19 BFC Georgia Agriculture Finance Bulletin

03/2014

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19 Ge o r g i a Agriculture Finance Bulletin State to cover 50—60% of Agricultural Insurance Premium EU Allocates EUR 15 Million in Support of Small Agricultural Cooperatives 68 Million USD Increase in Wine Exports in 2013 Private Investment in Agriculture Declines 23.4% in Adjara

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Georgian Agriculture Finance Bulletin 69B

Edition #19, March 2014

Contents 95B

State Initiatives ........................................................................................................... 2 70B

1)

State to cover 50—60% of Agricultural Insurance Premium ........................................................... 2

2)

Transparency International: Prohibition of Foreign Agricultural Land Acquisition Threatens Microlending.................................................................................................................................... 2 Agriculture Committee Considers “Spanish Model” of Agricultural Insurance Subsidization ........ 2 Ternali Tea: Preferential Agricultural Loan Terms not Acceptable ................................................. 2

73B

74B

3) 4) 75B

76B

5) 7B

6) 7) 8) 9) 78B

79B

80B

81B

Kvarlis Baga Company Establishes Farm with Assistance from the Preferential Agrolending Program ........................................................................................................................................... 3 Preferential Agroloan Portfolio Exceeds GEL 287,8 million ............................................................ 3 Agricultural Cooperative Registration Process Streamlined ........................................................... 3 Georgia to Sign Free Trade Agreement with EU in June ................................................................. 4 Import of Genetically Modified Seeds to be Banned from 2015 .................................................... 4

Foreign Aid ................................................................................................................. 4 71B

10) EU Allocates EUR 15 Million in Support of Small Agricultural Cooperatives ................................... 4 11) Frankfurt Hosts Georgian-German Economic Forum ...................................................................... 4 12) Public Registry Representatives Participate in World Bank Conference......................................... 5 82B

83B

84B

Private Sector.............................................................................................................. 5 72B

13) 14) 15) 16) 17) 18) 19) 20) 85B

86B

87B

8B

89B

90B

91B

92B

68 Million USD Increase in Wine Exports in 2013 ........................................................................... 5 Private Investment in Agriculture Declines 23.4% in Adjara ........................................................... 5 German Company to invest 25 Million Euros in Food Processing Plants ........................................ 5 Georgian Wine Exports Largely Unaffected by Ukraine-Russia Conflict ......................................... 5 Record Wheat Harvest Expected in 2014 ........................................................................................ 6 Half of Georgia’s Workforce Employed in Agriculture .................................................................... 6 Wine Exports Quadruple Year-on-Year Between January and February 2014 ............................... 6 16 Georgian Companies Take Part in “ProWein 2014” ................................................................... 6

21) The Georgian Co-Investment Fund Invests USD 59.3 Million in Milk Processing Plant and Greenhouse ..................................................................................................................................... 7 22) Price of Vine Saplings Triple—Price of Hectare of Kakheti Vineyard Doubles ................................ 7 93B

94B

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 » 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. Georgian Agriculture Finance Bulletin. Edition #19, March 2014

State Initiatives 1)

State to cover 50—60% of Agricultural Insurance Premium

March 7th, 2014, http://sarke.com/cgi/search/news.asp?Code=10040555

According to Insurance Association chairman Devi Khechinashvili, development of the agroinsurance program will depend on the structure of agricultural production and state involvement. Mr. Khechinashvili expects the state to cover 50—60% of the premium and the program to be online within a year.

A seminar on agro insurance development—organized by Swiss Agency for Development and Cooperation with the support of Georgia’s Agricultural Ministry—was held in Tbilisi. At the meeting, Business and Finance Consulting’s Managing Director Michael Kortenbusch stressed that, while agricultural lending has increased, savings and insurance are also important.

