#92 Georgia Agriculture Bulletin, BFC

04/2020

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92 Geo r g i a Agriculture Bulletin Georgia to take action to ensure food security amid COVID-19 pandemic EBRD, Georgia discuss cooperative efforts to support Georgia’s economy USD 16 million program to support Georgia’s dairy sector Increase in vegetable prices forecasted

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Georgian Agriculture Finance Bulletin Edition #92, April 2020

Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5) 6) 7) 8)

Georgia to take action to ensure food security amid COVID-19 pandemic .................................... 2 Ministries of Agriculture and Finance join forces to monitor food prices ...................................... 2 Trading platform created to ensure uninterrupted food supply chains ......................................... 2 Spring field work complies with health and safety standards ........................................................ 2 Government approves subsidy program to maintain flour and wheat prices ................................ 2 Georgia has the capacity to increase agricultural production ........................................................ 3 State increases funding under micro grant program ...................................................................... 3 Fees for use of irrigation water to be waived in 2020..................................................................... 3

Foreign Aid ................................................................................................................. 3 9) 10) 11) 12) 13) 14) 15)

EBRD, Georgia discuss cooperative efforts to support Georgia’s economy.................................... 3 EBRD, EU support Georgia’s food industry during COVID-19 pandemic ......................................... 3 FMO approves GEL 30 million loan for Credo Bank ........................................................................ 4 USD 16 million program to support Georgia’s dairy sector ............................................................ 4 EUR 1.16 million to support organic agriculture in Georgia ............................................................ 4 Grant competition in Shida Kartli and Racha-Lechkhumi................................................................ 4 ENPARD grants to support food production amid COVID-19 pandemic ......................................... 5

Private Sector.............................................................................................................. 5 16) 17) 18) 19) 20) 21) 22)

Increase in vegetable prices forecasted .......................................................................................... 5 COVID-19 pandemic as an opportunity for Georgia’s food industry .............................................. 5 No food shortage expected in Georgia ........................................................................................... 5 Raw milk producers request government assistance...................................................................... 6 Government takes actions to ensure no food shortages occur ...................................................... 6 Dairy producers moving to online sales .......................................................................................... 6 2019 agricultural production numbers released ............................................................................. 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 #3, January 2013

State Initiatives 1)

Georgia to take action to ensure food security amid COVID-19 pandemic

April 3rd, 2020, https://mepa.gov.ge/En/News/Details/17899

Following a meeting of the Inter-Agency Coordination Council, the Minister of Agriculture ensured Georgian residents that government is conducting regular and systematic monitoring of food supplies and observing a new procurement process flowchart in order to ensure food security for all Georgian residents. It should be noted that Georgia is widely regarded by experts has having the necessary policies in place to effectively manage food supply chains in times of crisis.

2)

Ministries of Agriculture and Finance join forces to monitor food prices

April 7th, 2020, https://mepa.gov.ge/En/News/Details/17909

The Ministries of Agriculture and Finance are working together to monitor the prices of food products that the government considers as essential in order to ensure that the population has affordable access to them during the COVID-19 pandemic period. At the same time, the government is also adopting measures to ensure that the interests of providers and resellers of such products are also not harmed.

3)

Trading platform created to ensure uninterrupted food supply chains

April 7th, 2020, https://mepa.gov.ge/En/News/Details/17907

The Minister of Agriculture has announced the creation of a special platform to facilitate trade between agricultural producers and wholesale merchants during the COVID-19 pandemic period. Government officials believe that this platform will help ensure uninterrupted food supply chains and the provision of food security to the population. The Minister also announced that additional, more organized trading platforms will be created in some districts of the Tbilisi to ensure trading is continued uninterrupted and in compliance with sanitary and hygienic rules.

4)

Spring field work complies with health and safety standards

April 13th, 2020, https://commersant.ge/en/post/georgias-spring-field-work-carried-out-in-compliance-with-safety-standards

Spring agricultural field work in Georgia has been and is being carried out in full compliance with all health and safety requirements imposed by the government of Georgia to combat the spread of COVID19. Moreover, the Regional Development Agency is in constant communication with farmers to keep them updated about the latest developments and status related to the COVID-19 pandemic.

