#58 Georgia Agriculture Bulletin, BFC

06/2017

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58 Geo r g i a Agriculture Bulletin New law on mandatory plant nursery certification

Georgian Development Bank established Agribusiness needs assessment report presented New land moratorium will complicate agrilending

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

More than 11,600 agricultural insurance policies issued ................................................................ 2 New law on mandatory plant nursery certification ........................................................................ 2 Lack of direct foreign investments in agriculture ............................................................................ 2 Georgia imposes moratorium on agricultural land ......................................................................... 3 Minister Davitashvili reports on Ministry activities......................................................................... 3 Produce in Georgia’ receives thousands of applications................................................................. 3

Foreign Aid ................................................................................................................. 4 7) 8) 9) 10) 11) 12) 13) 14) 15)

Georgian Development Bank established ....................................................................................... 4 ENPARD stakeholders discuss climate smart agriculture ................................................................ 4 Third Georgian Farmers’ Congress held in Tbilisi ............................................................................ 5 FAO creates how-to book on apple production in Georgia............................................................. 5 Results-Oriented Monitoring evaluates ENPARD projects .............................................................. 5 IFAD launches Danish-financed grant program ............................................................................... 6 Agribusiness needs assessment report presented .......................................................................... 6 Georgia Hazelnut Improvement Project launched .......................................................................... 6 FAO helps Georgia test for quality seed materials .......................................................................... 7

Private Sector.............................................................................................................. 7 16) 17) 18) 19) 20) 21)

New land moratorium will complicate agrilending ......................................................................... 7 Animal breeding continues to show growth ................................................................................... 8 Area used for agricultural crops in 2016 down 9% ......................................................................... 8 The absence of qualified workers in villages ................................................................................... 8 Number of highly productive cattle growing in Georgia ................................................................. 8 Startup Georgia to support vertical greenhouse project ................................................................ 9

Note: The Georgia Agriculture Bulletin presents a monthly roundup of headlines and news stories related 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. Read more » BFC Max-Högger-Strasse 6 CH-8048 Zurich, Switzerland

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BFC Agriculture Bulletin

State Initiatives 1)

More than 11,600 agricultural insurance policies issued

June 13th, 2017, http://cbw.ge/business/agro-insurance-program-granted-11-600-policies/

According to the Agriculture Projects Management Agency (APMA), 11,683 insurance policies have been issued under the Agricultural Insurance Program as of June 12, with 1,507 claims being submitted due to the natural disasters which occurred in May and June of this year.

The Agricultural Insurance Program was launched on September 1, 2014, aiming to develop the insurance market in the agricultural sector. Within the frames of the Agricultural Insurance Program, beneficiaries can purchase insurance for up to five hectares of land, with 50% reimbursement of the costs of the insurance for vineyards and 70% reimbursement of the costs for most other kinds of lands.

Interested parties can purchase an insurance policy through five insurance companies in Georgia.

2)

New law on mandatory plant nursery certification

June 14th, 2017, http://cbw.ge/business/plant-nursery-certification-process-will-protect-farmer-falsification/

Georgia’s ‘Plant the Future’ program has stimulated great interest in the cultivation of fruit tree gardens. In order to protect the quality of the fruits produced, and the future livelihood of sector as a whole, Georgia’s Parliament has approved a law on mandatory certification. The law regulates production, reproduction, processing, storage, certification, realization and traceability of local and imported seeds and planting material.

According to the law, a national catalog will be created and will include a list of agriculture crop varieties which are allowed for distribution within Georgian territories. While certain crop types will be subject to compulsory certification, others will be voluntary. This list of crops which will require mandatory certification will be determined by the government of Georgia. The certification of agriculture crop varieties and planting materials which are subject to mandatory certification will be free of charge until January 1, 2019; after that date, these services will be charged a certification fee.

It is hoped that the certification process will encourage domestic nurseries to obtain the requisite knowledge and skills to produce high-quality seedlings, thereby helping farmers produce high-quality products.

3)

Lack of direct foreign investments in agriculture

June 15th, 2017, http://cbw.ge/economy/otar-danelia-foreign-direct-investments-not-recorded-agriculture-sector/

Otar Danelia, head of the Parliament’s Committee for Agrarian Issues, has stated that the low level of nonresident activity in making investments in the agricultural sector was a key factor in deciding to restrict the sale of agricultural land to foreign citizens. Danelia noted that, despite the low level of direct foreign investments in agriculture, more than 45,000 hectares of agricultural land has been sold to foreigners, adding that domestic investments have exceeded those of foreign ones several times in the agricultural sector.