2)

Transparency International: Prohibition of Foreign Agricultural Land Acquisition Threatens Microlending

March 12th, 2014, http://www.sarke.com/cgi/search/news.asp?Code=10040603

The moratorium on acquisition of agricultural land by foreign citizens and companies was adopted by parliament in 2013. In case of borrower default, microfinancial institutions with foreign shareholders will be unable to seize land provided as collateral, argues Transparency International Georgia (TIG).

While the Ministry of Economy and Sustainable Development drafted an amendment exempting banks, TIG says this still leaves microfinancial institutions subject to the prohibition.

Last year TIG appealed against the moratorium, declaring it unconstitutional. The Constitutional Court will make a decision in the near future.

3)

Agriculture Committee Considers “Spanish Model” of Agricultural Insurance Subsidization

March 13th, 2014, http://sarke.com/cgi/search/news.asp?Code=10040606

Chairman Gigla Agulashvili indicated that, as part of the Rural Development Strategic Plan, the Committee is currently determining the level of state involvement in the development of agricultural insurance.

According to Agulashvili, a “Spanish model” has been proposed—in which the state subsidizes agricultural insurance through the partial payment of premiums.

Broad deliberation is scheduled for the end of March.

4)

Ternali Tea: Preferential Agricultural Loan Terms not Acceptable

March 17th, 2014, http://commersant.ge/eng/index.php?page=news&id=2841

Director Fidon Chitadze claims that Ternali Tea avoids the preferential agrolending program because interest rates are too high. Instead, Chitadze would like to see the government recognize tea-growing as a strategic industry and help with market access—particularly the Russian market. Read More » Page 2

BFC. Georgian Agriculture Finance Bulletin. Edition #19, March 2014

5)

Kvarlis Baga Company Establishes Farm with Assistance from the Preferential Agrolending Program

March 18th, 2014, http://sarke.com/cgi/search/news.asp?Code=10040666

The Agriculture Ministry reported Kvarlis Baga Company built a breeding and dairy farm in the Kvareli municipality with a USD 600,000 loan from the preferential agrolending program. The company purchased 132 Holstein heifers producing 3t of milk per day. The totality of production is sold in local markets.

The company grows feed on-site; it borrowed an additional 100,000 Lari from the preferential agrolending program to purchase fertilizer.

6)

Preferential Agroloan Portfolio Exceeds GEL 287,8 million

March 19th, 2014, http://en.bpi.ge/index.php?option=com_content&view=article&id=17486:preferential-agro-credit-portfolioexceeds-to-2878-million&catid=49:2011-11-06-16-56-03

By March 13, 2014, the preferential agroloan portfolio exceeded 287,8 million GEL. 2,685 beneficiaries borrowed a total of 1.1 million GEL via the first component (interest free commodity loans).

5072 beneficiaries borrowed a total of 150.4 million GEL via the second component (loans for medium and large farms).

430 beneficiaries borrowed a total of 49.8 million GEL via the third component (enterprise loans). 63 new enterprises were funded.

48 grape processing enterprises benefited from loans totalling 45.9 million GEL through the fifth component (15 month loans for wineries).

2 enterprises benefited from loans totalling 450,000 GEL via the sixth component (4 month loans for citrus producers).

7)

Agricultural Cooperative Registration Process Streamlined

March 21st, 2014, http://sarke.com/cgi/search/news.asp?Code=10040701

The National Agency of Public Registry (NAPR), the Agency for Development of Agricultural Cooperatives (ADAC) and the Notary Chamber signed a memorandum that aims to streamline the registration process for agricultural cooperatives through enhanced interagency cooperation.

A “single window� principle will be introduced. The NAPR will authorize notaries to receive applications for agricultural-cooperative status.

The ADAC will be responsible for assigning agricultural-cooperative status. The NAPR will responsible for the registration of agricultural cooperatives as legal entities.

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BFC. Georgian Agriculture Finance Bulletin. Edition #19, March 2014

8)

Georgia to Sign Free Trade Agreement with EU in June

March 24th, 2014, http://www.sarke.com/cgi/search/news.asp?Code=10040707

Mikheil Janelidze, Deputy Minister of Economy and Sustainable Development, says signing of the Georgia-EU Association Agreement—which includes the Deep and Comprehensive Free Trade Agreement (DCFTA)—is planned for June.

