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1DEVELOPMENT OF DIGITAL SERVICES OF GEORGIA
Bobojonov Azizjon Babaxanovich
DSc (marketing), PhD (ICT in economy) Tashkent State University of Economics
Abdurakhmonov Abdumalik Abdurashidovich
Researcher of Tashkent State University of Economics a. abduraxmonov@tsue. uz
Irina Guruli
Associate Professor at Ilia State University [email protected]
Abstract: This study evaluates Georgia's digital evolution by examining digital gaps across 12 sub-components relative to global median scores. Of these, nine subcomponents reveal a significant digital gap, while three outperform the global median. The areas of strength include Institutional Effectiveness and Trust, Institutions and the Business Environment, and the Inputs sub-category from Innovation and Change. These successes reflect Georgia's potential for growth in institutional and innovation-driven domains. However, the strong correlation coefficient (0.60) between digital gaps and overall digital evolution scores indicates that the digital divide with more developed countries is primarily due to indicators with low absolute values. This underscores the need for targeted investments to address underperforming areas, bridging the gap and enhancing Georgia's digital development trajectory. This research was supported by a Marie Curie Staff Exchange within the Horizon Europe Programme (grant acronym: CARSI, no: 101086415).
Keywords: Digital evolution, digital gap, institutional effectiveness, innovation inputs, digital divide, digital transformation, Georgia, digital development, institutional environment, correlation coefficient.
РАЗВИТИЕ ЦИФРОВЫХ УСЛУГ В ГРУЗИИ
Бобожонов Азизжон Бабаханович
Доктор наук (маркетинг), PhD (ИКТ в экономике) Ташкентский государственный экономический университет
a. boboj onov@tsue. uz
Абдурахмонов Абдумалик Абдурашидович
Научный сотрудник Ташкентского государственного экономического
университета
a. abduraxmonov@tsue. uz
Ирина Гурули
Доцент Государственного университета Ильи [email protected]
Аннотация: Это исследование оценивает цифровую эволюцию Грузии, исследуя разрыв в цифровых технологиях по 12 подкомпонентам в сравнении с глобальными средними показателями. Из них девять подкомпонентов демонстрируют значительный разрыв в цифровых технологиях, в то время как три из них превосходят глобальный средний показатель. К числу сильных сторон относятся институциональная эффективность и доверие, институты и бизнес-среда, а также подкатегория "Вклад в инновации и изменения". Эти успехи отражают потенциал Грузии для роста в институциональной и инновационной сферах. Однако высокий коэффициент корреляции (0,60) между цифровыми разрывами и общими показателями цифровой эволюции указывает на то, что цифровой разрыв с более развитыми странами в первую очередь обусловлен показателями с низкими абсолютными значениями. Это подчеркивает необходимость целевых инвестиций для решения проблем в областях с низкой эффективностью, преодоления разрыва и улучшения траектории цифрового развития Грузии. Это исследование было проведено при поддержке Фонда Марии Кюри по обмену сотрудниками в рамках Европейской программы Horizon (аббревиатура гранта: CARSI, номер: 101086415).
Ключевые слова: цифровая эволюция, цифровой разрыв, институциональная эффективность, затраты на инновации, цифровое неравенство, цифровая трансформация, Грузия, цифровое развитие, институциональная среда, коэффициент корреляции.
