Since the Soviets invasion of Georgia in 1921, Georgian industry has developed unevenly and followed through the subsequent stages:
1921-1940 – the rapid development of manufacturing (by 1940 with regard to 1913 production had risen more than ten times )
1941-1945 – industry was mainly oriented to the demand of the Second World War. There was a decline in production though the new branches of industry were introduced.
1945-1988 – a boost in industry, the improvement of qualitative characteristics, production had increased almost twenty times.
1989-1994 – the break-up of the Soviet Union and building of a new independent State. The severance of links with former suppliers and the energy crisis have wrought havoc on Georgian industry. By 1994 almost 1/3 of Georgian factories has ceased production.
1995-1998 – the political stabilization of the country and development of new industrial contacts has leaded to stabilization of the main industrial indicators and a small positive growth rate of GDP (2.4%).
As we see, cutbacks in industrial production coincide with significant historical and political events. Periods of a sharp decline in industrial production were short and with regard to the years of development can be seen as temporary processes.
Industry has always played a leading role in the economy of Georgia . In eighties of this century, industrial output accounted for 65% of GDP and 40 of GNP. By that time, Georgia produced 0.2% of the world industrial production while Georgian population formed 0.1% of the world population.
According to the World Development Report for 1997 by the World Bank, in Georgia GDP per capita was US$ 440 (34th position in the world) and the growth rate from 1985 to 1995 had been -17.0% (the last position in the world). The average annual growth rate of GDP in 1980-1990 had been 0.5% and it declined dramatically to -26.9 in 1990-1995. The average annual growth rate of industry from 1980 to 1990 had been 1.8 and this index also had dropped sharply to -34.1.
Georgian industry is characterized by uneven spatial distribution. Industrial areas are mainly located on valleys along railways. More than a half of industrial production is concentrated in three cities – Tbilisi , Kutaisi , and Rustavi . The giant steel mill in Rustavi , just to the east of Tbilisi , was producing more than 1 million tons/year of pig iron, steel and rolled metal before the collapse of the Soviet Union . The main industrial nodes are – Tbilisi-Rustavi (ferrous metallurgy, chemicals, engineering, construction materials, light industry and food), Kutaisi-Tqibuli (coal-mining, engineering and light industry), Zestaponi-Chiatura (electric engineering and mining industries), Gori-Khashuri. These areas have traditionally employed over two-thirds of the industrial workforce and produced more than 66% of the industrial output. In particular, in 1996 Tbilisi produced 31.1% of country’s industrial products, Kvemo Kartli – 19.1%, Imereti – 10.4%, Shida Kartli – 5.5%.
Tbilisi has always played significant role in industrial production, for example in 1997 with regard to the previous year; the average annual growth rate in industrial production was 6.4% higher than the same index for the country and was calculated by 114.5%. In 1997, the following regions had more than average growth rate: Ajara AR (134.1%), Samtskhe-Javakheti (145.2%), Mtskheta-Tianeti (116.2%), Racha-Lechkhumi and Kvemo Svaneti (117.1%), Kvemo Kartli (114%), Shida Kartli (106%). The production declined in the following regions: Kakheti by 15.6%, Samegrelo-Zemo Svaneti by 13.1% and Imereti by 2.1%.
In 1997 the value of total industrial production accounted for 801.3 million GELs. In 1997 with regard to the previous year, total manufacturing production kept rising as the total mining output declined by 1%. Nevertheless, for the recent years, the share of mining products in total industrial production has risen and consequently the share of manufacturing has gone down. Although, manufacturing is still leading branch of Georgian industry and its share in total industrial production is 74% as the share of mining is 26%. According to 1996 statistical data, since 1990 there has been a tendency of rising of the share of production in the following branches of industry: electricity energy, fuel production, ferrous and non-ferrous metallurgy, chemicals and oil chemicals and decline of the share of – engineering and metal processing, wood processing, paper industry, construction material, light industry and food.