When the agreement enters force, customs will be abolished subject to certain criteria. Georgian foodproduct imports will be subject to the EU’s food-safety regulations. Read More »

9)

Import of Genetically Modified Seeds to be Banned from 2015

March 27th, 2014, http://en.bpi.ge/index.php?option=com_content&view=article&id=17582:import-of-genetically-modifiedseeds-to-be-banned-from-2015&catid=49:2011-11-06-16-56-03

A law that prohibits the import of genetically modified seeds cannot be enforced until 2015, says the chairman of the parliamentary Committee of Environmental Protection. According to Gia Tsagareishvili, amendments to the Food Safety Code, prepared by the Ministry of Agriculture, are not reflected in the original draft. Read More »

Foreign Aid 10) EU Allocates EUR 15 Million in Support of Small Agricultural Cooperatives March 11th, 2014, http://sarke.com/cgi/search/news.asp?Code=10040584

The EU has signed grants totaling 15 million EUR in support of small cooperatives through the European Neighborhood Program for Agriculture and Rural Development (ENPRD).

The grants have been awarded to Oxfam (Great Britain), Care (Austria), People in Need and Mercy Corps (both Scotland). These will support more than 160 cooperatives in all 45 districts of Georgia through technical assistance, development of new capabilities and direct investments.

In December 2012, ENPARD put 40 million euros towards food production and reduction of rural poverty in Georgia. ENPARD also supports the Agriculture Ministry in the implementation of agricultural strategy.

11) Frankfurt Hosts Georgian-German Economic Forum March 18th, 2014, http://commersant.ge/eng/index.php?page=news&id=2855

The event is organized by the Frankfurt based Georgian-German Economic and Cultural Association and is supported by the Chamber of Commerce and Industry of Georgia.

Representatives of Georgian and German companies will hold seminars covering the following sectors: agriculture, real estate and construction, alternative energy, tourism, transport and logistics, banking and finance. Read More »

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BFC. Georgian Agriculture Finance Bulletin. Edition #19, March 2014

12) Public Registry Representatives Participate in World Bank Conference March 24th, 2014, http://www.sarke.com/cgi/search/news.asp?Code=10040715

Discussions with the World Bank will take place regarding the irrigation and land market development project planned for the second half of 2014. A pilot project, measuring and registering agricultural sites, will be implemented in 11 villages, the Registry said. Read More »

Private Sector 13) 68 Million USD Increase in Wine Exports in 2013 March 4th, 2014, http://commersant.ge/eng/index.php?page=news&id=2749

Chairman of the Agricultural Committee Gigla Agulashvili released export growth data for 2012—2014.

Wine export revenues totalled 232 million USD in 2013—representing an increase of 68 million USD year-on-years. The increase was attributed to the success of last year’s market diversification.

Read More »

14) Private Investment in Agriculture Declines 23.4% in Adjara March 13th, 2014, http://sarke.com/cgi/search/news.asp?Code=10040609

The Finance and Economy Ministry of Adjara reported that, in 2013, direct private investments in the autonomous republic amounted to USD 195 million—an increase of 28.3% year-on-year. Of the total, USD 3.6 million (1.85%) was invested in agriculture—a decrease of 23.4%.

15) German Company to invest 25 Million Euros in Food Processing Plants March 18th, 2014, http://commersant.ge/eng/index.php?page=news&id=2853

According to the Coordinating Center of International Investments (CCII) a well-known German company, unnamed at this stage, plans to invest EUR 25 million in the construction of two food processing plants in Imereti and Kakheti. Representatives of both institutions met at the end of last year. CCII director Giorgi Seturidze expects a detailed agreement to be reached by the end of April.