GRUZIYADA RAQAMLI XIZMATLARNING RIVOJLANISHI Bobojonov Azizjon Babaxanovich
Dsc (marketing), PhD (iqtisodiyotda AKT) Toshkent Davlat Iqtisodiyot universiteti
Abduraxmonov Abdumalik Abdurashidovich
Toshkent Davlat Iqtisodiyot universiteti ilmiy xodimi a. abduraxmonov@tsue. uz
Irina Guruli
Ilia Davlat universiteti dotsenti [email protected]
Annotatsiya: Ushbu tadqiqot Gruziyaning raqamli evolyutsiyasini global o'rtacha ko'rsatkichlarga nisbatan 12 ta kichik komponent bo'yicha raqamli tafovutni o'rganish orqali baholaydi. Ulardan to'qqizta kichik komponent raqamli texnologiyalarda sezilarli farqni ko'rsatadi, uchtasi esa global o'rtacha ko'rsatkichdan yuqori. Kuchli tomonlarga institutsional samaradorlik va ishonch, institutlar va biznes muhiti, shuningdek, "innovatsiya va o'zgarishlarga hissa qo'shish" kichik toifasi kiradi. Ushbu yutuqlar Gruziyaning institutsional va innovatsion sohalarda o'sish potentsialini aks ettiradi. Biroq, raqamli bo'shliqlar va raqamli evolyutsiyaning umumiy ko'rsatkichlari o'rtasidagi yuqori korrelyatsiya koeffitsienti (0,60) shuni ko'rsatadiki, rivojlangan mamlakatlar bilan raqamli tafovut birinchi navbatda past mutlaq qiymatlarga ega bo'lgan ko'rsatkichlar bilan bog'liq. Bu past samaradorlik sohalarida muammolarni hal qilish, bo'shliqni bartaraf etish va Gruziyaning raqamli rivojlanish traektoriyasini yaxshilash uchun maqsadli investitsiyalar zarurligini ta'kidlaydi. Ushbu tadqiqot Mari Kyuri jamg'armasi tomonidan Yevropaning Horizon dasturi (grant qisqartmasi: CARSI, raqami: 101086415) doirasida xodimlarni almashtirish jamg'armasi ko'magida o'tkazildi.
Kalit so'zlar: raqamli evolyutsiya, raqamli bo'shliq, institutsional samaradorlik, innovatsiya xarajatlari, raqamli tengsizlik, raqamli transformatsiya, Gruziya, raqamli rivojlanish, institutsional muhit, korrelyatsiya koeffitsienti.
INTRODUCTION
Georgia's digital economy encompasses a broad range of industries, with some already well-established and others in the early stages of development. Central to this progress are tech-driven startups, which are emerging as significant contributors by delivering innovative solutions across various sectors.
This report outlines a basic market overview, including key statistics across different sectors, and highlights notable examples of market players and startups. These examples underscore the crucial role these entities play within their industries and point to opportunities for further expansion. Notably, artificial intelligence (AI) is not examined as a standalone industry but rather as a transformative technology integrated
across all sectors, reflecting its widespread influence on Georgia's digital economy. Similarly, other facets of the digital economy, while not discussed separately, are acknowledged for their interconnected impact on various industries.
Digital advancements strategically bolster Georgia's microeconomic environment, enhance the competitiveness of local entrepreneurs and businesses, and contribute to sustainable economic growth1. These processes form a robust foundation for the country's economic policy. In developing nations like Georgia, digital transformation significantly affects governance, business models, and the overall government environment. The expanding digital ecosystem facilitates access to new technologies, encourages the establishment of small and medium-sized internet-based enterprises, and drives growth in the digital economy. This, in turn, creates new jobs and enables efficient utilization of capital and resources, fueling the nation's economic development.
Since the new government assumed office, efforts have been made to develop internet infrastructure as a cornerstone of the digital economy. Initiatives have included improving internet accessibility and literacy, increasing internet speed, and expanding the number of users. The growing digital ecosystem has a profound impact on societal well-being and socio-economic progress.
According to the World Economic Forum, Georgia ranks 58th in the Networked Readiness Index, 91st in Economic Impacts, and 44th in Social Impacts. However, the country ranks lower in areas such as ICT-related laws (76th), business-to-business ICT usage (79th), business-to-consumer internet use (94th), and government ICT usage (81st). These rankings highlight areas for improvement in the country's digital transformation journey2.
Broadband development remains a critical priority, serving as the backbone of the digital economy and enabling progress across all sectors. Affordable access to next-generation infrastructure—whether fixed, mobile, wireless, or satellite—is essential for fostering sustainable development.
LITERATURE REVIEW
The varying levels of digitalization development across countries have been a focal point of academic research since the early 2000s. This issue is commonly referred to as the digital divide, which highlights disparities in access to and use of digital technologies between developed and developing nations3.
1 Abuladze R., E-Government. TextBook, Second Edition. Publishing House "Universal". Tbilisi 2013.
2 World Economic Forum. The Global Information Technology Report 2016. Innovating in the Digital Economy. http://www3.weforum.org/docs/GITR2016/GITR_2016_full%20report_final.pdf
3 Czernich, N., Falck, O., Kretschmer, T., & Woessmann, L. (2011). Broadband infrastructure and economic growth.
The Economic Journal, 121(552), 505-532.
