#49 Georgia Agriculture Bulletin, BFC

09/2016

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49 Ge o r g i a Agriculture Bulletin Georgia and China Sign Free Trade Agreement Technical University gets GEL 12 Million Update New Online Platform Being Created to Promote Georgian Winemakers Georgian Wine Exports Increase 42 Percent

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Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4)

Otar Danelia Summarizes Achievements Prior to Leaving Office ................................................... 2 Georgia and China Sign Free Trade Agreement .............................................................................. 2 Technical University gets GEL 12 Million Update ............................................................................ 2 Georgia Signs Memorandum of Cooperation with the U.S. and Bulgaria ....................................... 3

Foreign Aid ................................................................................................................. 3 5) 6) 7)

New Online Platform Being Created to Promote Georgian Winemakers ....................................... 3 Akhaltsikhe Agricultural Fair Connects Cooperatives and Service Providers .................................. 3 New Program will Boost Georgian Hazelnut Quality ....................................................................... 4

Private Sector .............................................................................................................. 4 8) 9) 10) 11) 12) 13) 14) 15) 16) 17)

Hazelnut Plantation Owners Uneasy over 2016 Harvest Quality .................................................... 4 Tapping into the Great Potential of Georgian Livestock ................................................................. 4 New Hazelnut Factory for Georgia’s Guria Region .......................................................................... 5 Grape Harvest in Kakheti at 9,000 Tons and Counting .................................................................... 5 Georgian Wine Exports Increase 42 Percent ................................................................................... 5 Problems in Exporting Georgian Honey to the European Union ..................................................... 5 New Agro‐Investment Loan Supports Farmers, Agricultural Development .................................... 6 Rice Processing Plant to be Built in Samegrelo ............................................................................... 6 Iberia Fruits Opens Fruit Processing Center in Dusheti ................................................................... 6 New Project to Provide Quality Animal Feed to Georgia, South Caucasus ..................................... 7

Note: The Georgia Agriculture Bulletin presents a monthly roundup of headlines and news stories related to Georgia’s agricultural sector.

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State Initiatives 1)

Otar Danelia Summarizes Achievements Prior to Leaving Office

September 5th, 2016, http://georgiatoday.ge/news/4593/Georgia%E2%80%99s‐Agricultural‐Minister‐Summarizes‐ Achievements‐Prior‐to‐Leaving‐Post

Otar Danelia presented a summary report to the Prime Minister and members of the Cabinet outlining the works completed and on‐going projects started under his tenure as Minister of Agriculture.

According to Danelia, 150 new enterprises were established and another 700 were expanded under his watch. Further, 1,600 agricultural cooperatives were established and 23,600 hectares of land were insured as part of the agricultural insurance reform.

The Prime Minister noted Mr. Danelia’s successes while cautioning that many challenges still face the country’s agricultural sector. He added that agriculture is of vital importance for the country since more than half of the population of Georgia is engaged in its activities.

Mr. Danelia is leaving his post to compete as a candidate in Samegrelo (western Georgia) for the October 8 Parliamentary elections.

2)

Georgia and China Sign Free Trade Agreement

September 13th, 2016, http://cbw.ge/economy/georgian‐wines‐mineral‐waters‐agriculture‐products‐will‐enter‐china‐zero‐ tariffs/

Economy Minister Dimitri Kumsishvili announced that Georgia, after seven months of negotiations, has signed a free trade agreement with the People’s Republic of China. Once ratified by the parliaments of both countries, Georgia can export wines and other agriculture products to China with zero tariffs. This is expected to begin in 2017.

It is estimated that 95% of Georgian products will enter Chinese markets without tariffs once the agreement begins to take effect. Last year, for example, 2.6 million bottles of Georgian wine were sold in China; this year, around 5 million bottles are planned to be sold there. This agreement will bring huge benefits to Georgia and help establish Georgian products in Chinese markets.

3)

Technical University gets GEL 12 Million Update

September 22nd, 2016, http://www.finchannel.com/world/georgia/59978‐a‐project‐worth‐12‐million‐gel‐is‐completed

The Technical University of Agricultural Sciences and Bio‐System Engineering Faculty, which first took students in the 2014‐2015 academic year, has a brand‐new, modern building equipped with the latest laboratories and technologies. The new building was part of a GEL 12 million government project to develop the faculty’s infrastructure and update its software. The new building was officially opened during the Science and Innovation Festival 2016, an event comprised of agricultural science conferences, public lectures, presentations and training sessions.