16) Georgian Wine Exports Largely Unaffected by Ukraine-Russia Conflict March 21st, 2014, http://commersant.ge/eng/index.php?page=news&id=2889

According to chairman of Telavi Wine Cellars Zurab Ramazashvili, exports to Ukraine and Russia have not been impacted thus far—30% of the company’s exports go to Russia and 20% to Ukraine.

Tblivino director Giorgi Margvelashvilis, however, says there have been problems with timely transfer of funds in the Ukraine and sales have declined in some regions. Exports to Russia remain unaffected.

Tblivino sells 20% of its products in Russia and 10% in Ukraine. Read More »

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BFC. Georgian Agriculture Finance Bulletin. Edition #19, March 2014

17) Record Wheat Harvest Expected in 2014 March 22nd, 2014, http://sarke.com/cgi/search/news.asp?Code=10040547

The Agriculture Ministry expects a wheat harvest of at least 160,000t this year—up from 90,000t in 2013. New high-yield wheat varieties were sown in certain areas. In case of good weather, the Ministry estimates the harvest may exceed 220,000t.

Sown area amounts to 80,000 ha—a growth of 40% year-on-year.

Georgia’s wheat imports equaled USD 184.336 million in 2013; USD 240 million in 2012; USD 184.23 million in 2011; USD 174.156 million in 2010; and USD 105.506 million in 2009.

18) Half of Georgia’s Workforce Employed in Agriculture March 24th, 2014, http://www.sarke.com/cgi/search/news.asp?Code=10040709

According to Sakartvelos Ekonomika magazine, 850,000 persons are directly employed in agriculture, accounting for 49.3% of the total national workforce and 77% of the total rural workforce (1.1 million).

The article also stated that labor productivity (GDP per person) in agriculture totaled GEL 2,274—15% of the national average (GEL 15,178). Read More »

19) Wine Exports Quadruple Year-on-Year Between January and February 2014 March 24th, 2014, http://en.bpi.ge/index.php?option=com_content&view=article&id=17539:wine-is-in-the-top-3-list-of-theexport-products&catid=921:2011-11-06-16-36-05

Geostat reports wine exports totaled USD 32 million between January and February 2014—4 times more than the same period in 2013. The top export markets were: Russia, Ukraine, Kazakhstan, Poland and Latvia. Russia is the largest market with 68% of total exports. Wine is Georgia’s 3rd largest export during this period—behind cars and ferroalloys. Read More »

20) 16 Georgian Companies Take Part in “ProWein 2014” March 25th, 2014, http://www.sarke.com/cgi/search/news.asp?Code=10040726

Georgia’s Agriculture Ministry reported that 16 Georgian companies took part in the annual international wine and spirits exhibition “ProWein 2014” in Dusseldorf.

Amongst the 4,000 participants, three Georgian companies (Chateau Mukhrani, Georgian Wine and GWS) won medals. Read More »

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BFC. Georgian Agriculture Finance Bulletin. Edition #19, March 2014

21) The Georgian Co-Investment Fund Invests USD 59.3 Million in Milk Processing Plant and Greenhouse March 25th, 2014, http://www.sarke.com/cgi/search/news.asp?Code=10040728

The Georgian Co-Investment Fund announces projects totaling USD 1.2 billion. Of this total, USD 45 million is to be invested in a milk processing plant and USD 14.3 million in a tomato greenhouse.

Read More »

22) Price of Vine Saplings Triple—Price of Hectare of Kakheti Vineyard Doubles March 25th, 2014, http://www.sarke.com/cgi/search/news.asp?Code=10040723

In the past year, the price of vineyards in the Kakheti region has doubled to GEL 10,000—12, 000 per hectare, according to Rezonasi newspaper. Few vineyards are up for sale, the newspaper reports, while new vineyards are experiencing a shortage of concrete pillars for espaliers.

In the meantime, says Rezonansi, at GEL 1.5—2, the price of a vine sapling has almost tripled.

Read More »

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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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Copyright of articles is retained by their authors.