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33 Ge o r g i a Agriculture Finance Bulletin Georgia Aims to Become 2nd Largest Hazelnut Exporter China Invests USD 10 million in Irrigation Equipment, Funds 30 Greenhouses Georgian Sweet Cherry to be Exported to Asian Countries Decline in Price of Grapes Expected after Decline in Wine Exports
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Georgian Agriculture Finance Bulletin Edition #33, May 2015
Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5)
62 Hectares of Orchards through “Plant the Future” Program ....................................................... 2 Foreign Agricultural Land Ownership Bill yet to be Ratified – Meanwhile Foreigners May Continue to Buy Land ...................................................................................................................... 2 Georgia Aims to Become 2nd Largest Hazelnut Exporter ............................................................... 2 Guria Has Agriculture and Tourism Development Potential Says Prime Minister .......................... 3 Agrolending Programs Draw Debate to Their Relevance and Sustainability .................................. 3
Foreign Aid ................................................................................................................. 4 6) 7) 8) 9) 10)
Dutch Experts Assist in Georgian Leaf Vegetables Export ............................................................... 4 China Invests USD 10 million in Irrigation Equipment, Funds 30 Greenhouses .............................. 4 Georgia to Receive EUR 50 Million through ENPARD II ................................................................... 4 Austrian Businesses Offered Agriculture Investment Assistance in Georgia .................................. 5 European Investment Bank Supports Wine and Horticulture SMEs ............................................... 5
Private Sector.............................................................................................................. 5 11) 12) 13) 14) 15) 16) 17) 18)
Georgia to Import Russian Sheep .................................................................................................... 5 Poultry and Eggs Producers Request VAT Exemption ..................................................................... 5 Telavi Winery to Recoup Russian Debts through Courts ................................................................. 6 UAE Investors Interested in Georgian Livestock Sector .................................................................. 6 Georgian Wine can become Global Brand, says EBRD Managing Director ..................................... 7 Egg, Milk and Meat Production Increases in Q1 2015..................................................................... 7 Georgian Sweet Cherry to be Exported to Asian Countries ............................................................ 7 Decline in Price of Grapes Expected after Decline in Wine Exports ................................................ 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 #33, May 2015
State Initiatives 1)
62 Hectares of Orchards through “Plant the Future” Program
May 1st, 2015, http://agenda.ge/news/34399/eng
In Shida Kartli, 8 beneficiaries received support planting 62 hectares of orchards through the Ministry of Agriculture’s Plant the Future project. The project, launched in March 2014, supports the creation of gardens and plant nurseries. Successful applicants receive funds totaling 70% of plant costs and 50% of costs with the irrigation systems required for new gardens, while receiving 50% of investment required for new nurseries. According to the Ministry, the project will help farmers produce quality products capable of competing with imports on the local market, while simultaneously increasing their export potential. Successful applicants may also benefit from the Agricultural Credit Program, which provides pesticide sprayers to cooperatives, covers soil testing costs and administers training in agricultural techniques. An estimated 1,000-1,200 ha of modern gardens and 30-40 nurseries will be created through the project.
2)
Foreign Agricultural Land Ownership Bill yet to be Ratified – Meanwhile Foreigners May Continue to Buy Land
May 13th, 2015, http://sarke.com/cgi/search/news.asp?Code=10044534
Parliament is yet to agree on a final version of the draft bill on foreign agricultural land ownership. In the meantime, foreigners may still purchase agricultural land. The draft law stipulates that foreigners may own agricultural land only if married to a Georgian citizen, holding a residence permit or inheriting the land. The draft bill is highly controversial and has been opposed by various international NGOs. Former MP, Paata Koguashvili, however, considers that the distribution of land to foreigners must always be a state controlled process.
3)
Georgia Aims to Become 2nd Largest Hazelnut Exporter
May 17th, 2015, http://www.georgianjournal.ge/business/30474-georgia-aims-to-become-second-largest-hazelnutexporter.html
The government plans to turn Georgia into the 2nd largest hazelnut exporter by 2020. With 40,000 tons worth USD 183 million exported in 2014, the country stands 3rd behind Turkey and Italy. In Q1 2015, exports revenues more than doubled year-on-year, from USD 22 million to USD 52 million. In the same period, total export share tripled from 3% to 10%. In comparison, wine brought in USD 180 million in 2014 and its export share reduced from 7% to 3% in Q1 2015. With hazelnuts exports overtaking wine, the government has taken notice, said Minister of Agriculture Otar Danelia.
