing 1169* 3716 3875 4060 4356 4704
Electricity, gas and water supply 78 90 91 95 98
Constructions 582 1299 1383 1435 1517 1639
Wholesale and retail trade; repair of motor vehicles,
motorcycles and personal and household goods 4788 15193 18554 23384 28033 35042
Hotels and restaurants 938 980 1042 1124 1239
Transport, storage and communication 256 2119 2230 2294 2370 2521
Financial intermediation 440 465 475 515 545
Real estate, renting and business activities 2340 2535 2674 2860 3130
Public administration and defense; compulsory social
security 295 320 332 346 377
Education 477 529 559 599 625
Health and social work 778 818 859 893 942
Other community, social and personal service activities 1616 2740 3239 3796 4597 5365
Private households with employed persons 6 6 6 6 6
Extra-territorial organizations and bodies 5 6 6 6 7
2000 2001 2002 2003 2004
Tbilisi - total 30701 35327 41316 47632 56571
of which:
Gldani-Nadzaladevi 5105 5890 6919 7675 8296
Didube-Chugureti 7839 8937 10342 11819 14578
Vake-Saburtalo 8841 10298 12398 14405 16358
Mtatsminda-Krtsanisi 4435 5376 5925 6635 8116
Isani-Samgori 4481 4826 5732 7098 9223
Since the late 1990s the number of companies in Tbilisi, mainly the private ones, has
dynamically grown. As the above tables show the highest dynamics can be observed in
such sectors as industry, manufacturing, commerce and services. This tendency results
from the introduction of market economy and the trend is present in the whole country. In
2000 – 2004 in almost all the city districts the number of companies doubled.

2000 2001 2002 2003 2004 2005
Entities – total 30701 35327 41316 47632 56571 71351
Entities of private law - total 30145 34726 40657 46938 55838 70603
Commercial legal persons 14302 15827 17492 19476 22338 25585
Joint liability companies 198 203 209 213 225 240
Limited partnerships 5 6 8 10 14 21
Limited liability companies 13601 15068 16689 18609 21371 24506
Joint stock companies 461 512 548 604 686 774
Cooperatives 37 38 38 40 42 44
Non-commercial legal persons 1761 2327 2829 3425 3870 3962
Unions (associations) 1249 1648 2049 2617 3052 3129
Funds 512 679 780 808 818 833
Individual enterprises 12635 15011 18708 22313 27816 39194
Branches, representatives, etc. 1447 1561 1628 1724 1814 1862
Entities of public law – total 556 601 659 694 733 748
The increasing number of businesses is observed in all legal forms of entrepreneurship. The
number of firms listed on the stock exchange has been growing. They are typically the most
dynamically expanding companies with high future potential.
In ths people 1997 1998 1999 2000 2001 2002 2003 2004
Employment 725,0 761,9 743,8 737,4 708,7 681,7 723,8 722,4
Agriculture, Forestry, Fishing 33,6 34,7 34,8 17,2 17,8 17,8 36,7 33,8
Mining and quarrying 7,5 5,4 5,3 3,6 2,9 5,2 4,4 4,0
Manufacturing 84,7 95,3 96,7 89,5 78,9 66,7 80,1 77,1
Electricity, gas, water supply 17,8 22,4 20,6 28,8 29,1 28,4 22,5 24,3
Constructions 12,4 20,3 20,9 25,4 19,8 21,8 32,2 30,2
Trade and Utilities 63,4 61,5 74,6 72,5 65,4 68,0 77,7 75,9
Hotels and Restaurants 8,5 13,2 13,2 14,8 20,6 17,0 13,6 14,5
Transport and storage, communications 52,5 59,5 55,6 59,2 63,8 58,6 58,3 55,1
Financial Intermediation 10,0 12,4 10,5 13,5 8,6 8,4 11,1 13,5
Research and planning 36,6 34,6 36,2 24,0 18,6 19,6 24,9 28,1
Public administration, defense 102,9 112,4 105,8 105,7 108,2 108,7 104,6 102,9
Education 151,2 144,4 136,2 141,2 146,4 140,8 142,1 148,5
Health care and social services 91,9 85,4 77,2 89,0 81,2 69,5 60,3 58,0
Other community, social and personal 36,5 43,3 39,3 39,7 38,7 44,0 47,3 47,1
service activities
Private households with employed 14,1 15,0 15,0 7,1 7,1 6,1 4,9 4,9
persons
Ex- territorial organizations 1,6 2,0 1,8 1,6 1,6 1,3 3,1 4,6

In thds people
Employment, of which
Budgetary
organizations
State
owned
enterprises
Enterprise or
organization
without
foreign
participation
Joint
venture or
international
organization
Self employed, of
which
Other Employers Self
employed
outside
agriculture
2002 Total 109.5 33.0 161.9 10.9 3.6 11.4 64.7
Women 68.2 13.5 64.5 4.8 2.0 1.7 24.8
2003 Total 113.5 35.4 153.4 11.1 0.4 7.0 59.7
Women 68.8 14.1 56.7 4.2 0.1 1.8 23.4
2004 Total 98.7 39.4 162.1 13.2 2.1 9.5 62.8
Women 62.2 20.0 65.4 3.2 0.5 1.7 21.1
2005 Total 103.0 34.7 154.6 12.0 0.7 10.3 53.2
Women 61.6 16.0 62.5 3.2 0.3 2.2 18.8
The transformation of local economy is also illustrated by the employment structure in companies.
The largest share in the job market belongs to enterprises or organizations without foreign
participation. Government organisations still employ half of all employees, but for the last three
years their labour market share has been systematically shrinking.
1997 1998 1999 2000 2001 2002 2003 2004
Average monthly
wages (in GEL):
Total in the country 52,1 67,1 76,8 83,6 90,6 103,6 107,2 118,3
economy
In the state sector 43,9 55,3 62,1 63,9 70,4 75,2 78,8 91,4
In the private sector 56,6 73,0 83,9 93,5 102,0 120,0 122,0 132,8
Average monthly
wages (in GEL):
In industry 63,8 80,6 86,7 94,0 115,1 138,4 127,3 142,1
In agriculture 36,7 41,5 51,6 89,0 82,7 81,1 82,7 76,4
In service sector 50,4 65,0 75,2 80,8 86,0 96,8 103,9 114,0
In banking financial
sector
87,1 102,2 131,4 100,6 107,6 177,1 158,6 216,7
Employment (in
thousands of people)
Total in the country 725,0 761,9 743,8 1064,5 708,7 681,7 723,8 722,4
economy
In industry 110,0 123,2 122,6 121,9 110,9 100,3 107,0 105,3
In agriculture 33,6 34,7 34,8 17,2 17,8 17,8 36,7 33,8
In service sector 571,4 591,6 575,8 911,9 571,4 555,2 568,9 569,8
In banking financial
sector
10,0 12,4 10,5 13,5 8,6 8,4 11,1 13,5

Years
Of which by:
Total
investments budgetary non-budgetary individual builders
foreign
investments
Mln. lari (at actual prices)
2000 230.9 26.1 63.9 50.0 90.9
2001 294.2 12.3 96.5 23.8 161.6
2002 314.5 12.0 185.8 61.4 55.3
2003 253.7 20.2 119.3 49.8 64.4
2004 859.9 37.8 145.6 24.8 651.7
In % to the previous year
2000 186.2 78.1 287.8 103.3 454.5
2001 127.4 47.1 151.0 47.6 177.8
2002 106.9 97.6 192.5 258.0 34.2
2003 80.7 168.3 64.2 81.1 116.5
2004 338.9 187.1 122.0 49.8 1011.9
The city owes the significant 2003-2004 investment growth mainly to foreign investments. The
level of inside investments has not changed considerably since the early 2000 and stays at 150
mln GEL.

Units 2001 2002 2003 2004
Entities – total 4626 5989 6316 8939
Of which: 0 0 0 0
Agriculture, hunting and forestry 14 3 10 10
Fishing 0 2 0 1
Mining and quarrying 6 1 2 5
Manufacturing 159 185 296 348
Electricity, gas and water supply 12 1 4 3
Constructions 84 52 82 122
Wholesale and retail trade; repair of motor vehicles,
motorcycles and personal and household goods 3361 4830 4649 7009
Hotels and restaurants 42 62 82 115
Transport, storage and communication 111 64 76 151
Financial intermediation 25 10 40 30
Real estate, renting and business activities 195 139 186 270
Public administration and defense; compulsory social
security 25 12 14 31
Education 52 30 40 26
Health and social work 40 41 34 49
Other community, social and personal service activities 499 557 801 768
Private households with employed persons 0 0 0 0
Extra-territorial organizations and bodies 1 0 0 1
From the city’s economic policy point of view the dynamics and industrial structure of new
businesses are extremely important.
In each of the analysed years the number of businesses set up in Tbilisi grew. The only industry
where this dynamics has been slowing down is electricity, gas and water supply, but this area is
strongly controlled by the state and free market principles are non-existent there. Another such
area includes agriculture, hunting and forestry, i.e. industries that are not technologically
advanced and therefore not attractive. The third sector of poor dynamics is education. In this case
the reason for slower growth of businesses is heavy saturation of the market with traditional
educational services (schools, universities). The number of businesses in other areas is
increasing. Thus it seems necessary to carry out further research in order to answer the question
how long newly established companies can survive and how they will develop in the future.

Georgian exports are partially concentrated on low value-added commodities such as
ferrous metals, copper, aluminum, iron steel and mineral fuels ( see table 7.1 – chapter 7
appendices). However, the dynamics of export seems to indicate that the concentration of
exports on low value-added commodities will decrease gradually over time.
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Exports (million USD) 152 199 240 192 238 330 320 348 444 298
Imports (million USD) 395 687 942 880 602 651 684 731 1,058 765
Trade balance (million -243 -488 -702 -688 -364 -321 -364 -383 -614 - 467
USD)
Imports are dominated by mineral products (mainly including natural gas, oil and oil
products), and electricity, which indicates the dependence of Georgia on foreign energy.
In 2003 imports increased by 45% in USD, reflecting the need for imported goods for the
construction of the Baku- Tbilisi- Ceikhan (BTC) pipeline.
In 2004 exports increased by 66% compared with the same period of 2003, while imports
increased by 57%. Such significant growth in trade turnover is a result of anti- corruption
measures implemented by the Georgian Government, which brought about a stricter
control of import and export flows. The share of the ten main trade partners in the total
registered trade turnover was about 73,4%. The main partners in the last 10 years were
Russia, Turkey, Azerbaijan, and the UK.
USD ths Percent
Total imports 1057793 100
Petroleum oils and oils from bituminous minerals 102543 9,7
Tubes and pipes 93,723 8,9
Petroleum gases 65,99 6,2
Medicines 51,56 4,9
Sugar 50,58 4,8
Motor cars and other motor vehicles 44,51 4,2
Electric energy 21,51 2,0
Tobacco and manufactured tobacco substitutes 19,80 1,9
Steam turbines and other vapour turbines and thereof 17,72 1,7
Aircraft powered, spacecraft ( including satellites) and spacecraft
launch vehicles 16,94 1,6
Other 572,89 54,2
In 2003 imports were dominated by mineral products. The figures in Table 3 demonstrate
Georgia’s continuing dependence on foreign energy. The import of petroleum, gas, oil,
and electrical energy together represented about 18% of total recorded imports. The
import of articles of iron and steel (mainly pipes for the BTC construction) was the second
largest item, with a value of USD 93,7 million. Imports of pharmaceutical products
accounted for 5% of recorded imports. The share of imported food (wheat, flour) and
tobacco was slowly decreasing. Table ( Composition of registered imports) indicates that
the largest imported product groups together constituted about 46% of total imports in
2003.

( in percent of total 1998 1999 2000 2001 2002 2003 2004 2005
Export 100 100 100 100 100 100 100 100
Russia 29,1 20,8 20,8 23,3 17,7 18,2 16,2 17,8
Turkey 11,3 15,4 22,6 22,0 15,5 17,9 18,3 14,1
Azerbaijan 7,5 4,3 6,2 3,1 8,5 3,6 3,9 9,6
Armenia 9,7 6,6 4,2 3,9 5,8 6,7 8,4 4,6
Germany 6,7 11,0 10,6 2,4 1,6 2,1 2,5 3,3
Unites States 5,9 4,4 2,2 2,8 3,9 3,3 3,3 3,1
Italy 5,0 4,7 3,7 2,7 2,2 1,9 1,8 3,9
Ukraine 3,9 4,6 3,4 3,6 3,7 6,5 2,4 4,4
France 3,3 0,3 0,3 0,1 0,9 1,1 1,5 1,3
Switzerland 2,9 2,5 4,1 4,9 7,0 7,2 2,7 0,4
Netherlands 1,8 1,0 0,6 1,1 1,3 2,1 1,5 1,3
Bulgaria 1,7 0,2 0,7 0,2 0,0 0,0 2,4 4,9
Others 11,1 24,2 20,4 29,9 32,0 29,4 35,1 31,4
The main market for Georgian products is still the CIS. Turkey is a destination for 16% of
Georgian exports. The EU’s share is about same. During the past few years the CIS and
the EU have accounted for more than 70% of Georgia’s registered imports. Turkey has
accounted for another 10%. Imports from the USA were relatively small.
Several factors and parameters related to the prospective economic development of the
country provide sufficient grounds for dynamic expansion of export and import flows in
Georgia.
However, Georgia needs to diversify its export markets, which seems eminently possible
through full utilisation of its multilateral and bilateral trade arrangements as well as
through the production of internationally competitive products.
In 2005, the foreign trade turnover was USD 3,357.6 million, which is 34.6% more than in
2004. Export was USD 866.7 million (increased with 34.0%) and import USD 2,490.9
million (increased with 34.8%). The negative trade balance increased with 35.2% to USD
-1,624.2 million.
In 2005 Georgia had a negative trade balance with 101 partner states (104 in 2004), with
a combined trade deficit of USD 1,687.5 million (USD 1,321.4 in 2004). A positive trade
balance was recorded with 31 states (21 in 2004), with a total surplus of USD 63.3 million
(in 2004 USD 120.5 million).
In 2005 the share of foreign trade with CIS countries increased. The foreign trade
turnover with CIS countries reached USD 1,406.1 million (42.8% higher than in 2004) and
was 41.9% of total trade turnover. The foreign trade turnover with EU countries was USD
836.7 million, which is 14.8% higher than last year’s. The trade turnover with EU countries
was 24.9% of the total trade turnover.
Russia is the most important trade partner of Georgia. In 2005, the trade turnover with
Russia increased with 48.6% and reached USD 538.3 million, which is 16.0% of the total
foreign trade turnover. The next important partners are Turkey (12.1% of foreign trade),
Azerbaijan (9.4%) and Ukraine (7.7%).
No significant changes occurred last year in the export-import commodity structure.
In export, the most important commodities were black scrap metals (with a share in total
export of 9.7%), natural wine (9.4%), ferroalloys (9.3%), nuts (8.1%) and aircrafts (8.0%).
In import, the most important commodities were oil and oil products (13.5%), followed by
automobiles (7.2%).

Railroad Motovehicles Marine Air Total
1997 7,2 12,2 300
1998 8,4 15 625
1999 9,4 16 419
2000 11,5 18,5 63 13 30,0
2001 13,2 20,0 31 12 33,2
2002 14,9 22,5 36 13 37,4
2003 16,6 24,5 21 13 41,0
2004 15,4 25,7 29 16 41,1
2005 18,9 26,9 24 16 45,8
Georgian railway
The Georgian railway is one of the crucial links in Eurasian transit and serves as a shortcut
linking Europe and Central Asia. The Georgian railway system directly links the
railway systems of Armenia, Azerbaijan and Russia. Railway- ferry lines from Batumi and
Poti Black Sea ports directly connect the Caucasus and Central Asia with the Black Sea
regions.
To maintain the volume of freight flow on the Georgian railway and attract additional
freight, volume-based and preferential tariffs are applied. For example, the volume-based
tariff on transit of crude oil is 5 USD per ton and on transit of oil products it is 7 USD per
ton.
To ensure effective use of the Georgian transit corridor and attract additional freight, the
Government of Georgia actively cooperates with neighboring countries. A Poti - Baku-
Aktau - Almaty container train to which preferential tariffs will apply, will begin operation in
2006. Via this train export traffic to the territory of Kazakhstan is 0,22 USD per
container/km, and import traffic is 0,28 USD per container/km. Transit traffic through the
territories of Georgia and Azerbaijan is 0,28 USD per container/km.
years Volume of cargo ( in millions of tons) Number of passengers in millions
1995 4.6 1.7
1996 4.8 1.9
1997 7.2 1.9
1998 8.5 2.3
1999 9.5 1.9
2000 11.5 2.3
2001 13.1 2.1
2002 14.9 2.1
2003 16.4 2.2
2004 15.5 3.0
2005 8.3 1.4

local transit import export
1995 1.2 2.0 0.3 0.9
1996 1.4 2.1 0.7 0.5
1997 1.6 3.1 1.5 0.8
1998 1.2 5.5 1.3 0.4
1999 1.4 6.8 0.6 0.5
2000 1.7 8.4 0.6 0.6
2001 1.8 10.1 0.7 0.4
2002 2.0 11.6 0.8 0.5
2003 2.4 12.1 1.1 0.8
2004 2.0 10.7 1.6 0.9
2005 (6-months) 0.8 6.1 0.9 0.4
Years
Road transportation volume of cargo
(in millions of tons)
Rail cargo volume of cargo
( in millions of tons)
1998 15.0 8.5
1999 16.0 9.5
2000 18.5 11.5
2001 20.0 13.1
2002 22.5 14.9
2003 24 16.6
2004 15.4
2006 (months) 8.3
Civil Aviation
Number of passengers Number of connections Volume of cargo ( in tons)
International domestic International domestic International domestic
1995 4236 43 3794 1699
2000 27001 6004 6044 1526 7530
2003 314867 3419 7014 1130 4907
2004 39501 7386 8542 1476 5848
2005 536418 10742 9650 1612 6274
At present 4 national and 13 foreign regular airlines, including Austrian airlines, British
Airlines, Lufthansa and Turkish airlines are operating in Georgia. Direct air connections
are available from Tbilisi to Vienna, Zurich, Athens, Paris, Prague, Berlin, Munich,
Frankfurt, Istanbul, Moscow, St. Petersburg. In 2005, Georgia processed 260,000 air
passengers and 1.6 thousand tons of air cargo. 98% of air transportation is performed by
Tbilisi International Airport.
In 1994 Georgia became a member of International Civil Aviation Organization (ICAO),
and in 2005 a member of the European Civil Aviation Conference (ECAC).

Key conclusions on the economic performance:
1. Since the late 1990s the number of companies in Tbilisi, mainly the private ones, has
dynamically grown. The highest dynamics can be observed in such sectors as
industry, manufacturing, commerce and services.
2. The number of firms listed on the stock exchange has been growing. They are
typically the most dynamically expanding companies with high future potential.
3. The city owes the significant 2003-2004 investment growth mainly to foreign
investments.
4. In Tbilisi number of newly opened businesses has been growing each year.
5. Imports are dominated by raw materials (mainly natural gas, oil and oil products), and
electricity, which indicates the dependence of Georgia on foreign energy. In 2003
imports increased by 45% in USD as a result of the demand for imported goods
needed for the construction of Baku- Tbilisi- Ceikhan (BTC) pipeline.
6. What seems to have a particularly negative impact is the deficit in foreign exchange
that results from larger imports than exports and reflexes the inefficiency of local
economy in satisfying the local market. The export structure is dominated by raw
materials and unprocessed goods, which neither generates jobs nor stimulates
income growth in the City as well as in the country as it would happen if the
processing sector was more advanced.
7. The impact of market economy transformations has been most apparent in the city
economy which is mainly demonstrated by staff flow from public to private sector, the
increased number of businesses and growing popularity of self-employment.
8. Tbilisi job market covers almost 50% of jobs in the whole country and staff turnover is
stimulated by the systematically growing level of salaries which are now higher in the
private sector.
9. The number of people employed in industry has been falling, while services generate
more jobs every year.
10. The situation of local economy is also reflected in the transport sector where export
has a rather small share while transit transport (both road and railway transport, which
results from the country’s specific geographical position) is getting more and more
significant.
11. The growth of air transport is generated mainly by international flights. National flights
have remained at the same level since 2000. Such situation results from the fact that
the airport has joined several international aviation organisations and associations,
which forced them to restructure and adjust service levels to standards required by
their international partners’.

After the collapse of Soviet Union Tbilisi is back on the way to its natural role in the
region as city on transportation paths between Europe and Asia. As it is was also in the
history Tbilisi is competing with Baku and Yerevan to be Caucasian key urban center for
international relations and services. In spite of development of cooperation and new
transportation connections with Turkey can be observed there are now big cities that can
compete with Tbilisi in the eastern part of Turkey. Tbilisi doesn’t have competitors in the
North because of relations with Russia and situation in Northern Caucasus. Situation in
Central Asia is more important for role of Tbilisi in the wider region. Dynamic changes in
the Central Asiatic countries create a new position of their cites. New economic situation
create a Kazakhstan and both its cities Astana and Almaty as regional leaders and key
regional urban centers. In result looking for Tbilisi regional role, Georgian capitol will
compete with mainly with Baku and Yerevan and Astana with Almaty.
Because of lack of current comparative data on cities, first report present some data on
neighboring countries and assessment of Tbilisi role is presented in report two when city
competitive factors are discussed.

Population: 142,893,540
Age structure:
0-14 years: 14.2% (male 10,441,151/female 9,921,102)
15-64 years: 71.3% (male 49,271,698/female 52,679,463)
65 years and over: 14.4% (male 6,500,814/female 14,079,312) (2006 est.)
GDP
GDP - purchasing power parity - 1.559 trillion USD
GDP - official exchange rate - 763,7 billion USD
GDP - per capita (PPP) - 10,640 USD
public debt - 12,9 % of GDP
population below poverty line - 17,80%
Budget – gov. (2005)
Revenues: 176,7 billion USD
Expenditures: 125,6 billion USD
Inflation rate 12.7%
Unemployment rate 7.6% plus considerable
underemployment (2005 est.)
Administrative divisions: 48 oblasts (oblastey, singular - oblast), 21 republics (respublik,
singular - respublika), 9 autonomous okrugs (avtonomnykh okrugov, singular -
avtonomnyy okrug), 7 krays (krayev, singular - kray), 2 federal cities (singular - gorod),
and 1 autonomous oblast (avtonomnaya oblast'), note: administrative divisions have the
same names as their administrative centers (the exceptions have the administrative
center name following in parentheses)
Russia ended 2005 with its seventh straight year of growth, averaging 6.4% annually
since the financial crisis of 1998. Although high oil prices and a relatively cheap ruble are
important drivers of this economic rebound, since 2000 investment and consumer-driven
demand have played a noticeably increasing role. Real fixed capital investments have
averaged gains greater than 10% over the last five years, and real personal incomes
have realized average increases over 12%. During this time, poverty has declined
steadily and the middle class has continued to expand. Russia has also improved its
international financial position since the 1998 financial crisis, with its foreign debt declining
from 90% of GDP to around 31%. Strong oil export earnings have allowed Russia to
increase its foreign reserves from only $12 billion to some $180 billion at yearend 2005.
These achievements, along with a renewed government effort to advance structural
reforms, have raised business and investor confidence in Russia's economic prospects.
Nevertheless, serious problems persist. Economic growth slowed to 5.9% for 2005 while
inflation remains high. Oil, natural gas, metals, and timber account for more than 80% of
exports, leaving the country vulnerable to swings in world prices. Russia's manufacturing
base is dilapidated and must be replaced or modernized if the country is to achieve
broad-based economic growth. Other problems include a weak banking system, a poor
business climate that discourages both domestic and foreign investors, corruption, and
widespread lack of trust in institutions. In addition, a string of investigations launched

against a major Russian oil company, culminating with the arrest of its CEO in the fall of
2003 and the acquisition of the company by a state owned firm, have raised concerns by
some observers that President PUTIN is granting more influence to forces within his
government that desire to reassert state control over the economy. State control has
increased in the past year with a number of large acquisitions. Most fundamentally,
Russia has made little progress in building the rule of law, the bedrock of a modern
market economy.
Population: 15,233,244 (July 2006 est.)
Age structure:
0-14 years: 23% (male 1,792,685/female 1,717,294)
15-64 years: 68.8% (male 5,122,027/female 5,357,819)
65 years and over: 8.2% (male 438,541/female 804,878) (2006 est.)
GDP
GDP - purchasing power parity - 128.9 billion USD
GDP - official exchange rate - 56.08 billion USD
GDP - per capita (PPP) - 7,730 USD
public debt - 10.5% of GDP
population below poverty line - 19 %
Budget – gov. (2005)
Revenues: 12.19 billion USD
Expenditures: 12.44 billion billion USD
Inflation rate 7,6 %
Unemployment rate 8.1% (2005)
Administrative divisions: 14 provinces (oblystar, singular - oblys) and 3 cities* (qala,
singular - qalasy); Almaty Oblysy, Almaty Qalasy*, Aqmola Oblysy (Astana), Aqtobe
Oblysy, Astana Qalasy*, Atyrau Oblysy, Batys Qazaqstan Oblysy (Oral), Bayqongyr
Qalasy*, Mangghystau Oblysy (Aqtau), Ongtustik Qazaqstan Oblysy (Shymkent),
Pavlodar Oblysy, Qaraghandy Oblysy, Qostanay Oblysy, Qyzylorda Oblysy, Shyghys
Qazaqstan Oblysy (Oskemen), Soltustik Qazaqstan Oblysy (Petropavlovsk), Zhambyl
Oblysy (Taraz), note: administrative divisions have the same names as their
administrative centers (the exceptions have the administrative center name following in
parentheses); in 1995, the Governments of Kazakhstan and Russia entered into an
agreement whereby Russia would lease for a period of 20 years an area of 6,000 sq km
enclosing the Baykonur space launch facilities and the city of Bayqongyr (Baykonur,
formerly Leninsk); in 2004 a new agreement extended the lease to 2050.

Population: 46,710,816 (July 2006 est.)
Age structure:
0-14 years: 14.1% (male 3,377,868/female 3,203,738)
15-64 years: 69.3% (male 15,559,998/female 16,831,486)
65 years and over: 16.6% (male 2,635,651/female 5,102,075) (2006 est.)
GDP
GDP - purchasing power parity - 320.5 billion USD
GDP - official exchange rate - 81.66 billion USD
GDP - per capita (PPP) - 6,720 USD
public debt - 17 % of GDP
population below poverty line - 29 %
Budget – gov. (2005)
Revenues: 23,59 billion USD
Expenditures: 22.98 billion USD; note - this is the consolidated budget
Inflation rate 13.5 %
Unemployment rate 3,1 %
Administrative divisions: 24 provinces (oblasti, singular - oblast'), 1 autonomous republic*
(avtonomna respublika), and 2 municipalities (mista, singular - misto) with oblast status**;
Cherkasy, Chernihiv, Chernivtsi, Crimea or Avtonomna Respublika Krym* (Simferopol'),
Dnipropetrovs'k, Donets'k, Ivano-Frankivs'k, Kharkiv, Kherson, Khmel'nyts'kyy,
Kirovohrad, Kiev (Kyyiv)**, Kyyiv, Luhans'k, L'viv, Mykolayiv, Odesa, Poltava, Rivne,
Sevastopol', Sumy, Ternopil', Vinnytsya, Volyn' (Luts'k), Zakarpattya (Uzhhorod),
Zaporizhzhya, Zhytomyr note: administrative divisions have the same names as their
administrative centers (the exceptions have the administrative center name following in
parentheses).

Population: 4,661,473 (July 2006 est.)
Age structure:
0-14 years: 17.3% (male 428,056/female 380,193)
15-64 years: 66.2% (male 1,482,908/female 1,602,064)
65 years and over: 16.5% (male 308,905/female 459,347) (2006 est.)
GDP
GDP - purchasing power parity - 14.21 billion USD
GDP - official exchange rate - 6.39 billion USD
GDP - per capita (PPP) - 3,270 USD
public debt - 17 % of GDP
population below poverty line - 54 %
Budget – gov. (2005)
Revenues: 1.43 billion USD
Expenditures: 1.56 billion billion USD
Inflation rate 8,2 %
Unemployment rate 12,6% (2005)
9 regions (mkharebi, singular - mkhare), 9 cities (k'alak'ebi, singular - k'alak'i), and 2
autonomous republics (avtomnoy respubliki, singular - avtom respublika) regions: Guria,
Imereti, Kakheti, Kvemo Kartli, Mtskheta-Mtianeti, Racha-Lechkhumi and Kvemo Svaneti,
Samegrelo and Zemo Svaneti, Samtskhe-Javakheti, Shida Kartli cities: Chiat'ura, Gori,
K'ut'aisi, P'ot'i, Rust'avi, T'bilisi, Tqibuli, Tsqaltubo, Zugdidi autonomous republics:
Abkhazia or Ap'khazet'is Avtonomiuri Respublika (Sokhumi), Ajaria or Acharis
Avtonomiuri Respublika (Batumi).
Georgia's main economic activities include the cultivation of agricultural products such as
grapes, citrus fruits, and hazelnuts; mining of manganese and copper; and output of a
small industrial sector producing alcoholic and nonalcoholic beverages, metals,
machinery, and chemicals. The country imports the bulk of its energy needs, including
natural gas and oil products. It has sizeable but underdeveloped hydropower capacity.
Despite the severe damage the economy has suffered due to civil strife, Georgia, with the
help of the IMF and World Bank, has made substantial economic gains since 2000,
achieving positive GDP growth and curtailing inflation. Georgia had suffered from a
chronic failure to collect tax revenues; however, the new government is making progress
and has reformed the tax code, improved tax administration, increased tax enforcement,
and cracked down on corruption. In addition, the reinvigorated privatization process has
met with success, supplementing government expenditures on infrastructure, defense,
and poverty reduction. Despite customs and financial (tax) enforcement improvements,
smuggling is a drain on the economy. Georgia also suffers from energy shortages due to
aging and badly maintained infrastructure, as well as poor management. Due to
concerted reform efforts, collection rates have improved considerably to roughly 60%,
both in T'bilisi and throughout the regions. Continued reform in the management of stateowned
power entities is essential to successful privatization and onward sustainability in
this sector. The country is pinning its hopes for long-term growth on its role as a transit

state for pipelines and trade. The construction on the Baku-T'bilisi-Ceyhan oil pipeline and
the Baku-T'bilisi-Erzerum gas pipeline have brought much-needed investment and job
opportunities. Nevertheless, high energy prices in 2006 will compound the pressure on
the country's inefficient energy sector. Restructuring the sector and finding energy supply
alternatives to Russia remain major challenges.
Population: 2,976,372 (July 2006 est.)
Age structure:
0-14 years: 20.5% (male 322,189/female 286,944)
15-64 years: 68.4% (male 949,975/female 1,085,484)
65 years and over: 11.1% (male 133,411/female 198,369) (2006 est.)
GDP
GDP - purchasing power parity - 15.12 billion USD
GDP - official exchange rate - 4.903 billion USD
GDP - per capita (PPP) - 5,060 USD
population below poverty line - 43 %
Budget – gov. (2005)
Revenues: 786,1 million USD
Expenditures: 930,7 million USD
Inflation rate 0,6 %
Unemployment rate 31,6% (2005)
Administrative divisions: 11 provinces (marzer, singular - marz); Aragatsotn, Ararat,
Armavir, Geghark'unik', Kotayk', Lorri, Shirak, Syunik', Tavush, Vayots' Dzor, Yerevan
Under the old Soviet central planning system, Armenia had developed a modern
industrial sector, supplying machine tools, textiles, and other manufactured goods to
sister republics in exchange for raw materials and energy. Since the implosion of the
USSR in December 1991, Armenia has switched to small-scale agriculture away from the
large agroindustrial complexes of the Soviet era. The agricultural sector has long-term
needs for more investment and updated technology. The privatization of industry has
been at a slower pace, but has been given renewed emphasis by the current
administration. Armenia is a food importer, and its mineral deposits (copper, gold, bauxite)
are small. The ongoing conflict with Azerbaijan over the ethnic Armenian-dominated
region of Nagorno-Karabakh and the breakup of the centrally directed economic system
of the former Soviet Union contributed to a severe economic decline in the early 1990s.
By 1994, however, the Armenian Government had launched an ambitious IMF-sponsored
economic liberalization program that resulted in positive growth rates in 1995-2005.
Armenia joined the WTO in January 2003. Armenia also has managed to slash inflation,
stabilize its currency, and privatize most small- and medium-sized enterprises. Armenia's
unemployment rate, however, remains high, despite strong economic growth. The chronic
energy shortages Armenia suffered in the early and mid-1990s have been offset by the
energy supplied by one of its nuclear power plants at Metsamor. Armenia is now a net
energy exporter, although it does not have sufficient generating capacity to replace
Metsamor, which is under international pressure to close. The electricity distribution

system was privatized in 2002. Armenia's severe trade imbalance has been offset
somewhat by international aid, remittances from Armenians working abroad, and foreign
direct investment. Economic ties with Russia remain close, especially in the energy
sector. The government made some improvements in tax and customs administration in
2005, but anti-corruption measures will be more difficult to implement. Investment in the
construction and industrial sectors is expected to continue in 2006 and will help to ensure
annual average real GDP growth of about 13.9%.
Population: 7,961,619 (July 2006 est.)
Age structure:
0-14 years: 25.8% (male 1,046,501/female 1,011,492)
15-64 years: 66.3% (male 2,573,134/female 2,706,275)
65 years and over: 7.8% (male 246,556/female 377,661) (2006 est.)
GDP
GDP - purchasing power parity - 47.03 billion USD
GDP - official exchange rate - 12.56 billion USD
GDP - per capita (PPP) - 4,890 USD
population below poverty line - 49 %
Budget – gov. (2005)
Revenues: 3.18 billion USD
Expenditures: 2.986 billion USD
Inflation rate 0,6 %
Unemployment rate 1.1% official rate (2005)
Azerbaijan's number one export is oil. Azerbaijan's oil production declined through 1997,
but has registered an increase every year since. Negotiation of production-sharing
arrangements (PSAs) with foreign firms, which have thus far committed $60 billion to
long-term oilfield development, should generate the funds needed to spur future industrial
development. Oil production under the first of these PSAs, with the Azerbaijan
International Operating Company, began in November 1997. A consortium of Western oil
companies is scheduled to begin pumping 1 million barrels a day from a large offshore
field in early 2006, through a $4 billion pipeline it built from Baku to Turkey's
Mediterranean port of Ceyhan. Economists estimate that by 2010 revenues from this
project will double the country's current GDP. Azerbaijan shares all the formidable
problems of the former Soviet republics in making the transition from a command to a
market economy, but its considerable energy resources brighten its long-term prospects.
Baku has only recently begun making progress on economic reform, and old economic
ties and structures are slowly being replaced. Several other obstacles impede
Azerbaijan's economic progress: the need for stepped up foreign investment in the nonenergy
sector, the continuing conflict with Armenia over the Nagorno-Karabakh region,
and the pervasive corruption. Trade with Russia and the other former Soviet republics is
declining in importance while trade is building with Turkey and the nations of Europe.
Long-term prospects will depend on world oil prices, the location of new pipelines in the
region, and Azerbaijan's ability to manage its oil wealth.

Population: 5,213,898 (July 2006 est.)
Age structure:
Age structure: 0-14 years: 30.9% (male 821,976/female 789,687)
15-64 years: 62.9% (male 1,607,396/female 1,669,612)
65 years and over: 6.2% (male 126,847/female 198,380) (2006 est.)
GDP
GDP - purchasing power parity - 9.97 billion USD
GDP - official exchange rate - 2.441 billion USD
GDP - per capita (PPP) - 1,870 USD
population below poverty line - 40 %
Budget – gov. (2005)
Revenues: 516.3 million USD
Expenditures: 539.9 million USD
Inflation rate 5,2 %
Unemployment rate 18% official rate (2005)
7 provinces (oblastlar, singular - oblasty) and 1 city* (shaar); Batken Oblasty, Bishkek
Shaary*, Chuy Oblasty (Bishkek), Jalal-Abad Oblasty, Naryn Oblasty, Osh Oblasty, Talas
Oblasty, Ysyk-Kol Oblasty (Karakol) note: administrative divisions have the same names
as their administrative centers (exceptions have the administrative center name following
in parentheses)
Kyrgyzstan is a poor, mountainous country with a predominantly agricultural economy.
Cotton, tobacco, wool, and meat are the main agricultural products, although only tobacco
and cotton are exported in any quantity. Industrial exports include gold, mercury, uranium,
natural gas, and electricity. Kyrgyzstan has been progressive in carrying out market
reforms, such as an improved regulatory system and land reform. Kyrgyzstan was the
first CIS country to be accepted into the World Trade Organization. Much of the
government's stock in enterprises has been sold. Drops in production had been severe
after the breakup of the Soviet Union in December 1991, but by mid-1995, production
began to recover and exports began to increase. Kyrgyzstan has distinguished itself by
adopting relatively liberal economic policies. The drop in output at the Kumtor gold mine
sparked a 0.5% decline in GDP in 2002, but GDP growth bounced back in 2003-05. The
government has made steady strides in controlling its substantial fiscal deficit and
reduced the deficit to 1% of GDP in 2005. The government and international financial
institutions have been engaged in a comprehensive medium-term poverty reduction and
economic growth strategy, and in 2005 agreed to pursue much-needed tax reform.
Progress fighting corruption, further restructuring of domestic industry, and success in
attracting foreign investment are keys to future growth. Countrywide, official
unemployment is 3%, but the actual rate is closer to 40% . Women account for 62% of
those unemployed. Roughly 65% of Kyrgyz live in rural areas, and the majority of rural
residents are farmers. The lack of adequately paid work in rural areas is prompting an
out-migration to major cities like Bishkek, Osh and Jalal-Abad.

Population: 27,307,134 (July 2006 est.)
Age structure:
0-14 years: 32.9% (male 4,572,721/female 4,403,405)
15-64 years: 62.3% (male 8,420,174/female 8,594,478)
65 years and over: 4.8% (male 539,336/female 777,020) (2006 est.)
GDP
GDP - purchasing power parity - 53.87 billion USD
GDP - official exchange rate - 13,66 billion USD
GDP - per capita (PPP) - 2,020 USD
population below poverty line - 28 %
Budget – gov. (2005)
Revenues: 2,815 billion USD
Expenditures: 2,917 million USD
Inflation rate 6,9 %
Unemployment rate 0,7% (2005)
Administrative divisions:
12 provinces (viloyatlar, singular - viloyat), 1 autonomous republic (respublika), and 1 city
(shahar); Andijon Viloyati, Buxoro Viloyati, Farg'ona Viloyati, Jizzax Viloyati, Namangan
Viloyati, Navoiy Viloyati, Qashqadaryo Viloyati (Qarshi), Qoraqalpog'iston Respublikasi*
(Nukus), Samarqand Viloyati, Sirdaryo Viloyati (Guliston), Surxondaryo Viloyati (Termiz),
Toshkent Shahri**, Toshkent Viloyati, Xorazm Viloyati (Urganch)

Population: 7,320,815 (July 2006 est.)
Age structure:
0-14 years: 37.9% (male 1,396,349/female 1,375,168)
15-64 years: 57.4% (male 2,091,476/female 2,108,889)
65 years and over: 4.8% (male 154,162/female 194,771) (2006 est.)
GDP
GDP - purchasing power parity - 8.53 billion USD
GDP - official exchange rate - 2.326 billion USD
GDP - per capita (PPP) - 1,260 USD
population below poverty line - 64 %
Budget – gov. (2005)
Revenues: 442.3 million USD
Expenditures: 542.6 million USD
Inflation rate 7,1 %
Unemployment rate 12% (2005)
Provinces (viloyatho, singular - viloyat) and 1 autonomous province* (viloyati mukhtor);
Viloyati Khatlon (Qurghonteppa), Viloyati Mukhtori Kuhistoni Badakhshon* [Gorno-
Badakhshan] (Khorugh), Viloyati Sughd (Khujand) note: the administrative center name
follows in parentheses.
Macroeconomic overviews
Tajikistan has one of the lowest per capita GDPs among the 15 former Soviet republics.
Only 6% of the land area is arable; cotton is the most important crop. Mineral resources,
varied but limited in amount, include silver, gold, uranium, and tungsten. Industry consists
only of a large aluminum plant, hydropower facilities, and small obsolete factories mostly
in light industry and food processing. The civil war (1992-97) severely damaged the
already weak economic infrastructure and caused a sharp decline in industrial and
agricultural production. Even though 64% of its people continue to live in abject poverty,
Tajikistan has experienced steady economic growth since 1997, but experienced a slight
drop in its growth rate to 8% in 2005 from 10.6% in 2004. Continued privatization of
medium and large state-owned enterprises would further increase productivity.
Tajikistan's economic situation, however, remains fragile due to uneven implementation of
structural reforms, weak governance, widespread unemployment, and the external debt
burden. A debt restructuring agreement was reached with Russia in December 2002,
including a $250 million write-off of Tajikistan's $300 million debt to Russia. Tajikistan
ranks third in the world in terms of water resources per head. A proposed investment to
finish the hydropower dams Rogun and Sangtuda would substantially add to electricity
production. If finished, Rogun will be the world's tallest dam.

Population: 5,042,920 (July 2006 est.)
Age structure:
0-14 years: 35.2% (male 913,988/female 863,503)
15-64 years: 60.7% (male 1,501,486/female 1,557,155)
65 years and over: 4.1% (male 79,227/female 127,561) (2006 est.)
GDP
GDP - purchasing power parity - 39.54 billion USD
GDP - official exchange rate - 6.77 billion USD
GDP - per capita (PPP) - 8000 USD
population below poverty line - 58 %
Budget – gov. (2005)
Revenues: 1.401 billion USD
Expenditures: 1.542 billion USD
Inflation rate 10,5 %
Unemployment rate 60% (2005)
5 provinces (welayatlar, singular - welayat): Ahal Welayaty (Ashgabat), Balkan Welayaty
(Balkanabat), Dashoguz Welayaty, Lebap Welayaty (Turkmenabat), Mary Welayaty note:
administrative divisions have the same names as their administrative centers (exceptions
have the administrative center name following in parentheses)
Turkmenistan is a largely desert country with intensive agriculture in irrigated oases and
large gas and oil resources. One-half of its irrigated land is planted in cotton; formerly it
was the world's tenth-largest producer. Poor harvests in recent years have led to an
almost 50% decline in cotton exports. With an authoritarian ex-Communist regime in
power and a tribally based social structure, Turkmenistan has taken a cautious approach
to economic reform, hoping to use gas and cotton sales to sustain its inefficient economy.
Privatization goals remain limited. In 1998-2005, Turkmenistan suffered from the
continued lack of adequate export routes for natural gas and from obligations on
extensive short-term external debt. At the same time, however, total exports rose by 20%
to 30% per year in 2003-2005, largely because of higher international oil and gas prices.
In 2005, Ashgabat sought to raise natural gas export prices to its main customers, Russia
and Ukraine, from $44 per thousand cubic meters (tcm) to $66 per tcm. Overall prospects
in the near future are discouraging because of widespread internal poverty, the burden of
foreign debt, the government's irrational use of oil and gas revenues, and its unwillingness
to adopt market-oriented reforms. Turkmenistan's economic statistics are state secrets,
and GDP and other figures are subject to wide margins of error. In particular, the rate of
GDP growth is uncertain.

140
130
120
110
100
90
80
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Georgia 102,6 111,2 110,5 103,1 102,9 101,8 104,8 105,5 111,1 105,9 109,3 108,6
Azerbaijan 88,2 101,3 105,8 110 107,4 111,1 109,9 110,6 111,2 110,2 126,4 134,5
Armenia 106,9 105,9 103,3 107,3 103,3 105,9 109,6 113,2 114 110,5 114 113,4
Kazahstan 91,8 100,5 101,7 98,1 102,7 109,8 113,5 109,8 109,3 109,6 109,5 110,6
Ukraine 102,6 111,2 110,5 103,1 102,9 101,8 104,8 105,5 111,1 105,9 109,3 108,6
140
130
120
110
100
90
80
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Georgia 86 107 108 98 107 111 95 107 115 109 116
Azerbaijan 79 93 100,3 102 104 107 105 104 106 106 134 136,6
Armenia 102 101 101 98 105 106 105 115 115 102 108 99,1
Kazahstan 92 100,3 104 98 103 116 114 111 109 110 105 107
Ukraine 88 95 99,7 99 104 112 114 107 116 113 103 106,2

180
170
160
150
140
130
120
110
100
90
80
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Georgia 151 106 152 180 49 97 111 118 191
Azerbaijan 82 212 139 123 98 103 121 184 174 135 117 114,8
Armenia 96 113 100 117 98 127 106 145 141 115 133 137,1
Kazahstan 57 60 112 142 133 149 145 111 117 123 134 110,6
Ukraine 72 78 91 106 100,4 114 121 109 131 128 102 116,1
180
170
160
150
140
130
120
110
100
90
80
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Georgia 103 94 139 122 107 116 111 113 110 100,2 112 111,3
Azerbaijan 91 100,7 117 120 133 121 117 109 112 107 111 107,2
Armenia 99,7 92 94 87 91 90 114 169 92 93 123 119,1
Kazahstan 73 104 105 98 101 145 113 113 109 109 104 105,4
Ukraine 80 75 96 92 92 100 103 104 116 105 98 109,5

190
180
170
160
150
140
130
120
110
100
90
80
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Georgia 81 136 107 78 100,1 121 112 116 136 143 125 97
Azerbaijan 104 102 130 61 91 111 95 109 136 185 147 102,7
Armenia 107 76 74 85 70 130 121 108 134 97 150 113,2
Kazahstan 154 110 94 71 72 155 113 83 136 137 99,3 137,1
Ukraine 124 106 75 75 77 138 104 94 138 142 126 118
220
200
180
160
140
120
100
80
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Georgia 147 123 145 83 154 148 89 102 133 135 144 130,5
Azerbaijan 93 97 118 93 192 210 139 92 117 133 115 158,1
Armenia 176 160 85 102 125 130 111 162 136 107 131 100,7
Kazahstan 174 115 129 92 135 148 93 125 133 161 149 137,4
Ukraine 133 113 124 98 99 121 115 117 125 142 98 109,4

Year Quarter
Georgia -
total
City of
Tbilisi
Abkhazia
AR
Adjara AR Guria
region
Imereti
region
Kakheti
region
of which:
Mtskheta-
Mtianeti
region
Racha-
Lechkhumi
region
Samegrelo-
Zemo
Svaneti
region
Samtskhe-
Javaketi
region
Turnover in enterprises sphere by regions
mln. GEL
1 2 3 4 5 6 7 8 9 10 11 12 13
3975.2 2133.5 418.6 32.4 360.1 117.2 61.3 17.1 189.8 59.2 364.7 95.8
4595.6 2739.7 396.7 26.5 330.3 89.0 58.2 14.2 184.3 71.3 335.8 140.3
5523.0 3330.0 423.4 27.9 380.9 101.3 80.8 14.4 243.4 84.2 420.7 209.7
7248.4 4455.7 383.1 35.4 406.7 123.1 114.2 14.6 339.7 98.0 522.2 195.1
8464.3 5147.6 513.0 48.1 493.8 160.7 114.1 21.4 425.8 134.9 606.0 269.0
2342.7 1647.1 114.8 9.4 108.8 38.7 29.0 3.5 90.0 35.3 188.0 64.6
Share
100.0 53.7 10.5 0.8 9.1 2.9 1.5 0.4 4.8 1.5 9.2 2.4
100.0 59.6 8.6 0.6 7.2 1.9 1.3 0.3 4.0 1.6 7.3 3.1
100.0 60.3 7.7 0.5 6.9 1.8 1.5 0.3 4.4 1.5 7.6 3.8
100.0 61.5 5.3 0.5 5.6 1.7 1.6 0.2 4.7 1.4 7.2 2.7
100.0 60.8 6.1 0.6 5.8 1.9 1.3 0.3 5.0 1.6 7.2 3.2
100.0 70.3 4.9 0.4 4.6 1.7 1.2 0.1 3.8 1.5 8.0 2.8
Kvemo
Kartli
region
Shida
Kartli
region

Turnover in mnl GEL
8 000
7 000
6 000
5 000
4 000
3 000
Turnover in enterprices by regions 2001-2006
Tbilisi
Georgia
Adjara
Guria
Imereti
Kakheti
MchetaMtianeti
RachaLechkhumi
SamegreloSvaneti
SamtskheJavaheti
KvemoKartli
ShidaKartli
2 000
1 000
0
2001 2002 2003 2004 2005 2006
YEARS
mln GEL Minimum Maximum
Mean
in years 2001 - 2006
RachaLechkhumi 3.50 21.40 14.20
Guria 9.40 48.10 29.95
MchetaMtianeti 29.00 114.20 76.26
SamtskheJavaheti 35.30 134.90 80.48
Kakheti 38.70 160.70 105.00
ShidaKartli 64.60 269.00 162.41
SamegreloSvaneti 90.00 425.80 245.50
Imereti 108.80 493.80 346.76
Adjara 114.80 513.00 374.93
KvemoKartli 188.00 606.00 406.23
Tbilisi 1647.10 5147.60 3242.26
Georgia 2342.70 8464.30 5358.20

100%
Turnover in in enterprises sphere by regions in 2005
8 000
7 000
80%
6 000
Percent
60%
40%
5 148
5 000
4 000
3 000
Total value in GEL
2 000
20%
1 000
0%
Tbilisi
606 513 494 426 269 161 135 114 48 21
Adjara
KvemoKartli
0
SamegreloSvaneti Kakheti MchetaMtianeti RachaLechkhumi
Imereti ShidaKartli SamtskheJavaheti Guria

Year Quarter
Georgia -
total
City of
Tbilisi
Abkhazia
AR
Adjara AR Guria
region
Imereti
region
Kakheti
region
of which:
Mtskheta-
Mtianeti
region
Racha-
Lechkhumi
region
Samegrelo-
Zemo
Svaneti
region
Samtskhe-
Javaketi
region
Kvemo
Kartli
region
Shida
Kartli
region
Number of employed persons in enterprises sphere by regions
persons
1 2 3 4 5 6 7 8 9 10 11 12 13
313370 140468 28388 5589 44192 13537 5924 2541 21815 6980 26164 13268
301310 143556 25957 4990 38976 11714 5289 2491 18907 6177 23521 11837
297795 141674 25500 4640 39130 11368 5058 2595 17765 6292 23479 12000
322779 148984 24648 4402 33591 10823 5629 2321 18328 5463 23519 9831
310989 138166 25682 4033 33543 10832 5667 2365 18993 5787 24883 10636
297852 164861 22463 3430 32974 10811 4951 1726 17422 5412 22466 10475
Share
100.0 44.8 9.1 1.8 14.1 4.3 1.9 0.8 7.0 2.2 8.3 4.2
100.0 47.6 8.6 1.7 12.9 3.9 1.8 0.8 6.3 2.1 7.8 3.9
100.0 47.6 8.6 1.6 13.1 3.8 1.7 0.9 6.0 2.1 7.9 4.0
100.0 46.2 7.6 1.4 10.4 3.4 1.7 0.7 5.7 1.7 7.3 3.0
100.0 44.4 8.3 1.3 10.8 3.5 1.8 0.8 6.1 1.9 8.0 3.4
100.0 55.4 7.5 1.2 11.1 3.6 1.7 0.6 5.8 1.8 7.5 3.5

Number of employed
350 000
300 000
250 000
200 000
150 000
100 000
Employed in enterprises sphere by
regions 2001-2006
Georgia
Tbilisi
Adjara
Guria
Imereti
Kakheti
MchetaMtianeti
RachaLechkhumi
SamegreloSvaneti
SamtskheJavaheti
KvemoKartli
50 000
0
2001 2002 2003 2004 2005 2006
YEARS
Ascending rank Minimum Maximum
Mean employment in
years 2001 - 2006
RachaLechkhumi 1726.00 2595.00 2339
Guria 3430.00 5589.00 4514
MchetaMtianeti 4951.00 5924.00 5419
SamtskheJavaheti 5412.00 6980.00 6018
ShidaKartli 9831.00 13268.00 11341
Kakheti 10811.00 13537.00 11514
Samegrelo Svaneti 17422.00 21815.00 18871
KvemoKartli 22466.00 26164.00 24005
Adjara 22463.00 28388.00 25439
Imereti 32974.00 44192.00 37067
Tbilisi 138166.00 164861.00 146284
Georgia 297795.00 322779.00 307349

100%
Employment in enterprises sphere by regions in 2006 1st Q
300 000
Percent of total employment
80%
60%
40%
20%
164 861
250 000
200 000
150 000
100 000
50 000
Employment
0%
Tbilisi
32 974
22 466 22 463 17 422 10 811 10 475 5 412 4 951 3 430 1 726
0
KvemoKartli SamegreloSvaneti ShidaKartli MchetaMtianeti RachaLechkhumi
Imereti Adjara
Kakheti SamtskheJavaheti Guria

Year Quarter
Georgia -
total
City of
Tbilisi
Abkhazia
AR
Adjara AR Guria
region
Imereti
region
Kakheti
region
of which:
Mtskheta-
Mtianeti
region
Racha-
Lechkhumi
region
Samegrelo-
Zemo
Svaneti
region
Samtskhe-
Javaketi
region
Average wages and salaries per employed persons in industry by regions
GEL
1 2 3 4 5 6 7 8 9 10 11 12 13
126.2 160.5 59.4 81.5 86.9 91.9 133.5 105.6 60.7 115.5 146.6 69.6
139.4 155.3 77.0 61.6 85.9 123.2 169.8 126.5 72.3 135.6 195.6 106.5
174.3 206.5 103.6 78.9 135.0 114.4 202.7 115.3 74.0 150.1 208.0 123.0
201.4 229.5 130.6 89.8 156.4 163.6 202.7 183.0 80.3 176.8 259.0 138.6
278.3 330.2 279.3 136.2 172.9 202.9 382.0 262.5 177.6 371.7 317.8 173.0
Average wages and salaries per employed persons in enterprises sphere by regions
108.4 128.6 101.7 57.2 73.1 64.0 100.8 78.2 85.4 73.3 112.0 78.3
119.9 132.4 125.0 57.8 80.4 78.7 117.4 80.6 101.2 77.7 145.1 100.6
139.4 154.8 130.5 71.7 106.6 74.1 139.6 79.2 122.7 84.9 159.3 119.1
161.6 184.9 136.7 74.9 100.4 97.7 139.6 106.5 150.5 117.4 183.8 91.4
270.0 306.5 349.7 90.5 148.2 137.6 279.8 173.9 290.7 209.4 242.6 136.4
Kvemo
Kartli
region
Shida
Kartli
region

Ascending rank Minimum Maximum
Mean wages in years
2001-2004
Guria 57.20 90.50 70.4200
Kakheti 64.00 137.60 90.4200
ShidaKartli 78.30 119.10 97.3500
Imereti 73.10 148.20 101.7400
RachaLechkhumi 78.20 173.90 103.6800
SamskoJavaheti 73.30 209.40 112.5400
SamegreloSvaneti 85.40 290.70 150.1000
MchetaMt 100.80 279.80 155.4400
Georgia 108.40 270.00 159.8600
KwemoKartli 112.00 242.60 168.5600
Adjara 101.70 349.70 168.7200
Tbilisi 128.60 306.50 181.4400
Employment in enterprises - Georgia
325000
320000
315000
310000
305000
300000
Employment vs. wages in Georgia
YEARS
2001
2002
2003
2004
2006
295000
100 125 150 175 200 225 250 275 300
Avarage wages in Georgia in GEL

Employment in enterprices - Tbilisi
165000
160000
155000
150000
145000
Employment vs. wages in Tbilisi
YEARS
2001
2002
2003
2004
2006
140000
125 150 175 200 225 250 275 300 325
Avarage wages in Tbilisi in GEL
Tbilisi
(VA)
Georgia
(GDP)
In mln GEL 1996 2000 2005 2000 2005
Agriculture 0.2 9.1 8.2 1 245.0 1 717.7
Mining 40.9 85.3
Manufacturing 157.2* 262.5 535.3 516.7 991.1
Supply of Electricity, Natural Gas and Water 263.3 325.9
Production by Households 28.5 19.7 223.3 406.8
Constructions 41.1 120.0 276.7 224.7 1 015.3
Trade 323.3 275.2 422.1 762.3 1 315.7
Hotels and Restaurants 141.1 328.2
Transport 52.0 226.9 417.4 707.8 990.8
Post and Telecommunication 151.0 471.7
Financial Intermediation 15.8 88.3 230.9
Real Estate 26.3 110.4 334.7
Public Administration 3.5 84.9 263.3 202.8 750.5
Education 13.5 65.8 127.6 213.7 382.0
Health and Social Work 15.0 123.6 157.5 314.2 389.4
Other Community, Social and Personal Cervices 15.3 196.7 363.6
Hired Employment in Households 15.3 9.4
Indirect Assessment of the Use of Financial Brokerage
in Business Activity
-55.4 -129.7

in mln GEL 1998 1999 2000 2001 2002 2003 2004 2005
Agriculture, forestry, fishery 15.4 8.1 9.1 6.8 2.6 4.8 27.7 8.2
Processing by domestic agriculture 33.2 33.9 28.5 36.8 42.8 45.9 51.3 19.7
Industry 173.3 219.0 262.5 273.1 313.1 363.2 373.3 535.3
Constructions 108.9 79.5 120.0 108.0 150.6 202.0 247.7 276.7
Trade and technical service 166.4 201.8 275.2 291.7 351.2 380.5 401.1 422.1
Transport, store industry and 211.7 258.7 226.9 248.5 266.5 326.6 350.4 417.4
communication
State government, self defense 82.9 77.3 84.9 96.8 117.2 126.3 196.3 263.3
Education 41.6 54.8 65.8 75.0 81.2 92.9 121.3 127.6
Health care 88.8 94.4 123.6 121.9 142.3 115.9 104.4 157.5
Other kinds of services 398.4 451.2 419.7 426.9 613.4 612.0 532.6 772.4
The whole additional cost 1320.5 1478.8 1616.2 1685.5 2080.9 2270.2 2406.1 3000.2
Key conclusions for the Tbilisi benchmarking part:
1. The economy of Tbilisi is of key importance for the national economy. Since
2003 it generates over 60% of the turnover in enterprise sphere in relation to
other regions of the country. In this aspect Tbilisi is the national leader.
2. Every year the employment in Tbilisi economy exceeds 40% of the total
number of jobs in the enterprise sphere in all regions of Georgia.
3. The level of salaries is significantly higher than in other regions both in the
enterprise sphere and in the manufacturing sector. It is even three times higher
than in the region where salaries are lowest (Seida Karli).
4. Since the late 1990s the industrial production sector has been manufacturing
less and less advanced technology products, i.e. the ones of the highest added
value impact (electric engines, trucks, elements for air industry).
5. Recent introduction into official statistics of the data concerning the growing
number of computers, particularly notebook computers, is the element which
may point out a new direction in the development of local economy.

