03/2018
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67 Geo r g i a Agriculture Bulletin Agrozone to be created in Imereti Government support for mountainous areas continues Chinese to invest USD 500 million in tea plantations Agricultural lending drops off
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Contents State Initiatives ........................................................................................................... 2 1) 2) 3)
Agrozone to be created in Imereti .................................................................................................. 2 ‘Seed the Future’ program to expand ............................................................................................. 2 Government support for mountainous areas continues................................................................. 2
Foreign Aid ................................................................................................................. 2 4) 5) 6) 7) 8) 9)
Chinese to invest USD 500 million in tea plantations ..................................................................... 2 USAID to help Georgia combat stink bug infestation ...................................................................... 3 Imereti Greenery benefits from European support programs ........................................................ 3 EBRD, FAO education program sparks local investments ............................................................... 3 16th ENPARD stakeholders’ meeting held ...................................................................................... 4 EBRD and EU foster hazelnut production in Georgia ...................................................................... 4
Private Sector.............................................................................................................. 4 10) Agricultural lending drops off .......................................................................................................... 4 11) Agricultural sector investments down ............................................................................................ 5 12) The ISET Agri Review ....................................................................................................................... 5
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 »
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BFC Agriculture Bulletin
State Initiatives 1)
Agrozone to be created in Imereti
March 6th, 2018, http://agenda.ge/news/96857/eng
A total of GEL 100 million (EUR 33.18 million) is being invested through a public-private partnership project for the creation of a special agrozone in Georgia’s Imereti region. The agrozone will help farmers continue developing their agribusinesses and increase the export of high-quality agricultural products to European Union (EU) markets. More specifically, the project aims to: establish traditional greenhouses in Imereti, support local entrepreneurs, increase production volume and quality and establish two logistics centers.
2)
‘Seed the Future’ program to expand
March 14th, 2018, http://www.sarke.com/cgi/search/news.asp?Code=10053453
The government has decided to expand its ‘Seed the Future’ program to also include table grapes and pistachios. In announcing the move, Prime Minister Giorgi Kvirikashvili noted that Georgia almost completely imports all table grapes today, despite Georgia having the capacity to satisfy more of the domestic demand. He also noted that Georgia has a good capacity to grow and export pistachios, a crop currently enjoying a strong demand in the world. Within the ‘Seed the Future’ program, the state co-finances 70% of the cost of saplings and provides grants for 50% of the cost of installing drip irrigation systems. In the three years of its operations thus far, the program has helped plant orchards on a total area of 4,700 hectares.
3)
Government support for mountainous areas continues
March 27th, 2018, http://agenda.ge/news/98145/eng
The government of Georgia will continue its support of efforts to improve conditions for those living in Georgia’s high mountain areas. A total of GEL 20 million has been allocated for the high mountainous settlements development fund. From this amount, GEL 10 million will be spent on infrastructure projects, GEL 7 million will be spent on the rational use of state-owned hay-meadow and pasture lands (which were created for developing agricultural cooperatives) and GEL 3 million will be spent on the ‘Plant the Future’ program’s efforts to cultivate berries in high mountain settlements. Developing the mountainous areas of the country has been a priority of the government since it adopted a law on the development of these areas in July 2015 as part of an effort to reduce migration from rural areas to cities.
Foreign Aid 4)
Chinese to invest USD 500 million in tea plantations
March 3rd, 2018, http://www.bm.ge/en/business-inner/chais-plantaciebis-agdgenashi-500-milioni-chaideba/193/
A memorandum of understanding has been signed between Partnership Fund, Georgia’s Ministry of Agriculture and the Chinese companies Beijing Jinfenghengye Agricultural Development Co Ltd and Page 2
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Xinjiang Hualing & Trade (Group) Co Ltd for the restoration of 12,000 hectares of tea plantations in western Georgia, Guria, Imereti, Adjara and Samegrelo. In particular, the memorandum calls for USD 500 million in investments for this purpose over the next 12 years. Moreover, the full quantity of tea produced in these areas will be processed in Georgia before being exported to China in the form of final products. The Chinese companies also plan on developing a tourism component that will encourage tourists to visit plantations, taste the tea and benefit from antioxidants. Tea consumption in China is immense. The country produces approximately 70% of its demand, importing the rest. China is interested in Georgian tea due its high quality.
5)
USAID to help Georgia combat stink bug infestation
March 7th, 2018, http://agenda.ge/news/96969/eng
The United States Agency for International Development (USAID) and the Ministry of Agriculture have signed a memorandum of understanding that will result in USAID delivering USD 3.5 million as well as equipment and supplies to help in the country’s fight against the brown marmorated stink bug. The brown marmorated stink bug was first reported in Georgia in 2015 and has become a widespread nuisance in the country. In 2016, the pest destroyed a significant portion of the hazelnut harvest in western Georgia. In 2017, the pest spread and brought even greater devastation. The government has already elaborated a plan to combat the pest this year via an information campaign, the implementation of a monitoring system, stink bug control measures and scientific research.
6)
Imereti Greenery benefits from European support programs
March 7th, 2018, http://cbw.ge/business/green-shoots-growth-georgia-hydroponic-farming-eu-support/
Imereti Greenery, a Dutch-Georgian enterprise using hydroponic farming techniques, has benefitted from European Union (EU) support (under the EU4Business initiative) as well as the ‘Advice for Small Businesses’ program of the European Bank for Reconstruction and Development (EBRD). More specifically, the support has allowed the company to introduce modern accounting standards and make financial reporting more effective, thereby making its relations with banks more successful. In total, production has gone up 75% and profits have increased 380%. This has allowed the company to expand its greenhouse coverage to an area of 2 hectares and grow its number of staff by 129%. The company, which grows lettuce and cucumbers for major supermarket chains and high-class hotels in Georgia, also recently secured funding for LED lighting for the growing crops in the winter and is considering further expansion in near future.
