42 BFC Georgia Agriculture Finance Bulletin

02/2016

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42 Ge o r g i a Agriculture Finance Bulletin Over GEL 3 Million for Tea Rehabilitation in 2016 Government Officials Discuss Important Projects under “Produce in Georgia” New Grant Program Available to Farmers in North-Western Georgia Local Fruits and Vegetables Outnumbered by Imported Ones

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Georgian Agriculture Finance Bulletin Edition #42, February 2016

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

Over GEL 3 Million for Tea Rehabilitation in 2016 .......................................................................... 2 Aquaculture Development Strategy Underway .............................................................................. 2 Georgian Agricultural Minister Visits Italy ....................................................................................... 2 National Extension Forum ............................................................................................................... 3 Agro-Credit Project Bearing Fruit .................................................................................................... 3 Government Officials Discuss Important Projects under “Produce in Georgia” ............................. 4 Minister Danelia Speaks at Exhibition Opening in Marseille ........................................................... 4

Foreign Aid ................................................................................................................. 4 8)

New Grant Program Available to Farmers in North-Western Georgia............................................ 4

Private Sector.............................................................................................................. 5 9) 10) 11) 12) 13) 14) 15) 16) 17) 18)

Local Fruits and Vegetables Outnumbered by Imported Ones ....................................................... 5 Norwegian Consortium Sets Up Shop in Georgia ............................................................................ 5 French-owned Lactalis Enters the Georgian Market ....................................................................... 6 Georgian Wine Exports on the Rise ................................................................................................. 6 Bay Leaf Production Set to Boom in Western Georgia.................................................................... 6 Bordeaux to Host Exhibition on Georgian Wine-Making and Viticulture........................................ 7 Georgian Wines Prosperous in Tokyo Competition ........................................................................ 7 Grant Allocation is Not Enough ....................................................................................................... 7 Hazelnut Export Value Down in 2015 .............................................................................................. 8 Georgian Students Start Producing Beet Chips ............................................................................... 8

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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State Initiatives 1)

Over GEL 3 Million for Tea Rehabilitation in 2016

February 15th, 2016, http://georgiatoday.ge/news/2984/Over-3-Million-GEL-Allocated-for-Tea-Rehabilitation-in-2016

Last year, the Georgian government announced plans to rehabilitate Georgian tea plantations under a program that would be launched in 2016. Currently preparatory work is underway, according to the Deputy Director of Agricultural Projects Management Agency, Mamuka Kvaratskhelia: “About 64 thousand hectares [of tea plantations were utilized] in the Soviet era; yet today, the majority of the land is totally devastated and other crops are grown. This program serves to utilize existing potential.”

The government will encourage those who decide to invest in this field by offering 25-year lease agreements with a symbolic price of GEL 50 on state-owned lands to this aim. The project is being carried out in several stages, and the State Budget has allocated GEL 3.5 million for the first stage which will assess whether or not a plantation’s rehabilitation is possible or not and what quality of product can be expected from the land.

Tea produced within the program will necessarily be of high quality and of a standard controlled by a scientific body. “To bring any type of good to Europe, appropriate certification is necessary. Entering Europe is not possible without standardization and certification. [Which is why] we are working in this direction too,” Kvaratskhelia said.

2)

Aquaculture Development Strategy Underway

February 15th, 2016, http://cbw.ge/business/agriculture-ministry-to-introduce-aquaculture-development-strategy-by-2017/

The Ministry of Agriculture of Georgia has launched a project for the promotion of aquaculture sector development in Georgia. The fish farms development strategy will be prepared by the end of 2016.

In a visit to fish farms in the Kakheti region, Agriculture Minister Danelia noted that “Georgia imports a major volume of fish products while the country possesses enough resources to radically change the existing situation and replace the imported products with domestic ones.”

As part of the project, the Agriculture Ministry will hand over control of Ministry owned ponds to a Georgian research center. Scientists at the center plan to explore the existing fish reserves in natural and artificial water storage reservoirs in the Sagarejo and Gurjaani municipalities. Scientific-research works will be carried out in the ponds for developing fish production to provide farmers and businessmen with new species, high-quality juvenile fish, and in establishing new technologies.

3)

Georgian Agricultural Minister Visits Italy

February 19th, 2016, http://moa.gov.ge/En/News/1056

As part of his visit to Italy, Georgian Agriculture Minister, Otar Danelia, met with Maurizio Martina, his Italian counterpart, for the first time. The two discussed the importance of modern technology in the agrarian sector and the implementation of scientific research results. Mr. Danelia noted the importance of Italian support and experience as Georgia works to identify export potential for Georgian agro products and diversify their export markets.

