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Section 4. World economy
Korganashvili Larisa, doctor of economic sciences, professor Ivane Javakhishvili Tbilisi State University, Georgia E-mail: l.korganashvili@yahoo.com
GLOBAL COMPETITIVENESS AND URBANIZATION OF GEORGIA
Abstract: Global competitiveness is important in the sustainable development of the national economy. At present, Georgia ranks 67th in the global competitiveness rating of the World Economic Forum, and on the level of urbanization it is on the 137th position in the rating of the United Nations Department of Economic and Social Affairs. In Georgia, 53.5% of the population is urban and 46.5% rural. The purpose of this study is to show the impact of urbanization on Georgia's global competitiveness and to identify the impulses that contribute to the country's further economic development. The paper analyzes trends in the development of global competitiveness and urbanization of Georgia, summarizes and systematizes data on the socio-economic development of large cities of the country, shows the functions of cities of different sizes in the Georgian economy, the positive and negative aspects of urbanization, the possibility of increasing the global competitiveness of the national economy under the influence of urbanization. Based on the analysis, conclusions and recommendations have been made that contribute to the country's sustainable economic growth and its success in world markets. The findings will also be useful for the development of urban policies and for the proper management of these processes.
Keywords: competitiveness, urban, urbanization, economic development, Georgia.
Introduction fields with many countries of the world began, the
100 years ago, on May 26, 1918, Georgia gained structure of the Georgian economy changed sig-
independence, which existed until February 1921. nificantly. If in 1990 the share of agriculture in the
On April 9, 1991, on the basis of the results of the country's gross domestic product (GDP) was 31.7%,
nationwide referendum, the Supreme Council of the industry - 33.1% and services - 35.2%, then in 2016
Republic of Georgia adopted the Act on the Restora- they accounted for 9.0%, 24.9% and 66.1% respec-
tion of State Independence, which proclaimed the tively [1]. According to the preliminary data, in
Independence Act of 1918 and moved to a new stage 2017, Georgia's GDP at current prices amounted to
of its historical development with the transition from 15164.5 mil. USD (by 5.0% more than the previous
a centralized economic system to a market economy. year), GDP per capita - 4078.5 USD [2]. Despite
As a result of the transformation, old political and more than 25 years passed since the proclamation
economic structures were eliminated, active coop- of independence, the country has serious economic
eration in the political, economic, cultural and other problems and the national economy is character-
ized by insufficient competitiveness [3]. One of the main problems in the formation of market relations in Georgia is that the transformation was mainly spontaneous, with trial and error methods, without taking into account the characteristics of the transition period and analysis of social development. As a result, the country still has serious socio-economic and demographic problems, the national economy is characterized by insufficient competitiveness, and the demographic situation and the level of urbanization have changed significantly [4].
The purpose of this study is to analyze the tendencies of the development of global competitiveness and urbanization of Georgia, to summarize and systematize data on the socio-economic development processes of large cities of the country, to show the functions of cities of different sizes in the Georgian economy, the positive and negative aspects of urbanization, the possibility of increasing the global competitiveness of the national economy under the influence of urbanization.
1. Transformation of Georgia in conditions of state independence and its global competitiveness
Each country seeks common goals for the development of civilization, but it goes its own way, proceeding from its national interests, economic development, culture peculiarities, the mentality of the people, etc. Sovereign development of Georgia began with the conditions of a catastrophic economic recession. In 1994, the country's GDP fell to the lowest level and amounted to 32.4% of the 1990 level, hyperinflation averaged more than 3000%, which is almost three times higher than the inflation rate in the post-Soviet countries over the same period [3]. In the years 1991-1995 radical changes took place in Georgia: the transformation of the financial and budgetary and monetary spheres, the privatization ofstate property, the reform in health care, education, the social sphere, etc. In 1995, the national currency, Lari, entered circulation. To take the country out of the crisis, Georgia has accepted the conditions and standards of economic activity proposed by the International
Monetary Fund. As a result of their implementation, it was able to achieve economic growth [4: 5].
