An important strategic method to achieve Sustainable Development Goals faster in the country is the applying Local Economic Development approach (LED approach), for which it is necessary to have the preconditions in the country provided through decentralization processes.

This paper presents an analysis of the role of decentralization for successful implementation of the Local Economic Development approach in Georgia; a general overview of the current situation, problems, and challenges in Georgia; an assessment of relevant implemented reforms and problem-solving ways.

Since 2010, changes have been made in all directions of decentralization in Georgia ( for political, administrative, economic, and fiscal decentralization). However, despite the progress, the situation shows that many more reforms is needed to be carried out in order to involve local self-governments in the processes of local social and economic development and, moreover, to make them becoming initiators of Local Economic Development processes.

It is noted that the current legislation of Georgia does not clearly separate the role of municipalities in supporting entrepreneurship and stimulating economic development at the local level, neither in their own, exclusive nor in the delegated powers of municipalities. Performing functions related to socio-economic development depends only on the willingness, desire, and initiative of the local governments. In addition, municipalities have a poor property and own revenues in local budgets, and consequently, as a result of such conditions, the role of Georgian municipalities in local social and economic development is not important.

Problems related to the low level of institutional capacity of municipalities and low qualified human resources, which are considered as a threat to decentralization, are also a major obstacle for the application of this holistic-strategic approach - Local Economic Development in municipalities of Georgia.

Therefore, mitigating the threats of decentralization and implementing policies to strengthen and support the capacity of local governments will significantly increase the effectiveness of Local Economic Development policies and strategies in Georgia.

Keywords: Local Economic Development(LED), Decentralization, Strengthening Local Governments, Municipal Budget, Reforms, Fiscal Decentralization, Holistic-strategic approach.

JEL Codes: O10, O11, O12