#91 Georgia Agriculture Bulletin, BFC

03/2020

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91 Geo r g i a Agriculture Bulletin State support for installing anti-hail systems, pumping stations Fourth ENPARD phase to launch in Georgia this summer Japanese expert recommendations on agricultural cooperatives presented 12.1 million bottles of wine exported in first two months of 2020

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Georgian Agriculture Finance Bulletin Edition #91, March 2020

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

State support for installing anti-hail systems, pumping stations .................................................... 2 Amendments to Law on Tobacco Control proposed to Parliament ................................................ 2 Ministry of Agriculture to monitor, control prices on key products ............................................... 2 Agricultural works to continue in quarantined zones ..................................................................... 2

Foreign Aid ................................................................................................................. 3 5) 6) 7) 8) 9)

Fourth ENPARD phase to launch in Georgia this summer............................................................... 3 Japanese expert recommendations on agricultural cooperatives presented ................................. 3 FAO, EU organize pruning training for Gori farmers ....................................................................... 3 Wine enterprise to be established in Keda ..................................................................................... 3 SDC, FAO project to support agricultural development at the local level ...................................... 4

Private Sector.............................................................................................................. 4 10) 11) 12) 13) 14) 15) 16) 17) 18) 19)

Prices of food and non-alcoholic beverages increase 1.3% ............................................................ 4 Slaughterhouse data for Q4 2019 released ..................................................................................... 4 Cheap, low-quality poultry imports dominating Georgian markets ............................................... 5 Fifth Congress of the Georgia Dairy Sector postponed ................................................................... 5 12.1 million bottles of wine exported in first two months of 2020 ................................................ 5 Agricultural sector snapshot............................................................................................................ 5 Milk to become more expensive ..................................................................................................... 6 Georgian supplies of meat, fish adequate for the current situation ............................................... 6 Georgian wine industry faces uncertain future ............................................................................... 6 Georgian wheat, flour supplies sufficient........................................................................................ 6

Note: The Georgian Agriculture Finance Bulletin presents a monthly roundup of headlines and news stories related to investments and financing flows 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. Currently, BFC is implementing the Agricultural Lending Programme for KfW. Read more »

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BFC Georgian Agriculture Finance Bulletin. Edition #91, March 2020

State Initiatives 1)

State support for installing anti-hail systems, pumping stations

March 5th, 2020, https://www.newsgeorgia.ge/vlasti-gruzii-pomogut-fermeram-ustanovit

Agriculture Minister Levan Davitashvili has announced changes to the state-run Plant the Future program that will allow the government to help program beneficiaries install anti-hail systems and pumping stations as well as drill wells. The changes were made as part of an effort to protect farmers from the impact of natural disasters as well as to help them modernize their farms. Specifically, program beneficiaries are eligible for up to GEL 7,300 for the installation of anti-hail systems (up to GEL 14,600 for agricultural cooperatives) and up to GEL 15,000 (up to GEL 18,000 for agricultural cooperatives) for the installation of pumping stations and the drilling of wells.

2)

Amendments to Law on Tobacco Control proposed to Parliament

March 6th, 2020, https://cbw.ge/economy/ngo-another-attempt-to-pursue-the-interests

Amendments to the Law on Tobacco Control have been proposed to Parliament that will allow for additional tobacco to be packaged together, likely resulting in cheaper prices for tobacco products. Critics of the amendments state that this will increase the rate of smoking in the country, especially among adolescents. They also point to strict European Union (EU) directives regarding tobacco packaging and believe that Georgia should be moving toward alignment with these directives and not away from them.

3)

Ministry of Agriculture to monitor, control prices on key products

March 18th, 2020, https://cbw.ge/economy/prime-minister-instructs-agriculture-ministry-to-keep

Georgia’s Prime Minister has directed the Ministry of Agriculture to develop a mechanism to monitor and control the price of key products in order to ensure that price changes on them are kept to a minimum during the current situation. Specifically, the Ministry will monitor and work to control prices on rice, flour, macaroni, sunflower oil, milk powder and products made from milk powder.

4)

Agricultural works to continue in quarantined zones

March 23rd, 2020, http://bizzone.info/agriculture/2020/1584999995.php

Following a high risk of exposure to COVID-19, a complete quarantine (i.e. isolation) has been implemented for the Marneuli and Bolnisi regions of Georgia to contain the spread of the virus. Given that a large portion of the population of both regions are active in agricultural production and depend on it for their livelihoods, government officials are taking measures to ensure that such works can continue and that products can still reach the markets in Tbilisi and other major cities.

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BFC Georgian Agriculture Finance Bulletin. Edition #91, March 2020

Foreign Aid 5)

Fourth ENPARD phase to launch in Georgia this summer

March 4th, 2020, http://bizzone.info/agriculture/2020/1583383345.php

The European Union (EU) has announced the summer launch of the fourth phase of the European Neighborhood Program for Agriculture and Rural Development (ENPARD) in Georgia. This fourth phase will build of the previous phases of the program and will focus on food security, agriculture and rural development. The activities of this phase will also be coordinated with the recently-approved Georgian Strategy for the Development of Agriculture and Rural Areas for 2021-2027.

