12/2016
#
52 Geo r g i a Agriculture Bulletin Renewed Debate on Sale of Agricultural Land to Foreigners FMO Announced USD 55 Million in Loan Agreements Georgian Honey to Enter European Market
Record Grain Harvest in 2016
All materials are published “as is� and are the property of their respective owners.
Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5)
Agro/Food/Drink/Tech International Exhibition Held ..................................................................... 2 Meeting with Arab Delegation ........................................................................................................ 2 USD 129,000 Greenhouse Investment Successful ........................................................................... 2 Donor Organizations Meet with Agriculture Minister ..................................................................... 3 Renewed Debate on Sale of Agricultural Land to Foreigners .......................................................... 3
Foreign Aid ................................................................................................................. 3 6) 7) 8) 9) 10) 11)
Georgian Delegation Visits Polish Cooperatives .............................................................................. 3 Farmers Council Established ............................................................................................................ 4 Access to Finance for Cooperatives Forum Held ............................................................................. 4 EBRD Approves New Strategic Plan for Georgia ............................................................................. 5 FMO Announced USD 55 Million in Loan Agreements .................................................................... 5 EU Grants Nearly EUR 44 Million in Aid to Georgia ......................................................................... 5
Private Sector .............................................................................................................. 6 12) 13) 14) 15) 16) 17) 18) 19)
Georgian Honey to Enter European Market .................................................................................... 6 National Wine Agency Report Presented ........................................................................................ 6 Darcheli Hazelnut Highlighted at Brussels Conference ................................................................... 7 Agricultural Sector Inefficient as Is .................................................................................................. 7 Irrigation Service in Marneuli to be Restored ................................................................................. 7 Nuts Now Second among Georgian Exports.................................................................................... 8 Record Grain Harvest in 2016 .......................................................................................................... 8 Inquiries to Consulting Centers about EU Exporting Low ............................................................... 8
Note: The Georgia Agriculture Bulletin presents a monthly roundup of headlines and news stories related to Georgia’s agricultural sector. This bulletin is prepared by Business & Finance Consulting—a Swiss‐based development finance consulting company with a long history of working in Georgia. Read more »
BFC Max-Högger-Strasse 6 CH-8048 Zurich, Switzerland
Phone: +41 44 784 22 22 Fax: +41 44 784 23 23
info@bfconsulting.com www.bfconsulting.com
BFC Agriculture Bulletin
State Initiatives 1)
Agro/Food/Drink/Tech International Exhibition Held
December 2nd, 2016, http://enpard.ge/en/the‐exhibition‐agro‐food‐drink‐tech‐2016/
The 16th iteration of Agro/Food/Drink/Tech International Exhibition was held at the Expo Georgia center in Tbilisi. The exhibition, organized by the Ministry of Agriculture and the European Neighborhood Program for Agriculture and Rural Development (ENPARD), showcased cutting‐edge technologies and current trends, machinery and services in agriculture while also allowing participants and visitors to network and conclude business deals. This year also marked the second year that agricultural cooperatives had a marked presence at the exhibition and sold their products. Approximately 40 cooperatives attended, selling a diverse range of products such as tea, nuts, dried fruit, churchkhela, cheese, herbs, vegetables and fruit. In addition, 150 companies from 18 countries participated in the event, demonstrating agricultural equipment, machinery, containers and packaging materials, greenhouse technology and equipment, irrigation systems, laboratory equipment, planting and seed materials, fertilizers and pesticides, and consulting services. The event was also attended by farmers, allowing them to establish direct contact with entrepreneurs and learn more about new technologies and innovations in agriculture.
2)
Meeting with Arab Delegation
December 2nd, 2016, http://moa.gov.ge/En/News/1244
Agriculture Minister Levan Davitashvili hosted Kuwaiti government officials, Kuwaiti representatives from the business sector and representatives of the Hassad Food Company of Qatar. The goal of the meeting was to increase interest in investment opportunities in the agro‐food sector of Georgia as well as to enhance trade relations. Georgia as well as Gulf countries (Gulf Cooperation Council member states) have significant potential to further develop trade relations and increase trade turnover with Georgia. During the meeting, the parties highlighted issues related to the export of Georgian sheep and sheep meat, other products of animal origin, water, dry fruits and honey. Kuwaiti and Qatari representatives also became better acquainted with the situation in Georgian slaughterhouses, quarantine zones and biosafety points in the Marneuli district and expressed their interest whether or not they currently meet European Union (EU) standards. It should be noted that Hassad Food is an investment arm of the Qatar Investment Authority, with a primary focus on agriculture. They are currently planning to export Georgian agricultural products into Qatar and create hubs and distribution points to promote and take Georgian products into Gulf Cooperation Council member countries.