The improvement of environment that businesses work in is one of the priorities of the
Georgian government. In spite of the fact that many issues should be solved in the
near future it has to be said that many steps have been taken to stimulate economic
activities of Georgian citizens in recent years. The World Bank’s and the International
Finance Corporation’s (IFC) Doing Business report can be reviewed to assess current
situation and take actions in this field. The World Bank has assessed the conditions
and environment which the businesses, especially small and medium ones, have to
face in different countries. The database called “Doing Business” presents indicators
of business regulations and their enforcement. The Doing Business collects data and
provides comparable indicators across 175 worlds economies. It analyses the
regulatory costs of business and can be used to analyze specific regulations that
enhance or constrain investment, productivity, and growth. The Doing Business
project covers ten topics of business environment:
• starting a business
• dealing with licensing
• employing workers
• registering property
• getting credit
• protecting investors
• paying taxes
• trading across borders
• enforcing contracts
• closing business.
“Georgia was the top reformer in the Commonwealth of Independent States (CIS)
and was the leader in the global top 10 reformers’ rankings as far as the ease of doing
business in 2005–2006 is concerned, according to the report.
Georgia made enormous improvements to many areas of its business regulations and
jumped over an astonishing 75 places in the rankings in just one year, moving from
112th place to number 37, Georgia’s annual leap in the rankings was the furthest
since the Doing Business report was launched four years ago. It just shows how far a
country can go if it is committed to reforms. Georgia improved its business startup
procedures, dramatically improved its customs procedures, introduced specialized
courts, streamlined labor regulations, introduced a credit bureau, and enormously cut
the number of licenses. The country has seen a 55 percent increase in the number of
new businesses being registered. In addition, the unemployment rate fell by 2
percent.” says Caralee McLiesh, a co-founder of the Doing Business project.
1 Chapter based on The World Bank’s and the International Finance Corporation’s (IFC) Doing Business report.

In addition to being the leading global reformer, Georgia was the leading reformer in
three of the specific areas studied by the report:
(1) Dealing with licenses: The report looks specifically at construction licenses and
permits, and this year Georgia created a one-stop shop for building permits. Shorter
time limits for the issuance of permits were introduced, and several unnecessary
procedures were eliminated.
(2) Enforcing contracts: Georgia established specialized commercial sections in the
courts. Also, the supreme court can now decide which cases to review. Previously, it
dealt with every case sent by the lower courts. In addition, Georgia has been striving
to reduce corruption in the courts by increasing judges’ salaries and more
aggressively investigating corruption and taking disciplinary measures against judges.
(3) Employing workers: The new labor code eases restrictions on the duration of
term contracts and overtime work. The new law provides for one month’s severance
pay, replacing complex rules requiring varying notice periods and the involvement of
labor unions and the Ministry of Labor. Georgia also reduced the social security
contributions paid on wages by businesses from 31% to 20%. Together, these
changes make Georgia the sixth easiest place to employ workers globally (after the
Marshall Islands, United States, Singapore, Tonga, and the Maldives). In addition,
Georgia made strides in increasing the ease of starting business. Georgia reduced the
minimum capital required to start a new business from 2,000 lari to 200 (US$85). As a
result, business registrations rose by 55 percent from 2006 to 2006, reflecting both the
creation of new businesses and the registration of companies formerly operating in the
shadow economy. In the area of getting credit, Georgia also has made some
legislative changes to facilitate the exchange of credit information, and a private credit
bureau began to support the exchange of information among banks.
While Georgia is the leading reformer this year, there are still several areas where
there is considerable room for improvement. In the ease of paying taxes, for example,
Georgia ranks only 104 globally. Although tax reform in previous years has simplified
taxes and decreased rates, a company still spends about 53 days per year to pay
taxes. Georgia also is relatively poorly ranked in closing a business (ranked at 86),
suggesting a need for bankruptcy reform. Another priority area is trading across
borders, where Georgia ranks at 95, due to a relatively high cost to import and export
and a large number of required procedures.
Finally, Georgia ranks only 135 on protecting investors, lower than most of its CIS
colleagues. The International Finance Corporation is engaged on the ground in
supporting Georgia’s reform efforts. With support from BP and the Government of
Canada, it provides technical assistance in the area of SME policy work. The IFC
SME Policy Project tightly cooperates with the Georgian government to further
improve two regulatory issues: inspections and permits/licenses. The project is
working on streamlining licensing and inspecting procedures according to international
best practices. It also conducts regular surveys of entrepreneurs, providing first-hand
information on administrative barriers hindering business growth. The IFC SME survey
reports provide clear recommendations for improvement to the government. The
survey instrument is also used to measure the effect of administrative reforms on
businesses against a baseline established by IFC’s first Georgia survey, conducted in
2004. Recently, the project has finalized its second survey, polling 1880 SMEs in 11
regions throughout Georgia. The survey covers 4 key issues for SME sector
development: licenses and permits, inspection system, tax administration and exportimport
procedures, the World Bank noted in Doing Business 2007: ”Georgia makes
an unprecedented jump up the global rankings” http://web.worldbank.org/

Tbilisi development in the beginning of the 20th century is characterized by an
increasing population and high construction activity. In the middle of 1950s the
massive construction of housing settlements and following branches of industry
began: machinery construction (including military sector), electronics and
microelectronics, light industry, construction, food processing, timber reprocessing,
pharmaceutical and perfume industry, based on the imported raw materials,
technologies and norms. It had a guaranteed market to sell those products.
After the collapse of Soviet Union Tbilisi industry practically stopped existing. Since
2004 the capital city has been undergong revitalization process of its economy base,
looking for a new development factors. At the time of dissolution of the USRR in 1991
Georgia inherited a rather diversified sector of industry – a wide range of industrial
enterprises, from food and timber processing, production of fertilizers, and coal and
magnesium ore mining, to steel and non ferrous metallurgy. Many of these industries
have been, and still remain, unique natural monopolies in the broader region. The
dissolution of the USSR was accompanied by the fracturing of supply lines and the
elimination of the soviet –time guaranteed state contracts. Georgian industry declined
dramatically.
The recovery and growth of industry resulted from political and economic stabilization.
A great number of industrial enterprises were privatized or transformed into joint-stock
companies. The restructuring of oversized Soviet-style mega enterprises facilitated the
creation of economically efficient competitive industries as well as the development of
small and medium size businesses in the sector.

STRENGTHS
• State and economy reforms after “Rose
revolution”
• Increase in population
• Development of cooperation with foreign
partners and international institutions
• Growing number of visitors
• Improving technical infrastructure
• Beauty of city architecture and city cultural
heritage and unique city center
• Growing public budget revenues and public
investment
• Growing wages and community incomes
• Improved access to funding for citizens and
companies
• Improving municipal services and growing
quality of life
• Increased number of companies
• Increase of foreign investments
• Rapid growth of service and construction
sector
• Growing number of university students
• Large share of people with university
education in the city’s population
• Existing land for production/services
investments and housing
WEAKNESSES
• Decrease of young population
• Poor recognition of the city abroad
• Insufficient funds for quick development tasks
completion
• De-capitalisation of large part of housing and
infrastructure resources; large share of low quality
public space
• Depreciated large post-industrial areas
• Collapse of traditional economy and closing of
many factories that were functioning in the city
before what resulted with huge reductions of work
places
• City economic base still is largely traditional with
limited growth potential
• Workforce without qualifications in new sectors of
city economy
• Low innovation level of local economy – generally
low earning and low asset base type economy
• Insufficient network of roads and bridges
• Small demand for new workers
• Low quality of workforce development services and
programs
• High crime rate and the sense of insecurity among
residents and visitors
• Decrease in work places and growing
unemployment rate
• Large share of educated people among the
unemployed
• Export of raw materials and low processed goods
• Negative balance in foreign exchange
• Significant number of people living in poverty
• Pay gap between men and women
• Lack of highly processed “flag products” to be
exported by the City
• Overstaffed education
• Insufficient level of domestic capital investments
• Poor competitiveness of local business on
international markets
• Significant share of grey area in local economy

OPPORTUNIETIES
• Farther legal changes improving business
environment
• Cooperation with the European Union and other
international organizations
• Access to the international donors funds and
technical assistance
• Positive economic prognoses (growing GDP)
• The chance given to foreign business to invest
various segments of economy, especially in the
advanced technology area
• The farther reform of public finances
• Shrinkage of informal economy
• Development of business institutional
infrastructure (business organizations -
chambers, clusters, associations, access to
funding, access space for business and access
to technical assistance)
• Growing employment in public and market
services
• Transformation of education system following
requirements of labour market
• Opportunities for development of tourism
industry
• Development of Tbilisi metropolitan area
• Improved education level
• Investments in education
• Promotion of local business
• Better access to human resources in metro area
• Improved incoming and outcoming
transportation
• Favourable conditions for the development of
sport, leisure and tourism as well as for
organisation of important events.
• Development of infrastructure in the European
transport corridors, investment in roads, airports,
ports and new railway connections
THREATS
• Slowdown of reforms
• Negative demographic changes
• Emigration of young people and qualified
workers
• Growing number of people without incomes
form work and growing number of families in
poverty.
• Economic barriers disturbing the access to
health, educational and cultural services
• Missing the chances offered by foreign
institutions and donors to improve the quality
of life and to develop the economy
• Growing unemployment of young people
• Low level of education
• Lack of educational services outside traditional
schooling
• Lack of strong research institutions that can
transfer innovation and knowledge to local
companies
• Lack of products that are competitive on
international markets
• Week cooperation and networking between
firms and private and public institutions.
• Deepening deficit in foreign trade
• Growth of inflation and increase of living and
business costs
• Macroeconomic changes and global
competition
• The wave of bankruptcies and closedowns
• Economic growth depending on foreign capital,
know-how and technology.

Good outcomes reflecting the satisfying condition of Tbilisi economy, when compared
to the rest of the country, results from the fact that the city does not face any
competition as far as economic indices are concerned. Other regions perform much
worse than the City of Tbilisi.
The authors of new programmes of economic development have to consider the fact
that their impact will not be restricted only to the metropolitan area of Tbilisi, but that
they will strongly influence the national economy. The increase of economic indicators
is built mainly on the growing production of low processed goods (e.g. cement, sawn
wood) and on the export of raw materials (such as ores), which will not contribute to
the economic growth and increased competitiveness on foreign markets. Also, these
segments will not attract technology transfer and will not generate new, competitive
products.
As a result of economy transformation Tbilisi lost its traditional industries that were
generating incomes and workplaces for decades. Schools, universities and supporting
institutions were organized around them. Now, when most of old factories do not
operate any more all these institutions should transform their activities or will be closed
down too.
To create Tbilisi new economy profile and face competition of global markets new city
products should be identified and new institutional infrastructure should be developed
to support key city development possibilities. Cluster networks should grow around
competitive city products that will be identified. Workforce development programs
should be created to support young people entering labour market and those who
need to change or improve their qualifications. Schools and vocational training
institutions should develop new educational programs to prepare qualified workforce
for the new sectors of economy. To build foundations for knowledge-based economy
the research institutions should offer companies new management and production
technologies. The whole range of institutions is needed to offer funding to growing
companies (credit, capital and guarantees). Business networks, organizations,
consulting and marketing companies will help companies and their products enter
new markets and compete with foreign companies. Public institutions should
participate in the process of supporting promotion campaigns, offering good quality
space and qualified workforce for all new generation of firms and institution, in order
to build international reputation and recognition of the city.

USD thds
the name of the group 2000 2005
all 322 821.1 865 892.4
livestock 8.1 15.6
meat and meat products 303.2 533.0
fish and crustacea molluscs and other invertebrates 135.5 992.3
sea products, bird eggs, natural honey 42.8 2 625.5
products of animal origin, not settled on the other place - 0.4
alive plants, cut flowers and decorative grass 216.3 873.6
vegetables and roots and bulbs good for feed 560.3 1 053.6
fruit and nut good for feed, crust and skin of citrus 22 255.0 76 937.3
coffee, tea and condiments 7 269.8 5 199.5
bread cereals 1 184.4 6 152.6
flour production, starch, wheat 1 900.6 1 926.9
seed and fruit of plants, plants for medical and technical purposes 1 193.5 2 579.0
pitches and other vegetable juices and extracts 5.0 215.9
other products from plant origin, not settled on the other place 4.4 42.1
fats and oils and the products of their processing, prepared food, fats
and albumens 32.3 203.0
prepared food with meat, fish or roots or with sea invertebrates 67.3 41.3
sugar and confectionery products from sugar 2 844.1 30 571.4
cocoa and products with it 12.3 1 094.5
prepared food with grain, flour starch or milk, flour confectionery
products 161.7 84.4
vegetables fruit, nuts or plants processing products 1 117.0 5 445.4
various products of feed 381.8 829.9
alcoholic and not alcoholic drinks and vinegar 46 857.2 164 356.7
remains of feed industry, prepared food for animals 4.6 782.8
tobacco and industrial substitutes of tobacco 6 119.3 1 345.8
salt, sulfur, ground and stone, plaster stuff, limestone and cement 1 371.6 18 461.5
ores slag and ashes 29 767.1 38 386.9
mineral fuel, oil and oil products 26 267.1 27 952.6
norganic products of chemistry, admixture of metal radio-active
elements 5 686.4 7 358.9
substances of organic chemistry 100.4 367.6
pharmaceutical products 5 226.9 4 009.0
fertilizers 16 191.5 35 838.6
paint extracts and substances, spots, inks 757.9 1 050.9
etheroils, perfume cosmetics and toilet means 1 099.8 8 295.3
soup, washing and cleaning means, waxes, candles 53.3 966.3

albumonous substances, modified drinks, glues 3.6 0.1
explosive substances, matches - 58.5
photo and cinema 4.9 52.6
other chemistry products 3 048.7 509.9
plastics and their products 1 334.5 472.5
cauthchouc, rubber and their products 95.0 178.5
uncultivated leather and leather materials (except natural fur) and
leather 2 216.3 1 510.5
leather products and harness 104.6 168.0
natural and artificial fur and their products - -
wood and its products, tree coal 7 491.7 16 262.5
cork and its products 0.0 43.5
straw and other wittling products, baskets and wittling products 0.0 0.7
wood or other fibrous cellulose products 3.6 -
paper and cardboard, products of paper mass, paper or cardboard 611.2 625.4
printed books, newspapers and other polygraphic industry 38.1 263.3
silk 105.9 7.0
wool, thin and rough fur of animals, cloth of horse-hair 5.8 62.3
cotton 11.7 -
chemical threads 1.0 1.9
chemical fibres 36.8 124.6
cotton, thick felt and not knitting clothes, special thread, ropes and
cables 44.6 11.7
carpets and other loom floor cover 16.0 5.9
special clothes, laces, tapestries 9.0 4.1
loom materials, saturated, duplicated, technical loom products 0.8 3.3
stockinet linen hand or machine woven - 0.2
stockinet clothes and cloth parts hand or machine woven 96.1 298.6
loom clothes and cloth parts 915.3 8 265.0
other prepared loom products, used cloths and loom products 164.6 219.6
shoes, gaiters and analogical products, their parts 1 523.3 131.0
karchives and their parts 7.0 2.5
umbrellas, crutches, whips for horse riding 1.0 11.2
manufactured feathering and its products, artificial flowers - 0.2
stone, plaster, cement, mica or the production of analogical kind 46.2 263.1
ceramic products 44.8 388.1
glass and its products 1 409.3 452.5
pearl, stones, precious metals and their products 1 576.3 39 413.6
black metals 53 449.9 167 709.8
black metals and their products 3 037.3 4 080.5
copper and its products 4 348.4 11 624.4
nickel and its products 20.1 -
aluminum and its products 17 594.8 11 842.1
mixed doods 78.3 -
bullet and its products 84.1 538.2
zinc and its products 74.6 86.5
other non-precious metals, metal-ceramic and its products 514.7 146.6
instruments, their parts from non-precious metals 1 917.9 163.4
other products from non-precious metals 10.9 245.7

atomic reactors, installations and mechanic products, their parts 18 683.2 29 702.7
electric machines and installations, their parts 4 666.5 5 080.5
locomotives, movable composition and their parts 1 227.3 2 944.9
overground transport means, except railway or tram movable
composition 1 247.3 25 029.8
flying apparatus, cosmic apparatus and their parts 11 230.5 78 197.9
ships and other swimming means 1 618.8 6 106.4
optical, photographical measuring, control, medical instruments and
apparatus 224.3 1 215.0
clocks and their parts 8.3 46.4
musical instruments and their parts 24.8 32.3
weapon and fire arms 1 319.2 149.3
furniture, lighting, building constructions 354.1 4 143.4
toys, games and sporting stock, their parts 107.9 183.2
other prepared products 725.8 187.0
art production, collection things and their antiquary 85.7 33.7
1997 1998 1999 2000 2001 2002 2003 2004
(In millions of lari)
Nominal GDP at market prices 4.555 5.022 5.669 6.015 6.648 7.457 8.565 9.970
Nominal GDP at factor prices 4.285 4.782 5.342 5.649 6.212 6.961 8.042 9.135
Share in GDP (at factor prices)
(In percent of GDP)
Agriculture, forestry, fishing 29.2 27.6 26.2 21.6 22.1 20.6 20.6 17.8
Mining and quarrying 0.4 0.3 0.4 0.7 0.6 0.7 0.9 0.9
Manufacturing 10.7 8.9 8.8 9.1 8.3 9.0 9.3 9.8
Electricity, gas and water supply 3.3 3.8 4.7 4.7 4.1 4.5 4.0 3.5
Processing products by household 5.4 5.0 4.8 4.0 4.8 4.7 4.6 4.4
Constructions 3.8 4.9 4.0 4.0 4.2 5.5 6.8 6.8
Trade services, repair services 11.8 11.0 12.2 13.5 14.0 13.7 14.1 14.4
Restaurant and hotel services 2.1 2.0 2.6 2.5 3.1 3.1 3.8 4.5
Transport and storage 6.7 9.4 10.0 12.5 11.7 12.0 10.9 10.4
Communications 1.5 2.1 2.6 2.7 3.0 3.1 3.0 2.9
Financial intermediation 1.0 1.3 1.7 1.6 1.5 1.6 1.6 1.4
Real estate, renting and business activities 9.7 8.9 7.9 7.5 7.3 6.4 6.4 6.5
Public administration and defense 4.0 4.1 3.7 3.6 3.9 4.2 3.8 6.3
Education 2.9 2.9 3.5 3.8 3.8 3.9 3.5 3.8
Health care and social services 3.7 4.7 4.5 5.6 5.2 5.0 4.3 3.7
Other community, social and personal 3.7 3.6 3.2 3.5 3.1 2.8 3.1 3.7
service activities
Private households with employed persons 0.5 0.4 0.4 0.3 0.2 0.1 0.1 0.1
Nominal GDP at basic prices 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

.
(In thousand of tons, unless
otherwise indicated)
1997 1998 1999 2000 2001 2002 2003 2004
Fuel and energy
Electric power
7.2 8.1 8.1 7.5 6.9 7.3 7.2 6.9
(in billions of kWh)
Coal 4.6 14.7 12.0 7.3 5.0 6.0 8.0 8.0
Oil 133.8 119.2 91.3 109.5 98.8 73.9 139.7 97.6
Natural gas
79.5 40.2 16.7 17.8 10.9
(in millions of m3)
Gasoline 4.4 ... 3.6 1.8 ... ... 0.1 3.3
Diesel fuel 8.1 13.8 22.3 8.8 2.0 0.9 3.7 14.7
Fuel oil („Mazut“) 12.4 15.9 23.2 16.0 8.6 13.6 12.8 16.2
Metallurgy
Cast- iron 1.1 0.1 ... 0.0
Steel 103.2 56.4 7.0 0.1
Finished roll steel ferrous metal 86.7 42.7 7.2 1.4
Steel pipes 23.5 8.5 0.1 0.2
Manganese ore 14.2 16.0 54.9 63.1 98.4 130.4 173.5 218.7
Electro- ferro manganese 0.0 3.4 4.9 0.6 0.1 ... ... ...
Machine- building
Subversive electric motors (in 329.0 74.0 63.0 559.0 402.0 44.0 217.0 25.0
units)
A/C motors (in thousands of kW) 0.1 ... ... ... ... ... ... ...
Electric welding equipment 0.0 0.0 ... ... ... ... ... ...
(in thousands of units)
Metal- cutting machines
28.0 21.0 2.0 3.0 2.0 9.0 30.0 4.0
(in units)
Main- line locomotives
... ... ... 4.0 3.0 3.0 3.0 4.0
(in units)
Trucks (in thousands of units) 82.0 39.0 38.0 44.0 4.0 ... ... ...
Chemical/ timber products
Mineral fertilizers 80.9 55.4 95.1 100.2 39.2 83.2 89.9 98.8
Chemical fibers and threads 0.6 0.3 0.3 0.0 0.0 ... ... ...
Synthetic ammoniac 102.1 77.5 126.6 136.2 57.9 111.3 124.4 131.2
Synthetic detergents
46.8 10.9 ... ... ... ... ... ...
(in tons)
Sawn wood
(in thousands of m3)
16.7 33.0 34.3 42.8 43.5 51.7 71.1 69.4
Construction
Cement 94.1 198.6 341.4 347.7 335.2 346.8 344.8 424.6
Prefabricated ferro- concrete 8.8 8.7 9.3 13.4 4.6 3.7 4.4 3.9
structures
(in thousands of m3)
Masonry concrete and silicate 16.6 16.5 12.4 11.3 8.3 8.4 12.1 24.9
blocks
(in millions of units)
Natural stone decorative tiles
(in thousands of m3)
... 14.6 10.4 12.4 14.7 11.2 13.9 22.4

General merchandise and
household appliances
Porcelain and faience dishware 191.6 274.2 320.5 185.9 91.8 53.8 ... ...
(in thousands of units)
Color TV (in units) 2037.0 1039.0 1310.0 1585.0 1170.0 11.0 ... ...
Notebooks
953.4 316.0 370.0 194.0 213.0 262.0 1394.0 2035.0
(in thousands of units)
Light industry
Silk thread (in tons) 8.6 ... ... ... ... ... ... ...
Cotton yarn (in tons) 167.0 62.1 6.7 ... ... ... ... ...
Wool yarn (in tons) 61.4 58.7 40.0 5.0 5.0 8.0 11 1
Hosiery (thousands of pairs) 57.0 11.6 0.5 0.5 15.5 16.4 13.5 11.9
Knitwear
76.0 59.0 14.3 10.3 2.6 2.3 0.9 ...
(thousands of pairs)
Footwear
100.9 95.4 101.3 89.8 44.7 24.5 19.4 36.8
(thousands of pairs)
Basic foodstuff and foodprocessing
Bread and bakery products 198.7 172.5 113.6 111.3 88.1 91.6 77.0 100.4
Granulated sugar 19.7 ... 20.0 35.3 ... 47.9 91.8 86.9
Meat products 963.3 1330.0 1429.0 1053.0 415.2 573.3 885.5 1589.0
Meat (tons) 45.3 178.0 6.0 66.0 1.2 0.3 0.5 1.4
Sausage (tons) 918.0 1152.0 1423.0 987.0 414.0 573.0 885.0 1575.0
Butter (tons) 888.0 265.0 1490.0 813.0 519.0 203.0 284.0 666.0
Dairy products
5.4 6.6 4.6 4.2 4.8 5.5 ... ...
(in terms of milk)
Fat cheese (tons) 142.0 47.0 93.0 63.0 28.0 32.0 57.0 61.0
Vegetable (tons) 847.0 542.0 476.0 144.0 51.0 76.0 106.0 118.0
Flour 165.0 148.0 114.4 103.5 79.9 78.3 72.5 136.7
Canned fruit and vegetables 9.6 2.9 6.6 11.2 29.1 28.9 28.2 20.3
(mln.cans)
Confectionery (tons) 235.0 277.0 154.0 144.0 101.0 112.0 336.0 498.0
Packed natural tea 7.8 4.9 4.5 3.0 3.8 3.1 4.1 4.3
Macaroni products (tons) 357.0 860.0 470.0 270.0 293.0 505.0 542.0 738.0
Non- alcoholic beverages 4.0 2.9 2.2 2.9 3.5 3.8 6.8 8.9
(in millions of decaliteres)
Mineral water
66.5 61.3 49.7 72.3 79.7 119.2 138.1 163.6
(in milions of ½ liters)
Cigarettes (in billions) 0.9 0.6 1.3 0.3 1.6 1.8 3.0 2.8
Vodka and liqueurs
251.0 112.7 463.8 439.4 529.0 135.9 117.7 437.7
(in thousands of decaliters)
Grape wine
3.1 2.3 1.9 1.7 2.0 1.9 2.3 2.7
(in millions of decaliters)
Sparkling wine
75.6 40.3 66.9 87.7 115.1 117.7 160.3 177.8
(in thousands of decaliters)
Brandy (in thousands of
82.3 37.8 31.1 71.3 73.0 73.2 141.9 221.9
decaliters)
Beer (in millions of decaliters) 0.8 1.0 1.3 2.3 2.6 2.7 2.8 4.8

of which:
Year
of which: of which: of which:
Collection, purification and
distribution of water
Supply of steam and hot water
Supply of gas
Supply of electricity
Electricity, gas and water supply
Manufac-ture of transport equipment
Manufac-ture of electrical machinery
and optical instruments
manufac-ture of machinery and
equipment
Manufacture of basic metals and
fabricated metal products
Manufac-ture of other non-metalic
mineral products
Manufacture of rubber and plastic
products
Manufac-ture of chemical products
Manufac-ture of oil products
Manufacture of paper and publishing
Manufactu-re of wood and products
wood and cork
Manufac-ture of textiles and textile
goods
Manufac-ture of food products,
beverages and tobacco products
Manufactu-ring
Other mining and quarrying
Mining of metal ores
Mining of crude oil and natural gas
Mining of coal
Mining of eneregy producing
minerals
Mining and Quarrying
Industry - total
Number of employed persons in industry by type of economic activity ( Georgia)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
90392 6490 1550 668 882 3752 1188 58738 20330 2895 1842 3998 383 4858 612 4487 7796 1174 2351 5246 25164 16270 2445 49 6400
84502 6464 1453 657 796 3901 1110 54135 18756 2636 2071 3874 87 4588 686 3630 7358 1017 1420 6554 23903 17490 2295 49 6413
82004 6503 1353 527 828 1992 1158 51619 18105 1761 1995 3532 131 4508 644 3688 7181 943 1214 6745 23882 15014 2481 47 6340
85385 7252 1454 525 929 4511 1287 52649 20482 2065 2152 3453 199 4551 903 4012 6271 1087 1079 5117 25484 15985 2909 263 6327
83497 7596 1518 490 1028 4958 1120 52897 20139 2024 2255 3124 78 6774 931 4167 5438 823 1149 4766 23004 17080 3205 52 5924
82598 7318 1076 470 606 5121 1121 51340 21124 2420 1547 3407 22 4380 1554 4324 4886 752 797 4810 23940 14185 3527 69 6159
Share%
100 7,2 1,7 0,8 0,9 4,2 1,3 64,9 22,5 3,2 2,0 4,4 5,3 5,3 0,7 5,0 8,6 1,3 2,6 5,9 27,9 18,0 2,7 0,1 7,1
100 7,7 1,8 0,8 1,0 4,6 1,3 64,0 22,2 3,1 2,5 4,6 5,4 5,4 0,8 4,4 8,8 1,2 1,6 7,7 28,3 17,9 2,7 0,1 7,6
100 7,9 1,6 0,6 1,0 4,9 1,4 62,9 22,1 2,2 2,4 4,3 5,5 5,5 0,7 4,5 8,8 1,1 1,5 8,2 29,2 18,3 3,1 0,1 7,7
100 8,5 1,6 0,6 1,0 5,4 1,5 61,6 24,0 2,2 2,6 4,1 5,4 5,4 1,0 4,7 7,3 1,3 1,3 6,1 29,9 18,7 3,4 0,4 7,4
100 9,1 1,8 0,6 1,2 6,0 1,3 63,4 24,1 2,4 2,8 3,7 0,1 8,1 1,1 5,0 6,6 1,0 1,3 5,7 27,5 16,5 3,8 0,1 7,1
100 8,9 1,3 0,6 0,7 6,2 1,4 62,2 25,6 2,9 1,9 4,1 0,0 5,3 1,9 5,2 5,9 0,9 1,0 5,8 28,9 17,2 4,3 0,1 7,5

of which:
Year
of which: of which: of which:
Collection, purification and
distribution of water
Supply of steam and hot water
Supply of gas
Supply of electricity
Electricity, gas and water supply
Manufac-ture of transport equipment
Manufac-ture of electrical machinery
and optical instruments
manufac-ture of machinery and
equipment
Manufacture of basic metals and
fabricated metal products
Manufac-ture of other non-metalic
mineral products
Manufacture of rubber and plastic
products
Manufac-ture of chemical products
Manufac-ture of oil products
Manufacture of paper and publishing
Manufactu-re of wood and products
wood and cork
Manufac-ture of textiles and textile
goods
Manufac-ture of food products,
beverages and tobacco products
Manufactu-ring
Other mining and quarrying
Mining of metal ores
Mining of crude oil and natural gas
Mining of coal
Mining of eneregy producing
minerals
Mining and Quarrying
Industry - total
Turnover in industry by type of economic activity ( Georgia)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
1299 66,0 28,2 0,3 27,9 31,8 6,0 659,3 332,0 5 7,1 26,6 10,1 36,8 14,2 49,2 93,0 5,5 11,4 63,2 574,0 513 29,3 0,1 31,3
1548 77,2 20,9 0,2 20,7 46,8 9,5 846,6 387,0 5 9,5 30,0 5,3 39,8 16,1 54,4 116,1 4,1 7,3 92,4 624,5 533 52,3 0,1 38,3
1862 134,0 43,7 0,3 43,4 71,7 18,6 1042,7 544,7 6 12,3 40,0 16,8 79,8 20,4 80,4 125,9 7,8 9,2 137,3 685,6 575 69,7 0,1 40,8
2119 136,0 38,0 0,7 38,4 85,3 11,6 1243,5 682,4 8 13,3 47,5 32,1 106,0 29,2 100,5 142,4 8,3 12,1 53,1 740,2 598 94,7 0,1 46,9
2308 139,7 19,3 0,7 18,6 108,7 11,9 1438,9 785,5 13 19,6 50,7 1,3 120,3 25,9 119,4 218,2 13,8 14,1 4,6 730,1 591 100 0,1 38,7
675 32,5 10,3 0,1 10,2 19,3 2,9 371,2 201,4 4 3,6 13,8 0,0 32,0 7,8 28,0 65,1 2,8 2,1 7,0 271,4 180 76,1 0,0 14,5
100 5,1 2,2 0,0 2,2 2,4 0,5 50,7 25,6 0,4 0,5 2,0 0,8 2,8 1,1 3,8 7,2 0,4 0,9 4,9 44,2 39 2,3 0,0 2,4
100 5,0 1,3 0,0 1,3 3,0 0,6 54,7 25,0 0,3 0,6 1,9 0,3 2,6 1,0 3,5 7,5 0,3 0,5 6,0 40,3 34 3,4 0,0 2,4
100 7,2 2,3 0,0 2,3 3,9 1,0 56,0 29,3 0,4 0,7 2,1 0,9 4,3 1,1 4,3 6,8 0,4 0,5 7,4 36,8 30 3,7 0,0 2,2
100 6,4 1,8 0,0 1,8 4,0 0,5 58,7 32,2 0,4 0,9 2,7 1,0 6,0 1,6 5,2 9,2 0,6 0,6 3,3 34,9 26 1,6 0,0 2,1
100 6,1 0,8 0,0 0,8 4,7 0,6 62,3 34,0 6,0 0,9 2,2 0,1 5,2 1,1 5,2 9,5 0,6 0,6 0,2 31,6 25 4,3 0,0 1,7
100 1,8 1,8 4,6 4,0 58,7 32,2 0,4 0,6 2,2 50,0 1,4 0,0 6,7 0,4 0,6 2,5 0,2 34,9 28,2 0,0 0,0 0,0 0,0 0,0

LOCAL
ECONOMIC
DEVELOPMENT
PLAN FOR TBILISI
MUNICIPALITY
CITY COMPETITIVEES
ASSESSMENT
Tbilisi City Hall │ Economic Policy Agency
Address: 2, Liberty Sq │ Tbilisi 0105, Georgia
Tel.:(+99532)932314 │ Fax.:(+99532)932895
E-Mail: economic@tbilisi.gov.ge
www.tbilisi.gov.ge
1

TABLE OF CONTENTS
City of Tbilisi Competitiveness Assessment ....................................................................................................5
1. Role of cities in regional and national economy ......................................................................................5
1.1. Cities take more important role in national economy.......................................................................5
1.2. Tbilisi in Georgian economy..............................................................................................................7
2. City competitiveness .................................................................................................................................. 18
2.1. Factors of city competitiveness.............................................................................................................. 18
2.2. Assessment of Tbilisi competitiveness.................................................................................................. 20
3. Identification of competitive advantages of Tbilisi economy............................................................. 29
3.1. Identification of city products.................................................................................................................. 29
3.2. Identification of promising Tbilisi clusters .............................................................................................. 31
2

CHARTS
Chart 1-1 Population in Georgia and Tbilisi 2001-2006....................................................................................................................................8
Chart 1-2 Economic active population in Georgia and Tbilisi ..........................................................................................................................9
Chart 1-3 Employment in Georgia and Tbilisi 2001-2004...............................................................................................................................11
Chart 1-4 Structure type of activity in Tbilisi in 2004.......................................................................................................................................12
Chart 1-5 Turnover in business sector in Georgia and Tbilisi 2001-2005.....................................................................................................13
Chart 1-6 Turnover in business sector / Employed in 2001 - 2004..................................................................................................................14
Chart 1-7 Earnings in business sector in 2001 – 2005 in Georgia and Tbilisi ............................................................................................15
Chart 1-8 Volume of turnover per employee in business sector....................................................................................................................16
Chart 1-9 Comparative analysis of turnover and employment in business sector ......................................................................................16
Chart 1-10 Comparative analysis of employment and earnings in business sector....................................................................................17
Chart 1-11 Comparative analysis of turnover per employee and earnings in business sector.................................................................17
Chart 2-1 City of Kutaisi SWOT analysis .........................................................................................................................................................22
Chart 2-2 City of Rustavi SWOT analysis........................................................................................................................................................22
Chart 2-3 City of Batumi SWOT analysis.........................................................................................................................................................23
Chart 2-4 City of Tbilisi SWOT analysis............................................................................................................................................................24
Chart 2-5 City of Tbilisi in the region SWOT analysis.........................................................................................................................................27
3

TABLES
Table 1-1 Population in Georgia and Tbilisi 2001-2006....................................................................................................................................7
Table 1-2 Dynamics in population.........................................................................................................................................................................8
Table 1-3 Economic active population 2001 - 2005...........................................................................................................................................9
Table 1-4 Economic active population / total population 2001 - 2005..............................................................................................................9
Table 1-5 Dynamics in economic active population.........................................................................................................................................10
Table 1-6 Employment in Georgia and Tbilisi 2001-2004..............................................................................................................................10
Table 1-7 Dynamics in employment in Georgia and Tbilisi...........................................................................................................................11
Table 1-8 Structure of employment In Tbilisi 2004-2005 ...............................................................................................................................12
Table 1-9 Turnover in business sector 2001-2005..............................................................................................................................................13
Table 1-10 Changes of business turnover in Georgia and Tbilisi..................................................................................................................13
Table 1-11 Turnover in business sector / Employed in 2001 - 2004................................................................................................................14
Table 1-12 Earnings in business sector in 2001 - 2005..................................................................................................................................14
Table 1-13 Dynamics in earnings.......................................................................................................................................................................15
Table 2-1 City of Tbilisi in the country, assessment results ..............................................................................................................................21
Table 3-1 City of Tbilisi products evaluation ......................................................................................................................................................30
Table 3-2 Financial cluster assessment of attractiveness...............................................................................................................................32
Table 3-3 Education cluster assessment of attractiveness..............................................................................................................................33
Table 3-4 Real estate cluster assessment of attractiveness..........................................................................................................................34
Table 3-5 Transportation cluster assessment of attractiveness ......................................................................................................................35
Table 3-6 Industry cluster assessment of attractiveness................................................................................................................................36
Table 3-7 Creative cluster assessment of attractiveness.................................................................................................................................37
Table 3-8 Touristic cluster assessment of attractiveness ................................................................................................................................38
4

Report
City of Tbilisi Competitiveness
Assessment
1. Role of cities in regional and national economy
1.1. Cities take more important role in national economy
City are the more and more powerful engines of the national and global economy. Two
key forces - the globalization and the commercialization of new information as well as
communications technologies - have been driving the massive changes and thus
restructuring cities. Globalization is linked to liberalized trade and the opening up of world
markets through organizations and agreements such as the Word Trade Organization or
the European Union. Global corporations continue to expand their role on the world stage
through expansion, mergers and acquisitions.
Globalization would not be possible if there had not been for the explosion of new
information technologies with mobile wireless communication, personal computers, and
networks of internet, intranet and extranet. All of these have made it possible to manage
facilities distributed around the world, for the labour to move more freely across national
boundaries, and for the information, currencies and transactions to flow smoothly to any
destination. As globalization proceeds, regional and national economies become more
closely intertwined. National boundaries have gradually become less relevant as
globalization and information technology have reduced the role of the nation state. Big
metropolises with skilled workforce, globally connected businesses have emerged as the
engines of the new economy.
Globalization, and intensive competition which is integral to it, has led to a massive
restructuring of regional economies. The widespread de-industrialization of cities,
particularly of urban cores, is clear evidence of this. As the global marketplace expands,
each city is forced to focus upon the few things that it is very good at, in which it can
successfully compete at a global scale.
This more recent phase of economic restructuring has been characterized by a
transformation to a knowledge economy. The future quality of life in advanced economies
depends on upgrading and moving the economy towards a concentration in high value
added activities from any industry. The key is to focus on the high order, innovation
based, high productivity activities in each industry. The quality of life and economic
development, depend on making a successful transition to a knowledge economy.
Unlike an economy based on traditional manufacturing and natural resource extraction, in
which factors such as access to raw materials may have played a central role, the
knowledge economy is driven by:
• well educated and high-skilled workforce,
• innovation – creativity, flexibility, research and development,
• entrepreneurship – mentoring, networking, strategic alliances,
• information and communications technology (ICT).
5

The knowledge economy is present in all segments of our society and our economy. It is
not confined to certain groups, such as university graduates, or certain industries, such as
information technology or telecommunications. Rather, the knowledge economy
represents a way of life and a way of producing goods and services that focus on
continuous improvement of the above characteristics. Even “traditional” industries, can
be, or rather should be, a part of the knowledge-based economy. Today successful
companies in older industries employ high quality design and flexible advanced
manufacturing.
Cities have always been areas of growth, the places where economic resources,
entrepreneurship, and a diverse population provided natural opportunity for starting new
economic, cultural and intellectual activities. Cities have always fostered the creativity that
produces technological advancements and new forms of commercial organizations.
There are a lot of good examples in the last century of the power of cities to create new
technological and commercial innovations, as a result of combined activities of
entrepreneurs, artists and technicians congregated in these places. What we are
witnessing now in successful North American and European cities is the concurrence of
cultural and technological creativity that drive the new economy. The multi-media
industries that have exploded in several places are example of this creative convergence.
There is an assortment of specific conditions that exist in cities and which make them a
fertile ground for innovation, creativity, and technological and commercial advancement.
The most important thing that cities can offer is the diverse pool of skilled labour required
to make large-scale and specialized production possible. Secondly, because of their size
cities should offer local markets of sufficient size for specialized goods and services to be
developed. Thirdly, because of their geographical conditions and the enhanced possibility
for formal and informal contacts of all kinds, cities are places where technology and knowhow
can spill over. Information flows easily, and chance encounters can bring together
diverse interests and expertise to create new products and services.
In this context, urban arts and cultural amenities - including not only formal events and
places such as galleries, music halls or museums, but also the vitality of its more informal
amenities like restaurants, street cafés, bookstores and outdoor festivals - becomes
tangible assets that play a role in fostering creativity and innovation.
Cities combine diversity – of population and resources of all kinds. Unique assets show
the innovative capacity and the bunch of possibilities of each city. Under today’s
economic conditions, in the global knowledge economy that is driven by information,
creativity, innovation and technology, when cities are at centre stage, these special urban
characteristic are of the biggest importance.
The elimination, and in some places even the reduction, of national trade barriers has
brought us to the moment when either people or businesses are choosing to locate and
expand in cities that have the mix of economic, social, political and other attributes for
long term success. As a result of urban renaissance we are witnessing the rapid growth of
many North American and European cities. Urban-based industries are the fast-growth
industries, people are moving back to cities and central governments are commencing
massive urban regeneration schemes. It more and more widely recognized that cities are
the focal points of national economies and should follow through with proactive urban
regeneration strategies and investment funding.
6

1.2. Tbilisi in Georgian economy
On its way to becoming a regional center, Tbilisi’s relationships with the rest of the country
should naturally be transformed. The role of cities as major actors on the world economy
stage demands rethinking the whole approach to urban areas and their role in economic
growth and improving quality of life. This rethinking is required not only within cities, but at
the national level. City has not only the value of itself, but can mean even more in context
of the whole region. The realities of a global economy dictate that all levels of government
reevaluate their understanding of the role of cities, and their policies and approaches
towards cities and towns. While each city is developing its own solutions, particular group
of them should benefit from working together to develop and implement an integrated
national, approach to advancing the economies of major urban centers.
Funding and resources must now be directed toward supporting the transition to a
knowledge economy, in the same way that the government supported the resource
sector, and traditional manufacturing industries in the past. Central government
representatives need to take into account the likely impacts of their policy and program
decisions on urban economies. The emerging role of cities has been recognized round
the world and is being exploited as a engines of national economic growth. A wide range
of innovative initiatives and institutions are being put in place to more effectively respond
to the changing context for cities.
Population
Table 1-1 Population in Georgia and Tbilisi 2001-2006
Population (thds people)
Georgia - total Tbilisi Tbilisi share %
2001 4401.4 1089.7 24.8
2002 4371.5 1081.7 24.7
2003 4342.6 1083.5 25.0
2004 4315.2 1086.4 25.2
2005 4321.5 1092.6 25.3
2006 4401.3 1103.3 25.1
7

Chart 1-1 Population in Georgia and Tbilisi 2001-2006
5000
Population in Georgia and Tbilisi
Georgia population
Tbilisi population
4500
4401,40 4371,50 4342,60
4315,20 4321,50
4401,30
4000
3500
Population in thds
3000
2500
2000
1500
1000
1089,70 1081,70 1083,50 1086,40 1092,60 1103,30
500
0
2001 2002 2003 2004 2005 2006
YEARS
Table 1-2 Dynamics in population
Georgia- total
Dynamics
Tbilisi
2002-2001 99.3 99.3
2003-2002 99.3 100.2
2004-2003 99.4 100.3
2005-2004 100.1 100.6
2006-2005 101.8 101.0
Dynamics 2001-2006
Georgia- total 100.00
Tbilisi 101.25
While the Georgia population is stable Tbilisi slowly grows and now constitutes the one
quarter of the national population.
8

Economic active population
Table 1-3 Economic active population 2001 - 2005
Economic active population (thds people)
Georgia- total Tbilisi Tbilisi share %
2001 2113.3 434.5 20.6
2002 2104.2 448.5 21.3
2003 2050.8 429 20.9
2004 2041 426.9 20.9
2005 2023.9 429.8 21.2
Table 1-4 Economic active population / total population 2001 - 2005
Economic active population / Total population (%)
Georgia- total
Tbilisi
2001 48.0 39.9
2002 48.1 41.5
2003 47.2 39.6
2004 47.3 39.3
2005 46.8 39.3
Chart 1-2 Economic active population in Georgia and Tbilisi
2500
2250
2000
Economic active population in Georgia and
Tbilisi
2113,30 2104,20
2050,80 2041,00 2023,90
Georgia -economic
active population
Tbilisi-economic
active population
Economic active population
1750
1500
1250
1000
750
500
434,50 448,50 429,00 426,90 429,80
250
0
2001 2002 2003 2004 2005 2006
YEARS
9

Table 1-5 Dynamics in economic active population
Dynamics
Georgia- total
Tbilisi
2002-2001 99.6 103.2
2003-2002 97.5 95.7
2004-2003 99.5 99.5
2005-2004 99.2 100.7
Changes 2001-2005
Georgia- total 95.8
Tbilisi 98.9
While we can observe the decreasing number of economically active population in
Georgia and Tbilisi during this period, the capital has improved its situation in the last
years and its share in national economically active population has increased. It visible
that the share of economically active population in whole community is still much smaller
in Tbilisi than in the rest of the country.
Employment
Table 1-6 Employment in Georgia and Tbilisi 2001-2004
Employment ( thds people)
Georgia- total Tbilisi share %
2001 708.7 323.8 45.7
2002 681.7 319.5 46.9
2003 723.8 317 43.8
2004 722.4 315.8 43.7
10

Chart 1-3 Employment in Georgia and Tbilisi 2001-2004
Employment in Georgia and Tbilisi
800
700
600
500
400
300
200
100
0
2001 2002 2003 2004
Georgia- total
Tbilisi
Table 1-7 Dynamics in employment in Georgia and Tbilisi
Georgia- total
Dynamics
Tbilisi
2002-2001 96.2 98.7
2003-2002 106.2 99.2
2004-2003 99.8 99.6
Dynamics 2001-2004
Georgia- total 101.9
Tbilisi 97.5
11

