39 BFC Georgia Agriculture Finance Bulletin

11/2015

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39 Ge o r g i a Agriculture Finance Bulletin Georgia to Exempt 8,000 farmers from Agricultural Fines Georgia Plans to Open 20 New Agricultural Businesses Chinese Fund USD 3 million Vegetable Greenhouses in Marneuli Georgian Wine Exports Exceed 28 million bottles

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Georgian Agriculture Finance Bulletin Edition #39, November 2015

Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5) 6) 7) 8)

New Weather Station Benefits Georgian Farmers in Lower Kartli .................................................. 2 Georgia to Allocate GEL 2 Million for Subsidizing Tangerines ......................................................... 2 New Regulations for Agricultural Cooperatives .............................................................................. 2 Georgia to Exempt 8,000 farmers from Agricultural Fines.............................................................. 3 Georgian Government Steps Up Support for Tea Industry ............................................................. 3 Georgia Plans to Open 20 New Agricultural Businesses.................................................................. 3 Three New Projects Funded through Produce in Georgia Program ................................................ 4 State Agriculture Support Programs to Continue Next Year ........................................................... 4

Foreign Aid ................................................................................................................. 4 9) Otar Danelia Hosts the President of IFAD ....................................................................................... 4 10) EUR 3 million Rural Development Component Launched ............................................................... 5 11) Chinese Fund USD 3 million Vegetable Greenhouses in Marneuli.................................................. 5

Private Sector.............................................................................................................. 5 12) 13) 14) 15) 16) 17)

Georgian Wine Exports Exceed 28 million bottles .......................................................................... 5 Georgian Wine on Show at EnoExpo Fair in Poland ........................................................................ 6 Healthy Water Builds New Factory in Georgia ................................................................................ 6 Georgian Tea: A New Path Forward? .............................................................................................. 6 Georgia Agro Forum 2015 Held in Tbilisi ......................................................................................... 7 Georgian Wine Honoured in China .................................................................................................. 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 #39, November 2015

State Initiatives 1)

New Weather Station Benefits Georgian Farmers in Lower Kartli

November 5th, 2015, http://cbw.ge/economy/new-weather-station-benefits-georgian-farmers-in-lower-kartli/

Farmers in Georgia’s Lower Kartli region are now able to receive precise, real-time weather data thanks to a new Agricultural Meteorological Station established in the area. With this information, farmers will be offered timely recommendations about agriculture irrigation norms and dates to water their crops.

The recently built weather station, installed by Georgia’s National Environmental Agency, will provide valuable information to farmers including temperature, humidity, precipitation, wind speed and direction, and soil moisture content and temperature.

Similar Agricultural Meteorological Stations have been established in Georgia’s Samegrelo-Upper Svaneti region.

2)

Georgia to Allocate GEL 2 Million for Subsidizing Tangerines

November 9th, 2015, http://commersant.ge/index.php?m=5&news_id=28941

The Georgian government will allocate GEL 2 million for subsidizing non-standard tangerines. Those farmers who will deliver such mandarins for GEL 0.20 per kilogram will receive additional GEL 0.10, the Prime Minister announced at a government session.

Agriculture Minister Otar Danelia explained that the subsidy will be the same as last year, but processing and packaging quality equal to European standards should also be considered. He also stressed, “This year, the tangerine crop increased by 30-40% compared with last year. Export demand is 30-35 thousand tons, which is critical in terms of exports.”

3)

New Regulations for Agricultural Cooperatives

November 9th, 2015, http://georgiatoday.ge/news/1875/Dechert-OnPoint%3A-New-Regulations-for-Agricultural-Cooperatives

The Parliament of Georgia is currently working on set of amendments aimed at better serving the interests of farmers and harmonizing the applicable rules with the best international practices. The amendments could help lead to the rapid economic development of the country and are expected to guarantee that agricultural cooperatives, unlike other business entities, are focused more on optimization of labor forces rather than receiving profit from invested material resources.

Under the amendments, agricultural cooperatives will have associated members and general members.

The general members participate in the agricultural activities of the cooperative and hold respective stakes while associated members hold stakes but are not involved in agricultural activities. Every cooperative will be obligated to have an up-to-date member registry compliant with specific rules established by the Minister of Agriculture of Georgia.

General members are obligated to make mandatory contributions to the cooperative fund, which can be used only by the decision of the cooperative’s general assembly. The terms of contributions to be made by associated members are established by the general assembly of the cooperative, the Law and specific agreements concluded between the cooperative and the associated members. The new regulations intend to support development of the agricultural sector in Georgia.