6)

Japanese expert recommendations on agricultural cooperatives presented

March 6th, 2020, http://bizzone.info/agriculture/2020/1583539323.php

A group of Japanese experts have prepared a package of recommendations on the development of agricultural cooperatives in Georgia as part of the Creating Business-Oriented Agricultural Cooperatives project. The expert recommendations include taking efforts to enlarge cooperatives, developing secondlevel cooperatives and ensuring that all villages have access to a cooperative as well as strengthening the level of knowledge among shareholders and improving their management skills. The experts also recommended that the state’s agricultural extension offices increase their role in supporting the development of cooperatives throughout the country.

The Creating Business-Oriented Agricultural Cooperatives project is a joint effort between the Rural and Agricultural Development Agency of Georgia (ARDA) and the Japan International Cooperation Agency (JICA). The next phase of the project involves developing a technical assistance program for Georgian agricultural cooperatives based on the expert recommendations.

7)

FAO, EU organize pruning training for Gori farmers

March 6th, 2020, http://www.fao.org/georgia/news/detail-events/en/c/1265692/

The Food and Agriculture Organization of the United Nations (FAO), under the European Union (EU)funding Innovative Action for Private Sector Competitiveness in Georgia project, organized a three-day training for 50 Gori farmers and producers on the best techniques for pruning fruit orchards. At the training Participants received theoretical knowledge on proper pruning techniques and had a chance to practice what they had learned in a real-world environment. The workshop also provided recommendations on how to avoid practices that may reduce yields.

The Innovative Action for Private Sector Competitiveness in Georgia project is part of the EU4Business program, which aims to support private sector development in Georgia.

8)

Wine enterprise to be established in Keda

March 19th, 2020, http://georgiatoday.ge/news/20033/CENN-to-Establish-Wine-Enterprise

CENN, a non-governmental organization working to protect the environment by supporting sustainable development, is planning to help a local resident set up a wine enterprise for local and international visitors in the village of Vaio (Keda municipality). To set up the enterprise, a GEL 40,000 project has been announced, of which GEL 28,000 is being provided through the Optimizing the Potential of Local Assets for the Rural Development of Keda Municipality project. Once set up, the enterprise will stimulate ecoPage 3

BFC Georgian Agriculture Finance Bulletin. Edition #91, March 2020

nomic development in the region, increase wine production and provide more employment opportunities for locals.

The Optimizing the Potential of Local Assets for the Rural Development of Keda Municipality project is being supported by the European Union (EU)-funded European Neighborhood Program for Agriculture and Rural Development (ENPARD).

9)

SDC, FAO project to support agricultural development at the local level

March 25th, 2020, http://www.fao.org/georgia/news/detail-events/en/c/1267969/

The Austrian Development Cooperation (ADC) is funding a joint project by the Food and Agriculture Organization of the United Nations (FAO) and the Ministry of Agriculture that aims to support rural and agricultural development in Georgia. Specifically, the project, which is being implementing in Shida Kartli and Racha-Lechkhumi/Kvemo Svaneti, aims to enhance the competitiveness of the agricultural sector, increase food production and reduce poverty and social injustices. To accomplish these goals, the project will establish local initiative groups to plan project activities. Additionally, four demonstration plots will be created to showcase the best agricultural practices and expertise, including those that promote environment-friendly agricultural practices that reduce the risks and impact of climate change and ensure the formation of sustainable ecosystems. The project will also provide farmers with grant opportunities to boost local investment in agricultural production and, ultimately, improve living conditions.

The results of the project are also planned to be used in the development of a new National Strategy of Rural and Agricultural Development.

Private Sector 10) Prices of food and non-alcoholic beverages increase 1.3% March 2nd, 2020, https://agenda.ge/en/news/2020/637

In February 2020, the prices of food and non-alcoholic beverages increased in Georgia by an average of 1.3%. This includes increases to the price of vegetables (an 8% increase), fruits (a 3.6% increase), nonalcoholic beverages (a 1.7% increase) and sugar and sweetened products (a 0.7% increase). At the same time, prices decreased for oils and fats (a 0.6% decrease) and milk, cheese and eggs (a 0.3% decrease).

Overall, the consumer price index increased by 0.3% in February 2020 as compared to January 2020, while the annual inflation rate increase to 6.4%.

11) Slaughterhouse data for Q4 2019 released March 2nd, 2020, https://kalo.ge/news/view?id=8226

According to the National Statistics Office, there were 94 animal and bird slaughterhouses active in Georgia in the fourth quarter of 2019. During the fourth quarter, these slaughterhouses produced 9,669.4 tons of meat, including beef (43.4%), poultry meat (34.1%), pork (19.1%) and lamb and mutton (3.2%). On average, the price for slaughtering an animal during the fourth quarter was GEL 24.8 for cattle, GEL 22.8 for pigs and GEL 10.8 for sheep and goats.

