07 BFC Georgia Agriculture Finance Bulletin

04/2013

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7 Geo r g i a Agriculture Finance Bulletin New Government does not refuse “Boers Program” USAID Keeps Supporting Restoration of Agriculture Russian Market Opened for Georgian Agricultural Products Prime Minister Supports Foreign Farmers’ Participation in Developing Georgia’s Agriculture

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Georgian Agriculture Finance Bulletin Issue #7, April 1—15, 2013

Contents State Initiatives ........................................................................................................... 2 1) 2) 3) 4) 5) 6) 7) 8) 9) 10)

Building Agriculture Requires Funding ............................................................................................ 2 Russian Sanitary Service To Visit Georgia ........................................................................................ 2 Russian Market Is Open For Georgian Agriculture Production Export ............................................ 2 New Government does not refuse “Boers Program” ...................................................................... 3 Export Of Agricultural Goods To Russian Market Will Start In Summer ......................................... 3 Preferential Agricultural Loans Amount Up To 1 Million GEL [Full Article] ..................................... 3 Tbilisi Hosts Georgian-Slovakian Business Forum ........................................................................... 4 Czech Tractors Imported ................................................................................................................. 4 Banks Begin To Fulfill the Promise of the “Georgian Dream Party” ................................................ 4 In order to Promote Local Production, Goods Taxation Regime Planned to be changed ............... 5

Foreign Aid ................................................................................................................. 5 11) USAID Keeps Supporting Restoration of Agriculture ....................................................................... 5

Private Sector.............................................................................................................. 5 12) 13) 14) 15) 16) 17) 18) 19) 20) 21)

Agriculture Accounts For 0.6% Of VTB Bank Georgias Credit Portfolio .......................................... 5 Liberty Bank and Basis Bank Don’t Mind Financing Agricultural Start up Projects ......................... 6 Russian Market Opened for Georgian Agricultural Products .......................................................... 6 Iranian Investors Still Interested In Adjara Region .......................................................................... 6 Wheat Harvest Expected To Reach 90 000 Tons ............................................................................. 7 Ukraine Accounts for Almost Half Of Georgian Wine Export .......................................................... 7 Slovak Businessmen Interested in Agriculture, Energy and Tourism .............................................. 7 Prime Minister Supports Foreign Farmers’ Participation in Developing Georgia’s Agriculture ...... 8 “Telavi Wine Cellar” already Has a Partner in Russia ...................................................................... 8 Coordinating Center of International Investment Predicts a New Wave of Russian Investments from May ......................................................................................................................................... 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 » BFC Max-Högger-Strasse 6 CH-8048 Zurich, Switzerland

Phone: +41 44 784 22 22 Fax: +41 44 784 23 23

info@bfconsulting.com www.bfconsulting.com

BFC. Georgian Agriculture Finance Bulletin. Edition #7, April 1—15, 2013

State Initiatives 1)

Building Agriculture Requires Funding

April 1st, 2013, http://www.sarke.com/cgi/search/news.asp?Code=10037480

According to Shalva Pipia, the Deputy Minister, funding of farmer’s projects will be conducted by 11 commercial banks and 2 micro-financial organizations, while preferential terms will be secured by 1-billion fund for agriculture development, which will attract money from private donors. Agricultural profile and profitability of the project are the main criteria for financing, he adds.

The effective interest rate on loans will not exceed 8%, being lower in many cases, the Deputy Minister declares.

[Full Article]

2)

Russian Sanitary Service To Visit Georgia

April 1st, 2013, http://www.sarke.com/cgi/search/news.asp?Code=10037489

Georgian National Wine Agency declared that a 6-member delegation of Russian Sanitary Service will arrive to Georgia today.

Within the visit, experts of the Service will check the hygiene-sanitary state of 35 wine-producing companies that intend to enter the Russian market.

As the Agency said, Russian delegation will be divided into 3 groups and start monitoring companies on April 2. On April 5, the experts will leave Georgia and results of their monitoring will be disclosed after the delegation’s return to Russia.

It should be noted that Russia’s chief sanitary inspectr Gennady Onishchenko already named those Georgian wine producers, who already passed registration in Russia—Kindzmarauli Marani and Wine House Dugladze, while according to web-portal Hvino News, the 3rd company is Alaverdi.

In its turn, 6 representatives of Georgian National Food Agency are leaving for Russia today as well. They plan to hold working meeting on April 2 in Russian Veterinary and Phytosanitary Service and discuss export of Georgian agriculture production to Russia.

[Full Article]

3)

Russian Market Is Open For Georgian Agriculture Production Export

April 3rd, 2013, http://www.sarke.com/cgi/search/news.asp?Code=10037521

The Georgian National Food Agency declared that the Russian market is open for Georgian agriculture production export. Georgian and Russian sides reached the mentioned agreement at a meeting held in the Supervisory Service of Russian Agriculture Ministry.