According to Geostat, the national statistics service of Georgia, no direct foreign investments were registered in the agricultural sector in the first quarter of 2017, with 2016’s level of direct foreign investments in the sector only amounting to USD 10 million.

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4)

Georgia imposes moratorium on agricultural land

June 23rd, 2017, http://agenda.ge/news/82039/eng

Georgia has imposed a moratorium on foreign citizens obtaining property rights on agricultural lands.

During the moratorium, foreign nationals will not be allowed to register their property rights on agricultural lands within Georgia. The moratorium does not cover cases when a foreign national has already registered their property rights. In such cases, the agricultural lands remain in their ownership.

The Ministry of Justice of Georgia has ruled the moratorium will remain in place until a constitutional change banning Georgia’s agricultural lands being sold to foreign nationals comes into force. Under Georgia’s draft revised Constitution, agricultural lands cannot be sold to foreign citizens, foreignregistered companies or companies registered in Georgia by a foreign national.

5)

Minister Davitashvili reports on Ministry activities

June 27th, 2017, http://moa.gov.ge/En/News/1329

Agriculture Minister Levan Davitashvili presented a report on the activities undertaken by the Ministry of Agriculture in the first half of 2017 to Parliament’s Committee for Agrarian Issues. Among the key successes listed by the Minister were: the Ministry’s efforts at increasing the amount of irrigated land from 45,000 hectares to 111,800 hectares; the progress made by the National Food Agency in the fields of plant protection and phytosanitary reliability as well as their program to identify domestic animals; Georgian laboratories receiving international accreditation; and the success of rehabilitation projects such as ‘Georgian Tea’, which has helped rehabilitate 526 hectares of tea plantations. The Minister also pointed out the work done to bolster the viticulture sector, especially the efforts made to build the brand of the Georgian wine brand through participation at 11 international exhibitions in 7 countries and 50 winetasting events in 10 countries.

Additionally, the Minister reported on ongoing investment programs the Ministry runs. ‘Plant the Future’ has helped establish 3,546 hectares of intensive gardens. 19 new enterprises were also opened under the ‘Agro-processing and Storage Enterprises’ project in the first half of 2017, 43 applications were received in 2016-2017 under the ‘Agriculture Modernization, Market Access and Resilience’ project, representing a total investment of GEL 2.04 million (including GEL 799,000 being co-financed by the Ministry). The Minister also noted the success of the ‘Agro Insurance Project’, which has helped finance over 47,000 policies and insure GEL 326.8 million worth of crops on 39,198 hectares of land.

Towards the end of the report, the Minister focused on obligations under the Deep and Comprehensive Free Trade Area Agreement (DCFTA) with the European Union (EU) and legislative activities to improve the normative base regulating the agricultural sector such as ensuring safety and quality standards are met for products which have potential in EU markets.

Participants at the session assessed the works undertaken by the Ministry of Agriculture positively.

6)

Produce in Georgia’ receives thousands of applications

June 28th, 2017, https://cis.smebanking.club/proizvodi-v-gruzii/?utm_source

The ‘Produce in Georgia’ program, which is designed to support the local production of micro- and small-sized enterprises, received 20,000 applications for business ideas between May 15 and May 30, 2017. A selection process, undertaken by the Ministry of Economy, will narrow the list of applications to approximately 5,000. Finalists will then be sent to trainings dedicated to the creation of a business plan and its future implementation.

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‘Produce in Georgia’ is a state-run program which began in 2014. The goal of the program is to stimulate Georgian agricultural production. In 2015, the program became accessible for micro- and small-sized enterprises as well. So far, the program has invested more than USD 12 million and helped 8,000 people within its 3,200 projects financed.

Foreign Aid 7)

Georgian Development Bank established

May 31st, 2017, https://cis.smebanking.club/kitaj-investiruet-1-mlrd-v-geo

An official signing ceremony was held in Beijing to establish the Georgian Development Bank, with Georgian Bank TBC having already allocated a credit line of USD 100 million. The declaration was signed

by Deputy Prime Minister Dimitri Kumsishvili, who noted that National Bank of Georgia has already received an application for the coordination of the relevant official procedures necessary for the bank to operate. The founders of the bank are two of the largest corporations in China: CEFC China Energy Company Limited and Eurasian Invest LLC. Competition in the banking sector is crucial for the development of the Georgian banking system and economy; as such, it is seen as an important step that another large bank in Georgia will be contributing to the development of the private sector.

