Employers Demand for Labour Force

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2 Report for research carried out in 20 International Organization for Migration (IOM) EU Funded Targeted Initiative for Georgia (TIG) Project Support Reintegration of Georgian Returning Migrants and the Implementation of the EU-Georgia Readmission Agreement Labour Market Survey, carried out in 20 This project is funded by the European Union Tbilisi, 202

3 Report for research carried out in 20 Report for research carried out in 20 C o n t e n t s Introduction... 4 IOM is committed to the principle that humane and orderly migration benefits migrants and society. As an intergovernmental body, IOM acts with its partners in the international community to: assist in meeting the operational challenges of migration; advance understanding of migration issues; encourage social and economic development through migration; and uphold the human dignity and well-being of migrants.. Research Methodology and Organization Principal Results of the Survey Principal characteristics of the organizations surveyed Business development trends Human resources Publisher: International Organization for Migration (IOM), Mission to Georgia 4Gogebashvili 079 Tbilisi Georgia Tel: / Fax: iomtbilisi@iom.int Internet: Prospective demand for labour Employment features of migrants returning to Georgia Conclusions and Recommendations A n n e x e s A n n e x A n n e x Co-Publisher: Targeted Initiative for Georgia (TIG) 202 International Organization for Migration (IOM) All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior written permission of the publisher. This publication has been produced with the assistance of the European Union. The contents of this publication can in no way be taken to reflect the views of the European Union. The International Organization for Migration cannot accept responsibility for the opinions expressed under the framework of this research. 2 3

4 Report for research carried out in 20 Report for research carried out in 20 Introduction The Targeted Initiative for Georgia (TIG) project Support reintegration of Georgian returning migrants and the implementation of the EU-Georgia readmission agreement is being implemented with financial assistance from the European Union as a leading project of the cooperation between Georgia and EU Member States defined in the Mobility Partnership Declaration signed in November With more than its 30 different activities the project contributes to reduction of irregular migration, supports legal migration and assists in reintegration of migrants returning to Georgia. Studies show that causing factors of labour migration from Georgia are mainly of economic nature (unemployment and low income derived from employment). Consequently, the reduction of illegal migration and the social and economic reintegration of returning migrants largely depend on increased employment opportunities. In this regard, it is extremely important to ensure returned migrant awareness of the situation on the labour market, as well as the trends of the demand for workforce. This type of information is a precondition for the efficient implementation of vocational training and employment programmes for returning migrants. It is also significant for the management of circular migration. Official information on the situation on the Georgian labour market is extremely scarce and limited to the periodic (once a year) publication of a few general statistical indicators. Similar information is even more limited on the regional level. Research by government agencies of employers demand on the labour force, as well as the supply of workforce, unfortunately, does not sufficiently take place in Georgia. Accordingly, there is no systematic information available on which occupations are in demand, which occupations are in short supply, what are the expected trends in the labour market, etc. Various international and non-governmental organizations with donor support, International Organization for Migration (IOM), United States Agency for International Development (USAID), European Union (EU), United Nations Development Programme (UNDP), Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), Norwegian Refugee Council (NRC), etc., are attempting to fill this information gap. The International Organization for Migration (IOM) has implemented 7 studies, in , in order to study demand for workforce across the Georgian national economy, separate territorial units, and various areas of economic activity. In 20, a specific study was dedicated to the supply of workforce to the Georgian labour market (the research reports are available on the websites: Nevertheless, the requirement for such studies is still high, since the demand on the labour market is extremely dynamic. Moreover, without the systematic implementation of such studies and the elaboration of a unified information database, it will be difficult to predict demand for workforce; and without this it will be impossible to strengthen the orientation of vocational training and education towards the labour market and increase its efficiency. That is why the EU funded project, Targeted Initiative for Georgia (TIG), in order to become more familiar with the regional labour markets and employers demands, envisions the implementation of a specific study in four regions of Georgia:. Tbilisi and the surrounding territory of Mtskheta-Mtianeti; 2. Rustavi and the surrounding territory of Kvemo Kartli; 3. Kutaisi and the surrounding territory of Imereti; 4. Zugdidi and the surrounding territory of Samegrelo. This report outlines the results of the survey conducted in the framework of the TIG Project by IOM in the listed regions during the period of June-October, 20. The results of the labour market surveys will be utilized in daily counseling and referral work done by the Mobility Center and Job Counseling and Placement (JCP) Centers in Tbilisi and Kutaisi, operational under the TIG Project.. Research Methodology and Organization In the interests of the project Targeted Initiative for Georgia (TIG), the main objective of the survey was the study of employers demand for workforce in four regions of Georgia (. Tbilisi and the surrounding territory of Mtskheta-Mtianeti; 2. Rustavi and the surrounding territory of Kvemo Kartli; 3. Kutaisi and the surrounding territory of Imereti; 4. Zugdidi and the surrounding territory of Samegrelo), as well as the factors that impact business development and job creation. One of the principal objectives of the survey was the study of the current situation within the field of employment of returning migrants and employers attitudes towards them. For the purposes of the study, the implemented work was planned and carried out in four stages: I. Preparatory work; II. Field work; III. Processing of research results and development of an electronic database; IV. Analysis of the research results and report preparation. The following work was implemented at each stage: Stage I: Preparatory work (implementation period: June-August, 20): a) Preparation of methodological materials for the survey. In particular, the following was prepared: Questionnaire for employers in the business sector; Questionnaire 2 for employers in the state sector; Vacancy application form; Instructions for interviewers; Instructions for the local coordinators of the survey; Letter to employers; A form and rules for the registration of studied enterprises; A form and rules for the registration of work implemented by interviewers; Selection criteria for the studied facilities; Selection criteria for interviewers. b) Collection of information on Georgia-based enterprises and its stratification according to regional and administrational units: With kind assistance of the Ministry of Internally Displaced Persons from Occupied Territories, Accomodation and Refugees data (a unified list) on enterprises and organizations operating in Georgia as of April, 20 were obtained from the National Statistics Office of Georgia; From the unified list of operating enterprises, businesses were selected and grouped according to the territorial units, where, according to the project, the survey was to be implemented. 4 5

5 Report for research carried out in 20 Report for research carried out in 20 These are the following: Tbilisi (municipalities: Gldani, Didube, Vake, Isani, Mtatsminda, Krtsanisi, Old Tbilisi, Nadzaladevi, Saburtalo, Samgori, Chughureti) and surrounding territory of Mtskheta-Mtianeti (Mtskheta and Mtskheta municipality; Daba Tianeti and Tianeti municipality); Rustavi and surrounding territory of Kvemo Kartli (Gardabani and Gardabani municipality; Marneuli and Marneuli municipality); Kutaisi and surrounding territory of Imereti (Samtredia and Samtredia municipality; Tchiatura and Tchiatura municipality; Tskaltubo and Tskaltubo municipality; Tkibuli and Tkibuli municipality); Zugdidi and surrounding territory of Samegrelo (Zugdidi and Zugdidi municipality; Poti; Khobi and Khobi municipality; Senaki and Senaki municipality). c) Selection of study subjects according to their size and spheres of activity: In order to select enterprises based on separate cities and municipalities, their stratification first according to size (number of workers), and then according to spheres of activity was carried out; Of the enterprises sorted by size, all large (over 00 employees) and medium-sized (from 20 to 00 employees) businesses were selected; in all the cities and municipalities, besides Tbilisi, enterprises with a staff of to 20 persons were also selected. Such a differentiated approach during the selection process was instigated by the fact that, unlike Tbilisi, in the regions, the number of businesses with more than 0 employees is very scarce. In Tbilisi, during the selection of businesses, the number of employees of which varied from to 20, as well as from 5 to 0, their total numbers and division of labour were taken into account. When selecting businesses, the request that enterprises from all areas of economic activity be included in the study area in numbers that would allow for the principle of representation was also considered. A similar approach was implemented during the selection of enterprises, where the number of employees ranged from 5 to 0 or less than 5. Businesses with less than 3 employees were not considered for research purposes, since, in terms of demand for workforce, such organizations, as a rule, are less dynamic. In determining the number of selected enterprises, consideration was given to the fact that the list of active businesses provided by the Georgian National Statistics Office traditionally contained high numbers of enterprises that are, in fact, no longer functioning. Based on the above, the number of initially selected businesses was almost 2 times higher than the planned number of units to be studied (2,000-2,200) and amounted to 3,950 enterprises. On the following stage of the research, with the participation of local coordinators and interviewers, a list of operating businesses in the given territory was finalized, from which, taking into account the aforementioned criteria, the businesses for the survey were selected. d) The selection and training of local coordinators for the survey: Two local coordinators from Tbilisi and one per each remaining region were selected. The total number of local coordinators for the survey amounted to 5 persons. The selected coordinators participated in on-site trainings on the organization of the survey, the distribution of study subjects among interviewers, the implementation of field work, interviewer monitoring, the registration of businesses surveyed, and other issues. e) Locating and creating a reserve of potential interviewers: With the participation of the local coordinators of the survey, potential interviewers were identified: 82 persons in Tbilisi; 26 in Kutaisi and its surroundings; 24 in Rustavi and its surrounding area; and 8 in Zugdidi and its surroundings. f) Selection of interviewers: On the basis of preliminarily developed criteria and interviews, 45 interviewers in Tbilisi and its surrounding area, 2 in Kutaisi and its surroundings, 0 in Rustavi and its surroundings; and 9 in Zugdidi and its surrounding area, a total of 76 interviewers were selected. g) Interviewer training: 7 trainings were conducted for the interviewers, of which: 2 in Tbilisi; in Rustavi; 2 in Kutaisi; and 2 in Poti. Stage II: Field work (implementation period: September-October, 20): Respondents were surveyed mainly with the interview-questionnaire method (direct interview using a questionnaire). Several exceptions were presented at state management institutions, where the survey was conducted solely through a questionnaire. According to the project, the number of subjects intended for surveying was 2,000-2,200, of which,300-,450 employers were located in Tbilisi and its surroundings; in Rustavi and its surrounding area; in Kutaisi and its surroundings; and in Zugdidi and its surrounding area. Effectively,,450 employers were surveyed in Tbilisi and its surroundings; 65 in Rustavi and its surrounding area; 35 in Kutaisi and its surroundings; 70 in Zugdidi and its surrounding area; a total of 2,36 employers. Respondents participation in the survey was voluntary. Consequently, there were instances, when respondents refused to participate in the study. In such cases, the interviewers, in agreement with the local coordinators, were authorized to replace the respondent with a different respondent from the so-called reserve list in a way that would not violate the selection criteria (the size and sphere of activity of the enterprise). The coordination and monitoring of field work was carried out by both the local coordinators, as well as the head of the study. Enterprises often suspend their operation, but their removal from the list of active businesses does not take place, unless the entrepreneur in question makes an official statement on liquidation. 6 7