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BFC. Georgian Agriculture Finance Bulletin. Edition #33, May 2015
With the Ministry’s development program in place, exports can easily be tripled, overtaking even Italy, the Minister added. Demand is expected to grow over the next 10 years – not only in the surrounding region, but in Europe, the USA and Asia, says Deputy Minister of Agriculture Levan Davitashvili. While the government’s expansion plan includes market diversification to the aforementioned regions, it also focuses on developing cultivation and processing techniques, storage and processing infrastructure and hazelnut production legislation and regulation, said Davitashvili. However, Natia Gargulia, a former hazelnut producer, says Georgia lacks the land for such large scale plantation and warns of climate risks, such as frost, that can devastate plantations. Turkey compensates for bad harvests by tapping vast hazelnut reserves – a measure unavailable to Georgia, she added. Read More »
4)
Guria Has Agriculture and Tourism Development Potential Says Prime Minister
May 18th, 2015, http://www.sarke.com/cgi/search/news.asp?Code=10044591
At a meeting with local businessmen, Prime Minister Irakli Garibashvili said that Guria has great development potential in agriculture and tourism. According to the Garibashvili, the region is particularly suited to the development of milk, meat and fruit processing, poultry farming and cold storage facilities, while its Black Sea and Alpine regions are suited to the development of summer and winter tourism. While not providing specifics, the Prime Minister said 650 new agriculture and tourism projects are planned for 2015.
5)
Agrolending Programs Draw Debate to Their Relevance and Sustainability
May 28th, 2015, http://sarke.com/cgi/search/news.asp?Code=10044685
The Economic Policy Research Center (EPRC) attests that weak efficiency of expenses has led to slow expansion of the share of GDP, increasing by only 0.8% from 2012 (8.6%) to 2014 (9.4%). They claim the programs will not be sustainable once the allocation of preferential agro lending finances dissipates. The government claims that these numbers don’t represent only the primary production in the GDP, and the total added value is redistributed over various sectors. According to GeoStat, agribusiness production in 2014 rose to GEL 7.9 billion (growth in comparison to 2013 – 10%, to 2012 – 20.9%). The value added creation of agribusiness reached GEL 4.1 billion, a growth of 26.4% from 2012 and 9.7% from 2013. The government also states that the program assisting land-poor farmers led to a growth of cultivated land area of 24% from 2012 to 2014. It was also mentioned that preferential agro lending program aims to be sustainable by building relations and confidence between the banking sector and the agribusiness, which will allow the private sector to replace the state interventions. Read More »
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BFC. Georgian Agriculture Finance Bulletin. Edition #33, May 2015
Foreign Aid 6)
Dutch Experts Assist in Georgian Leaf Vegetables Export
May 8th, 2015, http://commersant.ge/index.php?m=5&news_id=21993&cat_id=6
Dutch experts are to provide assistance with the export of leaf vegetables to the EU, according to Minister of Economy George Kvirikashvili. Currently, Georgia exports mainly to CIS countries; assistance is needed to build greenhouses to European standards, facilitating exports of leaf vegetables to the EU, said the Minister. The multi-million dollar project will be funded mainly through the private sector, though the Partnership Fund and the Produce in Georgia Program will also be involved, said Kvirikashvili.
7)
China Invests USD 10 million in Irrigation Equipment, Funds 30 Greenhouses
May 11th, 2015, http://agenda.ge/news/34980/eng
China’s Minister of Agriculture, Han Changfu, met with his Georgian counterpart, Otar Danelia, to discuss cooperation avenues. Topics included tea growing and fish farming and processing, amongst others. With China’s support, more than 30 greenhouses will be built in Marneuli, said Danelia, while the country will provide irrigation equipment worth USD 10,764,000. Both measures are part of the Vegetable Cultivation Technology in Georgia cooperation program signed between the parties in November 2014. China had already donated 30 units of modern agricultural equipment in 2014, added Danelia. China is one of the most important importers of Georgian wine, with imports increasing by 66.4% yearon-year in January and February 2015. Changfu highlighted the potential of Georgian wine on the Chinese market, while reiterating China’s willingness to provide Georgia with expertise in tea growing. China was one of Georgia’s top 5 trade partners in 2014.