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The two ministers signed a memorandum of cooperation which will give Georgian agribusinesses insights learned from Italian experience in such fields as: rural development, enology, viticulture, aquaculture, phyto-sanitary, agro-tourism, agro insurance, control system of protected geographical indications and appellations of origin, and how to have an access to financial instruments and to use them.

At the conclusion of the meeting, Minister Danelia invited his counterpart and other Italian representatives to visit Georgia in the near future for further exchanges and development opportunities.

4)

National Extension Forum

February 22nd, 2016, http://moa.gov.ge/En/News/1057

The National Extension Forum took place between February 22, 2016 and February 24, 2016 with cooperation of the Georgian Agriculture Ministry and the USAID-funded ‘Strengthening Extension and Advisory Services in Georgia.’ The objective of the forum aims to, ultimately, lead to improved production practices and farmer knowledge in Georgia.

The forum is a unique platform where all stakeholders (including farmers' associations, members of agricultural cooperatives, private and state sectors, non-governmental organizations and educational institutions) could bring forward issues related to the development of extension service in Georgia.

Strengthening extension and advisory services promotes the sustainable development of agriculture, facilitates the inclusive economic growth, and brings significant benefits to the Georgian people.

The forum highlighted a new strategy, which was developed by the Ministry to enhance information and consultation service centers that were established under the initiative of the Ministry of Agriculture in all municipalities throughout the country in 2013.

5)

Agro-Credit Project Bearing Fruit

February 22nd, 2016, http://georgiatoday.ge/news/3054/Georgian-Tea-Exported-to-Mongolia http://georgiatoday.ge/news/2934/Nut-Processing-Factory-Opens-in-Western-Georgia

Since 2013, Project Management Agency, part of the Ministry of Agriculture, has been implementing an agro-credit project. Within the project, preferential loans are issued for establishing new enterprises as well as for expanding existing ones. Two companies have recently utilized the agro-credit preferential loans to develop and expand upon new market opportunities.

A new nut processing factory has launched in Zugdidi in western Georgia. Employing 50 people, Nutinvest has plans to produce tons of product each year for export to the EU market. Built in August 2015, their factory represents an investment of USD 430,000 of which USD 172,000 was a grant and USD 215,000 came in the form of preferential agro-credit.

Emir, a company based in Adjara, employs more than 30 people and has built a modern factory to process tea acquired from existing plantations in western Georgia. The processed, high-quality tea is then exported to the Mongolian market.

The project has already funded more than 600 operations for 147 new enterprises, employing about 10,000 people.

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6)

Government Officials Discuss Important Projects under “Produce in Georgia”

February 25th, 2016, http://cbw.ge/business/three-important-projects-for-business-development/ http://cbw.ge/economy/investor-to-put-40-000-gel-in-ozurgeti-tea-processing-plant/

During a recent cabinet session, government officials discussed three important projects to be financed under the “Produce in Georgia” program: a nut processing plant in Menji (Senaki municipality), a tea processing factory in Dvabzu (Ozurgeti municipality), and a dairy factory in Gardabani.

The nut processing plant in Menji is to have a planned output of 200 tons annually and will receive a government investment package worth GEL 200,000 in addition to the LLC Nochiola Georgia’s investment of GEL 186,000.

LLC Bouquet of Georgia will establish a tea processing plant in the village of Dvabzu and invest GEL 40,000 for the business development. For its part, the government will hand over 7,000 square meters for the project at a symbolic price of GEL 1.

LLC Raikavshiri Tanadgoma will produce mainly cheese and cottage cheese at 60,000 kilograms and 15,000 kilograms per year, respectively. They are expected to receive an investment of GEL 100,000 under the program. Read More »

7)

Minister Danelia Speaks at Exhibition Opening in Marseille

February 26th, 2016, http://moa.gov.ge/En/News/1058

Otar Danelia, Minister of Agriculture, attended the opening ceremony of agricultural exhibition in the Museum of European and Mediterranean Civilizations in Marseille, France where an exhibition stand is dedicated to Georgian wine culture. Speaking at the event, the Minster noted that “it’s important to promote Georgia in Europe as a country with an ancient civilization with a wine culture, a history and tradition. This will help to increase awareness of Georgian products in the European market.”

Georgia has an ancient history of winemaking; its winemaking heritage goes back 8,000 years.

Foreign Aid 8)

New Grant Program Available to Farmers in North-Western Georgia

February 24th, 2016, http://www.finchannel.com/index.php/world/georgian-news/item/54817-georgia-new-grant-supportprogramme-now-available-to-local-farmers

A new grant support program is now available to local farmers in the Racha-Lechkhumi region of northwestern Georgia. The goal of the grant scheme is to support the modernization and renovation of pig farms and the construction of ham smoking facilities.