6 Report for research carried out in 20 Report for research carried out in 20 Stage III: Processing of research results and development of an electronic database (implementation period: September-October, 20). At this stage, the following work was implemented: Logical and quality control of the filling out of questionnaires; Systematization and identification of answers to open-ended questions; Assignment of conditional codes to open-ended questions; Entering processed questionnaire data (respondents answers) into an electronic database; Processing of research results; Preparation of a preliminary tables; Data specification, based on the logical control of the results, and the cleaning of the database; Preparation of a final version of the database. 2. Principal results of the survey 2.. Principal characteristics of the organizations surveyed To ensure the reliability of the representativeness and assessment of the research results, the composition of the surveyed businesses and organizations is key. Of the 2,36 respondents participating in the survey,,950 are entrepreneurs, and 86 heads of state management facilities (ministries, departments, agencies, local administration and self-government bodies) and state-funded organizations. The study of the business environment and economic trends was based on the survey of entrepreneurs, while the study of the demand for workforce was based on the survey of all types (private and public, commercial and non-commercial) of organizations. The study covered all organizational and legal types of establishments stipulated by the current legislation of Georgia (see Chart ). Chart The results of the research were processed by computer. Data entry, as well as the creation, weighing and aggregation of a relevant database was implemented in MS Access. Output information was types, % prepared in MS Excel, and final tables were created in MS Word. 9,0,0 0,2 Stage IV: Analysis of the research results and report preparation (implementation period: December, 20 January, 202): 0, 0,3 5,7 75,6 Joint and Several Liability Company Limited Company Limited Liability Company (LLC) During the analysis of study results, the quantitative and qualitative indicators obtained as a result of 7,9 Joint Stock Company (JSC) employer surveys were utilized. For in-depth analysis and assessment purposes, correlation groups were also formed in accordance with the following parameters: Entrepreneur a) Territorial units; b) Spheres of activity; g) The business and public sectors. The results of the survey were grouped and analyzed in 5 thematic areas:. Principal characteristics of businesses surveyed; 2. Business development trends; 3. Human resources; 4. Long-term demand for labour force; 5. Employment characteristics of migrants returning to Georgia. The methodological and organizational preparation of the survey, the monitoring of its progress, and the processing of the results obtained were managed by the IOM Labour Market Research Coordinator, Doctor of Economic Sciences, Ms. Tsiuri Antadze. She has also written the text for the report. The large share of LLCs among the surveyed organizations is explained by the fact that the organizational-legal type of the overwhelming majority of Georgia-based entrepreneurships is Limited Liability Company 2. The selection of organizations by size (number of employees) brought about the relatively small share of individual enterprises among those surveyed. The remaining organizationallegal types of enterprises are presented in proportion to the general aggregate. The necessary precondition to the study of the demand for workforce on the regional labour markets was the research of subjects engaged in all spheres of economic activity. Accordingly, the survey covered employers in all areas of the economy (see Table 2...). The proportions of their territorial distribution essentially correspond to the sectoral specificity of the regions, taking into account the fact that the principal criterion for the selection of enterprises was the number of employees. 2 According to data provided by the Georgian National Statistics Office, as of April, 20, 60% of enterprises operating in Georgia are LLCs. 8 9

7 Report for research carried out in 20 Report for research carried out in 20 Table 2... Distribution of Enterprises and Organizations Surveyed According to s of Economic Activity, Enterprise/Organization of Economic Activity Total Tbilisi and Kutaisi and Zugdidi and Rustavi and Total* 2,53, Agriculture, forestry, fishing This selection criterion influenced the distribution of surveyed enterprises according to the number of employees (see Chart 2). In particular, among the enterprises surveyed, the percentage of microenterprises (less than 5 employees) is quite small (3%); 46% - are small enterprises (from 5 to 20 employees); 37% - are medium-size (from 20 to 00 employees); and 4% - are large enterprises (more than 00 employees). Chart 2 2 Mining and quarrying Manufacturing Electricity, gas, and water supply Construction Trade Less than 5 persons 5-0 persons -20 persons 2-40 persons 4-60 persons 7 Motor vehicle, household goods, and personal use item repair Hotels and restaurants Transport, warehousing persons persons persons persons 0 Travel agencies Communications More than 500 persons 2 Financial intermediation Insurance Real estate operations, leasing, equipment rental The distribution of surveyed enterprises according to the duration of activity is also diverse. Specifically, 42% of the businesses surveyed has a service record of 0 years or more; 4% years; 6% years; 3% years; 0% - -2 years; and 5% of enterprises have operated for less than year (see Chart 3). 5 Computers and related activities Research and development Chart 3 7 State management Education % 5% 0% 3% 9 Healthcare and social services Utility services Personal and social services Leisure, recreation, culture, sports % 6% * Note: the number of respondents according to spheres of activity exceeds the total number of subjects surveyed (2,36), since some entrepreneurs are simultaneously engaged in two types of business. Up to one year -2 years 3-4 years 5-6 years 7-0 years More than 0 years The distribution of enterprises according the aforementioned parameters in those regions where the survey was conducted is virtually identical and reflects the actual rations, which ensures the high representativeness of the research results. 0

8 Report for research carried out in 20 Report for research carried out in Business Development Trends During the research process, entrepreneurial activity trends during the previous and coming year were analyzed, since job creation and additional demand for human resources are highly dependent on these trends. The survey revealed that in all four regions of Georgia entrepreneurial activity trends were dominated by positive changes. In particular, during the previous year (from September, 200 to September 20) 35% of the studied enterprises have expanded their business; 28% have improved management; 2% have introduced new equipment and technology; 42% have increased the number of employees; and 8% have improved staff structure. Based on the fact that the business reality is never uniform, for a segment of entrepreneurs the situation during the past year has deteriorated. Namely, 9% of the enterprises surveyed have reduced their business; while 3% have reduced the number of employees; for ¼ of the surveyed entrepreneurs, the circumstances have not changed during the past year (see Chart 4). Chart 4 Changes in the Enterprise during the Past Year, survey results, % Number of employees was increased 4% Business was expanded 35% management was improved 28% No changes 25% New methodology/technology was instroduced introduced 2% 8% Number of employees was reduced 3% Business was reduced 9% the facility was renovated % 0% 5% 0% 5% 20% 25% 30% 35% 40% 45% These trends somewhat differ according to the regions surveyed (see Table 2.2.). According to the data in the table, the share of the enterprises, which have expanded their business in the past year is larger in Zugdidi and its surrounding areas (mainly in the city of Poti), as well as Kutaisi. The number of successful entrepreneurs is also quite high in Tbilisi. The regional indicators have been negatively affected by the employers survey results in the surroundings of Tbilisi (Mtskheta and Mtskheta municipality; Daba Tianeti and Tianeti municipality), since in these regions (especially in Daba Tianeti and Tianeti municipality) the economy is declining. In terms of management improvement and the introduction of new equipment/technology, better outcomes were observed in Kutaisi and Rustavi. Entrepreneurs in Tbilisi and Kutaisi more often indicated an increase in the number of employees. These cities and their surroundings also exhibit a higher number of enterprises for which circumstances during the past year have not changed. Reduc- tions in business and the number of employees were also more frequently indicated by entrepreneurs in Tbilisi and its surroundings, as well as Zugdidi and its surrounding areas. Table Changes in the Enterprise during the Past Year by Region, Based on Survey Results, % Changes Tbilisi and Kutaisi and Zugdidi and Rustavi and Growth/Expansion in Business Increase in the Number of Employees Improvement in Management Improvement in Staff Structure Introduction of New Equipment/ Technology No Change Reduction in Business Reduction in the Number of Employees Facility Renovation Total * * Note: The sum of the answers to the questions exceeds 00%, since there were several possible answers. In order to assess the economic development trends, it is essential to analyze the factors which have contributed to the development or hindrance of business in each region. Based on survey results, the range of factors which have contributed to the maintenance and/or expansion of business is quite broad (see Table 2.2.2). Table Factors Contributing to the Maintenance/Expansion of Business by Region, Based on Survey Results, % Factors Total Tbilisi and Kutaisi and Zugdidi and Rustavi and Demand (market presence) Staff professionalism Product / service quality