The Technical University of Agricultural Sciences and Bio‐Systems Engineering Faculty incorporates eight programs: breeding, agronomy, soil and water resource engineering, agricultural business management, food technology, forestry, agricultural technologies and agro‐engineering.

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4)

Georgia Signs Memorandum of Cooperation with the U.S. and Bulgaria

September 27th, 2016, http://moa.gov.ge/En/News/1195

Georgian Agriculture Minister, U.S. Ambassador Ian Kelly and Bulgarian Ambassador Dessislava Ivanova have signed a memorandum of cooperation which will see the United States Department of Agriculture and the Bulgarian Food Safety Agency provide technical assistance and expertise in the areas risk assessment and risk management systems. The technical assistance to Georgia will include the implementation of reforms which will help country to enter European Union (EU) and U.S. markets.

Strengthening capacity building skills in risk management and risk assessment systems will ensure effective mechanisms for identification, assessment and management of hazards in the foods of animal origin. This will further facilitate Georgia in meeting EU standards and help to make Georgia a reliable trade partner for EU and American markets.

Foreign Aid 5)

New Online Platform Being Created to Promote Georgian Winemakers

September 14th, 2016, http://cbw.ge/economy/online‐platform‐created‐georgian‐winemakers‐eu‐funded‐programme/

A new project within East Invest 2, a regional investment and trade facilitation program, is pairing the Georgian Wine Association, a non‐state organization, with the Bulgarian Chamber of Commerce and Industry, who will share their experience supporting the Bulgarian wine industry. The project aims to bolster support for the Georgian wine industry through a new online platform that will act as a one‐ stop‐shop with key information and guidance on the Georgian wine industry.

The online platform being developed will also promote local vineyards. 100 companies, mostly from the Kakheti and Kartli regions, have already been selected and interviewed to be featured on the site with information about their production, pricing and availability for export. The Georgian Wine Association is also planning to link the new platform with the popular tourism portal georgianwine.travel, generating more traffic and offering new cooperation and partnership opportunities between wine makers, vineyards and wine tourism companies.

6)

Akhaltsikhe Agricultural Fair Connects Cooperatives and Service Providers

September 19th, 2016, http://enpard.ge/en/european‐neighbourhood‐programme‐for‐agriculture‐and‐rural‐development‐ enpard‐supported‐agricultural‐fair‐in‐akhaltsikhe/

Within the framework of the European Neighborhood Program for Agriculture and Rural Development (ENPARD), Mercy Corps organized an agricultural fair on Mechanizatori Ltd grounds in Akhaltsikhe. More than 300 agricultural cooperatives attended the fair, and 40 agricultural service provider companies operating in the region displayed their products and offered their services to farmers and agricultural cooperatives.

In addition to agricultural cooperatives and agricultural service providers, delegations from the European Union to Georgia, the Agricultural Cooperatives Development Agency (ACDA), the Agricultural Projects Management Agency of the Ministry of Agriculture, the National Food Agency and the Georgian Amelioration also attended the fair along with local microfinancing and insurance companies.

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7)

New Program will Boost Georgian Hazelnut Quality

September 21st, 2016, http://agenda.ge/news/65729/eng

To strengthen Georgia’s role as a major global hazelnut producer, the country is launching a new program to increase the quality of exported nuts and sell them at a premium rate worldwide, enriching the economic livelihoods of more than 50,000 local hazelnut growers. The program, launched as part of the Georgia Hazelnut Improvement Project, will be implemented by Cultivating New Frontiers in Agriculture (CNFA), an international non‐profit organization headquartered in Washington, D.C. and Brussels with offices in Georgia.

The Georgia Hazelnut Improvement Project was created earlier this year to support the export of hazelnuts by broadening, deepening and advancing public and private sector development in the hazelnut industry and is funded by the United States Agency for International Development (USAID).

Hazelnuts are a major agricultural product for Georgia and have been the country’s largest agricultural export by value since 2014.

Private Sector 8)

Hazelnut Plantation Owners Uneasy over 2016 Harvest Quality

September 5th, 2016, http://www.sarke.com/cgi/search/news.asp?Code=10048449

Owners of hazelnut plantations are worried this year about the quality of their harvest. In the Guria region, three to four out of every hundred nuts have a rotten core, causing consumers to express unhappiness and the price of the nut to decline. In the Samegrelo region, eight to nine nuts in a hundred are rotten, causing greater consumer dissatisfaction and an even greater price reduction.

