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Georgian Local Agriculture Success – an Attraction for Foreign Investments and a Needed Boost for Regional Agricultural Hub Status - Diplomat Magazine
Despite the numerous woes elicited by the COVID-19 pandemic, Levan Davitashvili, Georgia’s Minister of Environment and Agriculture is pleased with the results achieved in the agricultural sector for 2020. Although he clearly notes that farmers have experienced challenges and are still experiencing some difficulties, he is optimistic that the solutions in place will yield appreciable results in no distant time.
Diplomat spoke to him about these challenges and other topical issues:
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How prepared was the Georgian agricultural sector to meeting the challenges presented by the pandemic and what were the main challenges that the Ministry had to deal with?
The crisis mostly affected the agro-food sector. In particular, there have been delays in the delivery of food all over the world, including our region. This was due to several factors, the first - food supplies - the physical presence of products and the second, logistics challenges, as new regulations on both freight and air transport were introduced to restrict traffic flows due to the spread of the infection.
The first thing we, i.e., the government took care of was to ensure that the provision of food to the population would not be a problem. The ministry received an assignment and began monitoring basic and primary food products to ensure that supplies were constantly replenished. At the same time, we created a platform for communication with the private sector, which allows us to plan and make instant decisions in an ongoing basis so that food is always available to our population.
As for the agricultural sector, work continued because, unlike other fields, the seasonal factor is very important for agriculture, so even in the conditions of strict closure, farmers had the opportunity to carry out their field work. However, field work requires a lot of support, especially from the service sector and other industrial areas that include mechanization, equipment maintenance / repair, fuel supply, and uninterrupted supply of auxiliary materials (fertilizers, pesticides, agro-chemicals). In many cases this is done by combined operators, which were quite limited under the strict lockdown conditions.
It should be noted that none of the long-term state-oriented development programs, such as co-financing, support for the creation of new farms, etc., have been suspended.
Which industries have been mostly affected by the pandemic, and what is the ministry’s vision for supporting them?
The tourism-related sectors have suffered the most. When the country loses 9 million tourists who would have been direct consumers, naturally the price of delivery in the domestic market increases. The reduction in demand was also caused by the compensatory switchover of the population to a relatively cheap product. For example, when cereals became more expensive in spring and seasonal potatoes, which are quite cheap, came out, potatoes replaced them in the food package. However, this is not favorable for our farmers, so by reducing prices for certain products, we have been helping producers to focus on reducing production costs.
With the help of 200 GEL per hectare, farmers would be able to purchase fertilizers and planting materials. The direct aid package summed up to about $ 40 million. Farmers also received diesel at a reduced price. In total, it was a discount of 5 million GEL in the form of subsidy for cheap diesel. Up to 30 million loans were also issued for annual crops, which was an available resource for anyone who wanted to do business in agriculture, as the bank interests will be fully covered by the state. Consequently, production became cheaper with easy resources and money. I think this kind of subsidy and intervention was a responsible step on our part.
Overall, we can say that 2020 is better than the previous year in terms of agricultural development, and we expect that subsequent years will bring better results, all of which would emanate from the efforts made over the last few years. We are already getting examples of this via the record exports of peach crops, the first multi-million dollar exports of berry crops (blueberries). Georgia has not exported regular apples for the last ten years, but we are returning to the market gradually and we are already in the second successful year that we have been able to sell Georgian apples abroad. Also noteworthy are the increased exports of mutton, live sheep, and the record number of birds sold.
In the Strategic Development Document designed for 2015-2020, it was written that the Agricultural Development Plan will be tailored to each region to achieve sustainable entrepreneurial development. In which region did you start implementing this plan and where do we have noticeable progress in terms of productivity growth?
When we talk about the regional vision, we are trying to set a correct and successful example for the European Union. The EU has an approach to the so-called local action groups. This is why we are pursuing the development of LAGs (Local Action Groups), which involves various members of the community, with some of them in the farming community, local civil society, local government, academia, or the scientific circles. They set priorities for a specific district and municipality, and work on a rural development plan, which is then implemented in close cooperation with the ministry. We currently have similar Local Action Groups in 19 municipalities and we are piloting them with the EU.
We have two components: the first, which includes pure agricultural activities, and the second includes the promotion of various sectors of the agricultural economy, or the promotion of various economic activities in rural areas, such as agriculture. For example, processing of agricultural products (storage, packaging, and sorting) may also include tourism elements such as agro-tourism, eco-tourism and wine tourism. It can also be an avenue for us to make good use of forest and natural resources because there are municipalities in Georgia where agricultural capacity and arable land are very scarce, but there are forest resources that are used properly and sustainably to bring economic benefits.
As part of our cooperation with the EU, we also look forward to launching another new program that will focus on several regions and cover many components of rural development over the next 4 years.
The regional context was also taken into account in our agricultural development programs. In particular, support based on soil and climate data, such as the Georgian Tea program, provided for the rehabilitation of tea plantations in major tea producing regions (Samegrelo, Guria, Imereti, Adjara). We also pivoted a hazelnut relief program aimed at fighting harmful diseases. The introduction of agro-techniques on farms and the experience also included elements of regional development. The cultivation of perennial crops is also targeted at specific regions, which have been verified and confirmed by our scientific-research center.
