03/2015
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31 Ge o r g i a Agriculture Finance Bulletin Government Supports Spring-Time Small-Scale Farming Activities Israel and China to Invest USD 1 Billion in Agriculture Projects GeoStat Reveals Record Number of Livestock Georgian Wine Exhibited at the China Food and Drinks Fair in Chengdu
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Georgian Agriculture Finance Bulletin Edition #31, March 2015
Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4)
Ministry of Agriculture to Introduce Agro-Guide for Farmers and Investors.................................. 2 Government Supports Spring-Time Small-Scale Farming Activities ................................................ 2 Penalties for Food Safety Regulation Violations to be Toughened ................................................. 2 American Chamber of Commerce Raises Issues with Foreign Land Ownership Law ...................... 2
Foreign Aid ................................................................................................................. 3 5) 6) 7) 8)
Israel and China to Invest USD 1 Billion in Agriculture Projects ...................................................... 3 FAO to Propose Cooperative Financing Schemes by July ................................................................ 3 Japanese International Cooperation Agency Discussed Agro-Development Projects .................... 3 Thomas-Reuters to Participate in Irrigation and Land Development Project ................................. 3
Private Sector.............................................................................................................. 4 9) 10) 11) 12) 13) 14) 15) 16) 17) 18) 19) 20) 21) 22) 23)
Georgia to Export Blueberries to Europe ........................................................................................ 4 GeoStat Reveals Record Number of Livestock ................................................................................ 4 Devaluation of Lari versus US Dollar Causes Increase in Food Prices ............................................. 4 “Agro Trading Georgia” to Invest GEL 2.6 Million in Fodder Plant.................................................. 4 GEL 15 Million “Plant the Future” Project Launched ...................................................................... 5 Wine Exports Decrease Threefold in the First 2 Months of 2015 ................................................... 5 National Wine Agency Continues Promotion Activities in China .................................................... 5 Flour Mills Facing Closure Due to Cheap Russian Imports .............................................................. 6 Blauenstein Georgia to Produce Matured Meat for the First Time in Georgia ............................... 6 27,713 Loans worth GEL 800 Billion Issued through Preferential Agro-lending Program .............. 6 Georgian Wine Exhibited at ProWein in Germany .......................................................................... 6 Wine Exports to Russia yet to Resume ............................................................................................ 7 US Wine Magazine Rates Georgian Wine Amongst its Top 100...................................................... 7 Georgian Business Zone LLC to Invest GEL 145,000 in Rotation Crops ........................................... 7 Georgian Wine Exhibited at the China Food and Drinks Fair in Chengdu ....................................... 7
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 #31, March 2015
State Initiatives 1)
Ministry of Agriculture to Introduce Agro-Guide for Farmers and Investors
March 3rd, 2015, http://www.interpressnews.ge/en/economics/66860-georgia-introduces-an-agro-guide-to-benefit-farmersand-investors.html?ar=A
The Ministry of Agriculture will release the first edition of a new guide for the agriculture industry. The guide will provide a variety of detailed information such as soil analyses, an inventory of crops cultivatable in Georgia and road, gas pipeline, electricity line and irrigation system maps. Deputy Minister of Agriculture Gocha Tsopurashvili said the guide will benefit farmers, investors and other agro-stakeholders. The guide will be published on the Ministry’s webpage.
2)
Government Supports Spring-Time Small-Scale Farming Activities
March 4th, 2015, http://agenda.ge/news/30766/eng
The government will spend GEL 50 million in support of spring-time small-scale farming activities across Georgia. Small scale farmers will have their land sown with the aid of state-owned tractors and receive agro-cards worth GEL 50 to spend as they choose. This is the final year of the 3-year Small Scale Agricultural Activity Program, launched in 2013. To date, 420,000 hectares where cultivated through the program.
3)
Penalties for Food Safety Regulation Violations to be Toughened
March 26th, 2015, http://sarke.com/cgi/search/news.asp?Code=10044086
The Ministry of Agriculture announced tougher penalties for food safety regulation breaches are in the pipeline. Currently, producers must not distribute or must recall products suspected of being unfit for human consumption. In case of violation, a GEL 1,000 fine is administered. A second violation leads to another GEL 1,000 penalty. The Ministry suggested penalties should be reviewed such that they are proportionate to the severity of the food safety breach. Since the beginning of the year, the Ministry has conducted 971 inspections – the activities of 12 businesses were suspended while a further 63 were fined.
