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47 Geo r g i a Agriculture Finance Bulletin German Delegation Interested in Investment Opportunities in Georgia Georgia Begins Exports to the United Arab Emirates PAFAI Project Working to Revamp Agricultural Insurance to Georgia Wine and Brandy Exports Experience Increases in the Past Six Months
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Georgian Agriculture Finance Bulletin Edition #47, July 2016
Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5) 6) 7) 8) 9)
German Delegation Interested in Investment Opportunities in Georgia ........................................ 2 Georgia Begins Exports to the United Arab Emirates...................................................................... 2 State Program to Support Land Privatization .................................................................................. 2 Georgian-Polish Exchange on Potato Plant Analysis Methods ........................................................ 2 More than 130 Irrigation Rehabilitation Projects Implemented since 2012 ................................... 3 State-owned Land Leased to the New Georgian Tea Company ...................................................... 3 Government to Subsidize 2016 Grape Harvest ............................................................................... 3 New State Program Offers Greater Support for Agricultural Cooperatives .................................... 3 Government Approves Agricultural Land Registration Bill .............................................................. 3
Foreign Aid ................................................................................................................. 4 10) 11) 12) 13) 14) 15)
PAFAI Project Working to Revamp Agricultural Insurance to Georgia ............................................ 4 ENPARD Georgia Phase I Ends with a Budget of EUR 52 Million ..................................................... 4 USAID Launches New ZRDA Activity in Georgia Project .................................................................. 5 EBRD Finds Financial Support for Georgian Chemical Producer ..................................................... 5 Racha Beekeeping Cooperative Formed Through ENPARD-AYEG Program .................................... 5 Agriculture Sector Included in USD 400 Million EBRD Investment Program .................................. 5
Private Sector.............................................................................................................. 6 16) 17) 18) 19) 20) 21)
Hazelnut Enterprises Introducing New Food Safety Standard ........................................................ 6 Georgian Peaches Bursting into the Markets .................................................................................. 6 Wine and Brandy Exports Experience Increases in the Past Six Months ........................................ 6 Number of Small Milk Processors in Georgia Rising ........................................................................ 6 Pistachio Association Launches Seedling Program .......................................................................... 7 Mixed News for the Georgian Grain Harvest .................................................................................. 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
State Initiatives 1)
German Delegation Interested in Investment Opportunities in Georgia
July 4th, 2016, http://www.sarke.com/cgi/search/news.asp?Code=10047998
A German delegation of investors recently visited with the Georgian Minister of Agriculture to become better acquainted with investment opportunities in Georgia. Delegation members particularly had interest in investments that could be made in the areas of winemaking, tea plantation rehabilitation, and state programs dealing with preferential agriculture lending and agricultural insurance. Delegation members expressed hope to discuss concrete investment proposals in the near future.
2)
Georgia Begins Exports to the United Arab Emirates
July 5th, 2016, http://www.sarke.com/cgi/search/news.asp?Code=10048010
The Ministry of Economy and Sustainable Development has announced that the first batch of Georgian blueberries has been successfully exported to the United Arab Emirates (UAE) with the support of the Entrepreneurship Development Agency. Negotiations are also underway for additional export opportunities to the UAE, including the potential export of vegetables, fruits, lemonades, mineral water and other foodstuff.
3)
State Program to Support Land Privatization
July 7th, 2016, http://www.sarke.com/cgi/search/news.asp?Code=10048035
The government has given its approval to go ahead with a plan to privatize agricultural land plots in certain areas which, for all intents and purposes, have been owned by private individuals for at least 15 years. For the moment, the plan will start in high-mountain settlements where land reform had not previously been conducted and legalize land ownership for local residents. The cost of privatization has been set at a symbolic GEL 1 for any plot of land up to 1.2 hectares and 10 times the annual property tax for larger land plots.
4)
Georgian-Polish Exchange on Potato Plant Analysis Methods
July 8th, 2016, http://bizzone.info/agriculture/2016/1468042305.php
Specialists from Georgia’s Agriculture Ministry traveled to Poland between July 18 and July 22 to visit a laboratory in the city of Torun and learn about methods of soil and potato analysis for quarantine organisms. During the five-day visit, Georgian experts learned about the organization of mycological and phytosanitary diagnostic laboratories in Torun as well as how quality assurance and laboratory accreditation are managed in Poland. The two sides also discussed rules of soil and plant sampling, sample handling, methods of parasite identification, and diseases in potato plants. The event was organized by the Technical Assistance and Information Exchange Instrument of the European Commission (TAIEX) in cooperation with the Main Inspectorate of Plant Health and Seed Inspection Service of Poland.