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4)

Georgia to Exempt 8,000 farmers from Agricultural Fines

November 19th, 2015, http://agenda.ge/news/46718/eng

The Government of Georgia is making amendments to the State Property Law to help farmers work without financial obstacles. The updated law would see about 8,000 leaseholders be exempt from fines they were obligated to pay based on leasing agreements for agricultural lands signed prior to January 1, 2014. In total, the Government will forgive farmers’ fines valued at about GEL 20 million.

Economy Minister Dimitri Kumsishvili led a discussion about the amendments at today’s Governmental meeting, stating: “The Government will exempt farmers from fines; the farmers had no idea they had been fined during all these years. [This] will improve relations with farmers.” Additionally, the Economy Minister announced the Government would forgive farmers’ unpaid rents for agricultural equipment which was rented between 2005 and 2007.

5)

Georgian Government Steps Up Support for Tea Industry

November 19th, 2015, http://agenda.ge/news/46676/eng

The Government of Georgia is launching two state programs to rehabilitate the country’s tea industry.

The programs, set to begin next year, seek to rehabilitate 7,000 hectares of tea plantations, support small tea processing businesses, and support tea storage facilities in order to expand the country’s tea season and allow tea products to be better stored.

Within the scope of the programs, the state will launch certification programs together with donor organisations to ensure tea production in Georgia meets high standards. All these efforts will make it easier for Georgian tea to be exported to European markets.

Georgia’s Agriculture Minister Otar Danelia said the entire tea industry would be offered some support but Georgia’s high mountain regions would be given more support than some other areas of the country. The Government revealed 12 municipalities with the lowest economic activities that would see and enjoy "important benefits”.

6)

Georgia Plans to Open 20 New Agricultural Businesses

November 20th, 2015, http://agenda.ge/news/46774/eng

The Georgian Government is pledging to open 20 new businesses in the agricultural sector as a way to continue supporting development in the industry.

While presenting a report of the past three years’ activities, Agriculture Minister Otar Danelia said 20 new enterprises would be opened in addition to the 139 recently financed businesses. Between 2013 and 2015, the Agriculture Ministry spent USD 120 million (GEL 288 million) financing 139 enterprises which provided employment for 2,992 people.

Of the many projects the Agriculture Ministry had recently implemented, Danelia stressed the importance of providing a clean, reliable water supply to about 100,000 hectares of land. Danelia also commented on next year’s budget and said Parliament had not made any remarks about the Agriculture Ministry’s proposed areas for funding in 2016.

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BFC. Georgian Agriculture Finance Bulletin. Edition #39, November 2015

7)

Three New Projects Funded through Produce in Georgia Program

November 27th, 2015, http://agenda.ge/news/47297/eng

Three new projects – a mineral water factory, a match factory, and a cattle farm – will be funded through the Produce in Georgia program. The requisite land for the projects was purchased off that state at a symbolic GEL 1.

Operated by “Healthy Water +”, the GEL 400,000 mineral water plant will be located on 54,838 m² of land in Pansheti, Kazbegi and is expected to produce 10 million liters of mineral water per annum. The GEL 200,000 match factory, operated by local company “Marc”, will be located on 18,136 m² of land in Khobi and completed in two years. The factory will have a capacity of 100 million boxes per annum and employ 50 people, according to Minister of Economy Dimitri Kumsishvili. Zaridze Ltd is to build a high-tech cattle farm on 498 m² of land in Sakdrioni, Tianeti. The farm will be completed in two years and is expected to produced 30 tons of milk and 5 tons of meat per annum.

8)

State Agriculture Support Programs to Continue Next Year

November 27th, 2015, http://commersant.ge/index.php?m=5&news_id=29748&cat_id=5

Existing state sponsored agriculture support programs will continue next year, according to Prime Minister Irakli Garibashvili. These include the spring farming activity, Produce in Georgia, agro-insurance and agro-credit programs. The spring farming activity support program was due to expire this year.

Since 2013, roughly 800,000 farmers have benefited from state assistance, according to the Minster of Agriculture, Otar Danelia.

Foreign Aid 9)

Otar Danelia Hosts the President of IFAD

November 9th, 2015, http://moa.gov.ge/index.php?menuid=17&lang=2&id=612#.VkiEcSuVG4o

Otar Danelia, Georgian Minister of Agriculture, recently hosted Kanayo F. Nwanze, President of the International Fund for Agricultural Development (IFAD).