Despite two decades of global digital advancements, a significant gap remains between regions and countries in their ability to access and share information, even amidst rapid progress in computer science and information technology. A notable distinction persists between developed and developing nations, as well as between OECD member and non-member countries, regarding key ICT indices4.
The rapid digitalization of the global economy has introduced the concept of digital convergence, which refers to the narrowing of the digital divide. Recent studies indicate that Central and Eastern European (CEE) countries have made progress in digitally converging with more developed EU nations, with tangible benefits observed particularly in Eastern Europe5.
However, during the period from 2002 to 2017, the digital gap between Western Balkan (WB) countries and EU member states widened, primarily due to differences in investments in human capital, particularly ICT-related skills development6.
On a global scale, while the group of nations with the lowest levels of digitalization showed the fastest rates of convergence, education was identified as the most effective means to enhance digitalization levels7.
The digital divide is closely tied to a country's development level, but digitalization itself can accelerate economic growth and promote economic convergence. Numerous studies have explored how various aspects of digitalization contribute to economic progress8.
Empirical evidence suggests that broadband infrastructure has a significant and positive impact on economic growth for both developed and developing nations9.
For instance, broadband connectivity has been shown to substantially boost GDP per capita, a critical metric for measuring economic convergence10. This demonstrates the transformative potential of digital infrastructure in bridging economic and technological gaps worldwide.
Georgia's e-government development strategy has largely been influenced by the action plans established under the framework of the Open Government Partnership (OGP). A significant number of the state's digital services introduced over the past decade have been initiated as part of its OGP membership. These services, as outlined in the action plans, have been instrumental in advancing the nation's e-governance capabilities. The adoption of the open government concept is particularly impactful in
4 Mardikyan, S., Yildiz, E. A., Ordu, M. D., & Simsek, B. (2015). Examining the global digital divide: a cross-country
analysis. Communications of the IBIMA, 2015, 1.
5 Mitrovic, B. (2020). Measuring the efficiency of digital convergence. Economics Letters, 188, 108982.
8 Myovella, G., Karacuka, M., & Haucap, J. (2020). Digitalization and economic growth: A comparative analysis of Sub-Saharan Africa and OECD economies. Telecommunications Policy, 44(2), 101856.
9 Qiang, Rossotto, & Kimura, 2009.
10 Czernich, N., Falck, O., Kretschmer, T., & Woessmann, L. (2011). Broadband infrastructure and economic growth. The Economic Journal, 121(552), 505-532.
the area of local governance. As the primary point of interaction between citizens and the state, local governments play a crucial role in addressing everyday needs. They also have numerous opportunities to implement various mechanisms that encourage public participation.11
Moreover, e-government is often considered a source of communication between the state and citizens12.
METHODOLOGY
This study investigates the digital evolution and associated gaps in Georgia by employing a quantitative analysis framework. Data for the study were sourced from global digital indices and datasets that measure digital evolution and its subcomponents. Specifically, the Digital Evolution Index (DII) was used to assess Georgia's performance across 12 sub-categories of digital development. The sub-categories include areas such as institutional effectiveness and trust, innovation inputs, transaction infrastructure, digital payment uptake, and broadband access. The digital gap was calculated for each of the 12 sub-components by comparing Georgia's scores to the median values of all countries in the dataset. This approach enabled the identification of sub-categories where Georgia lags behind or exceeds the global median.
A correlation analysis was conducted to explore the relationship between the digital gap and the overall digital evolution score. The correlation coefficient was calculated to determine the strength and direction of this relationship. The results revealed a significant positive correlation (0.60), indicating that the digital divide is most pronounced in indicators that are low in absolute terms. The study also involved a comparative assessment of Georgia's digital performance relative to other nations. The results were contextualized within global and regional trends, offering insights into how Georgia aligns with or diverges from digital development patterns in other countries.
The findings were visualized using scatter plots and charts, highlighting the distribution of digital gaps across sub-categories and illustrating Georgia's position relative to other countries. These visualizations were used to facilitate a deeper understanding of the digital gaps and strengths in the Georgian context.
DISCUSSION AND RESULTS
Countries assessed in the Digital Intelligence Index (DDI, December 2020) are categorized into four groups based on their levels of digital evolution: "Break Out,"
11 Gogidze, L. (2021), Peculiarities of Implementation of Open Government Practice at the Local Level in Georgia, Meridian Publishing, Tbilisi.