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BFC Georgian Agriculture Finance Bulletin. Edition #91, March 2020

12) Cheap, low-quality poultry imports dominating Georgian markets March 4th, 2020, http://bizzone.info/agriculture/2020/1583371533.php

Georgia’s poultry industry is on the verge of bankruptcy due to the import of cheap, low-quality alternatives. In fact, imported poultry products now occupy as much as 70% of the domestic market. Experts hold that the industry would be doing well if the imported poultry products were of a higher quality as they would be on par with the prices of domestic products. However, the cheap, low-quality imports (mostly from Turkey and China) leave no ability for Georgian producers to compete. This has many producers calling for restrictions and/or regulations on the import of poultry products. Not only would this help support the industry, it would also boost food safety for the population and bring the country more in line with European Union (EU) norms.

13) Fifth Congress of the Georgia Dairy Sector postponed March 5th, 2020, https://kalo.ge/news/view?id=8236

The Dairy Producers Association postponed this month’s Fifth Congress of the Georgian Dairy Sector due to the rapid spread of COVID-19. The Dairy Producers Association, in cooperation with the Food and Agriculture Organization of the United Nations (FAO), will monitor the situation and, as soon as the situation has been stabilized, will announce new dates for the event.

14) 12.1 million bottles of wine exported in first two months of 2020 March 9th, 2020, http://georgiatoday.ge/news/19794/Jan-Feb-2020%3A-Georgia-Exports

During the first two months of 2020, Georgia exports 12.1 million bottles of wine to 39 countries, generating USD 31 million. This represents a year-on-year increase of 7% in terms of value. The top five countries to import Georgian wine during this period were Russia (7.59 million bottles), Ukraine (1.31 million bottles), Poland (1.11 million bottles), China (562 thousand bottles) and Kazakhstan (274 thousand bottles).

15) Agricultural sector snapshot March 16th, 2020, http://georgiatoday.ge/news/19961/Agriculture-in-Georgia%3A-Are

Since 2012, the government of Georgia has been highlighting the importance of the development of the agricultural sector by boosting state financial support and launching a number of support programs. The results of these efforts are, however, not as strong as one would hope given increased state attention.

In fact, there has been no real growth in the sector. While there has been some production growth in some individual industries, overall growth in terms of GDP has been showing a clear downward trend.

Moreover, foreign direct investment (FDI) in the sector has also been declining, only accounting for an average of 1.1% of total FDI during the 2009-2019 period. Similarly, agriculture’s share of total employment is also declining, albeit only slightly (from 37% in 2011 to 33% in 2018). This macro-level picture clearly shows that more reforms and structural changes are needed if the sector is to reach its full potential.

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BFC Georgian Agriculture Finance Bulletin. Edition #91, March 2020

16) Milk to become more expensive March 18th, 2020, https://kalo.ge/news/view?id=8263

Although milk prices are typically lower int eh spring-summer season, milk prices are expected to remain higher this year due to a number of reasons, including increased prices for feeding dairy cattle and an overall decrease in dairy cattle numbers in the country. These higher prices are expected to continue throughout the year, outpacing inflation. Currently, the price per liter for milk is GEL 1.17, up from GEL 1.00 just one year ago.

17) Georgian supplies of meat, fish adequate for the current situation March 23rd, 2020, https://agenda.ge/en/news/2020/892

Agriculture Minister Levan Davitashvili has announced that Georgian supplies of meat and fish are adequate to get through the COVID-19 pandemic. Moreover, there are no issues for Georgia in replenishing its supplies. The Minister was careful to ensure citizens that the government is continuously monitoring the food supply in the country to ensure that the population will not suffer from food shortages.

18) Georgian wine industry faces uncertain future March 24th, 2020, https://commersant.ge/en/post/uncertain-future-and-expectations-of-georgian-wine-industry

The COVID-19 outbreak and global response measures are putting Georgia’s wine industry in a difficult situation and making its future uncertain. Although crisis situations often represent a good time for businesses to make investments in the future, Georgia’s wine industry is unable to do so due to a lack of funding caused by the near cessation of exports, no tourism and the closure of restaurants. This has caused many to being laying off workers in a bid to weather the storm. While the outlook may seem bleak at the moment, there is optimism in that China is showing positive recovery dynamics now that it has been able to control the outbreak within its own borders. It just remains to be seen how long it will take the rest of the world to do the same.

19) Georgian wheat, flour supplies sufficient March 28th, 2020, https://mepa.gov.ge/En/News/Details/16886

Agriculture Minister Levan Davitashvili recently visited the Georgia’s largest wheat mill to ascertain the status of the country’s wheat and flour supply amid the COVID-19 pandemic. Following this visit, the Minister reported that there is a sufficient supply of wheat and flour for the country and that there should be no delays in normal production. The visit was arranged within the framework of the State Program for Preservation of the Prices on Essential Foodstuffs, which aims to ensure adequate supplies of wheat and maintain stable prices of flour.

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