Chart 1-4 Structure type of activity in Tbilisi in 2004
Structure type of activity in Tbilisi in 2004
6%
2%
1%
2%
0%
5%
11%
2%
21%
24%
10%
5%
2%
7%
2%
Agriculture, Forestry, Fishing
Manufacturing
Construction
Hotels and Restaurants
Financial intermediation
Public administration & defense
Other community, social and personal services activities
Exterritorial organization
Mining
Electricity, gas, w ater supply
Trade and Utilities
Transport and storage, communications
Real estate renting, business activities
Education, Health, social services
Private house economy w ith hired employment
Table 1-8 Structure of employment In Tbilisi 2004-2005
Structure of employment In Tbilisi 2004 2005
Agriculture, Forestry, Fishing 6.8 3.1
Mining 0.6 0.5
Manufacturing 33.9 39
Electricity, gas, water supply 7.6 7.9
Constructions 15.4 11.6
Trade and Utilities 71.1 64.4
Hotels and Restaurants 7.7 6.6
Transport and storage, communications 21.2 21.9
Financial intermediation 5.2 6.1
Real estate renting, business activities 16.7 15.2
Public administration & defense 32.5 29.1
Education, Health, social services 67.6 69.1
Other community, social and personal services
activities 19.9 19.7
Private house economy with hired employment 6.5 8.4
Exterritorial organizations 2.9 2.5
Total 315.6 305.1
While the trade and utilities employ the most of workforce, their share decries. Industrial
companies after are slowly improving the crisis. The reforms reduced the public
administration share in the job market.
12

Turnover In business sector
Table 1-9 Turnover in business sector 2001-2005
Turnover in business sector in mln GEL
Georgia- total Tbilisi share %
2001 3975.2 2133.5 53.7
2002 4595.6 2739.7 59.6
2003 5523 3330 60.3
2004 7248.4 4455.7 61.5
2005 10076.3 6352.8 63.0
Chart 1-5 Turnover in business sector in Georgia and Tbilisi 2001-2005
Turnover in business Georgia and Tbilisi
12000
10000
8000
6000
4000
2000
0
2001 2002 2003 2004 2005
Georgia- total
Tbilisi
Table 1-10 Changes of business turnover in Georgia and Tbilisi
Changes of business turnover (%)
Georgia- total
Tbilisi
2002-2001 115.6 128.4
2003-2002 120.2 121.5
2004-2003 131.2 133.8
2005-2004 139.0 142.6
The indicators show how strong economic position of Tbilisi is in the country. Tbilisi
economic share is much higher than its population’s share and the higher economic
growth strengthens Tbilisi’s future position.
13

Turnover and employment
Table 1-11 Turnover in business sector / Employed in 2001 - 2004
Turnover in business sector / Employed
Georgia- total
Tbilisi
2001 5.6 6.6
2002 6.7 8.6
2003 7.6 10.5
2004 10.0 14.1
Chart 1-6 Turnover in business sector / Employed in 2001 - 2004
Turnover in business sector / Employed Georgia and
Tbilisi
16,0
14,0
12,0
10,0
8,0
6,0
4,0
2,0
0,0
2001 2002 2003 2004
Georgia- total
Tbilisi
Earnings
Table 1-12 Earnings in business sector in 2001 - 2005
Earnings in business sector ( in GEL/ month)
Georgia- total Tbilisi share %
2001 108.4 128.6 118.6
2002 119.9 132.4 110.4
2003 139.4 154.8 111.0
2004 161.6 184.9 114.4
2005 204.5 229.4 112.2
14

Chart 1-7 Earnings in business sector in 2001 – 2005 in Georgia and Tbilisi
Earnings in business sector Georgia and Tbilisi
250
200
150
100
50
0
2001 2002 2003 2004 2005
Georgia- total
Tbilisi
Table 1-13 Dynamics in earnings
Georgia- total
Dynamics
Tbilisi
2002-2001 110.6 103.0
2003-2002 116.3 116.9
2004-2003 115.9 119.4
2005-2004 126.5 124.1
Dynamics 2001-2005
Georgia- total 188.7
Tbilisi 178.4
The indicators show how strong the economic position of Tbilisi is in the country. Tbilisi
economic share is much higher than its population’s share and the higher economic
growth strengthens Tbilisi’s future position. The turnover per employee rate shows how
much more effective Tbilisi companies are. As a result wages are also higher in Tbilisi
than in the whole country.
15

Chart 1-8 Volume of turnover per employee in business sector
2005
Volume of turnover per employee in business
sector in Georgia and Tbilisi
25906,70
33616,30
Georgia
Tbilisi
2004
22456,20
29907,20
YEARS
2003
18546,30
23504,70
2002
15252,10
19084,50
2001
15188,50
12685,30
0 10000 20000 30000 40000
Volume in GEL
Chart 1-9 Comparative analysis of turnover and employment in business sector
10 000
Comparative analysis business sector
turnover and employment in Georgia and
Tbilisi ( X-employment, Y-turnover GEL mln)
2005
Georgia_turnover
Georgia_employed
Tbilisi_turnover
Tbilisi_employed
8 000
2004
2005
6 000
2003
2004
2002
4 000
2001
2003
2002
2 000
2001
100 000 150 000 200 000 250 000 300 000 350 000 400 000
16

Chart 1-10 Comparative analysis of employment and earnings in business sector
240
220
Comparative analisis business sector employment
and earnings in Georgia and Tbilisi (X-employment,
Y-earnings in GEL)
2005
Georgia_employed
Georgia_earnings
Tbilisi_employed
Tbilisi_earnings
200
2005
180
2004
160
2004
2003
140
120
2002
2001
2003
2002
100
2001
100 000 150 000 200 000 250 000 300 000 350 000 400 000
Chart 1-11 Comparative analysis of turnover per employee and earnings in business sector
35 000
Comparative analisis business sector
turnover per employee and earnings in
Georgia and Tbilisi (X-earnings,Y-turnover
per employee in GEL)
2005
Georgia_turnover_
peremployed
Tbilisi_earnings
Tbilisi_turnover_pe
Tbilisi_earnings
30 000
2004
2005
25 000
2003
2004
20 000
2002
2003
15 000
2001 2002
2001
10 000
120 140 160 180 200 220 240
17

2. City competitiveness
2.1. Factors of city competitiveness
City competitiveness can be defined as the ability to attract and retain citizens, investment
and good quality work places as well as visitors. It is no less important to support city
economy in such a way that city products keep strong position on international markets.
As we continue to move towards a global knowledge economy, the competitive playing
field has shifted dramatically. City-regions are now competing with one another:
• to attract skilled labour;
• to attract new investment and quality jobs;
• for their share of global markets in the city’s export cluster.
In a global knowledge economy, skilled labour, investment and jobs are increasingly
mobile. They can move relatively easily across national boundaries, and between cities.
Products and services compete globally. Sales of these products and services can
generate added value, income, investment and jobs in the region in which they are
produced. It means that cities should build on their strengths. Notably, they can create
partnerships and employment and innovation pacts, bringing together key players within
an area – elected representatives, business leaders, NGOs, interest groups and
universities – to engage in positive and dynamic social and economic development.
Cities should tackle their weaknesses, boosting employability among those groups within
the population which find it hardest to access employment. In some cases, cities compete
directly with other cities for market share, as in the tourism industry, where the character,
attractions and events compete directly to attract tourists and their money. In other cases,
the role of cities in supporting the competitiveness of their exports is more indirect.
As globalization proceeds, cities continue to take centre stage in the global economic
theatre. The relationship between cities is primarily one of intense competition. Ultimately,
a sustained or improved quality of life in particular metropolises depends upon its ability to
compete successfully with other cities and to provide the necessary economic
foundations for growth. Competitive businesses and industries create jobs for residents
and labour force, and assessment revenue for the city that allows it to provide a range of
social, community, physical and other services and programs.
Cities often naturally provide a stimulating environment for innovation and businesses to
flourish and there are steps they can take to further foster this environment. The added
value of city-level actions is that they have more information on the specificities of the
business environment and are able to carry out smaller scale complex actions tackling
multiple interlinked problems. Those are factors that allow cities to successfully compete
with each other.
18

Different factors influence the city competitiveness. The most important ones are listed
below:
• Demographic structure.
• Skilled workforce.
• Quality of life.
• Social diversity.
• City recognition.
• City recognition and reputation.
• Costs of doing business.
• Economic structure.
• Financing.
• Networking.
• Research and development.
• Institutional infrastructure.
• Legal regulations and policies.
• Transport and telecommunication accessibility.
• Technical infrastructure.
Demographic structure - when planning long-term involvement in economic
development the demographic trends such as migration rate, income distribution or age
structure cannot be omitted since they influence the availability of workforce, the
consumers’ buying potential and local business environment.
Skilled workforce -intellectual capital, ingenuity, creativity and technical capabilities
of the labour force are key drivers of economic growth nowadays. This is why the
availability of qualified workforce is a crucial factor when analyzing city competitiveness.
Quality of life - to attract and retain top specialists needed for the city’s economy to
develop, a region needs to provide them with satisfying conditions of living. Safe and
healthy physical environment, diversified opportunities for leisure, rich urban culture,
chances of professional and personal growth are among the main factors influencing
individuals’ decisions regarding their choice of a place of stay.
Social diversity - wealth and poverty distribution, social exclusion phenomena,
community’s social capital are important factors to be taken into consideration when
choosing industries to focus on.
City recognition - being easily recognized in a region and worldwide as a city with
certain industries developed can facilitate the process of attracting international
investments, gaining business partners and entering new markets.
Economic structure - among the key factors influencing the likeliness of business to
succeed are its economic surroundings. This factor includes industrial profile of the
region, developed economy sectors, the quality and extent of supply chains, the
competitiveness of local companies, etc.
Costs of doing business - costs related to companies’ activities are often decisive
when choosing a region for opening a new branch or founding a new company. These
include state and municipal tax levels, land and resources prices, office rents, wages and
so on.
Financing business – such initiatives as expansion to new markets or founding new
companies very often involve finding external financial support. The availability of various
institutions providing local firms with support on different levels, from small credits to joint
venture capitals, influences the chances of product development.
19

Networking - the strength of inter-firm and public-private relationships between
companies, institutions and a government within the region and beyond. High networking
level can seriously boost economic activity within the region, fostering innovation and
enabling the establishment of strategic alliances. Networking can take place both on
informal (random encounters) and formal (conferences, industry associations meetings)
basis.
Institutional infrastructure - the existence and quality of services of various
institutions supporting business, such as research centers, health, education and
community services, companies dealing with finance, legal issues, marketing or
transportation are crucial for business climate in the region.
Legal regulations and policies - policies and programs supporting this kind of
activity and quality of services that public administration provides to the market. These
may include anti-trust law, regulations regarding conditions of entering the market, local
officials willingness to support the branch and such.
Transport and telecommunication accessibility - collecting information and being
able to act fast are becoming increasingly important elements in gaining competitive
advantage. That is why companies are interested in the availability of transportation
channels such as roads, airports, railways, along with telecommunication services –
internet, mobile telephony and such.
Technical infrastructure - the availability of space for doing business (from small
offices for the start-ups and SMEs to greenfield investment land for multinationals),
electricity supply and the presence of basic urban infrastructure such as piped services
(water, sewers) are among the basic elements necessary for businesses to develop.
2.2. Assessment of Tbilisi competitiveness
The competitiveness of Tbilisi was assessed in two aspects:
• its competitiveness in relation to other Georgian cities,
• its competitiveness in relation to other cities in the region of Caucasus and central
Asia.
The assessments were carried out by means of the SWOT method, which is usually
applied by the SRGG when evaluating the competitiveness of cities.
Tbilisi in the country
In order to assess the economic situation of Georgian cities during the workshop session
of the City Team the guests from other Georgian cities evaluated current economic
changes in their environment. They took into consideration the condition of both traditional
and emerging economic sectors, demographic changes and the workforce educational
improvement, the level of technical and urban infrastructure.
The assessments were performed with Tbilisi city team and the guests from Rustavi,
Batumi and Kutaisi
20

The assessment results are presented in the table below.
Table 2-1 City of Tbilisi in the country, assessment results
Demography
Kutaisi Tbilisi. Rustawi Batumi Gori
• population 0 + 0 + -
• natural birth rate + + + + - -
• age structure - - - - - - -
• migrations - - + - 0 -
• suburbanisation 0 +- - - 0
Economy
• traditional economy - - - - + +
• new sectors + ++ + + 0
• institutional infrastructure + ++ + ++ ++
• new city products + ++ + + +
Education
• school education + +++ + ++ ++
• business supply + +++ 0 + +
• vocational trainings 0 +++ 0 + +
Financing resources
• local government ++ +++ ++ ++ ++
• business + + + ++ ++
• citizens + + + + +
Local government
• cooperation with Central ++ +++ + ++ ++
Government
• cooperation with neighbor 0 ++ + + 0
municipalities
• cooperation with citizens ++ ++ + + +
• cooperation with business + +++ + ++ ++
Explanation:
+++ increase more than 75%
++ increase more than 25% less 75%
+ increase more than 25% less 1%
--- decrease more than 1% less 25%
-- decrease more than 25% less 75%
- decrease more than 75%
The results show that all the cities are changing dynamically and their situation is
improving.
In the second phase the city teams carried out the SWOT competitive assessment of their
cities in relation to other Georgian cities.
21

City of Kutaisi
Chart 2-1 City of Kutaisi SWOT analysis
OPPORTUNITIES
2 Business
organizations
6 Reputation
of the City
3 Education system
4 Infrastructure
Weakness
es
1 Workforce
Strengths
5 Quality of life
THREATS
City of Rustavi
Chart 2-2 City of Rustavi SWOT analysis
OPPORTUNITIES
4 Infrastructure
5 Quality of life
1 Workforce
6 Reputation
of the City
Weaknesses
2 Business
organizations
Strengths
3 Education system
THREATS
22

City of Batumi
Chart 2-3 City of Batumi SWOT analysis
OPPORTUNITIES
2 Business
organization
s
1 Workforce
4 Infrastructure
6 Reputation
of the City
Weaknesse
s
3 Education system
Strengths
5 Quality of life
THREATS
The SWOT competitive assessment is based on positioning the key factors of city
competitiveness in a coordinate system. The X axis allows to evaluate factors such as
strong and weak points of the city. The Y axis positions the same factor vertically and
demonstrates the opportunities and threats it will bring in the future. The results of the
SWOT competitive assessment for Batumi, Rustavi, Kutaisi and Tbilisi are presented
below. Finally, Tbilisi team evaluated a complete list of competitiveness factors in their city
in comparison to other cities.
23

Chart 2-4 City of Tbilisi SWOT analysis
CITY OF TBILISI
IN GEORGIA
OPPORTUNITIES
city
recognition
technical
infrastructure
institutional
infrastructure
economic
structure
transport and telecommunication
accessibility
financing
skilled
workforce
demographic
structure
R&D
legal regulation and policy
quality of life
WEAKNESSES
STRENGTHS
networking
cost of doing business
social
diversity
THREATS
24

While assessing Tbilisi competitiveness in relation to other Georgian cities the teams
identified as its weak points the research and development, traditional structure of
economy, the costs of doing business and starting joint ventures. Also, the technical
infrastructure and the access to financial resources need to be strengthened. The areas
that are the most likely to develop are technical infrastructure and the structure of local
economy.
R&D is likely to improve slightly, while growing costs of doing business is the most
significant threat.
The strongest points are the city recognition and its demographic structure. The good
opportunities of growth have been observed in the areas that have been evaluated as
poorly developed, i.e. in the institutional infrastructure, skilled workforce, transport and
telecommunication accessibility.
Unfortunately, the quality of life is less likely to improve and the risk of social exclusion is
regarded as the most significant threat.
All in all, the following conclusions have been drawn:
• the economic situation in Tbilisi and other Georgian cities is improving,
• further efforts are necessary to improve technical infrastructure that directly
determines the competitiveness of local economy and the growth of local
business,
• in order to achieve the long-term growth capacity it is crucial for the city to improve
local business environment and institutional infrastructure, upgrade workforce
skills and facilitate the availability of investment funds.
Tbilisi in the region
After the collapse of the Soviet Union Georgia is regaining its traditional role in the region.
The country is situated along the transport links connecting Asia with Europe and Tbilisi
plays the role of service centre influencing Caucasus and the neighbouring regions. In the
regional exchange Tbilisi tries to become the central point of:
• economic life with advanced services where the most competitive business of the
region operate from,
• political life with the head offices of international organisations and donor
organisations operating in the region,
• education and research that attract young people from the whole region,
• culture and sport with the most important sports and cultural events in the region,
• tourist industry with the largest number of visitors.
25

The list of Tbilisi competitors in the region includes the cities of Ukraine, Turkey, Russia,
Azerbaijan, Armenia and the countries of central Asia that aspire to the position of the
regional service centre.
Due to the political situation there are no cooperation links in the region and, therefore,
Tbilisi has no competition in Northern Caucasus as well as in the neighbouring parts of
Russia. Moreover, none of the Ukrainian cities attempts to play an active role in
Caucasus so there is no alternative for Tbilisi.
Despite dynamic economic exchange with Turkey, in its eastern part there are no strong
urban centres that could be able to compete with Tbilisi.
That leaves us with Baku and Erevan, the capital cities of Azerbaijan and Armenia as
Tbilisi’s natural and historical rivals. In Central Asia it is Kazakhstan with its strong
political and economic position that boasts the role of a regional leader. Its authorities,
businesses and organisations are very active and have achieved the position of an
important economic partner as well as the key investors in the region.
Kazakh cities, mainly Astana and Alma-Ata, are likely to become regional centres that
influence neighbouring countries and attract investors, events and people. Numerous
investments in Astana and the plans of further local development make the city a regional
leader. Also, the historical, institutional and demographic potential of Alma-Ata positions
this city as another significant competition in the region. The political, social and economic
situation in other countries of Central Asia results in the limited potential of other cities in
the region, so they cannot threaten the leading position of Tbilisi. Therefore, the cities
eventually included in the comparative analysis were Astana, Alma-Ata, Baku and
Erevan.
The City team and the consultants carried out the SWOT analysis of Tbilisi, relating its
position in the region to Astana, Alma-Ata, Baku and Erevan.
By means of the SWOT competitive assessment in the system of coordinates the X axis
(horizontal) the strengths and opportunities of Tbilisi were placed. Taking into
consideration the time factor and analysing the prospective changes that are likely to
happen in Tbilisi and in its rival cities the areas of threats and opportunities were placed
on the Y axis (vertical).
26

Chart 2-5 City of Tbilisi in the region SWOT analysis
TBILISI in the
region
OPPORTUNITIES
cost of doing
business
quality of
life
transport and
telecommunication
accessibility
institutional infrastructure
legal regulation a
skilled workforce
financing
technical infrastructure
economic structure
demographic
structure
city recognition
WEAKNESSES
STRENGTHS
networking
social
diversity
R&D
THREATS
27

While assessing the present condition of the elementary city competitiveness factors with
a view to its weak and strong points the team pointed out a particularly weak position of
the Research and development sector and the highly unattractive traditional structure of
local economy. The team found that the capacity to start cooperation links and networking
as well as the accessibility of funds are slightly more satisfying but still poor. Also, the
qualifications of workforce, technical and institutional infrastructure, transport accessibility,
social diversity and the quality of life need to be improved.
In most cases the prospects of improvement were observed. The best opportunities are
likely to be observed in the quality of life and the transport and telecommunications
accessibility. The areas facing the most significant threats are R&D, networking and the
groups threatened by social exclusion of those who do not participate in economic and
life.
The demographic situation was assessed on a medium level. As for strong points of the
city, legal regulations, state policies and the city recognition were ranked the highest.
Other strong points included the costs of doing business, which were most likely to
improve, and the institutional infrastructure. Further reforms will make it possible to
improve legal framework. Ambitious plans of other cities may threaten the recognition of
Tbilisi as the regional centre.
In conclusion, it was pointed out that public intervention is necessary to support the
development of R&D, networking, the city recognition, workforce skills, availability of
financial resources and technical infrastructure. With regard to the technical infrastructure
it seems necessary to expand space for business activities, i.e. to developed land for
industrial, logistic and office activities with full infrastructure for services. Special attention
was paid to meeting the requirements of start-ups, mainly to regulations that make
establishing a business cheaper and less time-consuming.
28

3. Identification of competitive advantages of Tbilisi economy
3.1. Identification of city products
The first part of the assessment includes a list of products, services and goods
offered by companies and institutions in Tbilisi. In order to estimate their attractiveness the
following criteria have been chosen that are the most significant in the present situation of
Tbilisi:
• Market growth potential
• Product growth potential
• Job creation potential
• Tbilisi specific advantages.
While selecting these criteria we mainly focused on:
Market growth potential: The likeliness of the market to grow has the impact on future
opportunities for product development, geographical expansion and securing sufficient
income to make the industry self-sustainable. Investments in rising markets are promising in
terms of future growth of employment rates and of the number of developing companies
cooperating with the industry.
Product growth potential: Growth potential is one of the most critical factors in product
analysis since high-growth industries tend to yield higher profits, more workplaces and higher
wages. This is why it should be carefully analyzed, taking into particular consideration its
future perspectives, crucial resources and international market assessment.
Job creation potential: Market’s capability of creating high levels of employment in
short to medium term.
Tbilisi specific advantages: Tbilisi’s competitive advantages allowing the product
market to develop and contribute back to the city’s growth.
Over twenty products were evaluated. The final opinion was based on the number of
points assigned to an individual product. The products that were least attractive according to
a given criterion received zero points, medium attractiveness was rewarded with one point
and the high one – with two points.
29

Table 3-1 City of Tbilisi products evaluation
Product
market
growth
potential
product
growth
potential
job
creation
potential
Tbilisi
unique
adventage
Score
Primary and secondary education 1 1 1 1 4
Higher education 1 1 1 2 5
Vocational trainings 1 1 1 0 3
Hospital and health care services 0 0 1 1 2
Public administration 0 0 0 0 0
Social services 1 1 1 0 3
Finacial services 1 1 1 1 4
Advisory and consulting 2 1 1 1 5
IT services 2 2 2 1 7
Media products and services 2 2 1 1 6
Design services 1 1 1 1 4
Telecomunication services 2 2 2 1 7
transportation and logistic 2 2 2 1 7
Retail trade 2 2 1 1 6
Wholesale trade 1 1 1 1 4
Storage and confection 1 1 1 1 4
Constructions 2 2 1 1 6
Industrial products 0
Mashinery and equipment 1 1 1 0 3
Cosmetics and pharmaceutics 2 1 1 0 4
Oil products 0 1 1 0 2
Textail, aparel and cloths 0 0 0 0 0
Aviation products 0 0 0 0 0
Timber products 1 1 0 0 2
Building materials 1 1 1 0 3
Conferences and trainings 2 2 2 1 7
Trade fairs and shows 1 1 1 1 4
Historical monuments and city
architecture 0 0 0 1 1
Hotels, motels and private
accommodation 1 1 2 1 5
Restaurants and clubs 2 2 2 2 8
Galleries, museums and theatres 1 1 1 2 5
Georgian music and dances 1 1 1 2 5
Cultural and sport events 1 1 1 2 5
Recreational tourism 2 2 2 2 8
Heritage tourism 2 2 2 2 8
Business tourism 2 2 2 1 7
Spa and wellness 2 2 1 0 5
Space for offices 2 2 2 1 7
Housing - flats, apartments and houses 2 2 2 1 7
Industrial estate 1 1 2 1 5
Georgian food 0 0 1 2 3
Georgian vine 1 1 1 2 5
Mineral waters 1 1 1 1 4
30

On the basis of this assessment the results of potentially promising clusters for
further evaluation were identified:
• Creative cluster
• Industrial cluster
• Financial cluster
• Education cluster
• Transport and logistic cluster
• Construction and real estate cluster
• Tourism cluster.
3.2. Identification of promising Tbilisi clusters
Clusters has become a new tool for developing local and regional economic
development strategies. City economies can grow around dynamic clusters which offer
firms the best external spillovers and synergies. City representatives need a tool that
would allow them to identify local promising clusters, that have growth potential, can
generate new work places and can be competitive at international markets. Analysis is
intended to help the city leaders to better allocate resources intended for city economic
development by focusing investment in local business activity toward growing clusters
and by convincing firms to locate in these clusters.
The methodology that was utilized for the identification of promising industrial clusters in
Tbilisi is based on the analysis of market attractiveness developed by McKinsey &
Company to improve the allocation of corporate funds toward investments in new
markets.
An aim of McKinsey & Co’s analysis is to assess the attractiveness of a market using a
multitude of indicators. In their opinion it better reflects the complexities of a sector and
allow to understand that market attractiveness is a function of several various
components. Indicators correspond to three major -categories that are descriptive of the
market:
• market potential;
• market structure;
• external environment.
Several sub-categories fall under each of these three. The market potential is assessed
by estimating the market size, market saturation, and the market growth rate. Market
structure is composed of suppliers, buyers, substitute products, and intensity of rivalry.
The external environment comprises of the general economic conditions, political
situation, technology, and societal factors.
Each sub-category is assessed using a set of quantitative or qualitative data using
attractiveness ranges. To final evaluation they weigh each sub-category score by its
relative percentage importance to market attractiveness. The weights to each subcategory
score are subjective, depending on their relative importance, but when summed
they must add to 100 percent. The weighted scores are then summed to give a final score
of market attractiveness that ranges from a least attractive score to most attractive score.
31

It is the advantage of this method that it:
• can assess several different factors and gives one common denominator
• is flexible and the assessed categories and subcategories can be changed
• weights can always reflect local conditions and interest of stakeholders
In addition, the methodology is flexible in that the categories can be changed depending
on the characteristics of the evaluated markets. For instance, the weights can be changed
to reflect the importance of different categories to various markets.
The evaluation of the city products has made it possible to identify and assess local
clusters. In the analytical process the following potential clusters have been identified:
• Financial 1.1
• Education 1.1
• Real estate 1.2
• Transport and logistics 1.2
• Industry 0.7
• Touristic 1.3
• Small and medium enterprises 1.2
The clusters have been assessed in three categories: of their market potential, market
structure and environment.
Financial cluster
Table 3-2 Financial cluster assessment of attractiveness
Indicators of Cluster
Attractiveness
Assessment of Attractiveness Weights
low (0) middle (1) high (2)
Score
I. Market Potential
45% 0.6
→ Market Potential X 15% 0.3
→ Output Growth X 10% 0.1
→ Average Wages and
employment X 20% 0.2
II. Market Structure
20% 0.25
→ Suppliers X 5% 0.1
→ Buyers X 5% 0.1
→ Substitute Products X 5% 0.1
→ Intensity of Rivalry X 5% 0
III. External Environment
35% 0.25
→Economic Conditions X 10% 0.1
→ Political situation X 5% 0.1
→ Technology X 5% 0.1
→ Societal Factors X 15% 0
IV. Total Score
100% 1.1
The financial cluster has a high market potential and a medium potential of products
currently offered in Tbilisi. It also demonstrates a medium rate of the job market increase
as well as a medium salary level. As for the market structure the financial cluster has an
advantage of the lack of substitutes and of an easy access to new technological and
organisational solutions. The environment means mainly the
32

application of new technologies. The political situation in the country as well as its
economic situation are moderately attractive. Social indices indicate low attractiveness for
the cluster’s services, which probably results from the general economic situation of both
local residents and businesses. The financial cluster has received a general mark of 1.1
(the maximum mark is 2.0), which means that the cluster’s attractiveness and its growth
perspectives slightly exceed the medium level. It should be noted, however, that the
cluster is going to develop more dynamically when the local economy and the local
residents’ economic situation grow.
Education cluster
Table 3-3 Education cluster assessment of attractiveness
Indicators of Cluster
Attractiveness
Assessment of Attractiveness Weights
low (0) middle (1) high (2)
Score
I. Market Potential
45% 0.5
→ Market Potential X 15% 0.3
→ Output Growth X 10% 0.2
→ Average Wages and
employment X 20% 0
II. Market Structure
20% 0.3
→ Suppliers X 5% 0.1
→ Buyers X 5% 0.1
→ Substitute Products X 5% 0.1
→ Intensity of Rivalry X 5% 0.1
III. External Environment
35% 0.5
→Economic Conditions X 10% 0.1
→ Political situation X 5% 0.1
→ Technology X 5% 0
→ Societal Factors X 15% 0.3
IV. Total Score
100% 1.3
The education cluster demonstrates high growth potential due to the increased demand
for re-training services for adults and young people’s educational needs. Because of the
economic conditions in which local educational organisations operate the existing
education product has a medium growth potential. Over-supply of teachers as well as
low salaries do not provide favourable conditions for higher benefits and more
employment in the sector. The sector market structure and its environment are highly
attractive due to many customers, the shortage of alternatives, the political situation and
social expectations. Low marks concerning the cluster’s attractiveness result from the
employment and salary growth parameters, insufficient use of new technologies as well
as from low productivity. The constructed corporate city development plans should
particularly focus on the education cluster. With its good didactic and training facilities, a
market oriented offer and highly qualified stuff the cluster will obviously become one of the
fastest growing segments of local market. Its potential will be even more important as a
support to one of the main factors of the city competitiveness, i.e. the skilled workforce
33

Real estate cluster.
Table 3-4 Real estate cluster assessment of attractiveness
Indicators of Cluster
Attractiveness
Assessment of Attractiveness Weights
low (0) middle (1) high (2)
Score
I. Market Potential
45% 0.7
→ Market Potential X 15% 0.3
→ Output Growth X 10% 0.2
→ Average Wages and
employment X 20% 0.2
II. Market Structure
20% 0.2
→ Suppliers X 5% 0.1
→ Buyers X 5% 0.1
→ Substitute Products X 5% 0.1
→ Intensity of Rivalry X 5% 0
III. External Environment
35% 0.3
→Economic Conditions X 10% 0
→ Political situation X 5% 0.1
→ Technology X 5% 0.1
→ Societal Factors X 15% 0.2
IV. Total Score
100% 1.2
The analysis of processes occurring on the real estate market requires long time series,
because their nature is related to long-term trade cycles. In case of Tbilisi is a difficult task
due to the economic transformation and political changes. Moreover, the reliability of data
collected in previous years is undermined by the discrepancies between the official and
market prices. The real estate and construction cluster in Tbilisi is characterised by high
dynamics of the market potential and high potential of product growth. The parameters
that apparently diminish its attractiveness include strong competition and people’s low
economic potential. It is obvious that an important element of the cluster growth is the
programme aiming at keeping systematic record of available land, which will allow the city
to build a land market. The economic development is going to stimulate the real estate
market both in the housing construction sector and in office, storage and industrial
construction sector. Also the demand for new operating areas for trade companies is
going to grow.
34

Transportation cluster.
Table 3-5 Transportation cluster assessment of attractiveness
Indicators of Cluster
Attractiveness
Assessment of Attractiveness Weights
low (0) middle (1) high (2)
Score
I. Market Potential
45% 0.6
→ Market Potential X 15% 0.3
→ Output Growth X 10% 0.1
→ Average Wages and
employment X 20% 0.2
II. Market Structure
20% 0.1
→ Suppliers X 5% 0.1
→ Buyers X 5% 0.1
→ Substitute Products X 5% 0
→ Intensity of Rivalry X 5% 0
III. External
Environment 35% 0.5
→Economic Conditions X 10% 0
→ Political situation X 5% 0.1
→ Technology X 5% 0.1
→ Societal Factors X 15% 0.3
IV. Total Score
100% 1.2
The attractiveness of the cluster related to transport and logistics companies results
mainly from the geographical location of Tbilisi where main Georgian and international
transport routes meet.
The globalisation of manufacturing and the related supply chains increase the demand for
transport services. Logistics is getting increasingly important not only in Georgia itself, but
also as a part of international economic relations. When assessing the attractiveness of
the cluster the high marks have been given to the development potential and the products
(services) growth potential. The general mark of 1.2 places the cluster slightly below the
average, but the worldwide trends indicate that this cluster will develop dynamically in the
future.
The growth of commodity transportation logistics is first of all related to the economic
activity and is defined as the industry task. Main areas of the city intervention include
mainly giving access to developed land, promoting innovation and workforce training
35

Industry cluster.
Table 3-6 Industry cluster assessment of attractiveness
Indicators of Cluster
Attractiveness
Assessment of Attractiveness Weights
low (0) middle (1) high (2)
Score
I. Market Potential
45% 0.3
→ Market Potential X 15% 0
→ Output Growth X 10% 0.1
→ Average Wages and
employment X 20% 0.2
II. Market Structure
20% 0
→ Suppliers X 5% 0
→ Buyers X 5% 0
→ Substitute Products X 5% 0
→ Intensity of Rivalry X 5% 0
III. External Environment
35% 0.4
→Economic Conditions X 10% 0
→ Political situation X 5% 0.1
→ Technology X 5% 0
→ Societal Factors X 15% 0.3
IV. Total Score
100% 0.7
The industry cluster has been marked as the least attractive. The old system left
businesses closely dependent on the Russian markets and carrying the burden of high
fixed costs. Consequently most of traditional industry companies closed down. Because
of growing productivity, that has resulted from the use of new technologies, and stronger
competition mainly of Asiatic countries the industrial sector is not very attractive. Apart
form highly rated political situation and social indices the other attractiveness parameters
of the cluster demonstrate low values. Therefore, it has been assessed well below the
average. The revitalisation of buildings and warehouses that used to belong to closeddown
production plants should become one of the priorities while creating the economic
development plan for Tbilisi. Also the workers who have been made redundant should be
re-trained and instructed how to find new jobs.
36

Creative cluster
Table 3-7 Creative cluster assessment of attractiveness
Indicators of Cluster
Attractiveness
Assessment of Attractiveness Weights Score
low (0) middle (1) high (2)
I. Market Potential
45% 0.7
→ Market Potential X 15% 0.3
→ Output Growth X 10% 0.2
→ Average Wages and
employment X 20% 0.2
II. Market Structure
€ 20% 0.2
→ Suppliers X 5% 0.1
→ Buyers X 5% 0.1
→ Substitute Products X 5% 0.1
→ Intensity of Rivalry X 5% 0
III. External
Environment 35% 0.3
→Economic Conditions X 10% 0.1
→ Political situation X 5% 0.1
→ Technology X 5% 0.1
→ Societal Factors X 15% 0
IV. Total Score
100% 1.2
The support for the development of small and medium businesses entering new sectors
of new economy and using latest organisational and technological solutions should be a
key element of Tbilisi economic development strategy. The cluster has been marked 1.2,
which means that its attractiveness is above the average. It is its market growth potential
and the potential of created products that should be assessed particularly high. In the
situation when the traditional sectors of economy have collapsed as a result of economic
and political transformation, small and medium enterprises generate the largest number
of jobs. It is SMEs that fuel local economy and implement innovative solutions. Thanks to
the city’s support for projects dealing with microcredits, credit security funds,
entrepreneurship incubators, technology parks, promotion of local business, etc. the
cluster is likely to grow the fastest and, consequently, to create new jobs. The cooperation
of local authorities and the local business can contribute to improving not only the city
economic parameters but also the local quality of life and the standards of offered
services. In the longer perspective the companies in this sector are going to generate
larger and larger share of the added value and attract more and more external capital that
will finance new investments.
37

Touristic cluster
Table 3-8 Touristic cluster assessment of attractiveness
Indicators of Cluster
Attractiveness
Assessment of Attractiveness Weights
low (0) middle (1) high (2)
Score
I. Market Potential
45% 0.5
→ Market Potential X 15% 0.3
→ Output Growth X 10% 0.2
→ Average Wages and
employment X 20% 0
II. Market Structure
20% 0.2
→ Suppliers X 5% 0.1
→ Buyers X 5% 0.1
→ Substitute Products X 5% 0.1
→ Intensity of Rivalry X 5% 0
III. External Environment
35% 0.7
→Economic Conditions X 10% 0.2
→ Political situation X 5% 0.1
→ Technology X 5% 0.1
→ Societal Factors X 15% 0.3
IV. Total Score
100% 1.3
The touristic cluster has received the highest mark of all the identified potential clusters.
Its attractiveness results from the high market potential, the high potential of products
(services) growth as well as of the high quality of its environment. Thanks to its cultural,
architectural, social and historical values the touristic cluster is likely to make the city
attractive to both occasional visitors and organised groups. The large number of financial
institutions, international business corporations and support organisations operating in
Tbilisi is a good basis for creating a wide range of offers for business tourism. Thanks to
the stable political and economic situation a growing number of visitors are interested in
Tbilisi, as well as in Georgia. Tourist potential includes the historic buildings, local culture
and cuisine as well as local landscapes and nature. Also in this case the city should
initiate and support projects helping local tourist industry who are aiming at building an
integrated system of tourist information and a complex offer addressed to various types of
tourism. The integration of the environment institutions can have a positive effect on the
quality of the tourist offer
38

`

TABLE OF CONTENTS
1. Economies in transition - development trends of emerging markets.................................................. 4
1.1. The analysis of trends for key industries of Tbilisi economy. ................................................................. 6
2. Challenges and obstacles of Tbilisi new economy development.......................................................23
2.1. Development opportunities of Tbilisi new economy .............................................................................23
2.2. Identification of development barrieries.................................................................................................25
2.2.1. Creative cluster survey results .......................................................................................................25
2.2.2. Tourism cluster survey results........................................................................................................31
3. Attracting Tbilisi to investors ....................................................................................................................36
3.1. Tbilisi territorial development according to the basic historical stages.................................................36
3.2. Tbilisi territorial structure.........................................................................................................................37
3.3. New trends of Tbilisi city functional-spatial development under new social-economic
conditions ................................................................................................................................................38
3.4. Allocation of new development projects ................................................................................................41
4. Tbilisi alternative development strategies ..............................................................................................45
5. How Tbilisi can support new economy development ...........................................................................53

CHARTS
TABLES

In the second half of the 20th century the economy of Tbilisi was based on
industrial plants producing for the demand of the Soviet Union market.
Cooperation links, legal regulations, transport infrastructure and business
environment were oriented at satisfying the needs of this type of economy,
therefore the change of production profile of entering new markets were
hardly possible.
After the collapse of the Soviet Union and, consequently, of the centrally
managed economy many manufacturing firms in Tbilisi lost their markets and
either closed down or reduced their employment and production. The system
reform, introduction of market economy and opening to new markets resulted
in a thorough transformation of Tbilisi economy.
Although some positive effects can be observed, the transformation process
is long and generates serious social problems and costs. In order to
understand the ongoing changes, we cannot view the problem as merely a
systematic one. The economy of Tbilisi is also influenced by other economic
transformation factors that do not happen only in the post-communist
countries, but are observed all over the world. These factors are:
• globalisation and increasingly free flow of knowledge and ideas,
capital, products and services as well as people among the regions
and cities of the world,
• the use of new technology by businesses, state and local
governments as well as by ordinary people,
• cultural changes in the family model and life aspirations of the young
generation.
Due to the overlapping effects of regained independence and system
transformation on the other three universal processes both Georgia and Tbilisi
are facing a great challenge.
Public officials as well as entrepreneurs and ordinary residents of Tbilisi must
understand the ongoing changes and their implications in order to take a
maximum advantage of new opportunities. They have to reduce the social
costs to minimum and concentrate their resources in the areas where the
perspectives of growth are the most promising.

In order to strengthen the foundations of Georgia’s and Tbilisi’s new economic
position and to maximise the effects of the transformation system, it is vital to
introduce the following changes and reforms:
1. The deep reform of Georgian economy resulted in the fact that
environment regulators can facilitate establishing and running business on
the terms equal to those in the developed countries with market economy.
2. Building new transport and telecommunication infrastructures, that will
connect Georgia with the partners in the region and in the world, will make
it possible to export and import goods and services.
3. The reform of the education system and introducing the culture of life long
learning to instruct skilled workforce according to the standards of the
global job market.
4. Investments in technical infrastructure and the city revitalisation make
Tbilisi an attractive place to live and do business.
Phases of the city economy transformation process
Transformation of an industrial town into a postindustrial city is a long-lasting
and complex process. The examples of cities that have already undergone
this process offer experience that is worth using when working on Tbilisi
economic development plan.
In the process of transformation three phases can be distinguished:
• crisis of a traditional industrial town,
• attracting foreign investors to the city,
• inward development based on unique identity and own resources.
The phases can overlap and their duration cannot be determined in advance.
The intensity and directions of changes depend on the local actors, their
cooperation and capability to implement plans.
The first phase include:
• a substantial amount of workforce is made redundant in industry
sector,
• entrepreneurs set up service and trading companies that do not
require much capital,
• deprivation of industrial districts,
• deprivation of housing districts with low skilled communities,
• development of informal sector,
• education sector have no clear perspectives and teaching standards
in new professions.
Finding foreign investors make it possible to introduce to the economy the
elements that in the first phase are available locally, such as:
• capital,
• new technologies in production and management,
• new standards of employees’ recruitment,
• new cooperation links with other national economies,
• new products that are competitive on global markets.

It is hard to overestimate those benefits for the city economy that are
generated by foreign investors, but we should not forget that the reasons why
those firm invest in our cit must be thoroughly analysed. It will help us to take
maximum advantage of these investments and prevent disappointment if our
expectations are unrealistic.
Foreign firms invest in order to:
• lower the production costs,
• increase the value of the invested capital,
• enter new markets,
• gain access to resources that are out of reach where they have been
operating so far.
In a longer perspective these companies transfer their business activity to new
locations that provide them with better business environment.
For a long-term competitiveness of the city economy the third phase is of key
importance. It is based on endogenic potentials and the city identity.
The development of local businesses also leads to new quality of cooperation
with foreign investors who invest their capital not only to benefit from the
consumption potential of the local market and from lower production costs,
but are also interested in finding new partners who will give them access to
better solutions. It means that financial relations change too – the investor not
only bears the costs of their business activity, but also shares their profits with
a local partner.
In order to prepare guidelines on o available economic activities it was
necessary to analyze thoroughly the industries of the strongest development
potential in the city of Tbilisi.
The Competitiveness Assessment report analyzed the role of Tbilisi economy
in the national economy as well as the city’s competitive position among other
cities in Georgia and in the region of Caucasus and Central Asia. Thanks to
the application of proposed indicators, the SWOT analysis of competitiveness
assessment both on the regional and the national level as well as due to the
results of the City team’s and outside partners’ work, a further and deeper
analysis was possible of these sectors which demonstrate a high growth
dynamics and can create new jobs.
- Tourist sector - hotel business mainly
- Construction
- Enterprises of trade, repair of vehicles, personal & household goods
- Industry
- Banking
The competitiveness assessment report described the importance and links
among the key clusters as well as their role in seeking opportunities for the
future local economy. Guidelines on available economic activities are based
on the analysis of these of the industries that demonstrate the highest growth
of economic parameters and create the most significant number of jobs.
Therefore, the Guidelines recommend certain measures to be taken in order
to take the best advantage of the opportunities identified for Tbilisi.
When analyzing the clusters a common methodology was adopted which had
been developed by the City team and the outside partners during their work
on the Tbilisi Competitiveness assessment. The analysis covers the period of
2000- 2006 and compares the situation of individual industries in Tbilisi with

the rest of the country. In each of the industries the following parameters were
studied: turnover, employment, salaries, the relation of the salaries to the ones
in the whole business sector and the relation between the turnover and the
employment in the examined years.
Value of turnover in mln GEL
80
60
40
20
Hotels turnover in regions in mln GEL in 2006
63,6
100%
80%
60%
40%
Percent
Over 80% of revenue in
the hotel industry is
generated in Tbilisi. Two
out of other regions of
Georgia, i.e. Adjara and
Mtsheta generate app.
10% of the turnover. The
last 10% are generated
by the remaining
regions.
20%
0
7,5
3,4
Tbilisi Adjara Mtsheta
Mtianeti
0,7 0,4 0,1 0,1
Guria Imereti Kakheti Racha
Lekhumi
0%
4 000
3 000
Hotels employment in regions in 2006
100%
80%
Also, the employment in
the hotel industry is the
highest in Tbilisi, but
Adjar and Mtshet are
catching up.
Employment
2 000
60%
40%
Percent
1 000
1 668
20%
1 053
0
Tbilisi
Adjara
295 264
142
60 55 40 30 29 28
0%
Mtsheta Mtianeti
Samtshe Javaketi
Samegrelo Zemo
Racha Lekhumi
Shida Kartli
Imereti
Guria
Kakheti
Kvemo Kartli

Georgia turnover in hotels in mln GEL
90,00
80,00
70,00
60,00
50,00
40,00
30,00
Turnover in hotels in Georgia and Tbilisi
2006
2005
2004
2003
2002
YEARS
2001
2002
2003
2004
2005
2006
In 2001-2006 a
regular increase of
hotel industry
turnover was
observed both in
Tbilisi and in the
whole Georgia. In the
years of 2005 and
2006 the turnover
values doubled in
comparison to 2004
20,00
2001
0,00 20,00 40,00 60,00 80,00
Tbilisi turnover in hotels in mln GEL
Tbilisi turnover in hotels in mln GEL
80,00
60,00
40,00
20,00
Turnover vs employment in hotels in
Tbilisi
2003
2001
2002
2004
2005
2006
YEARS
2001
2002
2003
2004
2005
2006
Simultaneously to the
2001-2006 turnover
leap Tbilisi hotel
industry saw the
increase in
employment. 2003
was the only year
when employment
levels fell below 2001
values despite
growing turnover
0,00
1000 1100 1200 1300 1400 1500 1600 1700
Tbilisi employment in hotels

Earnings in Tbilisi in business sector in GEL
400
380
360
340
320
300
280
260
240
220
200
180
160
140
120
Earnings in business and tourism sector
2006
2005
2004
2003
2002
2001
YEARS
2001
2002
2003
2004
2005
2006
In comparison to the
private sector the
earnings in the tourist
sector were growing
at a slower rate and
in the years of 2004-
2005 a even a certain
decrease could be
observed.
Nevertheless, when
compared with 2001
the salaries in the
tourist sector almost
doubled, while in the
private sector they
more than tripled
100
100 120 140 160 180 200 220
Avarage earnings in turist sector in Georgia
in GEL
100 000
80 000
60 000
40 000
Comparative analysis of turnover (Y axis - in
mln GEL) and employment in hotels ( X axis)
in Georgia and Tbilisi
2003
2004
2005
2006
2003
2004
2005
2006
Georgia turnover
in hotels total
Georgia
employment in
hotels total
Tbilisi turnover in
hotels
Tbilisi employment
in hotels
The high rate at
which turnover and
employment grew in
the hotel industry was
seen both in Tbilisi
and throughout
Georgia. The
increase of these two
parameters was
determined first of all
by a significant
growth dynamics in
Tbilisi itself.
20 000
2001
2002
2001
2002
0
1 000 1 500 2 000 2 500 3 000 3 500 4 000

Value of turnover in mln GEL
1 200
1 000
800
600
400
Construction turnover in regions in 2006
760
100%
80%
60%
40%
Percent
In 2006 Tbilisi saw
the highest values in
Georgia of both the
turnover and the
employment in
construction industry
200
20%
0
80
Tbilisi
Adjara
44 42 37 35 21 18 16 6 4
0%
Imereti
Guria
Shida Kartli
Samtshe Javaketi
Samegrelo Zemo
Mtshketa Mtianeti
Racha Lekhumi
Kvemo Kartli
Kakheti turn
Employment
50 000
40 000
30 000
20 000
Construction employment in regions in 2006
100%
75%
50%
Percent
The construction
industry in Tbilisi
generated almost
80% of total turnover
and employed about
60% of all the
construction workers.
10 000
23 513
25%
0
Kvemo Kartli
Shida Kartli
Tbilisi
3 553 3 215 2 617 1 852 1 624 1 322 1 121 682 484 359
Adjara
Imereti
Kakheti
Guria
Samegrelo Zemo
Mtshketa Mtianeti
Samtshe Javaketi
0%
Racha Lekhumi

Construction turnover in Georgia in mln GEL
1200
1000
800
600
400
Turnover in construction sector in
Georgia and Tbilisi
2002
2003
2004
2005
2006
YEARS
2001
2002
2003
2004
2005
2006
After the period of
2000-2004 when the
construction industry
grew slowly, the
years of 2005-2006
brought a dynamic
growth of turnover. .
2001
200
100 200 300 400 500 600 700 800
Construction turnover in Tbilisi in mln GEL
Construction turnover in Tbilisi in mln GEL
800
700
600
500
400
300
200
Turnover vs employment in
construction sector in Tbilisi
2002
2003 2001
2004
2006
2005
YEARS
2001
2002
2003
2004
2005
2006
Also the employment
in constructions
increased
significantly in 2005.
Unfortunately,
despite the rise in
turnover in the
following year the
employment
practically stayed at
the same level
100
8000 10000 12000 14000 16000 18000 20000 22000
Construction employment in Tbilisi

Construction turnover in Tbilisi in mln GEL
800
700
600
500
400
300
200
Turnover vs earnings in construction
sector in Tbilisi
2001
2002 2003
2004
2005
2006
YEARS
2001
2002
2003
2004
2005
2006
Along the increase in
employment the
earnings in the
construction industry
were growing as
well. A significant
rise in salaries was
observed in 2005-
2006.
100
100 200 300 400 500
Earnings in construction sector in Tbilisi in
GEL
Earnings in business sector in Tbilisi in GEL
400
350
300
250
200
150
Earnings in business sector vs earnings in
construction sector in Tbilisi
2001 2002 2003
2004
2005
2006
YEARS
2001
2002
2003
2004
2005
2006
Also, if compared to
the salaries in the
whole private sector,
the earnings in the
construction industry
in Tbilisi were
growing
systematically in the
period of 2001-2006
with the most
considerable rise in
2006
100
100 200 300 400 500
Earnings in construction sector in Tbilisi in
GEL

1 000
800
600
400
Comparative analysis turnover (Y axis - in
mln GEL) and employment (X axis) in
Georgia and Tbilisi
2002
2006
2005
2004
2006
2005
Construction
turnover in Georgia
Construction
employment in
Georogia
Construction
turnover in Tbilisi
Construction
employment in Tbilisi
The rise in
turnover and
employment
could be
observed both in
Tbilisi and
throughout
Georgia. In the
last two years
both parameters
grew
considerably,
which indicates a
boom in the
construction
industry in
Georgia.
2003
2004
2001
200
2003
2002
2001
10000 20000 30000 40000

Value of turnover in mln GEL
6 000
5 000
4 000
3 000
2 000
Turnover in enterprises of trade, repair of
vehicles, personal & household goods in regions
in 2006
3 693
100%
80%
60%
40%
Percent
Also in the trade sector
Tbilisi has a leading
role in the regions of
Georgia. About 70% of
total turnover in the
trade sector are
generated in Tbilisi
1 000
20%
0
Shida Kartli
Guria turn
Tbilisi
422
Mtshketa Mtianeti
Samegrelo Zemo
Samtshe Javaketi
Racha Lekhumi
Adjara
272 194 192 146 92 86 38 22 5
0%
Imereti
Kakheti
Kvemo Kartlii
Employment
50 000
40 000
30 000
20 000
Employment in enterprises of trade, repair of
vehicles, personal & household goods in
regions in 2006
100%
80%
60%
40%
Percent
Approximately 50% of
people working in the
trade sector are
employed in Tbilisi. The
fact that the employment
in other parts of Georgia
is rather high in relation
to the declared income
means that a lot of
people in Georgia deal
with trade to satisfy their
elementary needs
10 000
24 310
20%
0
6 378 4 714 3 647 2 880 2 777 1 707 1 168 882 728 362
0%
Kvemo Kartli
Shida Kartli
Guria_empl
Adjara
Imereti
Tbilisi
Kakheti
Samegrelo Zemo
Samtshe Javaketi
Racha Lekhumi
Mtshketa Mtianeti

Trade turnover in Georgia in mln GEL
5000,0
4000,0
3000,0
2000,0
Turnover in enterprises of trade, repair
of vehicles, personal & household goods
in Georgia and Tbilisi
2003
2004
2005
2006
YEARS
2001
2002
2003
2004
2005
2006
The turnover in the trade
sector is growing
dynamically both in
Tbilisi and in the rest of
Georgia. It has been
particularly apparent in
the last three years
2002
2001
1000,0
1000,0 2000,0 3000,0 4000,0
Trade turnover in Tbilisi in mln GEL
Trade turnover in Tbillisi in mln GEL
4000,0
3000,0
2000,0
Turnover vs employment in enterprises of
trade, repair of vehicles, personal &
household goods in Tbilisi
2006
2003
2004
2005
YEARS
2001
2002
2003
2004
2005
2006
When comparing the
dynamics of the revenue
and employment growth
in the last six years it is
obvious that these two
parameters were
interrelated until 2005. In
2006, despite further rise
in turnover, the
employment fell.
1000,0
2002
2001
15000 20000 25000 30000 35000
Trade employment in Tbilisi