9 Report for research carried out in 20 Report for research carried out in Correct management / marketing strategies Improvement of the political and criminal situation in the country Improvement of the economic / investment environment in the country State assistance / support Introduction of new equipment / technologies Improvement of the tax system Affordable / low prices Enthusiasm, hard work Image / customer confidence Good infrastructure Location Business partners Financial support; credit availability Experience Foreign partner / donor / investor assistance A wide range of goods / services Lack of competition / low competition Availability of local raw materials Other 23 None No answer Total * Note: The sum of the answers to the questions exceeds 00%, since there were several possible answers. as follows: Demand for goods and services (market presence); Highly qualified staff (staff professionalism); High quality goods/services; Effective management. The aforementioned factors contributing to the expansion/maintenance of business are considered most significant by the entrepreneurs in all surveyed regions; however, entrepreneurs in Tbilisi and Rustavi noted market presence as the most essential contributing factor; those in Kutaisi and its surrounding area emphasized staff professionalism and effective management; while entrepreneurs in Zugdidi and its surroundings considered high quality goods and services offered as the key contributing factor in the expansion/maintenance of business (see Table 2.2.2). Among the contributing factors, exogenous aspects were also considered essential. These were as follows: improvement of the political and criminal situation in the country, improvement of the business environment, state assistance/support, improvement of the tax system, infrastructure development, credit availability, etc. Based on the survey results, the significance of these factors is considered especially great by entrepreneurs in Kutaisi and its surrounding area. State assistance/support in the form of special government programmes, purchase orders, tenders, etc. was identified as a contributing factor by 8% of the surveyed entrepreneurs. Their share is greater in Kutaisi (0%) and Tbilisi (9%). Particular state support is noted by entrepreneurs in the areas of tourism (22%), utilities (22%), electricity and water supply (7%), as well as construction (6%). It is noteworthy that this factor was not mentioned at all by entrepreneurs operating in the agricultural and financial intermediation sectors. The introduction of new equipment/technologies was emphasized as a contributing factor in business development by only 8% of the interviewed entrepreneurs. It is noteworthy that the indicator for the introduction of innovations is higher in Samegrelo and Imereti than in Tbilisi and Kvemo Kartli. The spheres of activity, where the introduction of new equipment/technologies was identified a major factor in the expansion of business were more prevalent in utilities (22% of respondents), healthcare (20%), communications (3%), and education (2%). It is worth noting that affordable/low-cost goods and services were included in the top ten contributing factors in business development, which is associated with low purchasing power of the population. According to the interviewed employers, low purchasing power is identified as the key factor in preventing business development (see Table 2.2.3). In all four regions, almost every 4 th entrepreneur points to this issue as the most significant factor adversely affecting the development of business. It is indicated as especially problematic by entrepreneurs in Samegrelo. This is understandable, since, according to official statistical data, the region of Samegrelo is characterized by high levels of poverty. The grouping of factors contributing to the expansion of business can be implemented according to endogenous and exogenous factors. Of the contributing factors listed by the surveyed entrepreneurs, four are endogenous and represent a natural precondition for the development of business. These are 4 5

10 Report for research carried out in 20 Report for research carried out in 20 2 Table Factors, which Have an Adverse Effect on the Expansion/Maintenance of Business, Based on Survey Results, % Factors Low purchasing power of the population / unemployment / reduction in the number of customers Lack of finances / credit unavailability Total Tbilisi and Kutaisi and Zugdidi and Rustavi and Inflation; exchange rate fluctuations Population migration from the region Disruptions in electricity, water supply Other 24 None No answer High competition Total * Tax system; high customs duties * Note: The sum of the answers to questions exceeds 00%, since there were several possible answers. 5 Economic crisis; high prices Unhealthy competition; monopolization Incorrect public policy; irregular legal system High cost of raw materials, electricity, fuel Based on the survey results, the second most significant barrier in the development/maintenance of business is the lack of finances and credit unavailability. The interviewed entrepreneurs emphasize that high interest rates on loans, high mortgage rates, and complicated procedures for obtaining bank loans make the financial resources necessary for the development of their businesses virtually inaccessible. This issue is relevant in all regions; however, it is more acute in the regions outside Tbilisi (see Table 2.2.3) Low professionalism of employees Underdeveloped infrastructure; lack of appropriate space Outdated equipment/ technologies; unavailability of new technologies Limited market (small domestic market) Unreliable partners Unstable political environment Climatic conditions; seasonality of production Low awareness level of the population; lack of/expensive advertising Poor location Shortage of raw materials 2 9 Government intervention; pressure 2 Thirteen percent of the surveyed entrepreneurs indicated high competition on the market as the principal factor hindering business development. This issue was especially frequently indicated by entrepreneurs operating in the areas of financial intermediation (27% of respondents), insurance (27%), motor vehicle and personal use item repair (9%), manufacturing (8%), trade (7%), and transportation (6%). Entrepreneurs in Samegrelo and Imereti especially object to market saturation and high levels of competition (see Table 2.2.3). Despite the fact that in recent years the business environment in Georgia has substantially improved and the amount of taxes and tariffs has decreased, 9% of the interviewed entrepreneurs identify the existing tax system (higher taxes and fines, problems in tax administration) as the main barriers to business development. The fact that entrepreneurs operating in the regions are more frequently objecting to the tax system than those in Tbilisi can be attributed to the low profitability of business in the regions, as well as low awareness levels of the population. The fact that 8% of the entrepreneurs indicate unhealthy competition and monopolization as the principal barrier to the development of business demands government attention. It is noteworthy that this indicator is particularly high in the following spheres of economic activity: transportation (6%); mining and quarrying (%); healthcare (0%); personal and social services (0%); trade (9%). As for the regional indicators, the aforementioned factor is most frequently noted by employers in Imereti (2% of the surveyed entrepreneurs). In certain areas of economic activity, incorrect public policy and irregular legal system are indicated as major barriers to business development by 7% of the interviewed entrepreneurs. The share of 6 7

11 Report for research carried out in 20 Report for research carried out in 20 respondents dissatisfied with the economic policies of the government is particularly great in agriculture (7%), healthcare (6%), and transportation (5%). Compared to the other regions, the greatest number of entrepreneurs pointing to this factor is in Samegrelo. Six percent of the surveyed entrepreneurs indicated low-skilled staff as a hindering factor in the development of business. The share of employers dissatisfied with the professionalism of their personnel is particularly high in insurance (8%), agriculture (7%), computers and related activities (5%), construction (2%) and tourism (%). In respect of this issue, the situation across all regions surveyed is almost uniform (see Table 2.2.3). Outdated equipment/technologies and the lack of access to new technologies were considered as one of the major barriers in the development of business. It should be noted that the reason for the unavailability of new equipment/technologies, along with a lack of financial resources, is a shortage of information and economic ties, especially in the regions. This has also been reflected in the survey results: in comparison with Tbilisi, the share of those entrepreneurs who do not have access to new equipment/technologies is 5.5 times more in Imereti and 2.5 more in Kvemo Kartli. For regional entrepreneurs it is also more problematic to find markets outside of the country. Accordingly, limited markets are considered as a serious challenge for business development. It is noteworthy that the migration of population from the region was indicated as a barrier to the expansion/maintenance of business. This factor is more frequently observed in the survey results of employers in the region of Imereti (see Table 2.2.3). Unlike previous years, a very small fraction of the respondents (%) listed government intervention/ pressure and corruption among factors that adversely affect the development of business. Moreover, disruptions in electricity and water supply were also identified as a barrier by the same insignificant number of people, which reflects active government efforts towards that end in recent years. The improvement of the business environment in the country has positively affected the attitudes and future plans of the entrepreneurs. To the question how will your business develop in the near future? 73% of respondents expressed optimistic expectations: 73% of the surveyed employees believe that their business will expand. Only 3% of the interviewed entrepreneurs expect their businesses to reduce, 0% state that they do not expect any changes, while % remain in a state of uncertainty (see Chart 5) Chart 5 The expectations of the entrepreneurs across the surveyed regions are approximately similar (see Table 2.2.4), however, in contrast with Tbilisi, entrepreneurs in Samegrelo and Imereti are more optimistically inclined and almost half expects their businesses to expand significantly. The share of employers who are uncertain about the future of their enterprises is larger in Kvemo Kartli, Tbilisi and Mtskheta-Mtianeti. Table Expectations for Change in Business Over the Coming Year, Based on Survey Results, % Entrepreneurs Expectations 0 Total results, % 2 2 Tbilisi and Kutaisi and Zugdidi and Rustavi and Significant expansion Insignificant expansion No change Significant reduction Insignificant reduction Without prospect Does not know Will not change Without prospect Does not know Total The means and methods by which the employers intend to ensure the maintenance/expansion of their businesses vary (based on survey results, there is an average of 3 resources per one interviewed entrepreneur). Among those, the introduction of new equipment/technologies (59% of the respondents), improvement of management (production and labour organization) (48%), discovery/development of new markets (34%), staff development (33%) and improvement of the quality of goods/services were identified as priorities (32%) (see Chart 6). 8 9