Mr. Nwanze’s visit is part of his larger, first visit to the Transcaucasian region. In addition to visiting the National Food Agency, the Agricultural Research Center, and the National Wine Agency, Mr. Nwanze also met with Minister Danelia to discuss future strategic priorities which IFAD can support in Georgia.

IFAD has been investing in Georgia since 1997 and is one of the most important donors in the rural agricultural system of the country. The fund has implemented four projects with a total value of approximately USD 120 million. "IFAD has made a huge contribution to the development of the agricultural sector in Georgia. A number of important programs have been implemented throughout years in Georgia under the initiative of IFAD. We are looking forward to successful cooperation in the future," said Danelia after the meeting.

Most recently, IFAD has been providing funding for a new four-year project ‘’The Agricultural Modernization, Market Access and Resilience” (AMMAR) with a total amount of USD 19 million. This project aims to raise the incomes of smallholder farmers, increase their agricultural production / processing, and improve value and supply chain performance. This is a four year project that will end in 2019.

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BFC. Georgian Agriculture Finance Bulletin. Edition #39, November 2015

10) EUR 3 million Rural Development Component Launched November 11th, 2015, http://cbw.ge/economy/georgia-and-eu-launch-e3-million-rural-development-component-under-enpard/

A new pilot project for rural development in Lagodekhi (under the EU-funded European Neighbourhood Program for Agriculture and Rural Development (ENPARD)) is being implemented by the international humanitarian NGO CARE in partnership with the National Association of Local Authorities of Georgia and the ETEA Foundation, a rural development organisation from Andalusia.

The project received EUR 3 million in financial support from the EU and focuses on the creation of Local Action Groups with representatives from local authorities, the private sector and civil society for the elaboration and implementation of local development strategies.

At a November 12 presentation of the project, guests were given the opportunity to learn about strategies, methods, and innovative approaches in rural development with a field visit to the guest houses and women’s agricultural cooperative in the village of Leliani along with an exhibition of handcrafts created by young people with special needs.

The presentation complements the recently held launching ceremony in the municipality of Stepantsminda, (Mtskheta-Mtianeti region) where the Lagodekhi project was presented along with two other pilot projects in Borjomi and Kazbegi.

Georgia is, at present, benefitting from EUR 52 million in support for agriculture and rural development through the EU-funded ENPARD programme.

11) Chinese Fund USD 3 million Vegetable Greenhouses in Marneuli November 26th, 2015, http://agenda.ge/news/47129/eng

China is investing USD 3 million in 5 hectares of vegetable greenhouses in Marneuli, Georgia. The investment is part of the GEL 7.5 million Georgia-China Technical Cooperation Project (GCTCP), financed by the Chinese government. The greenhouses will be completed by December this year, according to Minister of Agriculture Otar Danelia, who visited the site accompanied by GCTCP Project Coordinator San Hou. Georgian farmers and technicians will receive instruction in China on the latest vegetable growing techniques and technologies. The GCTCP was launched in January 2014.

Private Sector 12) Georgian Wine Exports Exceed 28 million bottles November 5th, 2015, http://agenda.ge/news/45886/eng

Georgia has exported over 28 million bottles of wine to 42 countries in the first 10 months of 2015, a 43 percent decrease than the previous year. Although wine exports have generated USD 77.2 million thus far in 2015, ongoing political-economic events in the region have seen exports drop by 54 percent in Russia and 61 percent in Ukraine (two of the heaviest importers of Georgian wine).

Despite the decline of exports this year, Georgian wine is gaining popularity and making an impression in strategically important markets such as the European Union and the United States. China is also considered one of the most strategically important markets for Georgia, where wine exports have Page 5

BFC. Georgian Agriculture Finance Bulletin. Edition #39, November 2015

increased by 87 percent. Georgian wine has also seen great increases in other important markets like Israel (212 percent increase) and Kyrgyzstan (168 percent increase).

The five countries that imported the most Georgian wine so far this year: Russia with 14,660,981 bottles, Kazakhstan with 4,004,586 bottles, Ukraine with 2,569,249 bottles, China with 1,807,955 bottles, and Poland with 1,260,870 bottles.

13) Georgian Wine on Show at EnoExpo Fair in Poland November 6th, 2015, http://agenda.ge/news/45949/eng

11 Georgian wine companies participated in EnoExpo 2015 held in Poland. The Georgian National Wine Agency supported all 11 companies as they participated in the fair to raise awareness of Georgian wine in the international market and establish connections with Polish wine importers who have helped Georgia to export 1.26 million bottles of wine to Poland during the first 10 months of 2015 (a two percent increase from the same period of last year).

