Small business in a small country and the role of government (the case of Georgia)

Abstract

Problem statement: The value of small and medium-sized enterprises (SMEs) for a national economy is recognized all over the world. Georgia is not an exception. Georgian government has declared the importance of the creation of a strong private sector in strategic documents - “Socio-Economic Development Strategy of Georgia – Georgia 2020” (2014) and “For a Strong, Democratic and United Georgia” (2015), first of all. In line with country’s general strategy - to achieve economic growth through private sector development - more proactive reforms to develop entrepreneurship, start-ups and build a competitive SME sector have been developed and special program -“SME Development Strategy 2016-2020”- was adopted. Nevertheless, some challenging tasks still remain. The aims of the article are twofold. Firstly, to analyze Georgian SMEs contribution to the national economy in order to reveal the role of this sector, and following this reasoning, critically assess government policy towards SMEs after signing in 2014 the Association Agreement with the European Union. Research methods applied in the paper are quantitative and qualitative based upon a bottom-up approach that combines desk research and statistical data analysis provided by the National Statistics Office of Georgia, national researches and international organizations. Desk research consists of analysis of academic literature related to the topic. Media reports and interviews are used as additional sources. Main results/ Findings are as follows:  nowadays Georgian SMEs contribution to the country’s economy is difficult to be assessed due to the new classification methodology applied by the National Statistics Office of Georgia,  Georgian government policy toward SME is changing,  Entrepreneurial education still remains a challenge,  Neither educational programs are fully successful nor government provided effective training programs. Practical implication of the work: Recommendations for the policy decision-makers were developed in order to provide guidance to policy makers for formulating and adjusting policies and programs.