Prospects for innovative development of sectors of the economy of Georgia in the next decade

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Ivane Javakhishvili Tbilisi State University Paata Gugushvili Institute of Economics
The first part of the work shows that there are factors that prevent the widespread intro-duction of basic and improving innovations in production and, consequently, the accelerated and balanced development of the economy. These are mainly problems associated with the difficulties of attracting basic and improving innovations to sectors and subsectors of the country's economy, difficulties associated with the sale of products intended for production in foreign markets, difficulties associated with financing innovations. The vast majority of basic and improving innovations introduced into sectors and subsectors of the economy, Georgia, like most other small and medium-sized countries, is forced to import either through the purchase of new process technologies or through the organization of joint ventures with foreign partners. In solving this problem, business should be assisted by the organization of innovation infra-structure, which are described in the first part of the work. These are the relevant ministries and relevant departments in large enterprises, the Georgian Innovation and Technology Agency, organizations promoting technology transfer and other elements of the innovation infrastructure. In our opinion, the creation of innovative enterprises (basic innovations) and the introduction of improving innovations should be coordinated by technology parks created for priority sectors and subsectors or for several production-related sectors. The International Organization of Technology Parks defines them as follows: “a technology park is an organization managed by specialists whose main goal is to increase the well-being of the local community through the promotion of an innovative culture, as well as the competitiveness of innovative business and scientific organizations. To achieve these goals, the technology park stimulates and manages the flow of knowledge and technology between universities, research institutes, companies and markets. It facilitates the creation and growth of innovative companies through incubation processes and processes for the emergence of new companies from existing ones. The Technopark provides other services in addition to high-quality premises.” In our opinion, this definition is suitable only for the largest countries, and even then not fully. For Georgia, which will have to import the vast majority of innovations, the main task of the technology park (it can be called differently, for example: an innovation center for promoting the creation of innovative enterprises and the introduction of improving innovations) should be to identify the latest technologies abroad for recognized priority sectors and subsectors of the economy, to promote their purchase and development, involvement of foreign specialists for equipment adjustment and training of employees, identification of potential markets for the products planned for production, involvement of scientists from domestic universities and research institutes to solve these problems, as well as involvement of these scientists (for a fee) in work to improve current foreign technologies to be used (process) or produced (product) in the country. Several technology parks have been created in Georgia, dealing mainly with IR technologies. Also, in our opinion, in the near future it is necessary to create a technology park dealing with the electrical industry, a technology park dealing with the production of composite materials and products from them. It is also necessary to organize several innovation clusters, the coordinating core of some of which will be technology parks. Moreover, it is necessary to create not a lot of actually formal innovation clusters, as happened in some small European countries, but to create real clusters to support innovative growth in priority sectors, for example, a cluster of energy and electrical industry, a cluster of composite materials and products from them, leather and foot-wear cluster (the latter existed in some countries for centuries, but, of course, they were not called clusters then), later it will be possible to create a transport engineering cluster (at pre-sent, there is already in its infancy a wine production cluster with farmers supplying grapes, a furniture cluster, however, they must first of all strengthen their function of identifying and studying the needs of sales markets and facilitating the promotion of their products to them; tourism infrastructure and related industries are also clustered to a certain extent). The first part of the work also discusses the problems of financing innovation activities. The business sector should take on the main burden of financing innovation activity, investing in the purchase of new relevant technologies or on the basis of organizing joint ventures with foreign partners, where part of the financing will be taken over by the foreign partner by sup-plying its technologies (of course, a domestic businessman should partially reimburse their cost, according to equity participation). In the first place, the Georgian Innovation and Technology Agency and the Produce in Georgia Agency should participate in state financing of innovation activities, to which, in the light of recent trends to strengthen state incentives for the development of private businesses in developed countries, the