8)

ENPARD stakeholders discuss climate smart agriculture

June 5th, 2017, http://enpard.ge/en/enpard-stakeholders-discussed-ways-promoting-climate-smart-agriculture-georgia/

Stakeholders and implementing partners of the European Neighborhood Program for Agriculture and Rural Development (ENPARD) met to share updates on ENPARD projects and discuss new actions that will promote climate smart agriculture in Georgia. Attendees learned of the achievements of ENPARD I, the ongoing activities of ENPARD II and negotiations regarding ENPARD III. Presenters also stressed the importance of elaborating new visions and new types of programs for sustainable agricultural and rural development practices in the country.

The meeting featured a presentation on climate smart agriculture approaches given by Javier Sanz Alvarez, coordination and support officer for FAO-ENPARD projects in Georgia. The recommendations focused on land use and planning, implementing good agricultural practices for soil, water and crop management, reducing agricultural green gas emissions and establishing efficient agrometeorological services. There was also an open discussion allowing ENPARD stakeholders to share their opinions and practical experiences on the successes and challenges of climate smart agriculture activities and practices.

Since 2013, the European Union has been supporting agriculture and rural development in Georgia through its ENPARD program, which has had a total budget of EUR 102 million (2013-2019). The main goal of ENPARD is to reduce rural poverty in Georgia.

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9)

Third Georgian Farmers’ Congress held in Tbilisi

June 9th, 2017, http://bizzone.info/agriculture/2017/1497071866.php

The third Georgian Farmers’ Congress took place in Tbilisi this June, bringing together a total of 250 participants, including smallholders, agricultural cooperatives, women farmers, decision-makers, international organizations and Georgian Alliance for Agriculture and Rural Development (GAARD) members. The Congress was organized by the EU-funded ‘Improving National Food Security Strategy and Support of Smallholder Farmers’ project.

Some of the issues discussed at the Congress were the challenges and perspectives of smallholder farmers regarding access to markets, available investments and loans, and subsidy mechanisms for smallholder farmers and cooperatives. Farmers also met with government officials to discuss the challenges faced by the agricultural sector in the country.

The ‘Improving National Food Security Strategy and Support of Smallholder Farmers’ project supports the government of Georgia in the process of drafting and implementing its food security strategy. The project also supports smallholder farmers in gaining access to local markets.

10) FAO creates how-to book on apple production in Georgia June 12th, 2017, http://www.fao.org/georgia/news/detail-events/en/c/896425/

The Food and Agriculture Organization of the United Nations (FAO) has prepared a publication which contains comprehensive guidelines for apple producers. Good Agricultural Practices in Apple Production is based on European experience but also takes into account Georgian agricultural realities. It contains advice for all phases of apple production, giving detailed descriptions of the principles of forming apple orchards, rejuvenating and refreshing old gardens, fertilizing and irrigating apple trees, protecting apple trees from pests, harvesting, sorting, packaging and storing. FAO also produced an educational video on apple pruning in which an FAO agricultural expert demonstrates the best practice of apple pruning.

FAO produced the book under the ‘Capacity Development of the Ministry of Agriculture’ project, which is funded and supported by the Austrian Development Cooperation (ADC). The book and the video are the first additions from the Good Agricultural Practices series. Books and videos on nectarines, peaches, nuts and tangerines are planned for the near future.

11) Results-Oriented Monitoring evaluates ENPARD projects June 15th, 2017, http://enpard.ge/en/independent-results-oriented-monitoring-mission-showed-good-progress-enpard-ruraldevelopment-projects-georgia/

Between March 27 and April 21, 2017, a Results-Oriented Monitoring (ROM) mission conducted a field technical assessment of the first three pilot development projects of the European Neighborhood Program for Agriculture and Rural Development (ENPARD) in the Lagodekhi, Borjomi and Kazbegi municipalities. The goal of the monitoring mission was to evaluate the performance of these projects according to the relevance, efficiency and sustainability of European Union (EU) supported actions. The ROM mission then provided conclusions and recommendations aimed at improving project performance in the immediate future.

Overall, the ROM mission assessed the projects as efficient, highly relevant and sustainable. In particular, the mission noted that all three projects follow the principle of bottom-up rural development, are in line with Georgian policies of rural development and actively involve all stakeholders in the private, public and civil sectors.

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The ROM mission concluded that the ongoing projects and future EU support will be instrumental for assisting the Georgian government in its endeavor to develop the institutional and human capacities necessary for future rural development sector management.