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5)
More than 130 Irrigation Rehabilitation Projects Implemented since 2012
July 12th, 2016, http://www.sarke.com/cgi/search/news.asp?Code=10048076
The Ministry of Agriculture has reported that more than 130 projects to rehabilitate irrigation systems have been implemented in Georgia since 2012, giving more areas of drained lands to work. Of particular note is the restoration of 637 kilometers of melioration channels in the Samegrelo, Guria, Imereti, and Ajara regions which now have an increased availability of drained land to utilize.
6)
State-owned Land Leased to the New Georgian Tea Company
July 15th, 2016, http://georgien.ahk.de/georgien/newsletter/agro-food-news-georgia/agro-sv/artikel/land-plots-handed-overto-new-georgian-tea-in-leasing/?cHash=2daa5877906b0c526c157b339fca13bd
Four state-owned land plots with a total area of 53.53 hectares in Laituri village (Guria region) have been leased to the New Georgian Tea company as part of the Georgian Tea state program which is seeking to revitalize the Georgian tea industry. The terms of the lease give the land to the company for tea production for 25 years with an annual fee of GEL 2,667.
7)
Government to Subsidize 2016 Grape Harvest
July 18th, 2016, http://georgiatoday.ge/news/4266/Government-to-Subsidize-Grape-Harvest-2016
Georgian Prime Minister Giorgi Kvirikashvili announced the Georgian Government will subsidize the 2016 grape harvest and support farmers in selling their produce in full. The move is part of a government effort to focus on developing the local wine industry and exploring new local and export markets for grapes. The amount of subsidy is dependent the grape variety with white, Rkatsiteli grapes receiving USD 0.19 (GEL 0.45) per kilogram and red, Saperavi grapes receiving USD 0.085 (GEL 0.20) per kilogram. A similar grape subsidy program in 2015 cost approximately USD 12.8 million (30 million GEL).
8)
New State Program Offers Greater Support for Agricultural Cooperatives
July 21st, 2016, http://agenda.ge/news/62459/eng
The government of Georgia is stepping up support for agricultural cooperatives by making it easier for them to do business with a recently approved program that will provide cooperative farms with technical equipment. Under the program, most cooperatives will receive 30% co-financing from the state to purchase agricultural equipment while cooperatives that operate in high mountainous regions of Georgia will receive 40% co-financing from state. The general aim of the new program is to increase the productivity of cooperatives, make their products more competitive in local and international markets, and bring greater returns for farmers.
9)
Government Approves Agricultural Land Registration Bill
July 28th, 2016, http://www.sarke.com/cgi/search/news.asp?Code=10048222
A draft agricultural land registration bill has been approved by the government. The bill will promote development by streamlining the agricultural property market, said Prime Minister Giorgi Kvirikashvili. Land registration barriers will be removed and processes facilitated, while reference retrieval and other notarial services will free for Georgian citizens. With inaccurate land measurements hampering registration in the past, the bill will also introduce common land survey methods. Page 3
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Foreign Aid 10) PAFAI Project Working to Revamp Agricultural Insurance to Georgia June 30th, 2016, http://georgiatoday.ge/news/4136/Georgia%E2%80%99s-Quest-to-Promote-Agricultural-Insurance
The Georgian government is working to build a positive image of agricultural insurance as the best way to mitigate the risks rural families face when natural disasters strike or crops fail. Traditionally, farmers have relied on government compensation in such events rather than insurance, and previous attempts to introduce agricultural insurance on mass have not been as successful as desired. Now, the Agricultural Projects Management Agency (APMA) is partnering with the Swiss Agency for Development and Cooperation (SDC) to revamp the Agro Insurance Program through the Promoting Access to Finance and Agri-insurance in Georgia (PAFAI) project. PAFAI is working to advise the government on agricultural insurance regulations and public-private partnerships as well as promoting insurance literacy among farmers through the creation and distribution of education materials such as easy-to-understand brochures and videos. Project staff is also working diligently to create a clear and transparent loss adjustment methodology as it will be crucial for insurance schemes and for the longterm and sustainable development of agricultural insurance in Georgia. By improving the quality of the product and increasing awareness about it, the government hopes that more farmers will buy insurance. The Georgian government and its partners face a long road towards expanded use of agriculture insurance; however, if the Agro Insurance Program and other, similar initiatives can be effectively put in place, Georgian farmers will be in a stronger, more secure position. Read More Âť
