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Georgia’s $40M Hi-Tech Project: A Mirage or Job Creator?

The Georgian government and World Bank are hoping a $40-million technology-development project will help economically struggling Georgia gain a competitive edge that can spur growth.
 
Georgia has struggled to overcome a high-tech deficit and institutional roadblocks that hamper entrepreneurial activity, in particular the education system’s inability to produce graduates who have the skills needed to fill high-tech, well-paying jobs. In 2015, the country ranked 73rd among 141 countries surveyed in the Global Innovation Index, an annual ranking that evaluates how government policies facilitate technological innovation. The index is compiled by the US-based Cornell University, France’s INSEAD business school and the World Intellectual Property Organization.
 
A 2013 World Bank study of Georgia’s labor force, entitled “Georgia: Skills Mismatch and Unemployment Labor Market Changes,” found there was neither a demand for, nor a supply of skilled labor.
 
“We usually can’t find a person out of university that’s [sic] ready to contribute right away,” said one Georgian digital entrepreneur, who asked to remain nameless. “We need to get someone when they are a first or second-year student and mentor them. We pay them a basic salary, and our senior software developers help them.”
 
To build up Georgia’s technological muscle, the World Bank expects in the coming weeks to approve the Georgian National Innovative Ecosystem Project, or GENIE. The two-year-old Georgian Innovation and Technology Agency (GITA), part of the Economy Ministry, will oversee the project.
 
The agency’s goals are ambitious. By 2020, GITA wants to have 40,000 export-oriented IT experts working in Georgia, to export $1.1-billion worth of IT products, and to see Georgia ranked among the world’s top 10 countries for information and communication technologies.
 
But the $40-million GENIE project is more set on raising the floor than the ceiling of Georgia’s technological capacity.
 
It prioritizes job creation through financing small and medium-sized businesses, while focusing on training in the basics — digital literacy and digital economy. A national network of “innovation centers” also will be created.
 
While GENIE’s focus on digitizing Georgia’s economy, if implemented effectively, might create demand for a more highly skilled workforce, it does little to train the programmers and software developers who would have the potential to meet GITA’s stated goals.
 
In correspondence with EurasiaNet.org, World Bank representatives, who spoke on condition of anonymity, acknowledged Georgia’s need for high-end tech skills, but stressed the more immediate need to create jobs.
 
Georgia officially has a 12.4-percent unemployment rate, though unofficial estimates range far higher.  The Bank hopes to make 3,000 people employable through GENIE trainings.
 
The question is whether the government can pull it off.
 
Hampered by annual budgets that have yet to exceed $3.5 million, GITA’s community activities to date have consisted primarily of short-term trainings, promotional events, such as hack-a-thons, and limited private-sector financing. It does not have a lengthy track record with larger projects. Last December, at a cost of roughly $2 million, it completed the first of four buildings that will make up Georgia’s first tech park, located in the capital, Tbilisi.
 
Georgia’s 2016 state budget, though, specifies no allotment for the park’s future development. GITA representatives did not respond to queries about the project’s timeline and budget.
 
For the government, the one-building “park” is already serving a key purpose: along with two tech laboratories, it was built to meet the World Bank’s requirements for a broader,  $60-million loan to the Ministry of Economy and Sustainable Development to encourage competitiveness in Georgia’s private sector.
 
Under the terms of that deal, only one building in the tech park needed to be “operational.”
 
The World Bank apparently recognizes that more needs to be done to bolster its ability to see the mega-million-dollar GENIE project through.
 
At an undisclosed cost, it will provide “capacity-building through coaching and rigorous implementation support,” while GITA will hire its own technical, environmental, and “social” experts.
 
The World Bank claimed that GITA received favorable feedback from business executives, students and tech-employees, but some tech-industry professionals are wary of its top-down nature. “[M]ajor change doesn’t happen because of a big government project,” commented Giorgi Dolidze, director of Tbilisi Marketing, a graphics and web-design firm. “It happens when these kinds of skills take root in the culture somehow. Then people start to create their own opportunities.”
 
Georgia also faces competition from its southern neighbor, Armenia, where big-name tech firms like American microchip designer Synopsys Inc and software firm National Instruments, among others, have set up operations. The Armenian government has heavily supported the country’s tech boom, and Armenia’s Soviet-era legacy of producing microelectronics and an early computer system has helped shape an atmosphere conducive to IT development.
 
Whether or not Georgia has a similar tech culture is open to debate. The World Bank stressed that they will provide “more targeted assistance to firms that wish to innovate” in Georgia, and claimed that the government has high-end skills training “in the works.” But some observers question whether that will suffice.
 
“There has been a big push by the EU and World Bank to promote job creation in Eastern Europe by financing the creation of state-funded tech incubators,” said Canadian-Armenian Raffi Elliott, founder of the health-tech start-up gettreated.co, based in the Armenian capital, Yerevan. “For the most part, it’s turned into a massive Potemkin village.”
 
“There’s an argument to be made about [the lower potential for success of] artificially created tech ecosystems versus organically created industries,” he added.
 
The World Bank, however, keeps its focus on the planned 3,000 new jobs. “Otherwise, we’re on the way to either wage deflation or frustration,” a bank representative stated.

Matthew Miller is a freelance writer based in Tbilisi.

Georgia’s $40M Hi-Tech Project: A Mirage or Job Creator?

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