Visitors to the fair were able to sample wines from countries that are famous for winemaking: Austria, Spain, France, Hungary and Italy but also from more untypical places like Armenia, Bulgaria, Croatia, Portugal, Romania, Slovenia, Ukraine and, of course, Georgia. A wine competition was also held where a Krakhuna 2013 wine from Georgia’s Amiran Vepkhvadze wine company won the top prize.

14) Healthy Water Builds New Factory in Georgia November 10th, 2015, http://agenda.ge/news/46145/eng

Healthy Water, a company that produces mineral and spring water, is expanding its products and building a new factory in Georgia’s Guria region in 2016. Healthy Water announced six bottling lines, a storage area and office will be built in the new facility, located on an area spanning 16,000m2 at cost of EUR 30 million. The facility will use renewable energy and will be an ecologically clean production system, said the company.

The new facility means Healthy Water will expand its product range of non-alcoholic beverages that meet German and Swiss industry standards. In addition to mineral and spring water, the business will soon produce 100 percent natural juices, lemonades and iced tea.

Healthy Water is implementing the project with Swiss and Austrian partners and the European Bank for Reconstruction and Development (EBRD).

15) Georgian Tea: A New Path Forward?

November 13th, 2015, http://www.georgianjournal.ge/business/31796-georgian-tea-finding-new-strength-in-unity.html

After many years of chaos and utter collapse, Georgia’s once glorious tea industry is again showing signs of life. More and more individual farmers and businesses grow, process, and pack tea. Despite competition from major producing countries and international brands, Georgian tea has great export potential because of the value attached to it all over the former Soviet Union.

While the potential is clearly there, it is not at all clear what strategy Georgian tea producers should pursue in developing the sector. The old, Soviet model of large scale sovkhoz-based production is dead

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and it is uncertain whether smallholders will be gradually replaced by large industrial farms or if smallholders can survive and thrive by cooperating with one another.

The manner in which farmer cooperation is being currently developed in Georgia is leaving the poorest Georgian farmers outside the fledgling cooperative movement. The latest proposed amendment in the Law on Agricultural Cooperatives is aimed at addressing this gap. The idea is to not allow processing cooperatives to source more than 30 percent of raw materials from non-members. The choice to be faced by such cooperatives will be to either shift to the Ltd. (business) mode of operation or expand membership.

Membership in a processing cooperative would provide smallholders with the long-term incentives, resources and knowhow to invest in skills and technology. Additionally, significant gains could be associated with better coordination and division of labor, resource sharing and mutual help.

Despite all the challenges, the future of Georgian tea looks quite bright. Local and international demand is an inexorable pull, driving investment throughout the entire value chain. It is only a matter of time before the right organizational model emerges in a process of trial and error.

16) Georgia Agro Forum 2015 Held in Tbilisi November 19th, 2015, http://www.finchannel.com/index.php/opinion/press-releases/item/52271-georgia-agro-forum-2015started-its-work-in-tbilisi

On November 19, nearly 170 representatives of agricultural companies, investment funds, banks and other business segments and industry associations from 11 countries participated in the first agricultural forum of Georgia. Georgia Agro Forum 2015 was organized by APK-Inform Agency in partnership with APK-Inform: Vegetables & Fruits and the legal service Interlegal Georgia.

The participants examined the potential of the Georgian agro-industrial complex, its investment attractiveness, and compliance with European standards. The Forum sessions also focused on the development of the fruit-and-vegetable and nut businesses as well as market segments of grains and grain by-products. The Forum also explored logistical issues between the Caspian and Black Sea regions.

17) Georgian Wine Honoured in China November 23rd, 2015, http://www.georgianjournal.ge/business/31824-georgia-named-among-5-best-wine-producer-countriesin-china.html http://agenda.ge/news/45893/eng

Georgian wine company "Teleda" was awarded honours for its 2011 Teleda - Amber Dry win at Interwine Guangzhou 2015, a wine exhibition held in Guangzhou, China. In total, 183 companies (including 9 Georgian companies) from 23 countries were participants in the wine competition.

The exhibition is the biggest professional exhibition in China to promote the progress of wine industries from all over the world. The exhibition was founded in 2005 and has business contacts with wineproducing companies from 72 countries. During the exhibition, the contractor of National Wine Agency and the head of the marketing company "Meiburg Wine Media", Debrah Meiburgh held a tasting and a seminar on Georgian wine.

Further, Kakhuri Wine Cellar participated at the Hong Kong International Wine and Spirits Fair 2015 with two of its wines. Both georgian wines received top honours at the fair.

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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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