state should provide more funds for this. It seems that the European Regional Development Fund and the Cohesion Fund can make a certain contribution to the financing of innovation in Georgia, and the European Social Fund can allocate funds for investment in education. Obviously, since Georgia is an associate member of the EU, when submitting justified projects, it will be able to count on the allocation of small funds from these funds for their implementation. The second part of the work presents proposals for the innovative development of some sectors and subsectors of the economy. It is noted that an important factor for attracting foreign capital to the sectors of the country's economy is the availability of cheap electricity. Meanwhile, at present, most of the electricity is imported. Therefore, in the next decade in the energy sector, it is necessary to focus on the creation of power plants operating on renewable energy sources. First of all, it is necessary, where it is still possible, to build a hydroelectric power stations (since the electricity generated by hydroelectric power plants is the cheapest), but not on such enslaving conditions on which it was supposed to build the Neskra hydroelectric power stations cascade, the con-tract for the construction of which was terminated. In the next decade, it is necessary to start a large-scale construction of innovative solar and, in particular, wind power plants, in which, due to the instability of their electricity generation in different periods, there should be energy storage devices. The cost of production (or import) and operation of energy storage will of course significantly affect the cost of generated energy, however, despite this, the construction of wind and solar power plants is becoming more and more relevant. But at the same time, it is necessary to use all the remaining opportunities for the construction of hydroelectric power stations. There are many studies and publications proving and substantiating the inevitability of a gradual transition to "clean energy" (meaning wind and solar power plants). Thus, in an article published on the eve of the UN Climate Change Conference (COP26) in Glasgow (held Octo-ber 31-November 13, 2021), J. Kortenhorst writes: “For decades, we at the Rocky Mountain Institute (RMI) have argued that the transition to a clean energy will cost less and happen faster than governments, firms and many analysts expect. In recent years, this prospect has fully proved true: the cost of renewable energy has been steadily falling, faster than expected, while their deployment has been faster than predicted, which has led to even greater cost reductions.... We must not allow further delays. As we move closer to COP26, it is imperative that world leaders understand that we already have cleaner, cheaper energy solutions ready for de-ployment today. Achieving our 1.5°C goal is not about sacrifice; it's about seizing opportuni-ties. If we get to work now, we can save trillions of dollars and prevent climate change that would otherwise befall our children and grandchildren.” [Kortenhorst J., 25.10.2021]. It must be added here that there is no alternative to the gradual transition to renewable energy sources, not only because of the need to solve the problems associated with climate change, but also because the reserves of the sought-after fuel are rapidly depleted (especially oil) and in connection with this their value is gradually increasing. Therefore, if timely measures are not taken to develop and improve technologies for the generation, accumulation (storage) and use of electricity from renewable energy sources and the construction of appropriate energy facili-ties, then a catastrophe will befall the modern technological civilization. However, in reality, everything is not as simple as it is shown in such overly optimistic publications about the possibility of rapid and relatively cheap deployment of green energy facilities and their replacement of traditional generation methods. Much remains to be done in the area of improving green generation technologies (in addition to hydroelectric power plants, where everything is open) and ensuring that the cost of electricity generated by these systems is reduced. So, for example, in the last year in the field of green energy in the EU, due to a num-ber of reasons, certain failures occurred. “In recent years, green energy has been developing in the EU to the detriment of nuclear power plants and traditional gas-fired energy. When at the beginning of the year the demand for gas increased all over the world due to the cold winter, and then the summer in Europe turned out to be low-wind, the Europeans did not have enough generation, and the many times more expensive gas led to a surge in fuel and electricity pric-es.” In this regard, “the European Union will present a new energy strategy by November due to the energy crisis,” German Chancellor Angela Merkel said at a press conference after the summit of EU heads of state. Firstly, alternative energy sources turned out to be unreliable - the power of the wind and the sun does not always help. The EU will create strategic gas reserves, said in turn the head of the European Commission Ursula von der Leyen. This year, the EU has not replenished its reserves, which led to fuel shortages and a sharp rise in energy prices. It is necessary to continue to use nuclear power plants as a stable source of energy, said Ursula von der Leyen. The EU is not going to abandon "renewable and clean energy", "along