Trade turnover in Tbillisi in mln GEL
4000,0
3000,0
2000,0
1000,0
Turnover vs monthly earnings in
enterprises of trade, repair of vehicles,
personal & household goods in Tbilisi
2003
2002
2004
2005
2006
YEARS
2001
2002
2003
2004
2005
2006
A different situation can
be observed when
comparing the dynamics
of turnover growth in the
trade sector with rising
salaries in the private
sector. In this case a
dynamic increase of
turnover and earnings in
the last two years could
be seen
2001
50,00 100,00 150,00 200,00 250,00 300,00 350,00
Earnings in trade sector in Tbilisi in GEL
Earnings in business sector in Tbilisi in GEL
400,00
350,00
300,00
250,00
200,00
150,00
Earnings in business sector vs earnings
in enterprises of trade, repair of vehicles,
personal & household goods in Tbilisi
2003
2002
2001
2004
2005
2006
YEARS
2001
2002
2003
2004
2005
2006
Salaries in the private
sector of Tbilisi have
been growing
dynamically and so have
the salaries in the trade
sector. Both parameters
grew significantly
throughout the last year
100,00
50,00 100,00 150,00 200,00 250,00 300,00 350,00
Earnings in trade sector in Tbilisi in GEL

6000,0
5000,0
4000,0
3000,0
2000,0
Comparative analysis turnover (X axis - in
mln GEL) and employment (Y axis) in
Georgia and Tbilisi in in enterprises of
trade, repair of vehicles, personal &
2006
household goods
2006
2003
2004
2005
2002
2001
2003
2004
2005
Trade turnover in
Georgia
Trade employment
in Georogia
Trade turnover in
Tbilisi
Trade employment
in Tbilisi
On the collective
chart presenting the
rate of the turnover
and employment
growth in Tbilisi and
in Georgia a
significant reduction
of employment in
2006 can be seen,
despite the rise in
the turnover values.
This trend is present
not only in Tbilisi but
also in the whole
Georgian trade
sector
1000,0
2002
2001
0,0
10000 20000 30000 40000 50000 60000

Value of turnover in mln GEL
4 000
3 000
2 000
1 000
Industry turnover in regions in 2006
1 409
100%
75%
50%
25%
Percent
In the industry sector
Tbilisi has a leading role
in the regions of
Georgia.
Over 40% of revenue in
the industry is generated
in Tbilisi. One out of
other regions of
Georgia, i.e. Kvemo
Kartli generate app.
Over 20% of the
turnover. The last 40%
are generated by the
remaining regions.
785
0
276 237
104 99 82 73 64 36 29 13
Shida Kartli
Samegrelo Zemo
Samtshe Javaketi
Mtshketa Mtianeti
Tbilisi
Imereti
Kakheti
Adjara
Abkhazja
0%
Racha Lekhumi
Guria
Kvemo Kartli
Employment
100 000
80 000
60 000
40 000
Industry employment in regions in 2006
100%
80%
60%
Percent
The employment in the
industry is the highest in
Tbilisi, and generates
over 40% of industry
employment in Georgia.
Other leading in
employment regions are
Imereti and Kvemo Kartli
and generates no more
than 20% each.
40%
20 000
35 137
20%
0
Kvemo Kartli
Shida Kartli
Abkhazja
Samtshe Javaketi
Mtshketa Mtianeti
Samegrelo Zemo
Tbilisi
13 999 10 763
5 630 4 813 4 543 3 042 1 892 1 821 1 215 880 497
Imereti
Adjara
0%
Kakheti
Guria
Racha Lekhumi

Industry turnover in Georgia in mln GEL
3000,0
2500,0
2000,0
1500,0
Turnover in industry sector in Georgia
and Tbilisi
2002
2003
2004
2005
2006
YEARS
2001
2002
2003
2004
2005
2006
In 2001-2006 a regular
increase of industry
turnover was observed
both in Tbilisi and in the
whole Georgia. In the
years of 2005 and 2006
the turnover values
doubled in comparison
to 2003.
2001
0,0 300,0 600,0 900,0 1200,0 1500,0
Industry turnover in Tbilisi in mln GEL
Industry turnover in Tbilisi in mln GEL
1500,0
1200,0
900,0
600,0
300,0
Turnover vs employment in industry
sector in Tbilisi
2003
2002
2004
2001
2005
2006
YEARS
2001
2002
2003
2004
2005
2006
When comparing the
dynamics of the revenue
and employment growth
in the last six years
despite further rise in
turnover,
the
employment fell from
2001-2003.
Simultaneously to the
2001-2006 turnover leap
Tbilisi industry saw the
increase in employment
in years 2003-2006.
2003 was the last year
when employment levels
fell values despite
growing turnover.
0,0
26000 28000 30000 32000 34000 36000
Industry employment in Tbilisi

Industry turnover in Tbilisi in mln GEL
1500,0
1200,0
900,0
600,0
300,0
Turnover vs earnings in industry sector
in Tbilisi
2001
2002
2003
2004
2005
2006
YEARS
2001
2002
2003
2004
2005
2006
A different situation can
be observed when
comparing the dynamics
of turnover growth of
turnover in the industry
sector with rising
salaries. In this case a
dynamic increase of
turnover and earnings
could be seen.
0,0
100 150 200 250 300 350 400
Earnings in industry sector in Tbilisi in
GEL
Earnings in business sector in Georgia in GEL
350
300
250
200
150
Earnings in business sector vs earnings in
2001
2002
2003
2004
2005
YEARS
2001
2002
2003
2004
2005
2006
industry sector in Tbilisi When compared with
2001 the salaries in the
industry sector and
2006
private sector they more
than
tripled
simultaneously. Both
parameters grew
significantly throughout
the last year.
In comparison to the
private sector the
earnings in the industry
sector were growing at a
faster rate.
100
100 150 200 250 300 350 400
Earnings in industry sector in Tbilisi in GEL

3000,0
2000,0
1000,0
Comparative analysis turnover (Y aixs - in
mln GEL) and employment (X axis) in
Georgia and Tbilisi
2004
20032002
2005
2001
2006
2006
2003
2004
2002
2001
2005
Industry turnover
in Georgia
Industry
employment in
Georogia
Industry turnover
in Tbilisi
Industry
employment in
Tbilisi
On the collective chart
presenting the rate of
the turnover and
employment growth
the rise in turnover
and employment could
be observed both in
Tbilisi and throughout
Georgia. In the last
two years both
parameters grew. In
Georgia a significant
reduction of
employment in 2006
can be seen but not in
Tbilisi despite the rise
in the turnover values
in Tbilisi and Georgia
in years 2001-2006.
0,0
20000 40000 60000 80000 100000
Conclusions
A thorough analysis of the tourist, construction, industry and trade clusters
gives a clear picture of the situation and the processes that are taking place in
the local economy of Tbilisi. The importance of the examined clusters can
demonstrated by means of the following conclusions:
- the examined clusters generate locally almost 80% of the national turnover
in these clusters;
- the employment in the examined clusters accounts for 50% - 80% of the
total employment in Georgia;
- a significant rise in the turnover volume (it almost doubled both nationally
and in Tbilisi) is a common tendency for all the clusters, particularly in the
observed period of 2004-2006;
- due to the dynamic growth of the examined markets a change in the
employment took place in each of them in the period of 2004-2006. The
number of the jobs in the construction cluster almost doubled (not in the last
year, though). After the period of falling figures since 2004 the industry cluster
has been providing 10% more jobs annually and it is a cluster that generates
the highest employment among the examined markets. Also the employment
in the hotel industry has been growing since 2003 at a rate of 10% per year.
The market of trade, repair of vehicles, personal and household goods, after a
period of 2001 – 2005 when the employment was growing, has reduced its
workforce below 25 000 people, i.e. to the level similar to 2003;
- In each of the examined clusters the steady rise in salaries has been
observed. The best paid jobs are in the construction cluster. The average pay
in this cluster is 30% higher than in the whole Tbilisi business sector and its

salaries rose the most in the last examined years, i.e. 2005-2006. Another
cluster where the salaries are higher than the business cluster average is the
industry cluster where the significant rise in salaries – by about 50% - took
place last year. The lowest salaries, not exceeding 220 GEL, were earned in
the tourist cluster, although they did rise by 30% in the last examined year.
Also, the pay level offered on this market in the three last examined years
(2004-2006) was 30% lower than the salaries in the whole business cluster.
The salaries in the trade, repair of vehicles, personal and household goods
cluster grew considerably in the last examined year (2005-2006) and are
comparable with the mean salary levels in the whole business sector. In the
previous years the salaries rose gradually, but no more than by 10% yearly.
- The comparative analysis of the turnover and employment in 2001-2006 in
Tbilisi and Georgia demonstrates a strong correlation between the processes
taking place on the examined markets in the Georgian national economy and
in the economy of Tbilisi. The tendencies observed in Tbilisi have their
reflection in the tendencies happening nationally, which is due mainly to the
fact that Tbilisi economy in the area of the examined clusters accounts for
over 50% of the national turnover and employment.
The sector of strategic importance for the city economy is the banking sector.
Although, when compared to other analysed industries, it does not generate
many jobs, but it employs staff that is better qualified and better paid than
other business sector employees. This is why a descriptive analysis of the
banking sector in Georgia and Tbilisi has been carried out as well. In 1994 a
reform of banking sector, introduction of a two-tier banking system (National
Bank of Georgia and the commercial banks). 18 banks functioning in Georgia
(March 2007), 13 of them are foreign controlled. Commercial bank’s total
assets comprise 31% of GDP and liabilities comprise 24%. The perspectives
of Georgia becoming the financial centre for the region are high but there are
also significant challenges:
Opportunities:
- Azerbaijan growth – many forms of banking and insurance are impossible to
introduce in the Arab countries. That is why investors from Muslim countries
tend to locate their money in Christian countries’ financial institutions. It is a
challenge for Georgia to attract capital from Muslim Azerbaijan which was the
world’s fastest growing economy in 2006 with GDP real growth rate amounted
to 32.5%.
- Attractive location – Georgia is located in the centre of the Caucasus,
bordering the Black Sea, between Turkey and Russia, there is no developed
financial centre in this area
- Professional support from western countries available – the example of
Dubai shows that a country which is developing a big financial centre can use
international help, especially in applying appropriate legal system and
introducing special conditions for investors
Challenges:
- International standards requirements: transport links, transparent regulatory
and legal systems, technological sophistication, a good quality of life for
expatriate bankers, liquid capital markets, etc
- Georgia still lacks internally adequate level of capital to finance large
projects. Most local banks are unable to finance multimillion dollar projects.
On the other hand, foreign banks are unfamiliar with their country and might
be reluctant or too expensive to finance local projects. Regional banking
would create a larger pool of capital to finance internal projects in Georgia.

It is of key importance for the city development to attract capital in the
following areas. In order to improve the conditions of business activity and the
quality of life it is most important to invest in technical infrastructure:
• transport infrastructure,
• telecommunication infrastructure,
• utilities.
In order to improve competitiveness of the economy the following investments
in institutional infrastructure are necessary:
• institutions facilitating access to funding,
• institutions of labour market and workforce development,
• institutions giving SME access to technical assistance (TA),
• networking and marketing organisations,
• know- how and technology transfer institutions,
• space for work with service provided.
To set up new firms and attract investors business space is necessary:
• offices,
• shops,
• warehouses,
• industrial units,
• hotels and restaurants,
• plots of land with infrastructure,
• houses and apartments.
The city can stimulate investment in these three areas in many ways. Some of
these investments belong to the private sector, others will remain public
investments. Part of the investments will be done by national investors, while
another part of the capital will come from international markets.
For the last twenty years we have been observing changes happening in the
cities of Central and East Europe which have abandoned centrally planned
economy and are joining global cooperation and competition. In the recent
years in Georgia strategic investments in technical infrastructure have been
done with both public and private money. Many international donors have
started programmes building institutional infrastructure for the new economy.
We can observe a boom on Tbilisi real estate market where, apart from
housing estates, new office and shopping space has been built. New hotels,
restaurants as well as factories and warehouses are being constructed as
well. Some of the old industrial buildings in the inner city after renovation have
been converted into moderate class offices and shops.

Progressing economic reform and further political stabilisation will help Tbilisi
go through the process of economic change, similar to the one experienced
by the cities of East Europe. Since Georgia has joined the global economy
and the skilled workforce resources in CEE have been running out, soon new
investors will get interested in Caucasus and Tbilisi.
Presently, Tbilisi sees processes typical for the second phase of economy
transformation described above. In the following years we will still witness
growing share of private investments in such areas as telecommunications,
transport, logistics, trade, hotels and restaurants, offices, light industries and
confection , media and entertainment.
Due to these investments the city economy will gain capital, new
organisational standards of production, management, staff skills as well as
new jobs and the awareness of international markets. Another direct benefit
for Tbilisi will be the increase of revenues from personal income tax (PIT), all
of which is the city budget revenue.
The mechanism of financing local government by the money coming from the
personal income tax makes the city more interested in participating in local
economic development.
New jobs, higher salaries, registering firms from the informal sector directly
affects the city budget. The share of 2003-2006 PIT revenue in this budget
proves how important it is for the city.
Year Total city budget revenues PIT
2006 466,9539 256,8945
2005 412,3000 189,7347
2004 328,744 159,357
2003 205,3 75,939
The table shows that two thirds of the city budget increase resulted from the
growth of Personal income Tax paid by its residents. It means that city
development strategies should be oriented for stimulation of high quality and
good paid work places. Situation in Central and Eastern Europe shows that
foreign investors and local companies are competing more and more for high
skilled workers with good work attitude. Of course business environment,
coast of running business and size of market, as well as provided
infrastructure is still important but skilled workforce became to be more and
more crucial factor.
Summarising long term strategy should be oriented on new sectors that will :
• create products and services that are competitive on global markets,
• generate locally high added value,
• create high quality jobs.

One of the elements of the process of writing the Local Development Plan for
Tbilisi was the survey of two groups of beneficiaries – tourist and innovation
companies. Such choice of the groups was determined by the outcomes of
analyses of Tbilisi potential clusters. As a result the consultants identified
seven potential clusters, out of which the tourism and creative clusters
received the highest marks. The aim of the survey was to examine the
barriers restricting the economic growth in the sectors (clusters) and identify
the way public partners can support development of both sectors.
As far as the employment volume in the surveyed companies is concerned
two groups dominate – the ones with up to employees – 34% and the firms
with 5-20 employees – 33 %. Companies employing 10-100 people account
for 18%, and 15% are the companies with 100 and more workers.
Employees in companies
15%
34%
18%
less than 5
5 to 20
20 to 100
100 and more
33%

Over one third of the firms declare annual income of 50,000-500,000 Lari.
29% are the firms with income of 5,000-50,000 Lari. 18% share in the market
have two groups of firms: the ones with income lower than 5,000 Lari and
over 500,000 Lari. Vast majority of businesses (67%) whose income exceeds
500,000 Lari are the companies employing over 100 workers.
Company incomes in 2006
70%
60%
50%
40%
30%
20%
10%
0%
less than 5
employees
5 to 20 employees
20 to 100
employees
100 and more
employees
Together
less than 5000 GEL 54% 0% 0% 0% 18%
5000-50000 GEL 31% 42% 14% 17% 29%
50000-500000 GEL 15% 58% 43% 17% 34%
More than 500000 GEL 0% 0% 43% 67% 18%
Most of the surveyed companies (60%) have existed on the market for over 3
years. 30% are the firms 1-3 years old. There are no companies who have
been operating on the market for over 10 years. New companies account for
4% of the examined population.
Most of the companies (92%) have permanent access to the Internet. 65% of
companies have declared that they have their web site.
When asked about their opinion about the industry they are operating in 44%
of companies reckon that their market will grow rapidly, 33% think that the
market will grow slowly, while 15% are of the opinion that it will remain stable.
Only 3% of companies predict that the market will be gradually shrinking. 5%
have no opinion in this matter. None of the companies think that the market
will decrease rapidly.
Half of the surveyed firms react to new opportunities emerging on the market,
20% of them have developed a formally adopted development plan for the
next three years and have already been implementing it, 25% do not have
any formal development plan document, but they have actually been
implementing it. Only 5% of the surveyed businesses operate without any
development plan for the next three years.

Companies opinion about their industry
70%
60%
50%
40%
30%
20%
10%
0%
less than 5
employee
5 to 20
employee
20 to 100
employee
100 and more
employee
Together
High grow th of market 43% 31% 57% 67% 45%
Slow grow th of market 43% 23% 29% 33% 33%
Market w ill be stable 7% 31% 14% 0% 15%
Slow decrease of market 0% 8% 0% 0% 3%
High decrease of market 0% 0% 0% 0% 0%
No opinion 7% 8% 0% 0% 5%
In case of 40% of companies high quality of products is an indicator of their
competitiveness on the market. Another factor is the high quality of services,
as it has been pointed out by 20% of businesses. Good brand is an important
competitiveness factor for 18% of firms, attractive price – for 10%. 5% of
businesses have no competition on the market, while 8% are not able to
define the competitiveness of their product or service on their market.
Competitiveness of the products
6
no opinion
5
high quality of service
4
3
price
high quality of products
2
1
lack of other
competitors on the
market
our products has good
reputation
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Great majority of firms (60%) intend to introduce next year new
products/services onto the market.

The surveyed companies claim that their main competitors are Tbilisi-based
(92% od firms), while the remaining 8% regard as rivals companies from other
parts of Georgia. The examined businesses do not recognise companies
operating in foreign countries as their competition.
35% of companies function on the market as a single entity, 25% cooperate
with a larger foreign company, 15% cooperate with a larger Georgian
company, while 25% cooperates with other similar firms based in Tbilisi.
When assessing their environment the companies most often point out difficult
access to investment and current spending funding. The companies express
a good opinion about the access to transport links, telecommunication, the
accessibility and quality of market services as well as about the access to high
quality office and production facilities and space. They are also satisfied with
the accessibility of new manufacturing technologies. 46% of them, however,
are critical about administrative regulations that do not support business
effectiveness. Almost 40% of companies indicated that the poor availability of
skilled workforce is also a serious obstacle for companies to grow.
Does the company have access to
funds for investments?
Does the company have access to
funds for current spending?
Is good quality office and
production space available?
Does the company have access to
new technologies in production?
Does the company have access to
new technologies in organization
and managing?
Is there an easy access to skilled
workforce?
Does the company have access to
technical support ?
Is it possible to cluster activities in
the market?
Do the clients and the market have
easy access to transportation links?
Is telecommunication system easily
accessible?
Are market services easily
accessible and of good quality?
Do legal and administrative
regulations support the
effectiveness of businesses?
Very good
access
conditions
Good
access
conditions
Problems
with
access
Serious
problems
with access
1% 9% 64% 26%
2% 16% 73% 8%
3% 47% 37% 13%
5% 43% 29% 22%
8% 34% 48% 9%
1% 23% 40% 36%
9% 28% 42% 22%
2% 38% 39% 20%
8% 48% 34% 9%
16% 58% 16% 11%
2% 42% 36% 20%
1% 25% 29% 46%

Last year almost half of the surveyed companies observed an over 20%
increase in sales and employment, while more than a half of them did not see
any changes in export, investments and new marketing areas.
Decrease
over 20%
Decrease
below 20%
No change
Increase
below 20%
Increase
over 20%
In sales 1% 6% 18% 27% 48%
In employment 1% 1% 31% 19% 48%
In revenues 1% 4% 17% 36% 42%
In export 1% 11% 53% 0% 34%
In investments 3% 5% 58% 21% 13%
In new marketing
areas 1% 2% 52% 24% 22%
In 2007 most of the companies declare increasing economic indicators,
particularly in new marketing areas, employment, incomes and sales.
Decrease
over 20%
Decrease
below 20%
No change
Increase
below 20%
Increase
over 20%
In sales 0% 4% 11% 22% 64%
In employment 0% 0% 23% 23% 54%
In revenues 1% 4% 11% 28% 57%
In export 1% 0% 39% 22% 38%
In investments 1% 2% 23% 35% 39%
In new marketing
areas 1% 1% 24% 17% 57%
86% of firms predicts strengthening their share in he market in the next two
years.
Moreover, the surveyed businesses pointed out the priority areas that require
improvement and support of public institutions. It turns out that the companies
first of all need: a guarantee fund (44 points in the ranking), vocational
training courses for employees (38 points), better access to office space with
service provided (28 points) and more training courses for managers (28
points). On the fifth position the companies have placed a microcredit fund (27
points).

Score
Establishing a guarantee fund 44
Training courses for employees 38
More office space with service (e.g. for new set-ups) 28
Managerial training courses 28
Establishing microcredit funds 27
Access to consulting services concerning new
products/services creation
13
Support in entering new markets and export areas 12
Support in implementing and applying new technologies 12
Promotion of companies abroad 11
Establishing a venture capital 8
Electronic platform for new set-ups with e-business software 4
Conclusions:
• The surveyed creative cluster companies are relatively young, but
having market experience, of very high growth dynamics in sales,
employment, export and finding new marketing areas.
• The companies remain competitive on the market mainly due to high
quality of their products or services, which may be a result of
cooperation with large foreign and domestic companies.
• As their main competitors the companies identify other Tbilisi-based
businesses. In a longer perspective they should take into
consideration growing business activity of foreign companies and start
preparing themselves for new competition by establishing an
economic cluster.
• The companies complain about the inaccessible investment and
operational funding as the barrier hindering their growth. Another
problem is a short supply of skilled workforce , which supports our
recommendation for developing the education cluster in order to offer
more training for line workers and managers.
• In the entrepreneurs’ opinion current legal regulations should be
modified so that local businesses could improve their effectiveness.
• As priority areas the companies have chosen: guarantee and
microcredit funds and vocational and managerial training packets.
• Although the companies are satisfied with the access to existing office
and production space, they point out, as another priority area, that it is
necessary to enlarge this space, especially for newly established
companies.

Most companies operating in the tourism cluster employ 5-20 people. In the
surveyed group no company employs over 100 workers.
Employees in companies
16% - 20 to 100
employee
15% - less than 5
employe
less than 5 employees
5 to 20 employees
20 to 100 employees
69% - 5 to 20
employee
Over half of the surveyed firms declares annual income of 5,000-50,000 Lari.
Two groups of companies account for 20% share of the market each – the
ones earning less than 5,000 Lari and 50,000-500,000 Lari. 8% of firms
declare over 500,000 of annual income. As far as th employment is
concerned, companies hiring less than 5 people declare income up to 50,000
Lari. In case of companies employing 20 to 100 workers their incomes is
evenly distributed into three groups.
Company incomes in 2006 in tourism sector
80%
70%
60%
50%
40%
30%
20%
10%
0%
less than 5
employees
5 to 20 employeeS
20 to 100
employees
Total
less than 5000 GEL 50% 13% 0% 20%
5000-50000 GEL 50% 56% 33% 52%
50000-500000 GEL 0% 25% 33% 20%
More than 500000 GEL 0% 6% 33% 8%

Tourist companies have substantial market experience. Only 10% of them are
younger than 3 years. Over the half of companies on this market have been in
business for 3-10 years. 18% of the businesses are more than 10 years old.
All the surveyed companies have a permanent access to the Internet and
most of them have their own web page. Yet, 8% of them do not have their
own web site.
Great majority of the tourist firms predicts their market will be growing. 65% of
them think it will be growing slowly, while 35% expects it to increase rapidly.
9% of the companies have no opinion about the development perspectives for
the tourism market in Tbilisi.
Opinion about perspectives of tourism sector
80%
70%
60%
50%
40%
30%
20%
10%
0%
less than 5 employees 5 to 20 employees 20 to 100 employees Together
High grow th of market 45% 28% 50% 35%
Slow grow th of market 45% 72% 50% 63%
Market w ill be stable 0% 0% 0% 0%
Slow decrease of market 0% 0% 0% 0%
High decrease of market 0% 0% 0% 0%
No opinion 9% 0% 0% 9%
36% of companies operate according to company development strategy they
have adopted. 26% follows the strategy but in an informalised way, while
33% simply react to the opportunities arising on the market. 5% of companies
have not developed any business strategy.
According to 63% of companies, competitiveness is mainly based on the
quality of offered products. Reputation and customer service are less
important for the company competitiveness.
Competitiveness of the products
5
high quality of
service
4
3
2
1
price
our products has
good reputation
lack of other
competitors on the
market
high quality of
products
0% 10% 20% 30% 40% 50% 60% 70%

Next year 82% of the surveyed companies intend to introduce a new product
or service on the market.
Most of the companies (94%) claim that their competitors are Tbilisi-based
firms. The remaining 6% sees their competition in other parts of Georgia or
abroad.
When evaluating the environment of the tourism market the companies
expressed their opinion that there was a good access to tourist offers in Tbilisi,
to cooperation with tourist market regulators and to modern information
technology. They indicated difficulties in accessing tourist infrastructure,
specialist health tourism offers and tourist information system. Another serious
problem hindering the industry development is, first of all, inefficient
transportation system followed by the quality of skilled workforce and the lack
of specialist offers dealing with training and education tourism as well as with
health tourism.
Very good
access
conditions
Good
access
conditions
Problems
with
access
Serious
problems
with access
Tbilisi tourist products offer 3% 74% 10% 13%
Tbilisi tourism marketing 3% 41% 38% 18%
Tourism information system 8% 38% 40% 15%
Access to Tbilisi from abroad 13% 38% 35% 15%
Inland country transportation 5% 46% 18% 31%
Transportation system 3% 47% 16% 34%
Sightseeing paths 3% 46% 28% 23%
Quality of accommodation
services 8% 42% 29% 21%
State of tourist infrastructure 3% 26% 44% 28%
Skilled workforce 10% 30% 30% 30%
Language skills of workforce and
community 10% 31% 36% 23%
Security problem 8% 46% 23% 23%
Calendar of events 8% 43% 35% 14%
Cooperation with domestic tourist
destinations 5% 53% 25% 18%
Specialized Tbilisi tourist product
offers - business tourism 5% 51% 32% 11%
Specialized Tbilisi tourist product
offers – education and training
tourism 5% 24% 39% 32%
Specialized Tbilisi tourist product
offers – spa and health tourism 5% 21% 44% 31%
Specialized Tbilisi tourist product
offers – youth tourism 5% 31% 38% 26%
Specialized Tbilisi tourist product
offers –heritage tourism 20% 43% 25% 13%
Access to IT technologies 8% 51% 28% 13%

Most of the surveyed firms did not observe any changes in last year’s
economic parameters. 37% of firms observed over 20% increase in sales,
25% - in employment and 33% - in income.
Decrease
over 20%
Decrease
below 20%
No change
Increase
below 20%
Increase
over 20%
In sales 3% 3% 31% 26% 37%
In employment 3% 0% 56% 17% 25%
In revenues 3% 3% 39% 22% 33%
In export 5% 5% 64% 14% 14%
In investments 4% 4% 63% 11% 19%
In new marketing
areas 3% 0% 77% 7% 13%
Great majority of the surveyed firms intends to improve their economic
outcome in 2007. 60% of companies are planning to increase their sales by
over 20%, half of them intends to increase employment, investments or
market share by over 20%. None of the companies expects their economic
parameters to fall this year.
Decrease
over 20%
Decrease
below 20%
No change
Increase
below 20%
Increase
over 20%
In sales 0% 0% 18% 23% 60%
In employment 0% 0% 28% 21% 51%
In revenues 0% 0% 20% 20% 60%
In export 0% 0% 35% 19% 46%
In investments 0% 0% 31% 13% 56%
In new marketing
areas 0% 0% 30% 18% 52%
The surveyed businesses pointed out the priority areas that required
improvement and support of public institutions. These areas include building
new sightseeing paths, access to Tbilisi from abroad, improvement of tourist
infrastructure and tourist information system.

Score
Sightseeing paths 27
Access to Tbilisi from abroad 26
State of tourist infrastructure 26
Tourism information system 25
Tbilisi tourist products 24
Tbilisi tourism marketing 22
Inland country transportation 14
Quality of accommodation services 14
Transportation system 13
Skilled workforce 10
Security problem 10
Specialized Tbilisi tourist product offers - education and training
tourism 4
Cooperation with domestic tourist destinations 3
Calendar of events 2
Specialized Tbilisi tourist product offers - spa and health tourism 2
Specialized Tbilisi tourist product offers - youth tourism 2
Access to IT technologies 2
Specialized Tbilisi tourist product offers - business tourism 1
Specialized Tbilisi tourist product offers - heritage tourism 1
Language skills of workforce and community 0
Conclusions:
• The tourism cluster companies have substantial market experience,
precisely defined development plans and employ 5-20 workers.
• They treat the Internet access and own web page as a working tool
and a way to present their business offer.
• The companies compete on the market mainly by means of high
quality products and services. Next year they are going to increase
their offer with new products and services.
• Their competition are first of all local businesses operating in Tbilisi in
the same industry. The companies are not afraid of the competition
from other parts of Georgia and from abroad.
• They consider a barrier for the industry development such areas as:
the quality of tourist infrastructure, the non-existent tourist information
system and the lack of specialist tourist offers (mainly the health
tourism offer).
• According to the surveyed firms, another serious problem for the
industry development is the transportation system in Tbilisi, the quality
of the skilled workforce and the lack of specialist offer for education
and training tourism as well as for health tourism.
• In the companies’ opinion the market will be systematically growing
and generating new jobs.
• As priority areas requiring intervention of public institutions the
surveyed companies pointed out the need to build sightseeing paths,
better access to Tbilisi from abroad, improved tourist infrastructure
and more effective tourist information system.

Contemporary territorial structure of Tbilisi was formed in the process of city
historical development as a result of internal and external factors impact. This
process consists of several emphatic chronological stages.
Feudal age (from recognition of Tbilisi as a capital city to the end of the XVIII
century). The city is developed on both embankments of the river Mtkvari, in
the limited territorial conditions – basically, within the city fence. In the end of
this period can be observed the trend of moving out of the fence in the mode
of external district.
Period of Russian empire (1801-1917) - The city self-defensive surrounding is
losing significance, Tbilisi first invades in higher Plato of the right embankment
of the river Mtkvari; on the left embankment German colony is established;
later occurs its and outskirt countries incorporation into Tbilisi administrative
boarders. The city acquires the trend of linear development, basically in the
upper direction of the river Mtkvari. Coexistence of ancient “Asian” and
modern “European” parts is formed like metaphoric description of “doubleface
Ianus”.
Short term existence of Georgian democratic republic (1918-1921) added
nothing to Tbilisi in terms of territorial development.
Soviet period (1921-1991) was marked with emphatic increase of capital
population and its territory. All parameters of the city development were
regulated by General plans; In the Soviet period, since 1934, 3 general plans
had been adopted; The calculating period of the last of which was accounted
till 2000. According to the general plan, residential massifs, industrial-storage
zones are created in the peripheries, social-cultural and storage-technical
infrastructure are developed; For the first time, attention is paid to the urban
heritage; also considerable attention is paid to the city green plants and
suburban recreational zones.
Period of Independence (1991- till now). In recent years the city has been
developing on behalf of the internal territorial resources, often, contradictional
to the emerged building process and without taking into consideration
interests of the residents. Under the conditions of reducing Tbilisi population
number and beginning suburbanization, in the end of 2006 emphatic
expansion of the capital administrative boarders (recently created Didgori
region) and separating of the “Old Tbilisi” administrative raegion acquires a
new space to the capital urban problem. This challenge should be answered
by the announced contest of the 3rd April of 2007 on composing “general
plan of Tbilisi land use”.

Such immanent feature of Tbilisi spatial development as linear was naturally
reflected in the configuration of its center. Logical Urban researches held yet
in the Soviet period, proved that entire city center of Tbilisi is developing linear
along the river Mtkvari gorge. Localization of city forming objects and mental
maps of Tbilisi residents make this fact evident. Thus, Tbilisi was exposing the
trend of natural development of the long center, in the widths direction of city
center in the general plan, resisting the voluntary approach of turning to the
Tbilisi sea.
Central structures expose general trends of development upper of the river
Mtkvari; Although lately, the desire of allocating city forming objects within “Old
Tbilisi” and in the direction of the flow of Mtkvari has been emphasizing. Thus,
Tbilisi common city center territorially expands from the Freedom square in
two directions.
First and basic, on the right embankment of the river Mtkvari implies Rustaveli
Avenue, acquires several branches at the Philharmonic buildings in the
direction of Merab Kostava and Melikishvili streets, moving into the Ilia
Chavchavadze Avenue, Konstantine Gamsakhurdia street and Vazha-
Phshavela Avenue. Simultaneously center forming functions of David the
builder and Akaki Tsereteli Avenues are being developed.
The second direction of the city develops from the Freedom Square including
the old city and, then in the directions of Avlabari-Isani and Ortachala with
linear branches.
Thus, the features of the Tbilisi common city center are:
• Linear and dynamic character;
• Expansion of the linear structures on behalf of the streets;
• Poor widthy functional-planning links between the parallel central
axises;
• Increasingly emphasized importance of the old city;
• Dispersive development of the city forming objects.
Such features of the Tbilisi center makes difficult identification of the center
core.
More simple is pointing out the transit and commercial corridors. Tbilisi located
in the TRACECA corridor is forced to let pass international cargo flows via its
embankment, because of the damaged condition of the Tbilisi sea beyond
road. These embankments, essentially, are the only draught highways on the
whole territory of Tbilisi. For now the issue on cutting Kakheti highway till
Avchala is being worked out, what will immensely unload the city center.
Coming out of the specific location of the Tbilisi relief (differences between
the heights of the river Mtkvari shores) widthy links are more complicated. The
railway line within the city creates the same problem; overcoming of the
railway line for the aboveground transport is possible only in two places, with
making distance of 5 kilometers between them. Implementation of viaduct in
the direction of Didube-Nadzaladevi accounted in general plan is far from
realizing.

Coming out of the linear configuration of the territorial structure, large
residential districts, basically, were constructed in the North and North-West,
also in the South-East parts of the city. Their construction was performed on
the precious agricultural lands, what was natural in Soviet period in the
conditions of extensive assimilating of the city territories.
As a result of expansion of Tbilisi territory in 2006 the capital city assimilated
part of the Mtskheta and Gardabani districts. Consequently, the diversified
problem of functioning of the country like residential areas in the joined part
has become very actual. Social-cultural and engineering-technical
rehabilitation or amenities will significantly increase the volume of Tbilisi
housing fund, will improve its quality and become the fundament of
broadening the base of city revenues.
The conditions of the development of the capital, also must be discussed
within the Tbilisi agglomeration, which implies significant part of Mtskheta,
Gardabani regions, cities of Tbilisi and Rustavi. Relevant problem must be
analyzed on the level of regional planning, taking into consideration basic
trends of reorganization of the country territorial arrangement and urbanization
in future.
New stage of Tbilisi functional-spatial development begins with reestablishment
of Georgia independence (1991). But, the face of contemporary
capital was essentially affected by the last period of communistic regime.
At that time, in order to facilitate the political tension in September of 1987 by
the directive bodies of Soviet Georgia was adopted document, which
practically was the first one, that admitted some construction initiative from the
side of population. The enforcement of the document was stimulated by the
tragic events of 9 April of 1989; In several weeks was issued decree by Tbilisi
city council executive committee, which gave permissions to the residents of
the state housing fund to lead the additional building of balconies, verandas
and other supporting receptacles by their financial means, following particular
technical conditions. Tbilisi was covered by ugly, often unsecured additional
buildings, which acquired more and more ugly look to the unsuccessful
without it blocks of mass building.
Little early, were taken first steps in the direction of making land accessible for
the city residents, outside the city giving kitchen gardens and country houses
in the form of cooperatives. In this new emerged areas land and house
volumes were severely defined by norms. City residents who desired to have
own land and individual houses immediately started construction; Tbilisi
outskirt territory in the radius of 30-40 km immediately was covered by country
like residential areas, that are now in the various stages of finish.
After coming in the power in 1991 the government of Zviad Gamsakhurdia
was treating with relevant care privatization issue of the real estate – city lands
including housing fund.

Law project on “privatization of housing” published in September of the same
year, basically was responding to the international practice, mainly, because
of working out of the housing reform economic aspects and was giving hope
for successful urban management under the modern social-economic
conditions.
But at the edge of 1991-1992 as a result of the state overturn the direction
was taken on unaccounted, populist solutions. Yet on the 1st February of
1992 decree of the ministers’ cabinet of the republic of Georgia #107 on “
privatization of housing (giving for free) in the republic of Georgia”. it was
underlined in the document, that “the objects of privatization maybe house
(flat) of state and public fund, among them damaged, reconstructional or
uninhabited flat in the house, that required capital repair. In the document
insufficiently was worked out organizational forms of multi-flat houses and
financial-economic mechanisms. With one hand wave in Georgia was created
new multi number class of real estate proprietors, who immediately made
familiar with their rights, without having any imagination on proprietors duties.
Thus, for “homo soveficus” the psychology of common dependant was not
only eliminated, but was even enhanced in terms of requirement of the “new
proprietors” from government to lead the repairment activities in really
damaged houses.
The results of the 25 April earthquake in 2002 emphasized the complaints of
the poor proprietors of the damages houses in the direction of government.
Simultaneously with the lack of care rapid degradation of housing fund, in one
trace with political and economic stabilization, commercial housing
construction began development; social (municipal, public) housing fund was
not being built in Tbilisi even till nowadays – despite the necessity, societal
requirements and international recommendations.
Explosion of commercial housing construction naturally emphasized its
territorial development issue. Distribution of lands according to the group and
private interests was followed by the deliberated discrimination of the last
Soviet Tbilisi reconstruction and by development of the general plan,
accounted on 2000. Assimilating and using of the city lands’ scheme was
activated reflecting the corruptive or group interests. According to the
evaluation of international organizations, at that time , by the volume of
bribing, issuance of construction permissions was on the second place in
rating after the bribery rate in police.
Commercial housing construction mainly was intending to concentrate on
historically formed, most prestigious districts such as Vake, Vera, Mtatsminda.
Prestige category, characteristic for Georgian culture, and which finally, is
reflected in the prices of real estate, acquired commercial meaning and was
also reflected in some normative acts. New multi-storied houses were often
built without accounting accurate city constructive situation, sanitary-hygienic
or housing norms, despite the protests of residents. Today its already evident,
that such tightening of building in prestigious districts caused ecological
problems, surplus of individual transport, overloading of social-cultural and
engineering-technical infrastructure, and finally, decline of urban environment
quality.
Most grave situation was created in Old Tbilisi, which acquired remarkable
monument defensive status yet in the Soviet period. Scandal housing
construction in the defensive zones led to the fact, that Tbilisi application in
2002 on inclusion in the UNESCO list of world heritage, was delayed till
legislative, institutional and in terms of practical improvement of the situation.

In recent years in the sector of housing construction developer activities
acquired more civilized look. This is maintained both by the initiatives of
Georgian ministry of culture, monument defense and sport and by the
corporative refinement of developers itself (emerging the developers
association, adopting the appropriate ethics code, etc. ). It is worth to mention,
that developer activities is expanding in terms of territory and it is moving to
the regions near to the center (Saburtalo); and recently to the regions, early
considered not to be prestigious.
In the terms of above, best example is Avlabari district, which despite its
features (central position, good micro-climate, transport infrastructure, best
view and exposition to the various parts of the country), was unevenly
positioned on the lower place in the classification of prestige districts. First one
who paid attention to the city constructive potential of Avlabari was great
friend of Tbilisi, scientist, architect from Hamburg Iost Schram, according to
who’s initiative in 1997 in the architectural institute of Georgian central
university began implementation of student project on renewing external area
of Avlabari. Simultaneously, in Avlabari was being implemented such city
forming activities, as construction of the Saint Trinity Cathedral and office of
the President of Georgia. All above mentioned increased the district prestige
and relatively price on the land.
Some developers take even more accurate steps and directs its interests to
yet non-prestigious territories. As an instance of this must serve start-up
project called “Ortachalis Turfa” implemented by the “Arci” company in the
south-East part of the city, and which attracts buyers with relatively low prices
and complexity of building (with the components of social infrastructure).
But, in terms of territorial attractiveness, traditional priority is on the side of
housing construction at the edge of Tbilisi North and North-West (Bagebi, Didi
Digomi), where important territorial resources and using of former agricultural
lands made possible to create homestead building. Besides the best microclimate
conditions, prestige of this zone was also encouraged by the
construction of the new Embassy of the USA.
Developers territorial preference naturally, is mainly defined by the priorities of
potential consumers. From this side, it’s very essential, that if early together
with prestige crucial importance was given to the prestige of accommodation
location and quantitative parameters (number of rooms, space), recently has
been observed emphasize of esthetic (“fine view”, “nice architecture”) and
ecological (“fresh air”, “greenery”)requirements.
The latest situation, together with general trend, states on a new position
destiny of country like residential areas in the Tbilisi surroundings existed yet
in the end of Soviet Period. Their engineering technical and social
rehabilitation will positively influence general structure of Tbilisi housing fund
and will be economically useful for the city. This topic deserves deeper
attention and more than that implementation of political projects.
In this direction really supporting factor is expansion of Tbilisi administrative
boarders in the end of 2006 on behalf of the hinterland and summer-cottage
zone. on the meeting of the 30th march of 2007 Tbilisi city council (Sakrebulo)
approved enhanced new fiscal zoning of Tbilisi, which will support developer
activities in the newly joined territories and thus, expansion of the
suburbanization process. It is important, that some companies have already
taken advanced steps for construction of the residential community. For

example, construction of “Tsavkisis Valley” by one of the Georgian-Jewish
company.
On the background of commercial housing construction, for balancing the
structure of Tbilisi housing fund, emergent task is creation of so-called “social”
(“municipal”, “public” ) accommodation. AS it was mentioned, the decree of
1st February of 1992, practically, transformed almost whole housing fund of
the city into the private property. Government still resists the creation of social
accommodation, what strains the social climate in the society of Tbilisi.
Moving into the new social-economic conditions caused dramatic changes of
office and commercial objects allocation terms in the city planning structure.
Large state establishment organizations of the Soviet period used to occupy
large scale, often specially constructed buildings. Cultural-household objects
were nearly even distributed in the city cell, relevant to the steps of services
shared at that time, with taking into consideration normative radiuses of
accessibility.
Market relations, mainly, were reflected in dislocation of small trading objects.
In 1993 was allowed street trade practically everywhere and in every form.
This type of trade soon was joined by transformation of ground floor of the
residential houses into the trading and household establishments. It’s
important to mention, that in the process of seeking own space on the market
the profile and class of these small objects was somehow changed; This
process, really little slowly but still can be witnessed. Houses ground floors
which made shelters for trading and service objects, weren’t satisfying new
purpose with their first planning structure (problem of entrance from the street;
engineering equipment, sanitarian conditions, non-existence of stores and
secondary closets, etc.). many problems are generated from arranging
downstairs in the cellars, what often was managed to accomplish using the
street sidewalks. Today in the central part of the city can be noticed internal
development of the offices already allocated on the ground floor, on behalf of
the second, seldom the third floors. In terms of real estate must be underlined
the fact, that such legal persons, as a rule, don’t participate in the
management of the whole house (condominium), despite the requirements of
the civic code.
Early simultaneously only with the diversification of the residential house
functions, was implemented departing, reducing of the structures of above
mentioned large organization-establishments and degovernmentation of most
of their owned buildings. Most important is the fact, that this process was
being implemented omitting municipalization stage of the real estate, with
fading the urban land problem. Even the management of the buildings in the
hands of multi proprietors wasn’t meeting even old requirements (elevators,
engineering equipments, cleanliness, fire security, etc.).
Following stage of development is presented by promotion and construction
of originally mixed function buildings, when 1-2 floors were accounted on
office or trade and service objects, above which were located flats.
Simultaneously some large companies were constructing separately located
headquarters.
New stage of creating and exploiting office spaces is construction of the
special buildings, what is recently observed in Tbilisi. In this direction, it’s
worth to notice basically office and trade building, which is being constructed
on Ilia Chavchavadze Avenue #34, and “Axis towers” also on I.

Chavchavadze Avenue. The latest is the mode of “second hand” architecture
(such objects of curved prisms (forms) are planned in Istanbul and Astana),
but today already announced prices dictate that These office spaces will
respond to the high rate of the international classification.
As for the mass and wholesale large trade objects (so-called “’bazrobebi”),
Two of them Lilo and Navtlughi fairs are located in the South-East periphery of
the city, and the attempts to move other two (to Dezertirebi market and Eliava
street) to the North-West periphery had no results and the government was
forced to be contended with making them “noble” at the same places.
Although, in terms of city planning, their location will dramatically damage the
city environment. Expansion of the restaurants and entertainment
establishment network (including casinos) maybe considered as an average
indicator of increase of economic wealth of the particular part of the
population. In addition if the casinos are concentrated in the central part of the
city (today, as a result of particular legislative steps only several casinos are
operating in Tbilisi and there’s an idea of moving all of them to Tskhaltubo
resort – like the planned measurements in Russia), newly opened restaurants
are moving in the direction of Old Tbilisi or Automobile highways, basically on
the Mtkvari embankment and in the North-West exit of the city.
Construction of the sport-recreational objects are not following the
requirements - there are only 2 modern swimming pools in Tbilisi. It’s being
implemented assimilating of the water reservoirs in terms of amenities – here
on the first place is “kus Tba” lake; It is followed by Lisi lake and Tbilsi sea.
Internal quarter mini-field (ground) network is being expanded (basically, with
artificial cover). By means of private capital new tennis ground was built in
Dighomi.
Energetically is being constructed Orthodox churches, besides the Saint
Trinity grand Cathedral, small parochial churches network will include every
residential district – as central, so peripheral. It must be separated issue of
developing hotels network. Recently, World brands of hotel economy such as
Sheraton, Marriott, Hilton, Radisson have been wildly interested in Tbilisi.
They operate in several directions – reconstruction of already existed hotels,
demolition of already existed building and construction of the new hotels,
acquiring of city forming objects and their adaptation. At the current stage
such interest from the world brands isn’t defined only by new economic
interests (operating hotels completing with guests is far from normative); It
must be defined as by future expectations, so by the presence factor of
assimilating world geography. Besides the entrance of the hotel-business
grands on Tbilisi market, network of the small hotels are being developed –
due to their low prices and familiar atmosphere. But, the main problem for the
city ambitions to become tourist center still remains non-existence of large,
cheap hotels and hostels for mass tourism. We’ll also name discrepancies of
the city information system (including language) and catastrophic conditions of
the public toilets – as in quantity terms, so in terms of quality among the
factors biasing tourism in Tbilisi.
In terms of internal city transport Tbilisi subway plays its stable role, which
saved Tbilisi from functional disintegration in the period of civil war. In the
recent years, as a result of reforms implemented in the transport system, tram
(transport) has been practically moved out of the city streets, also trolley bus
lines has been reduced to minimum, little early fully was demolished the
network of the rope lines. Positive event is changing unmanaged multi

number of micro bus taxis (“marshutka”) in the central street of the capital with
civic buses, although set of factors bias the normal functioning of the public
transport (the model of acquired buses; discrepancies of traffic organization –
for example “transport triangle of the Vera district”; ignoring the interests of
pedestrians, mainly the disabled persons; low rate of discipline among the
drivers and pedestrians; non-existence of automobile residences, etc. ).
Improvement of Tbilisi city transport system will be facilitated by implementing
recommendations on the basis of international contest, presentation of which
is expected in May.
As for external transport, activities for rehabilitation of the Tbilisi central railway
station arebeing performed; construction of railway branch from Kakheti line to
newly built airport is expected to start; Although non-existence of the
technical-economic documentation and miscalculation of the project in the
layer of regional planning must be considered as a serious discrepancy.
Under the conditions of distributing real estate, most attractive advantage of
the industrial objects was considered to be territories occupied by the latest. It
was particularly essential in the central zones and the ones near it. In the
years of Independence most part of the Tbilisi industrial objects stopped
functioning; Engines and equipments were sold as black scrap metals; And
the buildings itself in terms of modern technologies, didn’t make any sense
anymore. Instead of it, increased the interests of the builders to the territories
occupied by the above mentioned objects. On some of this territory already is
implementing construction of commercial housing (for example, silk weaving
plant territory in Vera district). Together with this, still exist such large industrial
zones, which don’t yet rise interest among developers (for instance, industrial
zone of Ulianovka); Converse of such zones would be facilitated in the case of
supporting steps taken by state/city.
Tbilisi, as a capital of the country takes functions of the central and city
government, which is reflected in the location of administrative institutional
structures and relevant objects.
Central functions are mainly gathered in the center of Tbilisi, but also there are
some exceptions. The example of territorial decentralization effort is the
Constitutional Court, moving of which was planned at first in the direction to
the city of Mtskheta and now to the city of Kutaisi. New residence of the
President of Georgia is being built in the district of Avlabari, which has a
prospect for urban renewal.
As for the city administration, as a result of new reform “Greater Tbilisi”
consists of 7 administrational districts. Their overwhelming sizes and the
difficulties with access to the district administrations (so-called “gamgeoba”)
doesn’t respond to such fundamental principles of the local self-government
as subsidiary and, also the historically formed tradition of structuring Tbilisi
territory as natural community.
Current radical reforms in the educational system was reflected in the
territorial localization of educational and upbringing establishments of various
level and rate. If early, in the Soviet period, nursery schools of children and
secondary schools networks, basically, served the population living near
them, today under the conditions of educational objects privatization and
abolishment of the records, the importance of their profile and financial terms
of teaching are emphasized.

As for the higher education, its objects are experiencing enlargement,
institutional restructuring, quantitative reduction in the way of restricting
accreditation terms. Although, localization of the leading higher education
objects remains basically unchanged.
The same may be said about the reforms of the healthcare and social work
system; Georgian Orthodox church, non-government and international
organizations begin to play notable role in this system.
Under Tbilisi conditions it’s very important to keep public spaces. As a result
of unanalyzed and often crime like privatization, the part of such important
elements of the city space as embankments, river channel and city square
moved into the hands of the private capital. Most harmful was the privatization
of such important for the city objects against the societal opinion, as Rikhis
Ubani on the left embankment of the river Mtkvari, within the historical core of
the city.
Sport-recreational objects are suffering from the attacks of the builders. It’s
already implementing or is starting building of such objects as the river Vere
gorge, which was forming as the children city “Mziuri” in the Soviet period;
Hippodrome of Tbilisi, stadium territory in Avlabari, etc. Tbilisi greenery is also
under the pressure (residential house in Alexander garden, separating
territories in the park of Vake and near wood-parks for the Embassies and
Football Federation, construction of elite residential houses in Bagebi, etc.).
Generally, may be said that Tbilisi now is in the transitional stage of getting
familiar with modern social-economic conditions and relations of its functionalspatial
organization and planning structure. Action in every particular case of
urban development is an unique combination of multi and often subjective or
contradictional factors. Following the maturing of the real estate market and
generally market relations, Tbilisi spatial-territorial development, distribution of
various functions, their restructuring and formation of modern body of the city
will become more comprehensive, adequate and forecasting, what will finally
maintain economic development of Tbilisi, as a large urban center.

As a result of social and economic transformation that has been taking place
for the last few years in Georgia and the region Tbilisi is facing both new
challenges and development opportunities. The analyses, surveys and
discussions with stakeholders prove that:
• the City economy has a major share in the Georgian gross national
product,
• the productivity of Tbilisi companies is higher than of the companies
operating in other parts of Georgia,
• Tbilisi labour market generates more well-paid jobs for highly qualified
specialists than the other parts of Georgia,
• the volume of local salaries creates the major consumption market in
Georgia,
• improved telecommunication infrastructure enhances Tbilisi’s links
with the rest of the region and of the world,
• Tbilisi has an attractive offer for various groups of visitors,
• an increasing number of links with the region and the world attracts
new firms and cooperators, improves competitiveness of the existing
companies and introduces new market standards,
• the development potential of Tbilisi encourages the growth of
suburban areas thus creating the base for a metropolitan area,
• the potential of companies operating in the growth sectors forces them
to explore new markets in order to maintain development tendencies.
The above findings are the basis for recommending measures to be taken in
order to strengthen the position of Tbilisi as the service center for the region.
The city attractiveness, the potential of local firms and the range of offered
services, the quality of workforce and a multi cultural heritage enable Tbilisi to
serve not only its metropolitan area and Georgia, but also the region of the
Black and the Caspian Sea.
The unfinished transformation of economy requires firms, employees and
public institutions to adjust to the changing situation on the global markets.
The City and other public institutions should support new forms of
organisations and professional training and create space for new enterprises.
One of the major conditions of local growth is to make the existing firms stay
in the city and attract new investors from outside as well as to prevent present
inhabitants from leaving the city and encourage others to come and settle
down. The attractiveness of Tbilisi center, the quality of life or an easy start for
companies are the project areas that should be supported and implemented
directly by the City authorities.