12 Zhang, Y. (2017), "Explaining citizens' e-participation usage: functionality of e-participation applications", Administration & Society, Vol. 26 No. 3, pp. 423-442.
"Watch Out," "Stand Out," and "Stall Out." Georgia achieved an overall digital evolution score of 53.46 out of 100, ranking 47th among 90 countries in the study (Figure 1). Despite this moderate level of digital evolution, Georgia demonstrates significant growth potential, with a digital evolution momentum score of 60.72 out of 100, securing 7th place globally.
As a result, Georgia is classified within the "Break Out" group, representing countries with lower but rapidly growing levels of digital evolution. Of the four key components of digital evolution—Supply Conditions, Demand Conditions, Institutional Environment, and Innovation & Change—Georgia aligns with the "Break Out" zone in three components. However, the "Innovation and Change" subcomponent falls within the "Watch Out" category, indicating slower progress in innovation for digital development.
Figure 1. Digital evolution level13
The chart below (figure 2) represents a scatter plot comparing the digital score of countries (according to the Digital Intelligence Index - DII) on the horizontal axis with their Digital Gap to the global average on the vertical axis.
13 https://www.wipo.int/gii-ranking/en/georgia
14
Figure 2. Digital gap and Digital levels in Georgia by DII sub-categories
If we take a look through detailed analysis of the graph, the dotted trendline indicates a positive correlation (R2 = 0.3606), suggesting that as a country's digital score increases, its gap compared to the global average also tends to increase positively. This reflects that higher-performing countries in digital infrastructure, innovation, and inclusion are further ahead of the global average. Indicators such as Institutional Effectiveness and Trust and Institutions and the Business Environment are positioned at the higher end of both axes. This implies that these factors are strong determinants of high digital performance and distinguish leaders from lagging countries.
Indicators like Digital Payment Uptake and Innovation Processes are placed at the lower end of both axes, reflecting areas where countries with low digital scores experience challenges.
Access Infrastructure Indicators, Transaction Infrastructure, Device and Broadband Uptake, and State of the Human Condition are located near the average levels. These represent foundational aspects that are improving but are not exclusive to top performers.
For many nations, advancing these metrics could provide the most achievable path to improving their digital scores and reducing their gaps.
Countries leading in digital transformation invest heavily in Institutions and Business Environment, Innovation Inputs, and Access Infrastructure. This highlights
14 https://idfi.ge/en/georgia-in-the-un-e-government-
survey%E2%80%932024#:~:text=Among%20the%2011%20neighboring%20countries%20in%20the%20Eastern%20P artnership%20and,9th%20position%20in%20e%2Dparticipation.
that a supportive institutional framework and robust access to digital tools are crucial for success.
Areas like Digital Payment Uptake and Innovation Outputs show the largest negative gap for countries with lower digital scores. These indicators often require significant infrastructure, trust in digital financial systems, and educational investments, which may not be readily available in developing regions.
To bridge the gap, countries with lower digital scores need to prioritize Transaction Infrastructure, Access Infrastructure, and Device and Broadband Uptake. These areas are prerequisites for economic participation in the digital economy.
Trust and effectiveness in institutions, along with a conducive business environment, play a critical role in achieving digital success. Policymakers should focus on reforms that enhance trust, reduce corruption, and foster business innovation.
Indicators like Innovation Inputs and State of the Human Condition suggest the importance of skilled human capital in advancing digitalization. Investments in education, especially digital literacy, are critical.
The widening gaps at both ends underscore the need for global cooperation to address disparities. While some countries excel in Institutions and Innovation, others struggle with basic infrastructure.
For countries with low digital scores, focusing on achieving parity in Digital Inclusion and Infrastructure Development can yield substantial gains in reducing the global digital divide. This analysis underscores that bridging the digital gap is a multi-faceted challenge that requires targeted investments, policy reforms, and international collaboration. Countries excelling in digital transformation typically have strong institutional frameworks, access to cutting-edge technology, and high levels of innovation. However, for less advanced nations, improving foundational aspects like broadband access and digital inclusion is a critical step toward narrowing the digital divide.
