A Multi-Market Systems Approach to Build Resilience in Georgia’s Administrative Boundary Line Regions
In Georgia, communities living adjacent to the Administrative Boundary Line (ABL) face significant challenges, including access to adequate goods, services and economic opportunities. Around 20% of the internationally recognized Georgian territory is occupied and around 200,000 people live in communities about 6.21 miles from the ABL, which separates the occupied regions of Abkhazia and South Ossetia from the rest of the country. Consequently, communities near the ABL face increased migration due to the tenuous situation in the region, which limits investment, hampering employment and economic opportunities.
While implementing market systems development (MSD) approaches in insecure areas may be perceived as high risk, adopting these approaches can be a critical strategy to drive sustainable economic growth in areas with few economic opportunities. Through the USAID-funded Georgia Resilient Communities Program, CNFA has adopted a multi-market systems approach to identify, facilitate and expand economic opportunities for communities near the ABL. In addition to focusing on agriculture, the program addresses the root causes of market failures by identifying market opportunities across multiple sectors and working to foster economic growth across these areas and the market system more broadly.
Since its launch in 2022, the program has initiated a rapid response to mitigate growing pressures and identify economic opportunities for local communities that are not reliant on Russian markets. Conducting a rapid assessment, the program identified high-potential sectors and designed a multi-market systems approach, which is already being implemented in partnership with market actors across 74 communities along the ABL. This analysis considered various sectors that would be most viable for low-income populations, women and youth to drive sustainable economic impact.
The findings determined that the agriculture and tourism sectors could have a significant impact on these groups, especially when it comes to building market systems resilience. Using these findings as the blueprint, the program is testing several strategies to improve and stimulate socioeconomic development and foster an environment that is conducive to the success of local businesses across sectors. This multiprong, inclusive approach is aimed at stimulating economic opportunities in the region while also encouraging youth to stay.
Within the agriculture sector, the program is:
- Incentivizing processors to source from areas near the ABL. The program chose to collaborate with agricultural processors that are motivated to work in the ABL and source agricultural products from local farms, but that need incentives to reduce their risks. The program is supporting 18 processors to increase their profits and reach new farmers, provide improved inputs and advisory services to producers, expand their processing lines, and improve their quality, enabling them to create jobs, increase farmer incomes and reach new markets. By adopting a payment-for-results mechanism, the program is offering businesses matching grants where they are paid for achieving results, such as integrating a predetermined number of farmers into their supply chains.
- Enhancing productivity by reducing financial risks. To address financial constraints faced by farmers, the program is sharing the financial risks of private companies who are interested in investing in the establishment of Machinery Service Centers that will rent out machinery to producers. This risk sharing will not only improve productivity but also bring farmland into production. This is a critical lifeline for farmers — the majority of whom own a hectare or less of land — as purchasing machinery is out of reach for most producers, with lending costs sitting around 15%.
Within the tourism sector, the program is:
- Connecting urban tourism operators to tourism providers in the ABL. By bringing together tourism operators with those providing local tourism services, such as accommodation, horseback riding, skiing and hiking, the program is facilitating enhanced market linkages, supporting rural and urban tourism companies to identify new business opportunities that will ultimately lead to business expansion and job creation.
- Developing marketing skills for small tourist businesses in the ABL. The program is developing a Market Business Service Providers Network that will provide support to tour providers, helping them develop their content marketing, place their products on booking platforms and increase their social media presence. By strengthening the local network, numerous businesses in the tourism sector will have access to marketing support in the long term, enabling them to reach new customers and grow. To support Market Business Service Providers in taking on this new business approach, the program is helping cover initial costs by offering payment awards upon achievement of results/milestones.
Additionally, to improve the overall business environment, the program is:
- Catalyzing entrepreneurship in diverse sectors. To encourage the development of entrepreneurship and new sectors, the program is partnering with the Georgian Innovation and Technology Agency to build the technical capacity of budding entrepreneurs and to facilitate access to finance. The program is engaging the agency through technical training and co-hosted events to get entrepreneurs investment-ready, while supporting the agency to continue providing these services in the long term.
- Developing the business service sector. To provide sustainable capacity building support to the private sector, the program is strengthening business service providers and linking them to a diverse set of local mirco, small and medium enterprises (MSMEs) in rural areas through direct facilitation and networking events. With more exposure to businesses working near the ABL, service providers have a better sense of the risks and opportunities in providing services in these regions. Additionally, the service providers can then support local MSMEs to improve their business plans, financial management, standards adoption and marketing to ultimately increase their access to finance and drive business growth.
- Strengthening local government. The program is working to enhance the capacity of municipalities in partnering with the private and civil sectors in order to foster socioeconomic development, such as reducing climate and disaster risks. Through targeted training and coaching, municipalities will gain the skills needed to support businesses and communities in taking advantage of economic opportunities and increasing their resilience to future shocks.
Through this multi-market systems approach, within the first year of implementation, the program has been able to lay the groundwork for locally led growth in a challenging environment. By partnering with the private sector and fostering market linkages, backed by local governments open to new ideas, the program has built a strong foundation for economic development intending to foster sustainable development in the ABL region.