Disease, possibly spread from Turkish plantations, is the culprit of the rotten nuts; however, a few additional factors helped the disease to be more rampant than it might otherwise have been: (1) a rainy year helped the disease spread more easily and (2) planting hazelnuts in unsuitable grounds (e.g. where tea or corn where previously grown) facilitates easier growth of the disease.

9)

Tapping into the Great Potential of Georgian Livestock

September 6th, 2016, http://www.sarke.com/cgi/search/news.asp?Code=10048466

Domestic meat consumption is rising and local products only manage to fill 25% of beef needs, 50% of pork need and 80% of poultry needs; the rest being filled by imported products worth an estimated USD 98 million in 2015. At the same time, Georgian cattle exports to Qatar and Saudi Arabia exceeded just over USD 1 million in 2016 and only 11,000 sheep have been exported to the main importer countries of Georgian livestock. There is great potential in Georgian livestock, however, both for meeting domestic demand as well as for export.

The current lack of production is due to many small farms maintaining a small scale of production, largely because of a lack of modern, efficient approaches to resources management, breeding and species selection. There is, however, a movement to tap into the potential of Georgian livestock by Blauenstein Georgia, a company founded in 2008. The company is working to create farms in every region of Georgia and promote local agricultural development. They are also working to upgrade the profitability of local breeds of cattle, pigs and lambs with better daily care and natural foods. The company aims to develop the livestock industry in a way that will ensure livestock and livestock products meet even the most stringent requirements for export.

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10) New Hazelnut Factory for Georgia’s Guria Region September 7th, 2016, http://agenda.ge/news/64680/eng

Local firm Guriis Tkhili is investing GEL 136,000 (USD 59,000) for the construction of a new hazelnut processing factory in the western part of the Guria region of Georgia. The new factory, located in Lanchkhuti, will employ 30 people and have a capacity to process 100 tons of hazelnuts annually.

Owners of Guriis Tkhili plan to export their products to Turkey, the European Union (EU) and Central Asia.

The processing factory is being built with support from the Produce in Georgia state‐run program that aims to recover Georgia’s production industry and improve the overall economic fortune of the country.

11) Grape Harvest in Kakheti at 9,000 Tons and Counting September 7th, 2016, http://agenda.ge/news/64659/eng

Georgia’s famous Kakheti wine region is in the midst of the grape harvest for this year. As of early this month, around 9,000 tons of grapes had been harvested, including 3,700 tons of Rkatsiteli, 3,700 tons of Saperavi and 460 tons of Kakhuri Mtsvane grape varieties. The 9,000 tons represent an estimated income of more than GEL 7.3 million (USD 3.17 million). While grape harvesting in almost completed in the Dedoplistskaro municipality, Sighnaghi still has roughly half its grapes to be harvested and the Guraani municipality has barely begun its harvest of slower maturing grapes.

To support this year’s grape harvest, the government has subsidized it and has guaranteed that the entire harvest will be received. The prices of grapes in the Kakheti region under the state subsidy program are: 1 kilogram of Rkatsiteli – GEL 0.45; 1 kilogram of Kakhuri Mtsvane – GEL 0.45; 1 kilogram of Saperavi – GEL 0.20.

12) Georgian Wine Exports Increase 42 Percent September 8th, 2016, http://cbw.ge/economy/wine‐export‐increased‐42/

The export of Georgian wine continues its dynamic growth. As of August 2016, more than 28 million bottles of wine have been exported from Georgia to 46 countries. This represents a 42% year‐on‐year increase. The total value of the exported wine is USD 64.8 million, a 16% year‐on‐year increase. China increased imports of Georgian wine by 184% and is now the second leading importer of Georgian wine, trailing only Russia. The top five exporting countries by volume are: Russia (14,664,610 bottles), China (3,368,361 bottles), Ukraine (3,042,192 bottles), Kazakhstan (2,287,826 bottles) and Poland (1,367,960 bottles).

13) Problems in Exporting Georgian Honey to the European Union September 12th, 2016, http://www.sarke.com/cgi/search/news.asp?Code=10048535

The export of Georgian honey to international markets increased from 53 tons in 2014 to 63.5 tons in 2015, a 20% increase. However, no honey was exported to the European Union (EU) despite the Deep and Comprehensive Free Trade Agreement. The major problem prohibiting the export of Georgian honey into the EU is an inability to conduct a full‐fledged test of honey samples. This is needed due to 30% of the latest samples not complying with minimum safety (e.g. an excessive content of antibiotics) and quality (e.g. the use of zinc centrifuges) requirements of the EU.