Head of the Agency Zurab Chekurashvili and chief of Russian Supervisory Service Sergey Dankvert declared at the press briefing that after reach of principal agreement, Georgian and Russian experts have to continue working on technical regulation.

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BFC. Georgian Agriculture Finance Bulletin. Edition #7, April 1—15, 2013

“Major considerations are held on putting veterinary and phytosanitary certificates in compliance with Russian legislation”, Chekurashvili noted.

To remind, Russia had banned import of Georgian agriculture production in 2006, citing improper quality and uncontrolled borders as the reason.

[Full Article]

4)

New Government does not refuse “Boers Program”

April 3rd, 2013, http://commersant.ge/eng/index.php?id=5032

Together with the One Billion Fund and rural voucher project, the Georgian government plans to develop agriculture with the help of Boers. As commersant.ge learned, the new government is going to continue another project launched by the previous government—“Back to Georgia”.

State Minister for Diaspora Affairs Kote Surguladze explains commersant.ge that the South African Boers are ordinary investors, who should be considered in the same light as the investor from any other country who is interested in investing in Georgia. Read More »

5)

Export Of Agricultural Goods To Russian Market Will Start In Summer

April 8th, 2013, http://www.sarke.com/cgi/search/news.asp?Code=10037577

Georgian Minister of Agriculture David Kirvalidze declared that export of Georgian agricultural production to Russia would start stage-by-stage in summer.

Georgian has achieved an agreement based on negotiations held on April 3 with Russian Agriculture Production Supervision Service in Moscow.

After lab tests, export of Georgian vegetables will start in the first instance, while export of fruits and other production will start in autumn, Kirvalidze declared at a press briefing today.

So far, Georgian and Russian experts continue working on respective technical regulation.

[Full Article]

6)

Preferential Agricultural Loans Amount Up To 1 Million GEL [Full Article]

April 8th, 2013, http://www.sarke.com/cgi/search/news.asp?Code=10037578

Agriculture Minister David Kirvalidze reported that credits of 55,000 GEL were within second component of preferential agriloans program. In total, 18 loans were issued so far, he said.

Besides, there are 153 applications under consideration, with total sum exceeding 4 million GEL. To remind, loans within this component are intended to small and medium agriculture farmers and range within 5,000—100,000 GEL.

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BFC. Georgian Agriculture Finance Bulletin. Edition #7, April 1—15, 2013

Regarding the third component (loans to agricultural enterprises, making up to 1 million in volume), Kirvalidze reported that single loan was issued so far, while more 23 applications are under consideration, totaling to USD 5 million.

To remind, there are 11 banks, involved in the second and third components of the mentioned program.

7)

Tbilisi Hosts Georgian-Slovakian Business Forum

April 8th, 2013, http://www.prime-news.ge/?p=103577&lang=en

Georgian-Slovakian business forum is underway in the “Holiday Inn” hotel, Tbilisi.

The event is organized by the Georgian National Investment Agency, Honorary Consulate of the Slovak Republic, Ministry of Foreign Affairs and the Employers’ Association.

Georgia’s Foreign Minister Maia Panjikidze, Slovakian Deputy Prime Minister and Foreign Minister Miroslav Lajcak, Executive Director of the Partnership Foundation Irakli Kovzanidze and Director of the National Investment Agency Giorgi Pertaia attended the opening ceremony of the forum. Read More »

8)

Czech Tractors Imported

April 10th, 2013, http://www.sarke.com/cgi/search/news.asp?Code=10037594

The Ministry Of Agriculture announced that today 150 tractors, manufactured by Czech company, Zetor, were delivered to Georgia. Financing for procurement of the mentioned machinery was allocated from Agriculture Development Fund.

The cost of one tractor is up to 40,000 EUR, the Ministry noted.

Farmers will be able to apply for the mentioned service to service-centers of LLC Mechanizator, which will charge a low price. Farmers can use the cards issued by the Ministry to pay for this service. Company Mechanizator plans to also acquire such kind of machinery in future, the Ministry noted. [Full Article]

9)

Banks Begin To Fulfill the Promise of the “Georgian Dream Party”

April 12th, 2013, http://www.sarke.com/cgi/search/news.asp?Code=10037621

The article notes that banks have begun to decrease interest rate on loans. For instance, the rate for consumer loans is 13.95% in Bank Republic, while 10.75% in TBC Bank and 8% in VTB Bank Georgia.

Zurab Gvasalia, president of Georgian Banking Association, says that “so far, all this is conducted within the framework of a 2-month campaign, but a trend of rate reduction is obvious”.

Gvasalia cites the recent decline of monetary policy rate as one of the causing reasons. Furthermore new technologies which reduce operating costs have been introduced, he notes. Gvasalia considers that on background of competition growth and strengthening of stability, the reduction of interest rates will have a systematic character and will continue in future.