3)
USD 129,000 Greenhouse Investment Successful
December 8th, 2016, http://cbw.ge/business/129‐090‐usd‐investment‐in‐green‐house‐agriculture‐mukhrani‐agro/
Mukhrani Agro LLC is a modern, standard greenhouse that was able to be constructed due to financing provided from the Common Agricultural Project of the Ministry of Agriculture. Mukhrani Agro made use of opportunities to invest USD 129,090 (including USD 99,175 as an agro credit and USD 29,915 as a
Page 2
BFC Agriculture Bulletin
beneficiary investment) to begin production. The enterprise now employs 15 people and produces 40 tons of tomatoes annually, which are sold in local markets. In total, the Common Agricultural Project has provided financing to more than 700 factories, including helping 154 new factories be opened. The state financial support has encouraged entrepreneurs to broaden production, raised the competitiveness and quality of Georgian products, and provided increased stability and food safety in the country.
4)
Donor Organizations Meet with Agriculture Minister
December 13th, 2016, http://moa.gov.ge/En/News/1250
Agriculture Minister Levan Davitashvili met with representatives from the United States Agency for International Development (USAID), the United Nations Development Program (UNDP) and members of the European Neighborhood Program for Agriculture and Rural Development (ENPARD) to discuss agricultural development projects and how coordinated efforts could significantly increase the effectiveness of project implementations. At the meeting, the sides also discussed specific issues for future projects, including strengthening warehousing, cold storage and processing enterprises, and the provision of technical assistance for farm service centers. Minister Davitashvili noted that coordination between government organizations and donors is crucial and that the Ministry will continue to communicate with donors in order to allocate resources efficiently.
5)
Renewed Debate on Sale of Agricultural Land to Foreigners
December 20th, 2016, http://www.commersant.ge/index.php?m=5&news_id=45740&cat_id=5&lng=eng
Discussions regarding the issue of whether or not to allow foreign citizens to purchase agricultural land have begun occurring on the sidelines of parliament. And while the issue has yet to be officially discussed in Parliament and sides are reticent to make public declarations, it is clear that the issue remains a contentious one. Opponents to the government’s current ban on the acquisition of agricultural land by foreign citizens consider it a big mistake that has led to the termination of investments in agriculture, destroyed the land market and, ultimately, contributed to the devaluation of the national currency. Many amongst them are proposing to remove the ban and allow foreigners to purchase agricultural land with the caveat that they have an investment plan for how to use the land. In this way, they hope, investment in agriculture can grow while still ensuring that foreigners do not buy land to sell it for a profit instead of cultivating it.
Foreign Aid 6)
Georgian Delegation Visits Polish Cooperatives
December 1st, 2016, http://enpard.ge/en/eu‐supported‐study‐visit‐of‐georgian‐cooperatives‐and‐institutions‐related‐to‐ agriculture‐to‐poland/
The Agricultural Market Agency in Poland hosted a Georgian delegation made up of representatives of Georgian cooperatives and other organizations related to Georgian agriculture. The visit allowed the Page 3
BFC Agriculture Bulletin
delegation to observe models of how agricultural cooperatives work in Poland and included a brief overview of the history of cooperatives in Poland, a presentation of information on support instruments designed for organizations and associations of agricultural producers, visits to several cooperatives to see elements in practice — including the system and practice of agricultural advisor education, and several visits to processing companies to observe Polish machinery and learn about the development of enterprises following Polish accession into the European Union (EU). The Georgian delegation found the visit informative and were impressed with the visit overall. The newly acquired knowledge will facilitate the development of a comprehensive and effective model for cooperatives in Georgia. The visit took place in early November 2016 and was part of a European Neighborhood Program for Agriculture and Rural Development (ENPARD) effort.