12 Report for research carried out in 20 Report for research carried out in 20 Chart 6 The aforementioned resources were listed as the principal means for the maintenance/expansion of business in all studied regions, however, the introduction of new equipment/technologies is more frequently planned by entrepreneurs in Imereti, those in Kvemo Kartli have high expectations for the improvement of management in their businesses, in Tbilisi and Imereti, employers are more oriented towards the discovery of new markets, while entrepreneurs in Samegrelo more frequently than in other regions see the need for personnel development (see Table 2.2.5). Table Means for the Maintenance/Expansion of Business by Region, Based on Survey Results, % 2 3 means for the maintenance/expansion of Business, Based on survey results, % Means for the Maintenance/Expansion of Business Introduction of new equipment/technologies Improvement of management Development of new markets Introduction of new equipment/technologies Improvement of management Total New market development Personnel development Improvement of quality Introduction of new goods/services Engagement of new partners Tbilisi and Kutaisi and Zugdidi and Rustavi and Personnel development Bank loans Attraction of foreign capital Own and/or partners savings Assistance from donors and foreign partners Increase in the volume of goods/services 7 8 Increase in the volume of goods/services offered Engagement of new partners Bank loans Attraction of foreign capital Own and/or partners savings Assistance from donors and foreign partners Does not know Total * * Note: The sum of the answers to questions exceeds 00%, since there were several possible answers. A relatively small number of entrepreneurs focus on increasing the volume of goods/services offered, which may be attributed to the limited nature and high saturation of domestic markets in Georgia. Almost ¼ (23%) of the surveyed entrepreneurs plans to offer a new range of goods and services in the future, while one third of the respondents intends to improve the quality of their goods and services. The surveyed employers also indicate the financial sources, which they intend to employ to fund measures necessary to maintain or expand their business. In particular, 4% of the entrepreneurs plan to engage new partners in their business; % intend to receive a bank loan; 6% hope for support from a foreign investor, and % - from a donor organization; 5% plan to maintain/expand their business by means of their own financial resources, or those of an existing partner. The distribution of financial resources among the regions is virtually uniform (see Table 2.2.5); however, entrepreneurs operating in the region of Samegrelo are more inclined towards attracting new sources of funding. Despite an optimistic outlook, employers identify barriers to business development and provide recommendations on what measures should be taken in order to stimulate business development and job creation in the country (see Table 2.2.6). The proposed recommendations (an average of 4 recommendations per entrepreneur) deal with the improvement of the current political situation, legislation, and economic policies in the country, as well as with increased availability of financial resources, improved quality of human resources, etc. Table Entrepreneurs Recommendations on the Stimulation of Business Development and Job Creation, Based on Survey Results 5 Improvement of quality Introduction of new goods/services Recommendation Enterprise % Reduction of interest rates on bank loans; simplification of procedures,

13 Report for research carried out in 20 Report for research carried out in 20 2 Reduction of taxes; simplification of procedures, Political stability, Development of human resources Existence of a competitive environment; creation of an antimonopoly service Prohibition of government intervention and pressure Tax exemption for businesses during the first year of operation Existence of fair trial in the country Obtaining information on new markets Imposition of a fixed tax for small businesses Improvement of labour legislation Simplification of license and permit issuance procedures Assistance in the transportation and sale of goods Tax exemption for reinvestment funds Simplification of the process of business registration Tax cuts in mountainous areas 25 9 Other 0 Total * 7, * Note: The sum of the answers to questions exceeds 00%, since there were several possible answers. Seventy-seven percent of the surveyed entrepreneurs consider the availability of financial resources as the most pressing issue and, according to their recommendations, in order to support business development, it is essential to reduce interest rates on bank loans, simplify procedures for obtaining loans, reduce mortgage rates, issue long-term loans, take into consideration the seasonality of production, etc. Tax reduction and the simplification of tax procedures was indicated as the second most significant factor for the stimulation of business development and job creation (72% of respondents). A segment of the entrepreneurs (8%) requires tax exemption for businesses during the first year of operation; 2% - the imposition of fixed taxes on small enterprises; 5% - tax exemption for reinvestment funds. It should be noted that the Government of Georgia has recently put forward the idea of a fixed tax for small-scale businesses 3. In its correct calculation and the adoption of an efficient taxation system, this idea may have considerable incentives to small businesses development in the country. For more than half of the surveyed entrepreneurs (55%), political stability in the country is a crucial 3 In December 20, articles - 95¹ were added to Georgian Labour Code. These articles define who are the payers of fixed taxes, identify objects of taxation etc. However, for these regulations to be implemented, Georgian government needs to identify those activities, which can become subject of fixed taxation. Currently, according to February 202 situation, the government has identified no such group of activities. element, and this is natural, since a volatile environment is a major barrier to the existence and development of business. The necessity to support the development of human resources ranks fourth (3% of respondents) among factors stimulating business development. This entails the development/implementation of personnel development/retraining programmes by the government or donor organizations. Although, local authorities (for instance, Tbilisi City Hall and Autonomous Republic of Adjara) and donor organizations carry out programmes in support of human resource development, in most cases, they are focused on the development of general skills (computers, foreign languages), or are small-scale. Targeted adult vocational education and training (VET) programmes are hardly available. This obliges entrepreneurs to carry out vocational education and training in the workplace (this issue is discussed in detail in the next paragraph). The following recommendations proposed by the employers demand particular attention on the part of the government: existence of a free competitive environment, creation of an antimonopoly service (22% of respondents); prohibition of government intervention and pressure (20%); existence of fair trial in the country (7%). It is noteworthy that these factors were indicated as specific hindering circumstances only by an insignificant fraction of the surveyed entrepreneurs, although in the general context the respondents more readily pointed out the necessity to tackle such problems. Considering the fact that the surveyed entrepreneurs consider the limitations of the domestic market as a hindering factor in business development, they value assistance in obtaining information on new markets (7% of respondents). The fact that only a small fraction of the surveyed entrepreneurs (4% of respondents) recommends the simplification of the terms and conditions for the registration of a business serves as recognition of the facilitated conditions for starting a business in Georgia. A relatively higher number of employers (7% of respondents) require further simplification of license and permission issuance procedures. Eight percent of the entrepreneurs surveyed recommended the improvement of labour legislation. In-depth interviews revealed that this recommendation signified a request to specify legislative provisions in more detail, in order to minimize the grounds for labour disputes. Specifically, the employers expressed interest in clarifying the following provisions: terms of laying down a verbal agreement, working hours, extra work, regulations on granting study or regular leaves, job maintenance conditions when the contract is on hold (e.g. maternity leave), regulation on covering costs in case of occupational accidents, benefits for employees working in harsh conditions etc. Thus, as a result of the study of the business development trends in surveyed regions, positive trends were observed overall. However, in order to ensure further improvement of the business climate, it is important, to the extent possible, to consider the recommendations proposed by the entrepreneurs Human Resources Business development trends were also to some extent reflected in changes in the number of employees. Based on survey results, 47% of the enterprises increased the number of their personnel during the 22 23

