Political Economy of Hydropower in Georgia and Armenia

by Yana Zabanova

IIn her research project, Yana Zabanova analyzes and compares Georgia and Armenia’s approaches to promoting investment in their hydropower sectors and the impact of these policies. Both nations have identified hydropower development as a key element of their energy security and economic growth. Armenia, which prioritized the development of small hydropower plants (SHPPs), developed a legal framework supporting renewables early on, introduced feed-in tariffs, and set up a special fund facilitating investment in renewables, successfully jumpstarting the SHPP sector. Georgia, on the other hand, has put a greater emphasis on the construction of large-scale HPPs, providing state co-financing and concentrating on attracting foreign investment. As for small HPPs, Georgia has opted for extensive deregulation and has lagged behind in drawing up a strategy for developing renewables. The research will thus address the following questions: Why have Georgia and Armenia chosen different approaches for promoting investment in hydropower? What impact has the emphasis on supporting large versus small HPPs had on the sector’s performance in each country, on governance structures within it, and on the interactions among different stakeholders? Does greater deregulation necessarily lead to state retrenchment? The research will look at these issues through a new institutionalist prism, relying in particular on Hudson and Leftwich’s Political Analysis method. In addition to the traditional political economy focus on institutions, incentives, and stakeholders, Political Analysis emphasizes the need to understand the role of power, agency, and the development of ideas and interests more dynamically. As part of the overarching GEE framework, the project will pay special attention to the structural and policy performances, as well as at the state’s ability to form effective partnerships in the hydropower sector.



The New Consensus of State’s Activism in Agricultural Sector of Georgia

 by Tamar Jugheli

The scope of Tamar Jugheli’s dissertation is to understand the nature, emergence and effectiveness of SBRs in agriculture sector of Georgia.  The state is intervening actively in agriculture sector of Georgia since 2013 to direct the investment in the sector and to support the growth of agriculture production and export.  According to the institutionalists approach to the state intervention, in order it to be effective, it has to be designed as a system of discovery of market opportunities and constraints. This is possible if effective SBRs are in place. The motivation for focusing on SBRs as a contributor in sector’s growth is influenced by a longstanding literature in political science and political economy, which argues that sustained economic growth occurred in the contexts, where the state took the attitude that good growth enhancing SBRs are possible and provided incentives for private investments and disciplined them.  Hence, this study argues that while intervening in economic activities in any sector, collaborative SBRs need to be in place in order to avoid adverse effects of information asymmetry, to identify binding constraints obstructing the growth of the sector and to address identified obstacles in the best possible ways.  Initially the research aims to understand how SBRs emerge/evolve in the agriculture sector of Georgia and then to assess its effectiveness in terms of structure and in terms of its impact on the growth of agriculture production and export. The discussions of nature and effectiveness of SBRs in literature are focused mainly on the cases of Asian, Latin American or African developing countries. Hence, this dissertation will contribute in academic literature on state activism and SBRs, as it aims to understand the nature, emergence and effectiveness of SBRs in case of the former Soviet Union member, Eastern European, small open economy, with democratic (hybrid) political regime.



Towards Effective State-Business Nexus in the Industrial Policy of Kazakhstan 

by Diana Usmanova

Diana Usmanova in her research focuses on the ability of the state to effectively cooperate with the private sector in order to promote economic development. Industrialization experience of countries in East Asia and Latin America is a telling example of how state and state’s interaction with corporate sector can create (un)favourable conditions for successful industrial campaigns. Based on this experience from other regions, research on Kazakhstan’s case aims to seek an answer to the question of how state-business cooperation in Kazakhstan has affected the results of its industrial programme. The research question, therefore, addresses many aspects of such interaction, such as state-business risk sharing system, performance-based incentive regime, control over re-investment structures, system of competition creation and sustaining.Using process-tracing methodology, the research will cover the period of the two five-year industrialization programmes (2010-2014 and 2015-2019) to discover whether institutional structure and policy formulation and implementation in the area of industrial policy in Kazakhstan carry characteristics that are conductive to successful target achievement. The expected outcome of the research would be a conclusion whether and how state in Kazakhstan provides effective leadership and its private sector is embedded in formulation and implementation of industrial policy. Finding an answer to the given research question will enable the author to attain the broader aim of Governance in Emerging Economies project, namely investigating how transition states’ economic development is influenced by state intervention and specific characteristics of institutional matrix.


Comparative Case Study of Machinery Industry related National Systems of Innovation in Uzbekistan, Kazakhstan, and Kyrgyzstan

 by Misook Choi

The development of Machinery and Equipment industry often shapes economic trajectories of a country, particularly so when they ensure the stability of agro-industrial development, energy and mining sectors and other key sectors of the economy. Misook Choi in her PhD thesis investigates whether and how the industrial sector evolved in Central Asia through comparative case studies of the sector in Kazakhstan, Uzbekistan and Kyrgyzstan. The researcher selected the three states because during the Soviet era, the current Central Asian region, particularly the three countries in question were one of the main production centers of the Machinery and equipments for the whole Soviet Union. However, the evolution of the sector to date differs greatly after their independence. This study uses the concept of National Systems of Innovation (NSI) as the analytical unit and focuses on comparing the setting up, organization and evolution of the NSI related to Machinery and Equipment industry in the three states. The study on NSI will allow the researcher to look into which parts and mechanism of the system, such as interaction among actors, the role of institutions and policies, education and training, R&D, infrastructure, macroeconomic and regulatory context, factor market and product market condition and interaction with other networks and systems contributed to the variance of the achievement. The researcher uses interviews, questionnaire, and observation as primary source of data after illustrating a quantitative picture using indictors and indexes on the countries examined. In line with the GEE project, this research explores how and to what extent state activism tends to influence the creation of innovation and growth in Central Asian region.


Socio-political Embedding of State Activism 

by Christian Timm

The most significant critique on state-led economic policy of the 1950s-1980s was not economic but political. Economic decision-making in developing countries could often not be shielded from political pressure or capture by particularistic interest groups. However, successful cases of state activism exhibit an institutional framework that not only guarantees significant autonomy of state bureaucrats but also creates incentive compatibility between powerful interest groups and the national development agenda. As any changes in economic regulation or state interventions cause distributive effects within the society, policy-makers are requested to set appropriate incentives to mobilize private business in line with the national development agenda and to avoid moral hazard. This cross-country study looks the institutional frameworks for (i) establishing incentive compatibility between private business and the state and (ii) performance-enhancing governance structures. The research will focus on state measures in the field of infant industries and capital control. The former allows for studying the state’s measures to mobilize and steer private sector activities; the latter is politically and economically relevant for the understanding the distribution and re-investment of economic rents. The study will deepen our understanding the socio-political embedding of successful state activism in various societies.