Open Question

Teaching entrepreneurship in the post-soviet country such as Georgia, can play crucial role in
the development of whole economic system of the country. In the country where there is not long-
lasting tradition of free market economy system and opportunity driven capitalism, Studying
entrepreneurship benefits people from different social and economic backgrounds because it teaches
people to cultivate unique skills and think outside the box. Moreover, it creates opportunity, instills
confidence, ensures social justice and stimulates the economy. Entrepreneurship education also
provides starting entrepreneurs with the skills and knowledge to come up with business ideas and
develop their own ventures. And this includes helping them to learn about core business areas such as
finance, sales, marketing, management and accounting, not to mention, broader ranging skills such as
adaptability, effective communication, and confidence

Study Case

O ne of the key goals of the economic policy of Georgia is the development of small
entrepreneurship, which serves as a basis for the stable development of the economy. It
ensures the creation of jobs in the country, employment of people capable of working and creation of a
‘middle class’ – a guarantee for stable development. Currently, unemployment and poverty still remain
the toughest problems for the country.

Setting up and development of startups in Georgia, what on its turn will promote the
improvement of business activity throughout the country and employment and the resultant economic
growth, has been an important priority of the strategy of economic development of the country since
2016. Consequently, the country started to establish an eco-system to develop startups with the goal to
establish a common entrepreneurial environment, encourage novice businesses and developing the
product in the country to be a milestone on the Georgian and foreign markets

According the GEM 2018 Global Adult Population Survey, Georgian entrepreneurs are mainly
necessity- rather than opportunity-driven. In particular, Georgia possesses the 1st place in the
prevalence of necessity riven entrepreneurship among the efficiency-driven European economies,
whereas the country holds the last place when it comes to the frequency of opportunity-driven
entrepreneurship. Besides that, Georgia, along with Macedonia, also holds the last position when it
comes to the improvement driven motivation entrepreneurship rate. This suggests that Georgian
entrepreneurs are mainly driven by necessity rather than by opportunity motives. As a result, the very
low motivation index is observed in the country. When we compare the dynamics of individual
motivation in Georgia, we observe an increase in necessity-driven entrepreneurship (2016 – 48.6%; 2017
– 51.1%) and a decrease in opportunity driven entrepreneurship (2016 - 50.6%; 2017 – 48.9%). This
suggests that the increased total-early stage entrepreneurial activity in Georgia was driven mostly by
increased necessity-driven entrepreneurship.

In the early 90s of the 20th century, the private sector was formed as a state property adjunct.
Many people wanted to begin their ‘own business’. However, we must underline, that the majority of
cooperatives during those times (75-80%) were formed based on state enterprises. during that time,
former Soviet Union countries began active trade with foreign countries with the easing of procedures
and restrictions on international trade and travel. And at the time, involvement in simple trade
operations resulted in substantial profits; During the same period, rentals (especially with the rental
redemption right) were actively entering the market, which led to a practically uncontrolled transition of
state property to the private sector. Wealth accumulation in Georgia first began in 1993 after the
collapse of the Soviet Union. The savings of much of the population were lost during the same period.
Inflation transformed into hyperinflation and only a handful of individuals accumulated wealth. As the
result of erroneous privatization, a small number of individuals were able to purchase state property for
virtually nothing Several entrepreneurs started businesses with foreign credit; Businessmen, who
accumulated wealth during this period, started to enter politics, while those who made money as a
member of parliament or the government began to start their own businesses at end of their tenure;
Individuals from different socioeconomic backgrounds, professional experience and academic
qualifications are representative of Georgian entrepreneurs. More than a half have completed degrees
in higher education, mainly in the fields of engineering and economics. Before 1999, Georgia witnessed
a sharp increase in entrepreneurial activity. While today, the situation remains stable.

In 2000s and 2010s, main strategy of the government was to promote micro and small
entrepreneurship, which led to several state funded programs. However, these programs had major
deficiencies. In 2016, Association of Young Georgian Economist conducted monitoring and evaluation of
the Enterprise in Georgia program. According to evaluation, entrepreneurs revealed several actual
problems: Instable economic environment, unpredictable exchange rate; legislative changes – especially
towards the tax reduction; Deficit of qualified work force. Mentioned problems emphasize poor
development of the country’s economy and only governmental programs is not able to resolve them.