with this, we need a stable source - this is nuclear energy, and during the transition period, of course, we need natural gas," she said. But despite this, the use of wind and solar energy to generate electricity is becoming in-creasingly relevant and businessmen and scientists in Georgia need to make great efforts to increase the number of relevant stations in the country and ensure greater reliability by provid-ing them with energy storage devices. For this (and not only for this), it is necessary to develop the electrical industry in Georgia, which must learn how to produce electricity storage devices: lithium-ion batteries (which are currently being intensively improved, new types of batteries are also being devel-oped); gravitational energy storage devices (which were invented quite recently); pumped-storage power plants (it seems that Georgian scientists should also be involved in the develop-ment of new types of batteries, and it would be expedient for the state to finance the relevant research and development). The production of batteries for electric vehicles and aircraft is also becoming very rele-vant. Therefore, it will be timely if Georgia learns how to produce such batteries, and scientists begin to explore the possibilities of their disposal in order to restore and reuse them. In the electrical industry of Georgia, one should also think about building a plant for the production of solar cells. In Georgia, there are already several factories for the production of composite materi-als and, mainly, products from them. Since there is already experience, in the near future it is necessary to create new productions recognized in the world as relevant in this subsector. To do this, it is necessary to create a special cluster, the innovation center of which will coordinate the development of this industry. First of all, it is necessary to create a factory for the produc-tion of prepregs (i.e., composite sheet forms), since the composite materials themselves are currently imported to Georgia, and products from them are formed at local factories. Next, you can create enterprises for the production of cases and wind blades from these prepregs which will be in demand both in the domestic and foreign markets, cases for cars, and open a line for the production of small aircraft and etc. In the metallurgical industry, a carbon-free steelmaking technology has recently been developed in Sweden. Consideration should be given to the creation in the future of a plant using this technology on the basis of the metallurgical plant that previously existed in Rustavi. However, it is too early to talk about the creation of such a plant due to the lack of electricity of its own production. But as we build up our own electric power capacities based on renewable energy sources, it will be possible to think about creating such industries, the relevance of which is increasingly growing in the light of the inevitable increase in measures for the "green" economy. Therefore, it seems that Georgian scientists should start studying the problems of creating such industries in the near future. In information and communication technologies, there are two areas of entrepreneur-ship: the production of information and communication equipment and the use and develop-ment of digital electronics achievements in other industries. In Georgia, of course, there is no possibility in the near future to establish the produc-tion of modern computers, televisions, smartphones and other basic communication devices. This market is firmly mastered by transnational companies and it is unlikely that any of them will want to establish a joint production with our entrepreneurs to manufacture, for example, modern televisions or other basic products. However, there is an opportunity to use and devel-op the achievements of digital electronics (IR technologies) for application in other industries. In some of these areas, a number of small businesses have already been established in Georgia. In the next decade, in our opinion, Georgian business needs to continue to develop initiatives in this direction, including with the support of the Georgian Technology and Innovation Agency and the Produce in Georgia Agency. Further, in the second part of the work, it is proposed and justified, following the exam-ple of a number of small countries, to organize in the subsector of transport engineering the current production of small propeller electric aircraft (which should be supported by the supply of components from the sector for the production of composite materials and products from them and the electrical industry), as well as electric vehicles. Now about light industry. It is possible to reduce the negative level of the export-import balance only by gradually moving to the global stage of processing of raw materials within the country. This problem particularly affects the light industry, whose products are almost completely imported into the country. In order to revive the light industry (textile, cloth-ing, leather and footwear), the export of wool and raw hides should be abandoned. It is neces-sary to create innovative textile and clothing enterprises, innovative enterprises for leather tan-ning (with the manufacture of various types of products) and enterprises for the manufacture of shoes and other leather products, mainly entering into agreements with manufacturers of re-placement brands for this purpose (although this is difficult, it is achievable) .
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