14 Report for research carried out in 20 Report for research carried out in 20 past year. However, their majority was limited to an increase of only -5 employees; whereas 2% of entrepreneurs increased their staff by 6 to 20 employees; 4% - by 2 to 50 employees; and only 3% - by over 50 employees. Thirty-six percent of the surveyed enterprises did not change the number of their personnel; while 7% reduced the number of employees (see Chart 7). Chart 7 Change in the Number of Personnel during the Past Year, Based on survey results, % By region, more enterprises increased the number of employees in Samegrelo; however, the share of those enterprises which have reduced the number of personnel during the past year is also greater in this region (see Chart 8). In terms of changes in the number of employees, a higher level of stagnation was observed in Kvemo Kartli, Imereti, Mtskheta-Mtianeti and Tbilisi. rustavi and surrounding area Zugdidi and surrounding area Kutaisi and surrounding area tbilisi and surrounding area Increased by -5 employees Increased by 6-20 employees Increased by 2-50 employees Increased by over 50 employees No change Decreased by -5 employees Decreased by 6-20 employees Decreased by 2-50 employees Decreased by over 50 employees Chart 8 Change in the Number of Employees by region, Based on survey results, % Employers mainly hire personnel through private contacts and recommendations, as well as through their own employees (see Chart 9). Chart 9 Ways of Personnel recruitment, Based on survey results 2% 9% 72% Internet 26% Own employees 3% 2% State employment programme 4% Private employment a gency 5% 0% 0% 20% 30% 40% 50% 60% 70% 80% Internet, as a means for the recruitment of new personnel is used by over ¼ of the entrepreneurs; 2% of employers use print media and television to advertise vacancies; 5% use private employment agencies; while 4% make use of state employment programmes (which are periodically carried out by the central and local authorities); 9% attract new personnel through contact with vocational training and education institutions. Their majority operates in the fields of insurance, financial intermediation, healthcare, education and tourism. Only 2% utilize special public competitions as a means to hire employees. Evidently, all forms of personnel recruitment generally make use of the competition principle; however, it is rarely organized as a public competition. Studies show that, during staff recruitment, personal contacts and recommendations frequently assume the nature of an oral advice and are a justified form of hiring; however, neither can we ignore the fact that, quite often, personal acquaintanceship becomes the reason for biased decision-making during the selection of employees in Georgia. It should be noted that similar results are confirmed by all other previous studies carried out by IOM. This is quite understandable, since labour market infrastructure in Georgia is undeveloped; there is no state employment service 4 ; the system of private employment agencies is still emergent; and the population s level of connectedness to the internet is quite limited (especially in small towns and villages). The latter has been reflected in the distribution of ways of personnel recruitment in the regions. In particular, entrepreneurs in Tbilisi are 3-4 times more likely to use the internet as a necessary tool for the hiring of employees than in the remaining regions (see Table 2.3.) increased No change reduced 4 An exception is the Adjarian AR, where, in October, 20, based on IOM s Job Counseling and Placement (JCP) Center, an Employment Agency of the Adjara A/R was established. Also, Tbilisi City Hall Employment Program is operating under the framework of the Organizational Department

15 Report for research carried out in 20 Report for research carried out in 20 Table Ways of Personnel Recruitment by Region, Based on Survey Results, % Ways of Recruitment Tbilisi and Kutaisi and Zugdidi and Rustavi and Private employment agency State employment programme Advertising (vacancy announcements) Through their own employees Internet Personal contacts and recommendations Vocational education and training institutions By competition 2 3 Total * * Note: The sum of the answers to questions exceeds 00%, since there were several possible answers. **The Programmes referred to here are state initiatives On-the-job Vocational Education, which were implemented in 2007 and The table also includes employment programme for the students and specific events undertaken by local authorities to support employment. to encounter problems in terms of personnel recruitment than smaller enterprises. The problem of hiring personnel also varies in relevance according to spheres of activity. Study results show that recruiting necessary personnel is most difficult for entrepreneurs operating in the following areas: Insurance 8% of the surveyed employers; Utilities 72%; Motor vehicle, household goods, and personal use item repair 7%; Computers and related activities 60%; Research and development 60%; Manufacturing 58%; Electricity, gas and water supply 57%; Communications 57%. Categories of employees, the recruitment of which is problematic for entrepreneurs include both skilled workers and specialists with higher education (see Chart ). Fifty-four percent of difficultto-recruit personnel are skilled workers, 42% - specialists with higher education, and 4% - are nonskilled workers. The recruitment of non-skilled personnel is problematic for employers due to the fact that, as a rule, this type of work offers low wages and poor working conditions. Chart Categories of Employees, whose recruitment Employers find Problems during the hiring process are encountered by 5% of the surveyed entrepreneurs, of whom 4% face problems on a regular basis, while 37% - periodically and rarely (see Chart 0). Chart 0 46% (Based on survey results, %) Skilled workers 49% 4% % 7% specialists Skilled workers a nd 37% Encounter problems regularly Encounter problems rarely Do not encounter problems 20 4% specialists Non-skilled workers Of the regions surveyed, staff recruitment problems are more acute in Kvemo Kartli and Samegrelo, although they are no less relevant in the remaining regions (see Chart 2). The intensity of problematic issues increases with the size of the enterprise: the larger the enterprise, the more difficult it is for employers to hire personnel with the required occupations and qualifications. This is natural, since the demand for staff of small enterprises is limited in terms of both quantity and structure. Based on survey results, large and medium-sized businesses are 2-3 times more likely 26 27

16 Report for research carried out in 20 Report for research carried out in 20 Chart 2 s with higher education: I. Healthcare 20.%; II. Business and management 9.6%; III. Education 7.6%; IV. Engineering 7.3%; V. Manufacturing and processing 6.6%; VI. Architecture and construction 6.%; VII. Social and behavioural sciences 5.9%; VIII. Art, culture, sports 3.6%; IX. Computers 2.5%; X. Journalism and information.9%. In all four regions, the overwhelming majority of difficult-to-recruit personnel are classified as skilled workers. The shortage in skilled staff is particularly acute in the region of Kvemo Kartli. Recruitment of qualified specialists with higher education is relatively more problematic in Samegrelo and Imereti. Entrepreneurs in Kutaisi and Tbilisi pointed to problems in the recruitment of personnel of both categories (see Chart 3). Chart 3 Categories of Employees, whose recruitment Employers find rustavi and surrounding area Zugdidi and surrounding area Kutaisi and surrounding area tbilisi and surrounding area Skilled workers Non-skilled workers The specific list of occupations and specialties, whose recruitment is problematic for employers (in both private and state organizations) exceeds 300 titles (please, see Appendix for a detailed list of occupations by region). If they are grouped according to fields of activity defined by the International Standard Classification of Education (ISCED) 997, the first 0 most in-demand areas will be as follows: Vocational education and training professionals 5 : I. Engineering 4.%; II. Mining and manufacturing 2.7%; III. Services.%; IV. Tourism and hotel and restaurant management 9.8%; V. Transport and transport services 9.%; VI. Construction 7.4%; VII. Information technology 5.0%; VIII. Medicine 3.7%; IX. Art, sports.3%; X. Agricultural sector.0%; The occupational grouping (first 0 groups) of higher education specialists by region, taking into account educational fields and the level of shortage is as follows: Table Occupational Grouping of s with Higher Education, According to Educational s and Deficit Levels Tbilisi and Education Healthcare Kutaisi and 2 Business and Management 2 Business and Management 3 Healthcare 3 Engineering 4 Engineering 4 Education 5 Manufacturing and Processing 5 Social and Behavioural Sciences 5 The featured grouping of vocational education and training occupations is based on the classification provided by the Ministry of Education and Science of Georgia. According to this classification, the Service sector also includes trade

17 Report for research carried out in 20 Report for research carried out in 20 6 Architecture and Construction 6 Architecture and Construction 7 Social and Behavioural Sciences 7 Manufacturing and Processing 8 Art, Culture, Sports 8 Art, Culture, Sports 9 Computers 9 Journalism and Information 0 Physical Sciences 0 Law 0 Agricultural Sector 0 Agricultural Sector Zugdidi and Rustavi and Engineering Engineering 2 Services 2 Mining and Manufacturing 3 Transport and Transport Services 3 Services Zugdidi and Rustavi and 4 Tourism and Hotel and Restaurant Management 4 Tourism and Hotel and Restaurant Management Healthcare Healthcare 2 Business and Management 2 Business and Management 3 Education 3 Manufacturing and Processing 4 Art, Culture, Sports 4 Engineering 5 Architecture and Construction 5 Architecture and Construction 6 Social and Behavioural Sciences 6 Law 7 Journalism and Information 7 Computers 8 Manufacturing and Processing 8 Education 9 Engineering 9 Agriculture, Forestry 0 Tourism and Hotel Management 0 Humanities As for in-demand vocational workers, their ranking in accordance with levels of shortage and spheres of education is as follows: Table Occupational Groups of Vocational Workers According to Educational Spheres and Deficit Levels 5 Mining and Manufacturing 5 Construction 6 Construction 6 Information Technology 7 Information Technology 7 Transport and Transport Services 8 Art, Sports 8 Art, Sports 9 Medicine 9 Medicine 0 Agricultural Sector 0 Agricultural Sector There are several reasons why employers are unable to recruit personnel with occupations and qualifications relevant to them. Based on survey results, among these, the lack of experience and relevant theoretical knowledge are dominating factors (see Chart 4). Thirteen percent of entrepreneurs denote the fact that specialists with required occupations are not being trained in the country as the principal reason for their inability to recruit personnel; 0% find hiring problematic because there is no training for relevant personnel available in the region, or individuals are unwilling to work in rural areas. Chart 4 Tbilisi and Kutaisi and Mining and Manufacturing Mining and Manufacturing 3 3 are not trained in the country 2 Engineering 2 Engineering 3 Services 3 Tourism and Hotel and Restaurant Management 4 0 are not trained in the region Candidates do not have relevant 4 Transport and Transport Services 4 Services 5 Tourism and Hotel and Restaurant Management 6 Construction 6 Construction 7 Information Technology 7 Medicine 5 Transport and Transport Services 38 2 Candidates do not have relevant Do not know who to address in search of required personnel Candidates do not agree to the terms 8 Medicine 8 Information Technology 9 Art, Sports 9 Art, Sports Candidates are unwilling to work in rural areas 30 3