7)
Farmers Council Established
December 5th, 2016, http://enpard.ge/en/with‐the‐eu‐support‐georgian‐farmers‐association‐established‐the‐farmers‐council/
The Board of Directors of the Georgian Farmers Association has decided to form the Farmers Council, which will have enough power to take part in the processes of making policies, dealing with issues of agricultural development and improving the state of Georgian farmers. The main goal of the establishment of the Council is to make sure farmers are actively involved in the policy‐making process and to support the formation of close ties between farmers and the government. The Farmers Council will consist of representatives from the 59 municipalities of Georgia, with two persons representing each municipality — one elected by the Georgian Farmers Association Board of Directors and the other a person of the opposite gender chosen by that person. The formation of this Council is being actively supported by Care International in the Caucasus and the European Neighborhood Program for Agriculture and Rural Development (ENPARD), partner organizations of Georgian Farmers Association.
8)
Access to Finance for Cooperatives Forum Held
December 6th, 2016, http://www.finchannel.com/world/georgia/61772‐agricultural‐cooperatives‐in‐georgia‐to‐receive‐easier‐ access‐to‐finance
The European Union (EU)‐funded European Neighborhood Program for Agriculture and Rural Development (ENPARD) organized an interagency forum, Access to Finance for Cooperatives, in Tbilisi in late November to discuss the challenges and opportunities that cooperatives face when trying to access finance. ENPARD‐supported cooperatives had indicated that access to credit was the number one constraint for business development in Georgia. Therefore, participants in the forum were looking for the best ways to solve this problem, and various stakeholders indicated potential ways to overcome this during forum. Deputy Agriculture Minister David Galegashvili noted that the last three years in cooperative development can be considered successful, but that they are still only at the beginning stages. Cooperatives, he added, will need support to achieve long‐term sustainability.
Page 4
BFC Agriculture Bulletin
9)
EBRD Approves New Strategic Plan for Georgia
December 19th, 2016, http://www.sarke.com/cgi/search/news.asp?Code=10049454
The Board of Directors of the European Bank for Reconstruction and Development (EBRD) has approved a new strategic plan for Georgia which envisages continuation of EBRD support for small‐ and medium‐ sized businesses and the private sector through a well‐developed, local banking sector, with special focus given to high‐priority fields like agriculture, hospitality and innovation. EBRD’s top two priorities will be: (1) the development of local currency and loan capital markets in order to provide better access to finances and (2) market expansion through interregional connection, focusing on Georgia’s potential as a regional link and intermediary between Central Asia and Europe. The new strategic plan also envisages a stronger emphasis on renewable energy, resource efficiency and adaptation to climate change. Since starting its activity in Georgia, EBRD has allocated approximately EUR 3 billion for around 200 projects in the financial, corporate, infrastructure and energy sectors.
10) FMO Announced USD 55 Million in Loan Agreements December 22nd, 2016, http://georgiatoday.ge/news/5470/TBC‐Bank‐to‐Receive‐USD‐55‐Million‐from‐Entrepreneurial‐ Development‐Bank‐
FMO Entrepreneurial Development Bank (FMO) has announced a loan agreement worth USD 55 million with two Georgian banks as part of a program to support the private sector in developing the economy. TBC Bank will receive USD 25 million over the next seven years, and Bank Republic will receive USD 30 million over a five year period. The uniqueness of these loans is that they will be available in GEL, which is essential for the de‐dollarization program that the National Bank of Georgia and the government of Georgia are implementing. TBC Bank and Bank Republic are both extremely active in assisting micro‐, small‐ and medium‐sized businesses, and transactions like these will enable them to support the sector even more. With these resources, the banks will be able to strengthen their positions in and increase financing for the sectors that are the most vital for the Georgian economy. The FMO program, which has an overall portfolio of EUR 7.6 billion, focuses on assisting financial institutions, the energy sector, agri‐businesses and food and water systems in countries with developing economies. In the last decade, there have been a total of ten loan agreements signed between TBC Bank and FMO, with financial resources provided amounting to a total of USD 150 million.