5)

Government approves subsidy program to maintain flour and wheat prices

April 19th, 2020, https://www.newsgeorgia.ge/v-gruzii-utverdili-programmu-dlja-uderzhanija-cen-na-muku-i-pshenicu/

The government of Georgia has approved a program to subsidize the import of wheat and first-grade flour in order to maintain existing market prices as well as encourage processing activities within Georgia. Under the program, the government will subsidize importers with up to USD 40 (in GEL equivalent) per ton of imported product provided that they import between 2,000 and 40,000 tons.

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BFC. Georgian Agriculture Finance Bulletin. Edition #3, January 2013

6)

Georgia has the capacity to increase agricultural production

April 21st, 2020, https://cbw.ge/economy/gela-khanishvili-we-can-increase-wheat-production-in-georgia-to-400000-tons

The Deputy Minister of Agriculture believes that Georgia has the capability to increase wheat production to 400,000 tons. The Deputy Minister also believes that the production of barley, corn, livestock and poultry products can also be increased. To this end, the Ministry of Agriculture is working to attracting USD 200 million in investments into Georgia’s agricultural sector. The Ministry is notably discussing this with the European Bank for Reconstruction and Development (EBRD), the Asian Development Bank (ADB) and the World Bank.

7)

State increases funding under micro grant program

April 27th, 2020, https://kalo.ge/news/view?id=8388

Within the framework of the state’s micro grant program, funding assistance for those living in rural areas who desire to run a small business will increase to GEL 30,000. This program has proven successful in the past, and increasing the assistance amount as well as the total portfolio size is expected to help those living in rural areas be able to meet local demand as well as increase the standard of living in rural areas.

8)

Fees for use of irrigation water to be waived in 2020

April 27th, 2020, https://kalo.ge/news/view?id=8387

Farmers and entrepreneurs involved in agricultural activities will be fully exempted from paying for irrigation water used in 2020. This decision was taken by the government of Georgia as part of the measures to mitigate the impact of the COVID-19 pandemic on the various economic sectors of Georgia.

Foreign Aid 9)

EBRD, Georgia discuss cooperative efforts to support Georgia’s economy

April 6th, 2020, https://www.ebrd.com/news/2020/ebrd-and-georgia-step-up-cooperation-during-crisis.html

The European Bank for Reconstruction and Development (EBRD) and the government of Georgia are stepping up cooperation as the country faces economic challenges amid the COVID-19 pandemic.

Separately, the two sides have already taken actions to help amid the pandemic, with EBRD making a total of EUR 1 billion in emergency funds available to clients across 38 economies (including in Georgia) and the government approving a stimulus package to support the economy. More recently, the sides have discussed possible avenues of cooperation and are currently exploring how to best work together to mitigate negative impacts on Georgia’s economy as a result of the COVID-19 pandemic.

10) EBRD, EU support Georgia’s food industry during COVID-19 pandemic April 7th, 2020, https://www.ebrd.com/news/2020/supporting-the-georgian-food-industry-at-times-of-covid19.html

The European Bank for Reconstruction and Development (EBRD) and the European Union (EU), via its EU4Business initiative, are supporting Georgia’s food industry during the COVID-19 pandemic. One successful example of this assistance is the poultry farm Chirina, which received assistance in procuring 14 new turnkey broiler farmhouses. The new broiler farmhouses, which were part of the company’s plan prior to the COVID-19 pandemic, were installed more quickly than originally anticipated in order to boost the company’s output by 50%, thereby helping ensure food security in the country. In fact, the

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BFC. Georgian Agriculture Finance Bulletin. Edition #3, January 2013

move has proven to be important as the company reports that more than 16,000 people visit their shops daily.

Chirina is a large employer in Georgia, with over 450 people currently working for the company.