11) ENPARD Georgia Phase I Ends with a Budget of EUR 52 Million July 5th, 2016, http://www.finchannel.com/index.php/world/georgia/58414-enpard-georgia-phase-i-budget-amounted-to-eur52-million
The European Neighborhood Program for Agriculture and Rural Development (ENPARD) has ended its first phase in Georgia. ENPARD was launched in Georgia in 2013 and has utilized EUR 52 million since then with the aim of reinvigorating the agriculture and the rural sectors in Georgia by supporting the Government's Agriculture Sector Strategy, strengthening small farmer organizations, and enabling sustainable rural development. The program is composed of a variety of aid modalities that include direct budget support to the government and technical assistance and small grants for nongovernmental organizations. Over the past three years of operation in Georgia, ENPARD has successfully: supported the development of the Strategy of Agricultural Development in Georgia 2015-2020; created monitoring and evaluation mechanisms; developed an effective coordination system between donors and those in need of their support; developed and delivered human resource training programs; helped establish 59 extension service centers which provide information and consultation to farmers and the rural population; and supported other state aid programs in the agricultural sector. ENPARD has also lent its support directly to more than 200 cooperatives and 1,700 farmers, who have received training and funding that amount to nearly GEL 1.4 million, and ENPARD cooperation schemes are credited as having significantly reduced the production costs of farmers. Read More Âť
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12) USAID Launches New ZRDA Activity in Georgia Project July 12th, 2016, http://moa.gov.ge/En/News/1148
The United States Agency for International Development (USAID) is launching a new project called ZRDA Activity in Georgia. The five-year project aims to facilitate sustainable development in border communities and will target the development of small- and medium-sized enterprises, rural poverty reduction, and revenue growth. It will also give opportunities to enhance trade relations between entrepreneurs and buyers, establish and strengthen business connections, and accelerate local economic development. The project will begin by working in the village of Nikozi (Shida Kartli region).
13) EBRD Finds Financial Support for Georgian Chemical Producer July 21st, 2016, http://cbw.ge/economy/ebrd-supports-georgian-chemical-producer-rustavi-azot/
The European Bank for Reconstruction and Development (EBRD) has arranged a USD 155 million financing package for Georgian manufacturer Rustavi Azot, a producer of nitrogen-based fertilizers and the largest industrial enterprise in Georgia. The funds come in the form of loans from EBRD, Dutch development bank FMO, East West United (a Luxembourg-based bank), and the Bank of Georgia. The funds will be used for restructuring debt and modernizing the ammonia production line, using energy-efficient measures that will decrease energy consumption by 30%. The refurbished plant will comply with higher environmental standards and improve its international competitiveness. This is seen as an important investment for Georgia’s chemical sector and will significantly increase export capacities. It will provide Rustavi Azot with a stable financing platform for introducing energy efficiency measures and will also contribute to greater productivity and setting higher environmental standards in the region.
14) Racha Beekeeping Cooperative Formed Through ENPARD-AYEG Program July 27th, 2016, http://www.economists.ge/en/news/200-success-story-coop-racha-natural-products
The Racha Natural Products (RNP) beekeeping cooperative was formed following a grant from a joint Association of Young Economists Georgia (AYEG) and European Neighbourhood Programme for Agricultural and Rural Development (ENPARD) project promoting the formation of cooperatives in the Racha-Lechkhumi Region. Cooperativization allowed members to address honey bee reproduction and disease issues more effectively, while ramping up honey production, according to RNP representatives. The cooperative also receives financial advice from AYEG. RNP now boasts 7 members, including 1 woman, and provides honey to the domestic market, as well as Turkey and Azerbaijan. The AYEG-ENPARD program – which runs until mid-2017 – aims to reduce rural poverty by increasing the productivity and revenues of small farms, agribusinesses and other rural enterprises through the formation of cooperatives. Since its launch in February 2014, the project has helped establish and fund 23 cooperatives.