11) EU Grants Nearly EUR 44 Million in Aid to Georgia December 27th, 2016, http://agenda.ge/news/72447/eng
The European Union (EU) has granted EUR 43.95 million in budget support to Georgia to support reforms in several sectors. Budget support is an instrument for the EU's cooperation with partner countries that involves direct financial transfers to the state budget of the partner country. It is contingent on the partner country showing progress in policy dialogue, performance assessment and capacity building in a given sector for disbursements to continue. EUR 6 million is being provided to support small‐ and medium‐sized businesses in taking advantage of trade potential with the EU, in line with the Deep and Comprehensive Free Trade Agreement (DCFTA). EUR 3.75 million is to enhance reforms in employment and vocational education and training (VET). EUR Page 5
BFC Agriculture Bulletin
3 million has been marked for helping integrate internally displaced people (IDPs) from Abkhazia and South Ossetia. EUR 6.5 million comes in the form of the last part of budgetary support for the first stage of the European Neighborhood Program for Agriculture and Rural Development (ENPARD), a program focused on the establishment of cooperatives, extension services at the district level, capacity building for small farmers and the promotion of rural development initiatives at the grassroots level. The remaining aid will allocated for regional development policy implementation (EUR 9 million), reforms to the justice sector (EUR 5.5 million), public administration reform (EUR 4 million) and support for public finance policy reforms (EUR 6.2 million).
Private Sector 12) Georgian Honey to Enter European Market December 5th, 2016, http://georgiatoday.ge/news/5312/Georgian‐Honey‐to‐Enter‐European‐Market
The European Union (EU) Trade Committee has declared that Georgian honey producers will now be able to export their products into the EU market. The decision is seen as a great success for the government of Georgia in their undertaking of all necessary activities to make this happen. The government, following EU directives, made legislative changes to better align honey production in Georgia to stringent EU standards. A plan to monitor veterinary drugs, pollutants and waste materials has been implemented, and new, special requirements are now in place for all Georgian honey producers.
13) National Wine Agency Report Presented December 9th, 2016, http://georgianwine.gov.ge/eng/new/13021
The National Wine Agency of the Ministry of Agriculture has presented its report on 2016 to the parliamentary committee on agricultural issues. According to the report, 2016 saw several important directions for viticulture and wine‐making, from successes in with grape production and procurement to an expansion of wine exports. In total, 115,252 tons of grapes were reprocessed this year, generating GEL 101.1 million in revenue for more than 18,000 viticulturists. This is believed to have been aided by the state‐run subsidy program which promised viticulturists no problems in selling their products this year and amounted to GEL 34.55 million for 2016. Another major direction this year was the promotion of Georgian wine internationally. Georgian wines were represented at all major fairs and degustation events around the world, and Georgia worked with scientists to establish and promote the rich history of Georgian wine and its unique place in the world. These efforts were rewarded with more than 45.5 million bottles of wine being exported to 53 countries, a 40% year‐on‐year increase. This amounted to USD 104 million in revenue, a 17% increase over last year. The head of the National Wine Agency, Giorgi Samanishvili, followed the report’s presentation by noting that the future of wine‐making in Georgia needs to be focused on small companies and family enterprises that produce unique, quality products. He added that subsidies for viticulture should not be permanent. He also stated that there is a need for additional programs to promote quality production amongst small enterprises. Page 6
BFC Agriculture Bulletin
14) Darcheli Hazelnut Highlighted at Brussels Conference December 12th, 2016, http://cbw.ge/economy/enpard‐programme‐presented‐conference‐eu‐
The EU Success Stories in the Eastern Neighborhood conference was held in Brussels and highlighted EU‐ funded projects from Georgia, Ukraine and Moldova. From Georgia, the Darcheli Hazelnut agricultural cooperative, a beneficiary of the European Union (EU)‐funded European Neighborhood Program for Agriculture and Rural Development (ENPARD), was spotlighted. The cooperative, established in August 2015 in the village of Darcheli (Zugdidi municipality), is involved in the cultivation, drying, processing, packaging, labelling and marketing of hazelnuts. With 516 members, it is now the largest agricultural cooperative in Georgia. Darcheli Hazelnut received support from ENPARD via the Ministry of Agriculture when the Ministry constructed hazelnut processing facilities in Darcheli and subsequently handed over control of the GEL 769,107 facilities to the cooperative. In addition, Darcheli Hazelnut received modern machinery and facilities for hazelnuts processing as well as various sectoral trainings directly from ENPARD as part of their small farmers’ cooperation component. As a result of EU support, the cooperative can now offer in‐shell hazelnuts, hazelnut kernels, hazelnut pieces, shrunken hazelnuts, moldy hazelnuts, hazelnut shells, and raw hazelnut processing, drying and storing. Moreover, EU support has significantly boosted the cooperative members’ incomes and increased the level and quality of its production. In the years to come, the cooperative plans to introduce Global GAP and Hazard Analysis and Critical Control Point (HACCP) standards as well as obtain ISO Certification for quality control and management. Starting next year, the cooperative will export products to EU member states.