4)
American Chamber of Commerce Raises Issues with Foreign Land Ownership Law
March 26th, 2015, http://commersant.ge/index.php?m=5&news_id=20220&cat_id=5
The American Chamber of Commerce (AmCham) addressed the Georgian parliament, raising issues with amendments to the foreign agricultural land ownership law. While the amendments remove some restrictions – allowing registered foreign residents and companies to purchase between 5-20 hectares and 20-200 hectares respectively – regulations in place for those wishing to purchase smaller areas than those prescribed are unclear, said AmCham.
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BFC. Georgian Agriculture Finance Bulletin. Edition #31, March 2015
Foreign Aid 5)
Israel and China to Invest USD 1 Billion in Agriculture Projects
March 11th, 2015, http://sarke.com/cgi/search/news.asp?Code=10043934
Prime Minister Irakli Garibashvili met with investors from Israel and China to discuss projects in energy, information technology and agriculture. The government’s press service announced agriculture projects worth USD 1 billion, without providing further details. According to Sakstat, Israel’s direct investment in Georgia amounted to USD 16 million in 2014 while China’s amounted to USD 195 million – an increase by a factor of 1.6 and 2.17 respectively.
6)
FAO to Propose Cooperative Financing Schemes by July
March 13th, 2015, http://moa.gov.ge/index.php?menuid=17&lang=2&id=448#.VQxiL9KUf7k
Minister of Agriculture Otar Danelia met with the FAO to discuss the development of cooperatives. Danelia reiterated the Ministry’s goal to increase the competiveness of Georgian agriculture through the development of cooperatives and their access to equipment, services and the markets, whilst ensuring adequate communication of the advantages of cooperatives and state programs to farmers. The FAO said it would provide cooperative financing proposals through the framework of the European Neighborhood Program for Agriculture and Rural Development (ENPARD) by July.
7)
Japanese International Cooperation Agency Discussed Agro-Development Projects
March 18th, 2015, http://sarke.com/cgi/search/news.asp?Code=10044001
The Ministry of Agriculture and the Japanese International Cooperation Agency (JICA) discussed “Regional Development Program” projects proposed for 2015-2016. The possible introduction of the “One Village, One Product” scheme – as seen in Japan – was also considered. The Deputy Director of JICA’s Department of East and Central Asia and Caucasus, Mino Sato, said the organization wants to proceed with the development of agriculture and eco-tourism in Georgia.
8)
Thomas-Reuters to Participate in Irrigation and Land Development Project
March 26th, 2015, http://agenda.ge/news/32278/eng
The Director of the National Agency of Public Registry (NAPR), Papuna Ugrekhelidze, met with Donald Peele, Vice-President of Thomson-Reuters and World Bank officials to discuss the strategy and implementation of the USD 50 million Irrigation and Land Development Project. Thomson-Reuters, a leading media and market research firm, will conduct an analysis of Georgia’s agriculture sector. The parties discussed the first phase of implementation, a draft law on land registration and ways to improve cadastral data. The project aims to improve irrigation systems and strengthen land registration policies and procedures. Twelve villages comprising 31,000 small-scale farming households cultivating roughly 26,000 hectares of land will benefit from improved irrigation systems while a further 19,000 households with unregistered agricultural land will benefit from registration with the streamlined policy mechanism. The project is funded by the World Bank. Page 3
BFC. Georgian Agriculture Finance Bulletin. Edition #31, March 2015
Private Sector 9)
Georgia to Export Blueberries to Europe
February 25th, 2015, http://en.bpi.ge/index.php?option=com_content&view=article&id=19540:georgian-blueberries-to-appearin-european-market&catid=49:2011-11-06-16-56-03
In light of Europe’s high demand for the fruit, a USD 6.7 million, 70 hectare blueberry planation and processing facility will be established in Laituri, Guria. The berries – 90% of which are destined for export to Western Europe – will be washed, sorted and frozen on site. The project will create roughly 100 permanent and 300 seasonal jobs, with a minimum salary of GEL 400 per month. Blueberries would join kiwi fruit as the only Georgian fruits to be exported to Europe. The project is a joint venture between the state-owned Partnership Fund (PF) and local blueberry producers Vanrik Argo. The latter said that project will attract Foreign Direct Investment while also increasing supply to the local market. Vanrik Argo, established in 2011, currently has a 50 hectare blueberry plantation located in Laituri. Minister of Agriculture Otar Danelia said the plantation is beneficial for three reasons. First, it will help rectify Georgia’s trade imbalance. Second, it will help develop Guria, which is relatively poor. Third, it will help diversify the economy.
10) GeoStat Reveals Record Number of Livestock March 2nd, 2015, http://agenda.ge/news/30612/eng
GeoStat – the National Statistics Office – released preliminary data of its 2014 agriculture and livestock survey, which showed a 7 year high in the livestock population. The survey records 1.3 million cattle, 209,000 pigs, 7.36 million chickens, and 867,000 sheep and goat across the country. Complete data will be available on June 16, 2015.