To assess the outcome of the transformation of sovereign Georgia, various international ratings can be used. Among them are the followings: The Bertelsmann transformation index, which consists of two components: the status index and the management index. According to the status index in 2018, Georgia ranks 42nd among 129 developing countries and countries with economies in transition, including 37th in political transformation and 47th in economic transformation. According to the management index, it is on the 33rd place. In accordance with the Bertelsmann transformation index, Georgia is among the successful countries [6]. Inclusive Development Index - in 2018, 32nd in the ranking of 78 developing countries [7]. Index of economic freedom - in 2018, 16th among 180 countries - is part of a group of mostly free states [8]. In the Human Development Index Georgia is 70th among 188 countries in the 2015 rating [9]. In the World Bank's index for ease of doing business, Georgia is the 9th among 190 countries in 2018 rating [10]. In the index of involvement in international trade, Georgia is in the 41st place among 136 countries in the 2016 rating [11]. Social Progress Index - 53rd place among 128 countries in the rating of 2017 [12]. The index of global competitiveness - 67th among 137 countries in the rating of2017-2018 [13].
At the present stage, the country's competitiveness is the main indicator reflecting the state of its economy, its position on the world market and the standard ofliving of the population. The World Economic Forum defines competitiveness as the set of institutions, policies, and factors that determine the level of productivity of an economy that can achieve [14]. In an open economy, all countries, as subjects of the world market, have equal rights, but because of the asymmetry of the development of countries, the real picture looks quite different. Politically influential and economically strong states achieve high competitiveness through strategic leadership and
monopolization of markets. On the other hand, less developed countries and regions pay "rents of backwardness" with their natural resources, human capital, environmental quotas, etc. The existing disparities between developed and developing countries (especially in the production and use of high-tech products) are expressed in different levels of global competitiveness [15; 16].
Starting with the 2011-2012 ranking, Georgia's global competitiveness tended to improve, but in the Global Competitiveness Index (GCI) 2017-2018, the situation changed and the country moved from the 59th place to the 67th. GCI score range across the 12 pillars is presented as follows: 1st pillar: Institutions - 50th place, 2nd pillar: Infrastructure - 69th place, 3rd pillar: Macro-economic environment - 48th place, 4th pillar: Health and primary education - 69th place, 5th pillar: Higher education and training - 87th place, 6th pillar: Goods market efficiency - 50th place, 7th pillar: Labor market efficiency - 53rd place, 8 th pillar: Financial market development - 63rd place, 9th pillar: Technological readiness - 70th place, 10th pillar: Market size - 100th place, 11th pillar: Business sophistication - 99th place and 12th pillar: Innovation - 118th place [13]. The above data show that the country is facing serious problems of further development and it does not have sufficient resources to switch to an innovative model of economic development based on knowledge [17; 18; 19].
2. The processes of urbanization and their impact on Georgia's global competitiveness
Urbanization is a multilateral socio-economic, demographic and geographical process of urban growth, increasing the proportion of the urban population and their role in the development of society. Today, 55% of the world's population live in urban areas, a proportion that is expected to increase to 68% by 2050. Projections show that urbanization, the gradual shift in residence of the human population from rural to urban areas, combined with the overall growth of the world's population could add another 2.5 billion people to urban areas by 2050, with close to 90% of this increase taking place in Asia and Africa [20]. The processes of urbanization in independent Georgia began spontaneously against the background of a changing demographic and economic situation. In 2017, compared to 1989, the country's population decreased by 1687.1 thousand people. One of the main reasons for this was the intensive migration of the population abroad. At the same time, the share of the urban population in the total population decreased from 55.4% to 53.7%. The highest proportion of the urban population (47.8%) was in 2003-2005 (Table 1). According to the level of urbanization in the ranking of The United Nations Department of Economic and Social Affairs, Georgia is on the 137th position.