18 Report for research carried out in 20 Report for research carried out in 20 Four percent of employers do not know who to address in search of required staff; while % acknowledge that poor working conditions serve as the main reason for their inability to recruit. This raises certain questions with regards to the entrepreneurs position: if they realize that the working conditions offered by them are unacceptable, why do they not propose better circumstances? In-depth interviews revealed that, in some cases, the reason for such a position is low business profitability (low income), while in other cases significant numbers of unemployed individuals and the hope that some will accept the poor working conditions. By region, the reasons for the inability to recruit necessary personnel are distributed as follows (see Table 2.3.4): Table Reasons for the Inability to Recruit Relevant Personnel by Region, Based on Survey Results, % Reason Personnel with required occupations are not trained in the country Personnel with required occupations are not trained in the region Candidates do not have relevant theoretical knowledge Candidates do not have relevant practical experience Do not know who to address in search of required personnel Candidates do not agree to the terms and conditions of work that employers are offering Candidates are unwilling to work in rural areas Tbilisi and Kutaisi and Zugdidi and Rustavi and Total As the Table above shows, the principal reason for the inability to recruit necessary personnel in all regions is employer dissatisfaction with the practical skills and theoretical knowledge of the candidates. In Tbilisi, one of the main reasons for unmet demand for personnel is the fact that, among the occupations in short supply, there are many for which training in the educational institutions of the country is unavailable. The following professions were named in this respect: lathe operator, metal craftsman, milling-machine operator, baker, sales manager, pre-sales person, inclusive education specialist, animator, specialist in IT technologies (special programmes), food technologists (beer, water, ice cream production etc.) and technicians, underwriter (insurance), electrical mechanic for installations, specialist for car diagnostics, roentgenologist, flight ticket reservation specialist, air technician, etc. Employers also named professions, for which trainings are provided in Georgia, however apparently employer companies have no information on that (e.g. polygraphy worker, sales consultant, pastry cook etc.). This shows the need for better information dissemination on the retrainings courses and professions among population and more active cooperation between employers and educational institutions. In terms of personnel training, the situation is even more difficult in the regions outside of Tbilisi. In particular, in all remaining regions, employers were 7 times more likely to indicate the reason that personnel with required occupations are not trained within their region. Among these professions are the following: Imereti lathe operator, machine-tool operator, electrical mechanic, polygraphy worker, video-audio apparatus technician, shoe-maker, bartender, masseur/masseuse, balneologist, pharmaceutist, industrial installation mechanic, moulder of construction tiles, heating/ conditioning specialist, electric fitter, black smith, engineer-builder, engineer-power specialist, psychologist, psychiatrist, doctors of various specializations, programist, human resource manager etc. Even though some re-trainings courses (e.g. cook, pastry cook, waiter etc.) are available in Kutaisi Vocational College Iberia, employers in the surrounding areas are not informed about that. It is also possible, that the population living in the villages and cities surrounding Kutaisi, do not have means to afford the travel and the courses. Samegrelo electric welder, electric mechanic, waiter, bartender, hair dresses/stylist, manicure/ pedicure specialist, masseur/masseuse, cook, pasty cook, television operator, polygraphy worker, programist, communication technician, electrician, docker, ship mechanic, specialist for car diagnostics, car electrician, jeweller etc. Kvemo Kartli electric welder, metallurgist, mechanic for food industry installations, electrician, electric fitter, mechanic for agricultural technologies, metal craftsman, crane operator, stone processing, gas installation operator, fire server, cook, pastry cook, bartender, waiter etc. This fact once again confirms the disbalance between supply of and demand for labour force in Georgia and the geographical inaccessibility of vocational education. The other reasons of the inability to recruit personnel (dissatisfaction with the quality of practical and theoretical education, lack of intermediary service centers etc.) were distributed almost equally among all territorial units (see Table ). During the research process, the level of employer satisfaction with the qualifications of their current employees was also studied. It was found that the absolute majority of entrepreneurs (64% of respondents) are quite satisfied with the qualifications of their employees, 35% are partially satisfied, and only % is very dissatisfied. Satisfaction with employee qualifications was more frequently expressed in Tbilisi and its surrounding area; while partial satisfaction is high in Samegrelo (see Chart 5). It is noteworthy that to the question: Given the opportunity, in what areas would you conduct the training and retraining of your staff? 75% of the entrepreneurs surveyed gave concrete answers

19 Report for research carried out in 20 Report for research carried out in 20 In our view, this figure more accurately reflects the level of employer satisfaction with the employee qualifications and confirms the necessity to develop human resources. Rustavi and Zugdidi and Kutaisi and Tbilisi and Chart List of professions and qualifications, as well as fields of education, in which employers would retrain their staff if those were available, is very long and contains more than 500 specializations. Top ten of the most demanded specializations named by the employers in the regions are the following: City of Tbilisi and the surrounding areas: teachers (esp. foreign language, physics, chemistry, math, Georgian language, elementary education, history, biology, geography, general aptitude, information technologies, inclusive education etc.), sales/marketing management, IT technologies, accounting, foreign language (esp. English), service sector (these skills are requested by the majority of employers in sales and service/hospitality sectors), culinary, waiters, hair dressers/stylists, financial management. City of Kutaisi and the surrounding areas: IT technologies, accounting, teachers (esp. English language, math, physics, chemistry, general aptitude, biology, Georgian language, Russian language, inclusive education, elementary education etc.), culinary, waiters, foreign language (esp. English), nurses, electric welders, echoscopy/endoscopy specialists, food technologies (bakery, meat products, beer, non-alcoholic beverages, ice cream, dairy products, wine). City of Zugdidi and the surrounding areas: foreign language (esp. English), teachers (esp. English language, general aptitude, physics, biology, IT Technologies, art, specialized instructors etc.), IT technologies, accounting, hair dressers/stylists, culinary, service, sales/ marketing management, waiters, car mechanics. City of Rustavi and the surrounding areas: accounting, metal craftsman/lathe operator, teachers (esp. English language, math, physics, biology, general aptitude, IT technologies, elementary education, specialized instructors etc.), culinary, electric welders, furniture craftsman, car mechanics, IT technologies, nurses, food technologies (beer, meat products). All the above regions have high demand on foreign language specialists, computer skills development, Does not comply Complete and raising qualification of medical personnel to manage modern technologies. Based on survey results, the majority of the entrepreneurs have realized the need to train and retrain their employees; however, only 30% of the employers (both in private and state institutions) systematically conduct measures for the professional development of their staff, while 20% do not implement such activities at all (see Chart 6) Chart 6 Personnel development, Based on survey results, % regular The share of employers who fail to provide advanced training of their personnel is more significant in Tbilisi and its surrounding area, as well as in the Kvemo Kartli region (see Chart 7). Rustavi and Zugdidi and Kutaisi and Tbilisi and 30 Periodic 38 Chart 7 The reasons why employers fail to implement measures for the professional development of their staff are diverse. Among these, the most pressing issue is the lack of funds, although this reason is 2 rare None Personnel development by region, % Regular Periodic Rare None

20 Report for research carried out in 20 Report for research carried out in 20 particularly dominant in Kvemo Kartli (see Table 2.3.5). In comparison with Tbilisi, the problem of locating suitable providers and instructors is more severe in the regions; the shortage of appropriate textbooks and materials is more acutely felt in Tbilisi, since demand for professionals whose training is not available in the country is higher in the capital, or employers are dissatisfied with the quality of personnel training in terms of innovative knowledge. Table Difficulties in the of Personnel Development by Region, Based on Survey Results, % Difficulties Total Tbilisi and Kutaisi and Zugdidi and Rustavi and Lack of funds Difficulties in finding suitable instructors Chart 8 Personnel development methods by region, Based on survey results, Invited trainers 2 Donor support 6 0 Internship abroad 20 Own training centers 8 62 On-the-job training Difficulties in the study (analysis) of the training Lack of desire on the part of the staff to participate in a training Of the regions surveyed, on-the-job training methods are most frequently used in Samegrelo; training centers and internships abroad are more accessible to entrepreneurs in Tbilisi; donor support is more evident for employers in Imereti and Samegrelo (see Table 2.3.6). 5 Poor quality of training (low efficiency) Table Personnel Development Methods by Region, Based on Survey Results, % 6 Unavailability of time for the implementation of training Training is not necessary Personnel Development Methods Tbilisi and Kutaisi and Zugdidi and Rustavi and 8 Lack of appropriate textbooks and materials Total* * Note: The sum of the answers to questions exceeds 00%, since there were several possible answers. On-the-job training Own training centers Vocational education and training centers Internship abroad It is noteworthy that 0% of the entrepreneurs surveyed do not consider staff training necessary. This, on the one hand, can be attributed to the fact that some employers are quite satisfied with the qualifications of their personnel, while others fail to see a requirement for training due to the simplicity of work performed. The lack of funds for the implementation of personnel training is grounds for the fact that the primary means of ensuring professional development in Georgia is on-the-job training (see Chart 8). Of the entrepreneurs who support the professional development of their staff, 62% offer on-thejob trainings 6, 20% employ the services of various training centers; and 8% - conduct trainings in their own facilities (these employers are mainly represented in the mining, electricity, gas and water supply, communications and public administration sectors). 6 Some employers are ready to offer their on-the-job trainings or trainings in their own facilities to raise the qualifications of the employees of other companies. This service is not free of charge. Through the survey, information is available on the specific vocational training opportunities. 5 Donor support Invited trainers Other 8 No answer 2 Total* * Note: The sum of the answers to questions exceeds 00%, since there were several possible answers. Thus, the recruitment of personnel with necessary occupations and qualifications is quite a serious problem for entrepreneurs and employers of state facilities within the studied regions. This emphasizes the need to strengthen the orientation of vocational education and training to the labour market and improve the quality of personnel training. The first step towards achieving these objectives lays in the study of prospective demand for labour and the determination of which occupations are expected to be in demand in the future