As we see from statistical data, in 1997 with regard to the previous year fuel production, medical, chemicals and oil chemicals, construction materials manufacturing, food industry, ferrous and non-ferrous metallurgy, engineering and metal processing had more than average growth rate. It has to be noted that although there is a rise in total production in abovementioned branches, production of some items continue to go down, e.g. coal by 86.7%, chemical fiber – 53.6%, rubber and asbestos by 83.6%, electro-techniques by 10.6% etc. The value of production has declined in the following branches: non-ferrous metallurgy, glass, ceramics manufacturing, light industry. Although production of some items has increased, e.g. tailor products by 1.8 million GEL that is 42.8%, leather, fur products and shoes by 17.9%.
It should be noted that in December 1997, 1248 out of 3399 registered enterprises did not function, including 623 (18.3%) that were brought to halt since the beginning of the year. The situation was hard in all regions except Tbilisi , where only 7.6% of registered enterprises did not operate. 65.2% of registered enterprises did not run business in Ajara AR , 60% in Kvemo Kartli, 52.8% in Kakheti, 50% in Mtskheta-Mtianeti, Racha-Lechkhumi and Kvemo Svaneti.
In 1997 the value of consumers’ goods produced by Georgia accounted for 321.9 million GEL, where food formed 259.8 million GEL (80.7%), non-food products (excluding light industry) – 26 million GEL (8.1%), light industry goods – 4.6 million GEL (1.4%) and wine and spirits (including beer) – 31.5 million GEL (9.8%).
In 1997 with regard to the previous year, the total value of consumers’ goods had increase by 34.4 million GEL i.e. by 12%. This growth resulted from the increase in food (by 8%) and non-food (by 37.1%), wine and spirits (including beer) (by 49.5%) products. At the same time there was a decline of production in light industry by 232.3 million GEL (33%).
In 1997 with regard to 1996, more than average annual growth rate of consumers’ goods was observed in Tbilisi (117.7%), Mtskheta-Mtianeti (170%), Samtskhe-Javakheti (166.1%), Kvemo Kartli (142.4%), Guria (104.1%), Racha-Lechkhumi and Kvemo Svaneti (108.8%). The rate stayed stabile in Kakheti. The rate declined in other regions.
In 1997 with regard to 1996, out of 100 important industrial products manufacturing of 40 items increased (e.g. oil mining, steel, silicon manganese, mini-tractors, natural zeolite, synthetic ammonia, mineral fertilizers, washing powder, leather shoes, butter, vegetable oil, non-alcoholic drinks, mineral water, wines, tea, etc.), while production of 52 items decreased (e.g. coal and manganese mining, steel pipes, motors, trucks, chemicals, cotton and silk textile, meat, cheese, flour, bread, pasta, confectionery etc) and 9 items were not produced at all (e.g. natural gas, pipeline parts, rubber shoes, cartoon, paper, bicycle etc)
Georgian metallurgy started to develop since 1944 when giant metallurgy factory of full circle was founded in Rustavi . Although, yet in 1862 there was a metallurgy mill in Chatakhi and manganese mining has started in Chiatura in 1879. In 1933 Non-Ferrous Alloys Factory was launched on the base of Chiatura manganese in Zestaphoni. Later the factory was transformed into giant electric metallurgy mill. The base for establishment of Rustavi factory was the existence of coked coal in Georgia and iron-ore in Dashkesan ( Azerbaijan ). Rustavi factory was producing pig iron, steel, rolled metal, coke, tin, and steel pipes for oil pipelines. The mill traditionally manufactured more than 50% of total metallurgical production in Georgia , owned more than a half of fixed inputs in metallurgy and employed almost 45% of workforce of the branch. In recent years, the factory has had problems with input supplies. Significant changes have occurred in production marketing. It should be noted that there is a tendency of raising the share of metallurgy output in total industrial production. In 1990 the share of metallurgy products was just 3.4%, in 1993 the index reached the pick of 18.3%, and in 1996 it was 5.9% that is 1.7 times more than in 1990.
Mining of non-ferrous metals started in late XVIII century. The first modern mill was launched on the base of lead and zinc and barite quarry in Kaiser in 1949. In 1974 on the base of quite rich quarry (lead and zinc, tin, barite, different precious elements, e.g. rhenium, gold etc) the concentrate mill was founded. There is a secondary aluminum mill operating in Rustavi . Georgia has a good perspective for developing the non-ferrous metallurgy.