12) IFAD launches Danish-financed grant program June 16th, 2017, http://moa.gov.ge/En/News/1324

The International Fund for Agriculture Development (IFAD) is launching a new grant program within the frames of the ‘Agriculture Modernization, Market Access and Resilience’ project. The goal of the grant program is to promote youth involvement in agribusiness related farm activities, as this is seen as important for the long-term and sustainable development of the agricultural sector. Beneficiaries of the program will include rural women under the age of 40 and men under 35. Agricultural cooperatives and other legal entities will also be able to participate in the program as long as their founders and management team meet the age requirement.

The program will provide support to potential beneficiaries at the primary stage of business planning.

On the basis of their business plan, each applicant will then be financed with no more than 40% of the cost of the project, up to USD 25,000. The program will be implemented by the Agriculture Projects Management Agency (APMA) and will be continued until 2019. The government of Denmark has allocated DKK 29,800,000 million (approximately USD 5 million) for the grants.

13) Agribusiness needs assessment report presented June 19th, 2017, http://www.economists.ge/en/news/217-european-union-supported-study-of-agribusiness-needs

An agribusiness needs assessment report was presented within the framework of the ‘Enhancing Small Farmers’ Cooperation and Productivity in Imereti and Racha Regions’ project being implemented by People in Need (PIN). The assessment was designed to learn the challenges faced by farmers and agricultural entrepreneurs as well as identify potential solutions to those challenges. Such information will help local, regional and central government officials in the joint planning of agriculture development projects in Imereti and Racha.

The results of the assessment identified the following key needs: increased availability of qualified agronomists, especially veterinarians; high productivity cattle breeds; hayfield meadow anti-erosion measures; improved pest and disease control; improved agricultural machinery services; more systemized trainings and consultations with farmers; more food processing and marketing enterprises; and more investments in reducing the risks and impacts of natural hazards. Government representatives will now examine the assessment and its proposed solutions and believe that the report is important for the development of a permanent public dialogue on improving Georgia’s agricultural sector.

The assessment was carried out between 2014 and 2016 by PIN and the Association of Young Economists of Georgia with the support of the European Union’s Neighborhood Program for Agriculture and Rural Development (ENPARD).

14) Georgia Hazelnut Improvement Project launched June 26th, 2017, http://cbw.ge/business/georgia-hazelnut-improvement-project-details/

Hazelnut production is a major industry for Georgia and supports the livelihoods of more than 50,000 growers and 30 processors. Despite this, a lack of quality and market distinction for Georgian hazelnuts Page 6

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means that the industry is performing well below its potential. To help solve this, the United States Agency for International Development (USAID), Ferrero and Cultivating New Frontiers in Agriculture (CNFA) have joined forces to create the Georgia Hazelnut Improvement Project (G-HIP). The vision for GHIP is to, by 2020, have two sustainable associations that assist growers and processors in exporting high quality, dried, traceable hazelnuts that sell at a premium to international buyers established and are working well.

G-HIP plans to leverage the technical and financial resources of each partner to increase sustainable capacity and broaden, deepen and advance public and private sector development of the hazelnut industry in Georgia. To accomplish this, G-HIP will concentrate on association development, increasing productivity and competiveness, and infrastructure development and marketing. More specifically, GHIP is planning a series of measures such as training, capacity building and implementing both postharvest quality incentive systems and traceability software.

15) FAO helps Georgia test for quality seed materials June 28th, 2017, http://www.fao.org/georgia/news/detail-events/en/c/900287/

As part of Georgia’s effort to combat counterfeit seeds which cheat farmers of the high-quality, highyield crops they need to make a living, the Food and Agriculture Organization of the United Nations (FAO) began a comprehensive program in 2014 to establish a fully functional seed certification system.

Under the program, FAO used funds provided by the Austrian government and the Austrian Development Cooperation (ADC) to furnish the Ministry of Agriculture’s Scientific Research Center with equipment for seed quality control. Using the equipment provided, laboratory staff can now conduct advanced seed-quality testing in line with international standards. FAO experts trained laboratory staff on international seed testing standards and field inspection methods, and workshops and study tours to the Gyumri Breeding Institute in Armenia were held.

Seed producers are invited to bring in their seed materials for certification at no cost. Seed certification will continue to be free until 2020, after which it will become a paid service.

Using certified quality seeds will mean higher production and improved livelihoods for farmers as well as greater export potential for Georgia.