21 2.4. Prospective Demand for Labour Report for research carried out in 20 Report for research carried out in 20 Chart 9 Within the framework of the present study, demand of employers operating in all fields of activity (both private and public sectors) for labour during the next one and 2-3 years in four regions of Georgia was studied 7. Based on survey results, 44% of entrepreneurs plan to increase the number of employees over the next 6 months: of which, 5% - significantly, and 29% - insignificantly. In comparison with other regions, the most considerable increase in the number of employees is planned by entrepreneurs in Imereti (see Table 2.4.). Table Planned Changes in the Number of Employees in the Next Year by Region, Based on Survey Results, % Total Tbilisi and Kutaisi and Zugdidi and Rustavi and Tbilisi and Kutaisi and Zugdidi and Rustavi and 58 5 s with Skilled workers Non-skilled workers Significant increase is planned Insignificant increase is planned Significant reduction is planned Insignificant reduction is planned No changes are planned Do not know No answer Total It is evident that employers demand for labour is high not only in the case of expansion of business, but also to meet current requirements, as well as during changes in staff structure, fluctuation of labour and other factors. Therefore, demand in terms of occupations and specialties were specified by 90.2% of the entrepreneurs surveyed, which is a reliable indicator for prognostic calculations. To the question: What occupations (specialties) may be required in your business over the next year? employers indicated up to 500 professions (the list, ranked according to the estimated number of employees, is given in Appendix #2). Proceeding from the fact that, in the surveyed regions, skilled workers were indicated as most in-demand, this category dominates expected demand over the coming year (see Chart 9). 7 Of course, in order to organize appropriate vocational training programmes, employer demand for labour should be studied for a longer period of time; however, in practice, research results show that due to the unstable economic situation in Georgia, entrepreneurs find it difficult to make long-term predictions and simply refuse to answer similar questions. Due to the fact that there are more enterprises and organizations operating in Tbilisi, naturally, the capital accounts for the greatest demand for labour: 67.5% of the overall demand; 70.% of the demand for specialists with higher education; 65.% of the demand for skilled workers; and 68.3% of the demand for non-skilled workers. Of the regions surveyed, Imereti ranks second (accordingly, 6.7%; 6.2%; 7.3%, and 6.8% of the demand), Kvemo Kartli is third (8.6%; 7.3%; 9.7%; and 9.6% of the demand), and Samegrelo ranks fourth (7.2%; 6.4%; 8.0%; and 5.4% of the demand). The distribution of demand for vocational (skilled) workers according to educational fields and regions over the next year is as follows: Table Demand for Vocational Personnel over the Next Year, According to Educational Fields, % Field Total Tbilisi and Kutaisi and Zugdidi and Rustavi and Services Engineering Mining and Manufacturing Transport and Transport Services Tourism and Hotel/Restaurant Management Construction Art, Sports

22 Report for research carried out in 20 Report for research carried out in 20 8 Information Technology Medicine Agricultural Sector Finance Total Higher education professions ranked according to fields of education, as well as the number and share of requested employees were distributed as follows: Table Demand for s with Higher Education over the Next Year, by Field of Education, % Field Total Tbilisi and Kutaisi and Zugdidi and Rustavi and Business and Management Healthcare Education Engineering Architecture and Construction Manufacturing and Processing Law Art, Culture, Sports Social and Behavioural Sciences Mathematics and statistics Physical Sciences Computers Journalism and Information Humanities Tourism and Hotel and Restaurant Management Agriculture, Forestry, Fishing Veterinary Science* Transport Life Science Agroengineering* Services Total Note: The relatively insignificant share of occupations in the agricultural sector can be attributed to the subject selection specifics of the study and the fact that the number of hired workers in agriculture is limited. Based on survey results, within the service field, the following occupations are most in demand: sales assistant, hairdresser/stylist, manicure and pedicure technician, massage therapist/spa center specialist, cosmetologist, nanny, etc. In engineering, technicians, mechanics, machine operators, as well as engineers of different profiles are in demand; in the medical field, demand for doctors in various specialties (dentist, therapist, surgeon, cardiologist, resuscitator, anaesthesiologist, etc.) is particularly high; demand for foreign language, mathematics, chemistry, primary education, geography, physics, biology, history, and information technology teachers dominates the education field (please, see Appendix 2 for detailed data by region). Despite the fact that predicting demand for labour in the prospect of 2-3 years is more difficult, the question: In the nearest 2-3 years, what occupations are likely to be in demand in your business? was answered by 77.9% of respondents, which is a fairly high indicator. Employers predict that demand for vocational (skilled) workers will be highest in the following fields: services, transport and transport services, tourism and hotel-restaurant management (see Table 2.4.4). This somewhat reflects government priorities in terms of development in the country and serves as proof for growing demand for personnel in the aforementioned spheres of activity. High demand is also expected for workers in the mining and manufacturing sectors. Table Demand for Vocational (Skilled) Workers Over the Next 2-3 Years by Field of Education, % Total Tbilisi and Kutaisi and Zugdidi and Rustavi and Services Transport and Transport Services Tourism and Hotel- Restaurant Management Mining and Manufacturing Engineering Art, Sports Construction

23 Report for research carried out in 20 Report for research carried out in 20 8 Information Technology Medicine Agricultural Sector Finances Total The distribution of most in-demand skilled workers according to fields of education varies by region. For instance, demand for personnel in the fields of service, and transport and transport services prevails in Tbilisi and Mtskheta-Mtianeti; service, mining and manufacturing, as well as engineering personnel are in demand in Kutaisi and its surrounding area; in Zugdidi and surrounding areas, occupations in services, tourism and hotel-restaurant management, and transport and transport services are in demand; while in Rustavi and its surrounding area, demand for professionals in engineering, processing and services is high. Over the next 2-3 years, specialists with higher education in the fields of business and management, education and healthcare are likely to be most in-demand (see Table 2.4.5). Of the listed professions, Imereti, Samegrelo and Kvemo Kartli will exhibit the highest demand on personnel in the medical field. Moreover, demand for education and engineering specialists is also expected to increase. Table Demand for s with Higher Education Over the Next 2-3 Years by Field of Education, % Field Total Tbilisi and Kutaisi and Zugdidi and Rustavi and Business and Management Education Healthcare Engineering Architecture and Construction Law Social and Behavioural Sciences Manufacturing and Processing Art, Culture, Sports Mathematics and Statistics Humanities Computers Tourism and Hotel and Restaurant Management Physical Sciences Journalism and Information Agriculture, Forestry, Fishing Veterinary Science Transport Life Science Total A detailed list of occupations and specialties, which are expected to be in demand in the surveyed regions over the coming 2-3 years, is presented in Appendix 2. In addition, employers plan to meet demand by retraining their current staff and implementing personnel development measures. Based on survey results, 74.6% of entrepreneurs, given the opportunity, would retrain their employees and/or conduct personnel development measures. By field of activity, occupations and skills, which employers indicated most frequently and which they would implement staff development in are as follows: Agriculture agronomist, veterinary doctor, veterinarian, financial manager. Mining and quarrying engineer/mechanic, hydraulics and pneumatics specialist, fitter, land surveyor, electrician. Manufacturing production technologist, technician/mechanic, baker/kneader, confectioner, accountant, sales/marketing manager, electric welder, tailor/cutter, furniture handyman, lathe operator/grinder, fitter, metal framework handyman, IT specialist, poligraphist. Electricity, gas and water supply electric welder, electrical installation worker, electro mechanic, gas industry specialist, IT specialist, accountant. Construction civil engineer, constructor, electric welder, machine operator/machinist (road, construction equipment), general builder, plumber, concrete worker/metalworker for reinforced concrete, electrician, mechanic/technician (construction equipment), IT specialist, accountant, foreign language specialist. Trade accountant, sales assistant, sales/marketing manager, IT specialist, pharmacist/ pharmacologist, foreign language specialist. Employers are willing to develop their personnel on a massive scale in the fields of service and communication. Repair of motor vehicles, household goods and items of personal use automobile repairer (engines, chassis, gearbox, painter, automobile electrician), automobile diagnostics specialist, household appliance repairer, elevator installer/repairer, welder, service manager. Hotel and restaurant management waiter/waitress, cook, bartender, administrator/manager (hotel, restaurant, bar), baker, confectioner. Employers are also willing to develop their personnel on a massive scale in the fields of service and foreign languages