However, expert Lia Eliava regards that rate reduction by the banks is merely a marketing tool and it will not be continued for a long time. “Economic problems still remain in Georgia and banks have serious difficulties, especially in terms of deposit return”, she declares.

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BFC. Georgian Agriculture Finance Bulletin. Edition #7, April 1—15, 2013

10) In order to Promote Local Production, Goods Taxation Regime Planned to be changed April 15th, 2013, http://commersant.ge/eng/?id=5129

In an interview with “Versia” daily “Georgian Dream” coalition member, a businessman Gogi Topadze speaks of the necessity to promote sales of Georgian products and notes that after a while the regulations will come into force, according to which, if the Georgian goods are not available in supermarkets, owners will be responsible for this.

“People should understand that local production means the employment of the locals and restoration of the country’s economy. When we import products, we kill jobs and bankrupt manufacturers. We are preparing bills, I mean, a change of commodity taxation regime. Everything cannot be taxed, we are working on such a change in the law so that a tax will be imposed on products and taxes will go to the budget, but at the same time, the entrepreneur will have the incentive to produce the products inside the country. The EU recommendations are to be considered as well,”—Topadze notes. Read More »

Foreign Aid 11) USAID Keeps Supporting Restoration of Agriculture April 5th, 2013, http://bizzone.info/agriculture/2013/1365206097.php

Today, the head of USAID mission Stephen Haykin took part in distribution of potato seeds in the municipality of Tianeti—Gulelebi and Simonanatekhi, within the frames of the project to help the victims of natural disaster.

Project is financed by USAID initiative—New Economic Opportunities.

USAID will support the restoration of the agriculture sector with 200 000 USD. Read More »

Private Sector 12) Agriculture Accounts For 0.6% Of VTB Bank Georgias Credit Portfolio April 2nd, 2013, http://www.sarke.com/cgi/search/news.asp?Code=10037511

According to audited data of VTB Bank Georgia, the volume of credits issued by the bank to the agriculture sector as of December 31, amounted to 2.1 million GEL, making up 0.6% of total credit portfolio.

It should be noted that compared to 2011, the bank’s loans to this sphere increased 3.9 times.

32.1% (i.e. 121.2 million GEL) of total loans (377.4 million GEL) were issued to trade and service spheres.

This volume is increased by 41.9%.

Construction accounted for 12.8% (48.3 million GEL, growth—24.7%), production—5.4% (20.4 million GEL, decline—2.1 times), financial activity—3.9% (14.9 million GEL, decline—17.8%), energy—2.6%

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BFC. Georgian Agriculture Finance Bulletin. Edition #7, April 1—15, 2013

(9.9 million GEL, growth—4.7%), transport and communications—0.9% (3.5 million GEL, growth—2 times).

As for loans issued to private individuals, their volume amounted to 145.1 million GEL, increasing by 49.8% within a year.

Credits of private individuals, secured by their deposits, amounted to 5.2 million GEL, declining by 20.4% within a year.

[Full Article]

13) Liberty Bank and Basis Bank Don’t Mind Financing Agricultural Start up Projects April 2nd, 2013, http://bizzone.info/agriculture/2013/1365206097.php

“We will finance both start up businesses and the ones that are already running”—Notes Irakli Gogishvili, representative of Liberty Bank. According to him Liberty Bank has no restrictions of this kind.

Gogishvili noted that the weak side of the Preferential Agricultural Credit is that it doesn’t finance startup businesses, but Liberty bank will stand out as it will also finance start up projects. Read More »

14) Russian Market Opened for Georgian Agricultural Products April 3rd, 2013, http://www.prime-news.ge/?p=103102&lang=en

The Georgian delegation’s visit to Moscow has completed fruitfully and Russian market is open for Georgian agricultural products, the National Food Agency of Georgia says.

The Georgian delegation, led by head of the National Food Agency Zurab Chekurishvili, left for Moscow on April 2. At the meeting, which lasted for more than 2 hours, the Georgian side talked about food safety state in Georgia.

The Russian side updated the Georgian delegation on the requirements and regulations which currently operate in Russia. Read More »

15) Iranian Investors Still Interested In Adjara Region April 4th, 2013, http://www.sarke.com/cgi/search/news.asp?Code=10037537

The Supreme Council of Ajara reported on the visit of a 5-member delegation of Iranian investors to the region.

Representatives of Pics Company have presented their plans at the introductory meeting, announcing intention to make investments in several directions, including agriculture.

“Iranian businessmen are interested in establishing an ostrich farm in Ajara. Besides, the company plans to establish cosmetics manufacturing plant and development of this sphere, as well as to construct entertainment centers and other important outlets”, head of Ajara Supreme Council Avtandil Beridze declared. No other details, including expected volume of investments, were provided at this stage.