11) Devaluation of Lari versus US Dollar Causes Increase in Food Prices March 5th, 2015, http://www.netgazeti.ge/GE/105/business/42073/
The devaluation of the GEL versus the USD, beginning in November 2014, has caused retail food prices to increase sharply by 10-30%. For example “Agara” brand sugar increased from GEL 1.45 in February to GEL 1.6 in March. In November 2014, USD 100 cost GEL 177 increasing to GEL 212 by the 4th of March.
12) “Agro Trading Georgia” to Invest GEL 2.6 Million in Fodder Plant March 6th, 2015, http://sarke.com/cgi/search/news.asp?Code=10043878
Agro Trading Georgia, a partner of Dutch company Trouw Nutrition, is to construct a fodder production plant near Tbilisi. Founder and Director Beka Bekaia said that, while the company already produces fodder, the process is only semi-automated, decreasing productivity and limiting quality control. Agro Trading Georgia was given land in exchange for the liability to complete construction in 15 months, create 20-25 jobs and invest at least GEL 2.6 million over the course of 2 years, added Bekaia. Page 4
BFC. Georgian Agriculture Finance Bulletin. Edition #31, March 2015
13) GEL 15 Million “Plant the Future” Project Launched March 6th, 2015, http://en.bpi.ge/index.php?option=com_content&view=article&id=19568:applications-open-for-plant-thefuture-project&catid=49:2011-11-06-16-56-03
The Agricultural Projects Management Agency launched the 2-year, GEL 15 million, Plant the Future project aimed at supporting aspiring farmers and agro-entrepreneurs with the establishment of plant nurseries or gardens. In order to receive funding, applicants must provide a detailed development concept in line with the Agency’s standards. Successful applicants will receive funds totalling 50% of the cost of nurseries and, in the case of gardens, 70% of plant costs and 50% of irrigation system costs. Beneficiaries may also receive funds through the preferential agro-lending program, while benefiting from free soil testing and technical training. Cooperatives will be given pesticide sprayers. The project aims to create 1,000-1,200 hectares of modern gardens and 30-40 new plant nurseries.
14) Wine Exports Decrease Threefold in the First 2 Months of 2015 March 9th, 2015, http://en.bpi.ge/index.php?option=com_content&view=article&id=19578:georgian-wine-export-decreasedthreefold-in-the-first-two-months-of-2015&catid=28:2011-11-06-17-04-50
Between January and February 2015, 3 million bottles of wine were exported compared to 9.8 million during the same period last year – a 3 fold decrease. During the same period in 2009, 918,180 bottles were exported in 2009; while 1,758,654 were exported in 2011; and 2,523,870 in 2013, according to the National Wine Agency. Exports were affected by the crises in Russia and Ukraine – with an 85% and 66% respective decrease in exports. However, Russia and Ukraine remain the top export destinations, with 1,007,231 bottles and 477,384 bottles sold – followed by Kazakhstan with 458,922; Poland with 220,082; and China with 216,842. Sales to strategic markets have increased by 64% in China; 39% in Japan; 32% in Canada; and 9% in Estonia, according to the Agency.
15) National Wine Agency Continues Promotion Activities in China March 9th, 2015, http://sarke.com/cgi/search/news.asp?Code=10043905
The National Wine Agency held meetings in Beijing with China’s largest wine importers – including Jointek Fine Wines – and wine media outlets – including China Wine News. About 20 groups (distributors, associations and press) took part in the meeting. A Wechat page was also created to promote Georgian wine. Wechat has over 300 million users in China. China is currently Georgia’s 4th largest export market, with roughly 217,000 bottles sold from January to February 2015, a 64% increase year-on-year.
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BFC. Georgian Agriculture Finance Bulletin. Edition #31, March 2015
16) Flour Mills Facing Closure Due to Cheap Russian Imports March 11th, 2015, http://en.bpi.ge/index.php?option=com_content&view=article&id=19594:flour-milling-plants-are-on-theverge-of-closing&catid=28:2011-11-06-17-04-50
Legislation must be introduced to protect Georgian flour producers from cheap Russian imports, said Chairman of the Grain Growers Association Levan Silagava. The mills risk closure if imports are not restricted, said Silgava, adding that Russia imposed a wheat import duty of 15% plus EUR 7.50 to protect its domestic market. Citing the EUR 172 per ton wheat import duty imposed by the EU, Silgava demanded the Georgian government put similar measures in place. The Chairman said the government is well informed about the problem and, in such situations, must enact a protection bill to shelter the local market. Georgia currently has 15 flour mills, each of which employ up to 70 people.