Private Sector 16) New land moratorium will complicate agrilending June 2nd, 2017, http://cbw.ge/business/giorgi-kepuladze-new-land-regulations-will-complicate-mortgaging-agriculture-lands/

Following the enactment of the moratorium on the sale of agricultural land to foreign citizens, it is expected that commercial banks will limit their lending volume within the agricultural sector. Under the new law, commercial banks and microfinance organizations founded by foreign capital are entitled to own mortgaged lands for a period of one year; they are then obliged to sell the lands. In general, commercial banks already follow a rather conservative policy in relation to agriculture lands, issuing loans of only 50% of the total value of a land plot. Given that a major part of Georgian banks are founded by foreign capital, even more caution is expected. As a result, it may become more difficult for agricultural clients to obtain the credit they need.

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17) Animal breeding continues to show growth June 16th, 2017, http://www.sarke.com/cgi/search/news.asp?Code=10051066

According to the ‘Georgian Agriculture 2016’ publication, the share of plant growth in terms of total agricultural production fell to 38% in 2016 (down from 44% in 2015 and 48% in 2014). At the same time, the share of animal breeding in 2016 grew to 56% (up from 50% in 2015 and 48% in 2014). Agricultural services accounted for 6% in 2016 (up from 5% in 2014 and 2015).

The publication also notes that the share of agriculture, forestry, hunting and fishery in Georgian GDP remained consistent in 2016 at 9.3%.

18) Area used for agricultural crops in 2016 down 9% June 20th, 2017, http://www.sarke.com/cgi/search/news.asp?Code=10051096

The area used for agricultural crops in 2016 was 240,000 hectares, 9% less than in 2015. The area used for winter crops was 60,500 hectares, a 7.7% year-on-year increase. At the same time, the area used for spring crops was 179,500 hectares, a 1.3% year-on-year decrease. The area used for grain and bean crops made up 119,500 hectares in 2016, down 16.3% over the area used in 2015. The area used for potatoes, vegetables and vine crops was 38,900 hectares, a year-on-year decrease of 11.2%.

The distribution of crop area by region was: 78,500 hectares in Kakheti, 31,000 hectares in Kvemo Kartli, 30,000 hectares in Imereti, 29,200 hectares in Samegrelo – Zemo Svaneti and 28,000 hectares in Shida Kartli.

19) The absence of qualified workers in villages June 26th, 2017, http://cbw.ge/economy/absence-qualified-workforce-villages-reasons-solutions/

One of the biggest issues facing agricultural development in Georgia is the lack of engineers, agronomists and other specialists in villages. To help solve a part of the problem, state education programs designed to retrain members of the available workforce in these domains would go a long way. These, however, would have to be serious investments as private sector agricultural entities will not put their money in unqualified staff and would rather invite specialists from abroad than risk entrusting their businesses to an untested and untrained workforce.

Another, perhaps harder-to-solve, problem is the unwillingness of many Georgians to take open positions. There are a great number of unemployed citizens in Tbilisi unwilling to leave Tbilisi to find jobs in Georgia’s regions. Moreover, many of the unemployed already living in areas where jobs are available are reluctant to take the jobs for fear of losing their status as socially vulnerable by being engaged in registered work. However, if people would be willing to change professions and gain employment in villages, they would contribute to Georgian production, improve the financial condition of themselves and their families and serve their country by helping Georgian agriculture continue to develop.

20) Number of highly productive cattle growing in Georgia June 28th, 2017, http://www.sarke.com/cgi/search/news.asp?Code=10051189

It is estimated that between 2,000 and 3,000 head of highly productive cattle have been brought into Georgia in the last two years. This is a good sign for the country as, previous to this, the selection of cows was not carried out and cattle breeds in Georgia have degraded. The cows, brought from Hungary, Page 8

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Holland and Ukraine, have enabled some larger farms to start selling raw milk for GEL 1.1 per liter, markedly higher than the average amount of GEL 0.5 per liter.

In order for a dairy farm to be profitable in Georgia, it is estimated that 100 head of cattle are needed.

This costs an estimated USD 1 million in investment; however, the return on investment has proven to be quite good in recent years.

21) Startup Georgia to support vertical greenhouse project June 29th, 2017, http://cbw.ge/business/startup-georgia-finances-micro-greens-vertical-greenhouse-72-000-gel/

The company Micro Green has secured GEL 72,000 in financial support from the ‘Startup Georgia’ program for a project to establish a micro-green vertical greenhouse in Georgia. In such an arrangement, plants are grown hydroponically, without any soil. Micro-greens are generally picked after 1-3 weeks and contain a higher quantity of vitamins and minerals.

The company is currently growing vegetables in special containers on 130 square meters and is growing around 10 kilograms as a test regime. They are mainly used in dishes such as salads, and the company has already introduced five varieties of vegetables to AgroHub for sale.

The total investment value of the project is GEL 80,000.

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