The strength of local communities and the skills of local workforce outline the
growth potential of Tbilisi. The City should get involved in:
• strengthening local communities because it leads to better quality of
life and to higher real property value in the residential areas,
• making development opportunities equal for everybody in order to
prevent large social groups from being excluded from the
development mainstream,
• support talented people because it is them who will decide about the
future city potential.
The cooperation of diverse partners is a key to success for many today’s
enterprises. The City can play a coordinator and facilitator role in the dialogue
and the cooperation of:
• citizens,
• social organisations,
• firms,
• public institutions,
• various tiers of national government.
In cooperation with national and foreign partners Tbilisi can strengthen its
recognisability as a meeting, business, culture and science center. A City’s
recognizable brand is one of the fundamental conditions to attract
cooperators, investors and visitors.
The table below presents alternative strategies, their aims as well as the
strategy implementation objectives and potential activities.

Alternative
Strategy implementation objectives Strategy implementation activities Strategy implementation
strategies
aim
Tbilisi as regional
center
• Access to the places, people
and initiatives,
• Logistic hub,
• Regional meeting place,
• Tourism destination,
• Forge cooperation with post
industrial regional centers for mutual
benefits
Support organization of different kind of international meetings that
will bring to Tbilisi people, businesses and ideas,
Working with airport authority;
• improve passenger services and connections with city
center,
• attract new carriers to include Tbilisi into their networks, with
special focus on regional connections,
In cooperation with other partners facilitate and assist in
development of logistic center near airport and railway.
Use marketing and public relations to promote Tbilisi to targeted
industries and organizations,
Develop tourism information system,
Organize city tourism information office and Tbilisi convention and
visitors bureau,
Facilitate development of special sites that can be recognized
worldwide,
Attraction of targeted industries, commercial uses, headquarters,
Initiate network of post soviet cities building knowledge based
economies,
Strengthen role of Tbilisi as
regional hub organizing and
attracting business, civic,
political, scientific,
entertainment, and sport
activities and events. Locate in
Tbilisi regional offices of
business and institutions.
Focus on change
and competitiveness
• Linking innovation to Tbilisi
businesses,
• Development of competitive
Tbilisi clusters,
• Provide space with assistance
for start –ups,
• Development of business
environment institutions and services.
Monitor and review city economic situation on annual basis,
Identify products and services that will have the most competitive
position at international markets,
Conducting of business attitude surveys:
• Cluster development needs
• Stat –ups development needs
Developed business
environment for Tbilisi new
economy.

• Technology transfer needs
• Workforce development needs
Development of cluster’s networks of most competitive sectors:
• Tourism cluster
• Creative cluster
• Education and training cluster
Provide electronic platform for e-business,
Working with other public and private institutions facilitate and
support through targeted public investment development of :
• Business incubators
• Industrial parks
• Technology parks
Support development of institutions providing financing to Tbilisi’s
small and medium companies:
• Grant and micro credits
• Guaranties
• Venture capital
Assist start-ups and small medium companies :
• Delivering needed information
• Organizing trainings for managers
• IT and Internet use ability for business purposes
• Assistance in obtaining finances
• Offering space to grow with assistance
• Offering business consulting and mentoring
Conducting economic missions for cluster partners to innovative
regions,
Organizing presentations at industry shows serving Tbilisi targeted
industries,

Marketing Tbilisi
livable city and
convenient for
business
• Invest in City Center,
• Invest in housing districts,
• Offer a space for different
size businesses,
• Invest in commercial corridors,
• Invest in development zones,
• Concentrate public investment
to facilitate private development,
Development of various publications (electronic and typed versions):
• Companies and investment projects important for Tbilisi
• Tbilisi conference abilities
• Tbilisi successful companies
• Map of Tbilisi most important businesses
• Tbilisi – place where it is possible to do business
Firms – creators of Tbilisi brand
Identify, protect and serve with technical infrastructure areas for new
functions within city territory that are crucial for city development:
• Different kinds of housing
• Public services
• Transit
• Offices
• Retail
• Hotels and restaurants
• Entertainment
• Recreational areas
• Industries
• Warehousing and logistic
• Research and development,
Support improvement of existing features in the city center that can
attract tourists,
Stimulate broad band internet access for businesses and citizens in
the city area,
Seek funding for preservation and rehabilitation of historic facilities,
Facilitate service and transit oriented development around rail and
metro stations,
Identify and support development of commercial corridors serving
Attract new businesses,
institutions and residents to
the city, as well as retain those
who are already living or
working in Tbilisi. Revitalize
deprived city areas. Create
identity of different districts and
neighborhoods.

People power Tbilisi
economy
• Strong local communities,
• Improve economic inclusion to
enable all citizens to fulfil their
potential,
• Workforce development,
• Invest in talents.
with retail and commercial services Tbilisi living districts:
• Conduct research to identify market needs and prepare
business recruitment strategy for each commercial zone
• Establish land use regulations
• Provide targeted public investment
• Coordinate public services within the area
Promote housing and mixed use development in commercial
corridors,
Identify and support revitalization of development zones that will
provide space for new commercial and public initiatives through:
• zoning
• targeted public investment,
Continue activities to promote redevelopment of post industrial
areas,
Support renovation of city public and private cultural, and
recreational facilities at the neighborhood level,
Enhance the position of Tbilisi retail services,
Monitor Tbilisi labour market developments and changes on the
annual basis,
Conducting surveys of youth professional potentials and aspirations,
Identifying partners and donors, working on issues of vocational
trainings,
Develop employee skills to
meet demand of labour market
and offer all citizens equal
chances to participate in
economic, social, political,

Survey how economy is developing, what kind of work places are
created, what kind of qualification people will be needed,
Facilitate development of career development paths for most needed
professions,
Develop labour market information system with internet portal,
Assist schools and other educational institutions serving youth to
make ICT technology and language skills a priority.
Support efforts of schools, training institutions and employment
service providers to prepare citizens for employment opportunities.
Facilitate cooperation of targeted industries with schools and
universities,
Organize city job and education fairs on annual basis:
• Employers will present job opportunities and conditions
• Consultations for pupils graduating from school on choosing
jobs and professional careers,
• Providing information on where and what can they study,
• New professions emerging at labor market,
• Information on scholarships and grants for students and
pupils,
• Trainings in writing CV, preparing for interviews,
Organize financial support for best pupils and students,
Award best pupils achievements,
Support vocational training and life long learning initiatives providing
assistance to mature workforce,
Develop assistance for low skilled people and youth at risk disabled
people that will create work opportunities for those groups,
cultural activities of Tbilisi
community.

Brand Tbilisi as a
place where you can
be understood and
supported
• Improve coordination of
different partners to maximize
economic growth,
• Business, engaged in
development project,
• Different tires of public
administration involved in strategy
implementation.
• City administration works as
coordinator and facilitator of
development initiatives.
Organize City Development Council with business, social and
political leaders advising Mayor of Tbilisi on city development
objectives,
Organize City Development Council with business, social and
political leaders,
Conduct platform for discussion and coordination of metropolitan
issues,
Organize and facilitate Education – Business Round Table,
Institutionalize community based programs offering organizational
and financial support for local communes revitalizing their
neighborhoods,
Improvement of qualifications and attitude of local government staff:
• Creating group directly operating with business and raising
its qualifications
• Creating group operating with investors and raising its
qualifications
• Periodic publication presenting office’s services
Institutionalize cooperation
with:
• Local communities,
• Businesses,
• Neighboring municipalities,
• Other public institutions

When creating long-lasting mechanisms of activities stimulating local
economy it is a matter of fundamental value to find a partner institution who
will initiate and coordinate development programmes.
The local government needs partners not only among ordinary people,
institutions and organisations in the City but should also find external partners
such as banks, regional authorities and business organisations who can offer
help in developing local job market.
When implementing the economic development strategy for Tbilisi the
following measures will be of key importance:
• cooperation among the stakeholders,
• establishing a municipal structure that is capable of generating and
implementing local economic policy,
• identification of priority projects being the foundation of local economic
development,
• starting cooperation with other cities that are undergoing the process
of similar transformation by means of best practices,
• encouraging local economic growth, which is such form of activity that
requires specific skills and initiatives that are beyond the city hall’s
traditional forms of activity.
An important role in strategy implementation can be played by efficient
Economic Development Agencies.
It is worth consideration that in the course of strategy implementation the
Tbilisi City Hall department dealing with economic development could be
transformed into an independent city agency provided with resources
necessary to carry out strategy tasks.
The Agency should:
• employ a team of experts capable of project implementation,
• develop a range of instruments to support companies and workforce,
• have at their disposal the funds enabling them to realize tasks by
means of their own earnings and subsidies for projects.
A non-governmental organisation that is competent to perform such tasks,
has adequate human technical and financial resources will secure sustained
activity and will immediately react to changing conditions.
When developing the Economic Development Strategy of Tbilisi City a
workshop was held where the participants learned how to establish an NGO
(foundation, association) and how to develop with local partners the local
operation programme, methods and forms of raising funds for operation and
project implementation.
Below the most important projects have been presented whose scopes and
subjects result directly from the entrepreneurs’ opinion. The projects were
developed during the workshop meetings with stakeholders and they deal
with: workforce, business activity financing, organising business activity
space, application of new technologies in economic development, support for
tourism and creative clusters.

SME support projects
•
•
•
•
•
•
•
•

.

-
-
-
-
-

•
•
•
-

-

-

-

Tourism development projects
Tourist Information centre ( TIC )

Tourism development projects
Tourist Information centre ( TIC )

Tourism development projects
Tourist Information centre ( TIC )

−
−
•
•
•
•
•
•

−
−
•
•
•
•
•
•

Workforce development projects
-
-
-
-
-
-
-
-
-
-
-

-
-

-
-
-
-

-
-
-
-

-
-

LOCAL
ECONOMIC
DEVELOPMENT
PLAN FOR TBILISI
MUNICIPALITY
EFFECTIVE STRATEGY
IMPLEMENTATION
METHODOLOGIES
Tbilisi City Hall │ Economic Policy Agency
Address: 2, Liberty Sq │ Tbilisi 0105, Georgia
Tel.:(+99532)932314 │ Fax.:(+99532)932895
E-Mail: economic@tbilisi.gov.ge
www.tbilisi.gov.ge
1

TABLE OF CONTENTS
Introduction.............................................................................................................................................................4
1. Strategic management framework and the city competitiveness.........................................................5
2. Integration of strategic management framework.....................................................................................7
3. Strategy implementation methodological guidelines ...........................................................................13
3.1. Partners participating in the plan development process.......................................................................14
3.2. Process of writing the Corporate City Development Plan ....................................................................15
3.2.1. Organization of teams dealing with the Plan development...........................................................15
3.2.2. Plan development process phases – the first edition....................................................................15
3.3. Methodology of updating the Corporate City Development Plan.........................................................17
3.3.1. Principal conditions for updating.....................................................................................................17
3.3.2. Cyclic activities ................................................................................................................................17
3.3.3. Timetable.........................................................................................................................................19
3.3.4. Summing-up....................................................................................................................................20
4. Strategy implementation tools ..................................................................................................................21
4.1. Corporate City Development Plan - responsibilities of involved partners...........................................23
4.2. Corporate City Development Plan – timeframe ....................................................................................24
4.3. Programs card.........................................................................................................................................25
4.4. Projects card ...........................................................................................................................................27
4.5. Project feasibility study ...........................................................................................................................28
5. Appendix – Directive of the Mayor of Tbilisi on up dating and implementation of the
Strategy Implementation Plan for Tbilisi .................................................................................................33
2

CHARTS
Chart 2-1 City strategy structure....................................................................................................................................................8
Chart 2-2 Integrated strategic management framework...........................................................................................................10
Chart 4-1 Strategy Implementation Plan.....................................................................................................................................22
TABLES
Table 4-1 Corporate City Development Plan - responsibilities of involved partners. ...........................................................23
Table 4-2 Corporate City Development Plan – timetable.......................................................................................................24
3

Introduction
Today, when the pace of economic changes has accelerated, it is necessary
to take advantage of this experience and work out such an instrument that will
enhance the application of city economic development methods coordinated
with overall city and national development strategies.
The presented proposal satisfies this need since it deals with such
organisation and procedures of integrated management that combine longterm
strategy goals with medium-term implementation objectives as well as
with individual projects and current local government tasks. Moreover, it is an
impulse to mobilise all the groups interested in conscious and active creation
of local development programs and their implementation.
It seems obvious that such activity should be of permanent nature. Therefore
it is necessary to institutionalise Corporate City Development Plan (CCDP) as
integration platform for city strategic management framework and tool for
successful strategy implementation. Corporate City Development Plan is a
mid-term plan updated annually for next three – five years and consists of
different projects generated within sectoral strategies that support city
strategic gaols and objectives. Corporate plan it also a tool for integration of
strategy with city annual budget.
Local Economic Development (LED) plan is on of sectoral strategies that play
key role in city development programming. When the LED gaols and
objectives are agreed and priority projects identified, they can be incorporated
into CCDP financed from city budget. Integration of strategic management
framework and efficient cooperation of all involved partners is possible when:
• CCDP development process is defined and formalized on annual
basis
• CCDP development process is synchronized with preparation of city
budget, investment and mid-term financial plan
• all partners and their responsibilities in the process are defined
• standardized tolls are used by all partners and sectoral programs to
prepare strategy implementation projects
• selection criteria should be based on city development objectives so
all sectoral programs will follow city strategy aims.
Report strength the role of efficient management for city competitiveness
position, presents conditions of integrated management framework as well as
methodology of Corporate City Development Plan. Special tools of successful
strategy implementation system are presented at the end of report.
4

1. Strategic management framework and the city competitiveness
Cities are now competing at both a national and international level to attract
investment, citizens as well as visitors.
Where globalization has had a positive effect in stimulating economic growth,
these benefits have not been evenly distributed. Cities therefore continue to
experience problems of poverty and inequality. In developing cities these
problems are compounded by urbanization which has led to problems of
unemployment, the proliferation of informal settlements and environmental
degradation. All cities have to face challenges because of:
1. economy transformation from the traditional to new knowledge based
economy
2. limited revenue capacity of companies, citizens and local
governments
3. movement of people and businesses
4. suburbanization and poverty in central areas
5. need of new education following workforce development demand
And last but not list there is huge pressure to change city government roles
and management methodologies to follow all these changes and challenges.
Since the 1980s there have been increasing efforts to introduce new
management methodologies to city administrations. Different solutions were
exercised in different countries but two issues were key elements of new
systems:
1. strategic planning methodology when new strategies and polices were
developed
2. integration of strategic management framework to coordinate all
sectoral plans and different partners involved in a timeframe
Transformation require efficient management to follow all changes, to face
challenges and to utilize resources efficiently. It's universally known that
better performing cities and those recognized as skilfully managed are more
attractive for new businesses. Although there is a lack of comparative
standards with which to measure whether a city is well performing and
assess key drivers of high performance, it is obvious that ability to cope with
5

change, leadership and vision shown by city representatives, its economic,
social and cultural diversity as well as its ability to make effective use of
human capital are the conditioning foundations of high performing city.
There are of cities that present high performance which are not
geographically centrally located and are not national capital cities. There is no
single model for creating high performing cities. Examples cited included
places as varied as market driven American cities like San Jose, supported by
government Asiatic cities as Singapore and somewhere in between the
European cities such as Dublin, Barcelona or Scandinavian cities. High
performance can be achieved under a variety of governance arrangements,
but usually results in high quality of life, better infrastructure and favorable
business environment with skilled workforce.
The fact that some sectors achieve a critical mass in a city may be more
important than
the location of a city itself. San Jose’s global position in the research and
commercialization of new technologies is not based on its location but on the
fact that this sector demonstrates a high degree of clustering and innovation,
which makes the city attractive to the others.
There are some obstacles on the way to a well managed competitive city that
should be taken into a count:
1. the importance of developing effective metropolitan policies and engaging
in long term spatial planning,
2. new strategies require strong civic leadership and vision to convince
public to changes,
3. weak citizen participation is a current and future problem and may result
in declining identification with governance structures and policies,
4. coordination and cooperation between different levels (region,
neighborhood) , sectors and partners (public, private and community
organizations or decision makers, professionals and stakeholders),
5. the question how far local government should be involved in local
economy.
These and other important issues should be discussed with a local
stakeholders at the beginning when the framework is constructed. The
agreement will create boundaries for all policies and define public role in city
development activities.
6

2. Integration of strategic management framework
Cities operate on the basis of different legal regulations that define city
responsibilities and polices which articulate community goals. The city
development strategy (CDS) covers community long term vision, gaols,
objectives and is the guideline for all city development activities. While the
cities operate not only as basic municipal services supplier but they are more
and more active as a coordinator and active partner in all initiatives important
for the city development, we are in the situation that many other programs are
also developed to coordinate joint activities within different sectors. Local
economic development ( LED) programs are the examples of local
government leaders with stakeholders assessing economic competitiveness
of the city and defining goals and tasks that should be undertaken. It is
important to integrate strategies on the level of aims, but it is even more
important and much more difficult to find the way that LED strategy
implementation can be incorporated into CDS implementation process.
All strategies are developed on the basis of strategic planning methodology.
While some tools and procedures specific for a given sector can be used,
basic elements of strategy development process are similar:
• organization,
• competitive assessment,
• strategy formulation,
• strategy implementation,
• strategy monitoring and review.
The LED strategic planning methodology that was implemented within World
Bank’s Cities of Change program can be fully utilized for Tbilisi purpose. The
methodology was based on a five-stage process:
• organizing effort,
• doing the competitive assessment,
• preparing the strategy,
• implementation of the strategy,
• developing the monitoring and evaluation system.
7

Chart 2-1 City strategy structure
VISION
STRATEGIC GOALS
G G G
STRATEGIC OBJECTIVES
Projects
PROGRA
PROGRAM 2
PROGRAM 3
PROGRAM
Additionally, the method gives access to well tested tools of cooperation with
stakeholders, to analyses and prognoses, to problem identification and
structuring of goals, objectives and programs, to the identification and
prioritizing of projects, their management and financing and, finally, to strategy
evaluation and to reaching anticipated objectives.
8

On that common basis the city management framework can be build.
The following assumptions of the integrated strategic management system
condition its success:
• the vision and the objectives of the local community have been
identified;
• the process of development planning is fuelled by the needs and
preferences of social partners and service receivers;
• the management system is based on translating the strategy vision
and objectives into the implementation plan priorities and the results of
the completed projects;
• responsibilities are fairly shared by politicians, professional and social
partners;
• institutional development is based on a step-by-step process and
implementation plans are updated annually;
• the indices of projects implementation are based on strategic
objectives and on social expectations;
• the effective monitoring and updating system is based on a repeatable
process;
• the annual budget preparations and the plan of strategy
implementation are fully integrated;
• the system of project management and inter-sector groups work has
been implemented;
• personal responsibilities have been defined and the staff training
system has been implemented.
Taking into account that strategic planning process starts from long term
vision and step down to operational everyday tasks and services, three levels
of the system should be identified:
• Long-term strategy/policy planning framework.
• Mid-term strategy implementation framework.
• Operational task/service management framework.
9

Chart 2-2 Integrated strategic management framework
INTEGRATED STRATEGIC MANAGEMENT FRAMEWORK
STRATEGIC
PLANNING
FRAMEWORK
STRATEGY
IMPLEMENTATION
FRAMEWORK
OPERATIONAL
MANAGEMENT
FRAMEWORK
CITY
STRATEGY
CITY
SECTORAL
STRATEGIES
CORPORATE CITY
DEVELOPMENT
PLAN
4-6 YEARS
SERVICE
PLANS
2-3 YEARS
ANNUAL
SERVICE
DEPARTMENTAL
PLANS
CAPITAL
IMPROVEMENT
PLAN
4-6 YEARS
CITY
BUDGET
FINANCIAL PLAN
6-8 YEARS
Strategy planning level consists of city development strategy (CDS) and other
sectoral strategies. Mid-term strategy implementation framework consists of
service plans following sectoral strategies, a capital improvement plan (CIP), a
mid-term financial plan (FP) and a city corporate development plan (CCDP).
That is the integration platform for different sectoral objectives with city longterm
goals (CDS) and financial and technical possibilities (CIP and FP). The
operational level is based on a city budget (CB) and consists of annual
departmental service plans.
Effective strategic management of local government, requires coordinated
planning and monitoring systems that enable key decision makers, both
political and
10

managerial, to take action based on facts about performance. Performance
management can also be thought of as a tool to help link and underpin the
initiatives that make up the
modernization agenda. Following from the policy development cycle, there are
three areas where indicators can assist local authorities in addressing the
challenges faced by cities. These are:
• developing appropriate policies with clear goals and strategies,
• monitoring the performance and reporting progress of local
governments implementing strategies,
• reviewing policies and strategies.
Since the goals of urban policy cut across different sectors, and should reflect
changes of different level of the strategic management framework (from
project results to strategy aims) the indicators will be of four types:
• Input indicators. Inputs are the resources allocated to specific tasks, such
as the amount of money spent or the total number of employee/hours
needed to deliver a service or project,
• Output indicators. These reflect the quantity of products or units of service
provided to the population,
• Outcome indicators. These measures report the results of programs and
services or relate to the quality of the service e.g. measures of customer
satisfaction,
• Impact indicators. These assess long term quality changes that strategy
implementation activities create in the city changing living conditions or
improving business environment.
When designing monitoring system in practice, specific indicators should be
identified and allocated for specific deliverables. Starting from the bottom of
framework we have projects. Their results can be assessed by means of
output indicators. Programs grouping a similar projects can be reviewed with
outcome indicators. Impact indicators can be designated to strategy objectives
and goals. Such a solution will support integration of the whole strategic
management framework and will work in both directions top-down and
bottom-up. When developing strategy implementation activities (coming down
11

from strategy goals and objectives) it will help to select right projects
supporting realization of the strategy concrete aims. Monitoring and reviewing
strategy results we can assess how specific projects and programs
participate in the upper level strategy deliverables.
Each indicator should be defined according to the specific result it is allocated
to. When the indicator is measured it should be also be agreed what is its
baseline and what targets should be achieved in a frame of strategy
implementation plan.
12

3. Strategy implementation methodological guidelines
This chapter contains information about the organisation, principles and
procedures of writing the first and subsequent Corporate City Development
Plans. In this area it is crucial to create procedures of efficient communication,
to specify personal responsibility and to activate social and business groups. It
is also important to approach the Plan as the principal management tool. It is
worth pointing out that it is necessary to verify the procedures and rules
applied in the process of writing and implementing the Plan. Thanks to the
conclusions drawn from such an evaluation subsequent editions of the Plan
can be improved.
The chapter also includes the descriptions of organisation, procedures and
institutional solutions needed when updating the Plan. Surprisingly, this
process turns out to be equally challenging as the works on the initial edition.
The authors should stay away from routine solutions so that they can remain
innovative and avoid failure when starting new projects.
An important rule when implementing the Plan is to follow closely the adopted
procedures and make sure that everyone does their job. The principle idea of
this proposal is permanent analysing and drawing conclusions from
completed tasks because they form the foundation for future projects.
13

3.1. Partners participating in the plan development process
Generally understood social and economic development is the principal
strategic objective of every commune as well as it is in the best interest of each
individual. So, since the plan was to be written with the participation of all the
concerned the partners who represented various interests and capabilities had
to be selected very carefully. Such type of cooperation is the basis of the
participation method which is considered to be highly effective.
At the same time the success in writing a good plan depended on such
allocation of competences that enabled experts to deal with analytic and
conceptual work, while politicians and social partners could express their
preferences in decision-making.
The list of the participants in the Plan development process consisted of the
representatives of:
• the City residents,
• key business groups,
• public institutions in charge of local development,
• self-government officials, local politicians,
• non-governmental organisations – especially the social and economic
ones.
Also, specialists, outside consultants took part in the works.
Local administration has to nominate the Plan coordinator. The Mayor of the
City himself and through delegated specialists is responsible for the formal
organisation and the Plan preparation. He is also in charge of logistics and the
subject-matter side of the process.
14

3.2. Process of writing the Corporate City Development Plan
3.2.1. Organization of teams dealing with the Plan development
In the process the works of preparatory and conceptual character were
separated from the decision-making at different stages of the Plan
development.
The team organisation and the allocation of tasks were based on the rule that
the selected groups of specialists performed all the works that required
professional skills according to the best practice principle. The teams
selected in such a way could quickly come to common conclusions. It should
be emphasised how vast the range of problems addressed in the Plan was.
The ability to synthesize problems is very useful in this process. Decision
makers and stakeholders are not involved in document preparatory works -
stakeholders consult The Mayor and City Council before they will take final
decisions. Detailed tasks and harmonogram of work is presented later in the
next chapter.
By the City Mayor directive the following teams should be appointed to
develop the Plan:
• The City Development Council – stakeholder group,
• Inter-sector Team of City Development Programme,
• Working Team.
3.2.2. Plan development process phases – the first edition
Phase One – team organisation and procedure adopting:
• appointing the Plan Working Team,
• appointing the Inter-sector Plan Team,
• appointing the City Development Council,
• creating the consulting group,
• adopting the Plan development procedure,
• selecting techniques and instruments to carry out the works,
• adopting a detailed schedule of the Plan development.
15

Phase Two – the assessment of the development and competitiveness level
of the City as the centre of entrepreneurship that provides its residents high
quality of life:
• collecting and processing information about the condition and
perspectives of local development, including a series of surveys,
• the analysis of the City’s condition in key areas,
• the analysis of the City Development Strategy and LED program
implementation results,
• writing reports about the analyses,
• conducting the SWOT analysis (strengths, weaknesses, opportunities
and threats), identifying key problems and defining development
priorities.
Phase three – the Plan development:
• the review of strategic objectives
• defining the Plan implementation indices (input, output, outcome and
impact) as the basis of the monitoring system of the city development
strategy implementation,
• adopting the subject-matter material scope of the Plan, including the
initial list of the strategic implementation projects.
Phase four – preparing the Plan document, consultations and the approval:
• gathering implementation projects, their assessment and selection,
• preparing the draft Plan document,
• presentation, consultations and modifications of the draft,
• adopting the resolution by the City Council.
16

3.3. Methodology of updating the Corporate City Development Plan
As it has been mentioned before, the resolution concerning the Corporate City
Development - the document of a strategic character - should not end the
cooperation among partners involved in its realisation.
3.3.1. Principal conditions for updating
The Working and Inter-sector Teams as well as the City Development Council
take over the responsibility for the Plan implementation and for its updating.
The Council should play the role of a main consultative body for the Mayor
and the City Council of Tbilisi in the process of updating the Plan.
The conditions under which the adequate updating system will be applied
strongly determine formal and organisational activities, define the Plan’s
characteristics and regulate the Plan development works:
• step-by-step character – updated annually,
• duration 3– 5 years,
• working on the Plan by means of standardised forms,
• accurate and clear criteria of the implementation projects selection,
• application of IT tools to create and update database,
• sensitivity to changes in social and economic situation as well as in
legal regulations,
• stable procedures, instruments and collective bodies (the teams, the
Council), consultations.
3.3.2. Cyclic activities
The updating should be performed annually – having in mind that not all the
data will change in a yearly cycle.
Phase I
The cycle starts with collecting necessary information about the level of social
and economic development, the strategy implementation and accompanying
phenomena. This phase also includes surveys in business and social groups.
Naturally, the more data is collected, the more reasonable further steps are. At
this stage it is vital to determine the cycles at which individual data will be
collected and to identify the sources where they can be found.
17

Phase II
As in every strategic programming process what should follow next is the
analysis of strengths, weaknesses, opportunities and external threats the City
has to face. It is a task that requires from the members of the Inter-sector
Team a lot of effort and professionalism. The natural outcome of this analysis
is the identification of key problems for Tbilisi development. Then, a
conceptual work begins in order to decide on the ways of solving these
problems, to define the priorities. These activities are performed by the Intersector
Team of the City Development Programme and the City Development
Council who define the development directions and recommend development
priorities to the President of the City.
Before the priorities are approved, the President consults the City Council
commissions, local community and selected organisations.
Phase III
After the consultation the adopted priorities are publicly announced, which is
an invitation to submit proposals of implementation projects. It is vital that the
announcement of the priority development directions is addressed to all
organisations and public administration institutions that are interested in
implementing various projects within the announced priorities. The proposed
implementation projects are submitted on standardized forms to the Working
Team whose task is to compare the projects. Then the Working Team
evaluates and selects the proposals. The evaluation and selection criteria are
first of all based on their efficiency in implementing the adopted priorities and
how well they are prepared. Then the shortlist is made of the ones that deal
with the major strategic issues. After consultations with the City Council the list
is eventually approved by the President.
18

Phase IV
The announcement of the list of the approved projects is the signal for the
bidders to send application forms. The standardized forms helps to evaluate
projects by comparing their main elements and to remain impartial. The
applications are then analysed by the Plan Inter-sector Team who finally
approves the projects that will contribute to working out the draft Corporate
City Development Plan for Tbilisi based on the implementation objectives of
the City Development Strategy. The Working Team writes the final version of
the Plan.
Then the President of the City consults various organisations and submits the
Plan for the City Council’s approval.
The implementation of the Plan requires a great deal of effort from all the
participants. The course of implementation is monitored and continually
adjusted due to changing conditions and unforeseen events.
3.3.3. Timetable
Every cycle begins with evaluation and gathering information about the
economic and social situation in Tbilisi. All these elements are repeated.
Professional evaluation of the City situation not only helps to identify the key
problems to be solved in the next edition of the Plan, but also defines the
needs of the opinion-making groups. It is easier to choose the best ways of
public intervention if the conclusions from the analysis (the survey, statistical
data analysis) are correct.
As it has been mentioned, the Corporate City Development Plans should be
developed in yearly cycles. When deciding when the works should commence
it is reasonable to take into consideration the City budget procedure and
reporting dates. It is important to remember about the deadlines of
applications to financial institutions and organisations supporting
implementation projects.
Therefore, if the starting and final date of procedure is to be chosen well, it is
important to take into consideration all these elements.
19

3.3.4. Summing-up
When updating the Corporate City development Plan it is crucial to continue
the assumptions of its first edition. It is important to focus on the analysis of
changes and the development strategy implementation level as well to draw
right conclusions. It gives the opportunity to confirm that the adopted priorities
are correct or modify them with due consideration. It also enables the
authorities to eliminate less valuable projects.
Additionally, it seems important that all the system participants avoid routine
because it could adversely affect not only the Plan, but also hinder social
participation.
It is also worth emphasising that consulting each year the priorities of the
Corporate City Development Plan with social partners encourages all parties
willing to participate in its implementation process to submit their proposals.
The participation of social partners in the process makes it possible to apply
the „multidimensional selection” method that is used when choosing priority
projects when the decision is made by a group of delegates who are
representative for a local community.
20

4. Strategy implementation tools
21

MAYOR
AND
CITY COUNCIL
Chart 4-1 Strategy Implementation Plan
OBJECTIVES
FOR
NEW PERIODS
PLAN
STRATEGY IMPLEMENTATION FRAMEWORK
APPROVAL
OF
PLAN
CAPITAL IMPROVEMENT PLAN
LOCAL TAXES AND FEES
BUDGET
DEPARTAMENTAL SERVICE PLANS
PERSONAL TARGETS
STAKEHOLDERS
GROUP
INTER
DEPARTAMENTAL
TEAM
RECOMEN
DATION OF
PRIORITY
ACTIONS
Q1
STRATEGY
REVIEW
AND
KEY
ISSUE
IDENTY
FICATION
CONSULTATION
OF
DRAFT PLAN
DRAFT
DEVELOPMENT
OF
Q2 PROJECTS
APPLICA
Q3 Q4
TIONS
FORMULATI
ON OF
DRAFT
PLAN
WORKING
TEAM
STARTEG
IMPLEMENT
ATION
REPORT
AND SOCIAL
ECONOMIC
ANALYSES
COLLECTION
AND
REVIEW
OF PROJECT
APLICA
TIONS
22

4.1. Corporate City Development Plan - responsibilities of involved partners
Table 4-1 Corporate City Development Plan - responsibilities of involved partners.
Working team Inter department team Stakeholder Group
Main task
Logistic and organizational
assistance for the process.
As time goes by, members of
the team should play more
important role as professional
specialists.
Detailed tasks
Constructing and updating city
socio-economic database.
Conducting strategy monitoring
process – analyses of
achieved targets (versus
identified measures and
indicators) and community
survey.
Technical preparations
organization of all meetings,
consultations.
Participation in all meetings
and consultations.
Preparation of TOR’s and
contracting external
consultants.
Key issues identification,
Focusing on plan concept and
presentations of draft plan
before the Stakeholder Group
Review of the materials
prepared by working team and
consultants
SWOT Analysis
Identification of key issues and
recommendation of priorities.
Measures and indicators for
strategic objectives.
Discussion on and initial
approval of the strategy
implementation draft Plan.
Participation in further
consultations and approval
process.
Discussion on the key issues;
identification of priorities for
coming period consultations
and final approval of the draft
Plan
Discussion on analysis
results.
Review of objectives for
coming planning period.
Discussion on the draft Plan
recommendation of
necessary changes.
Consultations of the draft
plan with the community.
Approval of the final draft plan
and presentation of the plan
to the Mayor and The City
Council.
23

4.2. Corporate City Development Plan – timeframe
Table 4-2 Corporate City Development Plan – timetable
The First Stage The Second Stage The Third Stage The Fourth Stage
Strategy monitoring,
competitive
assessment
Key issues
identification and
strategic objectives
review
Projects selection
Formulation of
Strategy,
Implementation Plan;
Business attitude
survey, Youth
aspirations and
professional career
opportunities survey,
Quality of live survey.
Information about
strategy
implementation plan
results.
A report on current
economic and social
situation. Pointing out
changes in respect to
the previous edition of
the report with
strategic and specific
performance
indicators.
Evaluation of Plan
implementation in the
previous year.
Pointing out
tendencies
Assessment city
competitive position.
Review of measures
and indicators of
implementation plan
objectives.
Announcement of
project request
conditions.
Collection and review
of projects requests.
Evaluation of the
projects according to
implementation plan
objectives.
Identification of
strategic projects
Announcement of the
shortlist of projects
Projects technical
preparations.
Analyses of the
projects technical and
financial implications.
Wide range
consultations of the
draft Strategy
Presentation of the
Strategy
Implementation Plan
to the City Council for
approval.
Deadline: 15th March Deadline: 30th April Deadline: 31st August Deadline: 15th
December
24

4.3. Programs card
Program :
Goal :
Description of the program :
Connection with other programs :
Possible sources of financing:
Partners, possible stakeholders:
Expected results: outcomes
Target group:
Program coordinator:
25

Connection with other strategies :
Estimated costs ( annually):
Total cost:
Program team:
Supervisor of the program:
Chairman of the team:
Members of the program working team :
Consultants:
26

4.4. Projects card
Project Title:
LED Program Type:
Brief description of the project:
Project leader ( implementer):
Beneficiaries
Potential partners and their benefits:
-
Potential contributions to the project:
-
Preconditions:
Risk factors:
Calculated expenses and financing sources Till 2006 2007 2008 2009 2010
Expenditur
es
Financing
sources
Investment costs
Exploitation costs
Local government budget
State budget
Donors
Other sources
Project results
2007
2008
2009
2010
27

4.5. Project feasibility study
I. Basic Information
1.1. Institution
1.2. Team
II. Information about the project
2.1. Title of the project
2.2. Localization
2.3. Sector
2.4. Type of project
2.5. Definition of project goals
28

III. Project identification
3.1. Detailed project description
3.2. Cooperation with other local governments and stakeholders
3.3. Project impact to local economy and community
3.4. Project impact to natural environment
3.5. Project connection with strategies
3.6. Tasks
TASK DESCRIPTION RESPONSIBLE OTHERS
Task 1
Task ....
IV. Project work plan
4.1. Description of the work plan
4.2. Graphic presentation of the work plan
TASKS TIME TIME TIME TIME TIME TIME
Task 1
Task 2
Task ..
29

V. Budget of the project
5.1. Estimated costs
5.2. Possible sources of financing
30

5.3. Detailed budget
tasks
task
description
COSTS CALCULATION
number
unit.
RATE
of units.
TOTAL COST
FINANCING SOURCES
SOURCE 1 SOURCE 2 SOURCE 3
Task 1
Task 2
Task 3
Task 4
Task 5
Task 6
Task ....
Total (GEL)
31

5.4. Cash flow analyses
5.5. Project impact analyses
VI. Additional information
VII. Attachments
32

5. Appendix – Directive of the Mayor of Tbilisi on up dating and
implementation of the Strategy Implementation Plan for Tbilisi
Directive No............. of the Mayor of Tbilisi
of .........................................................
on up-dating and implementation of the Strategy Implementation Plan for Tbilisi
Under the provisions of the Resolution No .......... of Tbilisi City Council of............................ on passing
the Strategy Implementation Plan for Tbilisi I hereby rule the following:
§ 1
I introduce the procedure of works concerning up-dating and implementing the Strategy
Implementation Plan that has been attached to this Directive.
§ 2
I appoint the following Teams
1. The Coordinating Team dealing with the Strategy Implementation Plan works. The Team is
headed by ...................
2. The Working Team
3. The Interdepartmental Team
4. Program Coordinators
§ 3
I oblige all the departments of Meria Tbilisi to cooperate with each other in developing the progressive
Strategy Implementation Plan in accordance with their assigned responsibilities stated in the
Appendix to this Directive.
§ 4
The Directive goes into effect on the day of its passage.
REASONS FOR THE DECISION
Under the provisions of the Resolution by Tbilisi City Council of ................. the Strategy
Implementation Plan for the years of ........................ has been adopted. The Strategy
Implementation Plan is a key element that integrates the city management system by linking
long-term strategic objectives with the operational activity. A long-term plan of the most
important development-oriented activities that has been founded on the priorities resulting from
the current local social and economic situation is the basis for consecutive annual activity plans
and budgets of the city. The annual mechanism of updating the Strategy Implementation Plan
makes it a system tool to manage the growth of Tbilisi. Due to the participation in the process of
diverse partners as well as to careful role distribution among specialists, social partners and
decision-makers the Strategy Implementation Plan is not only an administrative procedure, but
also a platform of cooperation for all groups that are responsible for and interested in the
development of Tbilisi. Taking into consideration the nature of the annual Plan updating mechanism,
it seems necessary to introduce a clear procedure and to define clearly personal responsibilities in
order to make consequent editions of the Strategy Implementation Plan well prepared and effective.
33

Appendix to the Mayor’s of
Tbilisi Directive
INTRODUCTORY INFORMATION
1. The Strategy Implementation Plan is progressive.
2. The Strategy Implementation Plan is a starting point for developing investment plans.
3. The Strategy Implementation Plan is updated annually. Updating involves the introduction of new
plans and updating data concerning projects that have already been included in the Plan. The
time. perspective is prolonged by one year each time the next edition of the Plan is developed.
4. Development of the Strategy Implementation Plan is always preceded by defining the local growth
priorities.
5. Every edition of the Plan is accompanied by the list of the most vital projects.
6. The selection of projects to be included in the Plan is based on the evaluation criteria adopted in
the decision-making process.
34

1. STRUCTURING TEAMS DEALING WITH THE PLAN DEVELOPMENT
In the whole process the preparatory and conceptual works have been separated from the decisionmaking
tasks on each stage of the Plan development. The teams and task separation are structured
in such a way that selected groups of specialists can perform all the tasks that require professional
background in accordance with good practice principles. If the team members are selected in this
way, they are able to come to conclusions more effectively. The scope and diversity of issues tackled
in the Plan are worth emphasising. The team members’ ability to synthetise and to analyse problems
thoroughly will be a desired feature.
The teams taking part in the Plan development:
• Working Team
• Interdepartmental Team
• Social Council
• Mayor and The City Council of Tbilisi
• Specialists commissioned to perform special tasks
The Working Team consists of 3-5 people – the employees of the Economic Policy Agency. The
Coordinator of the Working Team works is Mr Davit Darsavelidze.
This group is also a part of the Interdepartmental Team.
The Interdepartmental Team is a group having a consulting and conceptual character. It consists of
members of individual Departments of Meria – the experts on the areas that are crucial for the growth
of the City. The team is responsible for the Plan merits.
The Interdepartmental Team consists of people working in the following Meria departments:
− Economic Policy Agency
− Finance Agency
− Municipal Improvement Agency
− Property Management Agency
− Urban Planning Agency
− Transport Agency
− Social Service & Culture Agency
− Waste Management Agency
− Health & Social Affairs Agency
− Emergency Agency
− Citizenship & Integration Agency
− “Tbilisi Water” Ltd. (Municipal Enterprise)
− “Metropolitan” Ltd. (Municipal Enterprise)
The Interdepartmental team has also been joined by the administration workers from individual parts
of Tbilisi:
− Isani-Samgori
− Didube-Chughureti
− Gdani-Nadzaladevi
− Vake-Saburtalo
− Didgori
− Old Tbilisi
35

The Coordinator of the Team works is Mr Zviad Archuadze, the Director of Economic Policy Agency
Social Council – consists of leaders of social/professional groups and heads of institutions,
businesses and organisations that are important to the City. The Council plays a specific role – as a
matter of fact it is an opinion-making body, so its members cannot be appointed at random. The
Council’s structure should be an extension of the Interdepartmental Team.
2.. PLAN PREPARATION PHASES – FIRST EDITION
Phase one – Organisation of teams and adoption of the procedure
• Appointing the Working Team
• Appointing the Interdepartmental Team
• Appointing the Council of City and Commune Development
• Appointing the group of consultants
• Adopting the Plan preparation procedure
• Recognising techniques and tools to carry out works
• Adopting a detailed timetable of the Plan preparation
Phase two – The assessment of the development and competitiveness level of the City being a
centre of business activity that offers high quality of life to its residents.
• Collecting and analysing data about the present situation and perspectives of local development,
including a survey of local businesses,
• The analysis of the City situation in key areas,
• The analysis of the City Development Strategy implementation process,
• Writing reports about the analyses,
• Writing the SWOT (strengths, weaknesses, opportunities, threats) analysis, the identification of
key problems and defining the development priorities.
Phase three – the Plan preparation
• Selection of the priorities and developing the Local Development Plan,
• Defining the Plan implementation indices (of its product, result and impact) being the basis of the
strategy implementation monitoring system,
• Deciding on the material scope of the Plan, including an initial list of the strategic implementation
projects.
Phase four – Preparing the Plan document, consultations and final approval.
• Defining the rules, procedures and tools for the works on the Plan,
• Collecting the implementation projects, their evaluation and selection,
• Developing the draft Plan document,
• Presentation, consultations and modifications of the draft,
• Passing the resolution by The City Council
36

3. METHODOLOGY OF UPDATING THE LOCAL DEVELOPMENT PLAN
Passing the Local Development Plan for Tbilisi, which is a document of strategic character, does not
end the cooperation among partners involved in its implementation.
Basic elements of the updating
The Working and Interdepartmental teams and the City Social Council in a natural way take over the
responsibility for the implementation of the Plan and for its updating. In the updating process the
Council is the main opinion-making body for the Mayor and The City Council.
The terms of accurate Plan updating largely determine formal and organisational tasks and the
characteristic features of the Plan as well as the ways the Plan is developed:
• its progressive character – updated annually,
• works of the Plan documented on standard forms,
• clear and carefully chosen criteria of the implementation projects selection,
• application of IT tools to create and update bases of social and business data,
• sensitivity to changes in the social and economic situation and in legal regulations,
• stability of procedures, tools, teams (Teams, the Council), extensive consultation.
Cyclical activities
Updating is performed every year – although, obviously, not all the data change on the annual basis.
Phase I
The cycle starts with collecting information about the level of social and economic growth, the strategy
implementation as well as about the accompanying phenomena. Additionally, surveys are conducted
in the social and business groups. It is obvious that the more data is collected, the more effective
further activities will be. At this stage it is important to decide the length of the cycle at which specific
data will be collected. Also, the sources of the data should be identified.
Phase II
As in case of every strategic programming, the next activity deals with the strengths, weaknesses,
opportunities and external threats the City has to face. It is a task that requires from the
Interdepartmental Team members plenty of effort, effectiveness as well as professional expertise.
The natural outcome of this analysis is the identification of problems that are of key importance for the
growth of Tbilisi. Then the conceptual work commences in order to find out how these problems can
be solved and thus to define the priorities. These activities are performed by the Interdepartmental
Team and the Social Council of the City who defines the local development directions and
recommends development priorities to the Mayor.
Before the priorities are approved, the mayor consults them with the City Council commissions and
with chosen organisations.
Phase III
Afterwards the consultations the adopted priorities are disseminated, which is the signal for the
organisations to send in proposals of implementation projects within the frameworks of the adopted
priorities. It is important that the priority development directions are announced in an appropriate way
because the information about them should reach all the entities and public administration offices,
organisations and institutions interested in implementation of various projects concerning these
priorities. The proposals of implementation projects are submitted on standard forms to the Working
Team. The Working Team’s task is to compare these proposals. Then, the Interdepartmental Team
evaluates and selects them. The Team first of all takes into consideration the effectiveness of the
proposals in implementing the adopted priorities. Another criterion is how well the implementation
projects have been prepared. The projects that most effectively address the priorities are put on a
37

short list out of which the best, strategic projects are selected. Then, after consultations with the City
council, the Mayor finally approves and announces the winning projects.
Phase IV
The announcement of the list of the approved strategic projects is a signal for applicants to write their
applications using standard forms. The use of standard forms make it possible to assess the projects
by comparing their basic features and to remain impartial. The applications are reviewed by the
Interdepartmental team who eventually qualifies these projects that lead to the completion of the Draft
Local Development Plan for Tbilisi that is based on the adopted priorities. As a result it qualifies such
projects that will contribute to forging the Draft Local Development Plan. The final version of the Plan
is developed by the Plan Working Team.
As a consequence of these works the Mayor consults various organisations and submits the Plan to
the City Council for approval. The implementation of the Plan is a great challenge for all the
participants of the process; its progress is monitored and systematically adjusted to the occurring
changes or force majeure.
The calendar of activities
Each consecutive cycle starts with the evaluation and with the collection of data about social and
economic situation of the City, then all the above mentioned activities are repeated. Professional
evaluation of the situation not only facilitates the identification of key problems that may occur in the
next Plan edition, but also defines the needs of the opinion-making groups. Right analysis
conclusions (survey, statistical data analysis) make it possible to choose the best ways of public
intervention.
As it has been mentioned, the Local Development Plans should be written in yearly cycles. When
choosing the starting dates of works, it is important to remember about the City and Commune
budget procedure and the reporting deadlines. One of the key elements is to agree upon the final
dates of applications to financial institutions and organisations that deal with financing the
implementation projects.
.
38

COMPETENCE DISTRIBUTION IN THE PROCESS OF CREATING AND UPDATING THE LOCAL DEVELOPMENT PLAN
The Plan Working Team The Plan Interdepartmental Team The Social Council
Main task
Full technical and organisational service during
the Plan preparation
The Team members should gradually overtake
the role of external consultants and become the
main body that manages the Plan.
Detailed tasks
• To collect and analyse information necessary
for the assessment of the situation of the City
and for reaching the development strategy
goals,
• To build and run data bases necessary to
manage the City growth,
• To hold meetings, write programmes and
material packets for the meetings,
• To take minutes at the meetings
• To collect other information necessary for the
Plan development, e.g. about the effectiveness
of similar or already tested solutions,
• To participate in all the meetings of other
bodies where the Plan is discussed,
• To organise and participate in the process of
creating the Plan,
• To define the scope of possible cooperation
with the consultants.
To identify key problems and decide on the
Plan concept; to present the Plan to the
Council and other organisations
• To review materials prepared by the
Working team and the consultants,
• To conduct a SWOT analysis
• To identify and recommend the key
problems, the Plan priorities and the
strategic projects to the Social Council of
Tbilisi,
• To approve the draft Plan and to present
the Plan to the Social Council,
• To participate in the process of
consultation and approval.
To review key problems of social and
economic situation of the City, to select
priorities and adopt the final version of the
Plan
• To participate in the Plan development
through the analysis and evaluation of the
reports concerning the process,
• To select priorities around which the Plan
activities will be structured,
• To discuss the draft Plan , to present
opinion about it and to recommend
possible modifications,
• To present and consult the Plan in their
environments,
• To approve the final version of the Plan,
• To present the Plan to the City Council.
39

4. THE TIMETABLE OF WORKS ON THE LOCAL DEVELOPMENT PLAN
THE TIMETABLE OF THE PROCESS OF UPDATING AND IMPLEMENTING THE LOCAL DEVELOPMENT PLAN – A
YEARLY CYCLE
PHASE I PHASE II PHASE III PHASE IV
The assessment of the level of
social and economic growth in
Tbilisi and of the City
Development Strategy
implementation
Identification of the key problems
and defining the priorities of
development
Collecting proposed
implementation projects;
making a shortlist; final
selection of the strategic
projects
Preparing applications of
strategic projects
Development and approval of the
draft Local Development Plan
• The report describing the
current social and economic
situation – in all areas of the
City life; Highlighting the
changes in relation to the
previous edition of the report
(last year report),
• Information about the level of
implementation of the City
Development Strategy,
• The description of new
phenomena; entering related
data to the base; Expanding
and improving the system of
data base application.
• The assessment of the Plan
implementation in the previous
year,
• The assessment of data
resulting from the report;
highlighting the trends and
deviations; the SWOT analysis,
• Identifying key problems;
defining activity priorities;
adopting the Plan
implementation indicators,
• Recommending priorities, their
consultation and approval,
• Announcing the priorities,
• Collecting the proposed
Plan implementation
projects on special
standard forms,
• The evaluation, and
selection of the projects;
deciding if they conform
with the Plan priorities,
• Choosing the projects of
the greatest importance –
the set of strategic
projects,
• Announcing the final list of
these projects.
• Development of the strategic
projects with the use of
special standard forms,
• Forging the draft Local
development Plan,
• Submitting it to the selected
organisations for consultation
and approval; introducing
possible modifications; the
approval,
• Presenting the Plan to the
City Council with a view of
passing the suitable
resolution.
• Announcing the new invitation
to tender projects for the new
edition of the Plan.
to 15 March to 30 April to 31 August to 15 December
40

5. CRITERIA OF SELECTING PROJECTS FOR THE PLAN
In the process of developing the Plan the proposed projects need to be assessed. The teams
participating in the process of writing the Plan are responsible for the evaluation of the projects from
the technical and subject-matter point of view. The subject-matter analysis indicates those projects
that will contribute the most to reaching the projected goals.
The subject-matter assessment will be carried out in two stages:
- the first stage leading to the decision which priorities are the most important,
- the second stage, defining how individual project will contribute to reaching the adopted priorities.
The Interdepartmental and Working Teams decide about the importance of each priority, marking
them from 1 to 6.
On the second stage each of the projects will be related to the priorities by another mark, from 0 to 3.
The scale of assessing the projects depending on how they meet the priorities (from 0 to 3 points)
reflects the following assumptions:
0 – the project is not related to the priorities whatsoever;
1 – there is a weak link between the project and the priority,
2 – the project will significantly improve on a micro scale (locally, temporarily, in relation to a specific
group of beneficiaries) the present situation in the priority area,
3 – the project will significantly improve the situation in the priority area throughout the whole city.
41

LOCAL
ECONOMIC
DEVELOPMENT
PLAN FOR TBILISI
MUNICIPALITY
LED STRATEGY DRAFT
Tbilisi City Hall │ Economic Policy Agency
Address: 2, Liberty Sq │ Tbilisi 0105, Georgia
Tel.:(+99532)932314 │ Fax.:(+99532)932895
E-Mail: economic@tbilisi.gov.ge
www.tbilisi.gov.ge

TABLE OF CONTENTS
Introduction ..................................................................................................................................................... 5
1. Cities matter ............................................................................................................................................. 6
1.1. Cities are key centers of new economy.............................................................................................. 6
1.2. Role of cities for national economy..................................................................................................... 8
1.3. Role of Tbilisi in Georgia in region .................................................................................................... 10
2. Cities compete with other locations.................................................................................................... 13
2.1. City competitiveness......................................................................................................................... 13
2.2. Factors of competitiveness............................................................................................................... 14
2.3. Assessment of Tbilisi competitiveness ............................................................................................. 16
3. New dimension of city policies ( on the way to knowledge base economy) .................................. 20
3.1. Skilled workforce............................................................................................................................... 20
3.2. Clusters ............................................................................................................................................ 21
3.3. Start ups ........................................................................................................................................... 25
3.4. Quality of place................................................................................................................................. 26
3.5. Tbilisi territorial structure................................................................................................................... 27
3.5.1. Basic historical stages............................................................................................................... 27
3.5.2. Spatial structure ........................................................................................................................ 28
3.5.3. New trends of Tbilisi city functional-spatial development under new social-economic conditions29
3.6. Allocation of new development projects ........................................................................................... 31
4. Tbilisi economy ..................................................................................................................................... 34
4.1. Economic active population.............................................................................................................. 34
4.2. Employment ..................................................................................................................................... 35
4.3. Number of firms by sector................................................................................................................. 37
4.4. Turnover in business sector.............................................................................................................. 38
4.5. Earnings ........................................................................................................................................... 40
4.6. General data of external trade .......................................................................................................... 42
2