15) Agricultural Sector Inefficient as Is December 16th, 2016, http://www.sarke.com/cgi/search/news.asp?Code=10049449
Agriculture in Georgia employs more than half of Georgia’s labor force while only providing 9% of the country’s total added value, indicating that the sector is both ineffective and has low productivity. There are two main factors causing this: small plot sizes (1.4 hectares on average, as compared to 16 hectares in the European Union) and only one third of arable land being actively cultivated (with many land owners both not using their lands and not allowing others to use them). Experts believe that productivity growth in the agricultural sector could be achieved if farmers are actively engaged, are presented with a stable environment, and are not confronted with problems related to the purchase, sale or registration of land. With much land available for use, there is enormous potential for the agricultural sector of Georgia, especially if the area of cultivated lands is greatly expanded and there is increased efficiency in the use of resources such as fertilizers, pesticides and machinery.
16) Irrigation Service in Marneuli to be Restored December 16th, 2016, http://www.sarke.com/cgi/search/news.asp?Code=10049445
Georgian Melioration LLC is implementing a project that envisages the rehabilitation of the mechanical irrigation system and the Imirasani main channel in the village of Shaumiani (Marneuli municipality, Kvemo Kartli region). The rehabilitation project, which will restore irrigation service on 1,300 hectares of agricultural land, is estimated to cost GEL 2.73 million and is scheduled to be finished in 2017. Thus far, four kilometers of pipeline have been laid for the project. Page 7
BFC Agriculture Bulletin
17) Nuts Now Second among Georgian Exports December 21st, 2016, http://bizzone.info/agriculture/2016/1482383518.php
Based on data for the first 11 months of 2016, nuts have become the second largest exported product from Georgia, surpassing ferroalloys. From January 2016 through November 2016, Georgia exported USD 167 million worth of hazelnuts and walnuts, USD 3 million more than over the same period in 2015. Furthermore, growth of these products likely would have been even higher if not for a global decline in nut prices caused by Turkey’s record nut harvest. Georgia’s top five exports are: copper ore (USD 287 million), nuts (USD 167 million), ferroalloys (USD 153 million), cars (USD 153 million), and wine (USD 103 million).
18) Record Grain Harvest in 2016 December 22nd, 2016, http://bizzone.info/agriculture/2016/1482464367.php
This year, Georgia harvested a record‐setting 638 thousand tons of grain, a 51% increase over last year’s harvest. The increased harvest yield is mainly due to a much higher wheat yield than average. The gross wheat harvest amounted to 200 thousand tons (a 50% year‐on‐year increase), and maize production came in at 382 thousand tons, up 65% after a relatively barren 2015. In addition, the sowing of winter crops for the 2017 harvest was completed in October and rainfall since that time has been above average, indicating another likely favorable harvest. Despite the rich harvest, wheat imports will remain the same, at about 895 thousand tons, as local wheat is often considered of poor quality. The main supplier of wheat and wheat flour to Georgia is Russia.
19) Inquiries to Consulting Centers about EU Exporting Low December 28th, 2016, http://www.sarke.com/cgi/search/news.asp?Code=10049543
Representatives from 28 consulting centers from Kakheti, Samtskhe‐Javakheti, Mtskheta‐Mtianeti, Kvemo and Shida Kartli attended a training on raising awareness about Deep and Comprehensive Free Trade Agreement (DCFTA) standards in agriculture held in Tbilisi. At the meeting, several participants pointed out that small farmers infrequently ask consultation centers for information regarding European Union (EU) markets while large farmers with big turnover already export their products independent of any aid or advice from consultation services. Generally, they only receive relatively simple questions regarding standards, taxation and any specific requirements for the export of a particular product. The training was jointly implemented by Elva, the Center of Investigative Journalism and Advocating, and Cultivating New Frontiers in Agriculture (CNFA), with funding provided by the Embassy of the Netherlands.
Page 8
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. The articles do not necessarily reflect the opinions of BFC, its staff, its associates or its partners. Copyright of articles is retained by their authors.