The German Development Collaboration Project "Digital Transformation for SMEs in EaP countries" and how it benefits the business ecosystem in Georgia

On the 5th of October, at Pullman Tbilisi Axis towers, a project commissioned by the German Federal Ministry for Economic Cooperation and Development was officially launched.

The project, named "Digital Transformation of Small and Medium-sized Enterprises in Eastern Partnership Countries," is to be implemented by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) in Georgia, Armenia, Azerbaijan, Moldova, and Ukraine. Its duration is set for three years, starting in March 2023.

The project is specifically designed for small and medium-sized enterprises (SMEs). Still, it would assume close interaction and participation of intermediaries such as business associations, company network research organizations, financial institutions, and public policymakers. This collaboration would lay the foundation for creating broader regional innovation systems and developing digitalization strategies for SMEs.

Entrepreneur Georgia spoke with project director Niclas Rueffer and deputy project director Salome Argvliani to hear in detail what the project entails and how it can change the landscape of Georgian SMEs with digital transformation.

Could you please describe the significance of this project for the country's economic development? And what impact it would have on the broader region.

The project contributes to increasing the competitiveness of SMEs in EaP countries. By promoting digital technologies and expanding cooperation, the project improves the competitiveness, productivity, and attractiveness of entrepreneurial ecosystems within the EaP. Through the increased use of digital solutions, companies can increase their productivity and the quality of their products and services and open up new markets, such as the European market.

All SMEs in the country are eligible to apply to become the project beneficiaries. Intermediaries include business development organizations, chambers of commerce and industry, sectoral associations, technology transfer institutions, universities/colleges, or research and development organizations.

Niclas Rueffer states, "Innovation in the digital sphere and beyond is of central importance for societies and economies to deal with the challenges of our time. Collaboration and trust – between businesses, universities, research organizations, and public policy on the national level and between societies, businesses, and governments internationally- are central to creating favorable conditions for innovation. Therefore, we are very happy to be able to support our partners in working together on this project – on the national level, but especially also on the international level between the Eastern Partnership Countries and with EU countries, including, of course, Germany.

Any details on how this project can improve national and regional framework conditions and policies for the digital transformation of SMEs?

National statistical institutes and respective ministries of economy are addressed. Furthermore, we are working with ministries for digitalization and ministries for research, responsible for certain aspects of SME promotion. Representatives of the ministries will be advised on the development, thematic focus, and implementation of a policy dialogue in the field of digital transformation of SMEs.

The thematic design will be based on EU approaches (e.g. EU SME strategy) and promoting regional exchanges. To improve the statistical framework conditions, there is a focus on areas relevant to promoting Business and Innovation statistics, such as using the Digital Economy and Society Index (DESI) for policy-making. National Statistical Institutions will be strengthened in improving their individual data collection and evaluation capabilities (e.g., automatic data reporting by companies via digital interfaces), learning, and exchange by and with statistical institutions in the EU.

The project's overall objective is to strengthen the competitiveness of small and medium-sized enterprises in Eastern Partnership countries through digital transformation. The project thereby contributes to the broader implementation of the UN 2030 Agenda and specifically to the Sustainable Development Goals - economic growth, innovation, global partnerships, and as an important cross-cutting topic - gender equality.

Notable project's short to medium-term expected results are:

• Improved government and statistical framework conditions in the digital transformation of small and medium-sized enterprises.

• Intensified cooperation between actors of the digital and entrepreneurial ecosystems on services in the field of promoting the digital transformation of SMEs;

• Strengthening the capabilities of application of digital solutions for business and production processes in SMEs.

Coordinating ministries, downstream, and statistical authorities on relevant topics is vital to this goal. Sharing and exchanging knowledge around established frameworks and practices in the EU and promoting the strategic competence development of specialists and managers from SMEs in classic industrial and economic sectors would only stimulate digital transformation for SMEs.

In conclusion, please highlight any obvious challenges or opportunities concerning digitalization and innovation in the country.

The economy in the EaP countries recovered slowly from the effects of the COVID pandemic. According to the Global Competitiveness Index (GCI) and Global Innovation Index (GII), EaP countries generally have a reasonable basis for implementing and developing digital and innovative solutions, even though digital transformation has only recently begun in these countries. The COVID-19 pandemic has forced many SMEs to look at the possibilities of digital transformation, for example, by opening online sales channels, investing in digital marketing, or redesigning internal processes to minimize disruption in operations. Some of these changes will be irreversible and will determine the direction of future investments, the relationships along value chains, and the capabilities required in the future for digital transformation.

The impact of digital transformation will be paramount for Small to Medium-sized Enterprises. The digital disruption to the existing business processes is a much-needed transformation to the traditional ways of doing things in this dynamic world. Diversifying consumer segments and revenue streams will dramatically minimize the risks and improve industry productivity.

Salome Argvliani states: "The influence of digital transformation on SME`s sustainable growth is crucial. The project will support developing and strengthening the digital ecosystem by bringing all relevant stakeholders together to create synergy and enhance collaboration to enable SMEs' effective and efficient digital transformation.

Digital transformation for SMEs would ensure leveraging new technologies and creating opportunities for businesses to scale their operations. This Project will foster regional and international exchange of knowledge and skills between five Eastern Partnership countries, with Germany and other European Union member states. This intensified cooperation between actors in the digital and entrepreneurial ecosystems will further develop service offerings and improve national and regional framework conditions and policies to enable SMEs' digital transformation and improve SMEs' capacity to implement digital solutions for their business and production processes.