Animal husbandry is an important agricultural sector in Georgia, especially in the mountainous regions.

While farmers in this region have a long tradition of swine farming, the sector has been heavily affected by repeated outbreaks of animal diseases, obsolete equipment and outdated farming methods.

Launched by the United Nations Food and Agriculture Organisation (FAO), the funds are provided by the Austrian Development Agency through the EU-funded European Neighbourhood Programme for Page 4

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Agriculture and Rural Development (ENPARD). The initiative aims to enhance local ownership of the rural development process, build capacity and provide resources and incentives for improving services in agriculture, ecotourism and other rural businesses.

Private Sector 9)

Local Fruits and Vegetables Outnumbered by Imported Ones

February 2nd, 2016, http://www.sarke.com/cgi/search/news.asp?Code=10046613

There is abundance of imported fruits and vegetables in local markets, but a shortage of domestically produced products in the same markets, according to newspaper Rezonansi. Georgian vegetables are represented on the market by small amount of carrot, cabbage and potato; there are almost no Georgian fruits.

There has been a marked rise in export growth recently, especially to Russia following their embargo imposed on Turkish imports. Soso Manjavidze, manager at Georgian Fruit Company, notes that 90% of Georgian fruit exports now go to Russia. A shortage of Georgian fruit in the local market was expected, he added. Manjavidze also spoke to the “big obstacle of undeveloped regional logistics in Georgia. For instance, we faced problem of harvest collection and storage, and we could not find a solution to this problem.”

As the newspaper reports, current major suppliers of vegetables to Georgia are Turkey, Iran, Armenia and Azerbaijan. Import from these countries is especially active in winter.

10) Norwegian Consortium Sets Up Shop in Georgia February 3rd, 2016, http://agenda.ge/news/51769/eng

Georgia’s Ministry of Agriculture and Green Sea Food signed a Memorandum of Cooperation outlining a deal that will see a Norwegian consortium invest in Georgia’s Adjara region to start farming salmon.

The deal will see Green Sea Food bring the latest technologies in salmon farming to Georgia in order to establish a farm which produces biologically clean fish. Georgia’s geographic location and preferential investment environment were keys reasons in the Norwegian group’s interest. “Georgia’s water resources – rivers, lakes and sea – are very preferential for developing aquaculture, and Georgia is situated in the centre of the Silk Road; therefore Georgia is a perfect place for fish producing,” said a Green Sea Food representative.

The deal has the support of Georgian Agricultural Minister Otar Danelia: “We made the first important step forward in developing aquaculture in Georgia and signed a memorandum with a Norwegian company. This company will run a three-phase pilot project and within the project [Green Sea Food] will produce, process and export fish.”

The Minister said this project makes Georgia the first country in the region to implement this type of project.

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11) French-owned Lactalis Enters the Georgian Market February 3rd, 2016, http://georgiatoday.ge/news/2855/Dairy-Product-Company-Lactalis-Enters-Georgian-Market

French family-owned company Lactalis has entered the Georgian market and became shareholders in Sante, one of the market leaders in milk and dairy production in Georgia. Entering the Georgian market will enable the company to take Georgian products into the international market and, thus, contribute to the country’s economy.

According to the Prime Minister Giorgi Kvirikashvili, the company’s participation in Georgian dairy production is an important signal to international investors: “It is very good that the company has chosen Georgia as the entry point in the South Caucasus and wants to cover the regional market through Georgia.”

Lactalis is the third largest dairy group in the world, worth EUR 16.5 Billion in 2014 and employs 75,000 employees with more than 200 factories in 43 countries.

12) Georgian Wine Exports on the Rise February 10th, 2016, http://agenda.ge/news/52161/eng

2016 has started off in a positive direction for Georgian wine exports. In the first month of the year, over 1.5 million bottles of wine have been exported to 19 different countries — generating USD 3.62 million for Georgia. This represents a 13 percent growth over January 2015 numbers.

The top importers of Georgian wine are: Russia (960,462 bottles), Ukraine (199,722 bottles), Poland (114,276 bottles), China (45,160 bottles) and Lithuania (44,850 bottles). Exports to Russian are up a staggering 162 percent, to Lithuania 34 percent, and to Poland 22 percent.

January 2016 also saw over half a million bottles of brandy exported, a 104 percent increase worth USD 1.51 million. In total, Georgian exporting of alcoholic beverages has generated approximately USD 6.6 million for Georgia.