In the 2013 UNDP report, we read that Georgia lags behind other countries in the region in terms of wheat and corn production, but no physical or geographical obstacles have been identified by experts. What has the state done to increase grain production?
There is a lot of speculation around this issue and I want to use this interview as a response. When we talk about our dependence on Russian wheat, it should be taken into account that as at today, Russia is a global supplier of cheap and quality grain. Buying from Russia has replaced local production in too many countries and is breaking records in exports every year. At the same time, the region has the second largest supplier - Ukraine, which is a leader and competitive producer of grain, as well as Kazakhstan, close to the world leading producers. So the regional context should be taken into account when talking about the development in this direction. In agriculture, the main thing is to create more value, more prosperity, and more income for the rural population. These are two starting points in the process of developing an agricultural development plan but, it is not that we are focused on producing only one particular crop.
As for corn, we have total self-sufficiency here, and productivity is growing yearly. I expect us to produce even more, because the country really has the potential to do that.
It is noteworthy that we gave access to cheap monetary resources for cereal farmers, for their industrial and technological development and to boost their motivation. It should also be noted that Georgia is a small land country and we do not have the luxury of having low productivity so, with the use of irrigation infrastructure, we can significantly increase productivity per
hectare. We already have instances where we use appropriate irrigation material (irrigated or underground drip), although we are still far from massive use. To this end, we have launched a grant program that provides 50% co-financing for the installation of a drip irrigation system, and we plan to establish links from 2021 with places where similar types of irrigation systems are used, and where elements of agro-cooperation are introduced. Another aspect of productivity growth is the availability of quality sowing material, which is critically important in both grain and vegetable and other horticultural crops. The role of the European Union is noteworthy here, and with their help we started the planting and sowing material certification process. Alongside the adoption of legislation, it is also important to have a body that will physically implement and produce locally certified seeds that will allow us to increase productivity per hectare. We have such manufacturers springing up already here and there. The first is wheat crop, which is already subject to mandatory certification. In addition, the Certification Research Center has already started by introducing a certification system, setting up a laboratory with funding received from Austria, training specialists and developing protocols. In the first stage this system was free, in the next stage, the manufacturers will be paid an affordable amount. From next year, we plan to offer special assistance to producers of planting and sowing material in the second phase. With the emergence of the aid co-financing component, we want to produce quality sowing material on site, which will directly help us to boost grain production and productivity and, to consequently increase the income of farmers.
The next most important aspect is proper housing of the crop. In this regard, we have started a 50 percent co-financing program for harvesting equipment, which has been running for two years. At this stage, the emergence of harvesting equipment in the private sector is urgent, as this will allow them to harvest at a lower loss rate and in the right time, with maximum quality maintenance. With a similarly complex approach that includes supporting the seed-producing ring, I think we can increase productivity. However, we must note one thing, all of this must be based on the certification process, which in turn should be preceded by the testing of varieties and cataloging, which we have also established at the legislative level and started practical work in 2013. This activity is headed by the Agricultural Logistics and Services Company, which conducts zoning and industrial testing of both locally produced and imported varieties. Testing
of imported varieties in specific climates and soil conditions, gaining experience and several years of observation prior to the process are critical, and they have to be included in the catalog during the certification process to avoid past failures. The state will remain at the forefront of establishing the necessary infrastructure for all of these.
We also will like to mention the public infrastructure where we have been investing for a long time, I mean the drainage infrastructure in Western Georgia, where the removal of excess water from the soil is important for the productivity of corn crops. In Eastern Georgia, it is important to create irrigation infrastructure for both corn and other cereals, and in our case, to restore access to water. To give you a better idea, in 2012 we had 40 000 hectares of theoretically irrigated area in Georgia, but now we have more than 100 000, and we will complete the plan of about 200 000 by the end of 2020, with complete drainage and irrigation in total. It is to the credit of this large-scale work that we can use these areas to increase the productivity of both cereals and other crops. If these public infrastructure are not in place, all calls to farmers to increase productivity would be in vain.
The country is experiencing a huge shortage of sectoral specialists in the field of agriculture, what is the Ministry of Agriculture doing in terms of education?