If scrutinize from point of strength, Georgia's Institutional Environment strongly supports digital development, as highlighted by the Digital Intelligence Index. The legal framework is suitable for digital activities, though there is a need for more specific legislation related to the digital economy.
The Supply Conditions are improving rapidly, with internet access steadily increasing—rising by 15.4% over the past five years. By 2021, 86.1% of Georgian households had internet access. Additionally, mobile phone usage is exceptionally high, with 92.9% of individuals aged 6 and older using mobile phones, a critical tool for network connectivity.
From the demand perspective, digital technologies are gaining popularity among the population. In 2021, 77.4% of Georgians used the internet, and 70.1% accessed it
almost daily. Notably, there is no gender gap in internet usage, with 76.8% of women and 78.0% of men being online.
Investments in digital innovation are also a strength, with a growing startup ecosystem contributing to a sizeable innovation capacity.
Despite a supportive institutional environment, online access to state services is limited, and state digital participation remains low. Georgia's E-Participation Index score of 0.62 (out of 1.0) places it 84th among 141 economies, as reported in the 2019 Global Competitiveness Report.
On the supply side, there is a significant urban-rural digital divide. Internet penetration is much higher in urban areas (90.7%) compared to rural regions (74.5%).
While digital demand is growing, some areas remain weak. Internet use is primarily focused on communication services, although economic activities are gaining traction. For instance: 38.5% of internet users search for product or service information, 34.7% use internet banking, only 21.3% engage in e-commerce.
E-commerce adoption is higher among urban residents (27.4%) and younger users aged 15-29 (37.3%). However, only 18.4% of enterprises in Georgia have a website, and a mere 2.6% process orders online.
Despite strong inputs in digital innovation, the output and value creation remain weak. Innovation adoption and effectiveness are generally low, particularly among SMEs, which hampers broader economic benefits from digital advancements.
CONCLUSION
Digital development is transforming the future of the global economy. While technological advancements pose challenges for all nations, these are particularly significant for developing economies. Globalization has positioned Georgia as a partially developed digital economy, but further efforts are needed to address the challenges of digital transformation. Key priorities include such as expanding digital public services. Enhancing access to and the variety of digital services in the public sector is essential. Implementing effective e-governance models is crucial for modern policy-making.
Encouraging the use of the internet for business activities, such as finding, selecting, and purchasing products or services online, will foster greater adoption of digital solutions.
Developing sharing economy platforms as these platforms offer an effective means to boost digital participation and integration into the economy.
Lastly, evaluating and managing digital innovation outputs, because establishing clear evaluation criteria and management strategies for the practical outcomes of digital innovations is critical for driving sustainable progress in the sector.
REFERENCE
1. Abuladze R., E-Government. TextBook, Second Edition. Publishing House "Universal". Tbilisi 2013.
2. World Economic Forum. The Global Information Technology Report 2016. Innovating in the Digital Economy.
http://www3.weforum.org/docs/GITR2016/GITR_2016_full%20report_final.pdf
3. Gogidze, L. (2021), Peculiarities of Implementation of Open Government Practice at the Local Level in Georgia, Meridian Publishing, Tbilisi.
4. Zhang, Y. (2017), "Explaining citizens' e-participation usage: functionality of e-participation applications", Administration & Society, Vol. 26 No. 3, pp. 423-442.
5. Czernich, N., Falck, O., Kretschmer, T., & Woessmann, L. (2011). Broadband infrastructure and economic growth. The Economic Journal, 121(552), 505-532.
6. Mardikyan, S., Yildiz, E. A., Ordu, M. D., & Simsek, B. (2015). Examining the global digital divide: a cross-country analysis. Communications of the IBIMA, 2015, 1.
7. Mitrovic, B. (2020). Measuring the efficiency of digital convergence. Economics Letters, 188, 108982.
8. Park, S. R., Choi, D. Y., & Hong, P. (2015). Club convergence and factors of digital divide across countries. Technological Forecasting and Social Change, 96, 92-100.
9. Myovella, G., Karacuka, M., & Haucap, J. (2020). Digitalization and economic growth: A comparative analysis of Sub-Saharan Africa and OECD economies. Telecommunications Policy, 44(2), 101856.
10. Digital_Intelligence_Dashboard_GE. pdf
11. Qiang, Rossotto, & Kimura, 2009.