The situation in Georgia is not so good when we study entrepreneurial activity.. Government
and other institutions should try improve financial accessibility, legislative base, tax benefits and second
chance policies. Financial resource availability in the country is considered by national experts to be one
of the least developed item. In this index, according to GEM 2018 report, Georgia is ranked the 7th place
among 9 efficiency-driven European economies. This suggests that financing is one of the key constrain
for individuals to start a business in Georgia, which can be a hindrance to promote national economic
growth. Therefore, relatively cheap financial resources should be offered to entrepreneurs in the
country. This should be supported and motivated by public sector. General and regulatory policies as
well as government programs are rated one of the most positive conditions of the Georgian
entrepreneurial ecosystem. In these indexes, Georgia has the first position among the efficiency-driven
European economies. Despite high rankings of general/regulatory policies and implemented programs,
the Georgian government does not have stability in this field, regulations and restrictions on enterprise
are often changing. There should be the monitoring mechanisms which would adjust state regulations to
the problems of the market. Monitoring could include assessment of policy effectiveness in practice and
adjustments for improvement if needed. For internal market analyses there are mixed results. On the
one hand, we have high rates in market openness, but, on the other hand, we have low rates in market
dynamics. This might be due to the natural or semi natural restrictions of market dynamics such as
monopolies and oligopolies. To cope with this non–healthy market environment in the country, it is
suggested that there is explicit need of anti-monopoly legislation and the implementation of legislation.
Also when it comes to entrepreneurial education, only 1/3 of the Georgian population can identiy
business opportunities and the majority of them (58 %) think that they do not have enough knowledge
and skills to act entrepreneurially. This suggests that there is need of developing general and
entrepreneurship education programs to help individuals identify business opportunities and
successfully exploit them.

Theme

A social entrepreneur is an individual who works with an initiative to develop pioneering ideas
and solutions for the existing social problems and issues faced by the society. They try to resolve these
problems by changing the system of working and mind set of people, by spreading awareness about
how to tackle these problems and issues and developing social entrepreneurship resources to empower
the community.

Since Georgian entrepreneurs are mainly driven by necessity, it is improbable to expect from
them highest degree of social responsibilities. When the driving force of business is to survive in the
small market with the minimal financial assets, situations where negligence of social responsibilities will
be much higher. However, considering fact that Georgia faced global pandemic better than most of the
civilized world, could be the factor which will increase country’s entrerpreneurial activity dynamics.

One of the main pillars of Georgia’s economic development was always depending the foregin
direct investments (FDI). During the past year it was decreased drastically (58%) due to unstable political
processes in the country. Covid-19 completely changes the geopolitical and world trade conditions in the
world. After the events which transpired in China, they will be reluctant to further invest in such unsafe
market. Most of the European countries and US have also suffered huge losses because of pandemic.
Economical implications have been tremendous, which would force investors to search new safe
harbors for their capital.

Even if Georgia does not have capacity to become major player in the world trade, it has
business friendly legal environment and much less tax rates (20% in average for businesses) to become
attractive place for global enterprises to invest. This process will subsequently lead to economic
progress, which will reflect on the entrepreneurship in general. Smaller businesses might become
interest of huge global corporations and businesses as a whole.

Aside from financial opportunities, Covid-19 showed that being socially responsible in modern
times is necessary to adapt with the setbacks that might take place. In the capitalist system, where
supply and demand chain define everything, it has become apparent that Georgia cannot be relying only
on specific sectors of businesses and it should be open to any type of innovations, which might
accumulate wealth. Due to pandemic sectors of businesses such as tourism and restaurants suffered
major losses and there was no possibility to stimulate this process through state subsidies, because it
would have been pointless, when demand is basically non-existent. Main resources of country is owned
by the state, which should privatized and granted to private companies which have clear visions and
strategy, with regards to its usage. Main problem in Georgia’s economic sphere has always been
governmental activities which were reflected in the monopolies and oligopolies of certain privileged
parties affiliated with public officials. Privatized equity will give the private sector sufficient means to be
in competition with established conglomerates. Existence of strong small and medium sized business
sector will ultimately lead to better social environment and entrepreneurs will be encouraged to
become more socially responsible.