13) Bay Leaf Production Set to Boom in Western Georgia February 12th, 2016, http://cbw.ge/business/laurus-plans-the-production-of-200-tons-of-bay-leaves-and-its-export-2/

Refinery enterprise of bay leaves Laurus, located in western Georgia, plans to expand processing to 200 tons of high-quality bay leaves for export to the Russian market. Laurus, founded in October 2014, has been highlighted by Agriculture Minister Danelia as one of the most successful enterprises to be funded with the government’s preferential agro-credit. “The new enterprise provides a full cycle of bay leaf processing,” Minister Danelia stated. “More than 100 people are employed in the enterprise, and a number of other, similar enterprises are expected to open soon in western Georgia.”

The success of Laurus and the opening of additional enterprises is hoped to bolster employment opportunities for locals in the region.

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14) Bordeaux to Host Exhibition on Georgian Wine-Making and Viticulture February 15th, 2016, http://georgiatoday.ge/news/2975/Bordeaux-to-Host-Exhibition-Dedicated-to-Georgian-Wine-Makingand-Viticulture

The Bordeaux Center for Wine and Civilizations will host a large scale Georgian exhibition dedicated to wine-making and viticulture in 2017. Georgia will be the first invited country to open the series of exhibitions of wine-making and viticulture in the Bordeaux Center In recognition of the importance of the event, the Georgian government has set up a special commission, headed by the Minister of Agriculture, Otar Danelia. The commission has been charged with ensuring the event is successful and presented at a high level. “Bordeaux is a world center of winemaking. Presenting Georgia at the exhibition, as the cradle of wine, will promote our country in Europe and throughout the world,” Minister Danelia said. “It is important that Georgia be presented at the exhibition not only in terms of wine-making, but also in terms of culture, ethnography and history.”

The Bordeaux Center for Wine and Civilization will open on May 31st, 2016. The Center will feature modern architecture and technology and will present the latest achievements in the field.

15) Georgian Wines Prosperous in Tokyo Competition February 15th, 2016, http://cbw.ge/economy/great-success-of-georgian-wines-on-tokyo-international-competition-2016/

Georgian wines competing at the 3rd Sakura wine competition in Tokyo achieved great success. The international competition hosts contestants from 35 countries, presenting more than 3,500 wines.

Degustation was held between January 30, 2015 and February 3, 2016.

Four Georgian wines received a silver medal, and another four brought home gold medals; however, Kakhuri’s Sapravi. Reserve 2005 earned a “double gold medal.” The “double gold medal” means the wine will be showcased at the Foodex Japan international exhibition on March 8, 2016 for the chance to earn the highest award — the Diamond Trophy.

Georgian wine’s success in such events is a good sign for the industry and more such activities hope to popularize Georgian wine in markets all over Asia.

16) Grant Allocation is Not Enough February 18th, 2016, http://www.sarke.com/cgi/search/news.asp?Code=10046772

When entrepreneurs buy the necessary equipment and upgrades by means of donor funding, they face a number of other obstacles. Soso Archvadze, doctor of economics, points out that allocation of funds is not enough: “Let’s say several hundred million lari are allocated for plowing the land, but do we need to plow so much land? Maybe it is better to direct this funding elsewhere.”

Levan Dadiani, program manager of Oxfam, has observed that hundreds of millions of lari have been issued in grants for agricultural production over the last 25 years; however, the sustainability rate of such initiatives is very low: “The problem is complex and is not caused only by a shortage of money. We face insufficient accessibility of investments, issues in business management knowledge, the capacity of market operations and infrastructure.”

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17) Hazelnut Export Value Down in 2015 February 19th, 2016, http://www.sarke.com/cgi/search/news.asp?Code=10046784

Georgian hazelnut exports in 2015 came in at USD 167 million, USD 7 million less than 2014.

Turkey, the world’s largest producers of hazelnuts, had an abundant harvest in 2015 which caused a drop in the price of the nut on the world market to nearly half of previous levels.

Georgia is the 5th largest hazelnut producer country worldwide.

18) Georgian Students Start Producing Beet Chips February 26th, 2016, http://www.georgianjournal.ge/business/32247-georgian-students-start-producing-beet-chips.html

Georgian students from Agrarian University have recently produced apple chips which were positively received at a degustation event. They now are moving towards creating beet chips and are confident their reception will be equally positive.

Shalva Mdzinarashvili, one of the innovators, described the motivation behind this idea: “Our main goal is to give the vegetables and fruits some additional function so that they become more acceptable and useful for many people. We think our products will be acceptable for children as well as their parents.

Fruit and vegetable chips are not only delicious but also very wholesome.”

Students are planning to produce 50-gram packages and say that the price will be affordable for everyone.

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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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