24 Report for research carried out in 20 Report for research carried out in 20 Transport, warehousing accountant, sales/marketing manager, foreign language specialist, IT specialist, passenger/cargo transportation specialist, driver (trailer), automobile repairer. Tourism tour operator, animator, tour guide, reservations specialist. Employers are also willing to develop their personnel in foreign languages. Communications communications technician and engineer, TV and radio journalist, sales/ marketing manager, communications operator, IT specialist, PR manager. Financial intermediation credit officer, cashier-operator, financial manager, human resources manager, accountant. Insurance reinsurance specialist, financial manager, insurance manager. Real estate operations, renting, leasing accountant, sales/marketing manager, lawyer. Computers and related activities IT specialist, programmer, sales/marketing manager, accountant. Research and development land surveyor, geologist, architect, constructor, IT specialist, psychologist. Public administration lawyer, foreign language specialist, IT specialist, financier/financial manager, architect. Education teacher (foreign languages, physics, chemistry, biology, Georgian language, primary education, general skills, geography, etc.), nursery/kindergarten teacher, psychologist, IT specialist. Employers are willing to develop staff in contemporary methods of teaching. Healthcare nurse/midwife, diagnostic equipment operation specialist (ultrasound technician, endoscopist, tomography specialist), physician assistant and lab assistant, dental therapist, resuscitator, surgeon, paediatrician, clinic manager, etc. Utilities IT specialist, accountant, foreign language specialist. Personal and social services hairdresser/stylist, manicure and pedicure technician, cosmetologist, lawyer, sales/marketing specialist, visagist/makeup artist, IT specialist. Leisure, recreation, culture, sports coach (football, swimming, martial arts, basketball, etc.), office personnel, instructor (fitness, solarium), accountant. The consideration of the aforementioned research results during the planning/implementation of vocational education and training, retraining, and personnel development measures will contribute to the improvement of professional competitiveness and increase business profitability, which, in turn, is a natural prerequisite for new job creation and employment generation Employment Features of Migrants Returning to Georgia One of the objectives of the research implemented within the EU project Targeted Initiative for Georgia (TIG) was the study of the current situation in terms of employment of migrants returning to Georgia and the attitude of employers towards them. For this purpose, specific questions were developed and incorporated into the questionnaire, which allowed for the procurement and analysis of the following information: What is the share of enterprises and organizations where migrants who have returned to Georgia within the past 5 years are employed? Which countries have they returned from? What positions are they employed in? Do they have work experience in similar positions abroad? How valuable to employers is the experience gained by migrants abroad? Under otherwise equal conditions, do employers give preference to returned migrants during the personnel selection process? Based on survey results, of the 2,36 studied organizations, returned migrants are employed in 346 (6% of the overall number);,730 organizations (8%) do not have this category of employees, while the remaining 60 organizations (3%) found it difficult to provide specific information on the issue. It is noteworthy that the share of employers hiring returned migrants is greater in Imereti and Kvemo Kartli (see Chart 20). This is to be expected, since both regions are characterized by a high rate of migration and the proportion of repatriates is also likely to be greater, which is reflected in their employment indicator Tbilisi and Chart 20 returning migrants, Based on survey results, % Kutaisi and 9 78 Based on survey results, the number of employed returning migrants is not very large, since of the 346 organizations, where returning migrants are employed, 33 (90%) indicated that their numbers within the organization range from to 5 individuals; 2 organizations employ 6 to 0 returning migrants; 9 organizations to 20; and 3 organizations 20 to 40 persons. Respondents named 39 countries, from which the employed migrants have returned. Among these are countries in the Post-Soviet space, Europe, Asia, and Africa. The list of top ten countries of migration, which were most frequently identified by the employers, is as follows: 2 Zugdidi and 5 84 Rustavi and Are employed Are not employed Do not know No answer 44 45

25 Report for research carried out in 20 Report for research carried out in 20 Table Top Ten Country of Migration of Employed Migrants, Based on Employer Survey Results Country of Migratin Enterprise % Russia Greece Turkey Germany United States England Ukraine Spain France Italy 2 By region, the top ten countries of migration are somewhat different; however, Russia and Greece are dominant in all regions; in Samegrelo, Turkey ranks second after Russia, while in Kvemo Kartli the second place is occupied by Azerbaijan (see Table 2.5.2). Table Top Ten Countries of Migration of Employed Migrants by Region, Based on Employer Survey Results Tbilisi and Enterprise % Kutaisi and Enterprise % Russia 70 2 Russia Greece Greece Germany Turkey United States 36 4 Spain England Italy Turkey Germany Ukraine Ukraine France Kazakhstan Israel England Spain 5 0 Portugal 2 2 Zugdidi and Enterprise % Rustavi and Enterprise % Russia Russia Turkey Azerbaijan Ukraine Greece England 2 4 Turkey 4 5 Greece 2 5 Ukraine Portugal 2 6 Spain Iraq 2 7 United States 3 8 Germany 2 8 Holland 3 9 France 2 9 England Switzerland 3 The positions, where returning migrants are employed are diverse. In particular, based on survey results, 545 positions were indicated. The list of top ten positions, where returning migrants are more frequently employed is as follows: Table Top Ten Positions of Employed Migrants, Based on Employer Survey Results Position Number of Employees % Auxiliary Worker, Loader Office Personnel Sales/Marketing Manager Waiter/Waitress Cook, Culinary Expert Sales Assistant Financier/Financial Manager Teacher Baker, Kneader Production Manager 0 2 Based on survey results, 42% of employed migrants work in positions requiring higher education, 5% are skilled workers, while 7% are employed in non-skilled work (no prior preparation is needed for this type of work). In Tbilisi and Mtskheta-Mtianeti this indicator amounts to 5%, 44% and 5%, accordingly; in Imereti 2%, 7% and 8%; in Samegrelo 32%, 56% and 2%; in Kvemo Kartli 36%, 8% and 2%

26 Report for research carried out in 20 Report for research carried out in 20 The employment of returned migrants in their homeland largely depends on the experience or education they have received abroad. The overwhelming majority of emigrants from Georgia are employed in non-skilled or low-skilled work abroad. Young people who receive education abroad, following their return to their homeland, have more opportunities for finding employment in managerial positions. This is reflected in the employment features of migrants returning to Georgia. Employment of returned migrants is also affected by the specifics of the demand/supply of workforce in the labour market, which is reflected in the distribution of returning migrant employment by region (see Table 2.5.4). As seen from the data shown in the Table, returned migrants in Tbilisi are more frequently able to find employment in positions of sales and marketing managers, sales assistants and office personnel, while in Imereti, Samegrelo and Kvemo Kartli the dominant position in this respect is that of an auxiliary worker. Table Top Ten Positions of Employed Migrants by Region, Based on Employer Survey Results Tbilisi and Persons % Kutaisi and Persons % Sales/Marketing Manager 2 4 Auxiliary Worker, Loader Sales Assistant Waiter/Waitress Office Personnel Security Staff Auxiliary Worker, Loader Office Personnel Financier/Financial Manager Nurse 3 4 Zugdidi and Persons % Rustavi and Persons % Auxiliary Worker, Loader 4 0 Auxiliary Worker, Loader Office Personnel Electric Welder Physician Production Manager Sales/Marketing Manager Waiter/Waitress Cook, Culinary Expert Guard 3 6 Baker, Kneader Facing Worker Metal Framework Handyman 9 Guard Restaurant / Bar Administrator / Manager Restaurant / Bar Administrator / Manager Manicure and Pedicure Technician Endocrinologist Concrete Worker, Metalworker for Reinforced Concrete Technician/Mechanic (Sewing Machinery) 3 3 The fact that work experience received abroad impacts the rate of employment of returning migrants is evidenced by the results of the study, according to which, more than half of currently employed migrants have experience working in similar positions abroad (see Chart 2). 6 Cook, Culinary Expert Metal Framework Handyman 2 2 Chart 2 7 Teacher Driver Waiter/Waitress Cashier-Operator Baker, Kneader Financier/Financial Manager 2 2 0% on Employer survey results) 5% 0 Production Manager Credit Officer 2 2 Yes 39% No do not know Based on survey results, employers in Tbilisi and Mtskheta-Mtianeti are frequently better informed about the work experience of returning migrants employed by them, than in the remaining regions (see Chart 22)