4.7. Key industries of Tbilisi economy...................................................................................................... 44
4.8. Identification of key problems facing City of Tbilisi economy ........................................................... 49
5. Vision...................................................................................................................................................... 50
6. Strategic directions ............................................................................................................................... 52
7. Strategy implementation....................................................................................................................... 62
8. Strategy monitoring .............................................................................................................................. 64
3

CHARTS
Chart 1-1 Tbilisi in the region SWOT analysis ................................................................................................................................................................11
Chart 2-1 City of Kutaisi SWOT analysis.....................................................................................................................................................................18
Chart 2-2 City of Rustavi SWOT analysis...................................................................................................................................................................18
Chart 2-3 City of Batumi SWOT analysis....................................................................................................................................................................19
Chart 4-1 Employed in business sector by regions........................................................................................................................................................35
Chart 4-2 Turnover in business sector by regions in 2006 ...........................................................................................................................................38
Chart 4-3 Volume of turnover per employee in business sector in Georgia and Tbilisi............................................................................................39
Chart 4-4 Average monthly earnings in business sector by regions in 2006.............................................................................................................40
Chart 4-5 Turnover and employment in hotels in regions in 2006...............................................................................................................................44
Chart 4-6 Turnover and employment in construction in regions in 2006...................................................................................................................45
Chart 4-7 Turnover and employment in enterprises of trade in regions in 2006......................................................................................................46
Chart 4-8 Turnover and employment in Industry in regions in 2006 ..........................................................................................................................47
TABLES
Table 2-1 City of Tbilisi in the country, assessment results 17
Table 3-1 The employed by type of activity. 20
Table 3-2 Number of new registered entities by regions 25
Table 3-3 Number of new businesses by sector in Tbilisi. 25
Table 4-1 Employment in Tbilisi 36
Table 4-2 Structure of employment In Tbilisi 36
Table 4-3 Number of registered entities by kind of economic activity (by the end of year; unit). 37
Table 4-4 Number of registered entities by districts of Tbilisi 37
Table 4-5 Turnover in business sector in mln GEL 38
Table 4-6 Turnover in business sector and employment 39
Table 4-7 Earnings in business sector in Georgia and Tbilisi 40
Table 4-8 Average monthly wages in sectors 41
Table 4-9 Georgian external trade 42
Table 4-10 External trade by groups of countries 42
Table 4-11 Commodity positions by exports and import in 2006 43
Table 6-1 Programs and projects of strategic direction – Booming regional gateway 53
Table 6-2 Programs and projects of strategic direction – Time for business 55
Table 6-3 Programs and projects of strategic direction – A place to live 57
Table 6-4 Programs and projects of strategic direction – The hospitable city 59
Table 6-5 Programs and projects of strategic direction – People empower Tbilisi 61
4

Introduction
Tbilisi represents important industrial, social and cultural center of East Europe and
Caucasus region and, at the dawn of the millennium, is becoming one of the most
important transportation links for global energy carriers, information flows and trade
projects.
The construction of the Kars (Turkey)-Tbilisi-Baku (Azerbaijan) 826-kilometer railway will
probably be the most significant project in the entire Caucasus and could bring
tremendous economic dividends to the region and international economy. The railway line
has huge potential to deepen the integration of Turkey, Georgia and Azerbaijan, which, in
turn, will link them more closely with Europe and Asia.
In the Soviet era Tbilisi and Georgia were a part of centrally planned socialist economy.
Transportation system, cooperation networks, trade links were mainly developed within
internal Soviet market. And the country’s contacts with the rest of the world, including
transportation infrastructure, were led through the Soviet Union. Political reasons and
missing appropriate infrastructure not only stopped Georgia from the relations with
partners from outside the USSR but, due to the supremacy of central institutions, also
hindered bilateral contacts between the republics.
As a result of the political changes in the region transportation channels across Northern
Caucasus and Russia are closed.
Presently Georgia and Tbilisi are re-establishing their traditional central role on the route
from Asia to Europe. Not only does it require reconstructing economic and cultural links
but it is also vitally important to invest in transportation sector. Investments in the sea
harbours of Baku and Poti, the airport in Tbilisi and Baku, pipelines from Azerbaijan via
Tbilisi to Turkey, new road and railway connections from Tbilisi to Turkey and Baku will
integrate Georgia and Tbilisi into transit services and help rebuild natural cooperation
bonds.
By January 1, 2006, population of Tbilisi amounted to 1093 thousand, 15.2% of Tbilisi
population is ethnically non-Georgians. The major non-Georgian ethnic groups are
Armenians, Russians, Azeri and Sestinas.
Tbilisi represents multi-functional administrational, industrial and cultural-educational
centre of Georgia.
At the beginning of 2007 Tbilisi significantly expanded its territory incorporating suburban
areas. As a result, more housing and commercial land appeared on the market, which is
of key importance for the growth of Tbilisi metropolitan area.
5

1. Cities matter
1.1. Cities are key centers of new economy
Transformation of an industrial town into a post-industrial city is a long-lasting and
complex process. The examples of cities that have already undergone this process offer
experience that is worth using when working on Tbilisi economic development plan.
In the process of transformation three phases can be distinguished:
• crisis of a traditional industrial town,
• attracting foreign investors to the city,
• inward development based on unique identity and own resources.
The phases can overlap and their duration cannot be determined in advance. The
intensity and directions of changes depend on the local actors, their cooperation and
capability to implement plans.
The first phase include:
• a substantial amount of workforce is made redundant in industry sector,
• entrepreneurs set up service and trading companies that do not require much
capital,
• deprivation of industrial districts,
• deprivation of housing districts with low skilled communities,
• development of informal sector,
• education sector have no clear perspectives and teaching standards in new
professions.
Finding foreign investors make it possible to introduce to the economy the elements that
in the first phase are available locally, such as:
• capital,
• new technologies in production and management,
• new standards of employees’ recruitment,
• new cooperation links with other national economies,
• new products that are competitive on global markets.
6

It is hard to overestimate those benefits for the city economy that are generated by foreign
investors, but we should not forget that the reasons why those firm invest in our cit must
be thoroughly analysed. It will help us to take maximum advantage of these investments
and prevent disappointment if our expectations are unrealistic.
Foreign firms invest in order to:
• lower the production costs,
• increase the value of the invested capital,
• enter new markets,
• gain access to resources that are out of reach where they have been operating so
far.
In a longer perspective these companies transfer their business activity to new locations
that provide them with better business environment.
For a long-term competitiveness of the city economy the third phase is of key importance.
It is based on endogenic potentials and the city identity.
The development of local businesses also leads to new quality of cooperation with foreign
investors who invest their capital not only to benefit from the consumption potential of the
local market and from lower production costs, but are also interested in finding new
partners who will give them access to better solutions. It means that financial relations
change too – the investor not only bears the costs of their business activity, but also
shares their profits with a local partner.
In the second half of the 20th century the economy of Tbilisi was based on industrial
plants producing for the demand of the Soviet Union market. Cooperation links, legal
regulations, transport infrastructure and business environment were oriented at satisfying
the needs of this type of economy, therefore the change of production profile of entering
new markets were hardly possible.
After the collapse of the Soviet Union and, consequently, of the centrally managed
economy many manufacturing firms in Tbilisi lost their markets and either closed down or
reduced their employment and production. The system reform, introduction of market
economy and opening to new markets resulted in a thorough transformation of Tbilisi
economy.
Although some positive effects can be observed, the transformation process is long and
generates serious social problems and costs. In order to understand the ongoing
changes, we cannot view the problem as merely a systematic one. The economy of Tbilisi
is also influenced by other economic transformation factors that do not happen only in the
post-communist countries, but are observed all over the world. These factors are:
• globalisation and increasingly free flow of knowledge and ideas, capital, products
and services as well as people among the regions and cities of the world,
• the use of new technology by businesses, state and local governments as well as
by ordinary people,
• cultural changes in the family model and life aspirations of the young generation.
7

Due to the overlapping effects of regained independence and system transformation on
the other three universal processes both Georgia and Tbilisi are facing a great challenge.
Public officials as well as entrepreneurs and ordinary residents of Tbilisi must understand
the ongoing changes and their implications in order to take a maximum advantage of new
opportunities. They have to reduce the social costs to minimum and concentrate their
resources in the areas where the perspectives of growth are the most promising.
In order to strengthen the foundations of Georgia’s and Tbilisi’s new economic position
and to maximise the effects of the transformation system, it is vital to introduce the
following changes and reforms:
1. The deep reform of Georgian economy resulted in the fact that environment
regulators can facilitate establishing and running business on the terms equal to those
in the developed countries with market economy.
2. Building new transport and telecommunication infrastructures, that will connect
Georgia with the partners in the region and in the world, will make it possible to export
and import goods and services.
3. The reform of the education system and introducing the culture of life long learning to
instruct skilled workforce according to the standards of the global job market.
4. Investments in technical infrastructure and the city revitalisation make Tbilisi an
attractive place to live and do business.
1.2. Role of cities for national economy
City are the more and more powerful engines of the national and global economy. Two
key forces - the globalization and the commercialization of new information as well as
communications technologies - have been driving the massive changes and thus
restructuring cities. Globalization is linked to liberalized trade and the opening up of world
markets through organizations and agreements such as the Word Trade Organization or
the European Union. Global corporations continue to expand their role on the world stage
through expansion, mergers and acquisitions.
Globalization would not be possible if there had not been for the explosion of new
information technologies with mobile wireless communication, personal computers, and
networks of internet, intranet and extranet. All of these have made it possible to manage
facilities distributed around the world, for the labour to move more freely across national
boundaries, and for the information, currencies and transactions to flow smoothly to any
destination. As globalization proceeds, regional and national economies become more
closely intertwined. National boundaries have gradually become less relevant as
globalization and information technology have reduced the role of the nation state. Big
metropolises with skilled workforce, globally connected businesses have emerged as the
engines of the new economy.
Globalization, and intensive competition which is integral to it, has led to a massive
restructuring of regional economies. The widespread de-industrialization of cities,
particularly of urban cores, is clear evidence of this. As the global marketplace expands,
each city is forced to focus upon the few things that it is very good at, in which it can
successfully compete at a global scale.
8

This more recent phase of economic restructuring has been characterized by a
transformation to a knowledge economy. The future quality of life in advanced economies
depends on upgrading and moving the economy towards a concentration in high value
added activities from any industry. The key is to focus on the high order, innovation
based, high productivity activities in each industry. The quality of life and economic
development, depend on making a successful transition to a knowledge economy.
Unlike an economy based on traditional manufacturing and natural resource extraction, in
which factors such as access to raw materials may have played a central role, the
knowledge economy is driven by:
• well educated and high-skilled workforce,
• innovation – creativity, flexibility, research and development,
• entrepreneurship – mentoring, networking, strategic alliances,
• information and communications technology (ICT).
The knowledge economy is present in all segments of our society and our economy. It is
not confined to certain groups, such as university graduates, or certain industries, such as
information technology or telecommunications. Rather, the knowledge economy
represents a way of life and a way of producing goods and services that focus on
continuous improvement of the above characteristics. Even “traditional” industries, can be,
or rather should be, a part of the knowledge-based economy. Today successful
companies in older industries employ high quality design and flexible advanced
manufacturing.
Cities have always been areas of growth, the places where economic resources,
entrepreneurship, and a diverse population provided natural opportunity for starting new
economic, cultural and intellectual activities. Cities have always fostered the creativity that
produces technological advancements and new forms of commercial organizations. There
are a lot of good examples in the last century of the power of cities to create new
technological and commercial innovations, as a result of combined activities of
entrepreneurs, artists and technicians congregated in these places. What we are
witnessing now in successful North American and European cities is the concurrence of
cultural and technological creativity that drive the new economy. The multi-media
industries that have exploded in several places are example of this creative convergence.
There is an assortment of specific conditions that exist in cities and which make them a
fertile ground for innovation, creativity, and technological and commercial advancement.
The most important thing that cities can offer is the diverse pool of skilled labour required
to make large-scale and specialized production possible. Secondly, because of their size
cities should offer local markets of sufficient size for specialized goods and services to be
developed. Thirdly, because of their geographical conditions and the enhanced possibility
for formal and informal contacts of all kinds, cities are places where technology and knowhow
can spill over. Information flows easily, and chance encounters can bring together
diverse interests and expertise to create new products and services.
In this context, urban arts and cultural amenities - including not only formal events and
places such as galleries, music halls or museums, but also the vitality of its more informal
amenities like restaurants, street cafés, bookstores and outdoor festivals - becomes
tangible assets that play a role in fostering creativity and innovation.
9

Cities combine diversity – of population and resources of all kinds. Unique assets show
the innovative capacity and the bunch of possibilities of each city. Under today’s economic
conditions, in the global knowledge economy that is driven by information, creativity,
innovation and technology, when cities are at centre stage, these special urban
characteristic are of the biggest importance.
The elimination, and in some places even the reduction, of national trade barriers has
brought us to the moment when either people or businesses are choosing to locate and
expand in cities that have the mix of economic, social, political and other attributes for long
term success. As a result of urban renaissance we are witnessing the rapid growth of
many North American and European cities. Urban-based industries are the fast-growth
industries, people are moving back to cities and central governments are commencing
massive urban regeneration schemes. It more and more widely recognized that cities are
the focal points of national economies and should follow through with proactive urban
regeneration strategies and investment funding.
1.3. Role of Tbilisi in Georgia in region
Tbilisi in the region
After the collapse of the Soviet Union Georgia is regaining its traditional role in the region.
The country is situated along the transport links connecting Asia with Europe and Tbilisi
plays the role of service centre influencing Caucasus and the neighboring regions. In the
regional exchange Tbilisi tries to become the central point of:
• economic life with advanced services where the most competitive business of the
region operate from,
• political life with the head offices of international organizations and donor
organizations operating in the region,
• education and research that attract young people from the whole region,
• culture and sport with the most important sports and cultural events in the region,
• tourist industry with the largest number of visitors.
The list of Tbilisi competitors in the region includes the cities of Ukraine, Turkey, Russia,
Azerbaijan, Armenia and the countries of central Asia that aspire to the position of the
regional service centre.
Due to the political situation there are no cooperation links in the region and, therefore,
Tbilisi has no competition in Northern Caucasus as well as in the neighbouring parts of
Russia. Moreover, none of the Ukrainian cities attempts to play an active role in Caucasus
so there is no alternative for Tbilisi.
Despite dynamic economic exchange with Turkey, in its eastern part there are no strong
urban centres that could be able to compete with Tbilisi.
That leaves us with Baku and Erevan, the capital cities of Azerbaijan and Armenia as
Tbilisi’s natural and historical rivals. In Central Asia it is Kazakhstan with its strong political
and economic position that boasts the role of a regional leader. Its authorities, businesses
and organisations are very active and have achieved the position of an important
economic partner as well as the key investors in the region.
10

Kazakh cities, mainly Astana and Alma-Ata, are likely to become regional centres that
influence neighbouring countries and attract investors, events and people. Numerous
investments in Astana and the plans of further local development make the city a regional
leader. Also, the historical, institutional and demographic potential of Alma-Ata positions
this city as another significant competition in the region. The political, social and economic
situation in other countries of Central Asia results in the limited potential of other cities in
the region, so they cannot threaten the leading position of Tbilisi. Therefore, the cities
eventually included in the comparative analysis were Astana, Alma-Ata, Baku and
Erevan.
The City team and the consultants carried out the SWOT analysis of Tbilisi, relating its
position in the region to Astana, Alma-Ata, Baku and Erevan.
By means of the SWOT competitive assessment in the system of coordinates the X axis
(horizontal) the strengths and opportunities of Tbilisi were placed. Taking into
consideration the time factor and analysing the prospective changes that are likely to
happen in Tbilisi and in its rival cities the areas of threats and opportunities were placed
on the Y axis (vertical).
Tbilisi in the region
Chart 1-1 Tbilisi in the region SWOT analysis
OPPORTUNITIES
quality of life
transport and
telecommunication accessibility
skilled workforce
technical
infrastructure
cost of doing
business
institutional infrastructure
legal regulation
and policy
economic
demographic
structure
city recognition
Weaknesses
networking
social diversity
Strengths
R&D
THREATS
11

While assessing the present condition of the elementary city competitiveness factors with
a view to its weak and strong points the team pointed out a particularly weak position of
the Research and development sector and the highly unattractive traditional structure of
local economy. The team found that the capacity to start cooperation links and networking
as well as the accessibility of funds are slightly more satisfying but still poor. Also, the
qualifications of workforce, technical and institutional infrastructure, transport accessibility,
social diversity and the quality of life need to be improved.
In most cases the prospects of improvement were observed. The best opportunities are
likely to be observed in the quality of life and the transport and telecommunications
accessibility. The areas facing the most significant threats are R&D, networking and the
groups threatened by social exclusion of those who do not participate in economic and
life.
The demographic situation was assessed on a medium level. As for strong points of the
city, legal regulations, state policies and the city recognition were ranked the highest.
Other strong points included the costs of doing business, which were most likely to
improve, and the institutional infrastructure. Further reforms will make it possible to
improve legal framework. Ambitious plans of other cities may threaten the recognition of
Tbilisi as the regional centre.
In conclusion, it was pointed out that public intervention is necessary to support the
development of R&D, networking, the city recognition, workforce skills, availability of
financial resources and technical infrastructure. With regard to the technical infrastructure
it seems necessary to expand space for business activities, i.e. to developed land for
industrial, logistic and office activities with full infrastructure for services. Special attention
was paid to meeting the requirements of start-ups, mainly to regulations that make
establishing a business cheaper and less time-consuming.
12

2. Cities compete with other locations
2.1. City competitiveness
Cities are now competing at both a national and international level to attract investment,
citizens as well as visitors.
Where globalization has had a positive effect in stimulating economic growth, these
benefits have not been evenly distributed. Cities therefore continue to experience
problems of poverty and inequality. In developing cities these problems are compounded
by urbanization which has led to problems of unemployment, the proliferation of informal
settlements and environmental degradation. All cities have to face challenges because of:
1. economy transformation from the traditional to new knowledge based economy
2. limited revenue capacity of companies, citizens and local governments
3. movement of people and businesses
4. suburbanization and poverty in central areas
5. need of new education following workforce development demand
Transformation require efficient management to follow all changes, to face challenges and
to utilize resources efficiently. It's universally known that better performing cities and those
recognized as skilfully managed are more attractive for new businesses. Although there
is a lack of comparative standards with which to measure whether a city is well
performing and assess key drivers of high performance, it is obvious that ability to cope
with change, leadership and vision shown by city representatives, its economic, social and
cultural diversity as well as its ability to make effective use of human capital are the
conditioning foundations of high performing city.
The fact that some sectors achieve a critical mass in a city may be more important than
the location of a city itself. Modern cities in global position in the research and
commercialization of new technologies are not based on its location but on the fact that
this sector demonstrates a high degree of clustering and innovation, which makes the city
attractive to the others.
There are some obstacles on the way to a well managed competitive city that should be
taken into a count:
1. the importance of developing effective metropolitan policies and engaging in long term
spatial planning,
2. new strategies require strong civic leadership and vision to convince public to
changes,
3. weak citizen participation is a current and future problem and may result in declining
identification with governance structures and policies,
4. coordination and cooperation between different levels (region, neighbourhood) ,
sectors and partners (public, private and community organizations or decision
makers, professionals and stakeholders),
5. the question how far local government should be involved in local economy.
13

These and other important issues should be discussed with a local stakeholders at the
beginning when the framework is constructed. The agreement will create boundaries for
all policies and define public role in city development activities.
2.2. Factors of competitiveness
City competitiveness can be defined as the ability to attract and retain citizens, investment
and good quality work places as well as visitors. It is no less important to support city
economy in such a way that city products keep strong position on international markets.
As we continue to move towards a global knowledge economy, the competitive playing
field has shifted dramatically. City-regions are now competing with one another:
• to attract skilled labor;
• to attract new investment and quality jobs;
• for their share of global markets in the city’s export cluster.
In a global knowledge economy, skilled labor, investment and jobs are increasingly
mobile. They can move relatively easily across national boundaries, and between cities.
Products and services compete globally. Sales of these products and services can
generate added value, income, investment and jobs in the region in which they are
produced. It means that cities should build on their strengths. Notably, they can create
partnerships and employment and innovation pacts, bringing together key players within
an area – elected representatives, business leaders, NGOs, interest groups and
universities – to engage in positive and dynamic social and economic development.
Cities should tackle their weaknesses, boosting employability among those groups within
the population which find it hardest to access employment. In some cases, cities compete
directly with other cities for market share, as in the tourism industry, where the character,
attractions and events compete directly to attract tourists and their money. In other cases,
the role of cities in supporting the competitiveness of their exports is more indirect.
As globalization proceeds, cities continue to take centre stage in the global economic
theatre. The relationship between cities is primarily one of intense competition. Ultimately,
a sustained or improved quality of life in particular metropolises depends upon its ability to
compete successfully with other cities and to provide the necessary economic foundations
for growth. Competitive businesses and industries create jobs for residents and labor
force, and assessment revenue for the city that allows it to provide a range of social,
community, physical and other services and programs.
Cities often naturally provide a stimulating environment for innovation and businesses to
flourish and there are steps they can take to further foster this environment. The added
value of city-level actions is that they have more information on the specificities of the
business environment and are able to carry out smaller scale complex actions tackling
multiple interlinked problems. Those are factors that allow cities to successfully compete
with each other.
14

Different factors influence the city competitiveness. The most important ones are listed
below:
• Demographic structure.
• Skilled workforce.
• Quality of life.
• Social diversity.
• City recognition.
• City recognition and reputation.
• Costs of doing business.
• Economic structure.
• Financing.
• Networking.
• Research and development.
• Institutional infrastructure.
• Legal regulations and policies.
• Transport and telecommunication accessibility.
• Technical infrastructure.
Demographic structure - when planning long-term involvement in economic
development the demographic trends such as migration rate, income distribution or age
structure cannot be omitted since they influence the availability of workforce, the
consumers’ buying potential and local business environment.
Skilled workforce -intellectual capital, ingenuity, creativity and technical capabilities of
the labor force are key drivers of economic growth nowadays. This is why the availability
of qualified workforce is a crucial factor when analyzing city competitiveness.
Quality of life - to attract and retain top specialists needed for the city’s economy to
develop, a region needs to provide them with satisfying conditions of living. Safe and
healthy physical environment, diversified opportunities for leisure, rich urban culture,
chances of professional and personal growth are among the main factors influencing
individuals’ decisions regarding their choice of a place of stay.
Social diversity - wealth and poverty distribution, social exclusion phenomena,
community’s social capital are important factors to be taken into consideration when
choosing industries to focus on.
City recognition - being easily recognized in a region and worldwide as a city with
certain industries developed can facilitate the process of attracting international
investments, gaining business partners and entering new markets.
Economic structure - among the key factors influencing the likeliness of business to
succeed are its economic surroundings. This factor includes industrial profile of the region,
developed economy sectors, the quality and extent of supply chains, the competitiveness
of local companies, etc.
Costs of doing business - costs related to companies’ activities are often decisive
when choosing a region for opening a new branch or founding a new company. These
include state and municipal tax levels, land and resources prices, office rents, wages and
so on.
15

Financing business – such initiatives as expansion to new markets or founding new
companies very often involve finding external financial support. The availability of various
institutions providing local firms with support on different levels, from small credits to joint
venture capitals, influences the chances of product development.
Networking - the strength of inter-firm and public-private relationships between
companies, institutions and a government within the region and beyond. High networking
level can seriously boost economic activity within the region, fostering innovation and
enabling the establishment of strategic alliances. Networking can take place both on
informal (random encounters) and formal (conferences, industry associations meetings)
basis.
Institutional infrastructure - the existence and quality of services of various
institutions supporting business, such as research centers, health, education and
community services, companies dealing with finance, legal issues, marketing or
transportation are crucial for business climate in the region.
Legal regulations and policies - policies and programs supporting this kind of
activity and quality of services that public administration provides to the market. These
may include anti-trust law, regulations regarding conditions of entering the market, local
officials willingness to support the branch and such.
Transport and telecommunication accessibility - collecting information and being
able to act fast are becoming increasingly important elements in gaining competitive
advantage. That is why companies are interested in the availability of transportation
channels such as roads, airports, railways, along with telecommunication services –
internet, mobile telephony and such.
Technical infrastructure - the availability of space for doing business (from small
offices for the start-ups and SMEs to Greenfield investment land for multinationals),
electricity supply and the presence of basic urban infrastructure such as piped services
(water, sewers) are among the basic elements necessary for businesses to develop.
2.3. Assessment of Tbilisi competitiveness
The competitiveness of Tbilisi was assessed in two aspects:
• its competitiveness in relation to other Georgian cities,
• its competitiveness in relation to other cities in the region of Caucasus and central
Asia.
The assessments were carried out by means of the SWOT method, which is usually
applied by the SRGG when evaluating the competitiveness of cities.
Tbilisi in the country
In order to assess the economic situation of Georgian cities during the workshop session
of the City Team the guests from other Georgian cities evaluated current economic
changes in their environment. They took into consideration the condition of both traditional
and emerging economic sectors, demographic changes and the workforce educational
improvement, the level of technical and urban infrastructure.
The assessments were performed with Tbilisi city team and the guests from Rustavi,
Batumi and Kutaisi
16

The assessment results are presented in the table below.
Table 2-1 City of Tbilisi in the country, assessment results
Demography
Kutaisi Tbilisi. Rustawi Batumi Gori
• population 0 + 0 + -
• natural birth rate + + + + - -
• age structure - - - - - - -
• migrations - - + - 0 -
• suburbanisation 0 +- - - 0
Economy
• traditional economy - - - - + +
• new sectors + ++ + + 0
• institutional infrastructure + ++ + ++ ++
• new city products + ++ + + +
Education
• school education + +++ + ++ ++
• business supply + +++ 0 + +
• vocational trainings 0 +++ 0 + +
Financing resources
• local government ++ +++ ++ ++ ++
• business + + + ++ ++
• citizens + + + + +
Local government
• cooperation with Central ++ +++ + ++ ++
Government
• cooperation with
0 ++ + + 0
neighbor municipalities
• cooperation with citizens ++ ++ + + +
• cooperation with
+ +++ + ++ ++
business
Explanation:
+++ increase more than 75%
++ increase more than 25% less 75%
+ increase more than 25% less 1%
--- decrease more than 1% less 25%
-- decrease more than 25% less 75%
- decrease more than 75%
The results show that all the cities are changing dynamically and their situation is
improving.
In the second phase the city teams carried out the SWOT competitive assessment of their
cities in relation to other Georgian cities.
17

City of Kutaisi
Chart 2-1 City of Kutaisi SWOT analysis
OPPORTUNITIES
2 Business
organizations
6 Reputation
of the City
3 Education system
4 Infrastructure
Weaknesses
1 Workforce
Strengths
5 Quality of life
THREATS
City of Rustavi
Chart 2-2 City of Rustavi SWOT analysis
OPPORTUNITIES
4 Infrastructure
5 Quality of life
1 Workforce
6 Reputation
of the City
Weaknesses
2 Business
organizations
Strengths
3 Education system
THREATS
18

City of Batumi
Chart 2-3 City of Batumi SWOT analysis
OPPORTUNITIES
2 Business
organization
s
1 Workforce
4 Infrastructure
6 Reputation
of the City
Weaknesses
3 Education system
Strengths
5 Quality of life
THREATS
The SWOT competitive assessment is based on positioning the key factors of city
competitiveness in a coordinate system. The X axis allows to evaluate factors such as
strong and weak points of the city. The Y axis positions the same factor vertically and
demonstrates the opportunities and threats it will bring in the future. The results of the
SWOT competitive assessment for Batumi, Rustavi, Kutaisi and Tbilisi are presented
below. Finally, Tbilisi team evaluated a complete list of competitiveness factors in their city
in comparison to other cities.
19

3. New dimension of city policies ( on the way to knowledge base economy)
3.1. Skilled workforce
This indicator measures the total number of employed citizens in Tbilisi in the last four
years. It breaks down data by type of activity in order to describe the active labor market.
This data present key employment sectors in the past and show where the new jobs
emerged during four years as well as those sectors which are in urgent need of
improvement.
Table 3-1 The employed by type of activity.
(thsds. of persons) 2000 2002 2003 2004 2005
Agriculture hunting & forestry 0.7 3.0 2.6 6.8 3.1
Mining 1.4 0.5 0.1 0.6 0.5
Manufacturing 24.9 28.4 29.8 33.9 39.0
Electricity, gas & water supply 7.6 7.9 5.9 7.6 7.9
Construction 10.4 12.8 17.0 15.4 11.6
Wholesale & retail trade, repair of motor
vehicles & personal & household goods 44.5 78.2 73.3 71.1 64.4
Hotels and restaurants 5.8 5.7 6.4 7.7 6.6
Transport, storage & communication 19.5 24.6 25.8 21.2 21.9
Financial intermediation 0.2 3.4 4.1 5.2 6.1
Real estate renting & business activities 11.2 10.7 19.9 16.7 15.2
Public administration & defense, social
security 43.2 37.9 32.5 29.1
Education, healthcare & social work 37.3 64.3 63.7 67.6 69.1
Other community, social and personal
services activities 6.7 31.3 23.3 19.9 19.7
Household economy with hired
employment 5.1 5.3 6.5 8.4
Exterritorial organizations & bodies 0.3 1.9 2.9 2.5
Non identified
Total 170.2 319.5 317.0 315.6 305.1
More careful observation of the trends on the local labor market is also carried out in the
districts of Tbilisi. Its results show that every year there are less registered vacancies and,
at the same time, there are fewer job seekers. It results from the fact that people find jobs
outside the labor market institutions operating in Tbilisi. The districts where workers are
most looked for are Saburtalo-Vake oraz Didube-Chuhureti, while the district where the
number of job seekers is the highest (several times more than in other parts of the city) is
Isani-Samgori. It is worth mentioning that it is the district with the largest share of people in
productive age.
20

3.2. Clusters
Clusters has become a new tool for developing local and regional economic development
strategies. City economies can grow around dynamic clusters which offer firms the best
external spillovers and synergies. City representatives need a tool that would allow them
to identify local promising clusters, that have growth potential, can generate new work
places and can be competitive at international markets. Analysis is intended to help the
city leaders to better allocate resources intended for city economic development by
focusing investment in local business activity toward growing clusters and by convincing
firms to locate in these clusters.
The methodology that was utilized for the identification of promising industrial clusters in
Tbilisi is based on the analysis of market attractiveness developed by McKinsey &
Company to improve the allocation of corporate funds toward investments in new
markets.
An aim of McKinsey & Co’s analysis is to assess the attractiveness of a market using a
multitude of indicators. In their opinion it better reflects the complexities of a sector and
allow to understand that market attractiveness is a function of several various
components. Indicators correspond to three major -categories that are descriptive of the
market:
• market potential;
• market structure;
• external environment.
Several sub-categories fall under each of these three. The market potential is assessed
by estimating the market size, market saturation, and the market growth rate. Market
structure is composed of suppliers, buyers, substitute products, and intensity of rivalry.
The external environment comprises of the general economic conditions, political
situation, technology, and societal factors.
Each sub-category is assessed using a set of quantitative or qualitative data using
attractiveness ranges. To final evaluation they weigh each sub-category score by its
relative percentage importance to market attractiveness. The weights to each subcategory
score are subjective, depending on their relative importance, but when summed
they must add to 100 percent. The weighted scores are then summed to give a final score
of market attractiveness that ranges from a least attractive score to most attractive score.
21

The clusters have been assessed in three categories: of their market potential, market
structure and environment.
Financial cluster
The financial cluster has a high market potential and a medium potential of products
currently offered in Tbilisi. It also demonstrates a medium rate of the job market increase
as well as a medium salary level. As for the market structure the financial cluster has an
advantage of the lack of substitutes and of an easy access to new technological and
organisational solutions. The environment means mainly the application of new
technologies. The political situation in the country as well as its economic situation are
moderately attractive. Social indices indicate low attractiveness for the cluster’s services,
which probably results from the general economic situation of both local residents and
businesses. The financial cluster has received a general mark of 1.1 (the maximum mark
is 2.0), which means that the cluster’s attractiveness and its growth perspectives slightly
exceed the medium level. It should be noted, however, that the cluster is going to develop
more dynamically when the local economy and the local residents’ economic situation
grow.
Education cluster
The education cluster demonstrates high growth potential due to the increased demand
for re-training services for adults and young people’s educational needs. Because of the
economic conditions in which local educational organisations operate the existing
education product has a medium growth potential. Over-supply of teachers as well as low
salaries do not provide favourable conditions for higher benefits and more employment in
the sector. The sector market structure and its environment are highly attractive due to
many customers, the shortage of alternatives, the political situation and social
expectations. Low marks concerning the cluster’s attractiveness result from the
employment and salary growth parameters, insufficient use of new technologies as well
as from low productivity. The constructed corporate city development plans should
particularly focus on the education cluster. With its good didactic and training facilities, a
market oriented offer and highly qualified stuff the cluster will obviously become one of the
fastest growing segments of local market. Its potential will be even more important as a
support to one of the main factors of the city competitiveness, i.e. the skilled workforce
22

Real estate cluster.
The analysis of processes occurring on the real estate market requires long time series,
because their nature is related to long-term trade cycles. In case of Tbilisi is a difficult task
due to the economic transformation and political changes. Moreover, the reliability of data
collected in previous years is undermined by the discrepancies between the official and
market prices. The real estate and construction cluster in Tbilisi is characterized by high
dynamics of the market potential and high potential of product growth. The parameters
that apparently diminish its attractiveness include strong competition and people’s low
economic potential. It is obvious that an important element of the cluster growth is the
programmed aiming at keeping systematic record of available land, which will allow the
city to build a land market. The economic development is going to stimulate the real
estate market both in the housing construction sector and in office, storage and industrial
construction sector. Also the demand for new operating areas for trade companies is
going to grow.
Transportation cluster.
The attractiveness of the cluster related to transport and logistics companies results
mainly from the geographical location of Tbilisi where main Georgian and international
transport routes meet.
The globalization of manufacturing and the related supply chains increase the demand for
transport services. Logistics is getting increasingly important not only in Georgia itself, but
also as a part of international economic relations. When assessing the attractiveness of
the cluster the high marks have been given to the development potential and the products
(services) growth potential. The general mark of 1.2 places the cluster slightly below the
average, but the worldwide trends indicate that this cluster will develop dynamically in the
future.
The growth of commodity transportation logistics is first of all related to the economic
activity and is defined as the industry task. Main areas of the city intervention include
mainly giving access to developed land, promoting innovation and workforce training
Industry cluster.
The industry cluster has been marked as the least attractive. The old system left
businesses closely dependent on the Russian markets and carrying the burden of high
fixed costs. Consequently most of traditional industry companies closed down. Because
of growing productivity, that has resulted from the use of new technologies, and stronger
competition mainly of Asiatic countries the industrial sector is not very attractive. Apart
form highly rated political situation and social indices the other attractiveness parameters
of the cluster demonstrate low values. Therefore, it has been assessed well below the
average. The revitalization of buildings and warehouses that used to belong to closeddown
production plants should become one of the priorities while creating the economic
development plan for Tbilisi. Also the workers who have been made redundant should be
re-trained and instructed how to find new jobs.
23

Creative cluster
The support for the development of small and medium businesses entering new sectors
of new economy and using latest organizational and technological solutions should be a
key element of Tbilisi economic development strategy. The cluster has been marked 1.2,
which means that its attractiveness is above the average. It is its market growth potential
and the potential of created products that should be assessed particularly high. In the
situation when the traditional sectors of economy have collapsed as a result of economic
and political transformation, small and medium enterprises generate the largest number of
jobs. It is SMEs that fuel local economy and implement innovative solutions. Thanks to the
city’s support for projects dealing with micro credits, credit security funds,
entrepreneurship incubators, technology parks, promotion of local business, etc. the
cluster is likely to grow the fastest and, consequently, to create new jobs. The cooperation
of local authorities and the local business can contribute to improving not only the city
economic parameters but also the local quality of life and the standards of offered
services. In the longer perspective the companies in this sector are going to generate
larger and larger share of the added value and attract more and more external capital that
will finance new investments.
Tourist cluster
The tourist cluster has received the highest mark of all the identified potential clusters. Its
attractiveness results from the high market potential, the high potential of products
(services) growth as well as of the high quality of its environment. Thanks to its cultural,
architectural, social and historical values the tourist cluster is likely to make the city
attractive to both occasional visitors and organized groups. The large number of financial
institutions, international business corporations and support organizations operating in
Tbilisi is a good basis for creating a wide range of offers for business tourism. Thanks to
the stable political and economic situation a growing number of visitors are interested in
Tbilisi, as well as in Georgia. Tourist potential includes the historic buildings, local culture
and cuisine as well as local landscapes and nature. Also in this case the city should
initiate and support projects helping local tourist industry who are aiming at building an
integrated system of tourist information and a complex offer addressed to various types of
tourism. The integration of the environment institutions can have a positive effect on the
quality of the tourist offer
24

3.3. Start ups
Table 3-2 Number of new registered entities by regions
Number of new registered entities by regions
2002 2003 2004 2005 2006
GEORGIA- TOTAL 14585 12402 14841 25324 29978
of which
City of Tbilisi 5989 6316 8939 15534 19220
Apkhazeti A.R. 301 163 91 19 19
Ajara A.R. 1213 320 512 734 1039
Guria 386 106 126 752 549
Imereti 1686 824 781 636 1787
Kakheti 960 1866 226 306 613
Mtskheta- Mtianeti 622 386 430 444 407
Racha- Lechkhumi&Kvemo
Svaneti 206 133 75 46 80
Samegrelo- Zemo Svaneti 1280 807 955 2564 2480
Samtskhe- Javakheti 153 302 175 192 388
Kvemo Kartli 910 850 1343 3032 2417
Shida Kartli 1253 662 1533 1061 882
Table 3-3 Number of new businesses by sector in Tbilisi.
Units 2001 2002 2003 2004
Entities – total 4626 5989 6316 8939
Of which: 0 0 0 0
Agriculture, hunting and forestry 14 3 10 10
Fishing 0 2 0 1
Mining and quarrying 6 1 2 5
Manufacturing 159 185 296 348
Electricity, gas and water supply 12 1 4 3
Constructions 84 52 82 122
Wholesale and retail trade; repair of motor
vehicles, motorcycles and personal and
household goods 3361 4830 4649 7009
Hotels and restaurants 42 62 82 115
Transport, storage and communication 111 64 76 151
Financial intermediation 25 10 40 30
Real estate, renting and business activities 195 139 186 270
Public administration and defense; compulsory
social security 25 12 14 31
Education 52 30 40 26
Health and social work 40 41 34 49
Other community, social and personal service
activities 499 557 801 768
Private households with employed persons 0 0 0 0
Extra-territorial organizations and bodies 1 0 0 1
25

From the city’s economic policy point of view the dynamics and industrial structure of new
businesses are extremely important.
In each of the analyzed years the number of businesses set up in Tbilisi grew. The only
industry where this dynamics has been slowing down is electricity, gas and water supply,
but this area is strongly controlled by the state and free market principles are non-existent
there. Another such area includes agriculture, hunting and forestry, i.e. industries that are
not technologically advanced and therefore not attractive. The third sector of poor
dynamics is education. In this case the reason for slower growth of businesses is heavy
saturation of the market with traditional educational services (schools, universities). The
number of businesses in other areas is increasing. Thus it seems necessary to carry out
further research in order to answer the question how long newly established companies
can survive and how they will develop in the future.
3.4. Quality of place
The Government of Georgia established the amounts of social assistance for the families
below the poverty margin which depend on the number of members of registered socially
vulnerable families at the moment of allocation of the welfare benefit.
The amounts are as follows: for single-member families – 38 GEL; for two-member
families – 55 GEL; for three-member families – 70 GEL; for four-member families – 85
GEL; for five-member families – 100 GEL; for six-member families – 115 GEL; for sevenmember
families – 125 GEL. For the families with eight and more members 10 GEL
assistance is added for the eighth and each additional member.
On 30 May 2006 in Tbilisi there were 95 749 people living in 33 349 families who
considered themselves being in extreme poverty according to their socio-economic status
and who expressed the wish to receive social assistance. Both by number of families and
number of population, the majority of the registered families live in Gldani-Nadzaladevi
(32.0%) and Isani-Samgori districts (23.0%), while the minority of registered families
inhabit Vake-Saburtalo district (12.4%). The statistics indicate that the living conditions of
the registered population are extremely hard. Considering the cash-based add-ins of all
types, 37.2% of total financial income of registered population are old age pensions,
27.1% - salaries and 20.1% - income from individual business activity.
According to the declared data, total income of the last one month of the registered
socially vulnerable population amounted to 3,082,604 GEL that is 32.1 GEL per person
for the registered category of population, and this indicator represents only 32.5% of
minimum living costs according to the Department of Statistics as of January 1, 2006
(19.6% under old indicators).
26

3.5. Tbilisi territorial structure
3.5.1. Basic historical stages
Contemporary territorial structure of Tbilisi was formed in the process of city historical
development as a result of internal and external factors impact. This process consists of
several emphatic chronological stages.
Feudal age (from recognition of Tbilisi as a capital city to the end of the XVIII century). The
city is developed on both embankments of the river Mtkvari, in the limited territorial
conditions – basically, within the city fence. In the end of this period can be observed the
trend of moving out of the fence in the mode of external district.
Period of Russian empire (1801-1917) - The city self-defensive surrounding is losing
significance, Tbilisi first invades in higher Plato of the right embankment of the river
Mtkvari; on the left embankment German colony is established; later occurs its and
outskirt countries incorporation into Tbilisi administrative boarders. The city acquires the
trend of linear development, basically in the upper direction of the river Mtkvari.
Coexistence of ancient “Asian” and modern “European” parts is formed like metaphoric
description of “double-face Ianus”.
Short term existence of Georgian democratic republic (1918-1921) added nothing to
Tbilisi in terms of territorial development.
Soviet period (1921-1991) was marked with emphatic increase of capital population and
its territory. All parameters of the city development were regulated by General plans; In
the Soviet period, since 1934, 3 general plans had been adopted; The calculating period
of the last of which was accounted till 2000. According to the general plan, residential
massifs, industrial-storage zones are created in the peripheries, social-cultural and
storage-technical infrastructure are developed; For the first time, attention is paid to the
urban heritage; also considerable attention is paid to the city green plants and suburban
recreational zones.
Period of Independence (1991- till now). In recent years the city has been developing on
behalf of the internal territorial resources, often, contradictional to the emerged building
process and without taking into consideration interests of the residents. Under the
conditions of reducing Tbilisi population number and beginning suburbanization, in the
end of 2006 emphatic expansion of the capital administrative boarders (recently created
Didgori region) and separating of the “Old Tbilisi” administrative region acquires a new
space to the capital urban problem. This challenge should be answered by the
announced contest on composing “general plan of Tbilisi land use”.
27

3.5.2. Spatial structure
Such immanent feature of Tbilisi spatial development as linear was naturally reflected in
the configuration of its centre. Logical Urban researches held yet in the Soviet period,
proved that entire city centre of Tbilisi is developing linear along the river Mtkvari gorge.
Localization of city forming objects and mental maps of Tbilisi residents make this fact
evident.
Central structures expose general trends of development upper of the river Mtkvari;
Although lately, the desire of allocating city forming objects within “Old Tbilisi” and in the
direction of the flow of Mtkvari has been emphasizing. Thus, Tbilisi common city center
territorially expands from the Freedom square in two directions.
First and basic, on the right embankment of the river Mtkvari implies Rustaveli Avenue,
acquires several branches at the Philharmonic buildings in the direction of Merab Kostava
and Melikishvili streets, moving into the Ilia Chavchavadze Avenue, Konstantine
Gamsakhurdia street and Vazha-Phshavela Avenue. Simultaneously center forming
functions of David the builder and Akaki Tsereteli Avenues are being developed.
The second direction of the city develops from the Freedom Square including the old city
and, then in the directions of Avlabari-Isani and Ortachala with linear branches.
Thus, the features of the Tbilisi common city center are:
• Linear and dynamic character;
• Expansion of the linear structures on behalf of the streets;
• Poor withy functional-planning links between the parallel central axises;
• Increasingly emphasized importance of the old city;
• Dispersive development of the city forming objects.
Such features of the Tbilisi centre makes difficult identification of the centre core.
More simple is pointing out the transit and commercial corridors. Tbilisi located in the
TRACECA corridor is forced to let pass international cargo flows via its embankment,
because of the damaged condition of the Tbilisi sea beyond road. These embankments,
essentially, are the only draught highways on the whole territory of Tbilisi. For now the
issue on cutting Kakheti highway till Avchala is being worked out, what will immensely
unload the city centre.
Coming out of the specific location of the Tbilisi relief (differences between the heights of
the river Mtkvari shores) widthy links are more complicated. The railway line within the city
creates the same problem; overcoming of the railway line for the aboveground transport is
possible only in two places, with making distance of 5 kilometres between them.
Implementation of viaduct in the direction of Didube-Nadzaladevi accounted in general
plan is far from realizing.
28

Coming out of the linear configuration of the territorial structure, large residential districts,
basically, were constructed in the North and North-West, also in the South-East parts of
the city. Their construction was performed on the precious agricultural lands, what was
natural in Soviet period in the conditions of extensive assimilating of the city territories.
As a result of expansion of Tbilisi territory in 2006 the capital city assimilated part of the
Mtskheta and Gardabani districts. Consequently, the diversified problem of functioning of
the country like residential areas in the joined part has become very actual. Social-cultural
and engineering-technical rehabilitation or amenities will significantly increase the volume
of Tbilisi housing fund, will improve its quality and become the fundament of broadening
the base of city revenues.
3.5.3. New trends of Tbilisi city functional-spatial development under new socialeconomic
conditions
New stage of Tbilisi functional-spatial development begins with re-establishment of
Georgia independence (1991). But, the face of contemporary capital was essentially
affected by the last period of communistic regime.
At that time, in order to facilitate the political tension in September of 1987 by the directive
bodies of Soviet Georgia was adopted document, which practically was the first one, that
admitted some construction initiative from the side of population. The enforcement of the
document was stimulated by the tragic events of 9 April of 1989; In several weeks was
issued decree by Tbilisi city council executive committee, which gave permissions to the
residents of the state housing fund to lead the additional building of balconies, verandas
and other supporting receptacles by their financial means, following particular technical
conditions. Tbilisi was covered by ugly, often unsecured additional buildings, which
acquired more and more ugly look to the unsuccessful without it blocks of mass building.
Little early, were taken first steps in the direction of making land accessible for the city
residents, outside the city giving kitchen gardens and country houses in the form of
cooperatives. In this new emerged areas land and house volumes were severely defined
by norms. City residents who desired to have own land and individual houses immediately
started construction; Tbilisi outskirt territory in the radius of 30-40 km immediately was
covered by country like residential areas, that are now in the various stages of finish.
Law project on “privatization of housing” published in September of the same year,
basically was responding to the international practice, mainly, because of working out of
the housing reform economic aspects and was giving hope for successful urban
management under the modern social-economic conditions.
29

The results of the 25 April earthquake in 2002 emphasized the complaints of the poor
proprietors of the damages houses in the direction of government. Simultaneously with
the lack of care rapid degradation of housing fund, in one trace with political and economic
stabilization, commercial housing construction began development; social (municipal,
public) housing fund was not being built in Tbilisi even till nowadays – despite the
necessity, societal requirements and international recommendations.
Commercial housing construction mainly was intending to concentrate on historically
formed, most prestigious districts such as Vake, Vera, Mtatsminda. Prestige category,
characteristic for Georgian culture, and which finally, is reflected in the prices of real
estate, acquired commercial meaning and was also reflected in some normative acts.
New multi-storied houses were often built without accounting accurate city constructive
situation, sanitary-hygienic or housing norms, despite the protests of residents. Today its
already evident, that such tightening of building in prestigious districts caused ecological
problems, surplus of individual transport, overloading of social-cultural and engineeringtechnical
infrastructure, and finally, decline of urban environment quality.
In recent years in the sector of housing construction developer activities acquired more
civilized look. It is worth to mention, that developer activities is expanding in terms of
territory and it is moving to the regions near to the centre (Saburtalo); and recently to the
regions, early considered not to be prestigious.
In the terms of above, best example is Avlabari district, which despite its features (central
position, good micro-climate, transport infrastructure, best view and exposition to the
various parts of the country), was unevenly positioned on the lower place in the
classification of prestige districts. Avlabari was being implemented such city forming
activities, as construction of the Saint Trinity Cathedral and office of the President of
Georgia. All above mentioned increased the district prestige and relatively price on the
land.
Some developers take even more accurate steps and directs its interests to yet nonprestigious
territories. As an instance of this must serve start-up project called “Ortachalis
Turfa” implemented by the “Arci” company in the south-East part of the city, and which
attracts buyers with relatively low prices and complexity of building (with the components
of social infrastructure).
But, in terms of territorial attractiveness, traditional priority is on the side of housing
construction at the edge of Tbilisi North and North-West (Bagebi, Didi Digomi), where
important territorial resources and using of former agricultural lands made possible to
create homestead building. Besides the best micro-climate conditions, prestige of this
zone was also encouraged by the construction of the new Embassy of the USA.
30

The latest situation, together with general trend, states on a new position destiny of
country like residential areas in the Tbilisi surroundings existed yet in the end of Soviet
Period. Their engineering technical and social rehabilitation will positively influence
general structure of Tbilisi housing fund and will be economically useful for the city. This
topic deserves deeper attention and more than that implementation of political projects.
In this direction really supporting factor is expansion of Tbilisi administrative boarders in
the end of 2006 on behalf of the hinterland and summer-cottage zone. on the meeting of
the 30th march of 2007 Tbilisi city council (Sakrebulo) approved enhanced new fiscal
zoning of Tbilisi, which will support developer activities in the newly joined territories and
thus, expansion of the suburbanization process. It is important, that some companies
have already taken advanced steps for construction of the residential community.
3.6. Allocation of new development projects
Moving into the new social-economic conditions caused dramatic changes of office and
commercial objects allocation terms in the city planning structure.
Market relations, mainly, were reflected in dislocation of small trading objects. In 1993 was
allowed street trade practically everywhere and in every form.. It’s important to mention,
that in the process of seeking own space on the market the profile and class of these
small objects was somehow changed. Houses ground floors which made shelters for
trading and service objects, weren’t satisfying new purpose with their first planning
structure (problem of entrance from the street; engineering equipment, sanitarian
conditions, non-existence of stores and secondary closets, etc.). many problems are
generated from arranging downstairs in the cellars, what often was managed to
accomplish using the street sidewalks. Today in the central part of the city can be noticed
internal development of the offices already allocated on the ground floor, on behalf of the
second, seldom the third floors. In terms of real estate must be underlined the fact, that
such legal persons, as a rule, don’t participate in the management of the whole house
(condominium), despite the requirements of the civic code.
Early simultaneously only with the diversification of the residential house functions, was
implemented departing, reducing of the structures of above mentioned large
organization-establishments and degovernmentation of most of their owned buildings.
Most important is the fact, that this process was being implemented omitting
municipalisation stage of the real estate, with fading the urban land problem.
Following stage of development is presented by promotion and construction of originally
mixed function buildings, when 1-2 floors were accounted on office or trade and service
objects, above which were located flats. Simultaneously some large companies were
constructing separately located headquarters.
New stage of creating and exploiting office spaces is construction of the special buildings,
what is recently observed in Tbilisi. In this direction, it’s worth to notice basically office and
trade building, which is being constructed on Ilia Chavchavadze Avenue #34, and “Axis
towers” also on I. Chavchavadze Avenue. The latest is the mode of “second hand”
architecture (such objects of curved prisms (forms) are planned in Istanbul and Astana),
but today already announced prices dictate that These office spaces will respond to the
high rate of the international classification.
31