7)
EBRD, FAO education program sparks local investments
March 14th, 2018, http://www.sarke.com/cgi/search/news.asp?Code=10053454
Farmers who have passed trainings provided by the European Bank for Reconstruction and Development (EBRD) and the Food and Agriculture Organization of the United Nations (FAO) have invested a total of EUR 2.5 million in modernizing the production and purchase of productive cattle breeds. This, in turn, has resulted in milk production in Georgia doubling since 2015. EBRD and FAO are pleased with the progress made so far but are also eager to help Georgian farmers take the next step and increase cooperation efforts in order to further increase quality and tap into niche products and markets, ultimately leading to increased profits. Page 3
BFC Agriculture Bulletin
8)
16th ENPARD stakeholders’ meeting held
March 21st, 2018, http://www.fao.org/georgia/news/detail-events/en/c/1110197/
The Food and Agriculture Organization of the United Nations (FAO) brought together implementing partners of the European Neighborhood Program for Agriculture and Rural Development (ENPARD) for the 16th ENPARD stakeholders’ meeting. The aim of the meeting was to share project updates as well as discuss the current state and future of local action groups (LAGs). Following a briefing that outlined the legal status of LAGs in Georgia as well as the creation of the Georgian Association of LAGs (GALAG) and the Georgian Rural Development Network (GRDN), special attention was given to a new initiative to develop a manual on rural development for LAG members. Participants were also briefed on the status of the implementation of ENPARD phases II and III.
9)
EBRD and EU foster hazelnut production in Georgia
March 23rd, 2018, http://www.ebrd.com/news/2018/ebrd-and-eu-foster-hazelnut-production-in-georgia.html
Hazelnuts are one of Georgia’s top exports and a source of income for more than 50,000 farmers and dozens of processing facilities. Georgia hazelnuts, however, are often sold at reduced prices in order to try to compete with Turkish hazelnuts, which dominate the worldwide market due to Turkey’s status as the world’s largest producer and exporter of the product. As such, many Georgian producers are focusing on increased quality as a way to achieve higher prices and take a larger share of markets. The EBRD and the European Union (EU), under its EU4Business initiative, are supporting small- and medium-sized entrepreneurs (SMEs) in Georgia in these efforts. Part of this is realized through the free trade area with the EU. EBRD and the EU are also working to provide access to finance, a deeper knowledge of export market opportunities and ways to boost innovation. This support is made via agreements with partner banks in Georgia as well as technical support programs.
Private Sector 10) Agricultural lending drops off March 5th, 2018, http://www.commersant.ge/?view=post&id=139916&lang_id=en
The law prohibiting the sale of agricultural land to foreign citizens and companies is having an unintended consequence: the drop off of bank lending to the agricultural sector. Because the majority of Georgian banks are infused with foreign capital, they cannot use land plots as collateral. Moreover, it makes selling any agricultural land obtained as part of a default more difficult, thereby increasing the risks associated with agricultural lending. The law, intended to support the sector and protect Georgians working within it, has also caused investments in agriculture to come to a standstill as many companies interested in utilizing agricultural land have foreign founders. To help solve this in part, some members of Parliament are calling for the creation of a state bank for agricultural development. They argue that, because agriculture requires massive investments that are generally slow to pay off, commercial banks are not the most well-suited to serve the agricultural sector’s needs. A state bank, focused solely on agricultural development, would.
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11) Agricultural sector investments down March 12th, 2018, http://www.commersant.ge/?view=post&id=140225&lang_id=en
According to preliminary data of the National Statistics Office of Georgia, the investment volume in the agricultural sector has decreased 2.3 times. In 2016, USD 8.3 million was invested in the sector, whereas only USD 3.6 million was invested in 2017. This marks the lowest rate of investment in the last five years. It should, however, be noted that the sector has grown in general. For example, the output of primary and processed products has increased 32% since 2012, mostly due to agricultural investments made since that time.
12) The ISET Agri Review March 27th, 2018, http://georgiatoday.ge/news/9661/The-ISET-Agri-Review
The International School of Economics at Tbilisi State University (ISET) has started production of the ‘Agri Review’, which provides an overview of Georgia’s agricultural sector developments. The review covers production, employment, pricing (both domestic and international), trade and policy issues related to the agricultural sector. The labor force is approximately 2 million, 42%-44% of which is self-employed in rural areas. It is reasonably assumed that most of the self-employed people in rural areas are involved in the agricultural sector as employment opportunities outside of this sector in rural areas are quite limited. The latest edition outlines the decline of production in the sector, highlighting both the drop in share of GDP (from 6.7% in 2016 to 6.2% in 2017) and the drop in agricultural output (down 2.6% year-on-year in 2017). While prices for agricultural products have risen domestically (by 0.2% in February 2018 as compared to January 2018 and by 2.7% year-on-year), they have decreased internationally (by 3% yearon-year). In terms of trade value, agricultural exports increased 27% year-on-year in February 2018 (to USD 49 million), with agricultural imports increasing 23% year-on-year (to USD 85 million). The latest edition also noted that, although the share of foreign direct investment (FDI) in agriculture grew by 0.2% in 2017, it decreased significantly (by 56.6%) in terms of monetary value. It was also indicated that the Agricultural Project Management Agency (APMA) is considering establishing a separate agency responsible for the management of the agricultural insurance system in Georgia and has launched the new ‘Young Entrepreneur’ project (with funding from the Danish International Development Agency (DANIDA)) to support young people in rural areas. Read More »
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