Bridging Gaps in Higher Education for a Prosperous Future in the South Caucasus

The World Bank's report highlights the critical need for Armenia, Azerbaijan, and Georgia to revamp their underfunded and inequitable tertiary education systems to drive economic growth, innovation, and social development. By addressing skill gaps, boosting research, and increasing public investment, these nations can transform their universities into engines of progress.

The World Bank’s regional report on tertiary education in the South Caucasus, authored by Koen Geven and Felipe Puga Novillo, illuminates the region’s struggle to leverage higher education for economic growth. Despite Armenia, Azerbaijan, and Georgia achieving upper-middle-income status, their universities perform well below global standards, with none ranking as world-class institutions. This reflects decades of policy neglect, which began with the post-Soviet withdrawal of government oversight and funding. Tertiary education, once seen as a secondary priority, now stands as a critical pillar for these nations’ aspirations to escape the "middle-income trap." The report emphasizes the need to reposition higher education as a strategic resource for development, underscoring its role in skill development, fostering innovation, and regional economic growth.

Bridging the Skills Gap for Economic Growth

The South Caucasus universities have failed to align educational outcomes with labor market demands, resulting in significant skill mismatches. Employers across the region highlight deficiencies in graduates’ critical thinking, problem-solving, and teamwork skills abilities essential for modern economies. While tertiary education boosts access to the labor market, wage returns for graduates in Armenia and Georgia are alarmingly low, reflecting the limited value employers place on these credentials. Women, despite higher participation in higher education, face barriers in accessing high-paying sectors, though they benefit from higher labor force participation rates. To address these gaps, the report calls for modernized curricula, greater integration of professional skills training, and stronger partnerships between universities and employers.

Tackling Inequities in Access and Opportunity

Access to tertiary education has expanded significantly, but inequalities remain entrenched. Rural and economically disadvantaged students are underrepresented, as entrance exam systems and financial constraints perpetuate barriers to higher education. Urban and wealthier families dominate university enrollments, leaving rural youth with limited opportunities to advance. The report notes that demographic pressures, such as declining youth populations, have stabilized, creating a timely opportunity to implement reforms. Policymakers are urged to introduce targeted financial aid, enhance high school counseling programs, and reform entrance exams to reward merit rather than privilege. By addressing these inequities, governments can unlock the untapped potential of diverse talent pools.

Funding Woes and the Need for Innovation

The region’s higher education systems are plagued by chronic underfunding. Armenia and Georgia allocate just a fraction of what European Union nations spend on tertiary education per student, while Azerbaijan fares slightly better but still falls short. Most institutions rely heavily on tuition fees, limiting their ability to invest in quality improvements or infrastructure. This overreliance also places an undue burden on students and families, particularly those from low-income backgrounds. The report suggests exploring alternative funding models, such as international partnerships, contract research, and professional training programs, to diversify revenue streams. Governments must also increase public investment while demanding improved financial management and efficiency from universities.

Scientific Research: A Missing Catalyst for Innovation

Scientific research, a cornerstone of innovation, remains underdeveloped in the South Caucasus. The region’s output of citable scientific documents is minimal, and public funding for research and development hovers at just 0.2% of GDP far below the European Union average of 1.5%. Most research funding comes from foreign sources, underscoring a dependence on external support. The legacy of Soviet-era institutions, which separated research institutes from universities, continues to impede progress. Georgia has taken steps to integrate research institutes with universities, but systemic issues persist due to insufficient base funding and infrastructure. The report advocates for targeted investments in specific scientific domains aligned with industrial needs, drawing inspiration from Estonia’s successful education and innovation integration.

A Blueprint for Transforming Higher Education

The transformation of tertiary education in the South Caucasus is critical for economic resilience and growth. Governments must recognize higher education as a strategic resource and commit to comprehensive reforms. Increased public funding should be tied to enhanced transparency, efficiency, and measurable outcomes in quality improvement. Universities must modernize their teaching approaches, aligning curricula with labor market demands and incorporating practical skills training. Faculty development and the recruitment of top talent are essential to elevating academic standards. Additionally, fostering stronger collaborations between universities and industry can bridge the gap between education and employment.

Equity must remain a central focus of these reforms. Expanding access to disadvantaged groups through targeted scholarships, reduced reliance on tuition fees, and systemic changes to entrance examinations will create a more inclusive and meritocratic higher education system. Investments in infrastructure, digital tools, and research capacity will also position universities as hubs of innovation and engines of regional development. Scientific research, in particular, requires a strategic overhaul, with governments concentrating resources on high-potential fields and incentivizing collaboration between academia and industry.

A Call to Action for a Thriving Future

The World Bank’s report concludes that the South Caucasus nations have a unique opportunity to redefine their higher education systems as drivers of economic and social progress. By addressing disparities, enhancing quality, and investing in innovation, Armenia, Azerbaijan, and Georgia can transform their universities into globally competitive institutions. The rewards extend beyond economic growth, encompassing improved societal outcomes such as better governance, health, and cultural enrichment. While the challenges are formidable, the potential for a revitalized tertiary education sector to shape a resilient and prosperous future makes this an urgent and worthwhile endeavor. With strategic reforms and sustained commitment, these nations can ensure that higher education becomes a cornerstone of their long-term success.