11) FMO approves GEL 30 million loan for Credo Bank April 20th, 2020, https://www.fmo.nl/news-detail/6442e7b1-6e58-43f

Dutch development bank FMO has reached an agreement with Credo Bank on a 5-year, GEL 30 million loan to support agricultural businesses and young entrepreneurs during the COVID-19 pandemic.

Specifically, loan funds will target micro-, small- and medium-sized businesses, with a particular focus given to those engaged in agricultural production or run by young entrepreneurs. Both sides hope that this agreement will empower local businesses and support job creation during and after the pandemic period.

12) USD 16 million program to support Georgia’s dairy sector April 21st, 2020, https://cbw.ge/economy/16-million-dairy-farming-program-started-in-georgia

A program to support Georgia’s dairy sector has been launched thanks to a USD 16 million International Fund for Agricultural Development (IFAD) loan. The target groups of the program are vulnerable (1-5 employees) and progressive (6-20 employees) dairy companies from the Imereti, Samegrelo-Zemo Svaneti and Samtskhe-Javakheti regions. The program envisages co-financing to support the expansion, modernization and re-equipment of dairy farms. In particular, co-financing is available for primary milk production, the establishment of milk collection points, the establishment of dairy processing plants, the primary production of animal feed, veterinary care and artificial insemination.

13) EUR 1.16 million to support organic agriculture in Georgia April 28th, 2020, https://agenda.ge/en/news/2020/1328

The European Union (EU), Sweden and Austria have allocated EUR 1.16 million to the Local Development Initiative (LDI) to support the organic agricultural sector of Georgia. Farmers, cooperatives, processing units as well as other actors along various organic value chains can apply for assistance of between GEL 5,000 and GEL 15,000 provided that they also invest at least 10% of the total proposed budget.

LDI specifically focuses on the municipalities of Mestia, Lentekhi, Tsageri, Oni, Ambrolauri, Sachkhere, Chiatura and Tkibuli.

14) Grant competition in Shida Kartli and Racha-Lechkhumi April 28th, 2020, http://www.fao.org/georgia/news/detail-events/en/c/1273214/

The Ministry of Agriculture, in cooperation with the Food and Agriculture Organization of the United Nations (FAO) and the Austrian Development Cooperation (ADC), are offering small grant investments to farmers and cooperatives in Ateni, Plevi (Shida Kartli), Tvishi and Sori (Racha-Lechkhumi) under the Rural and Agricultural Development Project. The grants are expected to facilitate the development and expansion of activities of different social groups as well as improve the quality of life these areas.

Grants can be used for both funding production as well as for investments in agricultural infrastructure.

The maximum amount of each grant is equivalent to USD 10,000, with grant funds covering no more than 75% of the total cost of investment.

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BFC. Georgian Agriculture Finance Bulletin. Edition #3, January 2013

15) ENPARD grants to support food production amid COVID-19 pandemic April 28th, 2020, https://cbw.ge/economy/georgia-receives-grant-from-eu

The Ministry of Agriculture, the European Union (EU) and the Food and Agriculture Organization of the United Nations (FAO) are awarding grants to support food production and security during the COVID-19 pandemic. The grants, which are being awarded under the EU’s European Neighborhood Program for Agriculture and Regional Development (ENPARD), will focus on the vegetable, cereal, potato, beef, dairy, honey and wine value chains. The grants will allow farmers, cooperatives and small- and medium-sized enterprises to invest in equipment such as tractors, harvesters and greenhouses.

Private Sector 16) Increase in vegetable prices forecasted April 2nd, 2020, http://bizzone.info/agriculture/2020/1585880964.php

With the early vegetable season about to begin, many vegetable producers are concerned that COVID19 measures could impact production this year and lead to higher prices for vegetables. While companies engaged in vegetable production have indicated that, so far, the measures taken to combat the spread of COVID-19 have not yet negatively impacted work, they could in the near future as more workers will be needed. Specifically, companies have expressed concerns that there will be a shortage of workers. Although many do not think this alone would cause prices to rise, vegetable producers are also facing unfavorable weather conditions, specifically an unusually dry winter that prevented the land from being properly cultivated, and a rise in the costs of production.