As for the mass and wholesale large trade objects (so-called “’bazrobebi”), Two of them
Lilo and Navtlughi fairs are located in the South-East periphery of the city, and the
attempts to move other two (to Dezertirebi market and Eliava street) to the North-West
periphery had no results and the government was forced to be contended with making
them “noble” at the same places.
Although, in terms of city planning, their location will dramatically damage the city
environment. The casinos are concentrated in the central part of the city (today, as a
result of particular legislative steps only several casinos are operating in Tbilisi and there’s
an idea of moving all of them to Tskhaltubo resort – like the planned measurements in
Russia), newly opened restaurants are moving in the direction of Old Tbilisi or Automobile
highways, basically on the Mtkvari embankment and in the North-West exit of the city.
Construction of the sport-recreational objects are not following the requirements - there
are only 2 modern swimming pools in Tbilisi. It’s being implemented assimilating of the
water reservoirs in terms of amenities – here on the first place is “kus Tba” lake; It is
followed by Lisi lake and Tbilsi sea. Internal quarter mini-field (ground) network is being
expanded (basically, with artificial cover). By means of private capital new tennis ground
was built in Dighomi.
Energetically is being constructed Orthodox churches, besides the Saint Trinity grand
Cathedral, small parochial churches network will include every residential district – as
central, so peripheral. It must be separated issue of developing hotels network. World
brands of hotel economy have been wildly interested in Tbilisi. They operate in several
directions – reconstruction of already existed hotels, demolition of already existed building
and construction of the new hotels, acquiring of city forming objects and their adaptation.
At the current stage such interest from the world brands isn’t defined only by new
economic interests (operating hotels completing with guests is far from normative); It must
be defined as by future expectations, so by the presence factor of assimilating world
geography. Besides the entrance of the hotel-business grants on Tbilisi market, network
of the small hotels are being developed – due to their low prices and familiar atmosphere.
But, the main problem for the city ambitions to become tourist centre still remains nonexistence
of large, cheap hotels and hostels for mass tourism. We’ll also name
discrepancies of the city information system (including language) and catastrophic
conditions of the public toilets – as in quantity terms, so in terms of quality among the
factors biasing tourism in Tbilisi.
Under the conditions of distributing real estate, most attractive advantage of the industrial
objects was considered to be territories occupied by the latest. It was particularly essential
in the central zones and the ones near it. In the years of Independence most part of the
Tbilisi industrial objects stopped functioning; Engines and equipments were sold as black
scrap metals; And the buildings itself in terms of modern technologies, didn’t make any
sense anymore. Instead of it, increased the interests of the builders to the territories
occupied by the above mentioned objects. On some of this territory already is
implementing construction of commercial housing (for example, silk weaving plant territory
in Vera district). Together with this, still exist such large industrial zones, which don’t yet
rise interest among developers (for instance, industrial zone of Ulianovka); Converse of
such zones would be facilitated in the case of supporting steps taken by state/city.
32

Tbilisi, as a capital of the country takes functions of the central and city government, which
is reflected in the location of administrative institutional structures and relevant objects.
Central functions are mainly gathered in the centre of Tbilisi, but also there are some
exceptions. The example of territorial decentralization effort is the Constitutional Court,
moving of which was planned at first in the direction to the city of Mtskheta and now to the
city of Kutaisi. New residence of the President of Georgia is being built in the district of
Avlabari, which has a prospect for urban renewal.
As for the city administration, as a result of new reform “Greater Tbilisi” consists of 7
administrational districts. Their overwhelming sizes and the difficulties with access to the
district administrations (so-called “gamgeoba”) doesn’t respond to such fundamental
principles of the local self-government as subsidiary and, also the historically formed
tradition of structuring Tbilisi territory as natural community.
Under Tbilisi conditions it’s very important to keep public spaces. As a result of
unanalyzed and often crime like privatization, the part of such important elements of the
city space as embankments, river channel and city square moved into the hands of the
private capital. Most harmful was the privatization of such important for the city objects
against the societal opinion, as Rikhis Ubani on the left embankment of the river Mtkvari,
within the historical core of the city.
Sport-recreational objects are suffering from the attacks of the builders. It’s already
implementing or is starting building of such objects as the river Vere gorge, which was
forming as the children city “Mziuri” in the Soviet period; Hippodrome of Tbilisi, stadium
territory in Avlabari, etc. Tbilisi greenery is also under the pressure (residential house in
Alexander garden, separating territories in the park of Vake and near wood-parks for the
Embassies and Football Federation, construction of elite residential houses in Bagebi,
etc.).
Generally, may be said that Tbilisi now is in the transitional stage of getting familiar with
modern social-economic conditions and relations of its functional-spatial organization and
planning structure. Action in every particular case of urban development is an unique
combination of multi and often subjective or contradictional factors. Following the maturing
of the real estate market and generally market relations, Tbilisi spatial-territorial
development, distribution of various functions, their restructuring and formation of modern
body of the city will become more comprehensive, adequate and forecasting, what will
finally maintain economic development of Tbilisi, as a large urban centre.
33

4. Tbilisi economy
Tbilisi is on the way to becoming a regional center, Tbilisi’s relationships with the rest of
the country should naturally be transformed. The role of cities as major actors on the
world economy stage demands rethinking the whole approach to urban areas and their
role in economic growth and improving quality of life. This rethinking is required not only
within cities, but at the national level. City has not only the value of itself, but can mean
even more in context of the whole region. The realities of a global economy dictate that all
levels of government reevaluate their understanding of the role of cities, and their policies
and approaches towards cities and towns. While each city is developing its own solutions,
particular group of them should benefit from working together to develop and implement
an integrated national, approach to advancing the economies of major urban centers.
Funding and resources must now be directed toward supporting the transition to a
knowledge economy, in the same way that the government supported the resource
sector, and traditional manufacturing industries in the past. Central government
representatives need to take into account the likely impacts of their policy and program
decisions on urban economies. The emerging role of cities has been recognized round
the world and is being exploited as a engines of national economic growth. A wide range
of innovative initiatives and institutions are being put in place to more effectively respond
to the changing context for cities.
4.1. Economic active population
Economic active population
Table 4-1 Economic active population
Economic active population (thds people)
Georgia- total Tbilisi Tbilisi share %
2001 2113.3 434.5 20.6
2002 2104.2 448.5 21.3
2003 2050.8 429 20.9
2004 2041 426.9 20.9
2005 2023.9 429.8 21.2
34

Table 4-2 Economic active population / total population 2001 - 2005
4.2. Employment
While we can observe the decreasing number of economically active population in
Georgia and Tbilisi during this period, the capital has improved its situation in the last
years and its share in national economically active population has increased. It visible
that the share of economically active population in whole community is still much smaller
in Tbilisi than in the rest of the country.
Employment in business sector by regions
Chart 4-1 Employed in business sector by regions
Economic active population (thds people) / Total population (%)
Georgia- total
Tbilisi
2001 48.0 39.9
2002 48.1 41.5
2003 47.2 39.6
2004 47.3 39.3
2005 46.8 39.3
400 000
Employment in business sector in regions in 2006
300 000
100%
3,64% 1,96% 1,88% 1,37% 0,56%
3,82%
5,96%
7,75%
80%
Employment
200 000
53,76%
11,04%
8,25%
60%
Percent
40%
100 000
182 488
20%
0
ShidaKartli
Tbilisi
37 479 28 005 26 294 20 245 12 966 12 347 6 668 6 396 4 667 1 902
Imereti
Adjara
0%
Guria
Kakheti
SamegreloSvaneti
MchetaMtianeti
SamtskheJavaheti
KvemoKartli
RachaLechkhumi
35

Employment in business sector in Tbilisi
Table 4-1 Employment in Tbilisi
Employment ( thds people)
Georgia- total Tbilisi share %
2001 708.7 323.8 45.7
2002 681.7 319.5 46.9
2003 723.8 317 43.8
2004 722.4 315.8 43.7
Structure of employment
Table 4-2 Structure of employment In Tbilisi
Structure of employment In Tbilisi 2004 2005
Agriculture, Forestry, Fishing 6.8 3.1
Mining 0.6 0.5
Manufacturing 33.9 39
Electricity, gas, water supply 7.6 7.9
Constructions 15.4 11.6
Trade and Utilities 71.1 64.4
Hotels and Restaurants 7.7 6.6
Transport and storage, communications 21.2 21.9
Financial intermediation 5.2 6.1
Real estate renting, business activities 16.7 15.2
Public administration & defense 32.5 29.1
Education, Health, social services 67.6 69.1
Other community, social and personal services
activities 19.9 19.7
Private house economy with hired employment 6.5 8.4
Exterritorial organizations 2.9 2.5
Total 315.6 305.1
While the trade and utilities employ the most of workforce, their share decries. Industrial
companies after are slowly improving the crisis. The reforms reduced the public
administration share in the job market.
36

4.3. Number of firms by sector
Table 4-3 Number of registered entities by kind of economic activity (by the end of year; unit).
1997 2000 2001 2002 2003 2004
Entities – total 8411 30701 35327 41316 47632 56571
of which:
Agriculture, hunting and forestry 202 216 219 229 239
Fishing 9 9 11 11 12
Mining and quarrying 66 72 73 75 80
Manufacturing 1169* 3716 3875 4060 4356 4704
Electricity, gas and water supply 78 90 91 95 98
Constructions 582 1299 1383 1435 1517 1639
Wholesale and retail trade; repair of motor
vehicles, motorcycles and personal and
household goods 4788 15193 18554 23384 28033 35042
Hotels and restaurants 938 980 1042 1124 1239
Transport, storage and communication 256 2119 2230 2294 2370 2521
Financial intermediation 440 465 475 515 545
Real estate, renting and business activities 2340 2535 2674 2860 3130
Public administration and defense; compulsory
social security 295 320 332 346 377
Education 477 529 559 599 625
Health and social work 778 818 859 893 942
Other community, social and personal service
activities 1616 2740 3239 3796 4597 5365
Private households with employed persons 6 6 6 6 6
Extra-territorial organizations and bodies 5 6 6 6 7
Table 4-4 Number of registered entities by districts of Tbilisi
(end of year; unit) 2000 2001 2002 2003 2004
Tbilisi - total 30701 35327 41316 47632 56571
of which:
Gldani-Nadzaladevi 5105 5890 6919 7675 8296
Didube-Chugureti 7839 8937 10342 11819 14578
Vake-Saburtalo 8841 10298 12398 14405 16358
Mtatsminda-Krtsanisi 4435 5376 5925 6635 8116
Isani-Samgori 4481 4826 5732 7098 9223
Since the late 1990s the number of companies in Tbilisi, mainly the private ones, has
dynamically grown. As the above tables show the highest dynamics can be observed in
such sectors as industry, manufacturing, commerce and services. This tendency results
from the introduction of market economy and the trend is present in the whole country. In
2000 – 2004 in almost all the city districts the number of companies doubled.
37

4.4. Turnover in business sector
Turnover in business sector by regions
Chart 4-2 Turnover in business sector by regions in 2006
14 000
Turnover in business sector by regions in 2006
Turnover in mln GEL
12 000
10 000
8 000
6 000
4 000
5,8%
8,72%
68,01%
8 529
100%
3,02% 2,12% 1,79% 1,12% 0,53% 0,19%
3,57%
5,11%
80%
60%
40%
Percent
2 000
20%
0
KvemoKartli
Tbilisi
1 093
727 641 448 379 266 225 141 67 24
Adjara
ShidaKartli
Kakheti
Imereti
Guria
SamegreloSvaneti
MchetaMtianeti
SamtskheJavaheti
0%
RachaLechkhumi
The indicators show how strong economic position of Tbilisi is in the country. Tbilisi
economic share is much higher than its population’s share and the higher economic
growth strengthens Tbilisi’s future position.
Turnover in business sector in Tbilisi
Table 4-5 Turnover in business sector in mln GEL
Turnover in business sector in mln GEL
Georgia- total Tbilisi share %
2001 3975.2 2133.5 53.7
2002 4595.6 2739.7 59.6
2003 5523 3330 60.3
2004 7248.4 4455.7 61.5
2005 10076.3 6352.8 63.0
38

Turnover and employment
Table 4-6 Turnover in business sector and employment
Turnover in business sector / Employed
Georgia- total
Tbilisi
2001 5.6 6.6
2002 6.7 8.6
2003 7.6 10.5
2004 10.0 14.1
Chart 4-3 Volume of turnover per employee in business sector in Georgia and Tbilisi
2005
Volume of turnover per employee in business
sector in Georgia and Tbilisi
25906,70
33616,30
Georgia
Tbilisi
2004
22456,20
29907,20
YEARS
2003
18546,30
23504,70
2002
15252,10
19084,50
2001
15188,50
12685,30
0 10000 20000 30000 40000
Volume in GEL
Tbilisi economic share is much higher than its population’s share and the higher economic
growth strengthens Tbilisi’s future position. The turnover per employee rate shows how
much more effective Tbilisi companies are. As a result wages are also higher in Tbilisi
than in the whole country.
39

4.5. Earnings
Earnings in business sector by regions
Chart 4-4 Average monthly earnings in business sector by regions in 2006
250
Avarage monthly earnings in business sector by regions in 2006
200
Earnings in GEL
150
100
229
223
202
198
178
162
153
50
124
117
100
91
0
KvemoKartli
SamegreloSvaneti
MchetaMtianeti
SamtskheJavaheti
RachaLechkhumi
Kakheti
ShidaKartli
Tbilisi
Adjara
Imereti
Guria
Earnings in business sector in Tbilisi
Table 4-7 Earnings in business sector in Georgia and Tbilisi
Earnings in business sector ( in GEL/ month)
Georgia- total Tbilisi share %
2001 108.4 128.6 118.6
2002 119.9 132.4 110.4
2003 139.4 154.8 111.0
2004 161.6 184.9 114.4
2005 204.5 229.4 112.2
40

Table 4-8 Average monthly wages in sectors
1997 1998 1999 2000 2001 2002 2003 2004
Average monthly
wages (in GEL):
Total in the country 52,1 67,1 76,8 83,6 90,6 103,6 107,2 118,3
economy
In the state sector 43,9 55,3 62,1 63,9 70,4 75,2 78,8 91,4
In the private
sector
56,6 73,0 83,9 93,5 102,0 120,0 122,0 132,8
Average monthly
wages (in GEL):
In industry 63,8 80,6 86,7 94,0 115,1 138,4 127,3 142,1
In agriculture 36,7 41,5 51,6 89,0 82,7 81,1 82,7 76,4
In service sector 50,4 65,0 75,2 80,8 86,0 96,8 103,9 114,0
In banking financial
sector
87,1 102,2 131,4 100,6 107,6 177,1 158,6 216,7
- Rise in salaries has been observed. The best paid jobs are in the construction cluster.
The average pay in this cluster is 30% higher than in the whole Tbilisi business sector and
its salaries rose the most in the last examined years, i.e. 2005-2006. Another cluster
where the salaries are higher than the business cluster average is the industry cluster
where the significant rise in salaries – by about 50% - took place last year. The lowest
salaries, not exceeding 220 GEL, were earned in the tourist cluster, although they did rise
by 30% in the last examined year. Also, the pay level offered on this market in the three
last examined years (2004-2006) was 30% lower than the salaries in the whole business
cluster. The salaries in the trade, repair of vehicles, personal and household goods cluster
grew considerably in the last examined year (2005-2006) and are comparable with the
mean salary levels in the whole business sector. In the previous years the salaries rose
gradually, but no more than by 10% yearly.
- The comparative analysis of the turnover and employment in 2001-2006 in Tbilisi and
Georgia demonstrates a strong correlation between the processes taking place on the
examined markets in the Georgian national economy and in the economy of Tbilisi. The
tendencies observed in Tbilisi have their reflection in the tendencies happening nationally,
which is due mainly to the fact that Tbilisi economy in the area of the examined clusters
accounts for over 50% of the national turnover and employment.
41

4.6. General data of external trade
Table 4-9 Georgian external trade
General data on Georgian external trade (mln USD)
2002 2003 2004 2005 2006
Exports 345,9 461,4 646,9 865,5 992,5
Imports 795,5 1141,2 1845,6 2490 3677,8
Balance -449,6 -679,8 -1198,7 -1624,5 -2685,2
Table 4-10 External trade by groups of countries
Georgian external trade by groups of countries
2002 2003 2004 2005 2006
Total Exports 345,9 461,4 646,9 865,5 992,5
Of which:
CIS countries 168,7 224,8 327,6 407,2 394,7
Black Sea Economic Cooperation
Organization countries 180,2 250,3 343,2 498,8 505
GUAM 42,1 46,7 41,1 120,6 149,3
European Union countries 63,2 81,6 111,4 165,2 188,5
Organization of Economic Co- operation
and Development countries 155,6 212,4 272 360,7 423,1
Total Imports 795,5 1141,2 1845,6 2490 3677,8
Of which:
CIS countries 292,2 370,1 654,9 996,8 1401,5
Black Sea Economic Cooperation
Organization countries 389,3 499,4 853,2 1295,3 1953
GUAM 139,6 175 300,5 456,8 642,1
European Union countries 232,3 409,4 604,4 627,4 947,9
Organization of Economic Co- operation
and Development countries 411,4 625,3 946,8 1094 1709
The main market for Georgian products is still the CIS. During the past few years the CIS
and the EU have accounted for more than 70% of Georgia’s registered imports. Several
factors and parameters related to the prospective economic development of the country
provide sufficient grounds for dynamic expansion of export and import flows in Georgia.
However, Georgia needs to diversify its export markets, which seems eminently possible
through full utilization of its multilateral and bilateral trade arrangements as well as through
the production of internationally competitive products.
42

Table 4-11 Commodity positions by exports and import in 2006
Commodity positions
Major commodity positions by exports in 2006
thsd. USD
% in total
exports
2005 2006 2005 2006
Total Exports 865454 992544 100 100
Of which:
Ferro- alloys 80181 89792 9,3 9
Copper ores and concentrates 36386 79536 4,2 8
Ferrous waste and scrap; remelting scrap ingots
of iron or steel 84223 72427 9,7 7,3
Other nuts, fresh or dried 70298 56567 8,1 5,7
Motor cars 17915 50635 2,1 5,1
Other aircraft; spacecraft and spacecraft launch
vehicles 69025 49737 8 5
Gold unwrought or in semimanufactured forms,
or in powder form 34743 49371 4 5
Mineral or chemical fertilizers, nitrogenous 35839 46631 4,1 4,7
Wine of fresh grapes 81329 41051 9,4 4,1
Copper waste and scrap 11503 30161 1,3 3
Other products 344013 426636 39,7 43
Commodity positions
Major commodity positions by imports in 2006
thsd. USD
% in total
imports
2005 2006 2005 2006
Total Imports 2489953 3677793 100 100
Of which:
Petroleum and petroleum oils 336286 443103 13,5 12
Motor cars 178530 295322 7,2 8
Petroleum gases and other gaseous
hydrocarbons 90849 213082 3,6 5,8
Medicaments put up in measured doses 92469 114545 3,7 3,1
Wheat and meslin 45130 99063 1,8 2,7
Sugar 78194 65589 3,1 1,8
Transmission apparatus for radiotelegraphy,
radio- broadcasting or television 27083 58727 1,1 1,6
Automatic data processing machines and
units thereof 22443 46444 0,9 1,3
Motor vehicles for the transport of goods 23479 39296 0,9 1,1
Chocolate and other food preparations
containing cocoa 24821 33694 1 0,9
Other products 1570669 2268928 63,1 61,7
Georgian exports are partially concentrated on low value-added commodities such as
ferrous metals, copper, aluminum, iron steel and mineral fuels. However, the dynamics of
export seems to indicate that the concentration of exports on low value-added
commodities will decrease gradually over time.
43

4.7. Key industries of Tbilisi economy.
Hotels
Chart 4-5 Turnover and employment in hotels in regions in 2006
Value of turnover in mln GEL
80
60
40
20
Hotels turnover in regions in mln GEL in 2006
63,6
100%
80%
60%
40%
Percent
Over 80% of revenue in
the hotel industry is
generated in Tbilisi.
Two out of other
regions of Georgia, i.e.
Adjara and Mtsheta
generate app. 10% of
the turnover. The last
10% are generated by
the remaining regions.
20%
0
7,5
3,4
Tbilisi Adjara Mtsheta
Mtianeti
0,7 0,4 0,1 0,1
Guria Imereti Kakheti Racha
Lekhumi
0%
4 000
3 000
Hotels employment in regions in 2006
100%
80%
Also, the employment in
the hotel industry is the
highest in Tbilisi, but
Adjar and Mtshet are
catching up.
Employment
2 000
60%
40%
Percent
1 000
1 668
20%
1 053
0
Tbilisi
Adjara
295 264
142
60 55 40 30 29 28
0%
Mtsheta Mtianeti
Samtshe Javaketi
Samegrelo Zemo
Racha Lekhumi
Shida Kartli
Imereti
Guria
Kakheti
Kvemo Kartli
44

Construction
Chart 4-6 Turnover and employment in construction in regions in 2006
Value of turnover in mln GEL
1 200
1 000
800
600
400
Construction turnover in regions in 2006
760
100%
80%
60%
40%
Percent
In 2006 Tbilisi saw
the highest values in
Georgia of both the
turnover and the
employment in
construction industry
200
20%
0
80
Tbilisi
Adjara
44 42 37 35 21 18 16 6 4
0%
Imereti
Guria
Shida Kartli
Samtshe Javaketi
Samegrelo Zemo
Mtshketa Mtianeti
Racha Lekhumi
Kvemo Kartli
Kakheti turn
Employment
50 000
40 000
30 000
20 000
Construction employment in regions in 2006
100%
75%
50%
Percent
The construction
industry in Tbilisi
generated almost
80% of total turnover
and employed about
60% of all the
construction workers.
10 000
23 513
25%
0
Kvemo Kartli
Shida Kartli
Tbilisi
3 553 3 215 2 617 1 852 1 624 1 322 1 121 682 484 359
Adjara
0%
Imereti
Kakheti
Guria
Samegrelo Zemo
Mtshketa Mtianeti
Samtshe Javaketi
Racha Lekhumi
45

Trade
Chart 4-7 Turnover and employment in enterprises of trade in regions in 2006
Value of turnover in mln GEL
6 000
5 000
4 000
3 000
2 000
Turnover in enterprises of trade, repair of
vehicles, personal & household goods in regions
in 2006
3 693
100%
80%
60%
40%
Percent
Also in the trade
sector Tbilisi has a
leading role in the
regions of Georgia.
About 70% of total
turnover in the trade
sector are
generated in Tbilisi
1 000
20%
0
Tbilisi
422
272 194 192 146 92 86 38 22 5
0%
Adjara
Shida Kartli
Guria turn
Mtshketa Mtianeti
Samegrelo Zemo
Samtshe Javaketi
Racha Lekhumi
Imereti
Kakheti
Kvemo Kartlii
Employment
50 000
40 000
30 000
20 000
10 000
Employment in enterprises of trade, repair of
vehicles, personal & household goods in
regions in 2006
24 310
100%
80%
60%
40%
20%
Percent
Approximately 50%
of people working in
the trade sector are
employed in Tbilisi.
The fact that the
employment in other
parts of Georgia is
rather high in relation
to the declared
income means that a
lot of people in
Georgia deal with
trade to satisfy their
elementary needs
0
Kvemo Kartli
Shida Kartli
Guria_empl
Tbilisi
6 378 4 714 3 647 2 880 2 777 1 707 1 168 882 728 362
Imereti
Adjara
0%
Kakheti
Samegrelo Zemo
Samtshe Javaketi
Racha Lekhumi
Mtshketa Mtianeti
46

Industry
Chart 4-8 Turnover and employment in Industry in regions in 2006
Value of turnover in mln GEL
4 000
3 000
2 000
1 000
Industry turnover in regions in 2006
1 409
100%
75%
50%
25%
Percent
In the industry sector
Tbilisi has a leading role
in the regions of
Georgia.
Over 40% of revenue in
the industry is generated
in Tbilisi. One out of
other regions of
Georgia, i.e. Kvemo
Kartli generate app.
Over 20% of the
turnover. The last 40%
are generated by the
remaining regions.
785
0
276 237
104 99 82 73 64 36 29 13
0%
Tbilisi
Shida Kartli
Abkhazja
Guria
Samegrelo Zemo
Samtshe Javaketi
Mtshketa Mtianeti
Racha Lekhumi
Imereti
Adjara
Kakheti
Kvemo Kartli
Employment
100 000
80 000
60 000
40 000
Industry employment in regions in 2006
100%
80%
60%
Percent
The employment in the
industry is the highest in
Tbilisi, and generates
over 40% of industry
employment in Georgia.
Other leading in
employment regions are
Imereti and Kvemo Kartli
and generates no more
than 20% each.
40%
20 000
35 137
20%
0
Kvemo Kartli
Shida Kartli
Abkhazja
Samtshe Javaketi
Mtshketa Mtianeti
Samegrelo Zemo
Tbilisi
13 999
10 763
5 630 4 813 4 543 3 042 1 892 1 821 1 215 880 497
Imereti
Adjara
0%
Kakheti
Guria
Racha Lekhumi
47

A thorough analysis of the tourist, construction, industry and trade clusters gives a clear
picture of the situation and the processes that are taking place in the local economy of
Tbilisi. The importance of the examined clusters can demonstrated by means of the
following conclusions:
- the examined clusters generate locally almost 80% of the national turnover in these
clusters;
- the employment in the examined clusters accounts for 50% - 80% of the total
employment in Georgia;
- a significant rise in the turnover volume (it almost doubled both nationally and in Tbilisi) is
a common tendency for all the clusters, particularly in the observed period of 2004-2006;
- due to the dynamic growth of the examined markets a change in the employment took
place in each of them in the period of 2004-2006. The number of the jobs in the
construction cluster almost doubled (not in the last year, though). After the period of falling
figures since 2004 the industry cluster has been providing 10% more jobs annually and it
is a cluster that generates the highest employment among the examined markets. Also
the employment in the hotel industry has been growing since 2003 at a rate of 10% per
year. The market of trade, repair of vehicles, personal and household goods, after a
period of 2001 – 2005 when the employment was growing, has reduced its workforce
below 25 000 people, i.e. to the level similar to 2003;
The sector of strategic importance for the city economy is the banking sector. Although,
when compared to other analyzed industries, it does not generate many jobs, but it
employs staff that is better qualified and better paid than other business sector
employees. This is why a descriptive analysis of the banking sector in Georgia and Tbilisi
has been carried out as well. In 1994 a reform of banking sector, introduction of a two-tier
banking system (National Bank of Georgia and the commercial banks). Commercial
bank’s total assets comprise 31% of GDP and liabilities comprise 24%. The perspectives
of Georgia becoming the financial centre for the region and regional banking would create
a larger pool of capital to finance internal projects in Georgia.
48

4.8. Identification of key problems facing City of Tbilisi economy
Good outcomes reflecting the satisfying condition of Tbilisi economy, when compared to
the rest of the country, results from the fact that the city does not face any competition as
far as economic indices are concerned. Other regions perform much worse than the City
of Tbilisi.
The authors of new programmes of economic development have to consider the fact that
their impact will not be restricted only to the metropolitan area of Tbilisi, but that they will
strongly influence the national economy. The increase of economic indicators is built
mainly on the growing production of low processed goods (e.g. cement, sawn wood) and
on the export of raw materials (such as ores), which will not contribute to the economic
growth and increased competitiveness on foreign markets. Also, these segments will not
attract technology transfer and will not generate new, competitive products.
As a result of economy transformation Tbilisi lost its traditional industries that were
generating incomes and workplaces for decades. Schools, universities and supporting
institutions were organized around them. Now, when most of old factories do not operate
any more all these institutions should transform their activities or will be closed down too.
To create Tbilisi new economy profile and face competition of global markets new city
products should be identified and new institutional infrastructure should be developed to
support key city development possibilities. Cluster networks should grow around
competitive city products that will be identified. Workforce development programs should
be created to support young people entering labour market and those who need to
change or improve their qualifications. Schools and vocational training institutions should
develop new educational programs to prepare qualified workforce for the new sectors of
economy. To build foundations for knowledge-based economy the research institutions
should offer companies new management and production technologies. The whole range
of institutions is needed to offer funding to growing companies (credit, capital and
guarantees). Business networks, organizations, consulting and marketing companies will
help companies and their products enter new markets and compete with foreign
companies. Public institutions should participate in the process of supporting promotion
campaigns, offering good quality space and qualified workforce for all new generation of
firms and institution, in order to build international reputation and recognition of the city.
49

5. Vision
TBILISI
offers wide range of services and opportunities to
citizens, companies, institutions and visitors
who are living, working, learning and relaxing in the city and entire region.
TBILISI economic development strategy
right place, right time
DIRECTIONS
1. Tbilisi booming regional gateway
multicultural city, location of regional leading businesses
2. Time for business in Tbilisi
Support and space for business, money to start and grow business
3. Tbilisi place to live
Our home, Our neighborhood (ezo), Our community (ubani)
4. Tbilisi hospitable city
Improving quality services, provide needed info, prepared attraction
5. People empower Tbilisi
Future workforce, jobs for all, upgrade skills
50

TBILISI economic development strategy
right place, right time
desired
impact
• Competitive companies
• Prosperity of residents
• Growing City revenues
vision:
Tbilisi serves residents and region
strategic
directions
• Tbilisi booming regional gateway
• Time for business in Tbilisi
• Tbilisi place to live
• Tbilisi hospitable city
• People empower Tbilisi
51

6. Strategic directions
• Booming regional gateway
Directing the new potential of Tbilisi towards this aim will first of all lead to stimulating the
growth of the city as an internationally recognized metropolitan center. It can be achieved
by means of the effective use and development of its existing research, cultural, sports
and tourist potentials as well as by strengthening its role as one of the national service
centers.
Tbilisi, being a metropolitan area, boasts:
- a significant potential in science and education,
- important cultural organizations and institutions (a theater, a concert hall, a museum,
art galleries, artistic societies),
- numerous research organizations, business environment institutions (banks, trade fair
agencies, chambers of industry and commerce, the market of real property services,
business associations),
- good sports and tourist facilities,
- a convenient geographical location – at the crossroads of motor, rail and air routes.
The problems underlying the choice of the program are:
- weak links within the metropolitan area,
- broadened administrative city limits and insufficiently developed metropolitan
functions,
- missing fast road and rail network,
- insufficient transport links connecting the region and the country with the outside
world.
If Tbilisi develops in this direction, it will become a metropolitan area of regional, national
and international importance as well as it will boost its competitiveness.
The results will be:
- better inwards and outwards accessibility due to the establishment of transportation
system integrated with the airport,
- strengthened potential of the metropolitan area due to the complementary growth of
the main centers, especially in the field of research, culture and sport.
52

Under these strategy directions the following implementation programs and projects are
planned:
Table 6-1 Programs and projects of strategic direction – Booming regional gateway
Programs
1. Access point to the
region
• Tbilisi on your way
• Logistic centre
Projects
2. Regional meeting place • Calendar of regional events
• Conferences organizer guide
• Network of Caucasus cities
• Caucasus media and info centers guide
• Tbilisi convention bureau
3. You can serves the region
from Tbilisi
• Doing business in Caucasus
• Caucasus specialists data base
• We serve Caucasus – Caucasus Yellow Pages
• Financial and office centre of the region
•
53

• Time for business.
Time for business means first of all the creation of good conditions for the development of
modern economy of a regional character.
The growth of Tbilisi depends on the competitiveness of local companies and on the
number of new jobs. Unfortunately the city business life is not functioning well enough.
The proposed development tendency results from the need to remove the barriers that
local companies, both the existing ones and the set-ups, have to face. These barriers
primarily include the lack of adequate infrastructure and very poor technology transfer
from research centers. The aim is to provide the initial development impulse, trigger the
process of starting new companies and to create the image of the city as an attractive
place for doing business.
The proposed solution results mainly from problems related to the local economy such
as:
- insufficiently developed network of business environment institutions and the lack of
coordinated activities as well as the unconsolidated business community,
- no coherent system of information about services, support programs and investment
opportunities,
- poor competitiveness of companies, the lack of innovation improvement system and
the system of new technology inflow,
- poor access to starting capital,
- no leading sector that would be a driving power for the city.
The undertaken initiatives will meet the needs of Tbilisi companies to maintain their
position on the market and increase their competitiveness, create favorable conditions
for stimulating business activity of local citizens as well as encourage business
organizations to build a strong regional business center. The above will lead to the
following results:
- the increased number of companies,
- introduction and the use of new technologies in production and management,
- more jobs in the SME sector,
- the inflow of companies from the rest of the region.
The main planned initiatives are:
- the establishment and development of institutions specializing in promoting
entrepreneurship and innovation,
- building the infrastructure for business growth,
- encouraging new jobs creation,
- establishing institutions that support entrepreneurship.
54

Under these strategy directions the following implementation programs and projects are
planned:
Table 6-2 Programs and projects of strategic direction – Time for business
Programs
1. We support your
business
Projects
• We help you to start and grow your business
• We ask you about your problems and analyze
issues you face - Business attitude surveys and
analyses
• We offer you information you need - Reports
and business profiles
• We support development of promising clusters -
Clusters development
• We build digital platform for our businesses
• We talk directly with business community -
Business round tables
2. Space for your business • You can find a place to start business –
Incubator
• Space for your growing service company -
Office units
• Space for your industrial firm - Industrial units
• Home of new technologies - Technology park
• If you want to buy parcel to build your own real
estate
3. Money to start and grow
your business
4. Attracting Tbilisi to
investors
• Grants and micro credits to start business
• Loans to grow business
• Credit guaranties
• Conferences and fairs
• Targeted promotion campaigns
• Investors you are our gests – one stop shop
55

• A place to live.
The main objectives set to follow the chosen strategic city development direction are as
follows: to create conditions for a comprehensive development for Tbilisi residents, to
encourage their identification with the city as well as to create a modern and functional
urban space.
The quality of local residents’ life depends on their dwelling conditions, natural
environment and the accessibility of modern communal infrastructure. The existing
housing resources do not provide every family with a separate apartment. However, the
actual deficit may turn out to be larger because many apartment blocks have to be pulled
down due to their technical state or land development works (new roads and others).
Also, a tendency has been observed for the families to shrink in size. The city is facing
the problem of recapitalization of housing and infrastructural resources. It also has a large
share of poor quality urban space. These are mainly worn out buildings with insufficient
facilities. Some of them are in danger of collapsing and need to be immediately pulled
down. In order to lessen the housing deficit and improve local dwelling conditions it is
necessary to build new houses and to modernize most of the existing ones, taking into
consideration the need to upgrade the urban space and technical standards. What is
more, some of the residents have limited access to water supply and disposal facilities. It
seems absolutely necessary to invest in this sector in order to make the city function
smoothly and enhance the local quality of life.
The problems underlying the choice of the program are:
- a growing number of families whose situation, mainly the material one, prevents them
from maintaining their own apartment, which results in an increased demand for social
housing,
- insufficient supply of housing for moderate income families and young people,
- arrears in renovating the city material property (housing and infrastructural
resources), which has led to worsening local everyday living conditions as well as has
triggered some undesirable social phenomena,
- the need to revitalize and transform much of the urban functional space,
- insufficient technical infrastructure in the developed areas and in the areas to be
developed in future, which is hindering new constructions,
- poor offer of attractive construction lots directed to high income residents,
- downgraded natural environment resources.
The primary objective is to improve the quality of life in Tbilisi and to increase the
attractiveness of dwellings. Once this objective has been realized, the housing deficit will
decrease, its quality will improve, the number of migrants will be reduced and the local
economy will grow. The proposed activities are oriented at investors (the individual ones,
developers, housing cooperatives, real estate and city managers, the communal
infrastructure managers) and at all those who would like to settle down in Tbilisi.
56

The initiatives will be as follows:
- supporting the growth of housing market including the construction of apartments for
rent to encourage market-related mobility and the construction of apartments for social
housing purposes for the particularly disadvantaged individuals and families,
- creating a reserve of developed land for housing purposes,
- revitalization of degraded housing estates in order to upgrade local housing resources
and to protect and renovate listed historic buildings,
- supporting the transformation of post-industrial problem areas in order to animate their
economic, social and environmental potentials,
- revitalization of and enrichment of the natural environment resources and local leisure
centers,
- revitalization of the tracts of commerce and services,
- revitalization of areas degraded as a result of communal, business and military
activities,
- creation of the program of incentives encouraging the revitalization initiatives.
Under these strategy directions the following implementation programs and projects are
planned:
Table 6-3 Programs and projects of strategic direction – A place to live
Programs
Projects
1. Our home • Improving your home (lifts, doors, etc.)
• Coo financing for roof, door, lift and roof
discharging pipes repairs
• Coo financing of energy efficiency
improvements
• Buying new home
• Buy your first apartment
• We will help you to buy new apartment
when you can’t live in your current flat
2. Our neighborhood (ezo) • Great place to live
• Coo financing for technical infrastructure
• Coo financing for recreational
infrastructure
• Creating public meeting place and
cultural facilities
3. Our community (ubani) • Better services for residents
• We are living together
57

• The hospitable city.
Culture and tourism are one of the basic elements of Tbilisi attractiveness. They are also
one of the main factors determining the local quality of life and settlement decisions. This
is why in the effort to make Tbilisi a friendly and hospitable city it is so important to take
advantage of its cultural resources and create a system that would help to recognize and
promote the city internationally and to initiate a dialogue of cultures in the region while
maintaining specific symbols, values and tradition brought in by the rich Georgian
culture. It can contribute to strengthening Tbilisi’s position as a service center of an extra
regional importance.
Tbilisi and the surrounding area should meet the information requirements characteristic
for modern metropolitan areas. A complex city information including an address book and
the information about some of the local facilities and organizations is regarded as a mark
of the city and is used to promote its image. It is also an important element of tourist
promotion and a basic tool for tourism development. All the activities are aimed at a
modern and integrated City Information System (CIS) for Tbilisi and, in future, for the rest
of the metropolitan area.
The undertaken activities are meant to strengthen the position of Tbilisi as a metropolis
which is well founded in the culture of its own, of Georgia, of the Caucasus region and
outside its borders. All the actions that substantiate and encourage new cultural initiatives
and tourist attractions are expected to make Tbilisi a regional center of culture and
tourism.
The introduction of a new visual order will make getting around easier and safer for both
the visitors and the local residents (information for pedestrians). It will also improve traffic
(information for motorists), which should contribute to the city attractiveness and
accessibility.
Moreover, it has been planned to integrate the information about the city, to invest in
place and infrastructure, to create a unique and recognizable quality, to generate new
cultural and tourist products, to launch promotional campaign in the region and abroad, to
build and strengthen the tourist potential and recognisability of Tbilisi.
58

Under these strategy directions the following implementation programs and projects are
planned:
Table 6-4 Programs and projects of strategic direction – The hospitable city
Programs
Projects
1. See what Tbilisi is • We provide you needed info
• City tourism guide book
• Calendar of events
• Tbilisi tourist product info
• Tourism internet info and booking
page
• Video materials
• Study tours for tour operators
• Target countries campaign
2. Stay longer • Working in Tbilisi
• Being a student
• We are improving quality your services
• Professional guides - training
programs
• Tbilisi hospitality – training for
non professional guides
• Tbilisi quality certificates
• Tourism cluster development
• Market analyses and customer
services
• Tourism product award
• Tourism souvenir award
• We prepared attractions you can in joy
• Development of tourism paths
• Development of tourism support
infrastructure
• Support for cultural festivals and
meetings
• Tourism infrastructure and
facilities
59

• People empower Tbilisi.
This direction in the city strategic development will aim at maintaining the city’s business
position on the Georgian market as well as at improving the competitiveness of local
companies and encouraging them to offer more jobs. The activities under the strategy will
promote employment and reduce unemployment as well as they will make local residents
more employable.
Basing on the analysis of Tbilisi workforce market some vital problems have been
recognized: low employment rate, high unemployment rate and a low number of the
unemployed people who choose self-employment. Main activities will focus on
activisation of people who are unemployed or at risk of social exclusion and on
supporting these businesses who create new jobs.
This strategic development aim concentrates mainly on creating jobs for school
graduates because when jobs are difficult to find it is mainly the young people who have
just left vocational schools and have no or little professional experience who are at risk of
long-term unemployment.
The local system of education has become one of the factors generating unemployment
among young people because it does not respond to market requirements. The skills
structure of the workforce does not meet the demand since the system is not flexible
enough and the educational offer does not reflect the development tendencies of the
local business.
Nowadays the employers require practical skills rather than theoretical ones and they
want their future staff to have extra qualifications. Therefore it is necessary for the local
schools to introduce into their curriculum student job placements in order to provide their
graduates with more practical skills, which will make finding a job easier for them. So, it
seems important for the educational organizations of all levels to promote
entrepreneurship among their students.
The activities in this field will contribute to the correlation of needs and expectations of
Tbilisi business with the educational offer of local schools. The projects are also going to
increase the graduates’ competitiveness on the local workforce market.
The objective of this part of the development strategy is to decrease the number of the
unemployed graduates of vocational high schools and universities; to increase the
number of students doing job placements and the number of volunteers in local
companies; to encourage companies to create more job placement opportunities for
students; to improve IT technology level at schools – the beneficiaries of the project –
and to supply them with modern office equipment; to increase the number and improve
the quality of job advisors.
60

Under these strategy directions the following implementation programs and projects are
planned:
Table 6-5 Programs and projects of strategic direction – People empower Tbilisi
Programs
Projects
1. Future workforce • What the labor market will offer you?
• Youth Survey
• Workshops and debates on labor market
changes
• Education – business round table
• How you can become a good specialist?
• Carrere paths for most needed professions
• Best pupils and students fellowship
• Want you be a businessman?
• Best business idea awards
• Workshops and debates on new economy
2. You can upgrade your
skills
• How to find a job?
• Labor market information system with an
internet portal and one stop shop
• Jobs data base
• Labor market survey
• How to upgrade your skills?
• Preparation of CV and interview with
employer – workshops
• Language and IT trainings
• Support for school and training institutions
preparing citizens for work opportunities
• How you can upgrade or change your qualifications?
• Data base on vocational trainings
• Vocational trainings for most needed
specialists
• Labor fairs.
3. Jobs for all • Financing for new work places.
• City needs you .
• You can take care for your neighborhood (ubani).
61

7. Strategy implementation
An important rule when implementing the Plan is to follow closely the adopted procedures
and make sure that everyone does their job. The principle idea of this proposal is
permanent analysing and drawing conclusions from completed tasks because they form
the foundation for future projects.
The list of the participants in the Plan development process consisted of the
representatives of:
• the City residents,
• key business groups,
• public institutions in charge of local development,
• self-government officials, local politicians,
• non-governmental organisations – especially the social and economic ones.
Also, specialists, outside consultants took part in the works.
Local administration has to nominate the Plan coordinator. The Mayor of the City himself
and through delegated specialists is responsible for the formal organisation and the Plan
preparation. He is also in charge of logistics and the subject-matter side of the process.
In the process the works of preparatory and conceptual character were separated from
the decision-making at different stages of the Plan development.
The team organisation and the allocation of tasks were based on the rule that the selected
groups of specialists performed all the works that required professional skills according to
the best practice principle. The teams selected in such a way could quickly come to
common conclusions. It should be emphasised how vast the range of problems
addressed in the Plan was. The ability to synthesize problems is very useful in this
process. Decision makers and stakeholders are not involved in document preparatory
works - stakeholders consult The Mayor and City Council before they will take final
decisions.
By the City Mayor directive the following teams should be appointed to develop the Plan:
• The City Development Council – stakeholder group,
• Inter-sector Team of City Development Programme,
• Working Team.
Phase One – team organisation and procedure adopting:
• appointing the Plan Working Team,
• appointing the Inter-sector Plan Team,
• appointing the City Development Council,
• creating the consulting group,
• adopting the Plan development procedure,
• selecting techniques and instruments to carry out the works,
62

• adopting a detailed schedule of the Plan development.
Phase Two – the assessment of the development and competitiveness level of the City
as the centre of entrepreneurship that provides its residents high quality of life:
• collecting and processing information about the condition and perspectives of
local development, including a series of surveys,
• the analysis of the City’s condition in key areas,
• the analysis of the City Development Strategy and LED program implementation
results,
• writing reports about the analyses,
• conducting the SWOT analysis (strengths, weaknesses, opportunities and
threats), identifying key problems and defining development priorities.
Phase three – the Plan development:
• the review of strategic objectives
• defining the Plan implementation indices (input, output, outcome and impact) as
the basis of the monitoring system of the city development strategy
implementation,
• adopting the subject-matter material scope of the Plan, including the initial list of
the strategic implementation projects.
63

Phase four – preparing the Plan document, consultations and the approval:
• gathering implementation projects, their assessment and selection,
• preparing the draft Plan document,
• presentation, consultations and modifications of the draft,
• adopting the resolution by the City Council.
8. Strategy monitoring
As it has been mentioned before, the resolution concerning the Corporate City
Development - the document of a strategic character - should not end the cooperation
among partners involved in its realisation.
The Working and Inter-sector Teams as well as the City Development Council take over
the responsibility for the Plan implementation and for its updating. The Council should play
the role of a main consultative body for the Mayor and the City Council of Tbilisi in the
process of updating the Plan.
The conditions under which the adequate updating system will be applied strongly
determine formal and organisational activities, define the Plan’s characteristics and
regulate the Plan development works:
• step-by-step character – updated annually,
• duration 3– 5 years,
• working on the Plan by means of standardised forms,
• accurate and clear criteria of the implementation projects selection,
• application of IT tools to create and update database,
• sensitivity to changes in social and economic situation as well as in legal
regulations,
• stable procedures, instruments and collective bodies (the teams, the Council),
consultations
The updating should be performed annually – having in mind that not all the data will
change in a yearly cycle.
Phase I
The cycle starts with collecting necessary information about the level of social and
economic development, the strategy implementation and accompanying phenomena.
This phase also includes surveys in business and social groups. Naturally, the more data
is collected, the more reasonable further steps are. At this stage it is vital to determine the
cycles at which individual data will be collected and to identify the sources where they can
be found.
64

Phase II
As in every strategic programming process what should follow next is the analysis of
strengths, weaknesses, opportunities and external threats the City has to face. It is a task
that requires from the members of the Inter-sector Team a lot of effort and
professionalism. The natural outcome of this analysis is the identification of key problems
for Tbilisi development. Then, a conceptual work begins in order to decide on the ways of
solving these problems, to define the priorities. These activities are performed by the Intersector
Team of the City Development Programme and the City Development Council who
define the development directions and recommend development priorities to the President
of the City.
Before the priorities are approved, the President consults the City Council commissions,
local community and selected organisations.
Phase III
After the consultation the adopted priorities are publicly announced, which is an invitation
to submit proposals of implementation projects. It is vital that the announcement of the
priority development directions is addressed to all organisations and public administration
institutions that are interested in implementing various projects within the announced
priorities. The proposed implementation projects are submitted on standardized forms to
the Working Team whose task is to compare the projects. Then the Working Team
evaluates and selects the proposals. The evaluation and selection criteria are first of all
based on their efficiency in implementing the adopted priorities and how well they are
prepared. Then the shortlist is made of the ones that deal with the major strategic issues.
After consultations with the City Council the list is eventually approved by the President.
Phase IV
The announcement of the list of the approved projects is the signal for the bidders to send
application forms. The standardized forms helps to evaluate projects by comparing their
main elements and to remain impartial. The applications are then analysed by the Plan
Inter-sector Team who finally approves the projects that will contribute to working out the
draft Corporate City Development Plan for Tbilisi based on the implementation objectives
of the City Development Strategy. The Working Team writes the final version of the Plan.
Then the President of the City consults various organisations and submits the Plan for the
City Council’s approval.
The implementation of the Plan requires a great deal of effort from all the participants. The
course of implementation is monitored and continually adjusted due to changing
conditions and unforeseen events.
Timetable
Every cycle begins with evaluation and gathering information about the economic and
social situation in Tbilisi. All these elements are repeated. Professional evaluation of the
City situation not only helps to identify the key problems to be solved in the next edition of
the Plan, but also defines the needs of the opinion-making groups. It is easier to choose
the best ways of public intervention if the conclusions from the analysis (the survey,
statistical data analysis) are correct.
As it has been mentioned, the Corporate City Development Plans should be developed in
yearly cycles. When deciding when the works should commence it is reasonable to take
into consideration the City budget procedure and reporting dates. It is important to
remember about the deadlines of applications to financial institutions and organisations
supporting implementation projects.
65

LOCAL
ECONOMIC
DEVELOPMENT PLAN
FOR TBILISI
MUNICIPALITY
DETAILED ACTION PLAN
OF LED STRATEGY
IMPLEMENTATION
Tbilisi City Hall │ Economic Policy Agency
Address: 2, Liberty Sq │ Tbilisi 0105, Georgia
Tel.:(+99532)932314 │ Fax.:(+99532)932895
E-Mail: economic@tbilisi.gov.ge
www.tbilisi.gov.ge

TABLE OF CONTENTS
1. Role of Tbilisi for national economy...................................................................................................... 4
2. Changes of Tbilisi territorial structure in result of economy transition and strategy implementation 8
3. Vision for Tbilisi Economic future ....................................................................................................... 13
4. Strategic initiatives................................................................................................................................ 14
5. Strategy implementation....................................................................................................................... 15
5.1. Tbilisi booming regional gateway action plan ................................................................................... 15
5.2. Time for business in Tbilisi action plan ............................................................................................. 19
5.3. Tbilisi place to live action plan........................................................................................................... 25
5.4. Tbilisi hospitable city action plan....................................................................................................... 28
5.5. People empower Tbilisi action plan .................................................................................................. 31
6. Strategy implementation principles .................................................................................................... 35
2

TABLES
Table 5-1 Tbilisi booming regional gateway – action plan ............................................................................................................................................16
Table 5-2 Time for business in Tbilisi – action plan ......................................................................................................................................................20
Table 5-3 Tbilisi place to live – action plan.....................................................................................................................................................................26
Table 5-4 Tbilisi hospitable city – action plan..................................................................................................................................................................29
Table 5-5 People empower Tbilisi – action plan............................................................................................................................................................32
3

1. Role of Tbilisi for national economy
City are the more and more powerful engines of the national and global economy. Two
key forces - the globalization and the commercialization of new information as well as
communications technologies - have been driving the massive changes and thus
restructuring cities. Globalization is linked to liberalized trade and the opening up of world
markets through organizations and agreements such as the Word Trade Organization or
the European Union. Global corporations continue to expand their role on the world stage
through expansion, mergers and acquisitions.
Globalization would not be possible if there had not been for the explosion of new
information technologies with mobile wireless communication, personal computers, and
networks of internet, intranet and extranet. All of these have made it possible to manage
facilities distributed around the world, for the labour to move more freely across national
boundaries, and for the information, currencies and transactions to flow smoothly to any
destination. As globalization proceeds, regional and national economies become more
closely intertwined. National boundaries have gradually become less relevant as
globalization and information technology have reduced the role of the nation state. Big
metropolises with skilled workforce, globally connected businesses have emerged as the
engines of the new economy.
Globalization, and intensive competition which is integral to it, has led to a massive
restructuring of regional economies. The widespread de-industrialization of cities,
particularly of urban cores, is clear evidence of this. As the global marketplace expands,
each city is forced to focus upon the few things that it is very good at, in which it can
successfully compete at a global scale.
This more recent phase of economic restructuring has been characterized by a
transformation to a knowledge economy. The future quality of life in advanced economies
depends on upgrading and moving the economy towards a concentration in high value
added activities from any industry. The key is to focus on the high order, innovation
based, high productivity activities in each industry. The quality of life and economic
development, depend on making a successful transition to a knowledge economy.
Unlike an economy based on traditional manufacturing and natural resource extraction, in
which factors such as access to raw materials may have played a central role, the
knowledge economy is driven by:
• well educated and high-skilled workforce,
• innovation – creativity, flexibility, research and development,
• entrepreneurship – mentoring, networking, strategic alliances,
• information and communications technology (ICT).
4

On its way to becoming a regional center, Tbilisi’s relationships with the rest of the country
should naturally be transformed. The role of cities as major actors on the world economy
stage demands rethinking the whole approach to urban areas and their role in economic
growth and improving quality of life. This rethinking is required not only within cities, but at
the national level. City has not only the value of itself, but can mean even more in context
of the whole region. The realities of a global economy dictate that all levels of government
reevaluate their understanding of the role of cities, and their policies and approaches
towards cities and towns. While each city is developing its own solutions, particular group
of them should benefit from working together to develop and implement an integrated
national, approach to advancing the economies of major urban centers.
Funding and resources must now be directed toward supporting the transition to a
knowledge economy, in the same way that the government supported the resource
sector, and traditional manufacturing industries in the past. Central government
representatives need to take into account the likely impacts of their policy and program
decisions on urban economies. The emerging role of cities has been recognized round
the world and is being exploited as a engines of national economic growth. A wide range
of innovative initiatives and institutions are being put in place to more effectively respond
to the changing context for cities.
Good outcomes reflecting the satisfying condition of Tbilisi economy, when compared to
the rest of the country, results from the fact that the city does not face any competition as
far as economic indices are concerned. Other regions perform much worse than the City
of Tbilisi.
As a result of economy transformation Tbilisi lost its traditional industries that were
generating incomes and workplaces for decades. Schools, universities and supporting
institutions were organized around them. Now, when most of old factories do not operate
any more all these institutions should transform their activities or will be closed down too.
To create Tbilisi new economy profile and face competition of global markets new city
products should be identified and new institutional infrastructure should be developed to
support key city development possibilities. Cluster networks should grow around
competitive city products that will be identified. Workforce development programs should
be created to support young people entering labour market and those who need to
change or improve their qualifications. Schools and vocational training institutions should
develop new educational programs to prepare qualified workforce for the new sectors of
economy. To build foundations for knowledge-based economy the research institutions
should offer companies new management and production technologies. The whole range
of institutions is needed to offer funding to growing companies (credit, capital and
guarantees). Business networks, organizations, consulting and marketing companies will
help companies and their products enter new markets and compete with foreign
companies. Public institutions should participate in the process of supporting promotion
campaigns, offering good quality space and qualified workforce for all new generation of
firms and institution, in order to build international reputation and recognition of the city.
5