8)
Georgia to Receive EUR 50 Million through ENPARD II
May 15th, 2015, http://www.sarke.com/cgi/search/news.asp?Code=10044572
Georgia is to receive EUR 50 million during the second phase of the EU’s European Neighborhood Program for Agriculture and Rural Development (ENPARD II), said Minister of Agriculture Otar Danelia. The program aims to provide assistance with food production while reducing rural poverty. Georgia received EUR 52 million during the first phase of the program (ENPARD).
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BFC. Georgian Agriculture Finance Bulletin. Edition #33, May 2015
9)
Austrian Businesses Offered Agriculture Investment Assistance in Georgia
May 19th, 2015, http://www.sarke.com/cgi/search/news.asp?Code=10044603
Austria and Georgia signed a cooperation agreement in waste management, road infrastructure and water supply. Georgian Prime Minister Irakli Garibashvili offered investment assistance to Austrian businesses in real estate, energy, transport, tourism and agriculture. Austrian direct investments in Georgia totaled USD 2.72 million in 2014, almost half the amount invested in 2013, according to GeoStat. Georgian exports to Austria totaled USD 4.84 million (0.01% of total exports) in 2014, while Austrian exports to Georgia totaled USD 72.08 million (0.08% of total exports).
10) European Investment Bank Supports Wine and Horticulture SMEs May 22nd, 2015, http://agenda.ge/news/35722/eng
The European Investment Bank (EIB) will provide support for SMEs in the wine and horticulture industries. Eligible projects will have 50% of costs covered. The aim of the program is to increase competitiveness on international markets and allow SMEs to make the most of the Deep and Comprehensive Free Trade Area (DCFTA) agreement with the EU. The EU is Georgia’s largest trading partner, accounting for more than a quarter of trade. Read More »
Private Sector 11) Georgia to Import Russian Sheep May 7th, 2015, http://commersant.ge/index.php?m=5&news_id=21927&cat_id=5
Pending veterinary and customs inspection, Georgia is to import 1,000 Russian sheep in the coming weeks. Some of the livestock are intended for slaughter, while others are destined for farms. Due to the devaluation of the ruble, Russian sheep are now cheaper than domestic sheep. While unaware of the players involved, Head of the Georgian Sheep Breeders’ Association, Beka Gonashvili, believes the initiative is a private venture. Due to the devaluation of the lari, the export price of Georgian sheep also fell, said Gonashvili, adding that the main export destination remains Azerbaijan.
12) Poultry and Eggs Producers Request VAT Exemption May 13th, 2015, http://commersant.ge/index.php?m=5&news_id=22131&cat_id=6
According to Kakha Megrelishvili, sales manager at Koda – an egg and poultry producer – the recent devaluation of the lari has caused an increase in egg prices while reducing household purchasing power, negatively affecting sales.
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BFC. Georgian Agriculture Finance Bulletin. Edition #33, May 2015
Moreover, small-scale farmers are undercutting market prices, adding further pressure, said Megrelishvili. In its current state, the poultry market has become unmanageable, he added. As a solution, Megrelishvili suggests the introduction of product quotas - as seen in France - as well as exemption from VAT. Alexander Toprakashvili, Director of Mukhrani Chicken, also blames the decrease in egg sales on the devaluation of the lari. While the company has reduced prices as a counter measure, this has not led to an increase in sales. Toprakashvili also sees VAT exemption as a potential solution, adding that such a measure would see marked improvements in the business environment. Director of Patardzeuli, Otar Muchashvili, agrees with his contemporaries, explaining sales decreases on the devaluation of the currency. Patardzeuli consequently reduced egg prices by 2-3 tetri to 20-22 tetri per egg.
