Harnessing business expertise to advance critical economic reforms

Over the past 50 years, private investment in developing countries has dwarfed official development assistance provided by donors. The World Bank, IMF, and OECD estimate that in 2016, private investment accounted for 84% of financial flows to developing nations, compared to just 29% in the 1960s. In recognition of these trends, USAID launched a Private Sector Engagement Policy in 2018 and implemented agency-wide initiatives to make it easier for USAID to engage and collaborate with the private sector in achieving its mission.

Worldwide and in Georgia, USAID is engaging the private sector in its approach to challenges for greater development outcomes and sustainability. To strengthen Georgia’s economic governance, USAID is partnering with businesses to shape reforms that will have a sustained impact—and continue long after USAID support has ended. As a result, Georgian companies are playing an increasingly active and crucial role in developing and advancing implementation of important economic reforms.

The USAID Economic Governance Program has taken an innovative approach to private sector engagement by establishing letters of cooperation with key private sector partners to help spur reform in targeted sectors in a way that would not otherwise be as impactful and sustainable without public-private collaboration. It has signed letters of cooperation with three leading businesses to support foundational economic reforms for capital market development, e-commerce, and water resource management. Through these letters of cooperation, businesses in these sectors have agreed to advance reforms by sharing their expertise with other businesses and supporting the sector as a whole to adapt to the reforms.

Capital market development

To increase the public’s understanding of the importance of capital market development, Foresight Investment Group, a first-of-its-kind asset management company in Georgia, has developed a series of videos explaining capital market reform and how investment instruments work. It is also increasing public awareness through articles, TV reports, and other media products.

Foresight Investment Group was one of the first asset management companies to be licensed by the National Bank of Georgia under the 2020 Law of Georgia on Investment Funds. It has already registered and launched its first investment fund, Foresight Capital, a $30 million fixed-income fund.

“At Foresight, our partnership with the USAID Economic Governance Program underscores our belief in the vital role of the private sector in fostering local capital markets and thus sustainable economic growth,” notes Rati Morchiladze, Investor Relations Manager and investment officer at Foresight Investment Group.

“Through our educational campaign, we aim to demystify capital markets for the average Georgian citizen and help establish the concept of retail investing in Georgia. The goal is to create a robust and inclusive financial ecosystem where savers are presented with a variety of investment options, and businesses can tap into novel financing avenues.”

E-commerce

To increase trust in the e-commerce market, TNET LLC is partnering with USAID to help small and medium-sized businesses comply with new regulatory obligations and utilize self-regulatory mechanisms.

TNET LLC, which combines 10 large e-commerce sites, is joining forces with USAID’s Economic Governance Program to ensure the successful implementation of regulatory and self-regulatory mechanisms in the e-commerce industry. The alliance will hold awareness-raising campaigns for businesses and consumers to avoid online security risks and ensure self-regulatory mechanisms are effectively used to increase the reliability of local online platforms and shops.

“For the first time, an agreement has been signed between USAID and TNET that regards the development of e-commerce. It will be the first to solve the important issues of e-commerce that are relevant today,” notes TNET Director Giorgi Chumashvili.

“Private sector engagement in e-commerce reform is critical because we see the potential and importance of e-commerce reform for our sector and the Georgian economy,” Chumashvili says. “For customers, the reform will reduce fear of buying online, which will translate to a competitive advantage for e-commerce compared to traditional shopping. We are eager to contribute our expertise and knowledge to support the reform and help small and medium-sized businesses benefit from the new law.”

Water resource management

USAID is also partnering with Georgian Water and Power (GWP), a leading water supply company in the country and South Caucasus region, to raise awareness on the effective use of drinking water as well as the importance of wastewater treatment. It will also train municipalities on measures to protect drinking water sources in the Aragvi River basin.

GWP is the largest drinking water service provider company in Georgia. It provides drinking water service to Tbilisi and Mtskheta, serving more than half a million customers—and it is part of an international company that has years of experience operating in EU countries with similar water management systems. GWP’s contribution to the partnership with USAID to strengthen water management practices is approximately ₾500,000 ($200,000).

“Our company has been involved in water law discussions since day one. We have submitted many recommendations to the ministry and the parliament, most of which have been considered, and we believe that this is an important step forward for the development of our country,” explains Irakli Babukhadia, CEO of GWP.

“The entry into force of this law and its implementation is very important for us, because, as you know, GWP uses water resources to provide drinking water to the population, and the more water resources are protected, the more the population of Tbilisi will benefit, and therefore we are directly involved as a beneficiary in approving this legislation.”

Leveraging private sector experience

These newly minted partnerships reflect a growing trend in the development sector – leveraging private sector experience, reach, and technical expertise to advance reforms and strengthen sectors, says Nino Chokheli, the Deputy Chief of Party of USAID’s Economic Governance Program. “This is a new way of engaging that allows a USAID program and a private sector partner to identify a common policy objective and equally contribute resources to achieve this objective,” she says. “This approach has been traditionally used in private sector support programs, while for governance programs this is a novelty and requires innovative thinking.”

Under the program, USAID is increasing its engagement with the private sector and the Government of Georgia to more effectively address critical issues that impact the Georgian economy.

“Effective partnerships are built on shared values, trust, credibility, and transparency,” notes Beverly Hoover, USAID/Georgia Senior Private Sector Engagement Advisor. “To be successful, USAID and business partners should be committed as partners to co-creating innovative approaches to solving problems, providing valuable and complementary expertise, and supporting the development of the sector as a whole.”