It is of key importance for the city development to attract capital in the following areas. In
order to improve the conditions of business activity and the quality of life it is most
important to invest in technical infrastructure:
• transport infrastructure,
• telecommunication infrastructure,
• utilities.
In order to improve competitiveness of the economy the following investments in
institutional infrastructure are necessary:
• institutions facilitating access to funding,
• institutions of labour market and workforce development,
• institutions giving SME access to technical assistance,
• networking and marketing organisations,
• know- how and technology transfer institutions,
• space for work with service provided.
To set up new firms and attract investors business space is necessary for:
• offices,
• retail,
• warehouses,
• industrial units,
• hotels and restaurants,
• plots of land with infrastructure,
• houses and apartments.
The city can stimulate investment in these three areas in many ways. Some of these
investments belong to the private sector, others will remain public investments. Part of the
investments will be done by national investors, while another part of the capital will come
from international markets.
For the last twenty years we have been observing changes happening in the cities of
Central and East Europe which have abandoned centrally planned economy and are
joining global cooperation and competition. In the recent years in Georgia strategic
investments in technical infrastructure have been done with both public and private
money. Many international donors have started programmes building institutional
infrastructure for the new economy. We can observe a boom on Tbilisi real estate market
where, apart from housing estates, new office and shopping space has been built. New
hotels, restaurants as well as factories and warehouses are being constructed as well.
Some of the old industrial buildings in the inner city after renovation have been converted
into moderate class offices and shops.
Progressing economic reform and further political stabilisation will help Tbilisi go through
the process of economic change, similar to the one experienced by the cities of East
Europe. Since Georgia has joined the global economy and the skilled workforce
resources in CEE have been running out, soon new investors will get interested in
Caucasus and Tbilisi.
Presently, Tbilisi sees processes typical for the second phase of economy transformation
described above. In the following years we will still witness growing share of private
6

investments in such areas as telecommunications, transport, logistics, trade, hotels and
restaurants, offices, light industries and confection , media and entertainment.
Due to these investments the city economy will gain capital, new organisational standards
of production, management, staff skills as well as new jobs and the awareness of
international markets.
When creating long-lasting mechanisms of activities stimulating local economy it is a
matter of fundamental value to find a partner institution who will initiate and coordinate
development programmes.
The local government needs partners not only among ordinary people, institutions and
organisations in the City but should also find external partners such as banks, regional
authorities and business organisations who can offer help in developing local job market.
When implementing the economic development strategy for Tbilisi the following measures
will be of key importance:
• cooperation among the stakeholders,
• establishing a municipal structure that is capable of generating and implementing
local economic policy,
• identification of priority projects being the foundation of local economic
development,
• starting cooperation with other cities that are undergoing the process of similar
transformation by means of best practices,
• encouraging local economic growth, which is such form of activity that requires
specific skills and initiatives that are beyond the city hall’s traditional forms of
activity.
An important role in strategy implementation can be played by Economic Policy Agency.
It is worth consideration that in the course of strategy implementation the Tbilisi City Hall
department dealing with economic development could be transformed into an
independent city agency provided with resources necessary to carry out strategy tasks.
The Agency should:
• employ a team of experts capable of project implementation,
• develop a range of instruments to support companies and workforce,
• have at their disposal the funds enabling them to realize tasks by means of their
own earnings and subsidies for projects.
A non-governmental organisation that is competent to perform such tasks, has adequate
human technical and financial resources will secure sustained activity and will
immediately react to changing conditions.
When developing the Economic Development Strategy of Tbilisi City a workshop was
held where the participants learned how to establish an NGO (foundation, association)
and how to develop with local partners the local operation programme, methods and
forms of raising funds for operation and project implementation.
7

2. Changes of Tbilisi territorial structure in result of economy transition and
strategy implementation
The character, directions and pace of the city spatial development mostly depends
on the impact of the political, economic and social factors. Such type of impact is
considerably intensive during the dramatic changes in the public life, when evolutional,
even character of the urban development is replaced by the “leap-like” change (alteration)
and revolutionary or reformative effort finds its adequate reflection in the urban
environment. World urbanism is familiar with huge number of such examples; and Tbilisi
isn’t an exception. Moreover, because of its natural-landscape and historical-cultural
feature, Tbilisi represents one of the best examples of such discrete development.
Retrospective analysis of the spatial-planning development of the Georgian capital city
affords to state the above mentioned, which is simplified by the sharply separated stages
of the city history.
(1) Feudal (Medieval) era is long-term period of thirteen centuries – from 502,
when Tbilisi became a capital city until the turn of the 18 th and 19 th centuries when Eastern
Georgia was attached to the Russian Empire. In this period the city was gradually
developing on both banks of the river Mtkvari in the form of densely dwelled, compact
residential area. Defense held a leading role in the city functions, which is shown by the
city spatial arrangement reflected in the map of Tiflis (historical name of Tbilisi) drawn by
Vakhushti Batonishvili in 1735. In this period Tiflis represented a city locked within the
defensive walls, with small-scale settlement in the suburbs and gardens cultivated outside
of the city. The center formed by the palaces, churches and caravansaries was located
along the river Mtkvari; the resource of the city further spatial development was exhausted
under the current conditions.
(2) Period of the Russian Empire dominance (1801-1917) is characterized as the
first dramatic “leap” of Tiflis spatial arrangement. City defensive functions are loosing their
priority; a political task – creation of the leading political-administrative support for the
domination of the Russian Empire in the Caucasus - is being highlighted. The city freely
spreads up to the high terrace of the right bank of the river Mtkvari. Gardens of the King
and Queen (nowadays Freedom Square and a part of Sololaki district) are also used as a
resource of urban development. Planning of the new parts, on the contrary to the old
feudal city, is regular and sometimes even without accounting the features of the relief.
Many gorges running down from Mtatsminda are filled with soil; city engineering
infrastructure and institutions’ system are formed, central functions and institutions are
concentrated on the Golovin Prospect (now Shota Rustaveli Avenue). “Old Tbilisi”,
practically is not included in the city planning innovations where, instead of ruined
buildings, construction of basically new houses along the old streets is being held, which
gives a name of “Double-face” to Tiflis in the middle of 19th century. In this period Tbilisi
acquired such organic immanent feature as linear character of spatial arrangement, which
mostly determines functional effectiveness of already accepted or ready for acceptation
city planning solutions even till now.
Incorporation into the city space the villages (Kukia, Chughureti) in the vicinity of
Tiflis had a parallel character; for 1833 planning of the above mentioned territories was
considered by means of regular network of the streets – as well as, the territory of outer
Avlabari.
In the 1860-70s Tiflis continued growing on the left bank of the river Mtkvari,
which was supported by constructing the first in the TransCaucasia railway line – Poti-
8

Tiflis in 1872. In 1883 this railway terminal turned into a draught, transit line – Poti-Tiflis-
Baku. This railway line split the city space. It is significant that at first modern, often
squatter-like urban growth was basically located on one side of the railway line, on the
south-west side, but construction of the Nadzaladevi district generated a new problem –
the need for city space integration, which has acquired an acute character for now.
On a large scale, the fact that the city turned its back to the river Mtkvari – an axis
of Tiflis economic and public life and its spatial arrangement - must be considered as an
essential drawback of Tiflis spatial development.
(3) A new third stage of growth and development of the Georgian capital begins
after Georgia becoming a Soviet republic, but this period is not homogenous; it is divided
into several stages.
Under the conditions of rapid industrialization and urbanization of the country, for
1930 was set an ideological-political and spatial-planning deadline of radical transition of
Tiflis which was based on the doctrine of so-called “Socialistic Reconstruction”. The
expression of that doctrine in Tiflis, as well as in other large cities of the Soviet Union, was
“Tiflis Planning Project”.
The project was developed in 1934. The planning project of Tiflis, the capital of
TransCaucasian Federation at that time, did not set specific dates of implementation;
initially, it was to be completed in 20-30 years. The city of 3 700 hectares became three
times larger, expanding by 10.000 hectares and its population grew almost two times -
from 420 thousand to 725 thousand. It is worth mentioning that two versions of spatial
growth guidelines were developed.
From the today’s point of view, it is very interesting that the project set the issue of
assimilating so-called “Upper Tbilisi” – the directions of Tsavkisi, Shindisi, Tabakhmela,
Kojori, Manglisi.
The construction of Tbilisi-Koqsi railway had been already started in order to
urbanize that zone, but its construction was soon abandoned. “Upper Tbilisi” was
designed as a group of satellite settlements with their own industrial enterprises.
The project was based on principle of functional zoning of the city space. Thus, a
number of industries was concentrated in Didube, Ghrma-Ghele, Avchala and Navtlughi.
The location of the railway line remained unchanged; and its thrift (economy) was
basically developing in Didube.
The center of the capital was considered at a traditional place – on the Square of
TransCaucasian Federation (today the Freedom Square) and Rustaveli Avenue.
New housing on the city territory was distributed in the following manner:
- Old city (right embankment)…………………………………………………327 h;
- Nadzaladevi…………………………………………………………………...430 h;
- Central part on the left embankment……………………………………….380 h;
- Isani and Avlabari…………………………………………………………….464 h;
- Navtlughi……………………………………………………………………1.287 h;
- Vake……………………………………………………………………………184 h;
- Saburtalo……………………………………………………………………….610 h;
- Dighomi………………………………………………………………………1.600 h.
The project paid attention to regulating the river Mtkvari and its role in the creating
spatial-architectural waterfront of the capital. Also, the arrangement of four dams – in
Dighomi, Didube, Ortachala and Soghanlughi and in the river’s flooded cuts the launch of
river transport was considered. The dams, besides their primary purposes (raising the
level of water and producing electricity), would also serve as transport bridges. Besides,
building of 6 bridges was planned, 3 in Dighomi, one in each Didube, Saburtalo and
Avchala.
9

In order to turn the city facade to the river Mtkvari the arrangement of
embankments and, in some places, cutting into the river Mtkvari with green areas was
also planned.As for the “Old Tbilisi”, the “Socialistic Reconstruction” practically meant its
elimination.
It must be mentioned that implementation of the plan of 1934 was stopped by the
beginning of World War II; but some fragments of this plan were soon realized – forest
planting on Tiflis trench slopes; limitation of the Mtkvari bed in the concrete dams and the
arrangement of the embankments; cultivation of new gardens and parks; solution of such
important city planning knot as the Heroes’ Square, the construction of the Circus Hill, the
arrangement of Cheluskinelebi (today the Tamar the Queen street) bridge and street, etc.
After the war, basically, the already begun and planned constructions were continued –
the second row of Governmental House, building of Tea Thrift Trust (today the
Intercontinental hotel), building of Coal Industrial Trust on Zemeli, etc.
“Khrushchev thaw” acquired a powerful impulse to the spatial development of
Tbilisi in the second half of the 1950s. As a result of housing construction introduced in the
peripheral zones, communal flats were partly eliminated; housing stock structure met the
needs of the demographic structure (“one flat – one family”). New housing policy required
assimilation of new space; as a result of considering land as an non-economic category
the extensive forms of city development were introduced, basically by acquiring rural
areas.
Such tendency became significantly stronger under the conditions of developing
The Third General Plan of Tbilisi. “The General Plan of Tbilisi Reconstruction and
Development” was passed in 1970 and it fully reflected the ideology of a Soviet city
planning dominating at that time. In this case among the components of the ideology
several are essential:
o Considering Tbilisi as self-content, autonomous settlement;
o Principle of locked labor balance;
o Neglecting the agglomeration (metropolitan area) realities;
o Territorial expansion;
o
o
Extensiveness of planning;
Hard vertical subordination of territorial units in the settlement system (cityouter
district (suburbs) zone), etc.
As a result, planners were forced to think within the frame of expanded
administrative boarders of Tbilisi. On the contrary to the linear nature of the capital, a form
of “ring-shaped roll” around Tbilisi Water Reservoir, of spatial development was proposed
in the new general plan. Such kind of priority naturally caused generation of new,
latitudinal directions in the development of Tbilisi city center.
Tbilisi center continued its linear development; its basic axis was again up to the
river Mtkvari; the linear center was formed in the following configuration: Freedom Square
– Rustaveli Avenue – Merab Kostava Street in two directions – with branches to Vake and
Saburtalo and tied by means of newly built road of Vake-Saburtalo. Parallel growth of the
city center was observed by passing David the Builder Prospect into Didube, Akaki
Tsereteli Prospect.
Simultaneously to this leading tendency of Tbilisi center the second, specific
direction – returning certain functions to “Old Tbilisi” – is being gradually developed
basically, in the way of reconstruction and adaptation of historically formed urban
environment. This trend was conceived in the 70ies of the 20th century, when for the first
time in Tbilisi conditions the State Defense Zone of the Old City (1975), was introduced
which was developed later and acquired three part structure – State (strict) Defense Zone,
Development Regulating Zone and Natural Landscape Protection Zone (1985).
10

Nowadays this second direction of the city center development plays a more and
more important role. It is apparent how important it is to make a preliminary urban
decision in the development of city environment: it is enough to say that such city forming
“injections”, as the Saint Trinity Cathedral and the construction of the Presidential
Apartments have radically (dramatically) changed the position of Avlabari district on the
prestige scale and, consequently, the real estate prices. We should remember that the
similar activities in the 1980s (the construction of “Metekhi-Palace”) did not bring a
desired effect – the business and its environment were not ready for that at the time.
Under the conditions of dramatic increase of traffic and the city population mobility
a large-scale problem of providing latitudinal functional-spatial connections appeared. The
point is that a basic factor hindering functional-planning development of historically formed
part was its “strap-shaped” character which is determined by the existence of two,
principally different, separating barriers – the river Mtkvari and the railway line.
The general plan suggested the solution to lessen this problem – to move the
viaduct linking Didube-Nadzaladevi on the axis of Vakhushti Bridge over the railway line.
That proposal of the general plan was not realized in the Soviet period. Today, under the
entirely new socio-economic conditions such “strap-shaped” character of the planning
structure of the capital city of independent country not only makes it difficult to integrate
various parts of the city by means of transversal links, but also makes “isolated” parts stay
under undesirable conditions. This inequality is reflected even in such a summary
economic indicator as different prices of real estate on both sides of the railway line. In the
case of the river Mtkvari, if its role as a separating barrier is a natural, even organic factor
for Tbilisi, the railway line belongs to the anthropogenic category, its course reflects the
vision of the last quarter of the 19th century and is morally obsolete in terms of macro
structure of modern urban territory. Such estimation within the city would only become
more acute in connection with the development of the Tbilisi railway knot – considering
construction of Tbilisi-Akhalkalaki-Karsi line, and simultaneously to the regulating of the
geopolitical situation, opening the blocked railway direction, not to mention the idea of
possible reanimation of the Trans-Caucasian railway.
In these terms, the dismantling of the transit course of the railway line in the heart
of Tbilisi and rational use of these newly acquired areas may become that powerful
constructing impulse which Tbilisi has been waiting for a long time and which will bring
new quality to its spatial-planning structure.
Firstly, the expected empty area of railway economy, basically, in the Didube
district with its space and technical infrastructure (including a subway line) will create the
city planning preconditions for the development of a large business center (Central
Business District - CBD) which Tbilisi has been lacking so far. Now, because there is no
such a district in Tbilisi, business functions are performed in buildings offering high-quality
office space but dispersed all over the city.
Besides, the establishment of the CBD will have great impact on the surrounding
area – its integration, the prices of land will rise and the land use character will change. It
is most important for the revitalization of waterfront along the river Mtkvari which is one of
the problematic and derelict zones for now in terms of spatial arrangement.
What is more important is an indirect impact of CBD on the conditions of inward
development of Tbilisi historical center, because, according to the principle of “shared
vessel”, difficult to control developers’ intervention in the urban tissue of the “Old Tbilisi” in
the zones of conservation of the cultural heritage will be moved to the CBD. As a result, it
will enable the city authorities to conduct the reconstruction-conservation works in the “Old
Tbilisi” in such manner that it will ensure its proper functioning and will meet the ICOMOS
preconditions to include Tbilisi in the UNESCO list of world heritage sites.
11

Thus, the creation of the new CBD will strengthen the positive trends of functional
specialization in the territorial structure of Tbilisi entire city center: the representative
center – Rustaveli Avenue, the tourist center – “Old Tbilisi”, the medical center – Dighomi,
the recreational centers – Mtatsminda and Tbilisi Sea, etc.
The concept also involves the development of technological park and logistic zone
in the eastern part of the city, in the vicinity of the Airport and in the direction of Rustavi,
where “new generation” industrial and logistic objects will be moved.
Apparently, the restructuring of the entire city center must be based on the
convenient scheme of infrastructure development, the implementation of which will be
possible within a higher taxonomic unit – the metropolitan area, due to the establishment
and implementation of the spatial arrangement defined in the Georgian Law on the “Basis
of Spatial Arrangement and Urban Planning” (2005). Thus, the transportation
infrastructure is crucial – first of all linking the outer city with the inner one by means of a
highway constructed within the metropolitan area (supplemented by a railway roundabout,
the extension of the railway line from Airport to Rustavi, etc.).
The significant changes could be recently observed in the sector of housing, which
is likely to become a clear trend. The early housing projects had an individual character
and were persistently spreading towards prestigious districts (Vake, Vera). Nowadays
housing estates (one family houses, town-houses) are more and more popular and there
is a tendency to build facilities for services (security, sports, recreation) around the
estates, including the attempts to create gated communities. As for the location of the new
housing, developers are more daringly assimilating the districts that were earlier neglected
– Didube, Ortachala, not to mention Avlabari district which is rapidly rising on the city
scale of prestige and prices. First signs of suburbanization process should also be paid
attention to, for example contemporary Didgori district territory has been incorporated in
the administrative borders of Tbilisi.
Tbilisi spatial order has significantly changed its structure after assimilating
territories of Didgori district, yet this change has only a quantitative character. What will
Didgori district add to Tbilisi in terms of quality, it will entirely depend on the urban
development policy and documents developed on its basis, primarily, on the “Tbilisi Land
Use General (Operative) Plan”.
So far, almost fully privatized housing resources, the tendency of mass formation
and the activation of Home Owners’ Associations have become a positive trend, which is
mainly determined by the program that has been successfully implemented by the
Citizenship and Integration Agency (Tbilisi Corps.).
Thus, according to the above presented analyses may be made the conclusions
that major aim of the contemporary urban development of Tbilisi is to highlight, develop
and implement such partial and general and “leap-like” city constructing axis idea which
under the conditions of strong economic competitiveness among the world and regional
cities, directly or indirectly will ensure the role of this capital of the independent state as a
metropolitan area as well as the center of South Caucasus. Such a vision sets
significantly new and unprecedented requirements to Tbilisi functional and spatial
arrangement, mainly in terms of structural and architectural solution of the city center
system.
Careful examination of submitted proposals must be realized within the frame of
the “Tbilisi Land Use General (Operative) Plan”, with the participation of all the
stakeholders and taking into consideration the principle of transparency.
12

3. Vision for Tbilisi Economic future
TBILISI economic development strategy
right place, right time
desired
impact
• Competitive companies
• Prosperity of residents
• Growing City revenues
vision:
strategic
directions
offers wide range of services and opportunities
to citizens, companies, institutions and visitors
who are living, working, learning and relaxing
in the city and entire region
• Tbilisi booming regional gateway
• Time for business in Tbilisi
• Tbilisi place to live
• Tbilisi hospitable city
• People empower Tbilisi
13

4. Strategic initiatives
Tbilisi economic strategy identify five strategic directions that will be the basis of strategic
initiatives.
Action in these areas will make Tbilisi a regional financial and service center creating
comfortable environment for endogenous grow, attracting city to new investors, visitors
and residents.
TBILISI economic development strategy
right place, right time
DIRECTIONS
1. Tbilisi booming regional gateway
Access point to the region, regional meeting place , service center for the region
2. Time for business in Tbilisi
We support to start and grow your business, we create a space for your business, we
offer financing to develop your company, we attract Tbilisi to investors
3. Tbilisi place to live
We create our homes according to ambitions of our families, we develop livable
neighborhoods, we create strong communities, we build the city we will be proud of
4. Tbilisi hospitable city
Come and see what Tbilisi is, stay and experience what Tbilisi can offer you
5. People empower Tbilisi
Prepare yourself to participation in labour market, improve your skills, jobs for all
14

5. Strategy implementation
5.1. Tbilisi booming regional gateway action plan
Directing the new potential of Tbilisi towards this aim will first of all lead to stimulating the
growth of the city as an internationally recognized metropolitan center. It can be achieved
by means of the effective use and development of its existing business research, cultural,
sports and tourist potentials as well as by strengthening its role as one of the regional
service centers.
Tbilisi, being a metropolitan area, boasts:
numerous research organizations, business environment institutions (banks, trade fair
agencies, chambers of industry and commerce, the market of real property services,
business associations),
a significant potential in science and education,
important cultural organizations and institutions (a theater, a concert hall, a museum,
art galleries, artistic societies),
good sports and tourist facilities,
a convenient geographical location – at the crossroads of motor, rail and air routes.
The problems underlying the choice of the program are:
not sufficient connection within the metropolitan area and entire region
broadened administrative city limits and insufficiently developed metropolitan
functions,
missing fast road and rail network,
insufficient transport links connecting the region and the country with the outside
world.
If Tbilisi develops in this direction, it will become a metropolitan area of regional, national
and international importance as well as it will boost its competitiveness.
The results will be:
better inwards and outwards accessibility due to the establishment of transportation
system integrated with the airport,
strengthened potential of the metropolitan area due to the complementary growth of
the main centers, especially in the field of research, culture and sport,
best location for financial center of the region,
regional meeting places where international events can be organized.
15

Table 5-1 Tbilisi booming regional gateway – action plan
PROGRAM
Access point to the region
PROGRAM
Regional meeting place
Project name Problems and project description Measures Partners
Tbilisi on your way People going to different parts of Caucasus region can travel through and
stay for a while in Tbilisi.
Travel agencies,
Logistic centre
Caucasus house -
Tbilisi conference
center
Calendar of regional
events
Conference
organizer guide
Develop Caucasus travelers’ guide providing travelers with info about
plane, train and bus connections, driving conditions, accommodation,
travel agents and other needed data. Guide will be prepared in Georgian,
English, Russian language.
Development and renovation of Tbilisi Airport, new railway and road
connections can attract Tbilisi to cargo service companies
Make Tbilisi attractive as a regional logistic and distribution center to
investors and shipping agencies serving Caucasus.
-Companies delivering cargo to Caucasus region learn about logistic
services available in Tbilisi.
Comprehensive Conference Center will be the place where the most
important regional meetings can be organized.
Identifying potential Center locations can be involved in project
development and preparation of feasibility study for the center.
Visitors planning trip to Tbilisi needs to know when international events
are planned.
Collect and present a list of regional conferences, festivals, trainings take
place in the coming year, updated on annual basis.
Conference business is rapidly growing in the region. To attract Tbilisi to
potential conference organizers all necessary info should be easy
achievable.
Prepare Conference Organizers Guide presenting Tbilisi’s possibilities
and conditions for conference organizers.
The guide will be
available in printable
version at city portal.
Warehousing and
logistic Tbilisi profile
available on the city
website.
Project
accomplished.
The calendar will be
included into
different packages.
The guide will be
available.
hotels, car rent
agents, restaurant
network
Shipping agencies
-Developers
-City and regional
entrepreneurs
-Education
institutions
International
organizations,
public institutions,
business
organizations
Hotels,
conference
facilities owners,
service providers

PROGRAM
You can serves the region from
Tbilisi
Network of Caucasus
cities
Caucasus media and
info centers guide
Tbilisi
bureau
convention
Doing business in
Caucasus
Caucasus specialists
data base
Cities in Caucasus face similar challenges because of economic
transformation.
Continue cooperation with other cities in the region and partners from
Central and Western Europe to exchange experience on economic
transition. Organize exchange platform for best practices in the area of
local economic programs.
People staying working in Tbilisi needs easy access to different king of
information about current situation in the region.
Develop internet page with links to key regional resources providing
service in English.
Tbilisi should facilitate the coordination and communication between
potential customers and suppliers of various services for business
tourism. The. City will unite the representatives from the local tourist
industry to develop common marketing and promotional activities.
Establish Tbilisi Convention Bureau to promote Tbilisi as a place for
organizing meetings, trade fairs, exhibitions and incentive trips. The aim
will be to establish a body which will coordinate these activities and help
to develop common business tourism products.
To attract Tbilisi to global investors we should provide info about
conditions for doing business not only in Georgia but also in other parts of
the region.
Provide international and Georgian businesses located in Tbilisi with
information about legal businesses condition for doing business in
Armenia, Azerbaijan and other countries in the region.
International and Georgian companies serving different Caucasus
markets will need access to skilled professionals that could serve in entire
region or specific country.
Develop internet data base for professionals and employers seeking each
other.
Minimum one event
will be organized per
year.
Media links will be
available at key
Tbilisi’s portals.
Tbilisi Convention
Bureau established.
Guide will be
available at city
website updated on
annual basis.
Cities from region,
European
partners, GTZ
Media agencies
- Tourists
association
- Conference
facility owners
- Conference
facility service
providers’
- Hotels
- Fairs
-Chamber
commerce
business
organizations,
-Embassies.
Ongoing activity. Chamber of
commerce
of
17

We serve Caucasus –
Caucasus Yellow
Pages
Financial and office
centre of the region
International and Georgian companies located in Tbilisi and entering other
markets will need business partner providing quality services.
Develop internet data base for professionals and employers seeking each
other.
Tbilisi is the best location for financial and service center that can serve all
other parts of the region.
Identifying potential location that can provide enough space for Tbilisi
Business District (TBD). Develop concept and promote it to potential
investors. Development of Tbilisi real estate market profile. Organization
of Real estate promotion campaign.
Internet data base
provide info on
ongoing basis.
Promotion campaign
prepared. Tbilisi real
market profile,
International
conference for
developers and
investors.
-Business
organizations,
-Info providers
-Developers, -
Governmental
institutions,
-International
advisers.
18

5.2. Time for business in Tbilisi action plan
Time for business means first of all the creation of good conditions for the development of
modern economy of a regional character.
The growth of Tbilisi depends on the competitiveness of local companies and on the
number of new jobs. Unfortunately the city business environment is not functioning well
enough. The proposed development tendency results from the need to remove the
barriers that local companies, both the existing ones and the set-ups, have to face. These
barriers primarily include the lack of adequate infrastructure and very poor technology
transfer from research centers. The aim is to provide the initial development impulse,
trigger the process of starting new companies and to create the image of the city as an
attractive place for doing business.
The proposed solution results mainly from problems related to the local economy such
as:
insufficiently developed network of business environment institutions and the lack of
coordinated activities as well as the unconsolidated business community,
no coherent system of information about services, support programs and investment
opportunities,
poor competitiveness of companies, the lack of innovation improvement system and
the system of new technology inflow,
poor access to starting capital,
lack of leading sector that would be a driving power for the city economy.
The undertaken initiatives will meet the needs of Tbilisi companies to maintain their
position on the market and increase their competitiveness, create favorable conditions
for stimulating business activity of local citizens as well as encourage business
organizations to build a strong regional business center. The above will lead to the
following results:
the increased number of companies,
introduction and the use of new technologies in production and management,
more jobs in the SME sector.
The main planned initiatives are:
the establishment and development of institutions specializing in promoting
entrepreneurship and innovation,
building the infrastructure for business growth,
encouraging new jobs creation,
establishing institutions that support entrepreneurship,
offering space for business with assistance.

Table 5-2 Time for business in Tbilisi – action plan
PROGRAM
We support your business
Project name Problems and project description Measures Partners
Small and medium businesses are key players for development of Ongoing activity.
diversified city economy.
We help you to start and
grow your business
We ask you about your
problems and analyze
issues you face -
Business attitude
surveys and analyses
We offer you information
you need - Reports and
business profiles
We support development
of promising clusters -
Clusters development
Provide young people with advice and information about business
establishment procedures, development of business plans or financing.
- establish one stop shop for user friendly advice for small companies
- thru business partner organizations provide advice to local companies at
every stage of the business life cycle.
Independent from the aggregation of secondary statistic data on the
condition of the local economy it is necessary to find out the opinions of
people directly involved in business activity in that area, i.e. those who
make investment decisions and create new jobs.
Conduct Business Attitude Surveys:
- to grasp the attitudes of business environment towards local authorities
and local economic policy,
- to learn about the employers’ plans concerning their development projects
and possible change of address,
- to make business groups and local governments understand each other
better.
Different market research analyses can help companies and develop own
market strategies
Conduct analyses of city and regional growing markets. Discuss with
business community possibilities of join activities supporting expansion of
Tbilisi based companies.
Develop and strengthen the competitiveness of companies operating within
the structures of identified clusters that, directly or indirectly, influence the
economic and social growth of Tbilisi.
Supporting the clusters will be performed through various institutions from
business environment whose tasks will include supporting
Business Attitude
Surveys
conducted
annually.
Analyses
conducted and
conferences
organized on
annual basis.
Institutionalization
of key clusters
around
competitive city
products.
- Business
organizations
- International
organizations
- Business
organizations
- International
organizations
- Business
organizations
- International
organizations
- Local
entrepreneurs
- Universities
- Business
environment
institutions

We build digital platform
for our businesses
We talk directly with
business community -
Business round tables
entrepreneurship, facilitating starting a new business (start-ups, spin-offs)
and assisting them (entrepreneurship incubators, technology incubators).
Business environment institutions, with the coordinative support of the City,
will be responsible for:
- creating favourable conditions for new technology transfer,
- improving the quality of human resources in companies through training
and consultation,
- supporting cooperation links among companies,
- building a cooperation network and animating innovation
Information Community Technologies and telecommunication
infrastructures are more and more important for future competitiveness of
local companies in global economy.
Develop digital platform – economic internet portal for Tbilisi based
companies with needed info and e-businesses possibilities as a part of
public infrastructure.
Information exchange platform is the best way to identify joint projects
between Tbilisi municipality and local business.
The main task of the project is to: broaden and diversify the economic base
in Tbilisi; organise regular meetings with Tbilisi’s entrepreneurs,
municipality and Chamber of Trade and Industry and discuss actual topics
for city development and recognize business community situation and
needs, establish forum for direct cooperation between public and private
partners. Expected results: regular information exchange between local
business and municipality, Common projects could be developed,
development of business environment in Tbilisi and trust between business
and municipality
Digital platform
established.
Quarterly round
table discussions.
- Business
association and
Private Sector
Partnership
- International
organizations
- Governmental
institutions
- Key city
businesses,
- Business
organizations
21

PROGRAM
Space for Your business
You can find a place to
start business – Incubator
Space for your growing
service company - Office
units
Space for your industrial
firm - Industrial units
Home of new
technologies - Technology
park
Businesses that operate in the incubator can take advantage of common
administration, secretary office or information sources. Incubators will serve
entrepreneurs that need space to start
The incubator may serve as a tool of promoting certain types of business
activity or stimulating its weaker areas. As a result, they can save a lot of
money on starting investment costs and use it for equipment and working
capital instead. In an optimal version this project can be combined with a
business consultation centre and/or with project financing. From a financial
point of view several methods can be applied: the rent paid by the
incubator tenants can be refunded for a fixed period of time, or it can be
calculated as a turnover percentage. In both cases the tenants should pay
for communal services and share the administration costs. After 12 months
of exemption from rent the rent should gradually grow until it reaches
commercial levels after 2-3 years, which will enable the incubator to survive
Young and dynamically growing companies need more office space but
they don not have capital or credibility to buy or rent a commercial estate.
Provide through partnerships with developers and non commercial
organizations office space to growing companies within specific sectors.
Tbilisi needs more space for dynamically growing industrial companies
The objective of establishing Tbilisi Industrial Park (TIP) is to create an
attractive space for business and investments that boasts of efficient
infrastructure, low costs of facilities and of professional support services.
Competitive local economy has to create corridors for transfer of new
technologies.
Through partnership with other governmental institutions and universities
provide space and assistance to active in the area of knowledge based
economies. Promote Tbilisi to global corporations as locations of research
and development institutes.
Business
feasibility study
prepared.
Feasibility study
prepared
Joint projects
identified.
New projects
identified and
ready for
realisation.
Agreement on
city participation
in Tbilisi
Technology Park
development.
Business
-association
- International
organizations
- Developers,
- International
organizations
- Developers,
- Governmental
institutions,
- International
organizations,
- Neighbour local
governments
- Universities
- Governmental
Institutions
- International
organizations
22

If you want to buy land to
build your own real estate
Grants and micro credits
for start ups
Strong mature companies would prefer to invest in their own real estate.
Improve the information and advice on investment possibilities. Develop
strong partnership with a professional partner. Tbilisi real estate market
profile. Promote Tbilisi to real estate and industrial investors.
Providing easy access to cheap credits is an important element of business
activity stimulation. Local micro credits fund is an independent organisation
cooperating with the City structures.
Tbilisi real estate
market profile
available at city
portal annually
updated.
Info on current
investment offers
available at city
portal.
Micro – credits
provided to local
companies.
- Developers,
- Landlords,
- Governmental
institutions.
- Banks,
- International
organizations
PROGRAM
Money to start and grow Your business
Credit guaranties
The project objective is to support the SME sector in their access to
external financing, which should contribute to increasing their
competitiveness, investment potential and employment. The benefits of
establishing a loan fund are similar to the ones brought by a guarantee
fund – better availability of capital for start-ups and relatively good loan
terms. Good terms mean subsidised interest rates or replacing property
securities with a form of audit performed by the fund. The procedures in
commercial banks are very demanding. Few small entrepreneurs can meet
their requirements. The principal aim of this project is to establish an
organisation that, through financing small and medium businesses, would
create solid basis for starting up and expanding business activity.
The problem that companies complain about most often is the lack of
capital.. A small starting-up firm has to find its own unique unconventional
ideas, which is often connected with difficulties in finding capital.
A guarantee fund is a way to overcome one of the most important barriers
that prevents small and medium businesses from accessing funding
resources, i.e. the lack of appropriate financial guarantee. Commercial
banks do not find small firms with little capital attractive. The guarantee
fund is an attempt to reduce the distance between the interests of banks
(by lessening the risk and preliminary auditing of the client) and small
businesses (by securing the bank credit). Results: increased business
with/for the private sector, increased transparency of the local government,
possible savings in the local budget, tighter quality control of products /
Guaranties
offered to local
companies.
- Banks,
- International
organizations.
23

services
PROGRAM
Attracting Tbilisi to investors
Conferences and fairs
Targeted
campaigns
promotion
Investors, you are our
gests – one stop shop
Conferences and fairs create the best opportunity to invite potential
business partners and promote own products.
Through partnership with government institutions, international
organizations and business organizations city will support organization of
conferences, business missions and presentations promoting Tbilisi to
global investors.
Direct promotion campaigns at targeted markets will attract specified and
demanded investors to Tbilisi
Identifying potential barriers for specific investors. Work with other partners
to address these barriers. Provide targeted investors with info and advice
on investments opportunities, available workforce.
Easy access to office that will offer professional advice in management,
finance, marketing and human resources to current Small and Medium
Enterprises.
Interested companies will be able to acquire information and receive
assistance in complying with the administrative procedures related to
establishment and running of their businesses. These services include:
assistance to the managers in planning of their business, organization of
courses, seminars, support of the business community through
communication with the local administration, advocacy etc. The office will
gradually become sustainable. The initial office costs will be covered by
the municipal budget or donor funds. The establishment of this office will
become a factor in improving the overall business environment.
Participation in
different business
events.
Certain
companies
agreed
partners
implemented.
with
and
Agreement on
city participation
in one stop shop
development.
-Governmental
institutions,
-Business
organizations
-Business
organizations
- Embassies
-Governmental
institutions
- Government,
International
organizations,
- European Union
programs in regional
private enterprise
center,
24

5.3. Tbilisi place to live action plan
The main objectives set to follow the chosen strategic city development direction are as
follows: to create conditions for a comprehensive development for Tbilisi residents, to
encourage their identification with the city as well as to create a modern and functional
urban space.
The quality of local residents’ life depends on their dwelling conditions, natural
environment and the accessibility of modern communal infrastructure. The existing
housing resources do not provide every family with a separate apartment. However, the
actual deficit may turn out to be larger because many apartment blocks have to be pulled
down due to their technical state or land development works (new roads and others).
Also, a tendency has been observed for the families to shrink in size. The city is facing
the problem of recapitalization of housing and infrastructural resources. It also has a large
share of poor quality urban space. These are mainly worn out buildings with insufficient
facilities. Some of them are in danger of collapsing and need to be immediately pulled
down. In order to lessen the housing deficit and improve local dwelling conditions it is
necessary to build new houses and to modernize most of the existing ones, taking into
consideration the need to upgrade the urban space and technical standards. What is
more, some of the residents have limited access to water supply and disposal facilities. It
seems absolutely necessary to invest in this sector in order to make the city function
smoothly and enhance the local quality of life.
The problems underlying the choice of the program are:
a growing number of families whose situation, mainly the material one, prevents them
from maintaining their own apartment, which results in an increased demand for social
housing,
insufficient supply of housing for moderate income families and young people,
arrears in renovating the city material property (housing and infrastructural resources),
which has led to worsening local everyday living conditions as well as has triggered
some undesirable social phenomena,
the need to revitalize and transform much of the urban functional space,
insufficient technical infrastructure in the developed areas and in the areas to be
developed in future, which is hindering new constructions,
poor offer of attractive construction lots directed to high income residents,
downgraded natural environment resources.
The primary objective is to improve the quality of life in Tbilisi and to increase the
attractiveness of dwellings. Once this objective has been realized, the housing deficit will
decrease, its quality will improve, the number of migrants will be reduced and the local
economy will grow. The proposed activities are oriented at investors (the individual ones,
developers, housing cooperatives, real estate and city managers, the communal
infrastructure managers) and at all those who would like to settle down in Tbilisi

Table 5-3 Tbilisi place to live – action plan
Project name Problems and project description Measures Partners
City visiting card The lack of investments in technical and housing infrastructure resulted in Improvements in Gangebeli, local
the desolation of Tbilisi residents’ meeting places.
districts. towaristestwo
PROGRAM
Our City
PROGRAM
Our home
We care for the
quality of our life
We build our city
Improving your home
The City Visiting Card project involves district leaders and city residents in
restoring the past image of the places they live in and in the development
and revitalization of the public space that has been a traditional meeting
place. The project covers the following streets: Rustaweli, Freedom
Square and Gudiashvil Square
The quality of life is a monitoring mechanism for the changes that are
happening in the city.
The survey investigates not only the opinions about the quality and
availability of technical infrastructure but also about public services offered
by the local government. The survey deals with such areas of the residents’
life as public transport, health, safety, natural environment, leisure time,
workforce market or education.
Citizens wants to have direct impact on decisions improving public spaces.
On the basis on annual quality of life survey and internet forum citizens will
recommend the most desirable improvements of City squares, streets,
fountains or recreation areas and facilities.
Many communal houses has poor technical infrastructure. Local
government has limited financial possibilities.
Work with residents and towaristestwo in the districts. The City of Tbilisi
participates in co-financing hard infrastructure renovation and improvement
of : roofs, water pipes, elevators, doors, sewerage systems.
Completed
survey.
Recommendation
to the Mayor
three
improvements
chosen on basis
of the survey.
Number of
improvements.
Research
institute,
University,
public services
representatives.
Research
institute,
University
Gangebeli, local
towaristestwo

PROGRAM
Our
neighborhoo
d (ezo)
Great place to live
Devastation and lack of public space for residents.
In cooperation with residents City of Tbilisi is participating in Coo financing
for technical infrastructure, recreational infrastructure and creating public
meeting place and cultural facilities locally in the districts.
Increased
participation
residents in work
on creation of
public spaces.
Local leaders –
gangebeli, local
towaristestwo,
residents
PROGRAM
Our community (ubani)
Better services for
residents
We are living
together
Places for trade and services in the districts are poorly defined, scattered
and devoid of modern sanitary facilities, which impairs their competitiveness
and availability to the city residents.
The project activities first of all include putting trade and service tractsin the
districts in proper order. The area covered by the pilot project includes the
block of Kalaubnia and Zulukidze streets (Sam Gori) as well as
Mosulishvili, Khizanishvili, Omisgmerebie (Gdani).
The degeneration of public life in large housing estates and the lack of
integrating events has led to a situation where city residents do not form
interpersonal bonds and their identification with their place of residence is
poor.
The project activities include co-financing grants designed to support
organization of such cultural events that aim at integrating local
communities and promote participation in community life.
Districts
identified.
Social events in
districts.
Local leaders –
gangebeli, local
towaristestwo,
small business
representatives
Local leaders –
gangebeli, local
towaristestwo,
citizens
27

5.4. Tbilisi hospitable city action plan
Culture and tourism are one of the basic elements of Tbilisi attractiveness. They are also
one of the main factors determining the local quality of life and settlement decisions. This
is why in the effort to make Tbilisi a friendly and hospitable city it is so important to take
advantage of its cultural resources and create a system that would help to recognize and
promote the city internationally and to initiate a dialogue of cultures in the region while
maintaining specific symbols, values and tradition brought in by the rich Georgian
culture. It can contribute to strengthening Tbilisi’s position as a service center of an extra
regional importance.
Tbilisi and the surrounding area should meet the information requirements characteristic
for modern metropolitan areas. A complex city information including an address book and
the information about some of the local facilities and organizations is regarded as a mark
of the city and is used to promote its image. It is also an important element of tourist
promotion and a basic tool for tourism development. All the activities are aimed at a
modern and integrated City Information System (CIS) for Tbilisi and, in future, for the rest
of the metropolitan area.
The undertaken activities are meant to strengthen the position of Tbilisi as a metropolis
which is well founded in the culture of its own, of Georgia, of the Caucasus region and
outside its borders. All the actions that substantiate and encourage new cultural initiatives
and tourist attractions are expected to make Tbilisi a regional center of culture and
tourism.
The introduction of a new visual order will make getting around easier and safer for both
the visitors and the local residents (information for pedestrians). It will also improve traffic
(information for motorists), which should contribute to the city attractiveness and
accessibility.
Moreover, it has been planned to integrate the information about the city, to invest in
place and infrastructure, to create a unique and recognizable quality, to generate new
cultural and tourist products, to launch promotional campaign in the region and abroad, to
build and strengthen the tourist potential and recognisability of Tbilisi.

Table 5-4 Tbilisi hospitable city – action plan
PROGRAM
See what Tbilisi is
Project name Problems and project description Measures Partners
We provide info you
need
Packet of
We are improving the
quality of your
services
We have prepared
attractions you can
enjoy
Tourists, investors and city residents need a packet of practical information about
everyday life in Tbilisi (financial services, transportation services,
telecommunication, etc.)
- City tourism guide book
- Calendar of events
- Tbilisi tourist product info
- Tourism internet info and booking page
- Video materials
- Study tours for tour operators
- Target countries campaign
High quality tourist services, supporting tourist companies by training programs,
certificates of quality as well as encouraging local companies to group around the
service packet.
Project is a key condition for Tbilisi development and the growth of its
reconcilability in the region and worldwide.
- Professional guides - training programs
- Tbilisi hospitality – training for non professional guides
- Tbilisi quality certificates
- Tourism cluster development
- Market analyses and customer services
- Tourism product award
- Tourism souvenir award
An increasing number of visitors, the needs of local community and the dynamic
growth of the city make it necessary to make it more attractive not only for
tourists but also for the local residents.
- Development of tourism paths
- Support for cultural festivals and meetings
- Tourism infrastructure and facilities
materials
developed.
Ongoing activity
Training
curriculum’s for
targeted groups
of developed.
Feasibility study
for new tourists
infrastructure.
New tourist
products and
facilities outdoor
campaign.
-Tourists
association
- International
organizations
- Hotels
- University
-Tourists
association
-International
organizations
- Governmental
organizations
-Hotels
-Business
associations
-Tourists
association
- International
organizations
- Governmental
organizations
- Hotels

PROGRAM
Stay longer
Working in Tbilisi
Being a student
Foreigners and people from other Georgia regions working in Tbilisi need specific
info on every day life and conditions as well as tax and labor market regulations.
Provide people staying in Tbilisi for work reasons with info about taxes and
money transfers, labor market regulations, living conditions, city services and
recreation possibilities, renting a flat and other circumstances of every day life in
Tbilisi. Guide will be prepared in Georgian, English and Russian language
version.
Students coming from other regions of Georgia and abroad need specific info on
education and life conditions.
- Prepare students guidebook in electronic and hard version, in the Georgian,
English, Russian languages. Packet will include info on education offers, financial
support, living conditions, city attractions and leisure possibilities.
Printable
version will be
available at city
portal.
Guide will be
available at the
city portal in the
printable
version.
Real estate
companies
-State and
private
universities,
-Vocational and
training
institutions
30

5.5. People empower Tbilisi action plan
This direction in the city strategic development will aim at maintaining the city’s business
position on the Georgian market as well as at improving the competitiveness of local
companies and encouraging them to offer more jobs. The activities under the strategy will
promote employment and reduce unemployment as well as they will make local residents
more employable.
Basing on the analysis of Tbilisi workforce market some vital problems have been
recognized: low employment rate, high unemployment rate and a low number of the
unemployed people who choose self-employment. Main activities will focus on
activisation of people who are unemployed or at risk of social exclusion and on
supporting these businesses who create new jobs.
This strategic development aim concentrates mainly on creating jobs for school
graduates because when jobs are difficult to find it is mainly the young people who have
just left vocational schools and have no or little professional experience who are at risk of
long-term unemployment.
The local system of education has become one of the factors generating unemployment
among young people because it does not respond to market requirements. The skills
structure of the workforce does not meet the demand since the system is not flexible
enough and the educational offer does not reflect the development tendencies of the
local business.
Nowadays the employers require practical skills rather than theoretical ones and they
want their future staff to have extra qualifications. Therefore it is necessary for the local
schools to introduce into their curriculum student job placements in order to provide their
graduates with more practical skills, which will make finding a job easier for them. So, it
seems important for the educational organizations of all levels to promote
entrepreneurship among their students.
The activities in this field will contribute to the correlation of needs and expectations of
Tbilisi business with the educational offer of local schools. The projects are also going to
increase the graduates’ competitiveness on the local workforce market.
The objective of this part of the development strategy is to decrease the number of the
unemployed graduates of vocational high schools and universities; to increase the
number of students doing job placements and the number of volunteers in local
companies; to encourage companies to create more job placement opportunities for
students; to improve IT technology level at schools – the beneficiaries of the project –
and to supply them with modern office equipment; to increase the number and improve
the quality of job advisors.

Table 5-5 People empower Tbilisi – action plan
PROGRAM
Future workforce
PROGRAM
You can upgrade Your
skills
Project name Problems and project description Measure Partners
The changes on the workforce market can be observed not only in Tbilisi but
also in other parts of the world.
What will the labor
market offer to you?
How can you
become a good
specialist?
Do you want to be a
businessman?
How to find a job
Information on the market trends, the demand for jobs and a platform to
exchange information between employers and the local education system is the
basis to build a resource of highly qualified future workforce
- conduct youth survey organize
- organize workshops and debates on labor market changes and education –
business round table
Young people need practical information that helps them choose their line of
education.
Development of
- career paths for most needed professions
- best pupils and students fellowship
Motivating and awarding the most innovative business ideas among the young
people gives an additional opportunity for the local economy to develop.
- best business idea awards
- workshops and debates on new economy principles
The city residents, the young ones in particular, need information about job offers
on the dynamically changing workforce market.
Development of
- workforce market information system with an internet portal and one stop shop
- jobs data base
- workforce market survey
The report on the
survey, workshops
and debates.
Consultation with
business
community on
internships.
Best pupils and
students identified
Targeted career
paths developed
Annual awards for
the best business
idea.
A new web site,
the report on the
survey .
-Schools,
universities,
-Business
organizations
- Governmental
institutions
-Labour
movement
organizations.
Schools,
universities,
-Business
organizations.
Schools,
universities,
-Business
organizations.
Schools,
universities,
-Business
organizations.

PROGRAM
Jobs for all
How to upgrade your
skills
How can you
upgrade or change
your qualifications?
Labor fairs
Financing new work
places.
A skill to present oneself to a potential employer and the young people’s
capability to enter the workforce market is a basic condition to start a
professional career.
Development of:
- preparation of CV and an interview with an employer – workshops
- language and IT trainings
- support for schools and training institutions preparing citizens for work
opportunities
- identify potential partner at city and government level for vocational training
programs
The collapse of traditional industries and the development of new economy
based on modern technology has forced local workers to improve their skills or
change qualifications.
- Data base on vocational training courses
- Vocational training for most needed specialists
Job turnover, growing sectors can be the topics big community meeting
Organize job fairs with workshops, presentations, debates
Creation of new work places support local community and generate revenues of
city budget.
In cooperation with the banks and international organizations develop financing
frame offering credits to SME creating work places for specified groups of
residents ( low income, poor, aged people, disadvantage neighborhoods).
Completed
workshops.
Info on trainings
available at the
web site.
Job
organized
annually.
fairs
Credit framework
developed
Schools,
universities,
-Business
organizations.
-Schools,
universities,
-Business
organizations
- Governmental
institutions
-Labour
movement
organizations.
-Schools,
universities,
-Business
organizations
- Governmental
institutions
-Labour
movement
organizations.
Banks,
international
organizations.
33

City needs you
You can take care of
your neighborhood
(ubani).
Social exclusion is an emerging problem for all cities facing transition from
traditional economy to knowledge based economy.
In cooperation with housing communities and utilities temporary work places will
be organized to improve quality of life in deprived neighborhoods.
Community based programs can generate work places for low skilled and low
income people reducing poverty issue.
In cooperation with housing communities develop co-financing scheme for
creation a work places for local community members taking care for public
spaces within housing districts.
Number of
workers involved
in the program.
Number of
generated
annually work
places
Housing
communities
utilities
-Housing
communities
- International
organizations
34

6. Strategy implementation principles
It is crucial for strategy effective implementation that strategy objectives needs to be
agreed by City Government and also accepted by entire Tbilisi community.
Each of five strategic directions includes different tactics that city government should
pursue - new initiatives which weren’t finance from city budget before, new organizational
and operational frameworks, policy changes.
It is crucial that different institutions representing all sectors and levels of government, as
well as business and community leaders, international partners will be involved in to join
activities.
Implementing Tbilisi’s economic strategy will require mobilizing passions, leaderships,
skills and available resources of entire Tbilisi community and beyond including
government and international organizations.
Strategy implementation will be based on three main principles:
- Commitment around strategy directions. Strategy directions should be
communicated through all levels of city administration, so every person working for the
City Hall or other municipal unit will understand her/his role in strategy
implementation’s activities. City decision makers should discuss and agreed a priority
fast – track activities under each strategic direction to be implemented in coming two
years. Municipal entities should incorporate these objectives into development plans
and budget requests for 2008-2009.
- Develop partnership with stakeholders. City leaders and specialists should share
this plan with other governmental institutions, business and community partners and
international organizations supporting transition of Tbilisi economy. They should
engage all potential public commercial and community partners about how to move
forward on strategy directions.
- Monitor performance and facilitate progress. Special role in strategy
implementation will play Economic Policy Agency that will have to initiate, facilitate or
directly realize projects that will be selected. Organizational and professional capacity
of agency will decide how effective implementation process will be. To monitor
strategy implementation efficiency and observe dynamically changing city economy
Economic Policy Agency should truck measures related to strategy implementation
directions and publish them together with annually updated Tbilisi economy
competitive report.
Implementing strategy city should be aware that economic environment will continue to
change. After two years to face new challenges and utilize new opportunities City should
review strategy implementation and update plan in selecting priority projects for next
period of 2009-2011 years.