15) Agriculture Sector Included in USD 400 Million EBRD Investment Program July 28th, 2016, http://cbw.ge/business/ebrd-plans-invest-400-million-georgia/
The European Bank for Reconstruction and Development (EBRD) has earmarked USD 400 million for agriculture, renewable energy, hotel industry, and capital market development in Georgia. An agriculture sector training program will begin on September 21, said Economic Advisor to the President Page 5
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Maia Melikidze following discussions with EBRD Director for the Caucasus, Moldova and Belarus Bruno Balvanera. EBRD loans are advantageous due to their long maturity periods, with beneficiaries receiving 15% of loan amount from the European Union (EU) and the rest from the Bank, said Balvanera.
Private Sector 16) Hazelnut Enterprises Introducing New Food Safety Standard July 1st, 2016, http://georgien.ahk.de/georgien/newsletter/agro-food-news-georgia/agro-sv/artikel/enterprises-areintroducing-food-safety-standard-iso-22000/?cHash=aff541d697ce1a098307f4164bc2d538
Three hazelnut enterprises in the Samegrelo region are introducing the international standard of food safety management ISO 22000:2005 with the aid of the Agriculture Projects Management Agency and the United States Agency for International Development (USAID). Co-financing will be secured to cover 80% of the cost of introducing the new food management system into the enterprises.
17) Georgian Peaches Bursting into the Markets July 4th, 2016, http://georgiatoday.ge/news/4160/Georgian-Peach-Export-Rockets-
Georgian peaches are exploding onto the market. 942 tons of peaches were exported between June 1 and June 28 this year, more than 1,000 times last year’s 52 tons during the same period. In total, Georgia’s Ministry of Agriculture is projecting around 30,000 tons of peaches to be sold in domestic and international markets this year. Russia, Azerbaijan, Kazakhstan, Armenia and Ukraine are the leading importers of Georgian peaches.
18) Wine and Brandy Exports Experience Increases in the Past Six Months July 5th, 2016, http://www.sarke.com/cgi/search/news.asp?Code=10048009
The National Wine Agency is reporting that wine exports for the past six months amounted to USD 46.6 million, an 18% year-on-year increase. In terms of volume, this represents 19.8 million bottles exported, a 44% increase. Growth was experienced in the top five export markets for Georgian wine (Russia, Ukraine, China, Kazakhstan and Poland) as well as emerging markets like Belarus, Lithuania, and Germany, and Canada. Brandy export also showed growth and amounted to USD 8.5 million, a 20% year-on-year growth. In total, revenues from the export of wine, brandy, chacha, wine material, unbottled brandy and brandy spirit exceeded USD 33.1 million.
19) Number of Small Milk Processors in Georgia Rising July 18th, 2016, http://cbw.ge/business/leading-companies-ignore-genuine-milk/
Over the past few years, many small milk processing companies have appeared in Georgia thanks to joint efforts of the government and the nongovernmental sectors in providing grants and preferential loans as a stimulus to small businesses involved in the agricultural sector. Despite this rise in the number of companies, almost all small milk processors focus on cheese production rather than that of milk. This is due to milk production being dominated by Sante and MilkoFood (collectively controlling 50% - 60% of Page 6
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the market) and their almost exclusive reliance on milk powder as opposed to natural, unprocessed milk. The use of milk powder is both cheaper and safer, and new businesses who try to enter the market with natural product often find a difficult time finding a niche and competing against the two companies.
20) Pistachio Association Launches Seedling Program July 26th, 2016, http://cbw.ge/business/pistachio-family-project-underway-georgia/
The Georgian Pistachio Association (GPA) launched its “Pistachio in Our Family” seedling voucher program. Successful applicants can purchase up to 3 pistachio seedlings and will have access to a free pistachio farming advisory service. The GPA aims to promote pistachio farming and consumption across Georgia, while determining which regions are best suited to the nut’s cultivation.
21) Mixed News for the Georgian Grain Harvest July 29th, 2016, http://cbw.ge/economy/georgian-wheat-becomes-cheaper/ http://agenda.ge/news/61354/eng
Georgia is enjoying a record harvest of wheat, rye, barley and other grains. This year four tons of grain is expected to be harvested off each hectare of land, double the amount grown in 2015. Also, there is more land being used this year than in previous years. To aid in the large harvest, the Ministry of Agriculture has provided 86 special harvesting machines to farmers in the eastern Kakheti and Shida Kartli regions. Despite the large harvest, grain producers are bracing themselves for a reduction in prices as large harvests are projected globally, and Russia is expecting a record harvest this year. The mass harvest will put pressure on the market and further drive prices down. For example, the price of wheat is already down to GEL 0.41 per kilogram — GEL 0.10 lower than last year. 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. 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.