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More than 50,000 people are engaged in apiculture in Georgia; however, 99% of them are amateurs, and few farmers have more than 300 hives. This lack of large‐scale production prevents private testing laboratories from having the lucrative field they need to be fully established in Georgia. Further compounding the issue is that most small bee farmers are older than 55 and tend to be resistant to the modernization necessary to increase both production and quality. If Georgia can overcome these hurdles, however, and meet EU requirements, it is estimated that Georgia has the potential to export 2,000 tons of the product annually.

14) New Agro‐Investment Loan Supports Farmers, Agricultural Development September 12th, 2016, http://www.finchannel.com/~finchannel/index.php/world/georgia/59699‐agro‐investment‐loan‐by‐tbc‐ bank‐offers‐unprecedented‐terms‐for‐farmers

TBC Bank and the Georgian Ministry of Agriculture are teaming up to offer agro‐investment loans to citizens involved in agriculture. The agro‐investment loan is available for physical and legal entities that own agricultural land of at least 1 hectare and are interested in developing perennial plantations. The loan will fully fund cultivation and subsequent maintenance of the gardens. The new loan is being implemented to offer preferable agro‐credit terms and seeks to further develop the agricultural sector of Georgia. Agro‐investment loans will be in sums varying from GEL 20,000 to GEL 600,000. In addition to financing, the product frees borrowers from having to begin repayment for up to five years.

The newly issued agro‐investment loan is one of the latest projects of TBC Bank aimed at financial support of Georgia’s agriculture sector. Since 2013, the agricultural share of the bank’s loan portfolio has reached GEL 320 million and 8,000 borrowers.

Agriculture has become one of the prioritized sectors of development for the Georgian Government, and farmers can also benefit from the Plant for the Future project initiated by the Ministry of Agriculture. Under this project, farmers receive a grant up to a maximum of 70% of the cost of seedlings and 50% of the cost of an irrigation system.

Over 53% of Georgian citizens live in rural areas. Accordingly, such projects are very important as access to financial resources is the main contributor to the development of the agriculture.

15) Rice Processing Plant to be Built in Samegrelo September 15th, 2016, http://cbw.ge/economy/first‐rice‐processing‐plant‐underway‐samegrelo/

The Agro Zana company has invested USD 1 million towards the construction of a rice processing plant in the Samegrelo region of Georgia. An estimated additional USD 2 million is required to realize the full potential of the rice processing plant; however, the company believes that, beginning in 2017, it can produce 3,000 tons of rice annually. The rice is planned to be marketed in domestic markets and, eventually, take the place of all rice imports into Georgia.

16) Iberia Fruits Opens Fruit Processing Center in Dusheti September 28th, 2016, http://www.sarke.com/cgi/search/news.asp?Code=10048687

Iberia Fruits has opened a fruit processing center in the village of Zhinvali (Dusheti district of the Mtskheta‐Mtianeti region) with help of USAID’s REAP (Restoring Efficiency to Agriculture Production) project and the Agricultural Projects Management Agency. According to the Ministry of Agriculture, investments for the center totaled USD 230,000, out of which USD 92,000 was a grant, USD 85,000 was Page 6

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a preferential agroloan, and USD 30,000 came in the form of another grant from REAP. The rest of the cost was financed by company owners.

The center employs 14 people and is capable of an annual production of 114 tons of food and mixtures for fruit tea. Production will be sold on local market, with export to European Union countries planned for the near future.

17) New Project to Provide Quality Animal Feed to Georgia, South Caucasus September 29th, 2016, http://cbw.ge/business/new‐major‐investment‐project‐start‐georgia‐produce‐georgia‐program/

A new project being implemented in partnership with Trouw Nutrition, a Dutch‐based global leader in nutritional services for farm animals, will soon mean that Georgian farmers have access to top‐quality, balanced, non‐chemical feed that ensures long‐term and successful results for farmers. 50,000 tons of forage will be produced and supplied to Georgia and the entire South Caucasian Region from a plant being constructed in Georgia. The forage will support the poultry, cattle‐breeding and fishing sectors. In addition to the new plant, the project will also provide recommendations and consultations to farmers in the most effective use of their products.

Nutrimax company, operating in Georgia since 2009, has invested more than GEL 5 million in the project.

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Prepared by Business & Finance Consulting (BFC) www.bfconsulting.com In this bulletin, BFC provides extracts from articles that have been published by others and as a result cannot be held responsible for such content.

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