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BFC. Georgian Agriculture Finance Bulletin. Edition #7, April 1—15, 2013

To remind, representatives of another Iranian multiprofile company Iran-Uromyeh held a meeting in the Council two weeks ago. Their interest was focused on constructions of hotel complexes and a waste processing plant.

According to Sakstat, Iranian investment to Georgia in 2012 made up $404,700, declining 2.6 times yearon-year and accounting for 0.05% of total FDI in the country.

[Full Article]

16) Wheat Harvest Expected To Reach 90,000 Tons April 5th, 2013, http://www.sarke.com/cgi/search/news.asp?Code=10037551

The area of grain crops in Georgia made up 55,000 ha in the previous fall and the harvest is expected to be 90,000—100,000 t. The area of crops is increased by 10,000 ha, compared to 2011, but compared to 2003, it lacks 77,000 ha.

Georgia’s annual wheat consumption amounts to 800,000 t.

As Agriculture Minister David Kirvalidze notes, 330,000t was harvested in the country in 2001.

“I think special attention should be paid to the wheat harvest, because a large-scale program will be launched in next few months”, the Minister declared.

[Full Article]

17) Ukraine Accounts for Almost Half Of Georgian Wine Export April 5th, 2013, http://www.sarke.com/cgi/search/news.asp?Code=10037558

The National Wine Agency reported that in the 1st quarter, Georgian wine was exported to about 20 countries, the top five of which are Ukraine, Kazakhstan, Belorussia, China and Poland. Of these, as the Agency noted, Ukraine accounted for 47% of total wine export.

Total export of wine amounted in the 1st quarter to 3.38 million l. Compared to the same period of 2012, we are facing 21.8% growth.

[Full Article]

18) Slovak Businessmen Interested in Agriculture, Energy and Tourism April 9th, 2013, http://commersant.ge/eng/index.php?id=5088

Slovak businessmen who are visiting Georgia expressed their interest in agriculture, energy and tourism.

Georgian Minister of Finance met with the Slovak business delegation today.

Nodar Khaduri familiarized the guests with the investment environment, the processes taking place in the economy, the tax and customs legislation as well as with the government’s steps to promote and support investors’ activities. As finance minister says, the Slovak businessmen have specific proposals and are eager to start new projects in Georgia. Read More »

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BFC. Georgian Agriculture Finance Bulletin. Edition #7, April 1—15, 2013

19) Prime Minister Supports Foreign Farmers’ Participation in Developing Georgia’s Agriculture April 10th, 2013, http://www.prime-news.ge/?p=103976&lang=en

It’s normal that foreign farmers take part in development of Georgian agriculture, Prime Minister of Georgia Bidzina Ivanishvili said during a meeting with the editors of newspapers and Central TV Networks on Wednesday.

Ivanishvili explains that the new government has no right to forget the agreements signed legally by the previous government, “tear up the paper” and “start everything from the very beginning”.

“I have seen many citizens perturbed about the issue of land, but no matter our disapproval of the previous government, we still have to be consecutive and respect our country. We have no right to tear up what was legally carried out by the previously government, throw it away and start everything from the beginning. We must take all this into consideration. I think in some cases, the assessment is exaggerated. It’s normal that foreign farmers are in Georgia and take part in developing agriculture. Nothing bad is in it. In some cases the government obviously had attempted to sell the best land. There are questions about lawfulness, but we must be cautious here too”, Bidzina Ivanishvili said. Read More »

20) “Telavi Wine Cellar” already Has a Partner in Russia April 12th, 2013, http://commersant.ge/eng/index.php?id=5118

Some Georgian wine companies have already found a partner for the supply of their products to Russia.

As we reported, Russia’s Chief Sanitary Doctor criticized Georgian companies and rebuked for the poor distribution. However, “Telavi Wine Cellar” Chairman of the Supervisory Board states radio “Commersant” that they have signed an agreement with two companies and only “Rospotrebnadzor” consent is required to export products to Russia. Read More »

21) Coordinating Center of International Investment Predicts a New Wave of Russian Investments from May April 12th, 2013, http://commersant.ge/eng/index.php?id=5121

“The Coordinating Center of International Investment” expects a new wave of Russian investments in Georgia starting from May. The Center Director, who visited Russia, states radio “Commersant” that the Russian businessmen are interested in tourism and agriculture fields in Georgia.

According to Giorgi Seturidze, the Russian “Vinograd” is interested in investing 5 million USD in Georgian agriculture and the company’s management will arrive in Georgia in May. Read More »

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Prepared by Business & Finance Consulting (BFC) www.bfconsulting.com In this bulletin, BFC provides extracts from articles that have been published by others and as a result cannot be held responsible for such content.

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