17) Blauenstein Georgia to Produce Matured Meat for the First Time in Georgia March 11th, 2015, http://agenda.ge/news/31207/eng
Blauenstein Georgia, a Georgian-Swiss venture, has begun production at its Racha meat processing facility. Minister of Agriculture Otar Danelia said the products, destined for the local market, would help Georgia reduce its reliance on imports. The facility will produce meat matured for 14-21 days in a regulated environment, reducing acidity and improving flavor as a result – a first in Georgia. Blauenstein Georgia has been operating cattle farms in Racha since 2008, investing more than GEL 15 million and employing 60 people.
18) 27,713 Loans worth GEL 800 Billion Issued through Preferential Agro-lending Program March 16th, 2015, http://sarke.com/cgi/search/news.asp?Code=10043976
According to figures released by the government, to date, 27, 713 loans worth GEL 799,324 million were issued through the preferential agro-lending program. The funds were used to create 105 new enterprises and reequip a further 580 existing enterprises – creating 10,000 jobs in the process.
19) Georgian Wine Exhibited at ProWein in Germany March 16th, 2015, http://agenda.ge/news/31522/eng
With the backing of the National Wine Agency and National Wine Association, 19 Georgian producers of wines and spirits exhibited their products at the international ProWein trade fair in Dusseldorf, Germany. The event attracted 4,830 exhibitors from 47 countries and 49,048 visitors from 110 countries. Georgian producers held meetings with importers and distributers from Europe, Canada the United States and other countries, as well as wine associations, market research and PR organizations with global reach. ProWein is considered one of the most prestigious international wine and spirit exhibitions. Page 6
BFC. Georgian Agriculture Finance Bulletin. Edition #31, March 2015
20) Wine Exports to Russia yet to Resume March 23rd, 2015, http://commersant.ge/index.php?m=5&news_id=20077&cat_id=6
Georgian wine exports to Russia are yet to resume. The Director of Tbilvino, George Margvelashvili, said the company hopes circumstances will allow export to resume in April. However, even if exports resume, they will not reach levels previously experienced (25% of export volume), he added. Whilst Tbilvino will not experience losses, profits this year are likely to be smaller due to the crisis. Schuchmann Wines is responding to the ruble’s devaluation by reducing prices, according to CEO Nutsa Abramishvili. Goods vehicles are gradually being allowed to enter Russia and the situation is stabilizing, she added. Russia accounts for 30% of exports, though the company aims to reduces this to 15%. Both directors are seeking to diversify exports, reducing reliance on the Russian market. However, in order for Georgian wines to establish themselves in new markets, Abramishvili sees the need for state support, while Margvelashvili calls for an intensive marketing campaign.
21) US Wine Magazine Rates Georgian Wine Amongst its Top 100 March 25th, 2015, http://commersant.ge/index.php?m=5&news_id=20163&cat_id=6
US magazine “USA Wines and Spirits” scored a dry white wine produced by Schuchmann Wines Georgia 90/100, granting it a place in the magazine’s top 100 wines. The wine is the only from Eastern Europe to make the list.
22) Georgian Business Zone LLC to Invest GEL 145,000 in Rotation Crops March 26th, 2015, http://sarke.com/cgi/search/news.asp?Code=10044093
Four agricultural plots in Akhaltsikhe, Samtskhe-Javakheti, totalling 52.76 hectares were leased to Georgian Business Zone LLC for 25 years at GEL 5,200 per year. During the first 5 years, the company must invest at least GEL 145,000, cultivate at least 70% of the total area and employ at least 10 people for 6 months annually. The land will be used for the cultivation of rotation crops.
23) Georgian Wine Exhibited at the China Food and Drinks Fair in Chengdu March 27th, 2015, http://agenda.ge/news/32320/eng
Ten Georgian wineries are showcasing their products at the China Food and Drinks fair held this March in Chengdu, China. The event is expected to attract 3,000 exhibitors and 300,000 visitors. Georgian attendees included Kakhuri Wine Cellar, Shalvino, Bagrationi 1882, Chateau Mukhrani, Armazi, Vaziani, Sarajishvili, Winery Khareba, Batono and Kindzmarauli Winery. Chairman of Georgia’s National Wine Agency, Giorgi Samanishvili, said demand for Georgian wines in China is on the rise, noting 217,000 bottles were exported in the first two months of 2015 – a 34% increase 64% increase year-on-year – making China the 4th largest export market. Moreover, total exports for 2014 were 34% higher than in 2013, reaching 1.2 million bottles, he added. During the fair, a number of distributors agreed to increase imports of Georgian wines, according to Samnisvili, adding that the Agency has conducted a persistent marketing campaign in the country. Page 7
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.