Engineering and Metal Processing
Engineering and Metal Processing originate from the eighties of XIX century, but further development continued after the Second World War. Georgian engineering and metal processing industries involve production of: aircrafts, trucks, cars, boats, railway engines, machine tools, agricultural machinery, computers, TV sets, and metal frameworks. The main centers of engineering are Tbilisi , Kutaisi , Batumi and Poti. The main enterprises are presented by: Aircraft Factory, “Elmavalmsheni” (railway engines (in 1983 the factory produced 1/3 of railway engines manufactured in the Soviet Union)), Factory of Electric machinery, Electric-technical factories – “Electroautomat” and “Electogamshvebi” (highly qualified technical staff accounts for more than 20% of personnel there), Electric alloy factory, “Electroisolit”, “Micromotors”, “Elva”, lab equipment, hydro meteorological equipment, TV set factories, Tbilisi mill of agricultural machinery; Car Factory (car parts, trucks) which has subsidiaries in Geguti, Abasha, Chokhatauri, Electro-mechanic factory (motors for oil pumps, engines for mines, auto doors, pumps), factory of agricultural machinery – in Kutaisi; boat factories are located in Poti (high-speed passenger boat “Comet”) and Batumi (voyage boats).
Georgia has been specialized in engineering since the Second World War. Even now, the share of engineering in total production is high (7.6%), though the index is almost twice less than in 1990 (14.3%). In recent years production decrease deepened in most developed branches of Georgian engineering, such as production of trucks – output decreased 4 times in 1980 – 1990. Further reduction of production (62 times) occurred within the following six years.
Georgian Chemical Industry produces wide-range of products. The first chemical factory producing lithopone (white mineral paint) was founded in Kutaisi in the beginning of 20th century. Availability of domestic raw materials and high demand on wide-range chemical products resulted in rapid development of Georgian chemical industry after the Second World War.
Georgian chemical factories consume domestic coal, gas generated from coke, manganese, barite (along with imported), fire-resistant clays, tin, tin and zinc alloy, scrap iron, diatomite and other mineral and organic raw materials. Georgian chemical industry produces mineral fertilizers, chemical fiber, and chemicals for agriculture, household chemical goods, pharmaceuticals, technical rubber products, and perfume. The main centers are Rustavi – Nitrogen Fertilizer Factory (nitrogen fertilizers, potassium etc), Synthetic Fiber Factory, Chemical Fiber Factory; Kutaisi- Lithopone Factory (lithopone, varnish, water emulsion paint, liquid glass etc); Tbilisi – Chemical Factory, Factory of Polymeric Materials, Factory of Rubber Products, Paint and Varnish Factory, Factory of Synthetic Products, Pharmaceutical Factory; Batumi Pharmaceutical Plant. There are many other paint and vanish factories in small towns around the country. The share of chemical goods in total production is growing.
Industry of Construction Materials
Georgia possesses rich quarries of construction materials. There are two big cement mills in the country. In 1985 Georgia produced 22 million tons of cement. The index has been declined dramatically in recent years. In 1996 two mills produced some 95 000 tones of cement. Production reduced 20 times in1980 – 1996.
There are several places producing lime in Georgia . Georgia is rich with marble – Saleti, Sadakhlo, Lopota. Several small mills process marble bars. There is a teschenite -processing mill in Kursebi. Limestone bars are processed near EkGEL and Godogani quarries. Basalt and tuff bars are processed in Tbilisi and Kvemo Kartli.
There are several brick and hundreds of small block mills in Georgia producing ceramic and silicate bricks, blocks from cement and inert materials. Roof materials are presented by tin-plate, asbestos-cement plates (slate) and roofing. Production of roofing materials has decreased since 1990 (40 times by1996).
Wide range of decorative tiles is produced in Tbilisi Ceramic Plant. Metal-Concrete frameworks are produced in main cities.
Timber Processing and Paper Production
Timber Processing and Paper Production industries closely integrated into the Soviet economy and therefore heavily depended on supplies of raw materials. The share of their production in total industrial production is just 0.9%. Resources for these branches are limited in Georgia .