I agree with you, there is a really big deficit in this area, and logically, it is directly related to the economic situation that has been created in this direction. We are not witnessing it in this sector only, but also in other such sectors like the construction and industrial sectors. We started working on this issue in 2012, but it did not reflect instantly on the demand. I want to tell you that for the last two or three years there has been an increase in demand, not as much as we wanted, but we already have observed noticeable changes in the number of students enrolled in higher education. The market creates an incentive for young people to choose this field and specialty, and I hope that next year, more young people will choose these areas and we will have more specialists. It is also very important to have relevant work in the area of offering, providing, and delivering education. In this direction, the Ministry of Education does most of the work, but in close contact with us. We have prepared a database according to the sectoral directions, and according to the number of specialists that were needed in each field at the regional level. The Ministry of Education planned the process of offering educational programs with specific emphasis on this. I would also like to touch on the vocational education program, which is very important. The reform carried out for this program by the Ministry of Education was really revolutionary. If in the past vocational education was unattractive because young people would lose the prospect of getting into higher education, today we have introduced a dual model which will allow young people to use the credits accumulated in vocational education to get higher education. In fact, the young man will not only avoid wasting time, but will also prepare for higher education if
he so desires. You should also note that the prestige of vocational education is also slowly increasing as the country needs a lot of technicians, so a lot in terms of vocational education has been done in the country in recent years. In collaboration with UNDP, we have worked hard to develop curricula in close collaboration with the Ministry for their effectiveness. Another aspect that is quite important is the dual element, which includes practice-based education, where a large part of the students are paired with a potential employer in sectors such as wineries, agro-enterprises, farms, etc.
At the last stage, I would also like to touch on our Network of Information and Consulting Services, which we have created in the regions since 2014 and are improving every year in direct proportion to the increase in the qualification of employees. The people employed in this network are consultants who give advice directly to practicing farmers.
The state helps farmers with subsidies and so-called cheap money, although it is mainly intended for large farms, while small farms receive agro loans at a fairly high interest rate, do you think this can be considered to be an obstacle to small scale farming?
We understand that large farmers are more active. They have some advantages in terms of owning material resources. Even in dealing with the bank, they have more experience and are interesting prospects in terms of lending. Consequently, our coverage area is precisely that of small farmers, however one factor to consider here is that those who own a homestead plot, we will find it difficult to talk about any type of farming activity here as it is a more social category. From the defining criteria we consider a small farmer to be one who has a plot of land of 0.2 hectares and more. For such farmers we have provided direct subsidies and assistance per hectare. This year, we have also developed 100% co-financing for farmers who want to start new farms. A valid example is in the case of berry cultivation. In the provision of cheap working capital, the state personally managed the process by following the farmers to the banks, where a bank loan of 5 to 100 000 GEL was approved and issued. The Ministry of Economy in consultation with us also developed a GEL 30 000 micro-grant program for such initiatives. If a farmer needs production equipment for agricultural activities, these micro grants will be given to him as a gift. So, there are a lot of economical tools that are tailored and targeted at small and eager farmers. The same agro insurance format also covers up to 5 hectares of farms and up to 30 hectares of grain crops. If you consider all of these, you will see that the main focus of our policy is on small and medium farms.
Georgia is one of the beneficiaries of international agro diplomacy, meaning Georgia benefits from projects and activities implemented by the following organizations: USAID, UNDP DCFTA, FAO, ENPARD. We also have bilateral relations and cooperation with different countries, but there is greater potential for more cooperation and relations potential. Do you think that professional attachés in the field of agro would significantly advance Georgia in the field of agro-diplomacy?
At this stage, we are cooperating with the Ministry of Foreign Affairs in a high quality way, which includes getting involved at the ambassadorial level, in terms of meeting all needs. This includes assisting in trade relations, finding and exploiting new markets, overcoming trade barriers, and agreeing technical regulations with different countries. Diplomatic involvement for the latter is quite large, for example when we talk about trade in food products, many additional elements such as veterinary control, recognition of veterinary certificates and various technical issues are also inclusive depending on the specifics to be agreed between countries or blocs. It is also very important to coordinate closely with the Ministry of Foreign Affairs in the area of donor support, because the negotiation process includes a lot of elements and details, which our diplomats produce at high quality levels. This is aside the many situational elements, such as support for conferences and international forums. However, you are right in the sense that in the future, when the potential of the agro sector will grow even more, then, we will have more trade products and volume, then the existence of specific specialized cooperation will be on the agenda before an attaché or a diplomatic mission.
What do you think is the most important factor that will attract a potential investor?
The most important thing is to develop the right business climate that promotes doing business. Georgia’s ratings in this regard are really impressive and we should definitely use it. A liberal tax regime, a good living environment that includes security factors and high guarantees of safety of property, can certainly be very interesting and attractive for investors both
in our sector and other areas. Another important factor is the access to nearby markets provided by Georgia’s strategic geographical location. We have access to a fairly large market in the North as well as several hundred million EU markets, we have a billion-dollar free trade agreement with China, and we work closely with Turkey. So, the potential is huge not only in terms of primary production or because of our farms but also in terms of several other fields related to agriculture. All of these increases the interest in terms of production of agricultural auxiliaries, industry, service delivery and trade relations, and the hub function. We often hear the word hub and the potential for that really exists, and our country can be the coordinator of trade flows. For this, even more steps are being taken in terms of creating a tax incentive for our country.
As for land resources, we must understand that Georgia is limited in terms of resources for creating large farms, because we have very little arable land, which is also of interest to many Georgian farmers. However, in terms of greenhouses, attracting investment is a priority for us and special offers are being made to attract investors. An example of this is seen in the Imereti Greenhouse Cluster project, which we think is a large resource for multimillion-dollar investments.
