Private sector development South Caucasus

Project description

Title: Private sector development South Caucasus
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Armenia, Azerbaijan, Georgia
Lead executing agencies: Ministries of Economy of Armenia, Azerbaijan and Georgia
Overall term: 2013 to 2016


The three South Caucasus countries of Armenia, Azerbaijan and Georgia face the challenge of generating broad-based growth in order to ameliorate the urban-rural divide and reduce poverty in rural regions. Due to the small size and low purchasing power of the domestic markets, these countries are now working hard to develop their foreign trade. The diversification of the economy and improvements to the competitiveness of export products are given high political priority. Potential for exports exists above all in the areas of processed agricultural products and tourism.

Small and medium-sized enterprises (SMEs) are not yet fully exploiting the existing market opportunities with their most important trading partner, the European Union. The main hurdle in this respect is the inadequacy of business and institutional conditions needed for the development of export-oriented economic sectors, and thus for broad-based growth. This is the result of shortfalls in capacities in the institutions involved in policy-making for business and trade promotion, and for vocational training. Barely any inter-institutional cooperation takes place, nor is there an effective dialogue with the private sector. There is a dearth of services to support production, quality assurance, procurement and sales. Further challenges to private sector development are the growing demand for skilled workers, and the lack of systematic exchanges between the South Caucasus countries regarding business policy matters.


Conditions have improved for the development of certain foreign trade-oriented sectors, in order to achieve inclusive growth.


The main focus of the programme is on needs-based private sector promotion in specific value chains with proven export potential. To this end, it pursues measures intended to build a more conducive business environment and improve vocational training.

The programme supports the implementation of relevant policies, strategies and pilot measures. Across the three countries of the South Caucasus, the sectors demonstrating the greatest potential for exports and employment are wine and beverages, and tourism. Also important are high-precision mechanics in Armenia, the chemicals sector in Azerbaijan, and construction in Georgia.

The areas of activity of the programme:

  1. Improving the business environment
    The programme advises public and private business support organisations on their development strategies and sector promotion measures. At the regional level, it encourages exchanges of information and experience. Annual summer academies for business people from all the South Caucasian countries address the issues of sustainable value chain development and vocational training.
  2. Promoting the private sector in selected value chains
    Here, GIZ is cooperating with public-sector support institutions as well as training and service providers, and representatives of the private sector and business associations, in drafting and implementing action plans. Together, they are developing new services for small and medium-sized enterprises in the selected sectors. These can be introduced as part of international development partnerships to make it easier to adapt them to global standards.
  3. Vocational training
    With a view to developing the private sector, the programme analyses the quantitative and qualitative needs for skilled personnel, and identifies appropriate training providers in the selected sectors and value chains. It then supports those providers in developing new vocational training curricula and revising existing ones, and it helps them to improve their teaching and management methods and adapt them to sector-specific international standards.

Results achieved so far

Improving the business environment. Working with selected partners, studies have been completed on potentials and development status. These have been fed into the policy dialogue. Capacity development measures have also begun, focusing on techniques and methods of analysing business and structural policies. In Armenia, the Ministry of Economy has received support for the promotion of SMEs, which special emphasis on competition policy and increased analytical capacities. In Azerbaijan, the international competitiveness of the selected sectors is the main focus, with approaches and programmes developed in accordance with the national strategy ‘Azerbaijan 2020’. And in Georgia, studies have been started, and roundtables held on the impacts on selected business sectors of the Deep and Comprehensive Free Trade Agreements (DCFTA). The newly founded Georgian Entrepreneurship Development Agency is benefitting from advice for its first three-year plan during its development phase.

Promotion of vocational training. The first initiatives to improve vocational training in the selected sectors have begun, and the programme is providing support for new training services and curricula, and through development partnerships with the private sector. Armenia and Georgia are now preparing their participation in Worldskills International, in 2015. In this respect, the programme is advising the respective working groups on the comparison of international competency standards in the selected sectors, and increasing the cooperation between education provider and the private sector. Meanwhile, Azerbaijan has launched a broad-based training course for management staff of vocational education providers.