17) COVID-19 pandemic as an opportunity for Georgia’s food industry April 5th, 2020, https://cbw.ge/economy/levan-divitashvili-it-a-chance-for-food-sector-to-increase-production-and-employment

The Minister of Agriculture has stated that the food industry has the potential to become one of the most important employers in the country as its functioning is essential during the current pandemic state. Moreover, he noted that increased production opportunities (including for new products) have arisen due to restrictions on trade imposed by other countries. This presents Georgia’s food industry with the opportunity to increase production in the short term and then find new outlets for this increased production once the pandemic situation is over. The end result of this would be a more robust food industry that produces more and provides more employment opportunities.

18) No food shortage expected in Georgia April 13th, 2020, https://mepa.gov.ge/En/News/Details/17911

The Eurasian Economic Union (EEU) has taken the decision to ban the export of a number of food products through June 30, 2020; however, the government of Georgia does not believe that this will cause a shortage of food products in Georgia as the government has been proactive in monitoring food supplies (especially for essential foods) and diversifying markets to keep Georgia supplied.

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BFC. Georgian Agriculture Finance Bulletin. Edition #3, January 2013

19) Raw milk producers request government assistance April 14th, 2020, https://cbw.ge/economy/farmers-ask-for-subsidizing-raw-milk-production

The government of Georgia has included milk powder as an essential food product, meaning that the government will work to maintain the price of milk powder under a special state program of measures during the COVID-19 pandemic. Producers of raw milk, however, are requesting that the government rethink this decision, arguing that subsidizing milk powder sends funds out of the country and undermines the work of raw milk producers. Instead, they argue that the government should support the production of raw milk, thereby assisting domestic producers and keeping funds in the country.

Further, they argue that such a decision needs to be made shortly as many raw milk producers are suffering and in jeopardy of having to close their businesses.

20) Government takes actions to ensure no food shortages occur April 14th, 2020, https://commersant.ge/en/post/can-the-coronavirus-spark-food-shortages-in-georgia

Concerns regarding food shortages, especially for specific products, have risen as countries continue to enact measures aimed at combatting the spread of COVID-19. In Georgia, consumers became alarmed when Russia imposed a ban on the export of Russian rice, buckwheat, soybeans, turnips and onions through the end of June 2020. Georgia authorities, however, have been active in procuring import agreements with other sources to ensure that products (especially essential products) will remain available to Georgian consumers. Moreover, the government has announced that it will strictly control the prices of essential products during the state of emergency and quarantine.

21) Dairy producers moving to online sales April 15th, 2020, https://kalo.ge/news/view?id=8355

Measures taken to combat the spread of COVID-19 have made online sales even more relevant, including for industries not typically associated with them. Of particular note is that small- and mediumsized dairy producers in Georgia are quickly working to develop an online presence and boost sales through this channel. This is proving to be an important outlet for them as entering the network of supermarkets (the main providers of food products during the COVID-19 pandemic) has certain difficulties for new players, especially smaller producers. Although these efforts are, by and large, simple (i.e. social media posts), recent success could prove to provide an impetus for these producers to develop a more sophisticated online sales strategy in the future.

22) 2019 agricultural production numbers released April 16th, 2020, https://agenda.ge/en/news/2020/1178

The production of wheat, barley, potatoes, stone fruits and citrus decreased in Georgia in 2019. At the same time, the production of maize, nuts and subtropical fruits increased in the country. In particular, Georgia produced the following in 2019:

• • • • • • • •

102,500 tons of wheat (a 4.3% year-on-year decrease) 54,400 tons of barley (a 5.7% year-on-year decrease) 205,900 tons of maize (a 6% year-on-year increase) 208,600 tons of potatoes (a 12.2% year-on-year decrease) 38,600 tons of stone fruit (a 28.7% year-on-year decrease) 31,700 tons of nuts (a 37.2% year-on-year increase) 20,400 tons of subtropical fruit (a 27.5% year-on-year increase) 64,400 tons of citrus (a 2.9% year-on-year decrease) Page 6

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