Introduction

The Georgian Government identified private sector development addressing regional disparity, poverty and unemployment as key priorities for intervention in its new national development strategy " Socioeconomic Development Strategy of Georgia: 2020.” The financing of regional development programs, decentralization and investment in municipal infrastructure and services, are emerging as key tools in this regard as articulated in the Strategy on Regional Development. The objective of this strategy is to address regional disparities, focusing on developing the potential sources of economic growth in each region. Georgia’s demand-driven growth model has allowed it to significantly increase per capita income of local population. On current stage, high priority is attached to the public investments on regional and municipal level.

Authorities continue to support the private sector to lead such economic growth and job creation efforts. Georgia’s reforms in the past years have positioned the country as one of the most competitive business environments globally—ranked 15th out of 183 countries in the IFC 2014 “Doing Business” Report. Georgia scores well in terms of business start-ups, tax processes, investor protection, access to credit, enforcement of contracts, registering property and issuing construction permits. To continue the gradual process of regaining private sector confidence after the twin shocks, the Government developed a regional development framework to focus its efforts on attracting private investors in secondary cities across various sectors, including tourism and agriculture. However, there are still some physical and institutional capacity constraints to attracting private investments in regions with high economic development potential.