13) Telavi Winery to Recoup Russian Debts through Courts May 14th, 2015, http://commersant.ge/index.php?m=5&news_id=22195&cat_id=6
During the recent Russian economic crisis, several local wine distributors went bankrupt, leaving debts to their Georgian partners unpaid, said Chairman of Telavi Wines Zurab Ramazashvili. The company plans to recoup these debts through the courts, he added. While some difficulties were expected, the recent crisis has allowed Georgian exporters to gain valuable experience, leading to a strengthening of contractual payment conditions going forward, according to Ramazashvili. In the first four months of 2015, Tevali Wines saw a 32% decrease in exports year-on-year due to crises in Russia and Ukraine, while other markets saw export growth, said Ramazashvili. The company will continue to focus on Russia and the Ukraine, however, as these traditional markets will recover, he added. Director of Schuchmann Wines Nutsa Abramishvili said the company is currently not experiencing payment problems with its Russian partners. The company’s strategy is to increase exports to markets where Georgian wines have minimal presence, simultaneously reducing the share of exports destined for Russia – currently standing at 30%. Consequently, Schuchmann’s export performance will not be adversely affected by the crises, with an expected increase of 1.5 million bottles in 2015, said Abramishvili.
14) UAE Investors Interested in Georgian Livestock Sector May 19th, 2015, http://commersant.ge/index.php?m=5&news_id=22433&cat_id=5
Investors from the United Arab Emirates (UAE) are interested in the Georgian agriculture sector, with special focus on cattle-breeding, said Georgian Minister of Agriculture Otar Danelia. A UAE-Georgia business forum is currently being held in Tbilisi. According to the National Statistics Office, UAE investments in Georgia totaled USD 14 million in 2014 – a decrease by a factor of 4.4 year-on-year.
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BFC. Georgian Agriculture Finance Bulletin. Edition #33, May 2015
15) Georgian Wine can become Global Brand, says EBRD Managing Director May 21st, 2015, http://sarke.com/cgi/search/news.asp?Code=10044625
Oliver Descamps, Managing Director of Countries of Operations in the EBRD Banking Department, discussed Georgia’s economic potential at a business forum organized by EBRD in Tbilisi on May the 1415. According to the Director, Georgia has a high investment potential that can be attributed to the extensive economic reforms of the last decade. Agriculture, energy and SME development potential is particularly strong, according to Descamps. With regards to agriculture, he expects Georgian wine can become a global brand.
16) Egg, Milk and Meat Production Increases in Q1 2015 May 21st, 2015, http://www.sarke.com/cgi/search/news.asp?Code=10044632
In Q1 2015, 137.3 million eggs were produced, a 12.08% increase year-on-year, according to the National Statistics Office “GeoStat”. During the same period, milk production totaled 114.2 million liters (+ 6.53%); meat production totaled 9,500 tons (+ 10.47%); livestock totaled 1.43 million heads (+ 3.97%), including 661,300 cows and buffalo (+3.22%), 237,000 pigs (+ 27.51%), 1.16 million sheep and goats (+ 1.19%), and 8.35 million poultry (+ 6.93%).
17) Georgian Sweet Cherry to be Exported to Asian Countries May 28th, 2015, http://commersant.ge/index.php?m=5&news_id=22792&cat_id=6
Canadian company Caucasus Nectar plans to export Georgian sweet cherries to Asia. Caucasus Nectar owns orchards in the Gori district and plans to expand to the Marneuli municipality and Kakheti region. During the past two years the company has invested USD 3 million in the Georgian agricultural sector.
18) Decline in Price of Grapes Expected after Decline in Wine Exports May 29th, 2015, http://commersant.ge/index.php?m=5&news_id=22841&cat_id=6
As exports of wine decrease, so does the expectation of grape demand and prices, according to Tsitsi Mamulashvili, the head of the marketing department at the National Wine Agency. The National Wine Agency states that after a year-over-year increase of 26% of wine exports from 2013 to 2014, exports in the beginning of 2015 have dropped significantly as a result of the economic crisis in Ukraine and Russia. Wine exports to these countries fell by 63% and 86% respectively. In the first quarter of 2015 less than 1 million bottles of wine were exported to Russia, while companies are still trying to recover their debts from shipments made in 2014. As the situation in these countries is not showing any signs of improvement, many grape farmers could face financial hardships as this is their only source of income.
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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. 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.