Electricity Energy Production
Georgian electricity resources are roughly divided as follows: fuel – 30%, hydro-energy resources – 70%. Georgia ‘s dependence on hydroelectricity makes it vulnerable to variations in the weather. Total electricity output was 14bn-15bn kWh in eighties and it became 7 172.2 billion kWh in 1997. In 1997 Georgia consumed 7 363.1 billion kWh and exported 514.4 billion kWh of electric energy. It is obvious that the deficit was 705.3 billion kWh, which was imported from the neighboring countries. In 1989-1991 imports provided almost 25% of consumed electricity.
Since 1991 Georgia has faced an acute energy crisis, as Russia and Turkmenistan (main import partners) dramatically increased the price on their energy supplies that caused severe decline in the country’s economy. The situation worsened with destruction of the gas pipeline from Southern Russia to Georgia in October 1992 and than in 1994 with inability of Georgia to pay for its gas imports.
Currently Georgia imports oil from Iran and continues to import electricity from Russia and Turkey . Georgia exports electricity in summer time (514.4 billion kWh in 1997).
Since 1996 the efforts have been made to rehabilitate and restore power-generating facilities with the aid of German (US $33 million) and World Bank (US $35 million) grants.
It has to be stressed that the share of electricity in total production has increased since 1990 (by 892% comparing to 1990). Although Georgia generates almost a half of electricity it generated in 1990 (14 245.7 kWh). Development of hydroelectricity power stations in Georgia would improve the situation, due to the well-known fact that Georgia uses just 15% of its hydro-energy resources.
Georgian Food Processing Industry produces a wide range of food products. It mainly consumes domestic resources and that is why, it seems it has better adapted to restructuring. Georgian natural and climatic conditions permit the cultivation of wide variety of crops. Under the Soviet central planning Georgia was directed to specialize on citrus, tea and fruits. That was the reason why Georgia imported some 50% of its grain consumption from Ukraine and Kazakhstan , 60% of dairy products and more than 1/3 of meat from other Soviet republics. Traditionally Georgia was specialized in grape production and wine industry.
Georgian food processing can be divided into two main groups. The first group is represented by products, which mainly consume domestic resources and are oriented to export. The second group on the other hand, uses imported inputs/products and mainly supplies domestic market. The first group consists of wine, brandy, alcohol, tea and canned food, essential oils, tobacco products, bottled mineral water. The second group includes milk and dairy products, meat and ham, fish, sugar, oil, fat, pasta, beer and non-alcoholic drinks (presented by hundreds of small plants producing traditional lemonades and a larger company “Coca-Cola Bottlers Georgia”) etc. The share of food processing industry in total production remains very high – almost 30%.
Wine making is one of the oldest branches in Georgia . Georgians have been producing wine from ancient times for domestic consumption as well as for sale. First wine factories were founded in late XIX century. At the same time the first Georgian brandies were produced. Wine factories are located in Kakheti, Imereti, Racha, Tbilisi and produce various sorts of age-old bottled and bottling wines. Georgia produces ordinary and high quality dry, sweet, sparkling and strong wines.
Georgian wine industry has attracted foreign investors such as US firm “Chalice Wines” and a Dutch firm “Royal Coormans”.
Georgia produces “black” and “green”, Lao tea. Main factories are located in Western Georgia and in Tbilisi . “Martin Bauer” of Germany invested in a tea factory near Tbilisi and begun production in 1997.
Canned food mainly is made of fruits (compote/stewed fruit, juice, jam).
Georgia is rich with different types of mineral water such as Borjomi, Nabeglavi, Mitarbi, Sairme etc. The most famous is Borjomi with two bottling factories. Currently Borjomi is bottled by “Georgian Glass and Mineral Water Company” – a joint venture between Georgian Government, a TBS business group and the Dutch company.
Tobacco production has been developed since XIX century. Cigarettes are produced at Tbilisi , Sukhumi and Batumi tobacco factories.
There are big State grain elevators in Tbilisi , Kutaisi and Poti. Currently, they process flour from American wheat bought on a long-term credit from US Government.
Light Industry in Georgia is presented by textile and tailor products, leather goods, shoes and haberdashery. The main enterprises are located in Tbilisi , Kutaisi , Gori and Batumi .
Textile production involves processing of silk, wool and cotton. Tailor and haberdashery factories are located in almost all towns and cities all over the country. The share of light industry output in total production has always been very high in Georgia although it had dropped almost twice from 1990 (21.2%) to 1996 (11.1%).