Table 1.- Number of population of Georgia (at the beginning of the year)
Years Total population, thsd Urban, thsd Rural, thsd In total po] >ulation,%
Urban Rural
1 2 3 4 5 6
1989 5400.8 2991.3 2409.5 55.4 44.6
2002 4371.5 2284.8 2086.7 52.3 47.7
2003 4342.6 2266.8 2075.8 52.2 47.8
2004 4315.2 2252.5 2062.7 52.2 47.8
2005 4321.5 2257.5 2064.0 52.2 47.8
2006 4401.3 2310.4 2090.9 52.5 47.5
2007 4394.7 2308.9 2085.8 52.5 47.5
2008 4382.1 2303.8 2078.3 52.6 47.4
2009 4385.4 2309.1 2076.3 52.7 47.3
1 2 3 4 5 6
2010 4436.4 2350.5 2085.9 53.0 47.0
2011 4469.2 2371.3 2097.9 53.1 46.9
2012 4497.6 2391.7 2105.9 53.2 46.8
2013 4483.8 2410.8 2073.0 53.8 46.2
2014 4490.5 2411.7 2078.8 53.7 46.3
2015* 3713.7 2122.9 1590.8 57.2 42.8
2016 3720.4 2128.5 1591.9 57.2 42.8
2017 3718.2 2128.6 1589.6 57.2 42.8
* In 2015-2017 the data is based on the results of the Population Census of November 5, 2014. The 2014 General Population Census results revealed the necessity of re-estimation of basic demographic data of previous years. Currently, Geostat implements the reestimation of the main demographic indicators of previous years, whereby the harmonization of historical data with 2014 Census data will be available. Source: Geostat. http://geostat.ge/cms/site_images/_files/yearbook/Yearbook_2017.pdf, p. 18 [21]
In Georgia, there are more than 100 cities and lived in the city of Kutaisi (the center of Western
towns, but out of them only 4 cities have a population of more than 100 thousand people. As of the beginning of2017, 1083.8 thousand people lived in Tbilisi - 29.15% of the total population and 50.92% of the urban population of Georgia, though in 2002 Tbilisi accounted for 24.74% of the total population and 47.34% of the urban population of Georgia. According to the 2002 census, 186.0 thousand people
Georgia and the Imereti region) and it was the second city of the country, however, as the data of 2017 and the 2014 census show, it lost the place to Batumi, the capital of the Adjarian Autonomous Republic. In 2017, the Batumi share was 4.18% of the total population and 4.18% of the urban population, Kutaisi -3.96% and 6.92% respectively, and Rustavi - 3.40% and 5.93% (table 2).
Table 2.- Population in cities Tbilisi, Batumi, Kutaisi and Rustavi (at the beginning of the year, thsd)
2002* 2014* 2017
1 2 3 4
Total population, thsd. 4371.5 4490.5 3718.2
Urban population, thsd. 2284.8 2411.7 2128.6
Tbilisi, thsd 1081.7 1078.3 1083.8
Share in total population,% 24.74 24.01 29.15
Share in the urban population,% 47.34 44.71 50.92
Batumi, thsd 121.8 152.8 155.5
Share in total population,% 2.79 3.40 4.18
Share in the urban population,% 5.33 6.34 7.31
Kutaisi, thsd 186.0 147.6 147.2
Share in total population,% 4.25 3.29 3.96
Share in the urban population,% 8.14 6.12 6.92
Rustavi, thsd 116.4 125.1 126.3
Share in total population,% 26.6 2.79 3.40
1 2 3 4
Share in the urban population,% 5.09 5.19 5.93
Population in 4th cities 1505,9 1503,8 1512,8
Share in total population,% 34.45 33.49 40.69
Share in the urban population,% 65.90 62.35 71.07
*According to the population census.
Source: Geostat. Yearbook (2017) http://geostat.ge/cms/site_images/_files/yearbook/Yearbook_2017.pdf, pp. 34-36 [21]
In 2017, in four major cities of the country (Tbilisi, Batumi, Kutaisi and Rustavi), there were 1512.8 thousand people. (40.69% of the total population and 71.07% ofthe urban population), in 2014-1503.8 thousand people. (33.49% and 62.35% respectively), in 2002-1505.9 thousand people (33.49% and 62.35% respectively) (Table 2). These data indicate the uneven distribution of the population by region, as well as the growing concentration of the population in large cities and especially in the capital of Tbilisi, which is the most urbanized city of Georgia. The high concentration of the population in Tbilisi can be explained by the massive migration of the population (both from rural and urban settlements) to the capital to improve living conditions, as well as the number of refugees. According to the Ministry of Internally Displaced Persons from the Occupied Territories, by September 2014, the number ofrefugees was 259.247 people and more than a third of them settled in Tbilisi.
Large cities are the centers of growth of the national economy. It is proved that there is a direct link between urbanization and GDP growth. This is primarily associated with the possibility of using economies of scale and specialization, increasing in-
vestment attractiveness and changing market conditions. In large cities, human capital is usually concentrated, better living conditions and opportunities for employment are created, an opportunity arises for the formation of a "smart city", etc. Accordingly, a well-planned urbanization process contributes to economic growth and, ultimately, to the global competitiveness of the country.
Conclusion
The sustainable economic development of Georgia depends on its global competitiveness, which is increased by urbanization. The processes of urbanization in Georgia are spontaneous, which leads to uneven development of the regions of the country, the abandonment of a number of settlements, especially in mountainous areas.
In the long term, the processes of urbanization in Georgia will deepen and develop, since cities can make people's lives easier. In order for the benefits from the concentration of the population to exceed its costs, the government of the country must take control of these processes into its own hands. Only in this case, urbanization can influence the increase of Georgia's global competitiveness.
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